**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-Q**

 
| **(Mark One)**                                                                                                                                                                                               | ** **                                                                                         |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------|
| x                                                                                                                                                                                                            | **Quarterly report pursuant to section 13 or 15(d) of the  Securities Exchange Act of 1934**  |
| **for the quarterly period ended: June 30, 2006**                                                                                                                                                       |
| o                                                                                                                                                                                                            | **Transition report pursuant to section 13 or 15(d) of the  Securities Exchange Act of 1934** |
| **for the transition period from              to              ** |

 

**Commission File Number000-22091**

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**GOLF TRUST OF AMERICA, INC.**

(Exact name of registrant as specified in its charter)

 
| **Maryland**

(State or other jurisdiction of

incorporation or organization)                         | **33-0724736**

(I.R.S. Employer

Identification Number) |
|-------------------------------------------------------------------------------------------------------|----------------------------------------------------------|
| **10 North Adger’s Wharf, Charleston, South Carolina**

(Address of principal executive offices) | **29401**

(Zip Code)                                    |
| **(843) 723-4653**

(Registrant’s telephone number, including area code)                    |

 

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Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such report(s) and (2) has been subject to such filingrequirements for the past 90 days. Yes x  No o.

Indicate by check mark whetherthe registrant is a large  acceleratedfiler, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Act.

                                         Largeaccelerated filer  o       Accelerated filer  o      Non-accelerated filer x

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

                                                                                             Yes o  No x

On August 16, 2006, therewere 7,317,163 common shares outstanding of the registrant’s only class ofcommon stock. On August 16, 2006, there were 800,000 shares outstanding ofthe registrant’s 9.25% Series A Cumulative Convertible Preferred Stock,which is the registrant’s only class of outstanding preferred stock.

The Exhibit Index begins onpage 49.

 

 

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**GOLF TRUST OFAMERICA, INC.**

**Form 10-Q QuarterlyReport****For the Three and Six MonthsEnded June 30, 2006**

**INDEX**
| **PART I. FINANCIAL INFORMATION** |
|-----------------------------------|
| **Item 1.**                       | ** ** | **Liquidation  Basis Financial Statements** |
|                              |   | Condensed  Consolidated Statements of Net Assets as of June 30, 2006 (unaudited) and  December 31, 2005 |
|                              |   | Condensed  Consolidated Statements of Changes in Net Assets (unaudited) for the Three  Months Ended June   30, 2006 and 2005 |
|                              |   | Condensed  Consolidated Statements of Changes in Net Assets (unaudited) for the Six  Months Ended June   30, 2006 and 2005 |
|                              |   | Condensed  Consolidated Statements of Cash Flows (unaudited) for the Six Months ended  June 30, 2006   and 2005 |
|                              |   | Notes to Condensed  Consolidated Financial Statements (unaudited) |
| **Item 2.**                       | ** ** | **Management’s  Discussion and Analysis of Financial Condition and Results of Operations** |
| **Item 3.**                       | ** ** | **Quantitative  and Qualitative Disclosures About Market Risk** |
| **Item 4.**                       | ** ** | **Controls and  Procedures** |
| **PART II. OTHER  INFORMATION**   |
| **Item 1.**                       | ** ** | **Legal Proceedings** |
| **Item 1A.**                      | ** ** | **Risk Factors** |
| **Item 2.**                       | ** ** | **Unregistered  Sales of Equity Securities and Use of Proceeds** |
| **Item 3.**                       | ** ** | **Defaults upon  Senior Securities** |
| **Item 4.**                       | ** ** | **Submission of  Matters to a Vote of Security Holders** |
| **Item 5.**                       | ** ** | **Other Information** |
| **Item  6.**                      | ** ** | **Exhibits  and Reports on Form 8-K** |
| **Signatures**                    |   |   |
| **Exhibit  Index**                |   |   |

** **

**Cautionary Note RegardingForward-Looking Statements**

Thefollowing report contains forward-looking statements within the meaning ofSection 27A of the Securities Act of 1933, as amended, or the SecuritiesAct, and Section 21E of the Securities Exchange Act of 1934, as amended,or the Exchange Act. Forward-looking statements are statements that predict ordescribe future events or trends and that do not relate solely to historicalmatters. All of our projections in this Quarterly Report are forward-lookingstatements, including our projections regarding the amount and timing ofliquidating distributions. You can generally identify forward-lookingstatements as statements containing the words “believe,” “expect,” “will,” “anticipate,”“intend,” “estimate,” “project,” “assume” or other similar expressions. Youshould not place undue reliance on our forward-looking statements because the mattersthey describe are subject to known (and unknown) risks, uncertainties and otherunpredictable factors, many of which are beyond our control. Ourforward-looking statements are based on the limited information currentlyavailable to us and speak only as of the date on which this Quarterly Reportwas filed with the Securities and Exchange Commission, or the SEC. Ourcontinued internet posting or subsequent distribution of this dated report doesnot imply continued affirmation of the forward-looking statements included init. We undertake no obligation, and we expressly disclaim any obligation, toissue any updates to our forward-looking statements, even if subsequent eventscause our expectations to change regarding the matters discussed in those statements.Future events are inherently uncertain. Moreover, it is particularly difficultto predict business activity levels at the Westin Innisbrook Golf Resort, orResort, and whether a sale of the Resort will occur in the contemplated timeline and at a price that is approximately equivalent to its carrying value,with any certainty. Accordingly, our projections in this Quarterly Report aresubject to particularly high uncertainty. Our projections should not beregarded as legal promises, representations or warranties of any kindwhatsoever. Over time, our actual results, performance or achievements willlikely differ from the anticipated results, performance or achievements thatare expressed or implied by our forward-looking statements, and such differencesmight be significant and harmful to our stockholders’ interests. Many importantfactors that could cause such a difference are described under the caption “RiskFactors,” in our Annual Report on Form 10-K for the year ended December 31,2005, in subsequent reports on Form 10-Q and in Part II, Item 1A of thisQuarterly Report, each of which you should review carefully.

