UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K







|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number 000-50727

For the fiscal year ended December 31,
2007





ARC CORPORATE REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)







|                        |  |                                        
|----------------------- |  | ---------------------------------------
|Maryland                |  | 22-3247622                             
|(State of Organization) |  | (I.R.S. Employer Identification Number)



|                                         |  |           
|---------------------------------------- |  | ----------
|1401 Broad Street Clifton, New Jersey    |  | 07013     
|(Address of principal executive offices) |  | (Zip Code)

Registrants telephone number, including area code: (973) 249-1000

Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock

(Title of Class)





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes   ̈     No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d ) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and ( 2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference
in Part III of the Form 10-K or any amendment to this Form 10-K  x

Indicate by check mark
whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈     No  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈     No  x

As of March 12, 2008, the aggregate market value of shares of Class A Common Stock held by non affiliates of the registrant was $1,874,845.

The number of shares of the registrants shares of Class A common stock, $.001 par value, outstanding as of March 12, 2008 was 3,889,765.









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TABLE OF CONTENTS



|         |  |                                                                                                                      |  |     
|-------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                                                      |  | Page
|Part I   |  |                                                                                                                     
|         |  | Item 1.Business                                                                                                      |  | 2   
|         |  | Item 1A.Risk Factors                                                                                                 |  | 4   
|         |  | Item 1B.Unresolved Staff Comments                                                                                    |  | 5   
|         |  | Item 2.Properties                                                                                                    |  | 6   
|         |  | Item 3.Legal Proceedings                                                                                             |  | 13  
|         |  | Item 4.Submission of Matters to a Vote of Security Holders                                                           |  | 13  
|         | 
|Part II  |  |                                                                                                                     
|         |  | Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 14  
|         |  | Item 6.Selected Financial Data                                                                                       |  | 16  
|         |  | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 17  
|         |  | Item 7A. Quantitative and Qualitative Disclosure About Market Risk                                                   |  | 26  
|         |  | Item 8.Financial Statements and Supplementary Data                                                                   |  | 27  
|         |  | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 48  
|         |  | Item 9A. Controls and Procedures                                                                                     |  | 48  
|         |  | Item 9B. Other Information                                                                                           |  | 48  
|         | 
|Part III |  |                                                                                                                     
|         |  | Item 10. Directors, Executive Officers and Corporate Governance                                                      |  | 49  
|         |  | Item 11. Executive Compensation                                                                                      |  | 51  
|         |  | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters              |  | 53  
|         |  | Item 13. Certain Relationships and Related Transactions, and Director Independence                                   |  | 54  
|         |  | Item 14. Principal Accounting Fees and Services                                                                      |  | 56  
|         | 
|Part IV  |  |                                                                                                                     
|         |  | Item 15. Exhibits and Financial Statement Schedules                                                                  |  | 57  
|         |  |                                                                                                                     
|         |  | Signatures                                                                                                           |  | 58  
|         |  |                                                                                                                     
|         |  | Ex-21.1: Subsidiaries of ARC Corporate Realty Trust, Inc.                                                            |  |     
|         |  | Ex-31.1: Certification                                                                                               |  |     
|         |  | Ex-31.2: Certification                                                                                               |  |     
|         |  | Ex-32.1: Certification                                                                                               |  |     
|         |  | Ex-32.2: Certification                                                                                               |  |     



1



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PART I



|ITEM 1. | BUSINESS
|------- | --------

Cautionary Statements Concerning Forward-Looking
Statements

Certain information included or incorporated by reference in this Form 10-K may contain forward-looking statements
within the meaning of Section 27A of the Securities Act, and as such may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future
results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable
by use of the words may, will, should, expect, anticipate, estimate, believe, intend, project, or the negative of these words or other
similar words or terms. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to, changes in economic conditions generally and the real estate market specifically, adverse developments
with respect to our tenants, legislative/regulatory changes including changes to laws governing the taxation of REITs, availability of debt and equity capital, interest rates, competition, supply and demand for properties in our current and proposed
market areas and policies and guidelines applicable to REITs. These risks and uncertainties should be considered in evaluating any forward-looking statements contained in this Form 10-K.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Form 10-K may not occur and our actual results could differ materially from those anticipated or implied in the forward-looking
statements.

General

ARC Corporate Realty Trust®, Inc., a
Maryland corporation (ACRT), was formed in June 1993 and qualifies to be taxed as a real estate investment trust (REIT) under federal tax laws. ACRT is managed by its advisor, ARC Capital Advisors, L.P., an affiliate of
Mr. Ambrosi, ACRTs Chairman, President and a director. The advisor performs services for ACRT pursuant to the terms of an advisory agreement. Such services include serving as ACRTs investment and financial advisor and providing
consultation, analysis and supervision of ACRTs activities in acquiring, financing, managing and disposing of properties. The advisor also performs and supervises the various administrative duties of ACRT, such as maintaining its books and
records. When used in this report, the terms we, us and our refer to ACRT.

Business Strategy

ACRTs principal business strategy was the acquisition of credit lease properties throughout the United States. Credit lease
properties are general purpose retail, office and industrial properties which are each leased to one or more creditworthy tenants under a long term lease. The leases require tenants to pay most or all of the operating costs of the property,
including, but not limited to, real estate taxes and insurance, and generally provide for periodic fixed increases in base rent or additional rent based on some index tied to inflation or a percentage of tenant sales.

Each investment was secured by both the direct corporate obligation of the creditworthy tenant as well as the underlying value of the real estate.

On February 8, 2006, the board of directors approved the adoption of a Plan of Liquidation and Dissolution (the Plan).
The Plan was subject to the approval of ACRTs Common stockholders, by two-thirds vote.

On October 12, 2006, ACRTs
shareholders approved the Plan. Effective October 12, 2006, ACRT changed its basis of accounting from the going concern basis to the liquidation basis of accounting, which required ACRT to record all of its assets and liabilities at fair market
value at October 12, 2006 and at each subsequent reporting period.

The Plan calls for the orderly sale of all our assets and the
payment of (or provision for) our liabilities and expenses, as well as the establishment or a reserve to fund our contingent liabilities and anticipated expenses. The principal purpose of the liquidation is to maximize stockholder value by
liquidating our assets and distributing net proceeds of the liquidation to our shareholders. ACRT intends to continue to market the remaining properties and to sell these properties on the most favorable terms possible. ACRT believes this marketing
process is likely to maximize the consideration received for these properties. ACRT will continue to evaluate the marketing process throughout the liquidation process, however, in order to ensure the sale of the remaining properties in the most
economically attractive manner. At such time as ACRT has sold its properties, satisfied its liabilities, and distributed the net proceeds



2



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of the sales to the stockholders, ACRT will cancel all outstanding shares of Common Stock, file Articles of Dissolution with the State Department of
Assessments and Taxation of Maryland and ACRT will cease to exist. ACRT expects to complete the liquidation within 24 months from the adoption of the Plan by the stockholders, which was October 12, 2006.

On May 23, 2006, ACRT sold its partnership interest in Fort Washington Fitness, LP which owns the property in Fort Washington, Pennsylvania leased
to LA Fitness, to its joint venture partner.

On June 15, 2006, the property located in Overland Park, Kansas leased to Borders Books
and Bed, Bath and Beyond was sold to an unrelated third party.

On October 6, 2006, the property located in Norcross, Georgia leased
to AT&T was sold to an unrelated third party.

On October 25, 2006, ACRT sold its tenant in common interest in the Paramus, New
Jersey property leased to Babys R Us, Levitz Furniture and Wade, Odell, Wade to a related party.

On March 5, 2007, the
following properties were sold to an unrelated third party:



|                              |  |                                   |  |               |          
|----------------------------- |  | --------------------------------- |  | ------------- | ---------
|Property                      |  | Tenant                            |  | Selling Price
|Wichita, Kansas               |  | OfficeMax, Circuit City           |  | $             | 8,760,201
|Charlotte, North Carolina     |  | Caromont Medical                  |  |               | 9,205,970
|Montgomeryville, Pennsylvania |  | A.C. Moore, Thomasville Furniture |  |               | 9,699,417
|Memphis, Tennessee            |  | Walgreens Cos.                    |  |               | 2,200,000
|Lilburne Georgia              |  | Sports Authority, OfficeMax       |  |               | 7,928,869
|Marietta, Georgia             |  | Hollywood Video                   |  |               | 2,205,543

On March 12, 2007, ACRT sold its partnership interest in the Whitestone, NY partnership for
$5,469,450 to its joint venture partner in the deal.

On March 14, 2007, the property located in Sacramento, California leased to GART
Sports was sold to an unrelated third party for $8,250,000.

On May 17, 2007, the property located in Rochelle Park, New Jersey leased
to Bergen County Board of Social Services was sold to an unrelated third party for $20,800,000. ACRTs share of the sales price for its 51% tenant in common interest was $10,608,000.

On August 2, 2007, the property located in Plymouth, Indiana leased to United Technologies Inc. was sold to an unrelated third party for $3,450,000.

On November 28, 2007, ACRT sold its partnership interest in the Woodcliff Lake, New Jersey property to an unrelated third party for
$830,000.

As of December 31, 2007, ACRT owned one property located in San Antonio, Texas leased to Sears and had one partnership
interest in a Levittown, Pennsylvania property leased to Giant Food.

At December 31, 2007, the estimated remaining Net Asset Value
per common share for the Class A and Class B is $.66.

Other

ACRT operates in one industry segment, investments in credit lease properties.



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|ITEM 1A. | RISK FACTORS
|-------- | ------------

ACRT is subject to many risks in
the operation of its business and implementation of the Plan of Liquidation, including the risk factors set forth below.

Risks Related to the Plan
of Liquidation

There can be no assurances concerning the prices at which our portfolio properties will be sold.

We cannot give any assurances as to the price at which any of the properties we currently hold will be sold. Real estate market values are constantly
changing and fluctuate with changes in interest rates, the availability of suitable buyers, the perceived quality and dependability of income flows from tenancies and a number of other factors, both local and national. In addition, environmental
contamination or unknown liabilities, if any, at ACRTs properties may adversely impact the sales price of those assets. As a result, the actual prices at which we are able to sell our properties may be less than anticipated in connection with
the adoption and approval of the Plan of Liquidation, which would result in the amount available for distributions to our stockholders being less than the amount anticipated in connection with the adoption and approval of the Plan of Liquidation.
The amount available for distributions may also be reduced if the expenses we incur in selling our portfolio properties are greater than anticipated.

The value of our portfolio properties may be adversely affected by environmental contamination.

Discovery of environmental
contamination at one or more of our portfolio properties may have a material adverse effect on the value of the subject properties and ACRT. The value of one or more portfolio properties may be adversely affected and ACRT may be exposed to material
liability as a result of discovery of environmental conditions which were previously unknown, changes in law, the conduct of tenants or activities relating to properties in the vicinity of ACRTs properties. Changes in law increasing the
potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of our
tenants, which would adversely affect the value of our properties and subject ACRT to liabilities which would reduce the amount of distributions payable to our stockholders. The sale of a portfolio property will not terminate ACRTs exposure to
liability resulting from environmental contamination at that property. In the event of such liability, ACRTs assets may continue to be subject to the liability.

There can be no assurance that ACRT will be able to make distributions pursuant to the Plan of Liquidation.

We cannot assure you that ACRT will be successful in disposing of properties for values equaling or exceeding those currently estimated by ACRT, or provide assurances as to the timing of such dispositions. If the values of ACRTs
assets decline or the costs and expenses related to such sales or related to the liquidation process, exceed those which are currently estimated by ACRT, liquidation pursuant to the Plan of Liquidation may yield distributions in lesser amounts than
we have projected. No assurances can be made as to the actual amount and timing of distributions, which could be made over a substantial period of time.

The Board of Directors may amend the Plan of Liquidation if they determine that doing so is in the best interest of ACRT and our stockholders.

Our Board of Directors may amend the Plan of Liquidation without stockholder approval if they determine that doing so is in the best interest of ACRT and our stockholders. Thus, we may decide to conduct the
liquidation differently than described in the Proxy Statement. Further, the Board of Directors may decide not to proceed with liquidation and terminate the Plan of Liquidation without further action by our stockholders.

We may fail to continue to qualify as a REIT, which would reduce the amount of any potential distributions.

The estimated amount of the liquidating distributions per share set forth in this Annual Report assumes that ACRT will continue to qualify as a REIT under
the Internal Revenue Code of 1986, as amended (the Code) during the entire liquidation process and, therefore, no provision has been made for federal income taxes. There can be no assurance that ACRT will be able to maintain its REIT
qualification. If we lose our REIT status, we would be taxable as a corporation for federal income tax purposes and would be liable for federal income taxes at the corporate rate with respect to our entire income from operations and from liquidating
sales and distribution of our assets for the taxable year in which our qualification as a REIT terminates and in any subsequent years.

Stockholders may
be liable to our creditors for the amount received from us if our reserves are inadequate.

Under Maryland law, if we make distributions
to our stockholders and fail to maintain an adequate contingency reserve for payment of our expenses and liabilities, each stockholder could be held liable for payment to our creditors of such amounts owed to



4



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creditors, which we fail to pay. The liability of any stockholder would be limited to the amount of such liquidating distributions previously received by
such stockholder from us. Accordingly, in such event, a stockholder could be required to return all such distributions received from ACRT. If a stockholder has paid taxes on liquidating distributions previously received, a repayment of all or a
portion of such amount could result in a stockholder incurring a net tax cost if the stockholders repayment of an amount previously distributed does not cause a commensurate reduction in taxes payable. Any contingency reserve established by us
may not be adequate to cover any expenses and liabilities.

As of December 31, 2007, ACRTs total liabilities were approximately
$4.9 million, all of which consist principally of reserves in connection with liquidation ($4.6 million at December 31, 2007) and accounts payable for expenses incurred in the ordinary course of operating our business.

Risks Related to the Investment Company Act of 1940

We may become
subject to the Investment Company Act of 1940

If we invest our cash and/or cash equivalents in investment securities, we may be subject
to regulation under the Investment Company Act of 1940, as amended (the 1940 Act). If we are deemed to be an investment company under the 1940 Act because of our investment securities holdings, we must register as an investment company
under the 1940 Act. As a registered investment company, we would be subject to the further regulatory oversight of the Division of Investment Management of the Commission, and our activities would be subject to substantial regulation under the 1940
Act. In addition, in order to come within certain exemptive rules under the 1940 Act, at least 75% of our directors would need to be independent under the 1940 Act and we would need to have an independent chairman. We would seek to hire
an investment adviser registered under the Investment Advisers Act of 1940 to manage our assets, and such investment adviser would be entitled to management fees. We would also require the services of a custodian to maintain our securities, which
custodian would be entitled to custodial fees. In addition to registering with the Commission, we would need to file annual, semi-annual and quarterly reports with the Commission, and distribute annual and semi-annual reports to our stockholders.

Although we do not intend to become an investment company and we intend to limit the investments of our assets to government securities
and other investments that do not subject us to regulation under the 1940 Act, if we were deemed to have invested in investment securities and did not register under the 1940 Act, we would be in violation of the 1940 Act and we would be prohibited
from engaging in business or selling our securities and could be subject to civil and criminal actions for doing so. In addition, our contracts would be voidable and a court could appoint a receiver to take control of us and liquidate us. Therefore,
our classification as an investment company could materially adversely affect our business, results of operations and financial condition.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None



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|ITEM 2. | PROPERTIES
|------- | ----------

As of December 31, 2007, ACRT
owned one property located in San Antonio, Texas leased to Sears and had one partnership interest in a Levittown, Pennsylvania property leased to Giant Food.

The following is a summary of ACRTs properties as of December 31, 2007. The 2007 Annual Base Rent represents the cash rents received for the year ended December 31, 2007. For additional information,
see Description of Properties.



|                    |  |                 |  |        |  |               |  |                           |         |                             |      |                         |     
|------------------- |  | --------------- |  | ------ |  | ------------- |  | ------------------------- | ------- | --------------------------- | ---- | ----------------------- | ----
|Tenant              |  | Location        |  | Type   |  | SquareFootage |  | 2007Cash RentReceived (1) |         | PrimaryLease TermExpiration |      | ExtensionOptionsThrough
|Giant Food, Inc.(1) |  | Levittown, PA   |  | Retail |  | 40,100        |  |                           | 66,406  |                             | 2012 |                         | None
|Sears               |  | San Antonio, TX |  | Retail |  | 34,414        |  |                           | 323,492 |                             | 2010 |                         | 2020
|                    |  |                 |  |        |  |               |  |                           |         |                             |      |                         |     
|TOTAL:              |  |                 |  |        |  | 74,514        |  | $                         | 389,898 |                             |      |                         |     
|                    |  |                 |  |        |  |               |  |                           |         |                             |      |                         |     



|(1) | Represents ACRTs share of the cash rent received as of December 31, 2007. ACRT only owns a partial interest
in the Giant Food (20%).
|--- | -------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2007, the scheduled lease maturities for each of the next ten years are
as follows:



|                        |  |                 |  |               |  |                    
|----------------------- |  | --------------- |  | ------------- |  | -------------------
|Year Ended December 31, |  | Number ofLeases |  | SquareFootage |  | 2007Annual BaseRent
|2010                    |  | 1               |  | 34,414        |  | 323,492            
|2012                    |  | 1               |  | 40,100        |  | 66,406             

Sears/San Antonio Property

Description. The property is located at Northwest Loop 410 in San Antonio, Texas. The property is leased to Sears, Roebuck and Co. for an
initial term of 15 years and consists of a one-story steel frame retail facility with an aluminum and glass storefront on 3.48 acres. The property was constructed in October 1995 and consists of 34,414 square feet with a paved parking area of 168
spaces.

Lease. The property is 100% leased to Sears, Roebuck and Co. for use as a Sears Homelife Furniture Store retail
sales facility. The initial lease term of approximately 15 years commenced upon completion of construction in October 1995 and expires in September 2010. The tenant has two renewal options of five years each at an increased rental. The base rent as
of the commencement date was $289,077; rent increased in the sixth year to $306,285 and in the eleventh year to $323,492. The tenant is responsible for the cost of all insurance premiums, and real estate taxes and maintenance of the buildings
interior and heating, ventilation and air conditioning system. Tenant is also responsible for the costs of exterior and public area maintenance, subject to a cap of $.78 per square foot that increases by 6% annually. ACRT is responsible for repair
and replacement of the buildings structure, roof, parking areas and certain building systems. On July 11, 2001, the Sears Homelife store was closed. On October 1, 2001, the tenant vacated the property. Sears Roebuck & Co.,
as the guarantor on the lease, has continued to pay rent on a current basis and, as of November 2003, it has subleased this property to BEL Furniture Co. for the remainder of the original lease term.

Disposition.This property was sold on February 14, 2008 for $2,200,000 to an unrelated third party.

Giant Food/Levittown, Pennsylvania Property

Description. The property is located on New Falls Road, near the intersection with New Rogers Road (SR 413) in Levittown, Bucks County, Pennsylvania. The property is leased for an initial term of twenty years and consists of a
single story steel frame retail facility on 4.7 acres. The property was constructed in 1987 and is approximately 40,100 square feet.

Lease. The property is 100% leased to Giant Food Store, a subsidiary of Royal Ahold, N.V. The initial term of twenty years commenced in 1987 and expired in August of 2007. The annual base rent is $332,028. The tenant is
responsible for all real estate taxes, insurance, utilities and expenses of the building with the exception of roof and structure. In August of 2007, the lease was extended for five years.



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The tenant has outgrown this location and has relocated to a new store. Under the terms of the lease,
ACRT has the option, but not the obligation, to terminate the lease twelve months after the tenant vacates the building. The tenant does not have the right to sublet without the consent of ACRT. In January 2008, ACRT gave consent to Giant to
sublease the property to Golds Gym at Levittown at a rent of $332,028 per year.

Acquisition. In March 2003, ACRT
formed Levittown-ARC, LP and acquired the property. ACRT invested $200,000 for a 20% limited partnership interest in Levittown-ARC LP and the remaining 80% interest is owned by third party investors. ACRT also receives an additional 32% of the
available cash flow or capital proceeds in excess of a 9% preferred return to the limited partners.

Disposition.ACRT has
entered into an agreement with a related party to sell this investment for $300,000.



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Description of Properties Disposed of in 2007

A.C. Moore and Thomasville Furniture/Montgomery Property

Description. The Montgomeryville property was located in Montgomeryville, Pennsylvania at Route 309 and Stump Road and is located directly in front of a 500,000 square foot shopping center anchored by
Target, Giant Food, Barnes and Noble, Comp USA and Bed Bath and Beyond, effectively making it an out parcel to this larger development. The property was approximately 62% leased to A.C. Moore for an initial term of 10 years and approximately 38%
leased to Thomasville Furniture for an initial term of 10 years. A.C. Moore occupies 25,497 square feet and Thomasville Furniture occupies 15,544 square feet. The property was a 41,041 square foot retail facility on approximately 3.2 acres of land
and was constructed in 2003. Parking was provided for approximately 180 spaces.

A.C. Moore Lease. The property was
approximately 62% leased to A.C. Moore for use as a retail facility. The initial term of the 10 year lease commenced in January 2004 and expires in December 2013. The tenant had four successive options to extend the term for additional periods of
five years each. Base rent for the initial term was $433,449 per year. During the first year of the initial term the tenant receives a rent credit of $187,500. Base rent increased by approximately 5% for the first option period and approximately 10%
for each subsequent option period. Tenant must maintain casualty and liability insurance. The tenant must reimburse ACRT for its pro rata share of real estate taxes and common area charges. ACRT was responsible for roof, roof drainage, exterior
walls and structure.

Thomasville Lease.The property was approximately 38% leased to Thomasville for use as a retail
facility. The initial term of the 10 year lease commenced in January 2004 and expires in December 2013. The tenant had 2 successive options to extend the term for additional periods of five years each. Base rent for the first five years of the
initial term was $248,868 per year and increases to $273,750 per year for the last five years of the initial term. The base rent increased to $301,125 and $331,300 per year for the first and second option periods, respectively. Tenant must maintain
casualty and liability insurance. The tenant must reimburse ACRT for its pro rata share of real estate taxes and common area charges. ACRT was responsible for roof, HVAC, structure and slab.

Disposition. On March 5, 2007, sold this property to unrelated third party for $9,699,417.

BCBSS/Rochelle Park Property

Description. The property was located in Rochelle Park, New Jersey at the intersection of Route 17 and Passaic Street in the Park 17 Office Center. The location is approximately one-half mile from the intersection of Route 17,
Route 4, the Garden State Parkway, and the Garden State Regional Mall. The property was leased to the Bergen County Board of Social Services (BCBSS) for an initial term of 19 years. The building was built in 1989 on 2.543 acres of land
and contains three levels of office space, totaling 80,000 square feet and parking on two levels. Total parking on the premises was 312 spaces.

Lease. The property was 100% leased to the BCBSS for use as an office building. BCBSS is an independent corporate government agency established by Bergen County in 1932 to provide social services for Bergen County and is
funded by the county, state and federal governments. The initial lease term of approximately 15 years commenced on October 1, 1989. However, pursuant to an amendment to the lease in 1993, the tenant exercised all of its renewal options so that
the lease now expires on September 30, 2014. The rent was $1,540,000 per year through September 1999; was $1,820,000 per year through September 2009; and will be $1,840,000 per year through September 2014. The landlord was responsible for a
refurbishment allowance in October 2004 not to exceed $500,000. The tenant was responsible for utilities, all operating expenses in excess of the base year amount of $190,565 and real estate taxes in excess of the base year amount of $105,271. The
tenant had a right of first refusal with respect to a sale of the building.

Disposition.On May 17, 2007, the
property located in Rochelle Park, New Jersey leased to Bergen County Board of Social Services was sold to an unrelated third party for $20,800,000. ACRTs share of the sales price for its 51% tenant in common interest was $10,608,000.

CaroMont/Charlotte Area Properties

Description. The properties consist of four medical office buildings located in the Greater Charlotte, North Carolina metropolitan area. Each property was 100% leased to CaroMont Medical Group, Inc. for
a term of 15 years. Each property consisted of a single story building constructed from masonry and glass with a steel frame. Parking for each property meets or exceeds municipal requirements.

Leases. Each property was 100% leased to CaroMont Medical Group, Inc. for medical, dental and general office purposes pursuant to four
separate leases. The leases commenced January 2001 and expired in December 2015. The tenant was responsible for all real estate taxes, insurance premiums, utilities and all other building operation expenses. The tenant was also responsible for
performing all on-site maintenance of the properties.



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The initial annual rent was increased by 1.5% in each subsequent year. Each lease offered the tenant two
ten-year renewal options with the annual rental continuing to increase at the aforesaid specified rate.

Each lease granted the tenant an
option to expand the building at a lease rate which is based upon prevailing interest rates, amortization schedules and ACRTs cost of financing such expansion at the time the tenant exercises its expansion option. In the event the premises
were expanded, ACRT had the right to extend the term of the particular lease so that a minimum of fifteen years remain on the term. The tenant had a right of first offer in the event ACRT wishes to sell a property.

Disposition.In 2001, ACRT sold three of the original seven properties for $1,724,206, net of closing costs and broker commissions. On
March 5, 2007, ACRT sold the remaining properties to an unrelated third party for $9,205,970.

