**Exhibit 99.1**

 

**RISK FACTORS**

**OF GOLF TRUST OF AMERICA, INC.**

 

**Risksthat might Delay or Reduce our Liquidating Distributions**

** **

Wehave recorded the value of the Resort and our remaining golf courses andliabilities at our best estimates of fair value as of May 9, 2006;however, we can provide no assurance that these estimates reflect the actualcurrent market value for the applicable courses. As a result of our inabilityto provide any assurance regarding the estimates of the fair value of ourassets, including the probability of negotiating and closing a sale of theResort, at the present time, we do not believe that we are able to reliablyproject the amount of the total liquidating distributions we will make to theholders of our common stock over the remainder of the liquidation period andthe amounts may be significantly less than our earlier projections.Further, while we have provided in this report estimated adjustments to netassets in liquidation based upon the sale of the Resort and our interest in ParcelF for aggregate consideration of approximately $36.4 million, there can be noassurances that we will be able to close a sale of the Resort for a price thatwill allow us to realize the estimated proceeds for the Resort, if at all.Further, we can provide no assurance that the cash consideration paid for thebusiness of the Resort will be in a price range to allow us to repurchase AEW’spreferred stock for $20 million, if at all. As a result, the estimatedadjustments to net assets in liquidation provided in this report may proveincorrect and the amounts, if any, that we ultimately distribute as liquidatingdistributions may be significantly less than estimated.

 

***Ifwe are not able to sell the Resort and our other remaining golf property in atimely manner, liquify certain other non-real estate assets such as our notereceivable, or obtain some form of additional financing we may experiencesevere liquidity problems, not be able to meet the demands of our creditorsand, ultimately become subject to bankruptcy proceedings.***

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Inthe event that we are unable to sell the Resort and our other remaining golfproperty as planned, liquify certain other non-real estates assets such as ournote receivable, or obtain some form of additional financing, we may beunable to pay our obligations as they become due or upon demand. In addition,our ability to pay our obligations may be compromised if our chiefexecutive officer requires payment of outstanding performance

 

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milestonepayments owed by us to him before we are able to realize net cash proceeds fromasset sales sufficient to discharge those obligations. As of May 9, 2006,we owed our two most senior executive officers a total of approximately$1,763,000 in milestone payments and accrued interest on such milestonepayments. We also owe a substantial sum in legal fees, including fees incurredin connection with the negotiation of agreements providing for the sale of theResort.

 

Further,given that the Resort’s only source of cash is from any profitable operations ofthe Resort, and that the operational cash flow capacity of the Resort willlikely not permit the Resort to maintain positive cash flow through out 2006,we may be required to seek to provide additional capital to the Resort. Wemade intercompany advances to the Resort to support working capital needs inthe amounts of $2,000,000, $400,000 and $650,000 in July 2004, September 2005and November 2005, respectively. While the financial performance of theResort has shown signs of recovery since the Company assumed title to theResort on July 15, 2004, current projections provided by Westin indicatean operational cash flow shortfall by the end of the summer of 2006. Further,the Resort’s credit capacity is limited. There are no assurances thatadditional intercompany advances will not be necessary prior to theconsummation of a sale of the Resort. In the event that we must advanceadditional capital to fund operations at the Resort or our other operations, wemay be required to seek financing or raise further capital in order tomeet our obligations when they come due. Further, we may also be requiredto utilize proceeds from the sale of our other assets to fund our operationsand the operations of the Resort. There is no assurance that we will be able toliquify certain other non-real estate assets, obtain additional financing,raise further capital or that we will have sufficient proceeds from assetssales from which to draw, or that any funding that we receive will not containrestrictive covenants or other onerous terms. Additionally, we expect that thecash flow that we receive on the interest income from our note receivable andthe net operating income of the Stonehenge golf courses, if any, will not besubstantial

 

Inthe event we are not able to sell our remaining assets within a reasonableperiod of time and for reasonable amounts, liquify certain other non-realestate assets, or obtain additional financing, or if our expenses exceed ourestimates, we may experience severe liquidity problems and not be able tomeet our financial obligations of our creditors. If we cannot meet ourobligations to our creditors, we could ultimately become subject to bankruptcyproceedings.