 

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**GOLF TRUST OF AMERICA, INC.**

**CONDENSED CONSOLIDATED STATEMENTSOF NET ASSETS (LIQUIDATION BASIS)**

**AS OF JUNE 30, 2006 (unaudited) AND DECEMBER 31, 2005**

 
| ** **                                                                                             | ** ** | **June 30, 2006** | ** ** | **December 31, 2005** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                                                                                             | ** ** | **(in thousands)**     | ** ** |
| **ASSETS**                                                                                             |       |                        |       |                            |       |
| Real estate—held for  sale                                                                        |       | $                           | 55,234     |                            | $          | 56,506 |   |
| Cash and cash  equivalents                                                                             |       | 5,858                       |       | 2,822                           |       |
| Receivables—net                                                                                   |       | 5,716                       |       | 5,806                           |       |
| Other assets                                                                                           |       | 4,332                       |       | 4,597                           |       |
| Total assets                                                                                           |       | 71,140                      |       | 69,731                          |       |
| **LIABILITIES**                                                                                        |       |                        |       |                            |       |
| Debt                                                                                                   |       | 5,832                       |       | 5,830                           |       |
| Accounts payable and  other liabilities                                                                |       | 12,942                      |       | 13,080                          |       |
| Other obligations                                                                                      |       | 10,937                      |       | 11,120                          |       |
| Reserve for estimated  costs during the period of liquidation                                          |       | 7,997                       |       | 5,919                           |       |
| **Total liabilities**                                                                                  |       | 37,708                      |       | 35,949                          |       |
| Commitments and  contingencies                                                                         |       |                        |       |                            |       |
| Preferred stock, $.01  par value, 10,000,000 shares authorized, 800,000 shares issued and  outstanding |       | 20,000                      |       | 20,000                          |       |
| Total liabilities and  preferred stock                                                                 |       | 57,708                      |       | 55,949                          |       |
| **NET ASSETS IN LIQUIDATION**(available  to holders of common stock and OP units)                      |       | $                           | 13,432     |                            | $          | 13,782 |   |

 

See accompanying notes tocondensed consolidated financial statements.

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**GOLF TRUST OF AMERICA, INC.**

**CONDENSED CONSOLIDATED STATEMENTSOF CHANGES IN NET ASSETS (LIQUIDATION BASIS)**

**FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND 2005**

 
|                                                                                         | ** ** | **Three Months Ended  June 30, 2006** | ** ** | **Three Months Ended  June 30, 2005** | ** ** |
|-----------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                                                              | ** ** | **(in thousands, unaudited)**                   | ** ** |
| Net assets in  liquidation, beginning of period                                         |       | $                                                         | 13,432     |                                                      | $          | 14,941 |   |
| **Changes in net assets in  liquidation:**                                              |       |                                                      |       |                                                      |       |
| Adjustments to  liquidation reserve:                                                    |       |                                                      |       |                                                      |       |
| Operating income                                                                        |       | 22                                                        |       | 473                                                       |       |
| Net interest  expense                                                                   |       | (330                                                      | )          | (284                                                      | )          |
| Increase in fair  value of real estate                                                  |       | 34                                                        |       | —                                                    |       |
| Decrease(increase)  in reserve for estimated liquidation costs and capital expenditures |       | 274                                                       |       | (598                                                      | )          |
| Subtotal of  adjustments to liquidation reserve                                         |       | —                                                    |       | (409                                                      | )          |
| Preferred dividend  accrual                                                             |       | —                                                    |       | —                                                    |       |
| Value of common stock  redeemed                                                         |       | —                                                    |       | —                                                    |       |
| **Changes in net assets in  liquidation**                                               |       | —                                                    |       | (409                                                      | )          |
| **Net assets in liquidation, end of period**                                            |       | $                                                         | 13,432     |                                                      | $          | 14,532 |   |

 

See accompanying notes to condensed consolidated financial statements.

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**GOLF TRUST OF AMERICA, INC.**

**CONDENSED CONSOLIDATED STATEMENTSOF CHANGES IN NET ASSETS (LIQUIDATION BASIS)**

**FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005**

 
| ** **                                                                    | ** ** | **Six Months Ended  June 30, 2006** | ** ** | **Six Months Ended  June 30, 2005** | ** ** |
|-------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                    | ** ** | **(in thousands, unaudited)**                 | ** ** |
| Net assets in  liquidation, beginning of period                               |       | $                                                       | 13,782     |                                                    | $          | 15,045 |   |
| **Changes in net assets in  liquidation:**                                    |       |                                                    |       |                                                    |       |
| Adjustments to  liquidation reserve:                                          |       |                                                    |       |                                                    |       |
| Operating income                                                              |       | 3,520                                                   |       | 3,620                                                   |       |
| Net interest  income (expense)                                                |       | (648                                                    | )          | (627                                                    | )          |
| Increase in fair  value of real estate                                        |       | 374                                                     |       | —                                                  |       |
| Increase in  reserve for estimated liquidation costs and capital expenditures |       | (3,596                                                  | )          | (3,402                                                  | )          |
| Subtotal of  adjustments to liquidation reserve                               |       | (350                                                    | )          | (409                                                    | )          |
| Preferred dividend  accrual                                                   |       | —                                                  |       | —                                                  |       |
| Value of common stock  redeemed                                               |       | —                                                  |       | (104                                                    | )          |
| **Changes in net assets in  liquidation**                                     |       | (350                                                    | )          | (513                                                    | )          |
| **Net assets in liquidation, end of period**                                  |       | $                                                       | 13,432     |                                                    | $          | 14,532 |   |

 

See accompanying notes tocondensed consolidated financial statements.