Circuit City and OfficeMax/Wichita Property

Description. The property was located at the intersection of Kellogg Drive (Highway 54) and Ridge Road in
Wichita, Kansas, and is part of a shopping center which presently includes a Kohls department store. The property was approximately 55% leased to Circuit City Stores, Inc. for an initial term of 20 years and approximately 45% leased to
OfficeMax, Inc. for an initial term of 15 years. Circuit City occupied 37,591 square feet and OfficeMax occupied 30,446 square feet. The property was a 68,037 square foot retail facility on 5.92 acres of land and was constructed in 1996. Parking was
provided for 574 spaces.

Circuit City Lease. The property was 55% leased to Circuit City for use as a retail facility. The
initial lease term of approximately 20 years commenced in November 1996 and expires in January 2017. Tenant had five successive options to extend the term of the lease for additional periods of five years each. Initial base rent was $368,392 and the
rent increased in year six to $405,983, and increases every five years thereafter by the lesser of 10% or the percentage increase in the Consumer Price Index. The increases to base rent during the renewal terms were determined by the same formula.
The tenant was responsible for maintenance of its premises excluding the structural elements and roof. The tenant must also pay its pro-rata share of common area charges and reimbursed ACRT for its pro-rata share of real estate taxes. The tenant was
responsible for all utility usage charges and insurance premiums.

The tenant had been granted an exclusive in the shopping center for the
sale of consumer, office and automotive electronics products, computer hardware or software and entertainment media, cellular telephones, and household appliances, subject only to the rights of Kohls, a tenant in an adjacent shopping center
not owned by ACRT.

OfficeMax Lease. The property was 45% leased to OfficeMax, Inc. to be used as a retail facility. The
initial lease term of 15 years commenced in February 1997 and expires in January 2012. The tenant had five successive options to extend the term for additional periods of five years each. Initial base rent was $277,972 and the rent increased to
$293,195 in year six and will increase to $308,418 in year eleven for the duration of the term. Rent during the extension periods increase approximately 4.7% for each five-year period. The tenant was responsible for maintenance of the premises with
the exception of the roof, structural elements and parking lot repairs and in the final three years of the lease. ACRT was responsible for HVAC and sprinkler replacement. The tenant must reimburse ACRT for the tenants proportionate share of
common area maintenance costs, insurance premiums and real estate taxes. With regard to special assessments, the tenant had a cap of $.16 per square foot and no liability for payments after 1999. The sellers agreed to fund any shortfall on account
of the tenants cap on special assessments.

The tenant had been granted an exclusive in the shopping center for the sale of office,
home office, school or business supplies or equipment; office furniture, electronics and copy center. The lease, however, recognized the priority of Circuit Citys and Kohls pre-existing use. There was a possibility that the exclusive
rights granted to OfficeMax against the portion of the shopping center occupied by Kohls would not be enforceable against a subsequent tenant occupying Kohls premises after a termination of the Kohls lease. In the event the
OfficeMax exclusive was violated, tenant had the right to terminate the lease or pay a reduced rental. If this occurs, the sellers agreed to subordinate their right to distributions such that ACRT would get all of the cash flow from the property,
including the sellers portion thereof. OfficeMax also had a co-tenancy clause, which allows it to pay a reduced rental in the event both Circuit City and Kohls no longer occupy the shopping center and no suitable replacement could be
found.

Disposition.On March 5, 2007,ACRT sold this property to an unrelated third party for
$8,760,201.

GART Sports/Sacramento Property

Description. The Sacramento property was located in Sacramento, California at 1700 Challenge Way (a/k/a 1700 Arden Way) and located across from the Arden Way regional mall. The property was 100% leased
to GART Sports Company (GART), the successor by merger to Sportmart, Inc., for an initial term of 20 years for use as a retail facility. The store, on the 2.97 acre property, was a 40,145 square foot one-story concrete block structure,
with a wood and stucco veneer, which was constructed in 1985. The paved parking area had 112 spaces with the right to use additional parking spaces at the adjacent site.



9



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Lease. The property was 100% leased to GART for use as a retail sale facility for sporting
goods, athletic apparel and related goods. In 2003, GART merged with The Sports Authority. The initial lease term of approximately 20 years commenced in August 1994 and expires in January 2015. The tenant had two renewal options of 10 years each.
The base rent was $462,250 per year until January 31, 2005 and then increased on February 1, 2005 based upon a formula tied to increases in the Consumer Price Index to a maximum of $520,031 for the duration of the initial lease term. The
tenant was responsible for utilities, structural and non-structural maintenance and repairs, insurance, common area maintenance, landscaping and property taxes.

The tenant had been granted a right of first offer, effective after the second lease year, in the event landlord desires to sell the property. ACRT was obligated to first offer the tenant the right to purchase the
property on terms and conditions that ACRT would accept on the open market. If the tenant declined to purchase the property, ACRT had the right to sell the property to any third party on substantially the same terms and conditions offered to the
tenant within 120 days after notice of the tenants decision not to purchase. If the 120 day period expires, or if ACRT wishes to sell the property on terms and conditions which are materially different, ACRT must again offer the property to
the tenant. The tenant did not exercise their right of first offer.

ACRT was prohibited from entering into a lease with another tenant for
a use involving the sale of sporting goods, sports apparel and athletic footwear within a two-mile radius of the property. In the event of a taking by the state through eminent domain or other similar action of (1) any portion of the building,
(2) 15% of the parking area, or (3) which resulted in a permanent denial of access from Arden Way, the lease provided for payment of the first $5,160,000 of any condemnation award to ACRT, and for the excess to be split evenly between ACRT
and the tenant.

Disposition.On March 14, 2007, ACRT sold this property to an unrelated third party for $8,250,000.

Great Atlantic and Pacific Tea Co./Woodcliff Lake, New Jersey Property

Description. The property was located on approximately 7.26 acres at 500 Chestnut Ridge Road, Woodcliff Lake, New Jersey. The 70,000 square
foot property was 100% leased under a long-term lease to The Great Atlantic and Pacific Tea Co.

Lease. The property was 100%
leased to the Great Atlantic and Pacific Tea Co. for an initial term of 25 years commencing in February 1996. The rent per square foot for 2004 was $24.47. The tenant was responsible for real estate taxes, insurance, utilities and expenses of the
building.

Disposition.On November 28, 2007, ACRT sold its partnership interest in the Woodcliff Lake, New Jersey
property to an unrelated third party for $830,000.

Hollywood Video/Marietta (Atlanta) Property

Description. The property was located at Route 120 and Barrett Parkway in Marietta (Atlanta), Georgia. The property was an out parcel of a
shopping center, which was anchored by a Target store. The property was leased to Hollywood Entertainment Corporation for an initial term of 15 years. The 7,488 square foot retail facility on 0.75 acres of land was constructed of brick, masonry and
glass and was completed in December 1996. There was on-site parking with 46 spaces.

Lease. The property was 100% leased to
Hollywood Entertainment Corporation for use as a Hollywood Video store. The initial lease term of 15 years commenced in December 1996 and expired in December 2011. The tenant had two five-year renewal options. The initial annual base rent was
$138,031 for the first five years with an adjustment in year six to $154,388, which was based upon the percentage increase in the Consumer Price Index for All Urban Consumers, provided that the increase did not exceed 12% of the annual rent during
the first five-year period. Annual base rent during the renewal terms were determined in accordance with the same formula. The tenant was responsible for all real estate taxes, insurance premiums, utilities, operating expenses and roof and structure
maintenance.

Disposition.On March 5,2007,ACRT sold this property to an unrelated third party
for $2,205,543.

Toys R Us and National Amusements, Inc./New York City Property

Description. The property was located in New York City (Queens), New York on the
Whitestone Expressway at the intersection of 28thAvenue. The property was leased to Toys R Us under two separate leases for a Toys R Us and Kids R
Us facility and National Amusements, Inc. In 2003, Kids R Us announced it would cease operations. It closed this location on May 1, 2004, and subsequently subleased this location to Office Depot. The property was built and completed in July
1999 and consists of approximately 139,000 square feet located on 9.75 acres of land. The building had two levels with the movie theater occupying the entire second level. There were 1,200 spaces available for parking including off-site parking.



10



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Toys R Us Leases. The property was approximately 45% leased to Toys R Us NY LLC for use as
a retail facility. Toys R Us executed two separate leases, one for 43,999 square feet for use as a Toys R Us store and the other for 19,703 square feet for use as a Kids R Us store. The leases were guaranteed by the parent company, Toys R Us
Delaware, Inc. The initial lease term of 20 years commenced upon the completion of construction in July 1999 and expires in July 2019. The tenant had four successive options to extend the term of the leases for additional periods of five years each
with rent increases for each five-year period. Minimum base rent initially was $1,082,934 per year for years 1 through 5 and the rent increases to the lesser of:



| |  |  | the product of the minimum base rent for year one and twice the percentage increase in the Consumer Price Index or
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | the following minimum base rentals:
| | - |  | -----------------------------------



| |  |  | $1,191,227 per year for years 6 through 11;
| | - |  | -------------------------------------------



| |  |  | $1,310,350 per year for years 11 through 15; and
| | - |  | ------------------------------------------------



| |  |  | $1,441,576 per year for years 16 through 20.
| | - |  | --------------------------------------------

During the renewal periods, the tenant would also be obligated to pay percentage rent if sales exceed certain specified breakpoints. The tenant was responsible for maintaining the premises and the landlord was responsible for the structural
elements including the roof and parking areas. The tenant paid its pro-rata share of common charges and reimbursed the landlord for its pro-rata share of real estate taxes and insurance premiums. The tenant was responsible for all utility charges.

Toys R Us had been granted an exclusive for the sale of items customarily carried by a modern toy store and childrens specialty
store and the exclusive also applied to certain other property owned by Triangle Equities, Inc. (Triangle), ACRTs joint venture partner in this transaction and developer of the project. Triangle had agreed to hold ACRT harmless in
the event this exclusive is breached as a result of activities on its other properties.

National Amusements, Inc. Lease. The
property was approximately 55% leased to National Amusements, Inc. for use as a 12-screen multiplex movie theater. The initial lease term of 20 years commenced upon the tenants occupancy in May 1999 and expires in May 2019. The tenant had five
successive options to extend the term of the lease for additional periods of five years each with rent increases of approximately 9% for each five-year period. Base rent was:



| |  |  | $1,983,487 for the first 5 years;
| | - |  | ---------------------------------



| |  |  | $2,024,175 in year 6;
| | - |  | ---------------------



| |  |  | $2,206,175 in years 7 through 11; and
| | - |  | -------------------------------------



| |  |  | $2,404,508 in years 12 through 15, for the duration of the term.
| | - |  | ----------------------------------------------------------------

The tenant was also obligated to pay percentage rent on 8% to 10% of gross sales above specified breakpoints. The tenant was responsible for maintenance of its premises and the landlord is responsible for the
structural elements including the roof and parking areas. The tenant paid its pro-rata share of common charges and reimbursed the landlord for its pro-rata share of real estate taxes and insurance premiums. The tenant was responsible for all utility
charges.

The tenant had been granted an exclusive with respect to the property for its use as a movie theater.

Joint Venture. In June 1998, ACRT acquired a 40% interest in Triangle Plaza II LLC, a New York limited liability company (TP II LLC).
The remaining 60% of the TP II LLC interests are held by Triangle. The day-to-day management of the property was performed by an entity controlled by Triangle. ACRT was entitled to a 12% preferred return on its equity invested and had a preferred
position with respect to refinancing or sales proceeds distributed. ACRT had a right of first refusal and tag along rights if Triangle desires to sell all or a portion of the property or Triangles interest in TP II LLC.

Disposition On March 12, 2007, ACRT sold its partnership interest to its joint venture partner for $5,469,450.



11



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The Sports Authority and OfficeMax/Lilburn (Atlanta) Property

Description. The property was located at U.S. Highway 78 and Payton Drive, in Lilburn (Atlanta), Gwinnett County, Georgia. The property was
approximately 65% leased to The Sports Authority for an initial lease term of 20 years and approximately 35% leased to OfficeMax for an initial lease term of 20 years. The Sports Authority occupied 43,393 square feet and OfficeMax occupied 23,532
square feet for a total of 66,925 square feet on approximately seven acres of land. The building was constructed in 1996 and consists of steel frame and masonry construction. Parking was provided for approximately 340 parking spaces.

The Sports Authority Lease. The property was approximately 65% leased to The Sports Authority for use as a retail facility. In 2003, The
Sports Authority and GART Sports Company merged. The initial lease term of 20 years commenced on May 23, 1996, and expired on May 31, 2016. The tenant had four successive options to extend the term of the lease for additional periods of
five years each. Base rent for the initial term was $357,992. Base rent increased by 5% for each five-year option period. The tenant was responsible for maintaining its premises, including its roof and parking areas, as well as all utility charges.
The tenant maintained casualty and liability insurance; however, the tenant could self-insure its obligations to restore so long as its net worth exceeds $100,000,000. The tenant reimbursed ACRT for its pro-rata share of all real estate taxes. ACRT
was responsible for maintenance and repair of the structure and underground utilities and for parking area replacement.

The tenant had
been given an exclusive for the sale of sporting goods, including athletic sportswear and apparel, athletic footwear and general recreational merchandise.

OfficeMax Lease. The property was approximately 35% leased to OfficeMax for use as a retail facility. The initial lease term of 20 years commenced June 6, 1996, and expired on June 30, 2016.
The tenant had four successive options to extend the term of the lease for additional periods of five years each. Base rent for the initial term is $229,437. Base rent increased $11,766 for each five-year option period. The tenant was responsible
for maintaining the premises, building systems and all utility charges. The tenant reimbursed ACRT for its pro-rata share of all real estate taxes, casualty insurance premiums and parking area maintenance. ACRT was responsible for maintenance and
repair of the roof and structure and for parking area replacement.

The tenant had been given an exclusive for the sale of office products,
including school products, business supplies and equipment and office furniture and electronics.

Disposition.On
March 5, 2007,ACRT sold this property to an unrelated third party for $7,928,869.

United Technologies Automotive/Plymouth
Property

Description. The property was located in Plymouth, Indiana, within the 700-acre Plymouth Industrial
Development Park, near the intersection of Routes 30 and 31. The building was constructed under a build-to-suit lease for United Technologies Automotive, Inc. (UTA) and was completed in August 1994. The 105,600 square foot building on
approximately 30 acres of land is being used by UTA as a distribution center.

Lease. The property was 100% leased to UTA.
The lease was guaranteed by UTAs parent company, United Technologies Corporation. The initial lease term of 15 years commenced in December 1995 and expires in December 2010. The lease may be renewed by the tenant for either a five-year period
with two additional option periods of five years each on the same terms as the lease; or for a 10-year period with one additional option period for five years on the same terms and conditions as in the lease except that the rental increases in the
option period are 6% for the first five years and 7.5% each five years thereafter. The initial base rent was $315,000, which increased approximately 6% every three years. The tenant was responsible for all property expenses and real estate taxes.

The tenant had an option to expand the building at a lease rate, which was based upon interest rates, amortization schedules and costs at
the time of the expansion. If the tenant elected to expand the building and ACRT agreed to fund the cost, the lease term would extend to a date fifteen years from the completion of the expansion. The tenant had a right of first offer in the event
ACRT wished to sell the property at a mutually agreeable price.

Disposition.On August 2, 2007, ACRT sold this property
to an unrelated third party for $3,450,000.

Walgreen/Memphis Property

Description. The property was located approximately six miles northeast of downtown Memphis, Tennessee at the intersection of Range Line
Street and James Road in Shelby County. The property was approximately 88% leased to Walgreen Co. for an initial term of 50 years and 12% leased to H & R Block, Eastern Tax Services, Inc. for an initial term of four years. The property was a
freestanding masonry retail facility of 14,294 square feet on 1.149 acres, which was constructed in 1993. The paved parking area had 55 spaces.



12



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Walgreen Lease. The property was 88% leased to Walgreen Co. for use as a retail facility.
The initial lease term of 50 years commenced in January 1993 and expires in December 2042. Tenant had the option to terminate the lease after the 20th lease year and every five years thereafter. The lease called for fixed rent of $141,747 per year
and there was a provision for additional percentage rent, which was capped at an amount equal to the fixed rent. The tenant was responsible for insurance premiums, utilities and some non-structural maintenance and repairs to the interior of the
premises. The landlord was responsible for repairs to the exterior and structural portions of the premises.

H & R Block
Lease. The property was 12% leased to H & R Block, Eastern Tax Services, Inc., a national franchise which offers tax preparation services. The initial lease term of four years commenced in May 1994 and expired in May 1998; however, the
lease was extended through April 2009. The tenant had no other renewal options. The rent was $15,750 per year until May 1998 and then increased to $16,538. In May 2003, the rent increased to $17,027. The renewal extending the lease through 2009
increased the rent to $17,538 per year. The tenant was responsible for utilities, all non-structural repairs, insurance and property taxes. The landlord was responsible for structural and roof repairs.

Disposition.On March 5, 2007,ACRT sold this property to an unrelated third party for $2,200,000.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

None.



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

In 2007, ACRT did not make any submissions to a vote of security holders.

In 2006,ACRT filed its definitive
Schedule 14A and mailed a Proxy Statement regarding shareholder approval of a Plan of Complete Liquidation and Dissolution to its shareholders on September 11, 2006. On October 12, 2006, at a special meeting of shareholders called for such
purpose, the Plan of Complete Liquidation and Dissolution was approved by the shareholders. The vote at the special meeting was 2,451,316 (73.22% of outstanding shares) in favor of the Plan of Liquidation, 59,233 shares (1.77% of outstanding shares)
against the Plan of Liquidation and 40,600 shares (1.21% of outstanding shares) abstained.



13



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PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

As of March 12, 2008, there were approximately 709 holders of record of the shares of Class A common stock and one holder of record of the
shares of Class B common stock. ACRTs shares of common stock are not listed for trading on a national securities exchange or included for quotation on the Nasdaq Stock Market. If ACRTs capital stock is not listed for trading on a
national securities exchange or included for quotation on the Nasdaq Stock Market on or before March 31, 2006, dependent upon market and other conditions, the Board of Directors intends to explore liquidity strategies, including, but not
limited to, adopting a plan of liquidation, subject to market conditions and shareholder approval, pursuant to which ACRTs properties generally would be liquidated in an orderly fashion designed to return the most value to shareholders. Any
such plan of liquidation will be effected as may be determined by the Board of Directors to be in the best interests of ACRTs shareholders.

The Board of Directors recommended, and the shareholders approved, at the annual meeting held in May 2004, an extension of ACRTs liquidity date described above. The Board of Directors asked to have this date extended by five years, to
2011 to 2013, instead of 2006 to 2008. The Board retained the ability to implement a liquidity strategy earlier than that time if it determines that it would be in the best interests of the shareholders to do so.

On February 8, 2006, the board of directors approved the adoption of a Plan of Liquidation and Dissolution (the Plan). The Plan was
subject to the approval of ACRTs Common stockholders, by the affirmative vote of two-thirds of the outstanding shares.

On
October 12, 2006, ACRTs shareholders approved the Plan. Effective October 12, 2006, ACRT will change its basis of accounting from the going concern basis to the liquidation basis of accounting, which requires ACRT to record all of
its assets and liabilities at fair market value at October 12, 2006 and at each subsequent reporting period.

ACRT is selling its real
estate properties on an orderly basis, to pay or provide for its liabilities and to distribute its remaining cash to its shareholders.

Equity
Compensation Plan Information

Our equity compensation plan information as of December 31, 2007, is as follows:



|                                                   |  |                                                                                      |  |                                                                      |      |                                                                                                                                              |       
|-------------------------------------------------- |  | ------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------- | ---- | -------------------------------------------------------------------------------------------------------------------------------------------- | ------
|Plan Category                                      |  | Number ofsecurities to beissued uponexercise ofoutstandingoptions,warrants andrights |  | Weightedaverageexerciseprice ofoutstandingoptions,warrants andrights |      | Number ofsecuritiesremainingavailable forfuture issuanceunder
equitycompensationplans(excludingsecuritiesreflected in theto be issuedcolumn)
|Equity compensation plans approved by shareholders |  | 675,000                                                                              |  | $                                                                    | 8.50 |                                                                                                                                              | 75,000

On December 21, 2006, the board of directors terminated the existing ACRT Stock Options program and replaced
it with a Stock Option Settlement Agreement. Under the Stock Option Settlement Agreement, no dividends are paid to the holders of the Settlement Agreement until the existing Class A and Class B shareholders receive liquidating dividends in the
amount of $8.50 for four of the directors (the original option exercise price) and $10.00 for one director, after which the holders of the Stock Option Settlement Agreement will receive dividends with the existing Class A and Class B
shareholders. ACRT estimates that its aggregate obligation under all Stock Options Settlement Agreements is $3,110,404. Through December 31, 2007, ACRT has paid $2,708,775 under the Stock Option Settlement Agreement.



14



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Warrants

Chauner Securities, Inc. served as the managing broker-dealer in connection with a private placement of ACRTs Class A Common Stock in 1998 and 1999. In connection with that offering, ACRT issued 33,490
stock warrants to Chauner Securities, Inc. to purchase 33,490 shares of Class A Common Stock at an exercise price of $9.30 per share. The stock warrants were to expire in 2008.

Pursuant to the terms of the agreement with the managing broker-dealer for ACRTs third private placement offering which began on May 23, 2003,
ACRT issued to Chauner Securities, Inc., the managing brokerdealer or its designees, stock warrants equal to 7% of the total shares sold by the soliciting dealers or 71,295 stock warrants. The stock warrants had a term of 10 years and an
exercise price of $10.98.

On January 15, 2007, ACRT terminated the existing Warrants and replaced them with a Warrant Settlement
Agreement. Under the Warrant Settlement Agreement, no dividends are made to the Warrant Settlement Agreement holders until the existing Class A and Class B shareholders receive liquidating distributions in the amount of $9.30 or $10.98 (the
original Warrant exercise prices) after which the holders of the Warrant Settlement Agreement receive distributions in line with the existing Class A and Class B shareholders. ACRT estimates that its aggregate obligation under all Warrant
Settlement Agreements is $337,670. Through December 31, 2007, ACRT has paid $267,929 under the Warrant Settlement Agreement.

Income Taxes

ACRT has elected to be treated as a real estate investment trust (REIT) under the applicable provisions of the
Internal Revenue Code of 1986, as amended. In order to qualify as a REIT, ACRT is required to distribute to shareholders at least 90% of its taxable income and to meet certain asset and income tests, as well as certain other requirements. ACRT has
met and expects that it will continue to meet these requirements necessary to be treated as a REIT.

For federal income tax purposes,
distributions may consist of ordinary income dividends, nontaxable return of capital, capital gains or a combination thereof. Distributions in excess of ACRTs current and accumulated earnings and profits (calculated for tax purposes) will
constitute a nontaxable return of capital rather than a dividend and will reduce the shareholders basis in his or her shares of common stock for tax purposes. To the extent that a distribution exceeds both ACRTs current and accumulated
earnings and profits and the shareholders basis in his or her shares, the amount of such excess will generally be treated as gain from the sale or exchange of that shareholders shares. ACRT annually notifies shareholders of the
taxability of distributions paid during the preceding year. The following table sets forth the taxability of distributions paid in 2006 and 2005:



|                                         |  |       |   |  |       |  
|---------------------------------------- |  | ----- | - |  | ----- | -
|                                         |  | 2006  |   |  | 2005  |  
|Ordinary Income                          |  | 34.66 | % |  | 67.59 | %
|15% rate gain                            |  | 40.77 | % |  | 12.43 | %
|25% rate gain                            |  | 24.57 | % |  | 2.67  | %
|Percent non taxable as return of capital |  |      | % |  | 17.31 | %

In 2007, all distributions are liquidating distributions and are considered a return of capital to
shareholders up to the shareholders individual basis and everything exceeding the shareholders basis is considered capital gains.