 

***Ourestimate of the Resort’s fair value, as recorded on our books for accountingpurposes, is based on forward-looking estimates which are subject to change. Wemight sell the Resort for an amount less than our current estimate of its fairvalue, which could significantly reduce our liquidating distributions toholders of our common stock.***

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Wedo not believe we are able at this time to project the amount of the totalliquidating distributions we will make to the holders of our common stock overthe remainder of the liquidating period. The factors giving rise to thisuncertainty include, without limitation, the following:

 

•       improvementin the financial performance of the Resort that we have observed since we tooktitle in July 2004 may not continue;

 

•       despite ourexecution of a new management agreement with Westin at the Resort providing forincreased control by us over accounting and marketing and improved provisionsgoverning Westin’s reporting to us, we do not directly manage the Resort;

 

•       ourSettlement Agreement with our former borrower and related agreements that weentered with Westin may prove less successful than anticipated, and theperformance of the parties to the Settlement Agreement may fall short ofour expectations;

 

•       historicaluncertainty surrounding the future of the Resort and the level of Westin’sinvolvement upon the prospective sale of the Resort may create uncertaintyfor corporate meeting planners contracting for large corporate groups, and anysuch uncertainty may be used as a competitive advantage by our competitorswhen marketing their hotels against the Resort; and

 

•       uncertaintyabout our ability to close the transactions contemplated in any asset purchaseagreement we may execute.

 

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Asa result of the foregoing, at the present time we will refrain from eithermaking any adjustments (positive or negative) to any earlier reported range ofdistributions or proposing a new range. We may, however, be able to do so infuture periods in the event that the quality and reliability of all informationnecessary to make estimates of cash flow and, correspondingly, value becomemore reliable. You should not assume that the liquidating distributions havenot declined, perhaps in material amounts, from the historical projections weprovided in earlier filings.

 

Ourefforts to preserve the value of the Resort until we are able to consummate itssale may be unsuccessful, and we might ultimately sell our interest in theResort for significantly less than our last estimate of its fair value.Accordingly, our assessment of the Resort’s fair value may change at somefuture date, perhaps in a material adverse manner, based on facts andcircumstances at that time, and the Resort’s value may again bewritten-down.

 

***Wehave entered into an Option Agreement with the holder of our series Apreferred stock which provides that the holder will permit us to repurchase allof the holder’s series A preferred stock for less than the currentliquidation preferences afforded to those shares provided that we receive acash consideration for the business of the Resort of no more than $35 million.As a result of our agreement with AEW, we have not recorded in our net assets aliability for the accrual of preferred dividends payable for the quarterbeginning July 1, 2001 and all subsequent quarters. In the event that weare unable to exercise our option to repurchase all of the holder’s series Apreferred stock prior to its expiration date, we may be required to paythat holder all or a portion of the preferred dividends for which we have notrecorded a liability, reducing our liquidating distributions to commonstockholders.***

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OnApril 12, 2006 we executed an Option Agreement, with the holder of our series Apreferred stock, AEW, in which AEW agreed that we shall have an option topurchase, on or before June 30, 2006, the 800,000 shares of our series Apreferred stock held by AEW, including, without limitation, all of AEW’s rightsto due and unpaid principal, accrued and unpaid dividends and liquidationpreferences payable in respect of such series A preferred shares as of ourexercise of the option. The exercise price of this option is approximately$20,000,000. This option is only exercisable if the business of the Resort issold for no more than $35,000,000 million. This exercise price excludesdividends that would accrue to the series A preferred stock.

 

Asa result of our understandings with AEW, we have not recorded in our net assetsa liability for the accrual of quarterly preferred dividends for the period July 1,2001 to December 31, 2005 totaling $9,914,000, plus an additional dividendaccrual of $625,000 per quarter for preferred dividends through the date thatthe exit transaction is ultimately consummated and liquidation payments aremade to AEW. In the event that we are unable to exercise our option torepurchase all of the holder’s series A preferred stock prior to itsexpiration date of June 30, 2006, or if the cash consideration for thebusiness of the Resort is outside of the range permitting us to exercise ouroption to repurchase AEW’s preferred stock, we may be required to pay thatholder all or a portion of the quarterly preferred dividends for which we havenot recorded a liability, reducing our liquidating distributions to commonstockholders.