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**GOLF TRUST OF AMERICA, INC.**

**CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS (LIQUIDATION BASIS)**

**FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005**

 
| ** **                                                                                                   | ** ** | **Six Months Ended  June 30, 2006** | ** ** | **Six Months Ended  June 30, 2005** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                                                                   | ** ** | **(in thousands, unaudited)**                 | ** ** |
| **Cash flows from changes in net  assets in liquidation and operating activities:**                          |       |                                                    |       |                                                    |       |
| Changes in net  assets in liquidation                                                                        |       | $                                                       | (350       | )                                                       | $          | (513 | ) |
| Adjustments to  reconcile change in net assets in liquidation to net cash provided by  operating activities: |       |                                                    |       |                                                    |       |
| Increase in  liquidation reserve and changes in fair value of real estate and non-real  estate assets        |       | 3,256                                                   |       | 3,402                                                   |       |
| Cancellation of  common shares                                                                               |       | —                                                  |       | 104                                                     |       |
| Provision for  bad debts                                                                                     |       | 279                                                     |       | 54                                                      |       |
| Non-cash  interest                                                                                           |       | 369                                                     |       | 408                                                     |       |
| Other changes in  operating assets and liabilities                                                           |       | 760                                                     |       | (761                                                    | )          |
| Decrease in  liquidation liabilities                                                                         |       | (1,472                                                  | )          | (1,203                                                  | )          |
| Net cash  provided by operating activities                                                                   |       | 2,842                                                   |       | 1,491                                                   |       |
| **Cash flows from investing  activities:**                                                                   |       |                                                    |       |                                                    |       |
| Resort and golf  course improvements                                                                         |       | (143                                                    | )          | (492                                                    | )          |
| Proceeds from  asset sales                                                                                   |       | 1,038                                                   |       | —                                                  |       |
| Net cash provided by  (used in) investing activities                                                         |       | 895                                                     |       | (492                                                    | )          |
| **Cash flows from financing  activities:**                                                                   |       |                                                    |       |                                                    |       |
| Repayments on  debt and capital lease obligations                                                            |       | (701                                                    | )          | (545                                                    | )          |
| Net increase in cash                                                                                         |       | 3,036                                                   |       | 454                                                     |       |
| Cash and cash  equivalents, beginning of period                                                              |       | 2,822                                                   |       | 3,919                                                   |       |
| Cash and cash  equivalents, end of period                                                                    |       | $                                                       | 5,858      |                                                    | $          | 4,373 |   |
| **Supplemental Disclosure of Cash  Flow Information:**                                                       |       |                                                    |       |                                                    |       |
| Interest paid  during the period                                                                             |       | $                                                       | 383        |                                                    | $          | 288 |   |
| **Non-cash  transactions:**                                                                                  |       |                                                    |       |                                                    |       |
| Cancellation of  note receivable                                                                             |       | $                                                       | —     |                                                    | $          | 99 |   |
| Assets acquired through  capital leases                                                                      |       | $                                                       | 181        |                                                    | $          | 416 |   |

 

See accompanying notes tocondensed consolidated financial statements.

 

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** **

**GOLF TRUST OFAMERICA, INC.Form 10-Q Quarterly ReportFor the Three and Six Months Ended June 30, 2006 and 2005NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(unaudited)**

**1.  Plan of Liquidation and the Resort**

OnFebruary 25, 2001, the Company’s board of directors adopted, and on May 22,2001 the Company’s common and preferred stockholders approved, a plan ofliquidation for the Company. The plan of liquidation contemplates the sale ofall of the Company’s assets and the payment of, or provision for, the Company’sliabilities and expenses, and authorizes the Company to establish a reserve tofund the Company’s contingent liabilities. As of May 9, 2006, the Company hadsold 41 of the 47 (eighteen-hole equivalent) golf courses in which the Companyonce held interests pursuant to the plan of liquidation.

OnJuly 15, 2004, the Company entered into a settlement agreement, or theSettlement Agreement, with GTA-IB LLC, or GTA-IB, and Golf Host Resorts, Inc.,or our former borrower, Golf Hosts, Inc., Golf Host Management, Inc., Golf HostCondominium, Inc. and Golf Host Condominium, LLC and took control of the WestinInnisbrook Golf Resort, or the Resort. The settlement was accounted for usingmethods consistent with purchase accounting in accordance with Statement ofFinancial Accounting Standards, or SFAS, No. 141 “Business Combinations”. As aresult of the settlement, the financial results of GTA-IB, the Company’s whollyowned subsidiary that now holds title to the Resort, are consolidated in theCompany’s financial statements commencing July 16, 2004.

OnJanuary 21, 2005, in the interest of seeking to accelerate the completionof the Company’s liquidation, the Company engaged Houlihan Lokey Howard andZukin Capital, Inc., or Houlihan Lokey, as its exclusive financial advisorto provide financial advisory services to it in furtherance of the Company’sstockholder-approved plan of liquidation. The Company’s liquidationmay occur through the sale of its assets, a merger or otherwise in orderto allow it to maximize value to its stockholders. In addition, subject toappropriate approvals, the Company may pursue a recapitalization. In thisQuarterly Report, the Company refers to the type of transaction discussed inthe prior two sentences as an exit transaction. The initial term of HoulihanLokey’s engagement was nine months which was subsequently extended on amonth-to-month basis. Certain terms of this engagement provided that in theevent of a sale of the Resort with net proceeds to us of up to$38.0 million, Houlihan Lokey would receive a transaction fee of$1.0 million of which the Company has paid $100,000. If the Companyreceived net proceeds from $38 million up to $50 million, thetransaction fee would be $1.0 million plus 3.0% of such incremental value.If the Company received net proceeds in excess of $50.0 million, thetransaction fee would be the sum of $1.0 million, plus 3.0% of the valuebetween $38 million up to $50 million, plus 5.0% of the valueover $50 million.  Since anexit transaction has not occurred to date, the Company terminated itsmonth-to-month engagement with Houlihan Lokey on June 29, 2006.  However, subject to certain terms andconditions of the engagement letter with Houlihan Lokey, the transaction feemay still be due to Houlihan Lokey if a closing of an exit transaction were tooccur subject to certain terms of the engagement.