15



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|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The following table
presents selected historical financial data for each of the five years in the period ended December 31, 2007, which data has been derived from our audited financial statements for those years. For the year 2006, the periods shown represent the
period January 1, 2006 through October 11, 2006 under the Going Concern Basis and the period October 12, 2006 through December 31, 2006 under the Liquidation Basis. The financial data for the year ended December 31, 2007 is
under the Liquidation Basis. You should read the following selected financial data together with Managements Discussion and Analysis of Financial Condition and Results of Operations and our audited financial statements included in
this annual report.



|                                                                  |  |                                             |        |                      |      |   |        |  |   |       |   |  |      |        |   |      |   |        |   |  |   |       
|----------------------------------------------------------------- |  | ------------------------------------------- | ------ | -------------------- | ---- | - | ------ |  | - | ----- | - |  | ---- | ------ | - | ---- | - | ------ | - |  | - | ------
|                                                                  |  | As of and for the Year Ended December 31,  
|                                                                  |  | 2007                                        |        |                      | 2006 |   | 2006   |  |   | 2005  |   |  | 2004 |        |   | 2003
|                                                                  |  | (Liquidation Basis)                         |        | Going Concern Basis)
|                                                                  |  | (In Thousands Except for Per Share Amounts)
|Income Statement Data:                                            |  |                                             |        |                      |      |   |        |  |   |       |   |  |      |        |   |      |   |        |   |  |   |       
|Revenues                                                          |  | $                                           | 1,838  |                      |      | $ | 1,107  |  | $ | 3,270 |   |  | $    | 4,380  |   |      | $ | 3,849  |   |  | $ | 3,763 
|Expenses                                                          |  |                                             | 1,256  |                      |      |   | 716    |  |   | 4,255 |   |  |      | 4,390  |   |      |   | 4,326  |   |  |   | 3,639 
|Operating profit (loss)                                           |  |                                             |       |                      |      |   |       |  |   | (985  | ) |  |      | (10    | ) |      |   | (477   | ) |  |   | 124   
|Equity in income of unconsolidated subsidiaries                   |  |                                             | 346    |                      |      |   | 134    |  |   | 343   |   |  |      | 1,162  |   |      |   | 1,185  |   |  |   | 814   
|Gain on sale of unconsolidated subsidiary                         |  |                                             |       |                      |      |   |       |  |   | 1,546 |   |  |      | 400    |   |      |   |       |   |  |   |      
|Minority interest in (earnings) loss of subsidiaries              |  |                                             | (110   | )                    |      |   | 15     |  |   | 53    |   |  |      | 58     |   |      |   | 53     |   |  |   | 100   
|Income from discontinued operations                               |  |                                             |       |                      |      |   |       |  |   | 3,635 |   |  |      | 450    |   |      |   | 1,014  |   |  |   | 849   
|Net income                                                        |  |                                             |       |                      |      |   |       |  |   | 4,486 |   |  |      | 1,944  |   |      |   | 1,669  |   |  |   | 1,687 
|Adjustments for liquidation basis of accounting                   |  |                                             | 31     |                      |      |   | 15,261 |  |   |      |   |  |      |       |   |      |   |       |   |  |   |      
|Net change in net assets attributable to holders of common shares |  |                                             | 1,069  |                      |      |   | 15,771 |  |   |      |   |  |      |       |   |      |   |       |   |  |   |      
|Liquidating dividends                                             |  |                                             | 43,524 |                      |      |   |       |  |   |      |   |  |      |       |   |      |   |       |   |  |   |      
|Net income per common share from continuing operations-basic      |  |                                             |       |                      |      |   |       |  |   | 0.25  |   |  |      | 0.45   |   |      |   | 0.20   |   |  |   | 0.33  
|Net income per common share from discontinued operations basic   |  |                                             |       |                      |      |   |       |  |   | 1.09  |   |  |      | 0.13   |   |      |   | 0.30   |   |  |   | 0.34  
|Net income per share basic                                       |  |                                             |       |                      |      |   |       |  |   | 1.34  |   |  |      | 0.58   |   |      |   | 0.50   |   |  |   | 0.67  
|                                                                  |  |                                             |        |                      |      |  
|Balance Sheet Data:                                               |  |                                             |        |                      |      |   |        |  |   |       |   |  |      |        |   |      |   |        |   |  |   |       
|Investment in real estate                                         |  | $                                           | 2,200  |                      |      | $ | 54,225 |  |   |       |   |  | $    | 41,915 |   |      | $ | 53,183 |   |  | $ | 45,945
|Investment in unconsolidated subsidiaries and undivided interests |  |                                             | 300    |                      |      |   | 11,761 |  |   |       |   |  |      | 7,693  |   |      |   | 7,797  |   |  |   | 7,390 
|Total assets                                                      |  |                                             | 7,133  |                      |      |   | 78,000 |  |   |       |   |  |      | 53,177 |   |      |   | 65,318 |   |  |   | 58,635
|Mortgages, notes payable and credit facility                      |  |                                             |       |                      |      |   | 17,526 |  |   |       |   |  |      | 26,395 |   |      |   | 34,625 |   |  |   | 29,529
|Reserve for estimated costs during period of liquidation          |  |                                             | 4,631  |                      |      |   | 13,611 |  |   |       |   |  |      |       |   |      |   |       |   |  |   |      
|Total liabilities                                                 |  |                                             | 4,852  |                      |      |   | 31,783 |  |   |       |   |  |      | 27,052 |   |      |   | 38,369 |   |  |   | 30,532
|Cash distributions per common share                               |  |                                             |       |                      |      |   |       |  |   |       |   |  |      | 0.96   |   |      |   | 0.96   |   |  |   | 0.84  
|Weighted average shares outstanding -basic                        |  |                                             |       |                      |      |   |       |  |   |       |   |  |      | 3,348  |   |      |   | 3,348  |   |  |   | 2,518 
|Weighted average shares outstanding -diluted                      |  |                                             |       |                      |      |   |       |  |   |       |   |  |      | 3,954  |   |      |   | 3,954  |   |  |   | 2,518 



16



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

General

ACRT was formed as a Maryland corporation in June 1993 and is an externally
advised real estate investment trust (REIT) under the Internal Revenue Code of 1986. It has operated as a REIT since its inception. ACRT is managed by its advisor, ARC Capital Advisors, L.P., an affiliate of Mr. Ambrosi, ACRTs
Chairman, President and a director. The advisor performs services for ACRT pursuant to the terms of an advisory agreement. Such services include serving as ACRTs investment and financial advisor and providing consultation, analysis and
supervision of ACRTs activities in acquiring, financing, managing and disposing of properties. The advisor also performs and supervises the various administrative duties of ACRT, such as maintaining its books and records.

ACRT was formed to purchase geographically diverse credit lease properties, which are general purpose retail, office and industrial properties. Each
property is 100% leased to one or more creditworthy tenants under a long-term lease that generally requires tenants to pay most or all of the operating costs of the property, including real estate taxes and insurance.

As of December 31, 2006, ACRT had 21 leases with credit tenants in 16 properties encompassing 751,458 rentable square feet. The properties are 69%
leased to retail tenants, 17% to office tenants and the remaining 14% to industrial or warehouse tenants.

As of December 31, 2007,
ACRT owned one property located in San Antonio, Texas leased to Sears and had one partnership interest in a Levittown, Pennsylvania property leased to Giant Food encompassing 74,514 rentable square feet. The properties are 100% leased to retail
tenants. No properties were purchased in 2007 or 2006.

ACRTs revenues and cash flows are generated from property rent receipts and
reimbursements of operating costs of the properties, including real estate taxes and insurance.

Through 2012, ACRT has two leases expiring
totaling 74,514 rentable square feet and which generated, adjusted for ACRTs prorata interest, approximately $389,898 in rental revenue for the year ended December 31, 2007. The primary risks ACRT will incur in re-leasing these properties
are: (1) the period of time required to find a new tenant, (2) whether rental rates will be lower than the previous lease covering the property, (3) leasing costs, if any, incurred when re-leasing the property and (4) the payment
of operating costs, such as real estate taxes and insurance, while the property is vacant. ACRT will address these risks by communicating frequently with the tenant well in advance of the lease termination date to better understand the tenants
needs and requirements and, if needed, by using local brokers in the re-leasing process. No assurance can be given that once a property becomes vacant it will subsequently be re-leased.

On February 8, 2006, the board of directors approved the adoption of a Plan of Liquidation and Dissolution (the Plan). The Plan was
subject to the approval of ACRTs Common stockholders, by the affirmative vote of two-thirds of the outstanding shares. ACRT intends to sell its real estate properties on an orderly basis, to pay or provide for its liabilities and to distribute
its remaining cash to its shareholders.

On October 12, 2006, ACRTs shareholders approved the Plan. Effective October 12,
2006, ACRT changed its basis of accounting from the going concern basis to the liquidation basis of accounting, which required ACRT to record all of its assets and liabilities at fair market value at October 12, 2006 and at each subsequent
reporting period.

On May 23, 2006, ACRT sold its partnership interest in Fort Washington Fitness, LP which owns the property in Fort
Washington, Pennsylvania leased to LA Fitness, to its joint venture partner for $2,500,000.

On June 15, 2006, the property located in
Overland Park, Kansas leased to Borders Books and Bed, Bath and Beyond, was sold to an unrelated third party for $13,600,000.

On
October 6, 2006, the property located in Norcross, Georgia leased to AT&T was sold to an unrelated third party for $2,270,000.

On
October 25, 2006, ACRT sold its tenant in common interest in the Paramus, New Jersey property leased to Babys R Us, Levitz Furniture and Wade, Odell, Wade to a related party for approximately $9,121,000.

On March 5, 2007, the following properties were sold to an unrelated third party:



|                              |  |                                   |  |               |          
|----------------------------- |  | --------------------------------- |  | ------------- | ---------
|Property                      |  | Tenant                            |  | Selling Price
|Wichita, Kansas               |  | OfficeMax, Circuit City           |  | $             | 8,760,201
|Charlotte, North Carolina     |  | Caromont Medical                  |  |               | 9,205,970
|Montgomeryville, Pennsylvania |  | A.C. Moore, Thomasville Furniture |  |               | 9,699,417
|Memphis, Tennessee            |  | Walgreens Cos.                    |  |               | 2,200,000
|Lilburne Georgia              |  | Sports Authority, OfficeMax       |  |               | 7,928,869
|Marietta, Georgia             |  | Hollywood Video                   |  |               | 2,205,543



17



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On March 12, 2007, ACRT sold its partnership interest in the Whitestone, NY partnership for
$5,469,450 to its joint venture partner in the deal.

On March 14, 2007, the property located in Sacramento, California leased to GART
Sports was sold to an unrelated third party for $8,250,000.

On May 17, 2007, the property located in Rochelle Park, New Jersey leased
to Bergen County Board of Social Services was sold to an unrelated third party for $20,800,000. ACRTs share of the sales price for its 51% tenant in common interest was $10,608,000.

On August 2, 2007, the property located in Plymouth, Indiana leased to United Technologies Inc. was sold to an unrelated third party for $3,450,000.

On November 28, 2007, ACRT sold its partnership interest in the Woodcliff Lake, New Jersey property to an unrelated third party for
$830,000.

Overview of Liquidation Basis of Accounting

ACRT has adopted the liquidation basis of accounting for all periods subsequent to October 12, 2006, the date on which its shareholders approved our plan of liquidation. Accordingly, on October 12, 2006 its
assets were adjusted to their estimated fair value and our liabilities, including estimated costs associated with implementing the Plan, were adjusted to their estimated settlement amounts. All nonmonetary assets such as deferred rent receivable,
deferred financing fees and deferred leasing costs were written off. The minority interest in ACRTs Overland Park, Kansas and Wichita, Kansas properties were adjusted to reflect the minority interest at its settlement value based upon the
valuation of the related assets and liabilities.

Below is a Consolidated Statement of Net Assets as of October 12, 2006 under the
liquidation basis of accounting and the Consolidated Balance Sheet under the going concern basis of accounting.



|                                                                  |  |                   |            |                     |   |           
|----------------------------------------------------------------- |  | ----------------- | ---------- | ------------------- | - | ----------
|                                                                  |  | Liquidation Basis |            | Going Concern Basis
|Assets                                                            |  |                   |            |                     |   |           
|Investment in real estate                                         |  | $                 | 54,224,928 |                     | $ | 27,474,527
|Investment in unconsolidated subsidiaries and undivided interests |  |                   | 14,778,222 |                     |   | 6,835,578 
|Assets held for sale                                              |  |                   |           |                     |   | 5,809,281 
|Cash and cash equivalents                                         |  |                   | 8,137,588  |                     |   | 8,137,588 
|Restricted cash                                                   |  |                   | 432,128    |                     |   | 432,128   
|Deferred rent receivable                                          |  |                   |           |                     |   | 463,790   
|Rent receivable                                                   |  |                   | 201,167    |                     |   | 201,167   
|Prepaid expenses and other assets, net                            |  |                   | 102,127    |                     |   | 297,659   
|Deferred financing and other fees                                 |  |                   |           |                     |   | 151,247   
|Deferred leasing costs                                            |  |                   |           |                     |   | 32,710    
|                                                                  |  |                   |            |                     |   |           
|Total Assets                                                      |  | $                 | 77,876,160 |                     | $ | 49,835,675
|                                                                  |  |                   |            |                     |   |           
|                                                                  |  |                  
|Liabilities                                                       |  |                   |            |                     |   |           
|Mortgage notes payable                                            |  | $                 | 17,640,260 |                     | $ | 13,615,260
|Liabilities related to assets held for sale                       |  |                   |           |                     |   | 4,034,317 
|Dividends payable  Class B                                       |  |                   | 162,776    |                     |   | 162,776   
|Due to related parties                                            |  |                   | 140,514    |                     |   | 140,514   
|Due to joint venture partners                                     |  |                   | 392,907    |                     |   | 392,907   
|Unearned rental revenue                                           |  |                   | 317,096    |                     |   | 317,096   
|Accounts payable and accrued expenses                             |  |                   | 394,666    |                     |   | 385,349   
|Reserve for estimated costs during period of liquidation          |  |                   | 13,610,650 |                     |   |          
|                                                                  |  |                   |            |                     |   |           
|Total Liabilities                                                 |  |                   | 32,658,869 |                     |   | 19,048,219
|                                                                  |  |                   |            |                     |   |           
|Minority Interest                                                 |  |                   | 1,521,419  |                     |   | 37,819    
|                                                                  |  |                   |            |                     |   |           
|Net Assets in Liquidation/Shareholders Equity                    |  | $                 | 43,695,872 |                     | $ | 30,749,637
|                                                                  |  |                   |            |                     |   |           

The following adjustments and write-offs were made to convert the Consolidated Balance Sheet to
the October 12, 2006 Consolidated Statement of Net Assets in Liquidation.



18



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| |  |  | a $21,238,679 write-up of land and building to estimated fair market value and the elimination of assets held for sale which are now included in property.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a $8,426,806 write-up of our investments in unconsolidated subsidiaries and undivided interest to estimated fair market value.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | a $13,610,650 liquidation reserve for costs associated with the implementation and execution of the liquidation including settlement of ACRTs options and
warrants, mortgage settlement costs, property closing costs, commissions, professional fees, contingencies and transfer taxes related to the sale of properties, and incentive fees and disposition fees due to the Advisor.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a $1,498,468 write-up of the minority interest to record our joint venture partners share of the net assets of the consolidated entities at fair value.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a $431,438 charge for the write-off of deferred mortgage, leasing and financing costs.
| | - |  | --------------------------------------------------------------------------------------



| |  |  | a $709,400 charge for the write-off of deferred rent receivables.
| | - |  | -----------------------------------------------------------------

Critical Accounting Policies

Liquidation Basis of Accounting

As a result of ACRTs board of directors adoption of a plan of liquidation and its approval by its stockholders, ACRT adopted the liquidation
basis of accounting as of October 12, 2006. Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with the accounting principles generally
accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and other various assumptions that we believe to be reasonable under the
circumstances. Actual results may differ from these estimates.

Real Estate  Held for Sale.The valuation of real estate held for sale
as of December 31, 2007 is based on fair value which was determined by either current contracts for sale or estimates of sales values based on an independent appraisal of the real estate or indications of value based upon the marketplace.

Reserve for Estimated Costs during the Period of Liquidation.Under the liquidation basis of accounting, we are required to estimate and
accrue the costs associated with implementing the plan of liquidation. These amounts can vary significantly due to, among other factors, the timing and amounts associated with discharging known and contingent liabilities and costs associated with
cessation of operations. The costs are estimated and are expected to be paid over the liquidation period. (see Overview of Liquidation Basis of Accounting).

The following table represents the reserve for estimated costs during the period of liquidation from December 31, 2006 thru December 31, 2007:



|                                                         |  |                   |            |                    |   |            |                  |  |   |                   |   |  |   |          
|-------------------------------------------------------- |  | ----------------- | ---------- | ------------------ | - | ---------- | ---------------- |  | - | ----------------- | - |  | - | ---------
|                                                         |  | December 31, 2006 |            | ActualDisbursement |   |            | Change inReserve |  |   | December 31, 2007
|Dispositon fee due to advisor                            |  | $                 | 2,099,803  |                    | $ | (2,245,269 | )                |  | $ | 265,741           |   |  | $ | 120,275  
|Incentive fee due to advisor                             |  |                   | 3,306,205  |                    |   |           |                  |  |   | 379,729           |   |  |   | 3,685,934
|Mortgage retirement costs                                |  |                   | 1,969,318  |                    |   | (1,547,513 | )                |  |   | (421,805          | ) |  |   |         
|Settlement of options and warrants                       |  |                   | 3,227,152  |                    |   | (2,976,704 | )                |  |   | 220,922           |   |  |   | 471,370  
|Property sales commissions                               |  |                   | 1,308,498  |                    |   | (1,265,210 | )                |  |   | 22,712            |   |  |   | 66,000   
|Other                                                    |  |                   | 1,699,674  |                    |   | (597,655   | )                |  |   | (814,505          | ) |  |   | 287,514  
|                                                         |  |                   |            |                    |   |            |                  |  |   |                   |   |  |   |          
|Reserve for estimated costs during period of liquidation |  | $                 | 13,610,650 |                    | $ | (8,632,351 | )                |  | $ | (347,206          | ) |  | $ | 4,631,093
|                                                         |  |                   |            |                    |   |            |                  |  |   |                   |   |  |   |          

Going Concern Basis of Accounting

Prior to the approval of the Plan by ACRTs shareholders on October 12, 2006, ACRT prepared its financial statements under the going concern
basis of accounting. ACRTs accompanying financial statements for periods prior to October 12, 2006 have been prepared in conformity with accounting principles generally accepted in the United States of America, which require management to
make estimates that effect the amounts of revenues, expenses, assets and liabilities reported. The following are critical accounting policies which are important to the understanding of ACRTs financial condition and results of operations and
which require some of managements most difficult, subjective and complex judgments. The accounting for these matters involves the making of estimates based on current facts, circumstances and assumptions which could change in a manner that
would materially affect managements future estimates with respect to such matters. Accordingly, future reported financial conditions and results could differ materially from the current financial condition and results of operations reported
based on managements current estimates.



19



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Revenue Recognition.Rental revenue from tenant operating leases which provide for
scheduled rental increases are recognized in accordance with Statement of Financial Accounting Standards (SFAS) No. 13, on a straight-line basis over the term of the respective leases.

Gains on sales of real estate are recognized pursuant to the provisions of SFAS No. 66, Accounting for Sales of Real Estate. The
specific timing of the sale is measured against various criteria in SFAS No. 66 related to the terms of the transactions and any continuing involvement in the form of management or financial assistance associated with the properties. If the
sales criteria are not met, the gain is deferred and the finance, installment or cost recovery method, as appropriate, is applied until the sales criteria are met.

Rent Receivable.ACRT continuously monitors collections from its tenants and makes a provision for estimated losses based upon historical experience and any specific tenant collection issues that ACRT
has identified.

Purchase Accounting for the Acquisition of Real Estate.In accordance with SFAS No. 141, commencing
with properties acquired after June 30, 2002, the fair value of real estate acquired is allocated to the acquired tangible assets, consisting of land and building, and identified intangible assets and liabilities, consisting of the value of
above-market and below-market leases, other value of in-place leases and value of tenant relationships, based in each case on their fair values.

The fair value of the tangible assets of an acquired property (which includes land and building) is determined by valuing the property as if it were vacant, and the as-if vacant value is then allocated to land and building based
on managements determination of relative fair values of these assets. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease up periods, considering current market
conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenues during expected lease up periods based on current
market demand. Management also estimates costs to execute similar leases including leasing commissions.

In allocating the fair value of
the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the difference between the current in-place lease rent and managements estimate of current
market rent.

The aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, is measured
by the excess of (1) the purchase price paid for a property over (2) the estimated fair value of the property as if vacant, determined as set forth above. This aggregate value is allocated between in-place lease values and tenant
relationships based on managements evaluation of the specific characteristics of each tenants lease. The value of in-place leases and customer relationships are amortized to expense over the remaining non-cancelable periods of the
respective leases.

Industry Segments. ACRT currently operates in one industry segment, investments in credit lease
properties.

Impairment.ACRT continually assesses the recoverability of its properties by determining whether the costs can
be recovered through projected undiscounted cash flows. The amount of impairment, if any, is measured by comparing the carrying amounts to the fair values of such properties. Based on ACRTs analysis, management does not believe that any of its
properties are impaired. SFAS No. 144, Accounting for the Impairment or Disposal of Long Lived Assets, updates and clarifies the accounting and reporting for the impairment of assets held in use and to be disposed of. The
Statement, among other things, requires ACRT to classify the operations and cash flow of properties to be disposed of as discontinued operations.

For the year ended December 31, 2005, ACRT incurred an impairment charge of $287,259 on the Philadelphia, Pennsylvania property leased to Barnes and Noble.

Liquidity and Capital Resources

On February 8, 2006, the board of directors
approved the adoption of a Plan of Liquidation and Dissolution (the Plan). On October 12, 2006, ACRTs shareholders approved the Plan. ACRT intends to sell its real estate properties on an orderly basis, to pay or provide for
its liabilities and to distribute its remaining cash to its shareholders.

ACRT currently estimates that it will be able to pay its
obligations pursuant to the plan of liquidation, from the continued collection of rental payments and from the sale of the properties.

ACRT has allowed its line of credit to expire as it anticipates cash from the sale of properties and the cash from the continued collection of rent from unsold properties to be more than adequate to meet its needs.

The Plan calls for the orderly sale of all our assets and the payment of (or provision for) our liabilities and expenses, as well as the establishment or
a reserve to fund out contingent liabilities and anticipated expenses. The principal purpose of the liquidation is to maximize stockholder value by liquidating assets and distributing net proceeds of the liquidation to shareholders. ACRT intends to
continue to market the remaining properties and to sell these properties on the most favorable terms possible. ACRT believes this



20



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marketing process is likely to maximize the consideration received for these properties. ACRT will continue to evaluate the marketing process throughout the
liquidation process, however, in order to ensure the sale of the remaining properties in the most economically attractive manner. At such time as ACRT has sold all of its properties, satisfied its liabilities, and distributed the net proceeds of the
sales to the stockholders, ACRT will cancel all outstanding shares of Common Stock, file Articles of Dissolution with the State Department of Assessments and Taxation of Maryland and ACRT will cease to exist. ACRT expects to complete the liquidation
within 24 months from the adoption of the Plan by the stockholders, which was October 12, 2006.

As of December 31, 2007, ACRT
owned one property located in San Antonio, Texas leased to Sears, which was sold in February 2008, and had one partnership interest in a Levittown, Pennsylvania property leased to Giant Food.

Dividends. In connection with its intention to continue to qualify as a REIT for federal income tax purposes, ACRT expects to continue
paying dividends to its shareholders. Under the Plan, ACRT intends to sell its real estate properties and to pay or provide for its liabilities and to distribute its remaining cash to its shareholders. These dividends are expected to be paid from
operating cash flows and from the sale of properties.

In 2007, ACRT paid liquidating dividends to Class A common shareholders
totaling $41,360,423, to Class B common shareholders $2,163,154 and $2,976,704 to the Stock Option Settlement Holders and Warrant Settlement Holders.

Dividends paid to Class A common shareholders were $763,577 in 2006 as ACRT suspended dividends payments in anticipation of the approval of the Plan. Dividends were $3.054 million in 2005. As a result of the
Plan, stockholders may receive one or more liquidating dividends over the course of the liquidation. The amount of the dividend and the timing of the dividends will be determined by the sale of the properties.

In 2006, dividends for 2005 were declared and paid to Class B shareholders totaling $162,769. In 2005, ACRT paid to the Class B shareholder dividends
totaling $280,846, of which $118,077 were declared for the year ending December 31, 2003 and $162,769 were for the year ending December 31, 2004.

Under the Plan, all future dividends will be funded by the sale of properties and the rent collected from the unsold properties. Cash flows from operations as reported in the Consolidated Statements of Cash Flows were
$3.297 million and $3.364 million for 2006 and 2005, respectively.

Net cash provided by investing activities was $20.900 million in 2006
and $8.609 million in 2005. Cash used or provided in investing activities is related primarily to investments in real estate properties, investments in joint ventures or sales of same. Therefore, the fluctuation in investing activities relates
primarily to the timing of investments and dispositions.

Net cash used in financing activities was $13.447 million in 2006 and $11.698
million in 2005. Cash provided by or used in financing activities during each year was primarily attributable to proceeds from equity offerings, mortgage financings, and advances under the secured credit facility. Net cash used was for repayments
under the secured credit facility, dividends paid and debt service payments.

Debt Service Requirements

ACRTs principal liquidity needs were payments of interest and principal on outstanding indebtedness. As of December 31, 2007, ACRT no longer
has any outstanding indebtedness.

ACRT had purchased interest rate caps in connection with its variable rate mortgage on the Sacramento,
California property. The interest rate cap was coterminous with the mortgage and its notional amount was equal to the outstanding principal balance for the mortgage on the Sacramento mortgage. The interest rate cap expired on December 31, 2007.

Lease Obligations

Since ACRTs tenants bear all or substantially all of the cost of property operations and maintenance and repairs, ACRT does not anticipate significant need for cash for these costs. For the one remaining consolidated property, ACRT
has a certain level of property operating expense responsibility. To the extent there is a vacancy in a property, ACRT would be obligated to pay for all operating expenses, including real estate taxes and insurance.

Credit Exposure

Subsequent to July 2007, there has
been a tightening of credit loans by banks to borrowers. This tightening has had an adverse impact ACRTs attempts at selling its remaining property and investment as potential buyers have encountered problems in arranging financing and have
thus turned conservative in their pricing. This has resulted in a $1.405 million reduction in the fair market value of the remaining assets.