 

***Wecannot guarantee that we will be able to enter into a binding agreement for thesale or other disposition of the Resort.***

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Inconnection with our efforts to sell the Resort, we intend to negotiate andexecute a binding asset purchase agreement. Thereafter, any closing pursuant toan executed asset purchase agreement will be conditioned upon, among otherthings, consideration and approval of the transaction by the Special Committeeof our Board and the receipt of a satisfactory fairness opinion. We cannotassure you that we will enter into an asset purchase agreement for the Resortor, if we do so, that all conditions to closing will be satisfied and theResort will be sold. Further, the price that we receive if we sell the Resortmight be less than the then applicable carrying value of the Resort on ourfinancial statements. Significant legal and other costs and expenses will beincurred in connection with the negotiation of any sale of the Resort, andthese costs and expenses will further reduce the liquidating distributions thatwe make to the holders of our common stock.

 

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***Wetook ownership of the Resort on July 16, 2004 pursuant to a globalSettlement Agreement providing for the assumption of certain existing ormodified financial obligations of our former borrower. We are now responsiblefor any negative cash flow of the Resort. If the amount of assumed liabilitiesand expenditures with respect to the Resort exceed our expectations, ourliquidating distributions to common stockholders could be reduced.***

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OnJuly 15, 2004, we entered a Settlement Agreement relating to our June 1997$79.0 million loan to our former borrower. This loan was secured by amortgage on the Resort. As part of the Settlement Agreement, we assumedcertain financial obligations of the borrower, such as refurbishment expensespaid by the condominium owners, a modified termination rights fee andoutstanding golf facility management fees payable to Troon. As the owner of theResort, we are responsible for any negative cash flow associated with itsownership and operation. As a result of the assumption of these liabilities andour responsibility for any negative cash flow, we face the risk that ourultimate liabilities and expenditures might be greater than expected. In thatcase, our cash available for distribution and the ultimate amount of ourliquidating distributions to the holders of our common stock could be less thanour expectations. In 2005, we funded $1,050,000 to address seasonal cash flowshortfalls. However, there are no assurances that additional intercompanyadvances will not be necessary prior to the consummation of a sale of theResort.

 

Althoughthe revenues of the Resort have begun to increase since we took title to it, wecan provide no assurance that the Resort’s future performance will continue toshow improvement. If we do not continue to improve the Resort’s financialperformance, our recovery with respect to this asset might be significantlydelayed. A delay in our recovery of the Resort might reduce the net proceedsthat we ultimately receive upon a sale of the Resort to less than our currentestimate of the Resort’s fair value, and we may be forced to use funds thatotherwise might be distributed to our stockholders, if any, to fund cashshortages of the Resort, causing our liquidating distributions to holders ofour common stock to be reduced. Our estimate of the Resort’s fair value, asrecorded on our books for accounting purposes, is based on forward-lookingestimates which are subject to change. We can provide no assurance of successunder the Settlement Agreement, the future success of the Resort or the consummationof the transactions contemplated by the Asset Purchase Agreement.

 

***Stockholderlitigation related to the plan of liquidation could result in substantial costsand distract our management.***

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Extraordinarycorporate actions, such as our plan of liquidation, often lead to securities class actionlawsuits and derivative litigation being filed against companies such as ours.We became involved in this type of litigation in connection with our plan ofliquidation (and the transactions associated with it) in a legal action werefer to as the *Crossley* litigation. During thesecond quarter of 2003, the *Crossley* claimwas dismissed with prejudice on our motion for summary judgment. Accordingly,the lawsuit was dismissed and the plaintiff will not be allowed to refile theclaim, although the plaintiff could appeal the dismissal. We subsequentlyentered into a non-monetary settlement with the plaintiff whereby the plaintiffagreed not to appeal the dismissal and we agreed not to seek reimbursement ofour legal costs from the plaintiff. Even though the *Crossley*litigation has been dismissed, we face the risk that other claims might bebrought against us. Any such litigation would likely be expensive and, even ifwe ultimately prevail, the process would divert management’s attention fromimplementing the plan of liquidation and otherwise operating our business. Ifwe do not prevail in any such litigation, we might be liable for damages. It isnot possible to predict the amount of such potential damages, if any, but theymight be significant. Any damage liability would reduce our cash available fordistribution and the ultimate amount of our liquidating distributions toholders of our common stock.