TheCompany’s board of directors also formed a Special Committee comprised of allthree of its independent directors to consider certain matters relating to theliquidation and financial advisor services in evaluating an exit transaction.The Company continues to negotiate with prospective buyers of the Resort andrelated business. As of the filing date of this quarterly report, the Companyhas not entered into a definitive agreement for the sale of the Resort.

**2.  Organization and Basis of Presentation**

TheCompany was incorporated in Maryland on November 8, 1996 as a real estateinvestment trust, or REIT. As of fiscal year 2002 the Company no longer has itsREIT status as a result of its repossession and operation of golf coursesfollowing the default of its original third-party lessees. As of August 16,2006, the Company owned two properties which represent six golf courses. One ofthese properties (2.0 golf courses) is owned and managed by the Company, whilethe Resort is managed by Westin. The four golf courses at the Resort arecurrently managed by Troon Golf, L.L.C., or Troon, through Westin. Prior toJuly 15, 2004, the Resort served as collateral for a 30-year participatingmortgage wherein the Company was the lender. Upon the execution of theSettlement Agreement with its former borrower on July 15, 2004, theCompany obtained ownership of the Resort. The Company presently holds its twoproperties (6.0 golf courses) in fee simple. Four of the Company’s golf coursesare located in Florida and two are in South Carolina. The title to the Company’stwo golf courses in South Carolina is held by Golf Trust of America, L.P., aDelaware limited partnership and the Company’s Operating Partnership. TheCompany refers to Golf Trust of America, L.P. as its “operating partnership” or“OP” and the 

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Company refers tothe operating partnership and itself (together with all subsidiaries)collectively as “we”, “us” or our “Company.” The title to the Resort is held byGTA-IB, LLC, a wholly owned subsidiary of GTA-IB Golf Resort, LLC, which inturn is 100% owned by Golf Trust of America, L.P. Through its wholly ownedsubsidiaries GTA GP, Inc., or GTA GP, and GTA LP, Inc., or GTA LP,the Company holds a 99.6 percent interest in Golf Trust of America, L.P.as of August 16, 2006. GTA GP is the sole general partner of Golf Trust ofAmerica, L.P. and owns a 0.2 percent interest therein. GTA LP is a limitedpartner in Golf Trust of America, L.P. and owns a 99.4 percent interesttherein. These percentages give effect to all outstanding preferred OP units onan as-converted basis.

*Principlesof Consolidation*

Theaccompanying condensed consolidated financial statements include the accountsof GTA GP, GTA LP, Golf Trust of America, L.P. and their wholly-ownedsubsidiaries. All significant intercompany transactions and balances have beeneliminated in consolidation.

*Adjustmentsto Liquidation Basis of Accounting*

As aresult of the adoption by the Company’s board of directors of a plan ofliquidation of the Company and approval of that plan by the Company’sstockholders, the Company adopted the liquidation basis of accounting for allperiods subsequent to May 22, 2001. Accordingly, on May 22, 2001, theCompany’s assets were adjusted to their estimated fair value and the Company’sliabilities, including estimated costs associated with implementing the plan ofliquidation, were adjusted to their estimated settlement amounts. The valuationof real estate held for sale as of June 30, 2006 relies on estimates of salesvalues based on indications of interest from the marketplace, certainassumptions by management specifically applicable to each property, and on theproperty value ranges. The valuation of the Company’s other assets andliabilities under the liquidation basis of accounting are based on management’sestimates as of June 30, 2006.

Forthe three months ended June 30, 2006, net assets in liquidation reflects thegain of approximately $34,000 upon closing the sale of the Tierra Del SolCountry Club, the Company’s 18-hole golf property in Belen, New Mexico, offsetby an increase in the provision for capital expenditures of approximately$34,000.  For the six months ended June30, 2006,  net assets in liquidationdecreased by approximately $350,000. This decrease resulted from (a) an increase in the carrying value ofTierra Del Sol to reflect the estimated gain on the sale of Tierra Del Sol ofapproximately $340,000 plus (b) the additional gain realized upon the actualclosing of the sale of Tierra Del Sol of approximately $34,000 offset by (x) anincrease in the provision for capital expenditures of approximately $44,000,(y) legal fees of approximately $415,000 and (z) corporate operating costs of approximately$265,000 to be incurred in (i) the negotiation of an asset purchase agreementand consummation of the sale of the Resort, (ii) litigating the proceedings towhich the Company is currently a party and (iii) the administrative conclusionof the Company’s plan of liquidation.

Thenet assets of approximately $13,432,000 at June 30, 2006 would result in aliquidation distribution per share of approximately $1.85. This $1.85 estimatefor liquidation distribution per share includes projections of costs andexpenses expected to be incurred during the period required to complete theplan of liquidation, that is, until the Company sells its remaining two assets,including the Resort. These actual per share distributions that we make to theholders of the Company’s common stock could be materially lower than theCompany currently estimates due to factors such as (i) the timing of any saleof the properties, (ii) the performance of the underlying assets, and (iii) achange in the underlying assumptions of the cash flow amount projected. The$1.85 estimate is derived by dividing the net assets in liquidation by thenumber of shares of common stock and common operating partnership unitsoutstanding (7,353,000 less 85,000) after consideration of those shares thatwill be cancelled prior to the distribution of the net assets. A total 85,000shares of common stock pledged to the Company as security for the payment andperformance of the obligations and liabilities of the pledgor under a commonstock redemption agreement executed concurrently with a 2001 asset sale.Because this redemption agreement provides in part that these shares willbe tendered to us if and when the total amount of liquidating distributionspaid to its holders of common stock pursuant to the plan of liquidation is lessthan $10.74 per share, we expect these shares to be canceled.