21



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Results of Operations



|                                                                                |  |                        |        |   |                   |   |         |                       |  |                        |       |  |   |        |   |  |   |       |  
|------------------------------------------------------------------------------- |  | ---------------------- | ------ | - | ----------------- | - | ------- | --------------------- |  | ---------------------- | ----- |  | - | ------ | - |  | - | ----- | -
|                                                                                |  | LiquidationDec. 2007   |        |   | CombinedDec. 2006 |   |         | GoingConcernDec. 2005 |  | Favorable(Unfavorable) |      
|Selected Income Statement Data                                                  |  |                        |        |   | 2007-2006         |   |         | 2006-2005             | 
|                                                                                |  | (Dollars in thousands) |       
|Rental revenue                                                                  |  | $                      | 1,302  |   |                   | $ | 4,168   |                       |  | $                      | 4,207 |  | $ | (2,866 | ) |  | $ | (39   | )
|Interest and other income                                                       |  |                        | 536    |   |                   |   | 209     |                       |  |                        | 173   |  |   | 327    |   |  |   | 36    |  
|Interest expense                                                                |  |                        | 322    |   |                   |   | 1,274   |                       |  |                        | 1,258 |  |   | 952    |   |  |   | (16   | )
|Depreciation and amortization expense                                           |  |                        |       |   |                   |   | 569     |                       |  |                        | 763   |  |   | 569    |   |  |   | 194   |  
|Management fees-affiliate                                                       |  |                        | 190    |   |                   |   | 623     |                       |  |                        | 685   |  |   | 433    |   |  |   | 62    |  
|Property operating expenses                                                     |  |                        | 152    |   |                   |   | 578     |                       |  |                        | 599   |  |   | 426    |   |  |   | 21    |  
|General and administrative                                                      |  |                        | 97     |   |                   |   | 115     |                       |  |                        | 113   |  |   | 18     |   |  |   | (2    | )
|Stock based compensation                                                        |  |                        |       |   |                   |   | 1,097   |                       |  |                        | 449   |  |   | 1,097  |   |  |   | (648  | )
|Professional expenses                                                           |  |                        | 418    |   |                   |   | 685     |                       |  |                        | 485   |  |   | 267    |   |  |   | (200  | )
|Other expenses                                                                  |  |                        | 77     |   |                   |   | 30      |                       |  |                        | 38    |  |   | (47    | ) |  |   | 8     |  
|Minority interest in earnings (loss) of subsidiaries and undivided interests    |  |                        | (110   | ) |                   |   | 68      |                       |  |                        | 58    |  |   | 178    |   |  |   | (10   | )
|Equity in income of unconsolidated subsidiaries and undivided interests         |  |                        | 346    |   |                   |   | 477     |                       |  |                        | 1,162 |  |   | (131   | ) |  |   | (685  | )
|Gain on sale of investment in unconsolidated subsidiary                         |  |                        |       |   |                   |   | 1,546   |                       |  |                        | 400   |  |   | (1,546 | ) |  |   | 1,146 |  
|Income from discontinued operations                                             |  |                        |       |   |                   |   | 3,635   |                       |  |                        | 450   |  |   | (3,635 | ) |  |   | 3,185 |  
|Net income allocable to Class A and Class B common shareholders                 |  |                        |       |   |                   |   | 4,996   |                       |  |                        | 1,944 |  |   |       |   |  |   | 3,052 |  
|Decrease (increase) in reserve for estimated costs during period of liquidation |  |                        | 347    |   |                   |   | (14,405 | )                     |  |                        |      |  |   |       |   |  |   |      |  
|Changes in Fair Value of investments in real estate                             |  |                        | (317   | ) |                   |   | 29,665  |                       |  |                        |      |  |   |       |   |  |   |      |  
|Changes in Net assets in Liquidation before liquidating dividends               |  |                        | 1,069  |   |                   |   | 20,257  |                       |  |                        |      |  |   |       |   |  |   |      |  
|Liquidating dividends                                                           |  |                        | 43,524 |   |                   |   |        |                       |  |                        |      |  |   |       |   |  |   |      |  

Comparison of the Combined Periods ended December 31, 2007 to Year Ended
December 31, 2006

Upon stockholders approval of the plan of liquidation on October 12, 2006, ACRT adopted the
liquidation basis of accounting. This basis of accounting is very different from the going concern basis of accounting. Therefore, it is very difficult to draw meaningful direct comparisons between results of operations for the calendar year when
ACRT used a single accounting basis-namely 2005 (going concern basis) and the calendar year 2006 which is comprised of combined fiscal periods where it used different bases- January 1, 2006 to October 11, 2006 (going concern basis) and
October 12, 2006 to December 31, 2006 (liquidation basis). Although direct comparisons between the 2005 calendar year and the combined fiscal periods of January 1, 2006 to October 11, 2006 and October 12, 2006 to
December 31, 2006 are presented above, readers are cautioned to keep the changed accounting basis in mind when reviewing the comparisons.

Rental revenue decreased by $2,866,000 due mainly to the sale of eight properties in 2007 and 2 properties in 2006.

Interest and
other income increased by $327,000 due to higher cash balances on hand in 2007 and higher interest rates in money market accounts in 2007.

Interest expense decreased by $952,000 due to lower outstanding loan balances in 2007 due to sale of properties.

Depreciation and
amortization expense decreased by $569,000 due to the change from Going Concern Basis to Liquidation Basis on October 12, 2006. The change resulted in the discontinuation of depreciation of ACRTs properties effective October 12,
2006.

Management fees-affiliate expense decreased by $433,000 due to sales of properties in 2007 and 2006.

Property operating expenses decreased by $426,000 due to the sale of eight properties in 2007 and 2006.

Stock based compensation decreased by $1,097,000 due to the termination of the stock option plan and accrual of the estimated liabilities under the stock
settlement plan in the reserve for estimated costs of liquidation.

Professional expenses decreased by $267,000 due to higher legal and
accounting fees incurred in 2006 associated with the Proxy preparation and the Plan of Liquidation.

Other expenses increased by $47,000
due primarily to higher state taxes associated with the sale of properties.



22



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Minority interest in earnings (loss) of subsidiaries and undivided interest decreased by $178,000 due to
lower income attributable to the sale of the properties and to the minority interests share of the change in estimated fair market value of a property, which was sold for a lesser price in the first quarter of 2007.

Equity in income of unconsolidated subsidiaries and undivided interests decreased by $131,000 due to mainly to the sale of unconsolidated subsidiaries
and undivided interests in 2007 and 2006.

Gain on sale of investment in unconsolidated subsidiary decreased $1,546,000 due to the sale of
the Fort Washington, Pennsylvania property in 2006 and because, subsequent to the adoption of the Plan of Liquidation, ACRT was no longer required to report properties as discontinued operations.

Income from discontinued operations decreased by $3,635,000 due mainly to the gain on sale of the Overland Park, Kansas and Norcross, Georgia property.

The reserve for estimated costs during period of liquidation decreased by $347,000 due primarily to a $751,000 reduction in other reserves
due to reclassification and lower actual incurred expenses and a $421,000 reduction in the mortgage retirement costs reserve due to lower actual incurred expenses, offset by $221,000 higher estimated amounts due for the stock option and warrant
settlement agreements, $265,000 higher estimated disposition fees and $379,000 for higher estimated incentive fees due to an increase in the estimated aggregate net asset value to be distributed under the Plan of Liquidation.

The fair value of investment in real estate decreased by $317,000 primarily due to $1,969,000 of higher actual selling prices on the properties offset by
a $846,000 decrease in the fair market value of the Plymouth, Indiana property and a $1,105,000 decrease in the fair value of the San Antonio, Texas property based on the current offers ACRT has received to sell the property and a $327,000 decrease
in the estimated value of the Levittown, Pennsylvania investment.

Comparison of the Combined Periods ended December 31, 2006 to Year Ended
December 31, 2005

Rental revenue decreased by $39,000 due mainly to lower rental revenue attributable to the
Montgomeryville property.

Interest and other income increased by $36,000 due to $186,000 in higher interest income due to higher cash
balances on hand in 2006 and higher interest rates on those balances offset by $150,000 in lower other income due to a fee paid for the termination of the HPI contract in 2005.

Interest expense increased by $16,000 due mainly to higher interest rates in 2006 offset by lower debt due to lower balances

outstanding on the lines of credit.

Depreciation and
amortization expense decreased by $194,000 due to the change from Going Concern Basis to Liquidation Basis on October 12, 2006. The change resulted in the discontinuation of depreciation expenses on ACRTs properties effective
October 12, 2006.

Management fees- affiliate expense decreased by $62,000 due to sales of properties in 2006 and 2005.

Stock based compensation increased by $648,000 due to changes in the estimated fair value of ACRTs common stock from $12.00 to $13.50 per share in
2006.

Professional expenses increased by $200,000 due to higher legal and accounting fees associated with the Proxy preparation and to
higher accounting fees associated with the change from Going Concern Basis to Liquidation Basis.

Other expenses decreased by $8,000 due
primarily to interest due mainly to lower loss on the Interest Rate Cap.

Equity in income of unconsolidated subsidiaries and undivided
interests decreased by $685,000 due to $494,000 related to the discontinuance of the equity method of accounting for Triangle and the reversal of prior period estimates of ACRTs share of the Triangle investment and $42,000 due to the sale in
2006 of the Paramus and Fort Washington investments and $140,000 to lower income on the Rochelle Park investment due to losses on the interest rate cap and higher interest expense.

Income from discontinued operations increased by $3,185,000 due mainly to the gain on sale of the Overland Park, Kansas property.



23



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Inflation

ACRTs long-term leases generally contain provisions to mitigate the adverse impact of inflation on its operating results. Such provisions include clauses entitling ACRT to receive scheduled fixed base rent
increases and base rent increases based upon the consumer price index. In addition, ACRTs leases generally require the tenants to pay operating expenses, including maintenance, real estate taxes, insurance and utilities, thereby reducing
ACRTs exposure to increases in costs and operating expenses resulting from inflation.

Environmental Matters

Based upon managements ongoing review of its properties, management is not aware of any environmental conditions with respect to any of ACRTs
properties, which would be reasonably likely to have a material adverse effect on ACRT. There can be no assurance, however, that the discovery of environmental conditions which were previously unknown, changes in law, the conduct of tenants or
activities relating to properties in the vicinity of ACRTs properties, will not expose ACRT to material liability in the future. Changes in law increasing the potential liability for environmental conditions existing on properties or
increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of ACRTs tenants, which would adversely affect ACRTs consolidated
financial condition and results of operations.

Recently Issued Accounting Standards

In December 2004, the FASB issued Statement No. 123 (revised 2004), Accounting for Stock-Based Compensation (SFAS 123R) which
supersedes Accounting Principals Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,and its related implementation guidance. SFAS 123R establishes standards for the accounting for transactions in which an
entity exchanges its equity instruments for goods and services. It also addresses transactions in which an entity incurs liabilities in exchange for goods and services that are based on the fair value of the entities equity instruments or that may
be settled by the issuance of those equity instruments. SFAS 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share based payments transactions. SFAS 123R requires a public entity to measure the
cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The cost will be recognized over the period in which an employee is required to provide services in exchange for the
award. SFAS 123R is effective for fiscal years beginning after January 1, 2006, based on new rules issued by the Securities and Exchange Commission. The adoption of this pronouncement did not have any material impact on ACRTs consolidated
financial statements.

In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement
Obligations-an Interpretation of SFAS Statement No. 143 (FIN 47). FIN 47 clarifies the timing of liability recognition for legal obligations associated with the retirement of tangible long-lived asset when the timing and/or method of
settlement are conditional on a future event. FIN 47 is effective for fiscal years ending after December 15, 2005. ACRT adopted FIN 47 on December 31, 2005. The adoption did not have any impact on ACRTs consolidated financial
statements.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections which replaces
Accounting Principles Board Opinions No. 20 Accounting Changes and SFAS No. 3 Reporting Accounting Changes in Interim Financial Statements An Amendment of APB Opinion No. 28. SFAS No. 154
provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application as the required method for reporting a change in accounting principle and the reporting of a correction of an
error. The adoption of this statement had no impact on ACRTs consolidated financial position or results of operations.

In June 2005,
the FASB ratified the Emerging Issues Task Forces (EITF) consensus on EITF 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 provides a framework for determining whether a general partner controls, and should consolidate, a limited partnership or a similar entity. It was effective after June 29, 2005, for all newly formed limited
partnerships and for any pre-existing partnerships that modify their partnership agreements after that date. General partners of all other limited partnerships will apply the consensus no later than the beginning of the first reporting period in
fiscal years beginning after December 15, 2005. The adoption of EITF 04-05 did not have a material impact on ACRTs consolidated financial position or results of operations.

In 2005, the EITF released Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements (EITF 05-6), which
clarifies the period over which leasehold improvements should be amortized. EITF 05-6 requires all leasehold improvements to be amortized over the shorter of the useful life of the assets, or the applicable lease term, as defined. The applicable
lease term is determined on the date the leasehold improvements are acquired and includes renewal periods for which exercise is reasonably assured. EITF 05-6 was effective for leasehold improvements acquired in reporting periods beginning after
June 29, 2005. The adoption of EITF 05-6 did not have a material impact on ACRTs consolidated financial position or results of operations.

In June 2006, FASB issued Interpretation No. 48 Accounting for Uncertainty in Income Taxes-an Interpretation of FASB No. 109. FIN 48 provides guidance on recognition and measurement of
uncertainties in income taxes and is applicable for fiscal years beginning after December 15, 2006. The adoption did not have a material impact on ACRTs consolidated financial statements.



24



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In September 2006, FASB issued SFAS No. 157, Fair Value Measurements, which defines fair
value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. The Statement explains key concepts that are needed to apply the definition, including market participants, the
markets in which the company would exchange the asset or liability, and the valuation premise that follows from assumptions market participants would make about the use of an asset. SFAS No. 157 is effective for fiscal years beginning after
November 15, 2007, and interim periods with those fiscal years. Management is currently evaluating the impact of SFAS No. 157 on the consolidated financial statements.

In September 2006, the SEC Staff issued SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108). SAB 108 provides guidance for
SEC registrants on how the effects of uncorrected errors originating in previous years should be considered when quantifying errors in the current year. SAB 108 was issued to eliminate diversity in practice for quantifying uncorrected prior year
misstatements (including prior year unadjusted audit differences) and to address weaknesses in methods commonly used to quantify such misstatements (i.e., the rollover and iron curtain methods). SAB 108 does not amend the
SECs existing guidance for evaluating the materiality of errors included in SAB 99,Materiality. The initial application of the guidance did not have a significant impact on ACRTs consolidated financial statements.

In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an amendment of SFAS
No. 115.This Statement permits entities to choose to measure many financial instruments at fair value. This standard allows entities to achieve an offset accounting effect for certain changes in fair value of certain related assets and
liabilities without having to apply complex hedge accounting provisions, and is expected to expand the use of fair value measurement consistent with the FASBs long-term objectives for financial instruments. This Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007.Management is currently evaluating the impact of SFAS No. 159 on the consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141(R)), and SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51 (SFAS 160). SFAS 141(R) will significantly change how business acquisitions are accounted for and will impact financial
statements both on the acquisition date and in subsequent periods. SFAS 141(R) requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the transaction, including contingent
consideration, and also requires acquisition related costs to be expensed as incurred. SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component
of equity. SFAS 141(R) and SFAS 160 are both effective for periods beginning on or after December 15, 2008. SFAS 141(R) will be applied prospectively. SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for
existing minority interests and other requirements of SFAS 160 will be applied prospectively. The adoptions of these two statements are not expected to have a material impact on ACRTs financial position or results of operations.

Off-Balance Sheet Arrangements

Unconsolidated Real Estate
Joint Ventures and Undivided Interests

ACRT had investments in various real estate joint ventures with varying structures. At December 31, 2007, ACRT
had one remaining non-controlling interest in Levittown ARC, LP.

This property is financed with individual non-recourse mortgage loans. Non-recourse
mortgage debt is generally defined as debt whereby the lenders sole recourse with respect to borrower defaults is limited to the value of the property collateralized by the mortgage. The lender generally does not have recourse against any
other assets owned by the borrower or any of the members of the borrower, except for certain specified expectations listed in the particular loan documents. These exceptions generally relate to limited circumstances including breaches of material
representations. ACRT invests in joint ventures with third parties to increase portfolio diversification, reduce the amount of equity invested in any one property and to increase returns on equity due to the realization of advisory fees.

Contractual Obligations

ACRT, after the sale of the
8 properties in 2007, no longer has any long term debt obligations.



25



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7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ACRTs exposure to market risk relates to its
variable rate debt. At December 31, 2007, ACRT had paid off all its variable rate mortgages and no longer has exposure to market risk on variable rate debt. At December 31, 2006, ACRT had two variable rate mortgages totaling $7.976
million. These mortgages bore interest at LIBOR plus 206 basis points (7.38% on $3.968 million) and LIBOR plus 225 basis points (7.578 % on $4.008 million). Had the LIBOR rate been 100 basis points higher during 2006, ACRTs net income would
have been reduced by approximately $80,000.



26



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|ITEM 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

Index to Financial
Statements



|                                                                                                                                                                                                                                                                                                                          |  |     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                                                                                                                                                                                          |  | Page
|Report of Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                   |  | 28  
|                                                                                                                                                                                                                                                                                                                          | 
|Consolidated Statement of Net Assets as of December 31, 2007 and December 31, 2006 (Liquidation Basis)                                                                                                                                                                                                                    |  | 29  
|                                                                                                                                                                                                                                                                                                                          | 
|Consolidated Statement of Changes in Net Assets for the Year Ended December 31, 2007 and for the Period October 12, 2006 to December
 31, 2006 (Liquidation Basis) and the Consolidated Statements of Income for the Period January 1, 2006 to October 11, 2006 and the Year Ended December 31, 2005(Going Concern Basis) |  | 30  
|                                                                                                                                                                                                                                                                                                                          | 
|Consolidated Statements of Shareholders Equity for the Period January 1, 2006 to October 11, 2006 and the Year Ended December 31, 2005 (Going Concern Basis)                                                                                                                                                             |  | 31  
|                                                                                                                                                                                                                                                                                                                          | 
|Consolidated Statements of Cash Flows for the Period January 1, 2006 to October 11, 2006 and for the Year Ended December 31, 2005 (Going Concern Basis)                                                                                                                                                                   |  | 32  
|                                                                                                                                                                                                                                                                                                                          | 
|Notes to Consolidated Financial Statements                                                                                                                                                                                                                                                                                |  | 33  
|                                                                                                                                                                                                                                                                                                                          | 
|Schedule III-Real Estate and Accumulated Depreciation as of December 31, 2007                                                                                                                                                                                                                                             |  | 47  



27



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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

ARC Corporate Realty Trust, Inc.:

We have audited the accompanying
consolidated statements of net assets in liquidation of ARC Corporate Realty Trust, Inc. and subsidiaries as of December 31, 2007 and 2006, the related consolidated statements of changes in net assets in liquidation for the year ended
December 31, 2007 and for the period from October 12, 2006 to December 31, 2006, and the consolidated statements of income, stockholders equity, and cash flows for the period from January 1, 2006 to October 11, 2006
and for the year ended December 31, 2005. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

As described in Note 3 to the consolidated financial statements, the stockholders of ARC Corporate Realty Trust, Inc. approved a
plan of liquidation on October 12, 2006, and the Company commenced liquidation shortly thereafter. As a result, the Company changed its basis of accounting for periods subsequent to October 12, 2006, from the going concern basis to a
liquidation basis.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the net assets in
liquidation of ARC Corporate Realty Trust, Inc. and subsidiaries as of December 31, 2007 and 2006, and the changes in their net assets in liquidation for the year ended December 31, 2007 and for the period from October 12, 2006 to
December 31, 2006, and the results of their operations and their cash flows for the period from January 1, 2006 to October 11, 2006, and for the year ended December 31, 2005, in conformity with U.S. generally accepted accounting
principles.



/s/ KPMG LLP





|                  
|------------------
|New York, New York
|March 11, 2008    



28



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ARC CORPORATE REALTY TRUST, INC.

Consolidated Statement of Net Assets (Liquidation Basis)

As of December 31, 2007 and December 31, 2006



|                                                                  |  |      |           |      |   |           
|----------------------------------------------------------------- |  | ---- | --------- | ---- | - | ----------
|                                                                  |  | 2007 |           | 2006
|Property and Investments:                                         |  |      |           |      |   |           
|Investment in real estate                                         |  | $    | 2,200,000 |      | $ | 54,224,928
|Investment in unconsolidated subsidiaries and undivided interests |  |      | 300,000   |      |   | 11,761,277
|                                                                  |  |      |           |      |   |           
|Total investment in property held for sale and investments        |  |      | 2,500,000 |      |   | 65,986,205
|Cash and cash equivalents                                         |  |      | 4,546,518 |      |   | 11,462,671
|Restricted cash                                                   |  |      | 60,000    |      |   | 436,717   
|Rent receivable                                                   |  |      |          |      |   | 65,970    
|Prepaid expenses and other assets, net                            |  |      | 26,079    |      |   | 48,041    
|                                                                  |  |      |           |      |   |           
|Total assets                                                      |  | $    | 7,132,597 |      | $ | 77,999,604
|                                                                  |  |      |           |      |   |           
|                                                                  |  |     
|Liabilities:                                                      |  |      |           |      |   |           
|Mortgage notes payable                                            |  | $    |          |      | $ | 17,526,024
|Due to related parties                                            |  |      | 12,434    |      |   | 180,245   
|Unearned rental revenue                                           |  |      |          |      |   | 1,462     
|Accounts payable and accrued expenses                             |  |      | 208,706   |      |   | 464,182   
|Reserve for estimated costs during period of liquidation          |  |      | 4,631,093 |      |   | 13,610,650
|                                                                  |  |      |           |      |   |           
|Total liabilities                                                 |  |      | 4,852,233 |      |   | 31,782,563
|Minority interest                                                 |  |      | 60,000    |      |   | 1,541,625 
|                                                                  |  |      |           |      |   |           
|Net Assets in Liquidation (available to holders of common shares) |  | $    | 2,220,364 |      | $ | 44,675,416
|                                                                  |  |      |           |      |   |           

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



29



---

ARC CORPORATE REALTY TRUST, INC.