 

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***Ifwe are unable to retain at least one of our key executives and sufficient staffmembers to complete the plan of liquidation in a reasonably expeditious manner,our liquidating distributions might be delayed or reduced.***

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Ourability to consummate sales transactions for our other interests in golfcourses depend to a large extent upon the experience and abilities of our twomost senior executives, W. Bradley Blair, II, our chief executive officerand president, and Scott D. Peters, our senior vice president and chieffinancial officer, and their experience and familiarity with our assets, ourcounter-parties and the market for golf course sales. Mr. Blair and Mr. Petersare currently serving us on a reduced schedule basis. We believe ourliquidation has progressed to the point that the resignation of one, but notboth, of our executives would not likely cause significant adverseconsequences. However, a loss of the services of both of these individualscould materially harm our ability to complete the plan of liquidation in areasonably expeditious manner and our prospects of selling our assets at thebest potential prices.

 

Thepotential resignation of Mr. Blair poses a relatively greater risk at thistime in light of the fact that the amount of time that Mr. Peters isrequired to commit to us is less than the amount of time that Mr. Blair isrequired to commit to us. If Mr. Blair were to resign, we would likelyseek to hire a replacement for Mr. Blair. The cost that we incur toreplace Mr. Blair would likely depend upon our determination of theexperience and skills that must be possessed by his replacement in light of ourfinancial condition, our assets remaining to be liquidated, and the complexityof any issues bearing on us and the liquidation at that time.

 

Ourability to complete the plan of liquidation in a timely manner also depends onour ability to retain our key non-executive employees, in particular ourcontroller. Those employees may seek other employment rather thanremaining with us throughout the process of liquidation, even though theygenerally would lose their eligibility for severance payments by resigning. Ifwe are unable to retain enough qualified staff to complete our plan ofliquidation in a reasonably expeditious manner, liquidating distributions mightbe delayed or reduced.

 

***Ifwe are unable to consummate a sale of the Resort or our other remaining golfcourses at our revised estimates of their respective values, our liquidatingdistributions might be delayed or reduced.***

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Inaddition to the four golf courses at the Resort, we have one other property (ortwo eighteen-hole equivalent golf courses). In calculating our projectedliquidating distributions, we assumed that we would be able to find buyers forthe Resort and our other remaining property at purchase prices equal to ourestimates of their respective fair market values. However, our estimates of thesales prices of the Resort and our other remaining property may exceed theprices we eventually receive. At December 31, 2005, we recorded a $2.421million write-down in the value of the Resort based on market indications ofinterest. Should we not be able to find a buyer at our current carryingvalue,  in order to find a buyer in areasonably expeditious manner, we might be required to lower our asking pricefor the Resort and our other remaining property below our estimate of theirfair value. If we are not able to find new buyers for these assets in areasonably expeditious manner, or if we have overestimated the sales prices wewill ultimately receive, our liquidating distributions to the holders of ourcommon stock will be significantly delayed or reduced.

 

Atthe present time, we do not believe we are able to reliably project the amountof the total liquidating distributions we will make to the holders of ourcommon stock over the remainder of the liquidation period. Accordingly, youshould not rely on the valuations or ranges earlier provided as representativeof our current views on the subject.

 

***Ifwe are unable to realize the value of a promissory note taken as part ofany purchase price, our liquidating distributions might be reduced.***

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Insome golf course sales, we may agree to receive promissory notes from thebuyer as a portion of the purchase price. Promissory notes are often illiquid.If we are not able to sell the promissory note without a great discount, or inthe case of a short-term note, if we hold it to maturity and the makerultimately defaults, our liquidating distributions might be reduced.

 

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***Decreasesin golf course values caused by economic recession and/or additional terrorist activitymight reduce the amount for which we can sell our assets.***

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Thevalue of our interests in golf courses might be reduced, and substantially so,by a number of factors that are beyond our control, including the following:

 

•       adversechanges in the economy, prolonged recession and/or additional terroristactivity against the United States or our allies, or other war-time activitiesmight increase public pessimism and decrease travel and leisure spending,thereby reducing golf course operators’ revenues (particularlydestination-resort golf course revenues) and diminishing the resale value ofthe affected golf courses;

 

•       increasedcompetition, including, without limitation, increasing numbers of golf coursesbeing offered for sale in our markets or nationwide;

 

•       continuingimbalance in supply and demand in the golf course industry; and

 

•       changes inreal estate tax rates and other operating expenses.