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* *

*Reservefor Estimated Costs During the Period of Liquidation*

Under the liquidation basis of accounting, the Companyis required to estimate and accrue the costs associated with implementing andcompleting the plan of liquidation. These amounts can vary significantly dueto, among other things, the timing and realized proceeds from golf coursesales, the costs of retaining personnel and others to oversee the liquidation,including the costs of insurance, the timing and amounts associated withdischarging known and contingent liabilities and the costs associated withcessation of the Company’s operations. These costs are estimates and areexpected to be paid out over the liquidation period which contemplates ananticipated sale of the Resort byDecember 31, 2006 and, if the Company deems appropriate, the transfer of ourremaining assets to a liquidating trust within a reasonable period thereafter.The Company can provide no assurance that those dates will be met.  As a result, the Company has accrued theprojected costs, including corporate overhead and specific liquidation costs ofseverance, financial advisors and other professional fees, and othermiscellaneous wind-down costs, expected to be incurred during the projectedperiod required to complete the liquidation of the Company’s remaining assets.The Company has also accrued the projected operating results of the Resort andthe other  property that the Company ownsand manages through the projected remaining holding period of December 31,2006. These projections could change materially based on the timing of anyanticipated sale, the performance of the underlying assets, the conclusion ofthe Company’s negotiations with AEW (discussed below) and any change in theunderlying assumptions of the cash flow amount projected. These accruals willbe adjusted from time to time as projections and assumptions change.

Based upon the Company’s current negotiations withAEW, the holder of all of the Company’s series A preferred stock, regarding theterms of an amendment of an existing agreement or a new agreement which willallow the Company to repurchase all of AEW’s series A preferred stock for aprice of $20,000,000 or less.   As aresult of the Company’s assumption that these negotiations will lead to an executed agreement, the Company has notrecorded in its net assets a liability for the accrual of preferred dividendspayable for the quarter beginning July 1, 2001 or for subsequent quarters.  Further, the carrying amount of the preferredstock remains at $20 million on the Company’s statement of net assets,consistent with the redemption amount in the prior letter agreement with AEW.In the event that either the Company is unable to reach an agreement with AEW,or the Company is unable to exercise any repurchase right and close therepurchase under any agreement the Company may reach with AEW, the Company maybe required to pay AEW all or a portion of the preferred dividends for whichthe Company has not recorded a liability, reducing its liquidatingdistributions to holders of its common stock. These preferred dividends would reduce the net assets available tostockholders in liquidation, and, correspondingly, the estimated liquidationdistribution per share.  See notes 9 and10 for further discussion

The following is a summary of the changes in theReserve for Estimated Costs During the Period of Liquidation (LiquidationReserve) (unaudited):

 
| ** **              | ** ** | ** **          | ** ** | ** **             | ** ** | **Increases in the  Liquidation Reserve** | ** ** | ** **      | ** ** |
|-------------------------|------------|---------------------|------------|------------------------|------------|----------------------------------------------------------|------------|-----------------|------------|
| ** **              | ** ** | ** **          | ** ** | ** **             | ** ** | **Operating**                                            | ** ** | ** **      | ** ** | ** ** | ** ** |
| ** **              | ** ** | **January 1,** | ** ** | **Transfers and** | ** ** | **Income**                                               | ** ** | ** **      | ** ** | **June 30,** | ** ** |
| ** **              | ** ** | **2006**            | ** ** | **Payments**           | ** ** | **and Interest**                                    | ** ** | **Adjustments** | ** ** | **2006** | ** ** |
| ** **              | ** ** | ** **          | ** ** | ** **             | ** ** | ** **                                               | ** ** | ** **      | ** ** | ** ** | ** ** |
| Severance               |       | $                   | 1,847,000  |                   | $          | (3,000                                                   | )          | $               | —     |   | $ | — |   | $ | 1,844,000 |   |
| Professional  fees      |       | 1,565,000           |       | (1,233,000             | )          | —                                                   |       | 415,000         |       | 747,000 |   |
| Financial  advisor fees |       | 911,000             |       | (14,000                | )          | —                                                   |       | —          |       | 897,000 |   |
| Capital  expenditures   |       | 26,000              |       | (46,000                | )          | —                                                   |       | 44,000          |       | 44,000 |   |
| Other                   |       | 1,570,000           |       | (222,000               | )          | 2,872,000                                                |       | 265,000         |       | 4,465,000 |   |
| Total                   |       | $                   | 5,919,000  |                   | $          | (1,518,000                                               | )          | $               | 2,872,000  |   | $ | 724,000 |   | $ | 7,997,000 |   |

 

Included in the accrued severance amounts above areperformance milestone payments due, but not yet paid, to the Company’sexecutives pursuant to their amended and restated employment agreements. TheCompany expects that the performance milestone payments aggregatingapproximately $1,399,000, plus accrued interest, will be paid in due course;however, there are no remaining conditions to such payment. Any severancepayments otherwise payable by the Company under the amended and restated employmentagreements will be reduced by the amount of all earlier performance milestonepayments made. The increase in the adjustments to the Liquidation Reserve is toprovide a provision for legal fees and corporate operating costs to be incurredin (i) the negotiation of an asset purchase agreement and through andincluding the consummation of a sale of the Resort, (ii) litigating theproceedings to which the Company is currently a party and (iii) theadministrative conclusion of the Company’s plan of liquidation.