Consolidated Statements of Changes in Net Assets for the Year Ended December 31, 2007
and for the Period October 12, 2006 to December 31, 2006 (Liquidation Basis) and Consolidated Statements of Income for the Period January 1, 2006 to October 11, 2006 and the Year Ended December 31, 2005 (Going Concern Basis)



|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|------------------------------------------------------------------------------- |  | ----------------------- | ----------- | - | -------------- | - | ----------- | --------------------------------------------- |  | - | --------------------------------------- | - |  | --------------------------------------------------- | --------- | - |  | - | --------- | -
|                                                                                |  | 2007(Liquidation Basis) |             |   | 2006(Combined) |   |             | Period 10/12/06 to12/31/06(Liquidation Basis) |  |   | Period 1/1/06 to10/11/06(Going Concern) |   |  | Twelve Months EndedDecember 31, 2005(Going Concern) |          
|Net Assets in Liquidation, beginning of period                                  |  | $                       | 44,675,416  |   |                | $ |             |                                               |  | $ |                                         |   |  | $                                                   |           |   |  | $ |           |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Revenues:                                                                       |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Rental revenues                                                                 |  |                         | 1,225,587   |   |                |   | 3,723,807   |                                               |  |   | 913,890                                 |   |  |                                                     | 2,809,917 |   |  |   | 3,772,909 |  
|Real estate tax reimbursements                                                  |  |                         | 76,515      |   |                |   | 444,054     |                                               |  |   | 101,764                                 |   |  |                                                     | 342,290   |   |  |   | 434,266   |  
|Interest and other income                                                       |  |                         | 536,019     |   |                |   | 209,439     |                                               |  |   | 91,451                                  |   |  |                                                     | 117,988   |   |  |   | 172,980   |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Total revenues                                                                  |  |                         | 1,838,121   |   |                |   | 4,377,300   |                                               |  |   | 1,107,105                               |   |  |                                                     | 3,270,195 |   |  |   | 4,380,155 |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|                                                                                |  |                         |             |   |               
|Expenses:                                                                       |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Interest expense                                                                |  |                         | 322,686     |   |                |   | 1,273,490   |                                               |  |   | 265,133                                 |   |  |                                                     | 1,008,357 |   |  |   | 1,257,566 |  
|Depreciation and amortization                                                   |  |                         |            |   |                |   | 569,263     |                                               |  |   |                                        |   |  |                                                     | 569,263   |   |  |   | 762,731   |  
|Asset management fees-affiliate                                                 |  |                         | 189,727     |   |                |   | 623,381     |                                               |  |   | 123,235                                 |   |  |                                                     | 500,146   |   |  |   | 684,702   |  
|Real estate taxes                                                               |  |                         | 92,866      |   |                |   | 447,534     |                                               |  |   | 104,860                                 |   |  |                                                     | 342,674   |   |  |   | 441,005   |  
|Property operating expenses                                                     |  |                         | 58,794      |   |                |   | 130,905     |                                               |  |   | 23,908                                  |   |  |                                                     | 106,997   |   |  |   | 158,499   |  
|General and administrative expenses                                             |  |                         | 97,746      |   |                |   | 114,647     |                                               |  |   | 28,764                                  |   |  |                                                     | 85,883    |   |  |   | 112,894   |  
|Stock based compensation                                                        |  |                         |            |   |                |   | 1,097,058   |                                               |  |   |                                        |   |  |                                                     | 1,097,058 |   |  |   | 448,758   |  
|Professional fees                                                               |  |                         | 417,901     |   |                |   | 684,991     |                                               |  |   | 156,087                                 |   |  |                                                     | 528,904   |   |  |   | 485,632   |  
|Loss on interest rate cap                                                       |  |                         | 2,821       |   |                |   | 3,965       |                                               |  |   | 1,065                                   |   |  |                                                     | 2,900     |   |  |   | 4,103     |  
|State and local taxes                                                           |  |                         | 73,761      |   |                |   | 25,857      |                                               |  |   | 13,352                                  |   |  |                                                     | 12,505    |   |  |   | 34,557    |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Total expenses                                                                  |  |                         | 1,256,302   |   |                |   | 4,971,091   |                                               |  |   | 716,404                                 |   |  |                                                     | 4,254,687 |   |  |   | 4,390,447 |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|                                                                                |  |                         | 581,819     |   |                |   | (593,791    | )                                             |  |   | 390,701                                 |   |  |                                                     | (984,492  | ) |  |   | (10,292   | )
|Minority interests in loss (earnings) from subsidiaries                         |  |                         | 110,360     |   |                |   | (68,109     | )                                             |  |   | (14,640                                 | ) |  |                                                     | (53,469   | ) |  |   | (58,365   | )
|Equity in income of unconsolidated subsidiaries and undivided interests         |  |                         | 345,776     |   |                |   | 476,768     |                                               |  |   | 134,188                                 |   |  |                                                     | 342,580   |   |  |   | 1,162,243 |  
|Gain on sale of investment in unconsolidated subsidiary                         |  |                         |            |   |                |   | 1,546,204   |                                               |  |   |                                        |   |  |                                                     | 1,546,204 |   |  |   | 400,000   |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Income from continuing operations                                               |  |                         |             |   |                |   | 1,361,072   |                                               |  |   | 510,249                                 |   |  |                                                     | 850,823   |   |  |   | 1,493,586 |  
|Income from discontinued operations                                             |  |                         |             |   |                |   | 3,634,685   |                                               |  |   |                                        |   |  |                                                     | 3,634,685 |   |  |   | 450,291   |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Net income allocable to Class A and Class B common shareholders                 |  |                         |             |   |                |   | 4,995,757   |                                               |  |   | 510,249                                 |   |  | $                                                   | 4,485,508 |   |  | $ | 1,943,877 |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Decrease (increase) in reserve for estimated costs during period of liquidation |  |                         | 347,206     |   |                |   | (14,404,968 | )                                             |  |   | (14,404,968                             | ) |  |                                                     |           |   |  |   |           |  
|Change in fair value of investment in real estate                               |  |                         | (316,636    | ) |                |   | 29,665,486  |                                               |  |   | 29,665,486                              |   |  |                                                     |           |   |  |   |           |  
|Liquidating dividends                                                           |  |                         | (43,523,577 | ) |                |   |            |                                               |  |   |                                        |   |  |                                                     |           |   |  |   |           |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Changes in net assets in liquidation                                            |  |                         | (42,455,052 | ) |                | $ | 20,256,275  |                                               |  | $ | 15,770,767                              |   |  |                                                     |           |   |  |   |           |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Net assets in liquidation, end of period                                        |  | $                       | 2,220,364   |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|                                                                                |  |                         |             |   |               
|Basic:                                                                          |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Net income (loss) per share from continuing operations                          |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  | $                                                   | 0.25      |   |  | $ | 0.45      |  
|Net income (loss) per share from discontinued operations                        |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     | 1.09      |   |  |   | 0.13      |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Net income (loss) per share                                                     |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  | $                                                   | 1.34      |   |  | $ | 0.58      |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|                                                                                |  |                         |             |   |               
|Diluted:                                                                        |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Net income (loss) income per share from continuing operations                   |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  | $                                                   | 0.21      |   |  | $ | 0.38      |  
|Net income (loss) per share from discontinued operations                        |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     | 0.92      |   |  |   | 0.11      |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Net income (loss) per share                                                     |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  | $                                                   | 1.13      |   |  | $ | 0.49      |  
|                                                                                |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     |           |   |  |   |           |  
|Weighted average shares outstanding-basic                                       |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     | 3,348,000 |   |  |   | 3,348,000 |  
|Weighted average shares outstanding-diluted                                     |  |                         |             |   |                |   |             |                                               |  |   |                                         |   |  |                                                     | 3,954,000 |   |  |   | 3,954,000 |  

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



30



---

ARC CORPORATE REALTY TRUST, INC.

Consolidated Statements of Shareholders' Equity for the Period January 1, 2006 to
October 11, 2006

and for the Year Ended December 31, 2005 (Going Concern Basis)



|                                         |  |                     |       |                     |   |                          |  |                           |            |                                     |   |           |                          |   |            |   |  |   |            |  
|---------------------------------------- |  | ------------------- | ----- | ------------------- | - | ------------------------ |  | ------------------------- | ---------- | ----------------------------------- | - | --------- | ------------------------ | - | ---------- | - |  | - | ---------- | -
|                                         |  | Class ACommonShares |       | Class BCommonShares |   | AdditionalPaid-inCapital |  | DeferredCompensationPlans |            | Distributionsin Excess ofNet Income |   |           | TotalShareholders'Equity |  
|Balance, January 1, 2005                 |  |                     | 3,182 |                     |   | 166                      |  |                           | 32,106,429 |                                     |   | 299,172   |                          |   | (5,491,083 | ) |  |   | 26,917,866 |  
|Amortization of stock based compensation |  |                     |      |                     |   |                         |  |                           |           |                                     |   | 448,758   |                          |   |           |   |  |   | 448,758    |  
|Net income                               |  |                     |      |                     |   |                         |  |                           |           |                                     |   |          |                          |   | 1,943,877  |   |  |   | 1,943,877  |  
|Dividends                                |  |                     |      |                     |   |                         |  |                           |           |                                     |   |          |                          |   | (3,217,077 | ) |  |   | (3,217,077 | )
|                                         |  |                     |       |                     |   |                          |  |                           |            |                                     |   |           |                          |   |            |   |  |   |            |  
|                                         |  |                     |       |                     |   |                         
|Balance, December 31, 2005               |  |                     | 3,182 |                     |   | 166                      |  |                           | 32,106,429 |                                     |   | 747,930   |                          |   | (6,764,283 | ) |  |   | 26,093,424 |  
|Increase in deferred compensation, net   |  |                     |      |                     |   |                         |  |                           |           |                                     |   | 1,097,058 |                          |   |           |   |  |   | 1,097,058  |  
|Net income                               |  |                     |      |                     |   |                         |  |                           |           |                                     |   |          |                          |   | 4,485,508  |   |  |   | 4,485,508  |  
|Dividends                                |  |                     |      |                     |   |                         |  |                           |           |                                     |   |          |                          |   | (926,353   | ) |  |   | (926,353   | )
|                                         |  |                     |       |                     |   |                          |  |                           |            |                                     |   |           |                          |   |            |   |  |   |            |  
|                                         |  |                     |       |                     |   |                         
|Balance, October 11, 2006                |  | $                   | 3,182 |                     | $ | 166                      |  | $                         | 32,106,429 |                                     | $ | 1,844,988 |                          | $ | (3,205,128 | ) |  | $ | 30,749,637 |  
|                                         |  |                     |       |                     |   |                          |  |                           |            |                                     |   |           |                          |   |            |   |  |   |            |  

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



31



---

ARC CORPORATE REALTY TRUST, INC.

Consolidated Statements of Cash Flows

For the Period January 1, 2006 to October 11, 2006 and Year Ended December 31, 2005 (Going Concern Basis)



|                                                                                                          |  |                                               |             |   |                           |   |             |  
|--------------------------------------------------------------------------------------------------------- |  | --------------------------------------------- | ----------- | - | ------------------------- | - | ----------- | -
|                                                                                                          |  | Period 1/1/06 to10/11/06(Going Concern Basis) |             |   | 2005(Going Concern Basis) |  
|Cash Flows from Operating Activities:                                                                     |  |                                               |             |   |                           |   |             |  
|Net income/Net change in net assets                                                                       |  | $                                             | 4,485,508   |   |                           | $ | 1,943,877   |  
|Adjustments to reconcile net income/net change in net assets to net cash provided by operating activities |  |                                               |             |   |                           |   |             |  
|Adjustments for liquidation basis of accounting                                                           |  |                                               |            |   |                           |   |            |  
|Depreciation and amortization                                                                             |  |                                               | 686,502     |   |                           |   | 1,100,835   |  
|Write off of deferred financing costs                                                                     |  |                                               | 20,952      |   |                           |   | 141,376     |  
|Amortization of stock based compensation                                                                  |  |                                               | 1,097,058   |   |                           |   | 448,758     |  
|Amortization of acquired unfavorable lease                                                                |  |                                               |            |   |                           |   | (139,772    | )
|Minority interest in earnings of subsidiaries                                                             |  |                                               | 3,615,069   |   |                           |   | 224,611     |  
|Impairment charge on disposed property                                                                    |  |                                               |            |   |                           |   | 287,259     |  
|Gain on sale of properties                                                                                |  |                                               | (6,629,366  | ) |                           |   |            |  
|Gain on sale of investment in unconsolidated subsidiary                                                   |  |                                               | (1,546,204  | ) |                           |   | (400,000    | )
|Write off TMD minority interest                                                                           |  |                                               |            |   |                           |   | 26,648      |  
|Loss on interest rate cap                                                                                 |  |                                               | 2,900       |   |                           |   | 16,364      |  
|Equity in income of unconsolidated subsidiaries and undivided interests                                   |  |                                               | (342,580    | ) |                           |   | (1,162,243  | )
|Distributions from unconsolidated subsidiaries and undivided interests                                    |  |                                               | 735,326     |   |                           |   | 1,266,449   |  
|(Increase) decrease in assets:                                                                            |  |                                               |             |   |                           |   |             |  
|Restricted cash                                                                                           |  |                                               | 85,579      |   |                           |   | (93,672     | )
|Rent receivable                                                                                           |  |                                               | (6,079      | ) |                           |   | 41,779      |  
|Deferred rent receivable                                                                                  |  |                                               | 489,294     |   |                           |   | (68,539     | )
|Prepaid expenses and other assets, net                                                                    |  |                                               | (51,669     | ) |                           |   | 1,451       |  
|Increase (decrease) in liabilities:                                                                       |  |                                               |             |   |                           |   |             |  
|Due to related parties                                                                                    |  |                                               | 95,453      |   |                           |   |            |  
|Accounts payable and accrued expenses                                                                     |  |                                               | (177,572    | ) |                           |   | (271,292    | )
|Unearned rent revenue                                                                                     |  |                                               | 285,846     |   |                           |   |            |  
|                                                                                                          |  |                                               |             |   |                           |   |             |  
|Net cash provided by operating activities                                                                 |  |                                               | 2,846,017   |   |                           |   | 3,363,889   |  
|                                                                                                          |  |                                               |             |   |                           |   |             |  
|                                                                                                          |  |                                              
|Cash Flows from Investing Activities:                                                                     |  |                                               |             |   |                           |   |             |  
|Proceeds from the sale of unconsolidated subsidiary                                                       |  |                                               | 2,351,980   |   |                           |   | 400,000     |  
|Net proceeds from sale of property                                                                        |  |                                               | 15,367,141  |   |                           |   | 7,362,720   |  
|Payoff of notes receivable                                                                                |  |                                               | 20,940      |   |                           |   | 800,000     |  
|Principal payments in notes receivable-tenants                                                            |  |                                               |            |   |                           |   | 46,685      |  
|                                                                                                          |  |                                               |             |   |                           |   |             |  
|Net cash provided by (used in) investing activities                                                       |  |                                               | 17,740,061  |   |                           |   | 8,609,405   |  
|                                                                                                          |  |                                               |             |   |                           |   |             |  
|                                                                                                          |  |                                              
|Cash Flows from Financing Activities:                                                                     |  |                                               |             |   |                           |   |             |  
|Mortgage notes principal amortization                                                                     |  |                                               | (538,500    | ) |                           |   | (765,144    | )
|Payoff of principal on mortgage note                                                                      |  |                                               | (9,816,267  | ) |                           |   | (5,217,712  | )
|Borrowings under mortgage notes payable                                                                   |  |                                               | 1,600,000   |   |                           |   |            |  
|Lines of credit, net                                                                                      |  |                                               |            |   |                           |   | (2,247,613  | )
|Deferred financing and other fees                                                                         |  |                                               | (32,677     | ) |                           |   |            |  
|Distributions to minority interest owners                                                                 |  |                                               | (3,609,322  | ) |                           |   | (250,159    | )
|Class A and B dividends paid                                                                              |  |                                               | (763,577    | ) |                           |   | (3,217,077  | )
|                                                                                                          |  |                                               |             |   |                           |   |             |  
|Net cash (used in) provided by financing activities                                                       |  |                                               | (13,160,343 | ) |                           |   | (11,697,705 | )
|                                                                                                          |  |                                               |             |   |                           |   |             |  
|Change in cash and cash equivalents                                                                       |  |                                               | 7,425,735   |   |                           |   | 275,589     |  
|Cash and cash equivalents, beginning of period                                                            |  |                                               | 711,853     |   |                           |   | 436,264     |  
|                                                                                                          |  |                                               |             |   |                           |   |             |  
|Cash and cash equivalents, end of period                                                                  |  | $                                             | 8,137,588   |   |                           | $ | 711,853     |  
|                                                                                                          |  |                                               |             |   |                           |   |             |  
|Supplement Disclosure of Cash Flow Information:                                                           |  |                                               |             |   |                           |   |             |  
|Cash payments for interest                                                                                |  | $                                             | 1,518,035   |   |                           | $ | 2,208,793   |  
|                                                                                                          |  |                                               |             |   |                           |   |             |  

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



32



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



|1. | GENERAL
|-- | -------

ARC Corporate Realty Trust, Inc. and
subsidiaries (ACRT) is a corporation which was formed under the laws of the State of Maryland on June 25, 1993. ACRT operates in a manner intended to enable it to qualify as a real estate investment trust (REIT) under
Sections 856-860 of the Internal Revenue Code (the Code). ACRT is managed by ARC Capital Advisors L.P. (Advisor), which performs services for ACRT pursuant to the advisory agreement (the Advisory Agreement) (Note
6). ACRT was formed to purchase geographically diverse credit lease properties which are general purpose retail, office and industrial properties each 100% leased to one or more creditworthy tenants under a long term lease that generally requires
tenants to pay most or all of the operating costs of the property including real estate taxes and insurance.

ACRT raised $33,678,336 of
gross proceeds (net of stock retirements) representing 3,181,540 Class A shares from 674 investors which, net of offering costs, has yielded $30,545,106 to ACRT. In addition, ACRT has raised $1,781,735 of gross proceeds representing 166,397
Class B shares from one investor, which, net of offering costs, has yielded $1,564,671 to ACRT.

On February 8, 2006, the board of
directors approved the adoption of a Plan of Liquidation and Dissolution (the Plan). ACRT intends to sell its real estate properties on an orderly basis, to pay or provide for its liabilities and to distribute its remaining cash to its
shareholders.

On October 12, 2006, ACRTs shareholders approved the Plan. Effective October 12, 2006, ACRT changed its basis
of accounting from the going concern basis to the liquidation basis of accounting, which requires ACRT to record all of its assets and liabilities at fair market value at October 12, 2006 and at each subsequent reporting period.

The Plan calls for the orderly sale of all of ACRTs assets and the payment of (or provision for) our liabilities and expenses, as well as the
establishment of a reserve to fund contingent liabilities and anticipated expenses. The principal purpose of the liquidation is to maximize stockholder value by liquidating ACRTs assets and distributing net proceeds of the liquidation to its
shareholders. ACRT intends to continue to market the remaining properties and to sell these properties on the most favorable terms possible. ACRT believes this marketing process is likely to maximize the consideration received for these properties.
ACRT will continue to evaluate the marketing process throughout the liquidation process in order to ensure the sale of the remaining properties in the most economically attractive manner. At such time as ACRT has sold its properties, satisfied its
liabilities, and distributed the net proceeds of the sales to the stockholders, ACRT will cancel all outstanding shares of Common Stock, file Articles of Dissolution with the State Department of Assessments and Taxation of Maryland and ACRT will
cease to exist. ACRT expects to complete the liquidation within 24 months from the adoption of the Plan by the stockholders, which was October 12, 2006.

On August 10, 2005, ACRT sold the Philadelphia, Pennsylvania property leased to Barnes and Noble to an affiliate for approximately $7,734,000.

On May 23, 2006, ACRT sold its partnership interest in Fort Washington Fitness, LP which owns the property in Fort Washington, Pennsylvania leased to
LA Fitness, to its joint venture partner for $2,500,000.

On June 15, 2006, the property located in Overland Park, Kansas leased to
Borders Books and Bed, Bath and Beyond, was sold to an unrelated third party for $13,600,000.

On October 6, 2006, the property located
in Norcross, Georgia leased to AT&T was sold to an unrelated third party for $2,270,000.

On October 25, 2006, ACRT sold its tenant
in common interest in the Paramus, New Jersey property leased to Babys R Us, Levitz Furniture and Wade, Odell, Wade to a related party for approximately $9,121,000.



33



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



On March 5, 2007, the following properties were sold to an unrelated third party:



|                              |  |                                   |  |               |          
|----------------------------- |  | --------------------------------- |  | ------------- | ---------
|Property                      |  | Tenant                            |  | Selling Price
|Wichita, Kansas               |  | OfficeMax, Circuit City           |  | $             | 8,760,201
|Charlotte, North Carolina     |  | Caromont Medical                  |  |               | 9,205,970
|Montgomeryville, Pennsylvania |  | A.C. Moore, Thomasville Furniture |  |               | 9,699,417
|Memphis, Tennessee            |  | Walgreens Cos.                    |  |               | 2,200,000
|Lilburne Georgia              |  | Sports Authority, OfficeMax       |  |               | 7,928,869
|Marietta, Georgia             |  | Hollywood Video                   |  |               | 2,205,543

On March 12, 2007, ACRT sold its partnership interest the Whitestone, NY partnership for
$5,469,450 to its joint venture partner in the deal.

On March 14, 2007, the property located in Sacramento, California leased to GART
Sports was sold to an unrelated third party for $8,250,000.

On May 17, 2007, the property located in Rochelle Park, New Jersey leased
to Bergen County Board of Social Services was sold to an unrelated third party for $20,800,000. ACRTs share of the sales price for its 51% tenant in common interest was $10,608,000.

On August 2, 2007, the property located in Plymouth, Indiana leased to United Technologies Inc. was sold to an unrelated third party for $3,450,000.

On November 28, 2007, ACRT sold its partnership interest in the Woodcliff Lake, New Jersey property to an unrelated third party for
$830,000.



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------



| | a. | Basis of Presentation  Prior to the approval of the Plan by ACRTs shareholders on October 12, 2006, ACRT prepared its financial statements
under the going concern basis of accounting.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of ACRTs board of directors adoption of the Plan and its
approval by its stockholders on October 12, 2006, ACRT adopted the liquidation basis of accounting. Accordingly on that date, ACRTs assets were adjusted to their estimated fair value and ACRTs liabilities, including estimated costs
associated with implementing the Plan, were adjusted to their estimated settlement amounts. All non monetary assets such as deferred rent receivable, deferred financing fees and deferred leasing costs were written off. The minority interest in
ACRTs Overland Park, Kansas and Wichita, Kansas properties were adjusted to reflect the minority interest at its settlement value based upon the valuation of the related assets and liabilities.



| | b. | Use of Estimates  The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | Properties  Prior to October 12, 2006, properties were carried at cost which included the purchase price, acquisition fees, and any other costs incurred in
acquiring the properties. Buildings were depreciated on a straight-line basis over their estimated useful lives, which were 40 years. Maintenance and repairs are charged to expense as incurred. Replacements and betterments, which significantly
extend the useful lives of a property, are capitalized. In accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, ACRT was amortizing certain intangible costs associated
with property acquisitions over the lives of the leases underlying the properties (see Note 2e).
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On October 12, 2006,
with the approval of the Plan by ACRTs shareholders, ACRTs properties were adjusted to their estimated fair value. The valuation of real estate held for sale as of December 31, 2007 is based on fair value which was determined by
either current contracts for sale and estimates of sales values based on an independent appraisal of the real estate and indications of value based upon the marketplace.



34



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



| | d. | Reserve for Estimated Costs during Period of LiquidationUnder the liquidation basis of accounting, ACRT is required to estimate and accrue the costs
associated with implementing the Plan. These amounts can vary significantly due to, among other factors, the timing and amounts associated with the discharging of known and contingent liabilities and costs associated with the cessation of
operations. The costs are estimated and are expected to be paid over the liquidation period (see Note 3 on Liquidation Basis of Accounting).
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | Purchase Accounting for the Acquisition of Real EstateIn accordance with SFAS No. 141, commencing with properties acquired after
June 30, 2002 through October 12, 2006, the fair value of real estate acquired was allocated to the acquired tangible assets, consisting of land and building and identified intangible assets and liabilities, consisting of the value of
above-market and below-market leases, other value of in-place leases and value of tenant relationships, based in each case on their fair values. The fair value of the tangible assets of an acquired property (which includes land and building) was
determined by valuing the property as if it were vacant, and the as-if vacant value was then allocated to land and building based on managements determination of relative fair values of these assets. Factors considered by
management in performing these analyses included an estimate of carrying costs during the expected lease up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management included real
estate taxes, insurance and other operating expenses and estimates of lost rental revenues during expected lease up periods based on current market demand. Management also estimated costs to execute similar leases including leasing commissions.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and
below-market in-place lease values were recorded based on the difference between the current in-place lease rent and managements estimate of current market rent.

The aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, was measured by the excess of (i) the purchase price paid for a property over (ii) the
estimated fair value of the property as if vacant, determined as set forth above. This aggregate value was allocated between in-place lease values and tenant relationships based on managements evaluation of the specific characteristics of each
tenants lease. Prior to the adoption of the Plan, the value of in-place leases and customer relationships were amortized to expense over the remaining non-cancelable periods of the respective leases.



| | f. | ImpairmentPrior to the adoption of the Plan, ACRT assessed the recoverability of its properties by determining whether the costs could be
recovered through projected undiscounted cash flows. The amount of impairment, if any, was measured by comparing the carrying amounts to the fair values of such properties. The evaluation included reviewing anticipated cash flows of the properties,
based on current leases in place, coupled with an estimate of proceeds to be realized upon sale. However, estimating future sales proceeds is highly subjective and such estimates could differ materially from actual results.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SFAS No. 144 Accounting for the Impairment or Disposal of Long Lived Assets updated and clarified the accounting and reporting
for the impairment of assets held in use and to be disposed of. The Statement, among other things, required ACRT to classify the operations of properties to be disposed of as discontinued operations.

During the year ended December 31, 2005, ACRT sold one property located in Philadelphia, Pennsylvania, previously designated as to be disposed and
for which an impairment charge of $287,259 was recorded, which included a disposition fee of $116,016. This property was sold on August 10, 2005 for aggregate net proceeds of $7,362,720, which resulted in no gain or loss for financial reporting
purposes.

The following presents the operating results for the properties sold for the applicable periods:



|                                    |  |                                                   |            |   |                             |   |            |  
|----------------------------------- |  | ------------------------------------------------- | ---------- | - | --------------------------- | - | ---------- | -
|                                    |  | For the PeriodJanuary 1, 2006 to October 11, 2006 |            |   | Year Ended December 31,2005 |  
|Revenues                            |  | $                                                 | 1,276,236  |   |                             | $ | 3,055,757  |  
|Expenses                            |  |                                                   | (709,316   | ) |                             |   | (2,439,220 | )
|Gain on sale of property            |  |                                                   | 6,629,366  |   |                             |   |           |  
|Minority interest                   |  |                                                   | (3,561,601 | ) |                             |   | (166,246   | )
|                                    |  |                                                   |            |   |                             |   |            |  
|Income from discontinued operations |  | $                                                 | 3,634,685  |   |                             | $ | 450,291    |  
|                                    |  |                                                   |            |   |                             |   |            |  



35



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



| | g. | Cash and Cash EquivalentsCash and cash equivalents consist of highly liquid investments with an original maturity of three months or less.
Restricted cash represents cash maintained for real estate taxes, insurance and capital expenditures.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cash and cash
equivalent balances may exceed insurable limits. ACRT believes it mitigates risk by investing in or through major financial institutions.