 

Anyreduction in the value of our golf courses would make it more difficult for usto sell our assets for the amounts and within the time-frames that we haveestimated. Reductions in the amounts that we receive when we sell our assetscould decrease or delay our payment of liquidating distributions to ourstockholders, perhaps in substantial ways.

 

***Ifour liquidation costs or unpaid liabilities are greater than we expect, ourliquidating distributions might be delayed or reduced, potentially in asubstantial manner.***

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Beforemaking the final liquidating distribution to the holders of our stock, we willneed to pay all of our transaction costs pertaining to the liquidation and allvalid claims of our creditors, which we expect will be substantial. Our board may alsodecide to acquire one or more additional insurance policies covering unknown orcontingent claims against us, including, without limitation, additionaldirectors’ and officers’ liability insurance, for which we would pay anadditional premium based upon market prices prevailing at the time of any suchpurchase. In addition, if we form a liquidating trust, we may haveadditional expenses for items such as insurance for the trustees. We haveestimated such transaction costs in calculating the amount of our projectedliquidating distributions. To the extent that we have underestimated costs andexpenses in calculating our historical projections, our actual aggregateliquidating distributions will be lower than we have historically projected,and perhaps by substantial amounts.

 

***Theholder of our series A preferred stock might exercise its right to appointtwo directors to our board of directors, which might result in decisions thatprejudice the economic interests of our common stockholders in favor of ourpreferred stockholders.***

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Weentered into a voting agreement with the holder of our preferred stock, AEW,pursuant to which the holder agreed to vote in favor of our plan ofliquidation. The voting agreement provided that if we failed to redeem our series Apreferred stock by May 22, 2003, the holder of the preferred stock wouldbe entitled to require us to redeem the preferred stock. We received such ademand from the holder of our preferred stock on May 23, 2003; however, wedo not have cash available to redeem the holder of our preferred stock. Ourdefault in making a timely redemption payment gives the holder of our preferredstock the right under the voting agreement to appoint two new directors to ourboard. Our charter also gives the holder of our preferred stock the right toelect two new directors if and when dividends on its series A preferredstock are in arrears for more than six quarters. Currently, dividends on the series Apreferred stock are nineteen quarters in arrears. These director electionrights are not cumulative, which means that the holder of our preferred stock may electtwo, but not four, new directors. The current holder of our preferred stock,AEW, informed us previously that it does not currently intend to exercise itsdirector election rights. However, it might decide to exercise such right atany time in the future. The appointment of such directors to our board mightreduce the efficiency of our board’s decision-making or result in decisionsthat prejudice the economic interests of the holders of our common stock infavor of the holder of our preferred stock. The Option Agreement executedbetween us and AEW on April 12, 2006 does not impact AEW’s right under thevoting agreement as described above to appoint two new directors to our boardshould they desire to do so.

 

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***Distributinginterests in a liquidating trust may cause you to recognize gain prior tothe receipt of cash.***

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Aswe contemplate the sale of our remaining assets and the wind-up of our company,as expressly contemplated by our plan of liquidation, we may elect tocontribute our remaining assets and liabilities to a liquidating trust. Ourstockholders would receive interests in the liquidating trust, our corporateexistence would terminate and our shares would no longer trade publicly. Theplan of liquidation prohibits us from contributing our assets to a liquidating trustunless and until our preferred stock has been redeemed in full or until suchtime as it consents to such a contribution.

 

Fortax purposes, the creation of the liquidating trust should be treated as adistribution of our remaining assets to our stockholders, followed by acontribution of the same assets to the liquidating trust by our stockholders.As a result, we will recognize gain or loss inherent in any such assets, withany gains offset by available net operating loss carry-overs (discussed above).In addition, a stockholder would recognize gain to the extent his share of thecash and the fair market value of any assets received by the liquidating trustwas greater than the stockholder’s basis in his stock, notwithstanding that thestockholder would not contemporaneously receive a distribution of cash or anyother assets with which to satisfy the resulting tax liability, and would notbe able to transfer its interests in the liquidating trust.