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Since the Company is presentingliquidation basis financial statements that only reflect the changes in netassets in liquidation, the operating results of the Company are summarized andreflected in the table below:

 
| ** **                                                      | ** ** | **For the three months ended   June 30,** | ** ** |
|-----------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **2006**                                                                | ** ** | **2005** | ** ** |
| Revenues                                                        | ** ** | ** **                                                              | ** ** | ** ** | ** ** |
| Revenue from  Resort and managed golf course operations         |       | $                                                                       | 13,155,000 |   | $ | 12,082,000 |   |
| Expenses                                                        |       |                                                                    |       |   |   |
| General and  administrative                                     |       | 248,000                                                                 |       | 251,000 |   |
| Direct expenses  from Resort and managed golf course operations |       | 12,885,000                                                              |       | 11,358,000 |   |
| Total operating  expenses                                       |       | 13,133,000                                                              |       | 11,609,000 |   |
| Operating income                                                |       | 22,000                                                                  |       | 473,000 |   |
| Interest  expense—net                                      |       | (330,000                                                                | )          | (284,000 | ) |
| Operating (loss) income  and interest expense—net          |       | $                                                                       | (308,000   | ) | $ | 189,000 |   |

 
| ** **                                                      | ** ** | **For the six months ended  June 30,** | ** ** |
|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **2006**                                                        | ** ** | **2005** | ** ** |
| Revenues                                                        |       |                                                            |       |   |   |
| Revenue from  Resort and managed golf course operations         |       | $                                                               | 31,161,000 |   | $ | 28,509,000 |   |
| Expenses                                                        |       |                                                            |       |   |   |
| General and  administrative                                     |       | 500,000                                                         |       | 531,000 |   |
| Direct expenses  from Resort and managed golf course operations |       | 27,142,000                                                      |       | 24,358,000 |   |
| Total operating  expenses                                       |       | 27,642,000                                                      |       | 24,889,000 |   |
| Operating income                                                |       | 3,519,000                                                       |       | 3,620,000 |   |
| Interest  expense—net                                      |       | (648,000                                                        | )          | (627,000 | ) |
| Operating income and  interest expense—net                 |       | $                                                               | 2,871,000  |   | $ | 2,993,000 |   |

 

**3.  Summary of Significant Accounting Policies**

*Interim Statements*

The accompanying condensedconsolidated financial statements for the three and six months endedJune 30, 2006 have been prepared in accordance with (i) accountingprinciples generally accepted in the United States of America, or GAAP, andunder the liquidation basis of accounting following our stockholders’ approvalof the plan of liquidation on May 22, 2001, and (ii) the instructionsto Form 10-Q and Article 10 of Regulation S-X. These financialstatements have not been audited by a registered independent public accountingfirm; however, they include adjustments (consisting of normal recurringadjustments) which are, in the judgment of management, necessary for a fairpresentation of the net assets, financial condition, results of operations andcash flows for such periods. However, these results are not necessarilyindicative of results for any other interim period or for the full year. Inparticular, revenues from golf course operations are seasonal.

Certain information and footnotedisclosures normally included in financial statements in accordance with GAAPhave been omitted as allowed in quarterly reports by the rules of the SEC. TheCompany’s management believes that the disclosures included in the accompanyinginterim financial statements and footnotes are adequate to make the informationnot misleading, but also believes that these statements should be read inconjunction with the summary of significant accounting policies and notes tofinancial statements included in the Company’s annual report on Form 10-Kfor the year ended December 31, 2005.

**4.  Commitments and Contingencies**

***Young Complaints***

OnMarch 22, 2004, a lawsuit was filed (and was served on the Company’s agentfor service of process on March 25, 2004) in the U.S. District Court forthe District of South Carolina, Florence Division, by one of the Company’sprior directors, Larry D. Young (together with Danny L. Young, Kyle N. Young,the Young Family Irrevocable Trust and The Legends Group, Ltd.), againstthe Company’s independent auditors, BDO Seidman, LLP (together with threeformer BDO partners) and the Company (together with the Company’s executiveofficers).

Thecomplaint alleges that the BDO defendants engaged in professional malpractice,misrepresentation, breach of fiduciary duty and fraud by counseling plaintiffsto participate in a type of tax shelter transaction, allegedly held illegal bythe 

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Internal Revenue Service. The complaint has sevencounts, the last of which applies to all defendants (the first six apply onlyto BDO and its partners). The seventh count alleges that the Company conspiredwith BDO to convince Mr. Young that he would realize a large projected taxgain in order to induce Mr. Young (and the other plaintiffs) to enter intothe failed tax shelter transactions. The plaintiffs are seeking damages of atleast $3.7 million, together with legal expenses and other costs.