ACRT has not prepared a statement of cash flows for 2007 as it is not required under the liquidation basis of accounting.



| | h. | Rent Receivable ACRT continuously monitors collections from its tenants and makes a provision for estimated losses based upon historical
experience and any specific tenant collection issues that ACRT has identified.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | i. | Amortization Prior to the adoption of the Plan, deferred financing and other fees were amortized using the straight-line method over the life of the
related mortgage or line of credit. Deferred leasing costs were amortized using the straight-line method over the life of the related lease. Capitalized costs related to ACRTs equity investments were amortized over the estimated useful life of
the underlying real estate assets.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On October 12, 2006 with the approval of the Plan by the ACRTs shareholders,
all deferred costs were written-off.



| | j. | Income Taxes  ACRT operates in a manner intended to enable it to qualify as a REIT under Sections 856-860 of the Code. Under these sections, a real estate
investment trust which distributes at least 90% of its real estate investment trust taxable income to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to
its shareholders. ACRT pays state taxes, which are not significant.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | k. | Revenue Recognition  Prior to the adoption of the Plan, rental revenue from tenant operating leases which provide for scheduled rental increases were
recognized on a straight-line basis over the term of the respective leases.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On October 12, 2006, with the approval of
the Plan by the ACRTs shareholders, all previously recorded deferred rent receivable was written off and rental revenue is recognized in accordance with the contractual terms of the leases.

Gains on sales of real estate are recognized pursuant to the provisions of SFAS No. 66, Accounting for Sales of Real Estate. The
specific timing of the sale is measured against various criteria in SFAS No. 66 related to the terms of the transactions and any continuing involvement in the form of management or financial assistance associated with the properties. If the
sales criteria are not met, the gain is deferred and the finance, installment or cost recovery method, as appropriate, is applied until the sales criteria are met.



| | l. | Derivative Instruments and Hedging Activities  ACRT follows the provisions of SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended. The Statement generally requires that all derivative instruments be reflected in the consolidated financial statements at their estimated fair value. Changes in the fair value of non-hedging instruments are
reported in current period earnings.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | m. | Earnings Per Share Prior to the adoption of the Plan, basic net income per share was computed by dividing net income allocable to Class A and
B common shareholders by the weighted average number of shares outstanding during the period. Diluted net income per share amounts were similarly computed but include the effect, when dilutive, of in the money common share options.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



36



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



The following is a reconciliation of the denominator of the basic and diluted weighted average number
of common shares outstanding.



|                                                                                           |  |                                             |  |                            
|------------------------------------------------------------------------------------------ |  | ------------------------------------------- |  | ---------------------------
|                                                                                           |  | For the PeriodJanuary 1 to October 11, 2006 |  | Year Ended December 31,2005
|                                                                                           |  | (in thousands)                             
|Total weighted average Class A common shares                                               |  | 3,182                                       |  | 3,182                      
|Total weighted average Class B common shares                                               |  | 166                                         |  | 166                        
|                                                                                           |  |                                             |  |                            
|Weighted average number of common shares used in calculation of basic earnings per share   |  | 3,348                                       |  | 3,348                      
|Shares issuable on exercise of warrants                                                    |  | 104                                         |  | 104                        
|Shares issuable upon exercise of stock options (15% of outstanding common shares)          |  | 502                                         |  | 502                        
|                                                                                           |  |                                             |  |                            
|Weighted average number of common shares used in calculation of diluted earnings per share |  | 3,954                                       |  | 3,954                      
|                                                                                           |  |                                             |  |                            



| | n. | Recent Accounting Pronouncements  In December 2004, the FASB issued SFAS No. 123R Accounting for Stock-Based Compensation. The statement
supersedes APB Opinion No. 25 Accounting for Stock Issued to Employees. The statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It
also addresses transactions in which an entity incurs liabilities in exchange for goods and services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of those equity instruments. The
statement is effective as of the beginning of the first quarter of 2006. The adoption of this pronouncement did not have a material impact on ACRTs consolidated financial position or results of operations.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations-an Interpretation of SFAS
Statement No. 143 (FIN 47). FIN 47 clarifies the timing of liability recognition for legal obligations associated with the retirement of tangible long-lived asset when the timing and/or method of settlement are conditional on a future
event. FIN 47 is effective for fiscal years ending after December 15, 2005. ACRT adopted FIN 47 on December 31, 2005. The adoption did not have any impact on ACRTs consolidated financial statements.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections which replaces Accounting Principles Board
Opinions No. 20 Accounting Changes and SFAS No. 3 Reporting Accounting Changes in Interim Financial Statements An Amendment of APB Opinion No. 28. SFAS No. 154 provides guidance on the
accounting for and reporting of accounting changes and error corrections. It establishes retrospective application as the required method for reporting a change in accounting principle and the reporting of a correction of an error. The adoption of
this statement had no impact on ACRTs consolidated financial position or results of operations.

In June 2005, the FASB ratified the
Emerging Issues Task Forces (EITF) consensus on EITF 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 provides a framework for determining whether a general partner controls, and should consolidate, a limited partnership or a similar entity. It was effective after June 29, 2005, for all newly formed limited partnerships and for any
pre-existing partnerships that modify their partnership agreements after that date. General partners of all other limited partnerships will apply the consensus no later than the beginning of the first reporting period in fiscal years beginning after
December 15, 2005. The adoption of EITF 04-05 did not have a material impact on ACRTs consolidated financial position or results of operations.

In 2005, the EITF released Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements (EITF 05-6), which clarifies the period over which leasehold improvements should be
amortized. EITF 05-6 requires all leasehold improvements to be amortized over the shorter of the useful life of the assets, or the applicable lease term, as defined. The applicable lease term is determined on the date the leasehold improvements are
acquired and includes renewal periods for which exercise is reasonably assured. EITF 05-6 was effective for leasehold improvements acquired in reporting periods beginning after June 29, 2005. The adoption of EITF 05-6 did not have a material
impact on ACRTs consolidated financial position or results of operations.



37



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



In June 2006, FASB issued Interpretation No. 48 Accounting for Uncertainty in Income
Taxes-an Interpretation of FASB No. 109. FIN 48 provides guidance on recognition and measurement of uncertainties in income taxes and is applicable for fiscal years beginning after December 15, 2006. The adoption did not have a
material impact on ACRTs consolidated financial statements.

In September 2006, FASB issued SFAS No. 157, Fair Value
Measurements, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. The Statement explains key concepts that are needed to apply the definition, including
market participants, the markets in which the company would exchange the asset or liability, and the valuation premise that follows from assumptions market participants would make about the use of an asset. SFAS No. 157 is effective
for fiscal years beginning after November 15, 2007, and interim periods with those fiscal years. Management is currently evaluating the impact of SFAS No. 157 on the consolidated financial statements.

In September 2006, the SEC Staff issued SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements (SAB 108). SAB 108 provides guidance for SEC registrants on how the effects of uncorrected errors originating in previous years should be considered when quantifying errors in the current year. SAB 108 was issued to
eliminate diversity in practice for quantifying uncorrected prior year misstatements (including prior year unadjusted audit differences) and to address weaknesses in methods commonly used to quantify such misstatements (i.e., the
rollover and iron curtain methods). SAB 108 does not amend the SECs existing guidance for evaluating the materiality of errors included in SAB 99,Materiality. The initial application of the guidance did not have
a significant impact on ACRTs consolidated financial statements.

In February 2007, FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities  Including an amendment of SFAS No. 115.This Statement permits entities to choose to measure many financial instruments at fair value. This standard allows entities to achieve an
offset accounting effect for certain changes in fair value of certain related assets and liabilities without having to apply complex hedge accounting provisions, and is expected to expand the use of fair value measurement consistent with the
FASBs long-term objectives for financial instruments. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007.Management is currently evaluating the impact of SFAS
No. 159 on the consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations (SFAS 141(R)), and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51 (SFAS 160). SFAS 141(R) will significantly change how
business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 141(R) requires the acquiring entity in a business combination to recognize all the assets acquired and
liabilities assumed in the transaction, including contingent consideration, and also requires acquisition related costs to be expensed as incurred. SFAS 160 will change the accounting and reporting for minority interests, which will be
recharacterized as noncontrolling interests and classified as a component of equity. SFAS 141(R) and SFAS 160 are both effective for periods beginning on or after December 15, 2008. SFAS 141(R) will be applied prospectively. SFAS 160 requires
retroactive adoption of the presentation and disclosure requirements for existing minority interests and other requirements of SFAS 160 will be applied prospectively. The adoptions of these two statements are not expected to have a material impact
on the Companys financial position or results of operations.



| | o. | Stock-based CompensationOn May 21, 2004, ACRT shareholders approved revisions to ACRTs 1997 Stock Option Plan which extended the life of
ACRTs stock options from ten to fifteen years and removed all restrictions on their exercise on April 1, 2008 or upon the occurrence of certain earlier events. However, the total number of options exercised cannot exceed fifteen percent
of the outstanding shares at the exercise date.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Accordingly, ACRT recognizes compensation expense ratably over the vesting
period for variable stock awards previously granted under the plan. For the period from January 1, 2006 to October 11, 2006 and for the year ended December 31, 2005, ACRT recognized stock based compensation expense totaling $1,097,058
and $448,758, respectively.

Compensation expense was calculated through December 31, 2005 using a market price of $12.00 based on
ACRTs last stock offering which expired on December 31, 2003, and the option price of $8.50 per option. The compensation expense was adjusted in the first quarter of 2006 to reflect the current projected liquidation price of $13.50 a
share.



38



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



On December 21, 2006, the board of directors terminated the existing ACRT Stock Options program
and replaced it with a Stock Option Settlement Agreement. Under the Stock Option Settlement Agreement, no dividends are paid to the holders of the Settlement Agreement until the existing Class A and Class B shareholders receive liquidating
dividends in the amount of $8.50 (the original option exercise price) after which the holders of the Stock Option Settlement Agreement will receive dividends with the existing Class A and Class B shareholders.



| | p. | Fair Value of Financial Instruments
| | -- | -----------------------------------

Cash Equivalents, Notes Receivable, Rent Receivable and Accounts Payable and Accrued Expenses

ACRT estimates that the fair
value approximates carrying value due to the relatively short maturities of the instruments.

Mortgage Notes Payable and Lines of
Credit

ACRT determines the fair value of these instruments based on a discounted cash flow analysis using a discount rate that
approximates the current borrowing rates for instruments of similar maturities. Based on this analysis, ACRT has determined that the fair value of these instruments approximates their carrying values.



| | q. | Industry SegmentsACRT operates in one industry segment, investments in credit lease properties.
| | -- | ------------------------------------------------------------------------------------------------



| | r. | Environmental MattersBased upon managements ongoing review of its properties, management is not aware of any environmental conditions with
respect to any of ACRTs properties, which would be reasonably likely to have a material adverse effect on ACRT or would require accrual or disclosure in accordance with FIN47. There can be no assurance, however, that the discovery of
environmental conditions which were previously unknown, changes in law, the conduct of tenants or activities relating to properties in the vicinity of ACRTs properties, will not expose ACRT to material liability in the future. Changes in law
increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the
operations of ACRTs tenants, which would adversely affect ACRTs consolidated financial condition and results of operations.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | s. | ReclassificationsCertain reclassifications were made to prior period amounts to conform with the current period presentation.
| | -- | ------------------------------------------------------------------------------------------------------------------------------



|3. | LIQUIDATION BASIS ACCOUNTING
|-- | ----------------------------

ACRT has adopted the
liquidation basis of accounting for all periods subsequent to October 12, 2006, the date on which the shareholders approved the Plan. Accordingly, on October 12, 2006, the assets were adjusted to their estimated fair value and the
liabilities, including estimated costs associated with implementing the Plan, were adjusted to their estimated settlement amounts. All non monetary assets such as deferred rent receivable, deferred financing fees and deferred leasing costs were
written off. The minority interest in ACRTs Overland Park, Kansas and Wichita, Kansas properties were adjusted to reflect the minority interest at its settlement value based upon the valuation of the related assets and liabilities.



39



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



Below are a Consolidated Statement of Net Assets as of October 12, 2006 under the liquidation
basis of accounting and the Consolidated Balance Sheet under the going concern basis of accounting.



|                                                                  |  |                   |            |                     |   |           
|----------------------------------------------------------------- |  | ----------------- | ---------- | ------------------- | - | ----------
|                                                                  |  | Liquidation Basis |            | Going Concern Basis
|Assets                                                            |  |                   |            |                     |   |           
|Investment in real estate                                         |  | $                 | 54,224,928 |                     | $ | 27,474,527
|Investment in unconsolidated subsidiaries and undivided interests |  |                   | 14,778,222 |                     |   | 6,835,578 
|Assets held for sale                                              |  |                   |           |                     |   | 5,809,281 
|Cash and cash equivalents                                         |  |                   | 8,137,588  |                     |   | 8,137,588 
|Restricted cash                                                   |  |                   | 432,128    |                     |   | 432,128   
|Deferred rent receivable                                          |  |                   |           |                     |   | 463,790   
|Rent receivable                                                   |  |                   | 201,167    |                     |   | 201,167   
|Prepaid expenses and other assets, net                            |  |                   | 102,127    |                     |   | 297,659   
|Deferred financing and other fees                                 |  |                   |           |                     |   | 151,247   
|Deferred leasing costs                                            |  |                   |           |                     |   | 32,710    
|                                                                  |  |                   |            |                     |   |           
|Total Assets                                                      |  | $                 | 77,876,160 |                     | $ | 49,835,675
|                                                                  |  |                   |            |                     |   |           
|                                                                  |  |                  
|Liabilities                                                       |  |                   |            |                     |   |           
|Mortgage notes payable                                            |  | $                 | 17,640,260 |                     | $ | 13,615,260
|Liabilities related to assets held for sale                       |  |                   |           |                     |   | 4,034,317 
|Dividends payable  Class B                                       |  |                   | 162,776    |                     |   | 162,776   
|Due to related parties                                            |  |                   | 140,514    |                     |   | 140,514   
|Due to joint venture partners                                     |  |                   | 392,907    |                     |   | 392,907   
|Unearned rental revenue                                           |  |                   | 317,096    |                     |   | 317,096   
|Accounts payable and accrued expenses                             |  |                   | 394,666    |                     |   | 385,349   
|Reserve for estimated costs during period of liquidation          |  |                   | 13,610,650 |                     |   |          
|                                                                  |  |                   |            |                     |   |           
|Total Liabilities                                                 |  |                   | 32,658,869 |                     |   | 19,048,219
|                                                                  |  |                   |            |                     |   |           
|Minority Interest                                                 |  |                   | 1,521,419  |                     |   | 37,819    
|                                                                  |  |                   |            |                     |   |           
|Net Assets in Liquidation/Shareholders Equity                    |  | $                 | 43,695,872 |                     | $ | 30,749,637
|                                                                  |  |                   |            |                     |   |           

The following adjustments and write-offs were made to convert the Consolidated Balance Sheet to
the October 12, 2006 Consolidated Statement of Net Assets in Liquidation.



| |  |  | a $21,238,679 write-up of land and building to estimated fair market value and the elimination of assets held for sale which are now included in property.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a $8,426,806 write-up of our investments in unconsolidated subsidiaries and undivided interest to estimated fair market value.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | a $13,610,650 liquidation reserve for costs associated with the implementation and execution of the liquidation including settlement of ACRTs options and
warrants, mortgage settlement costs, property closing costs, commissions, professional fees, contingencies and transfer taxes related to the sale of properties, and incentive fees and disposition fees due to the Advisor.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a $1,498,468 write-up of the minority interest to record our joint venture partners share of the net assets of the consolidated entities at fair value.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a $431,438 charge for the write-off of deferred mortgage, leasing and financing costs.
| | - |  | --------------------------------------------------------------------------------------



| |  |  | a $709,400 charge for the write-off of deferred rent receivables.
| | - |  | -----------------------------------------------------------------

Under the liquidation basis of accounting, ACRT is required to estimate and accrue the costs associated with implementing the Plan. The estimated amounts can be significantly impacted due to, among other things, the
costs of disposition fees to the Advisor, incentive fees to the Advisor, retiring mortgages, property sales commissions and other costs associated with discharging the known and contingent liabilities of ACRT. As a result, ACRT has recorded an
estimated liability for amounts expected to be incurred during the projected period required to complete the liquidation of ACRTs assets. These estimates could change materially based on the timing of the anticipated sales, the
performance of the underlying assets or modifications to the Agreement. Periodically, as the facts and circumstances associated with the disposition of ACRTs assets change, the reserve for estimated costs during period of liquidation will
be reviewed and adjusted as appropriate.



40



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



The following table represents the reserve for estimated costs during the period of liquidation from
December 31, 2006 thru December 31, 2007:



|                                                         |  |                   |            |                    |   |            |                  |  |   |                   |   |  |   |          
|-------------------------------------------------------- |  | ----------------- | ---------- | ------------------ | - | ---------- | ---------------- |  | - | ----------------- | - |  | - | ---------
|                                                         |  | December 31, 2006 |            | ActualDisbursement |   |            | Change inReserve |  |   | December 31, 2007
|Disposition fee due to advisor                           |  | $                 | 2,099,803  |                    | $ | (2,245,269 | )                |  | $ | 265,741           |   |  | $ | 120,275  
|Incentive fee due to advisor                             |  |                   | 3,306,205  |                    |   |           |                  |  |   | 379,729           |   |  |   | 3,685,934
|Mortgage retirement costs                                |  |                   | 1,969,318  |                    |   | (1,547,513 | )                |  |   | (421,805          | ) |  |   |         
|Settlement of options and warrants                       |  |                   | 3,227,152  |                    |   | (2,976,704 | )                |  |   | 220,922           |   |  |   | 471,370  
|Property sales commissions                               |  |                   | 1,308,498  |                    |   | (1,265,210 | )                |  |   | 22,712            |   |  |   | 66,000   
|Other                                                    |  |                   | 1,699,674  |                    |   | (597,655   | )                |  |   | (814,505          | ) |  |   | 287,514  
|                                                         |  |                   |            |                    |   |            |                  |  |   |                   |   |  |   |          
|Reserve for estimated costs during period of liquidation |  | $                 | 13,610,650 |                    | $ | (8,632,351 | )                |  | $ | (347,206          | ) |  | $ | 4,631,093
|                                                         |  |                   |            |                    |   |            |                  |  |   |                   |   |  |   |          

On January 31, 2007, ACRT made a liquidation distribution of $2.00 per share to shareholders
of record on December 31, 2006, totaling $6,695,934.

On April 30, 2007, ACRT made a liquidation distribution of $7.30 per share
to shareholders of record on March 31, 2007, totaling $24,440,164 and also made a distribution to stock option settlement holders of $.80 per share, totaling $479,176.

On July 30 and July 31, 2007, ACRT made a liquidation distribution totaling $1.68 per share to shareholders of record on May 31, 2007 and
June 30, 2007, totaling $5,624,586 and also made a distribution to stock option settlement holders and warrant settlement holders of $1.68 per share, totaling $1,010,650 and $56,263, respectively.

On August 31, 2007, ACRT made a liquidation distribution totaling $2.02 per share to Class A shareholders of record on July 31, 2007
totaling $6,426,773 and also made a distribution to stock option settlement holders and warrant settlement holders of $2.02 per share, totaling $1,218,949 and $211,666, respectively. On November 27, 2007 ACRT made a liquidating distribution to
Class B shareholders of $2.02 per share, totaling $336,122.



|4. | PROPERTIES AND PROPERTY INVESTMENTS
|-- | -----------------------------------

On
January 3, 2005, an affiliate of the Advisor exercised its right to purchase ACRTs property located in Philadelphia, PA leased to Barnes and Noble, for approximately $7.7 million. ACRT has recorded an impairment charge of $287,259 in
connection with the transaction in 2005. On August 10, 2005, ACRT sold the property for net proceeds to ACRT of $7,362,720 after costs and expenses, which resulted in no gain or loss for financial reporting purposes.

On June 15, 2006, the property located in Overland Park, Kansas leased to Borders Books and Bed, Bath and Beyond, was sold to an unrelated third
party for $13,600,000, which resulted in a gain for financial reporting purposes of $6,137,479.

On October 6, 2006, the property
located in Norcross, Georgia leased to AT&T was sold to an unrelated third party for $2,270,000, which resulted in a gain for financial reporting purposes of $491,887.

On March 5, 2007, the following properties were sold to an unrelated third party:



|                              |  |                                   |  |               |          
|----------------------------- |  | --------------------------------- |  | ------------- | ---------
|Property                      |  | Tenant                            |  | Selling Price
|Wichita, Kansas               |  | OfficeMax, Circuit City           |  | $             | 8,760,201
|Charlotte, North Carolina     |  | Caromont Medical                  |  |               | 9,205,970
|Montgomeryville, Pennsylvania |  | A.C. Moore, Thomasville Furniture |  |               | 9,699,417
|Memphis, Tennessee            |  | Walgreens Cos.                    |  |               | 2,200,000
|Lilburne Georgia              |  | Sports Authority, OfficeMax       |  |               | 7,928,869
|Marietta, Georgia             |  | Hollywood Video                   |  |               | 2,205,543

On March 14, 2007, the Sacramento, California property leased to Sports Authority was sold
for $8,250,000 to an unrelated third party.



41



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



On August 2, 2007, the property located in Plymouth, Indiana leased to United Technologies Inc.
was sold to an unrelated third party for $3,450,000.

As of December 31, 2007, ACRT owned one property located in San Antonio, Texas
leased to Sears. This property was sold on February 14, 2008 to an unrelated third party for $2,200,000

During 2007, ACRT recorded a
net charge of $316,636 for changes in its estimate fair value of real estate investments, which is summarized as follow:



|                    |  |                    |            |  
|------------------- |  | ------------------ | ---------- | -
|                    |  | Increase(decrease) |           
|Wichita, KS         |  | $                  | (372,054   | )
|Charlotte, NC       |  |                    | 386,637    |  
|Montgomeryville, PA |  |                    | 1,266,287  |  
|Lilburne, GA        |  |                    | (217,466   | )
|Marietta, GA        |  |                    | 330,434    |  
|Memphis, TN         |  |                    | (8,231     | )
|Sacramento, CA      |  |                    | 290,908    |  
|Plymouth, IN        |  |                    | (895,996   | )
|San Antonio, TX     |  |                    | (1,105,447 | )
|Rochelle Park, NJ   |  |                    | 342,718    |  
|Woodcliff Lake, NJ  |  |                    | (7,085     | )
|Levittown, PA       |  |                    | (327,341   | )
|                    |  |                    |            |  
|Total               |  | $                  | (316,636   | )
|                    |  |                    |            |  



|5. | INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES AND UNDIVIDED INTERESTS
|-- | -----------------------------------------------------------------

Prior to the adoption of the Plan on October 12, 2006, investments in non-controlled entities, which included the investments listed below, were accounted for under the equity method. Under the equity method,
ACRTs investment increases as a result of contributions and its allocable share of net income and decreases as a result of distributions and its allocable share of net losses. After the adoption of the Plan on October 12, 2006, all
investments in non-controlled entities were adjusted to their estimated fair market value and any distributions received that are not a return of investment are recorded as income.

ACRTs investment in unconsolidated subsidiaries and undivided interest is as follows:



|                                                  |  |           |      |  |              |         |  |   |           
|------------------------------------------------- |  | --------- | ---- |  | ------------ | ------- |  | - | ----------
|                                                  |  | %Interest |      |  | December 31,
|                                                  |  |           | 2007 |  | 2006        
|Triangle Plaza II, LLC (Triangle)                 |  | 40        | %    |  | $            |        |  | $ | 5,469,540 
|Levittown ARC LP (Levittown)                      |  | 20        | %    |  |              | 300,000 |  |   | 627,341   
|Rochelle Park ACRT, LLC (Rochelle)                |  | 51        | %    |  |              |        |  |   | 4,828,539 
|ARC International Fund II, LP (ARC International) |  | 11.2      | %    |  |              |        |  |   | 835,857   
|                                                  |  |           |      |  |              |         |  |   |           
|Total                                             |  |           |      |  | $            | 300,000 |  | $ | 11,761,277
|                                                  |  |           |      |  |              |         |  |   |           

ACRTs equity in income (loss) of unconsolidated subsidiaries and undivided interests is as
follows:



|                                                  |  |      |   |  |      |         |      |   |         |      |  |   |           |  
|------------------------------------------------- |  | ---- | - |  | ---- | ------- | ---- | - | ------- | ---- |  | - | --------- | -
|                                                  |  |      |   |  | 2007 |         | 2006 |   |         | 2005 | 
|Triangle Plaza II, LLC (Triangle)                 |  | 40   | % |  | $    | 15,000  |      | $ | (18,027 | )    |  | $ | 476,389   |  
|Levittown ARC LP (Levittown)                      |  | 20   | % |  |      | 18,000  |      |   | 1,912   |      |  |   | (2,477    | )
|Rochelle Park ACRT, LLC (Rochelle)                |  | 51   | % |  |      | 204,000 |      |   | 152,484 |      |  |   | 293,287   |  
|Paramus ACRT, LLC (Paramus)                       |  | 40   | % |  |      |        |      |   | 247,808 |      |  |   | 206,742   |  
|ARC International Fund II, LP (ARC International) |  | 11.2 | % |  |      | 108,776 |      |   | 45,188  |      |  |   | 57,561    |  
|Fort Washington Fitness, LP (Fort Washington)     |  | 50   | % |  |      |        |      |   | 47,403  |      |  |   | 130,741   |  
|                                                  |  |      |   |  |      |         |      |   |         |      |  |   |           |  
|Total                                             |  |      |   |  | $    | 345,776 |      | $ | 476,768 |      |  | $ | 1,162,243 |  
|                                                  |  |      |   |  |      |         |      |   |         |      |  |   |           |  



42



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



Certain of Partnership or LLC agreements for investments in real estate investment contain provisions
that stipulate a disproportionate sharing of cash flow among the investors after a specified rate of return has been achieved. Accordingly, the cash flow distributed to ACRT from an investment in real estate may not be proportionate to ACRTs
ownership interest.