 

Inaddition, it is possible that the fair market value of the assets received bythe liquidating trust, as estimated for purposes of determining the extent ofthe stockholder’s gain at the time interests in the liquidating trust aredistributed to the stockholders, will exceed the cash or fair market value ofproperty ultimately received by the liquidating trust upon its sale of theassets, in which case the stockholder may not receive a distribution ofcash or other assets with which to satisfy any tax liability resulting from thecontribution of the assets to the liquidating trust. In this case, thestockholder would recognize a loss in a taxable year subsequent to the taxableyear in which the gain was recognized, which loss might be limited under thetax code.

 

Ifwe do not distribute our assets to a liquidating trust and, instead, continueto operate as a regular corporation until all of our assets are sold, we wouldrecognize gains or losses upon the sale of assets for federal income taxpurposes. Since we are no longer a REIT, we could be subject to income tax onany recognized gains. If we were to recognize taxable gains in a year beforeconsideration of net operating loss carryovers, we could be subject toalternative minimum tax. Generally, for tax years ending after December 31,2002, the use of net operating loss carryovers to reduce alternative minimumtaxable income is limited to 90% of alternative minimum taxable income.Therefore, tax at a rate of 20% could be imposed on our alternative minimumtaxable income that cannot be reduced by net operating loss carryovers. If aliquidating trust is formed, our net operating loss carryovers will not beavailable to reduce any gains recognized within the trust. However, the trustwill have a tax basis equal to the fair market value of its assets at the datethe liquidating trust is formed. Any gain recognized by the trust would thus bethe result of either appreciation in the value of the assets during the timethat they are owned by the trust, or an initial underestimation of the fairmarket value of the assets at the time the trust is formed.

 

***Ourstock may be de-listed from American Stock Exchange, which would make itmore difficult for investors to sell their shares.***

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Currently,our common stock trades on the American Stock Exchange, or Amex. We cannot assureyou that we will be able to maintain our listing on Amex or any otherestablished trading market. Among other things, Amex has considerablediscretion with respect to listing standards, which include qualitative andquantitative criteria, some of which are beyond our control. Further, in theevent that we form a liquidating trust, we expect that we would de-listfrom the Amex.

 

Wecannot assure you that we will be able to maintain our listing on Amex, andinvoluntary delisting would harm our business and the value of your investment.If our common stock were to be de-listed from Amex, either as a result ofvoluntarily action by us or because we no longer meet the Amex listingstandards, it could severely limit the market liquidity of the common stock andyour ability to sell our securities in the secondary market.

 

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***Weand our subsidiary, GTA-IB LLC, expect to incur significant compliance costsrelating to the Exchange Act and Sarbanes-Oxley Act.***

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Weand our subsidiary, GTA-IB, LLC, are required to comply with the reportingrequirements of the Exchange Act as they apply to non-accelerated filers. Assuch, both entities must timely file Quarterly Reports on Form 10-Q,Annual Reports on Form 10-K and Current Reports on Form 8-K, amongother actions. Further, recently enacted and proposed laws, regulations andstandards relating to corporate governance and disclosure requirementsapplicable to public companies, including the Sarbanes-Oxley Act and new SECregulations have increased the costs of corporate governance, reporting anddisclosure practices which are now required of us and of GTA-IB. We were formedprior to the enactment of these new corporate governance standards, and as aresult, we did not have all necessary procedures and policies in place at thetime of their enactment. Our efforts to comply with applicable laws andregulations, including requirements of the Exchange Act and the Sarbanes-OxleyAct, are expected to involve significant, and potentially increasing, costs.Costs incurred in complying with these regulations may reduce the amountof cash available for liquidating distributions.

 

TheSarbanes-Oxley Act and related laws, rules and regulations create legalbases for administrative enforcement, civil and criminal proceedings against usin case of non-compliance, thereby increasing our risk of liability andpotential sanctions. Costs incurred in defending against any such actions orproceedings, and any liability or sanctions incurred in connection with suchactions or proceedings, could negatively affect the amount of cash availablefor liquidating distributions.

 

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