DefendantsBDO Seidman, LLP (together with three former BDO partners) filed a motion tocompel arbitration and dismiss the complaint, and the Company filed a motion onbehalf of the Company (together with the Company’s executive officers, the GTADefendants) to stay, and for extension of time in which to answer or otherwiserespond to plaintiffs’ complaint.  Theplaintiffs’ filed memoranda opposing the aforementioned motions. A hearing onthese motions was held in Florence, South Carolina on October 19, 2004. Atthe conclusion of that hearing, the judge indicated that the former motionwould be taken under advisement, while the GTA Defendants’ motion would begranted in part and denied in part. As a result, the court declined tostay the litigation pending the outcome of the arbitration, but granted themotion extending time and giving the GTA Defendants additional time to servetheir answer. On November 4, 2004, the Company filed its answer andcounterclaims (nine counterclaims against some or all of the plaintiffparties). On January 21, 2005, the magistrate judge issued a report andrecommendation, recommending that the BDO defendant’s Motion to CompelArbitration be granted, and that the claims pending against the BDO defendantsbe stayed pending arbitration. On February 14, 2005, the District Judgeaccepted the magistrate’s report and recommendation, and granted the BDOdefendants’ Motion to Compel Arbitration, staying the claims pending againstthe BDO defendants. The plaintiffs and the GTA Defendants have since agreedupon a proposed schedule for their part of the litigation, which wasjointly submitted to the court on March 11, 2005, and thereafter acceptedand entered as an order on or about April 19, 2005. The scheduling orderwas entered, and the parties conducted discovery until on or aboutAugust 2, 2005 when the parties agreed to informally stay all activity in thislitigation to pursue the possibility of settlement. There is as yet nosettlement. While the Company remains open to the possibility of settlement onthe basis of mutual dismissals, the Company also intends on meeting itsdeadlines and litigating vigorously. To that end, before the deadline for doingso, the Company filed and served its motion for summary judgment as to theplaintiffs’ claims on December 23, 2005. The plaintiffs did not file anydispositive motion within the time permitted to do so, either with respect totheir own claims or to the Company’s counterclaims, nor did the plaintiffstimely file any written response to the motion for summary judgment. OnMarch 21, 2006, at a hearing held on the plaintiffs’ motion, the courtdenied the plaintiffs’ motion to re-open discovery, with the exception thatlimited discovery was allowed until June 19, 2006 only on the question ofthe damages sought by the GTA Defendants in their counterclaims against theplaintiffs. The court allowed the plaintiffs to file a late response to themotion for summary judgment, which the plaintiffs did on March 31, 2006.GTA Defendants filed a reply thereto.  OnJuly 7, 2006, the plaintiff moved for summary judgment on GTA Defendants’counterclaims, to which GTA Defendants responded with a motion to strike ongrounds of gross untimeliness.  The Courtdecided not to dismiss the complaint on Rule 12 grounds, but has requested thatthe December 23, 2005 motions be refiled, and has granted leave to refile, as amotion on the Rule 56 summary judgment grounds to facilitate the Court’sconsideration of the motion.  The GTADefendants filed an amended motion for summary judgment on August 10,2006.  The court has determined that thetrial date for this matter will not occur before October 1, 2006.  At this time, the Company is unable to assessthe likely outcome of this litigation**.**

***Black Bear Golf Course***

Theaction entitled *Ashley Fields, L.L.C. v. Golf Trust ofAmerica, L.P. and GTA-Black Bear, LLC,* Case No. 05-CA-207, wasfiled on January 24, 2005, in the Circuit Court of the Fifth JudicialCircuit in Lake County, Florida. The plaintiff is seeking damages against theCompany based upon alleged breach of contract, fraudulent concealment,fraudulent inducement and tortuous interference by the defendants. Theplaintiff has alleged that the Company has breached certain representationsrelated to the storm water permit issued at the property and that the Companyfailed to pay certain accounts payable at the property arising out of the saleof the Black Bear Golf Club to them on September 25, 2004. The plaintiffhas not stated the amount of its demand for damages related to the storm waterretention and construction deficiencies. The Company’s counsel estimates theplaintiffs’ claims to be approximately $250,000. Plaintiff’s claim forpost-closing adjustments has not been stated in detail but appears to be lessthan $5,000. The prevailing party in the litigation will recover attorney’sfees and costs. On February 22, 2005, the defendants filed a motion todismiss the lawsuit. A hearing was scheduled for March 29, 2005 but priorto the hearing, the parties resolved the issues in the motion to dismiss bystipulation that the plaintiff would amend the exhibits to its complaint so thehearing was cancelled. Plaintiff amended its complaint in June 2005. InJanuary 2006, the Company filed a motion for partial summary judgment. OnMarch 31, 2006, the Company received a memorandum in opposition to themotion for partial summary judgment. The plaintiff objected to proceeding tosummary judgment based upon the fact that the plaintiff had not taken certaindepositions. The court ordered that such depositions must be taken by theplaintiff within the next 30 days. A hearing was expected to be scheduled in May 2006on this motion for partial summary judgment. The Company asked the Court toenter summary judgment on the alleged fraud and tortuous interference claims.Subsequently, a settlement, effective June 8, 2006, was reached at mediation,which provides, among other things, that the 

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defendants pay theplaintiff $62,500.  This settlementagreement was executed and the settlement amount paid on August 11, 2006.  The Company is currently awaiting the filingof the joint notice of voluntary dismissal with prejudice of the Plaintiff’samended complaint and the Company’s counterclaims which it expects will occurby August 31, 2006.