Triangle

On January 5, 2005, a subsidiary of ACRT (Whitestone) sent to the joint venture partner a notice of right of first refusal to purchase Whitestones interest in the property at a price and other terms as set forth in
the notice, subject to an attached form of contract that required both shareholder and board of director approval. Subsequently, ACRT discovered that the calculation used to allocate capital proceeds in the contemplated sale, prepared by a third
party, was incorrectly allocated and as a result management and the board of directors of ACRT did not approve the terms of the sale. In addition, ACRT believes the joint venture partner, due to their unique insight into the value of the interest as
the manager of the property, was aware that the capital proceeds were incorrectly allocated. The joint venture partner has refused to accept a revised purchase price calculation, which necessitated ACRT bringing suit to halt the sale. On
April 1, 2005, ACRTs joint venture partner filed a separate lawsuit against Whitestone compelling a sale of ACRTs interest under the terms of the original right of first refusal.

In March 2005, ACRT brought suit against its joint venture partner regarding the exercise of a right of first refusal on the purchase of ACRTs
interest in Triangle. On October 5, 2006, the New York Supreme Court ruled that ACRT must sell its Triangle investment for $5.4 million and required ACRT to return a distribution it received in 2005 of $340,869 with accrued interest of
approximately $43,000. As a result of the October 5, 2006 court ruling, ACRT will not receive its share of earnings from Triangle in 2006 and has ceased accounting for Triangle on the equity method. On January 25, 2007, ACRT and its joint
venture partner reached an agreement. Under this agreement ACRT, on March 12, 2007, sold its partnership interest in the New York property for $5.469 million to its joint venture partner and ACRT retained all distributions received in 2005.

Rochelle Park

On
January 25, 2005, the tenant in the Rochelle Park, NJ property, who had filed suit against ACRT, signed a stipulation of settlement agreeing to dismiss the suit against ACRT. As part of the settlement, the tenant entered into a contract to
purchase

ACRTs 51% tenant in common interest and the remaining 49% tenant in common interest not owned by ACRT for $19,500,000.This contract was subsequently terminated. No further action has been taken. Rochelle Park has received $51,000 in distributions since October 12, 2006, which have been recorded as income.

On May 17, 2007, the property was sold to an unrelated third party for $20,800,000. ACRTs share of the sales price for its 51% tenant in common
interest was $10,608,000.

Fort Washington

On May 23, 2006, ACRT sold its partnership interest in Fort Washington Fitness LP, which owns the property in Fort Washington, Pennsylvania leased to LA Fitness, to its joint venture partner for $2,500,000 and
recognized a gain for financial reporting purposes of $1,546,204.

Paramus

On October 25, 2006, the investment in the Paramus, NJ property leased to Babys R Us, Levitz and Wade, Odell, Wade

was sold to a related party for $9,121,498.

ARC International

On November 28, 2007, ACRT sold its partnership interest in the Woodcliff Lake, New Jersey property
leased to the Great Atlantic and Pacific Tea Company to an unrelated third party for $830,000.



|6. | RELATED PARTY TRANSACTIONS
|-- | --------------------------

The Advisor performs
services for ACRT pursuant to the terms of the Advisory Agreement. Such services include serving as ACRTs investment and financial advisor and providing consultation, analysis and supervision of ACRTs activities in acquiring, financing,
managing and disposing of properties. The Advisor also performs and supervises the various administrative duties of ACRT such as maintaining the books and records. The Chairman and President of ACRT is an affiliate of the Advisor. The Advisor is
entitled to acquisition, financing, disposition, incentive and asset management fees.



43



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



ACRT incurred asset management fees of $189,727, $623,381 and $684,702 for the years ended
December 31, 2007, 2006 and 2005, respectively. Unpaid asset management fees included in due to related parties on the consolidated statements of net assets and consolidated balance sheets were $12,434 and $180,245 as of December 31, 2007
and 2006, respectively.

On March 5, 2007, ACRT incurred disposition fees totaling $1,121,158 on the sale of the Charlotte, North
Carolina property, the Montgomeryville, Pennsylvania property, the Memphis, Tennessee property, the Lilburne and Marietta Georgia properties and the Wichita, Kansas property. On March 12, 2007, ACRT incurred a disposition fee totaling $454,871
on the sale of its partnership interest in the property located in New York City, New York. On March 14, 2007, ACRT incurred a disposition fee totaling $247,500 on the sale of the property located in Sacramento, California. On May 17,
2007, ACRT incurred a disposition fee totaling $318,240 on sale of the Rochelle Park, New Jersey property. On August 2, 2007, ACRT incurred a disposition fee totaling $103,500 on the sale of the Plymouth, Indiana property. On May 23,
2006, June 15, 2006, October 6, 2006 and October 25, 2006, ACRT incurred disposition fees in the amount of $148,020, $203,796, $68,100 and $273,644 on the sales of the Fort Washington, Pennsylvania investment, the Overland
Park, Kansas property, the Norcross, Georgia property and the Paramus, New Jersey investment, respectively. The disposition fee is generally equal to 3% of the contract sales price of each portfolio property, provided that only 50% of the
disposition fee will be paid if the property is sold at a loss, pursuant to the Advisory Agreement. The estimated accrued disposition fees included in reserves for estimated costs during the period of liquidation on the Consolidated Statements of
Net Assets as of December 31, 2007 and 2006 is $120,275 and $2,099,803, respectively

ACRT has also agreed to pay the Advisor incentive
compensation in the amount of 25% of amounts distributed to ACRTs stockholders after the stockholders have received distributions equal to the amount of their initial investment in shares of Common Stock plus the preferred return of 8%. The
accrued incentive fee included in reserve for estimated costs during period of liquidation on the Consolidated Statement of Net Assets as of December 31, 2007 and 2006 is approximately $3.686 million and $3.306 million, respectively.



|7. | LEASES
|-- | ------

ACRT is entitled to certain rentals
relating to the properties it owns. In addition to the base rent, the tenants are generally required to pay all operating costs related to the properties. Future minimum annual base rentals due under the non-cancelable operating leases in effect as
of December 31, 2007, are as follows:



|           |  |   |        
|---------- |  | - | -------
|2008       |  | $ | 323,492
|2009       |  |   | 323,492
|2010       |  |   | 242,616
|2011       |  |   |       
|2012       |  |   |       
|Thereafter |  |   |       
|           |  |   |        
|           |  | $ | 889,600
|           |  |   |        

ACRT seeks to reduce its operating and leasing risks through diversification achieved by
geographic distribution of its properties, tenant industry diversification, avoiding dependency on a single property and the creditworthiness of its tenants. For the years ended December 31, 2007, 2006 and 2005 the following tenants accounted
for greater than 10% of rental revenues:



|                     |  |      |   |  |      |   |  |      |  
|-------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|                     |  | 2007 |   |  | 2006 |   |  | 2005 |  
|Sports Authority     |  | 13.1 | % |  | 18.0 | % |  | 14.1 | %
|Bed, Bath and Beyond |  |     |   |  |     |   |  | 11.3 |  
|United Technologies  |  | 18.3 |   |  |     |   |  |     |  
|CaroMont Medical     |  |     |   |  | 12.7 |   |  | 10.1 |  
|Sears                |  | 27.8 |   |  |     |   |  |     |  
|A.C. Moore           |  |     |   |  | 10.0 |   |  | 10.0 |  
|OfficeMax            |  |     |   |  | 11.1 |   |  |     |  



44



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



|8. | MORTGAGES PAYABLE
|-- | -----------------

ACRT had fixed rate mortgages
totaling $9,549,718 at December 31, 2006. On March 5, 2007, the fixed rate mortgage totaling $4,055,938 on the Lilburne, Georgia property was repaid. On March 31, 2007, the fixed rate mortgage totaling $4,021,196 on the Wichita,
Kansas property was repaid. On August 2, 2007, the fixed rate mortgage totaling $1,293,045 on the Plymouth, Indiana property was repaid.

ACRT has variable rate mortgages totaling $7,976,306 at December 31, 2006. On March 5, 2007, the variable rate mortgage totaling $3,991,667 on the Caromont, North Carolina property was repaid. On March 14, 2007, the variable
rate mortgage totaling $3,931,987 on the Sacramento, California property was repaid.

During the year ended December 31, 2007, ACRT
incurred $1,547,513 of mortgage retirement costs.

On January 15, 2003, in connection with ACRTs variable rate mortgage totaling
$4,414,500, ACRT entered into an interest rate cap agreement with a third party. The cap is coterminous with the mortgage loan and its notional amount equals the outstanding principal balance on the mortgage loan. The cap agreement was entered into
as part of ACRTs management of interest rate exposure and effectively limits the amount of interest rate risk that may be taken on its variable rate mortgage. In accordance with SFAS No. 133, the interest rate cap is reflected at its fair
value. The interest rate cap expired on December 31, 2007. The carrying amount of the interest rate cap, included in prepaid expenses and other assets, was reported as an asset of $2,821 as of December 31, 2006 based on information
supplied by the counter party to the cap contract, and the change in the fair value of the interest rate cap of $2,821, $3,965 and $4,103 has been recorded as a loss, and included in loss on interest rate cap, net, on the accompanying consolidated
statement of changes in net assets for the years ended December 31, 2007 and 2006 and the consolidated statements of income for the year ended December 31, 2005, respectively.



|9. | STOCK OPTION PLANS
|-- | ------------------

ACRT established, with the
approval of the Shareholders, the 1997 Stock Option Plan (the Plan) for the purposes of encouraging and enabling ACRTs officers, employees, directors and advisors to acquire a proprietary interest in ACRT. On January 21, 1998,
ACRT granted 25,000 nonqualified stock options to purchase Class A common stock to the five non-employee directors and 650,000 nonqualified stock options to purchase Class A common stock to the advisor at an exercise price of $8.50. In
January 2000 and October 2003, ACRT granted each of its three additional non-employee directors an option under the Option Plan to purchase 5,000 shares of Class A common stock at an exercise price of $8.50. Each of these will vest as to 25% of
such option for each full year that the non-employee Director has previously served and continues to serve as a Director of ACRT. In 1998 and 2003, three non-employee directors holding a total of 15,000 stock options retired with their stock options
unexercised.

Compensation expense was calculated through December 31, 2005 using a market price of $12.00 based on ACRTs last
stock offering which expired on December 31, 2003, and the option price of $8.50 per option. The compensation expense calculation was adjusted in the first quarter of 2006 to reflect the current projected liquidation values on the shares of
$13.50 a share. For the years ended December 31, 2006 and 2005, ACRT recognized stock based compensation expense totaling $1,097,058 and $448,758, respectively.

In connection with the adoption of the Plan, the board of directors terminated the existing ACRT Stock Options program and replaced it with a Stock Option Settlement Agreement. Under the Stock Option Settlement
Agreement, no dividends are paid to the holders of the Settlement Agreement until the existing Class A and Class B shareholders receive liquidating dividends in the amount of $8.50 for four of the directors (the original option exercise price)
and $10.00 for one director, after which the holders of the Stock Option Settlement Agreement will receive dividends with the existing Class A and Class B shareholders. A similar agreement was reached with the holders of 104,785 warrants. For
the year ended December 31,2007, ACRT had paid dividends totaling $2,976,704 under the Stock Option and Warrant Settlement Agreements. As of December 31, 2007 and 2006, the obligation under the warrant and stock option settlement
agreements amounted to $471,370 and $3,227,152, respectively, and is included in reserve for estimated costs during the period of liquidation.



|10. | DIVIDENDS TO SHAREHOLDERS
|--- | -------------------------

ACRT paid cash dividends
to Class A shareholders of $41,360,423, $763,577, $3,054,308 in 2007, 2006 and 2005, respectively.



45



---

ARC CORPORATE REALTY TRUST, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007 AND 2006



|                                         |  |      |        |   |      |   |        |      |  |   |        |  
|---------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                         |  | 2007 |        |   | 2006 |   |        | 2005 | 
|Total dividends per share                |  | $    | 13.00  |   |      | $ | 0.24   |      |  | $ | 0.96   |  
|Ordinary income                          |  |      |       |   |      |   | 34.66  | %    |  |   | 67.59  | %
|15% rate gain                            |  |      |       |   |      |   | 40.77  | %    |  |   | 12.43  | %
|25% rate gain                            |  |      |       |   |      |   | 24.57  | %    |  |   | 2.67   | %
|Percent non-taxable as return of capital |  |      | 100    | % |      |   |       |      |  |   | 17.31  | %
|                                         |  |      |        |   |      |   |        |      |  |   |        |  
|                                         |  |      | 100.00 | % |      |   | 100.00 | %    |  |   | 100.00 | %
|                                         |  |      |        |   |      |   |        |      |  |   |        |  

In 2005, ACRT approved dividends to the holders of Class B common stock for the year ending 2004
totaling $162,769. These dividends were paid on April 25, 2005.

On February 8, 2006, the board of directors declared dividends to
holders of Class B common stock for 2005 totaling $162,776. These dividends were paid on November 29, 2006.

In 2007, ACRT approved and
paid dividends to the holders of Class B common stock for the year totaling $2,163,154.



|11. | UNAUDITED QUARTERLY FINANCIAL DATA
|--- | ----------------------------------



|                                                       |  |                                               |       |   |         |   |         |  |   |          |   |  |   |      
|------------------------------------------------------ |  | --------------------------------------------- | ----- | - | ------- | - | ------- |  | - | -------- | - |  | - | -----
|                                                       |  | 2007                                         
|                                                       |  | 3/31/07                                       |       |   | 6/30/07 |   | 9/30/07 |  |   | 12/31/07
|                                                       |  | (dollars in thousands, except per share data)
|Revenues(1)                                            |  | $                                             | 988   |   |         | $ | 411     |  | $ | 253      |   |  | $ | 186  
|                                                       | 
|                                                       |  | 2006 (3)                                     
|                                                       |  | 3/31/06                                       |       |   | 6/30/06 |   | 9/30/06 |  |   | 12/31/06
|                                                       |  | (dollars in thousands, except per share data)
|Revenues(1)                                            |  | $                                             | 1,014 |   |         | $ | 1,060   |  | $ | 1,075    |   |  | $ | 1,228
|Net income allocable to common shareholders            |  |                                               | (175  | ) |         |   | 4,755   |  |   | (392     | ) |  |   | 808  
|Net income allocable to common shareholders per share: |  |                                               |       |   |         |   |         |  |   |          |   |  |   |      
|Basic(2)                                               |  | $                                             | (0.05 | ) |         | $ | 1.37    |  | $ | (0.12    | ) |  | $ | .19  
|                                                       |  |                                               |       |   |         |   |         |  |   |          |   |  |   |      
|Diluted(2)                                             |  | $                                             | (0.05 | ) |         | $ | 1.13    |  | $ | (0.12    | ) |  | $ | .17  
|                                                       |  |                                               |       |   |         |   |         |  |   |          |   |  |   |      



|(1) | All periods have been adjusted to reflect the impact of properties classified as held for sale, which are reflected in discontinued operations in the consolidated statements of
income.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The sum of the quarterly income per common share amounts may not equal the full year amounts primarily because the computations of the weighted average number of common shares
outstanding for each quarter and the full year are made independently.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The 2006 Quarterly Financial Data represents income before adjustments for liquidation basis.
|--- | ---------------------------------------------------------------------------------------------



|12. | SUBSEQUENT EVENTS
|--- | -----------------

On
February 14, 2008, the San Antonio, Texas property leased to Sears was sold to an unrelated third party for $2,200,000.



46



---

REAL ESTATE AND ACCUMULATED DEPRECIATION

SCHEDULE III (000S OMITTED)

DECEMBER 31, 2007

Gross Amount at
which carried at end of year (A)



|            |  |                              |  |              |   |      |   |       |                           |  |   |       |   |  |                         |        |              |  |                 |   |                                       |      |  |      |  |   
|----------- |  | ---------------------------- |  | ------------ | - | ---- | - | ----- | ------------------------- |  | - | ----- | - |  | ----------------------- | ------ | ------------ |  | --------------- | - | ------------------------------------- | ---- |  | ---- |  | --
|Description |  | Location                     |  | Encumbrances |   | Land |   |       | Buildings andImprovements |  |   | Total |   |  | AccumulatedDepreciation |        | DateAcquired |  | DateConstructed |   | UsefulLife Usedto
ComputeDepreciation
|Retail      |  | San Antonio, TX              |  |              |  |      |   | 1,256 |                           |  |   | 2,049 |   |  |                         | 3,305  |              |  |                 |  |                                       | 1995 |  | 1995 |  | NA
|            |  | Fair Market Value Adjustment |  |              |  |      |   | (420  | )                         |  |   | (685  | ) |  |                         | (1,105 | )            |  |                 |  |                                       |      |  |      |  |   
|            |  |                              |  |              |   |      |   |       |                           |  |   |       |   |  |                         |        |              |  |                 |   |                                       |      |  |      |  |   
|            |  |                              |  | $            |  |      | $ | 836   |                           |  | $ | 1,364 |   |  | $                       | 2,200  |              |  | $               |  |                                       |      |  |      |  |   
|            |  |                              |  |              |   |      |   |       |                           |  |   |       |   |  |                         |        |              |  |                 |   |                                       |      |  |      |  |   



|(A) | The initial costs include the purchase price paid by ACRT and acquisition fees and expenses.
|--- | --------------------------------------------------------------------------------------------



|                                                                                 |  |              |         |   |      |   |        |      |  |   |         |  
|-------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------ | ---- |  | - | ------- | -
|                                                                                 |  | December 31, |        
|                                                                                 |  | 2007         |         |   | 2006 |   |        | 2005 | 
|Reconciliation of Real Estate Owned:                                             |  |              |         |   |      |   |        |      |  |   |         |  
|Balance at the beginning of period                                               |  | $            | 54,225  |   |      | $ | 49,065 |      |  | $ | 59,584  |  
|Additions during the period                                                      |  |              |        |   |      |   |       |      |  |   |        |  
|Properties sold during the period                                                |  |              | (50,074 | ) |      |   | (9,929 | )    |  |   | (10,519 | )
|Accumulated depreciation netted against real estate                              |  |              |        |   |      |   | (6,150 | )    |  |   |        |  
|Fair market value adjustment                                                     |  |              | (1,951  | ) |      |   | 21,239 |      |  |   |        |  
|                                                                                 |  |              |         |   |      |   |        |      |  |   |         |  
|Balance at end of the period                                                     |  | $            | 2,200   |   |      | $ | 54,225 |      |  | $ | 49,065  |  
|                                                                                 |  |              |         |   |      |   |        |      |  |   |         |  
|Reconciliation of Accumulated Depreciation:                                      |  |              |         |   |      |   |        |      |  |   |         |  
|Balance at the beginning of period                                               |  | $            |        |   |      | $ | 7,151  |      |  | $ | 6,401   |  
|Depreciation expense                                                             |  |              |        |   |      |   | 576    |      |  |   | 934     |  
|Accumulated depreciation of property sold during the period                      |  |              |        |   |      |   | (1,577 | )    |  |   | (184    | )
|Accumulated depreciation eliminated on change to liquidation basis of accounting |  |              |        |   |      |   | (6,150 | )    |  |   |        |  
|                                                                                 |  |              |         |   |      |   |        |      |  |   |         |  
|Balance at end of the period                                                     |  | $            |        |   |      | $ |       |      |  | $ | 7,151   |  
|                                                                                 |  |              |         |   |      |   |        |      |  |   |         |  



47



---

|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

None.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Evaluation of
Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of ACRTs disclosure
controls and procedures (as defined in rule 13a-15 (e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act) as of the end of the period covered by this annual report on Form 10-K was made under
the supervision and with the participation of ACRTs management, including its Chief Executive Officer and its Chief Financial Officer. Based upon this evaluation, ACRTs Chief Executive Officer and its Chief Financial Officer have
concluded that ACRTs disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by ACRT in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and
reported and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by ACRT in reports filed or submitted under the Exchange Act is accumulated and communicated to ACRTs
management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Managements Report on Internal Control Over Financial Reporting

This annual report does not
include an attestation report of ACRTs registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by ACRTs registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit ACRT to provide only managements report in this annual report.

Changes in Internal Controls

There have been no significant changes in ACRTs internal controls over financial
reporting (as defined in Rule 13a-15(f) of the Exchange Act) or in other factors that occurred during the period covered by this annual report on form 10-K that has materially affected or is reasonably likely to materially affect ACRTs
internal control over financial reporting.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None



48



---

PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS OF REGISTRANT AND CORPORATE GOVERNANCE
|-------- | --------------------------------------------------------------------

As of December 31, 2007, ACRT has seven Directors, five of whom are Independent Directors. The Directors and executive officers of ACRT are as follows:



|                          |  |                                               
|------------------------- |  | ----------------------------------------------
|NAME                      |  | OFFICE                                        
|Robert J. Ambrosi#        |  | Chairman, President and Class III Director    
|James Steuterman*+        |  | Class III Director                            
|Richard G. Kelley*+#      |  | Class II Director                             
|Garrett E. Sheehan*       |  | Class II Director                             
|Mervin H. Goldman, CPA*+# |  | Class I Director                              
|Dietmar Georg*            |  | Class I Director                              
|Marc Perel, CPA           |  | Executive Vice President and Class II Director
|Claudia Graff             |  | Vice President                                
|Joseph M. Morena          |  | Treasurer                                     
|Bruce Nelson, CPA         |  | Chief Financial Officer                       



|* | Independent Director
|- | --------------------

|+ | Member of the Audit Committee
|- | -----------------------------

|# | Member of the Compensation Committee
|- | ------------------------------------

Robert J. Ambrosi, 57, is Chairman, President and a Class III Director of ACRT, and President and founder of ARC Properties, Inc.,
an affiliate of the Advisor. Mr. Ambrosi has more than 25 years of experience in the acquisition, development and management of real estate projects internationally. He began his real estate career as a real estate investment analyst for the
Mutual Life Insurance Company of New York. From 1976 to 1978, he was Vice President of Marcil Properties, Inc. a Canadian-based investment company which concentrated on the acquisition of U.S. real estate on behalf of foreign-based investors.
Mr. Ambrosi is also the co-founder and President of Tibor Pivko + Company, a real estate company which acts as an advisor to foreign-based investors and has activities in the United States, Europe and the Middle East, and has acted as managing
principal in more than 50 separate real estate entities. Mr. Ambrosi is also President and owner of ARC Financial Services, Inc., which is a member of the NASD. Mr. Ambrosi has a Bachelor of Science degree in Engineering from the New
Jersey Institute of Technology, a Masters degree in Finance from Rutgers University and a Senior Certificate in Real Estate from New York University.

James M. Steuterman, 51, is a Class III Director of ACRT and is a Senior Vice President of Toll Brothers Realty Trust (Toll), a commercial development and management firm specializing in
retail, multi-family and office development. Mr. Steuterman joined Toll in 2002. Toll Brothers Realty Trust is an affiliate of Toll Brothers, Inc. (NYSE: TOL), a Fortune 1000 company and the nations leading builder of luxury homes. Prior
to joining Toll, Mr. Steuterman was the Chief Operating Officer of New Plan Excel Realty Trust (New Plan), a publicly traded real estate company with a national portfolio of property investments exceeding $3.0 billion. In addition,
Mr. Steuterman was a member of New Plans Board of Directors and its Investment Committee. Prior to 1984, Mr. Steuterman worked with Schnuck Markets, Inc., a regional grocery chain, and Baur Properties, a developer of suburban office
parks and warehouse space. Mr. Steuterman holds a Business degree from the University of Missouri and is an active member of the International Council of Shopping Centers and National Association of Real Estate Investment Trusts.

Richard G. Kelley, 76, is a Class II Director of ACRT and the former Chairman, Chief Executive Officer, and Director of Citizens
First National Bank. Mr. Kelley has more than 35 years of banking experience and has been Chairman, President, Chief Executive Officer, and Director of three commercial banks. He was president of the American Institute of Banking and was also a
presidential appointment as a full-time consultant for the U.S. Department of Commerce in Washington, D.C., and appointed by the Governor as a member of the State of New Jersey Banking Advisory Committee. Mr. Kelley attended the Rutgers
University Stonier Graduate School of Banking where he was president of his class, and subsequently, a faculty member and member of the Board of Regents. He has a Bachelor of Science degree in Management and a Juris Doctorate in Law from Quinnipiac
University where he is currently trustee, member of the Executive Committee and Chairman of the Academic Affairs Committee.

Garrett
E. Sheehan, 59, is a Class II Director of ACRT, and is presently Managing Director of Sentinel Real Estate Investment Corporation, a real estate advisory and investment management firm. Prior to joining Sentinel in 1999, he was a
Managing Director of Jones Lang Wootton, an international real estate services and advisory firm. In his ten years at Jones Lang Wootton, he was a broker/dealer affiliate, and a partner in its national Investment Sale and Finance Group. Prior to
joining Jones Lang Wootton, he was a Vice President of the Pivko Group and a Commercial Loan and Acquisition Officer for Travelers Insurance in its Real Estate Investment Department. He received a Bachelor of Arts degree from Trinity College in
Hartford, Connecticut and a graduate degree from Oxford University in England.



49



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Mervin H. Goldman, CPA,80 retired, is a Class I Director of ACRT and was formerly a
Senior Partner in, and founder of, the accounting firm of Dorfman, Goldman, Stobezki & Goldman, P.A. Mr. Goldman founded Dorfman & Goldman in 1974 and has over 20 years of experience in public accounting and financial
planning. Prior to 1974, Mr. Goldman held positions of Vice President of Finance and Operations and Treasurer for firms in the textile industry. In 1994, Mr. Goldman was appointed to the Advisory Board of Valley National Bank, in Wayne,
New Jersey. Mr. Goldman received a Bachelor of Science degree in Accounting from New York University. In addition to being a Certified Public Accountant, he is also a member of the New Jersey CPA Society and the American Institute of Certified
Public Accountants.

Dietmar Georg,53, is a Class I Director and is a Managing Director and Principal of GLL Real
Estate Partners (GLL), an international real estate advisory and management firm which he formed with majority shareholders Lend Lease (London) and Assicurazioni Generali. Prior to forming GLL, Mr. Georg was a Managing Director of
HVB Capital Markets, Inc. (HVBCM), the New York-based U.S. investment banking subsidiary of Munich-based HypoVereinsbank, Germanys second largest bank and Europes largest real estate lender. He also serves as chief executive
of entities investing in retail and office properties. Mr. Georg is a frequent speaker at real estate conferences both in Germany and in the U.S. and has authored several articles in real estate, finance and business publications.
Mr. Georg has earned dual masters degrees in Business Administration, University of Giessen, and in Economics, Kansas State University, Manhattan, Kansas.

Marc Perel, CPA, 54, is a Class II Director and Executive Vice President of ACRT and has been Senior Vice President of ARC Properties, Inc. since 1985. From 1984 to 1985, Mr. Perel was employed by
Secured Properties, Inc., a real estate investment company. From 1977 to 1984, Mr. Perel was with Zimmerman & Co., a certified public accounting firm, where he became head of the firms real estate department in 1980 and a partner
in 1984. During that period, he was responsible for due diligence, property audits, investor reporting, tax planning and investment analysis. In addition to his accounting experience, Mr. Perel has experience in and continues to be involved
with real estate development and property management. Mr. Perel has a Bachelor of Science degree in Accounting from Long Island University and is a Certified Public Accountant.

Claudia Graff, 59, is Vice President of ACRT and Vice President of ARC Properties, Inc., since 1985 and has more than 17 years of
experience in the acquisition and analysis of credit lease properties. Ms. Graff is currently responsible for the screening of properties submitted to ACRT and the coordination of market research and valuation data. Prior to her involvement in
the real estate business, Ms. Graff was an office and systems administrator for the Security Mutual Life Insurance Company in Kearney, Nebraska.

Bruce Nelson, CPA, 53, is the Chief Financial Officer of ACRT and Controller of ARC Properties, Inc. Mr. Nelson, who is a Certified Public Accountant, holds a Bachelor of Science degree in
Accounting from William Paterson College of New Jersey and a Masters degree in Business Administration and Finance from Fairleigh Dickinson University. Prior to joining ACRT in 1996, Mr. Nelson held a variety of financial and accounting
positions, most recently as Controller and Treasurer for the Cirkus Real Estate Group, one of the largest real estate developers and property managers in New Jersey. Prior to that, Mr. Nelson was the Corporate Accounting Manager for Becton,
Dickinson & Co., a Fortune 500 company. Mr. Nelson is responsible for all accounting operations of ACRT.

Joseph M.
Morena, 54, is Treasurer of ACRT. Prior to joining ACRT in 1996, Mr. Morena was Vice President and Chief Financial Officer of Tel-Save Holdings Inc., a publicly traded telecommunications company. From 1980 to 1993,
Mr. Morena was Vice President and Treasurer of Air & Water Technologies Inc., a publicly traded international engineering and construction company. Mr. Morena has substantial experience in corporate finance, including capital
raising in the public IPO market, bank loan, public bond and private placement markets. Mr. Morena also has significant business management experience in the area of financial statement preparation and control, as well as communication of
financial performance to institutional investors. Mr. Morena is a graduate of New York University from which he received BS and MBA degrees in Banking and Finance.

Compensation of Directors

Each independent director receives annual compensation of
$5,000, a meeting fee of $1,000 for each Board meeting and a committee meeting fee of $500 for all committee members, plus costs of attending meetings. In addition, each Independent Director has been awarded an option under the Option Plan to
purchase 5,000 shares of Class A Common Stock. These options have been terminated pursuant to agreements providing for payment of the value they represent, at the time and to the same extent that liquidating distributions are paid to
shareholders.

Audit Committee

The Audit Committee has three members, Messrs. Goldman, Steuterman and Kelley. The Audit Committee meets on a quarterly basis. During its quarterly meetings, the Audit Committee reviews ACRTs financial statements and credit reports on
each of ACRTs tenants. In connection with the issuance of ACRTs annual and quarterly financial statements, the Audit Committee meets with ACRTs independent registered public accounting firm to discuss the financial statements and
any related issues with management. Each director who serves on the Audit Committee receives fees of $500 for each meeting attended. The Board of Directors has determined that Mr. Goldman is an Audit Committee independent financial expert as
defined by Securities and Exchange Commission regulations.



50



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Compensation Committee

The Compensation Committee has three members, Messrs. Ambrosi, Goldman and Kelley. The Compensation Committee meets separately from the entire Board as needed but not less than annually. The Compensation Committee
reviews the cash compensation of the Directors and officers of ACRT as well as reviews non-cash compensation that may include stock options, restricted stock and stock appreciation rights pursuant to the 1997 Stock Option Plan. Each member of the
Compensation Committee, other than Mr. Ambrosi, receives fees of $500 for each meeting attended.

Section 16(a) Beneficial Ownership
Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive
officers and certain stockholders to file reports of ownership and transactions that result in changes in ownership of our equity securities on prescribed forms with the SEC.

Based solely on our review of the copies of these forms, we believe that during the year ended December 31, 2007, all directors and executive
officers of ACRT made all necessary filings.

Code of Ethics

In light of the pending liquidation, the Board of Directors has determined not to incur the expense associated with adopting a Code of Ethics applicable
to ACRT Management.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The Advisor

ACRT is managed by its advisor, ARC Capital Advisors L.P, a Maryland limited partnership, which is affiliated with
Mr. Ambrosi, ACRTs President and Chairman. The Advisor performs services for ACRT pursuant to the terms of an advisory agreement (the Advisory Agreement). Such services include serving as ACRTs investment and financial
advisor and providing consultation, analysis and supervision of ACRTs activities in acquiring, financing, managing and disposing of properties. The Advisor also performs and supervises the various administrative duties of ACRT such as
maintaining the books and records. ACRT pays the Advisor fees pursuant to the Advisory Agreement as follows:



| |  |  | Acquisition fees equal to 3% of the purchase price of the property;
| | - |  | -------------------------------------------------------------------



| |  |  | Financing fees equal to .5% of the principal amount financed;
| | - |  | -------------------------------------------------------------



| |  |  | Annual asset management fees equal to 1% of the first $36,049,000 of ACRTs average invested assets (the base amount, as defined in the Advisory Agreement).
One half of this fee, the subordinated asset management fee, is withheld by ACRT until the shareholders have been paid the Preferred Return (as defined in the Advisory Agreement). In addition, on a yearly basis, the net asset value for all
properties used in the calculation of the annual asset management fee are recalculated by an outside, independent party and this revised net asset value is the basis used in the calculation of the annual asset management fee;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Disposition fees equal to 3% of the contract sales price of the property being sold; with the provision that only 50% of the disposition fee will be paid if the
property is sold at a loss.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Incentive compensation in the amount of 25% of amounts distributed to ACRTs stockholders after the stockholders have received distributions equal to the
amount of their initial investment in shares of Common Stock plus the preferred return of 8%.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | ACRT reimbursed the Advisor $1,250 per month for various legal functions connected with stock transfers and filings of ACRT. The reimbursements were not required
after May of 2005.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ACRT has no employees because all of its management functions are performed by the Advisor with
oversight from the Board of Directors.

The term of the Advisory Agreement ends on December 31, 2010. The Advisory Agreement may be
terminated:



| |  |  | immediately by ACRT for Cause;
| | - |  | ------------------------------



51



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| |  |  | by the Advisor with at least 60 days written notice; or
| | - |  | --------------------------------------------------------



| |  |  | immediately with Good Reason by the Advisor.
| | - |  | --------------------------------------------

Good Reason is defined in the Advisory Agreement to mean either:



| |  |  | any failure by ACRT to obtain a satisfactory agreement from its successor to assume and agree to perform ACRTs obligations under the Advisory Agreement; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any material breach of the Advisory Agreement of any nature whatsoever by ACRT.
| | - |  | -------------------------------------------------------------------------------

Cause is defined in the Advisory Agreement to mean fraud, criminal conduct, willful misconduct, breach of fiduciary duty by the Advisor, a
material breach of the Advisory Agreement by the Advisor or the Bankruptcy of the Advisor.

The Advisory Agreement is not assignable
without the consent of the other party; however, either ACRT or the Advisor may assign or transfer the Advisory Agreement to a successor entity.

The Advisor and its Affiliates expect to engage in other business ventures and, as a result, their resources will not be dedicated exclusively to ACRTs business. However, pursuant to the Advisory Agreement, the Advisor must devote
sufficient resources to the administration of ACRT to discharge its obligations.

1997 Stock Option Plan

In March 1997, the Board of Directors adopted, and the shareholders of ACRT approved, ACRTs 1997 Stock Option Plan under which an aggregate of
750,000 shares of all classes of Common Stock were reserved for issuance. Shares issued under the Option Plan can be of Class A, Class B or Class C Common Stock. The Option Plan was intended to qualify as an incentive stock option
plan under Section 422 of the Code. Both incentive stock options and non-qualified stock options may be awarded under the Option Plan. Awards under the Option Plan may be granted to officers, employees, consultants and advisors of ACRT and its
subsidiaries. Administration of the Option Plan was vested in the Compensation Committee, which had the authority to interpret the Option Plan, select the persons to whom grants were to be made, designate the number of shares to be covered by each
grant, and determine the time or times and the manner in which each option would be exercisable and the duration of the exercise period.

Except for grants to 10% shareholders of ACRT, the maximum term of options granted under the Option Plan was 10 years. Provisions are made for the exercise of options upon the death, disability or termination of employment by the optionee.

With respect to options which were incentive stock options, and except with respect to 10% shareholders, the exercise price per share of
common stock that may be purchased under the stock option may be determined by the Compensation Committee at the time of grant but may not be less than the fair market value on the date of grant for an incentive stock option. The exercise price per
share for grants of non-qualified stock options to non-10% shareholders cannot be less than the par value of the shares of stock underlying the option.

If an optionee, at the time the option is granted, owns 10% or more of the total combined voting power of all classes of stock of ACRT or any subsidiary, the option price of an incentive option must be at least 110%
of the fair market value of the stock (determined at the time of grant) subject to the option and any such option would only be exercisable for five years from the date of grant.

On January 21, 1998, ACRT granted the Advisor a non-qualified option to purchase 725,000 shares of Class A Common Stock at an exercise price of
$8.50 per share. These options vested in four equal installments, beginning upon the date of grant and continuing upon the first, second and third anniversaries of the date of grant. On October 23, 2003, the Advisor agreed to amend its option
agreement whereby 75,000 options were cancelled. In accordance with the cancellation of those options, they became available for grant under the Stock Option Plan. On January 21, 1998, ACRT granted each of its five non-employee Directors an
option under the Option Plan to purchase 5,000 shares of Class A Common Stock at an exercise price of $8.50 per share. In January 2000, ACRT granted each of its two additional non-employee Directors an option under the Option Plan to purchase
5,000 shares of Class A Common Stock at an exercise price of $8.50 per share. On October 23, 2003, Mr. Steuterman, a newly appointed non-employee Director, was granted a non-qualified option to purchase 5,000 shares of Class A
Common Stock at an exercise price of $8.50 per share. Each of these options would vest as to 25% of such option for each full year that the non-employee Director has previously served and continues to serve as a Director of ACRT. Upon termination of
service as a Director of ACRT, all options granted under the Option Plan are terminated. In 1998 and 2003, three non-employee Directors holding a total of 15,000 stock options retired with



52



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their stock options unexercised. These stock options were retired and are available to be re-granted. These options would vest in full immediately upon a
change of control (as defined in the option agreement) of ACRT. As of December 31, 2005, there were 75,000 shares of Common Stock available for grant under the Option Plan.

The vesting of all of the foregoing options will be accelerated upon a Change of Control (as defined in the Option Plan) of ACRT, the sale of all or
substantially all of ACRTs assets, and/or the adoption of a plan of liquidation by ACRT. However, an optionee may not exercise his options, regardless of any regular or accelerated vesting schedule provided by the option agreements, unless
both of the following requirements are met:



| | (a) | Either
| | --- | ------



| | (1) | the shares of Class A Common Stock are listed for trading on any national securities exchange or is quoted on any tier of the Nasdaq Stock Market, including, without
limitation, the Nasdaq Stock Market, the Nasdaq Small-Cap Market or the Over-the-Counter Bulletin Board System or any other automated quotation service; or
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | the occurrence of a Change in Control of ACRT, the sale of all or substantially all of ACRTs assets, or the adoption of a plan of liquidation by ACRT; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | immediately prior to such exercise, the number of shares of Common Stock issued and outstanding as a result of the exercise of options granted under the Option Plan (including the
number of shares that the optionee desires to exercise) do not exceed 15% of the total number of then issued and outstanding shares of Common Stock.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For purposes of the foregoing calculation, the number of shares that the optionee desires to exercise would be included in the total number of then issued and outstanding shares of Common Stock.

Other Awards under the Option Plan. In addition to the incentive and non-qualified stock options available for grant under the Option Plan, the
compensation committee may also award:



| |  |  | stock appreciation rights;
| | - |  | --------------------------



| |  |  | restricted stock awards;
| | - |  | ------------------------



| |  |  | phantom stock unit awards; and
| | - |  | ------------------------------



| |  |  | performance share units.
| | - |  | ------------------------

Amendments
to the Stock Option Plan were recommended by the Board of Directors and approved by the shareholders of ACRT at the annual meeting held in May 2004. The Stock Option Plan now allowed for grants of options until March 31, 2013. In addition, the
current term of outstanding stock options awarded pursuant to the Stock Option Plan were extended from 10 years to 15 years and all future stock options awarded pursuant to the Stock Option Plan would have a term that ends in 2013. The restrictions
applicable to the exercise of the options would be removed effective April 1, 2008.

In connection with the adoption of the Plan, the
board of directors terminated the existing ACRT Stock Options program and replaced it with a Stock Option Settlement Agreement. Under the Stock Option Settlement Agreement, no dividends are paid to the holders of the Settlement Agreement until the
existing Class A and Class B shareholders receive liquidating dividends in the amount of $8.50 for four of the directors (the original option exercise price) and $10.00 for one director, after which the holders of the Stock Option Settlement
Agreement will receive dividends with the existing Class A and Class B shareholders. A similar agreement was reached with the holders of 104,785 warrants. As of December 31, 2007 and 2006, the obligation under the warrant and stock option
settlement agreements amounted to $417,475 and $3,227,152, respectively, and is included in reserve for estimated costs during the period of liquidation.

Employment Contracts

ACRT does not have any employees nor any employment agreements other than the Advisory
Agreement with the Advisor.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

Class A Common Stock.As of December 31, 2007, there were 3,889,765 shares of Class A Common Stock outstanding. The following table
sets forth, as of December 31, 2007, the beneficial ownership of shares of:



| |  |  | each person who holds more than a 5% interest in ACRT;
| | - |  | ------------------------------------------------------



53



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| |  |  | the directors of ACRT;
| | - |  | ----------------------



| |  |  | the executive officers of ACRT; and
| | - |  | -----------------------------------



| |  |  | the directors and executive officers of ACRT as a group.
| | - |  | --------------------------------------------------------



|                                                |  |               |     |  |                                 |  
|----------------------------------------------- |  | ------------- | --- |  | ------------------------------- | -
|                                                |  | No. of Shares |     |  | Percentage ofOutstanding Shares |  
|Robert J. Ambrosi(1)                            |  | 33,074        | (2) |  | 1.0                             | %
|James Steuterman                                |  |              | (2) |  |                                |  
|Richard G. Kelley                               |  | 2,702         | (2) |  | *                               |  
|Garrett E. Sheehan                              |  |              | (2) |  |                                |  
|Mervin H. Goldman                               |  | 4,000         | (2) |  | *                               |  
|Dietmar Georg                                   |  |              | (2) |  |                                |  
|Marc Perel                                      |  | 2,702         |     |  | *                               |  
|Claudia Graff                                   |  | 540           |     |  | *                               |  
|Joseph Morena                                   |  | 3,242         |     |  | *                               |  
|Bruce Nelson                                    |  | 5,202         |     |  | *                               |  
|                                                |  |               |     |  |                                 |  
|All directors and executive officers as a group |  | 51,462        |     |  | 1.6                             | %
|                                                |  |               |     |  |                                 |  



|* | Represents less than 1% of the outstanding Shares.
|- | --------------------------------------------------

|(1) | The address for all persons named is 1401 Broad Street, Clifton, NJ 07013.
|--- | --------------------------------------------------------------------------

|(2) | Certain persons to whom ACRT granted stock options, including the Advisor which is controlled by Mr. Ambrosi, have
entered into Stock Option Settlement Agreements with ACRT, the terms of which are described in Item 5 under the heading Equity Plan Compensation Information. As a result of these agreements, the stock options have been terminated
and therefore are not reflected in this table.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Class B Common Stock.As of December 31, 2007, there were
166,397 shares of Class B Common Stock outstanding. All of the currently issued and outstanding Class B Common Stock is beneficially owned by Working Capital Invest, N.V.

The Board of Directors has the authority to issue Class C Common Stock to management of ACRT and the Advisor. However, the Board of Directors intends to issue Class C Common Stock only in the event of a threatened or
actual takeover of ACRT. The Class C Common Stock has ten votes per share, and, if issued, could give management and/or the Advisor effective control over the affairs of ACRT, including the election of all of the Directors of ACRT.

ACRT is not aware of any arrangements which may, at a subsequent date, result in a change in control of ACRT, which would result in the issuance of Class
C Common Stock.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

The Advisory Agreement

Many of the services to be performed by the Advisor in managing ACRTs day-to-day
activities are summarized below. This summary is provided to illustrate the material functions, which the Advisor will perform for ACRT as its advisor, and it is not intended to include all of the services which may be provided to ACRT by the
Advisor or by third parties. Under the terms of the Advisory Agreement, the Advisor undertakes to use its best efforts to present to ACRT investment opportunities consistent with its investment policies and objectives as adopted by ACRTs Board
of Directors. In its performance of this undertaking, the Advisor, subject to the authority of the Board, either directly or indirectly, will:



| |  |  | serve as ACRTs investment and financial advisor;
| | - |  | -------------------------------------------------



| |  |  | provide the daily management of ACRT, including perform and supervise the administrative functions of ACRT;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | investigate and select and, on behalf of ACRT, engage and conduct business with persons and entities to provide ACRT with services necessary or desirable for the
performance of its obligations, including, but not limited to, consultants, accountants, lenders, attorneys, brokers, insurance agents, property owners and banks;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in consultation with ACRTs officers and Directors, formulate and implement ACRTs financial and other policies and objectives;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



54



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| |  |  | provide the Directors with periodic reports with respect to prospective investments;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | negotiate on ACRTs behalf with banks or lenders for loans and with broker-dealers for the sale of shares;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | obtain for, or provide to, ACRT services in connection with acquiring, managing and disposing of ACRTs properties or loans;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | provide or arrange for administrative services, personnel and other overhead items necessary to ACRTs business;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | provide ACRT with accounting and other financing reporting assistance;
| | - |  | ----------------------------------------------------------------------



| |  |  | maintain ACRTs books and records;
| | - |  | ----------------------------------



| |  |  | provide cash management services; and
| | - |  | -------------------------------------



| |  |  | provide such other services as may be required from time to time for the management of ACRT and its assets.
| | - |  | -----------------------------------------------------------------------------------------------------------

The term of the Advisory Agreement ends on December 31, 2010.

The Advisor must obtain the prior approval of the Directors, including a majority of the Independent Directors, for transactions involving:



| | (1) | investments in property made through joint venture arrangements with the Advisor or its affiliates;
| | --- | ---------------------------------------------------------------------------------------------------



| | (2) | investments in property which are not contemplated by the terms of ACRTs investment guidelines;
| | --- | ------------------------------------------------------------------------------------------------



| | (3) | transactions that present issues which involve conflicts of interest for the Advisor (other than payment of fees and expenses); and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------



| | (4) | making or purchasing any loans on behalf of ACRT.
| | --- | -------------------------------------------------

Joint
ventures with the Advisor or its affiliates will only be permitted if:



| | (1) | the affiliate has a comparable investment objective as ACRT;
| | --- | ------------------------------------------------------------



| | (2) | there is no duplication of property management or other fees to the Advisor; and
| | --- | --------------------------------------------------------------------------------



| | (3) | the affiliate makes its investment on substantially the same terms and conditions as ACRT.
| | --- | ------------------------------------------------------------------------------------------

The cost of generating joint investments will be shared ratably among the participating investors and ACRT.

ACRT will reimburse the Advisor quarterly for certain operating, general and administrative expenses, including, without limitation, the following:



| |  |  | Offering Expenses (as defined in the Advisory Agreement);
| | - |  | ---------------------------------------------------------



| |  |  | all operating expenses (as defined in the Advisory Agreement) paid or incurred by ACRT;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | fees and expenses of outside counsel, accountants and auditors of ACRT;
| | - |  | -----------------------------------------------------------------------



| |  |  | payments to Directors and the expenses associated with meetings of the Directors and the shareholders;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | expenses incurred in connection with payment of distributions to shareholders;
| | - |  | ------------------------------------------------------------------------------



| |  |  | travel expenses for ACRT business; and
| | - |  | --------------------------------------



| |  |  | expenses of managing and operating the properties owned by ACRT, including insurance costs.
| | - |  | -------------------------------------------------------------------------------------------

ACRT will not reimburse the Advisor or its affiliates to the extent such amounts would exceed those which would be payable to non-affiliated third
parties in the same location for similar products or services.



55



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|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------

The
following table presents audit fees charged by KPMG LLP for the years ended December 31, 2007 and 2006 and fees billed for other services rendered by KPMG LLP.



|                   |  |      |         |      |   |        
|------------------ |  | ---- | ------- | ---- | - | -------
|                   |  | 2007 |         | 2006
|Audit Fees         |  | $    | 163,765 |      | $ | 150,000
|Audit Related Fees |  |      |        |      |   | 112,060
|                   |  |      |         |      |   |        
|Total              |  | $    | 163,765 |      | $ | 262,060
|                   |  |      |         |      |   |        



56



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Part IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------



|                                 |  |      
|-------------------------------- |  | -----
|                                 |  | Page 
|(a) (1) Financial Statements     |  | 29-32
|(2) Financial Statement Schedule |  | 47   
|(3) Exhibits                     |  | 59   



|            |  |                                                                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                      
|21.1        |  | Subsidiaries of ARC Corporate Realty Trust, Inc.                                                                                                                                             
|            | 
|31.1        |  | Certification of Chief Executive Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, 12 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002(3)
|            | 
|31.2        |  | Certification of Chief Financial Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, 12 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002(3)
|            | 
|32.1        |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(2)                                         
|            | 
|32.2        |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(2)                                         



57



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



ARC CORPORATE REALTY TRUST, INC.By:

/s/ Robert J. AmbrosiName:

Robert J. AmbrosiTitle:

Chairman and President (Principal Executive Officer)Date:

March 12, 2008By:

/s/ Bruce NelsonName:

Bruce NelsonTitle:

Chief Financial Officer(Principal Accounting Officer)Date:

March 12, 2008


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of ACRT and in the capacities and on the date indicated.



|                       |  |                                                       
|---------------------- |  | ------------------------------------------------------
|/s/ Robert J. Ambrosi 
|Name:                  |  | Robert J. Ambrosi                                     
|Title:                 |  | Chairman and President (Principal Executive Officer)  
|                      
|/s/ Bruce Nelson      
|Name:                  |  | Bruce Nelson                                          
|Title:                 |  | Chief Financial Officer (Principal Accounting Officer)
|                      
|/s/ Dietmar Georg     
|Name:                  |  | Dietmar Georg                                         
|Title:                 |  | Director                                              
|                      
|/s/ Mervin H. Goldman 
|Name:                  |  | Mervin H. Goldman                                     
|Title:                 |  | Director                                              
|                      
|/s/ Richard G. Kelley 
|Name:                  |  | Richard G. Kelley                                     
|Title:                 |  | Director                                              
|                      
|/s/ Marc Perel        
|Name:                  |  | Marc Perel                                            
|Title:                 |  | Director and Executive Vice President                 
|                      
|/s/ Garrett E. Sheehan
|Name:                  |  | Garrett E. Sheehan                                    
|Title:                 |  | Director                                              
|                      
|/s/ James Steuterman  
|Name:                  |  | James Steuterman                                      
|Title:                 |  | Director                                              

DATE: March 12, 2008



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