***Land Use Lawsuits***

OnMarch 10, 2005, the Company filed a Motion to Intervene in the suit titledInnisbrook Condominium Association, Inc., C. Frank Wreath, Meredith P.Sauer, and Mark Banning, Plaintiffs vs. Pinellas County, Florida, Golf HostResorts, Inc. and Innisbrook F LLC, Defendants, Case No. 043388CI-15.This motion was filed in the Circuit Court of the Sixth Judicial Circuit, inand for Pinellas County, Florida, Civil Division.  In this report, the Company refers to thismatter as the “Initial Land Use Lawsuit.” The plaintiffs in the Initial LandUse Lawsuit have filed a multi-count complaint seeking injunctive anddeclaratory relief with respect to the land use and development rights of atract of land known as Parcel F. Parcel F is a parcel of land locatedwithin the Resort and owned by GHR. The plaintiffs allege that there are noremaining development units (residential units) available to be developedwithin the Resort property. On March 29, 2005, the Company filed a Motionto Intervene as a defendant in the Initial Land Use Lawsuit in order to protectour property, and our land use and development rights with respect to Parcel Fand our property. A hearing on the Motion to Intervene was held onApril 4, 2005, after which the court granted our Motion to Intervene. OnApril 5, 2005, the Company joined in the filing of a Motion to Dismiss andMotion to Strike three of the seven counts of the plaintiffs’ complaint. Thecourt granted the Motion to Dismiss on April 26, 2005. On that same date,four individuals (Joseph E. Colwell, Marcia G. Colwell, Kirk E.Covert, Deborah A. Covert) and Autumn Woods Homeowner’sAssociation, Inc. moved to intervene in the Initial Land Use Lawsuit. Thecourt has not ruled on that motion. On April 8, 2005, a separate suit wasfiled by James M. and Mary H. Luckey and Andrew J. andAphrodite B. McAdams against Pinellas County, a political subdivision ofthe State of Florida, Golf Host Resorts, Inc., a foreign corporation andBayfair Innisbrook, LLC, a Florida limited liability corporation. In thisreport the Company refers to this matter as the “Subsequent Land Use Lawsuit.” The Subsequent Land Use Lawsuit seeks injunctive and declaratory reliefin six separate counts, all relating to the land use and development rights ofParcel F. This suit was consolidated with the Initial Land Use Lawsuit onMay 3, 2005. After May 6, 2005 the Company has filed our Motion toDismiss the Subsequent Land Use Lawsuit. The motion was heard by the court onMay 31, 2005. Since that hearing, the Company has filed an Answer andAffirmative Defenses to both complaints that have been filed in theconsolidated action. On August 3, 2005, a case management conference washeld before the judge who is now presiding over this case. At that hearing, thecourt scheduled a hearing on the defense motions for summary judgment forAugust 30, 2005, and a trial starting on December 12, 2005. OnAugust 30, 2005, the judge heard extensive argument on the defense motionsfor summary judgment and entered a number of rulings in the defendants’ favor.In summary, the court dismissed those claims in the Initial Land Use Lawsuitand the Subsequent Land Use Lawsuit which are founded upon the theory that theproposed development is inconsistent with the Pinellas Countywide Plan andRules adopted pursuant to Chapter 73-594, Laws of Florida. The courtfurther dismissed for lack of jurisdiction those claims of the plaintiffs’ inthe Subsequent Land Use Lawsuit that are based on the theory that the proposeddevelopment is inconsistent with the Pinellas Comprehensive Plan. The courtentered a similar ruling on certain counts of the Third Amended Complaint as tosome, but not all, of the Plaintiffs in the Initial Land Use Lawsuit.

Thedefendants in the Initial Land Use Lawsuit also filed a Motion to Strike theplaintiffs’ Demand for Jury Trial. In the face of that motion, the plaintiffsdropped their jury trial demand and the court confirmed by order datedSeptember 21, 2005 that this case would not be tried by a jury. The courtthen entered an order scheduling the remaining claims for non-jury trial duringDecember 2005.

Inaddition, the plaintiffs in the Initial Land Use Lawsuit have filed a motionfor summary judgment. The court set the hearing date for the summary judgmentreview for December 7, 2005.

As anintervenor in the Initial Land Use Lawsuit, the Company will seek to obtain aruling from the court which preserves and protects our property, and our landuse and development rights with respect to Parcel F and our property, inorder to maximize the value of those rights as they relate both toParcel F and the Resort in general. The Company refers to these twomatters as the “Land Use Lawsuits.”

FromDecember 19 through December 23, 2005, the court tried these consolidated casesin a non-jury trial. At the conclusion of the evidentiary portion of the trial,the court deferred final argument until Friday, January 6, 2006. On that date,the court heard final arguments and rendered its decision. The court ruled infavor of all defendants and against all plaintiffs as to each count in bothLand Use Lawsuits. On March 8, 2006, the court formally entered its final judgmenton the record ruling in favor of the defendants on all counts and denying allclaims asserted by the plaintiffs in both Land Use Lawsuits. On March 31, 2006,the plaintiffs in the consolidated cases filed a notice of appeal.  There have been no material actions taken onthis case since that date.

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*** ***

***Lake Ozark Industries, Inc. and Everett HoldingCompany, Inc. v. Golf Trust of America, et al.***

Thisis an action initiated in the Circuit Court of Miller County, Missouri, by acontractor, Lake Ozark Construction Industries, Inc., or LOCI, and itsasserted assignee of lien and account rights, Everett HoldingCompany, Inc., in the Fall of 1999 against numerous defendants, includingGolf Trust of America, L.P. Plaintiffs assert LOCI performed construction serviceson, or that benefited, the property of various defendants, including Golf Trustof America, L.P. So far as the action concerns Golf Trust of America, L.P.,plaintiffs seek to foreclose a mechanic’s lien upon property formerly owned byGolf Trust of America, L.P. The lien is for the principal amount ofapproximately $1,276,000, plus interest at 10% per annum and attorney fees.Plaintiffs calculate interest to May 20, 1999, just prior to the lienfiling, to be approximately $151,000 and interest thereafter to be $354 perday. In March 2002 the Court orally granted a motion for summary judgmentfiled by Golf Trust of America, L.P., ruling that plaintiffs’ claimed lien doesnot comply with requirements of the Missouri mechanic’s lien statute and isinvalid. The court entered its written order granting Golf Trust of America,L.P.’s motion for summary judgment in April 2002. Since not all claimsinvolved in this lawsuit were disposed of by that ruling, Plaintiffs’ time toappeal this ruling did not begin to run. In November 2003 the courtentered a final judgment, and plaintiffs appealed the ruling in favor of GolfTrust of America, L.P. to the Missouri Court of Appeals. The briefs in theappeal were filed and the case was argued to the court of appeals on October 19,2004. On November 9, 2004, the Company filed with the Court of Appeals aMotion to File Supplemental Brief, along with a copy of a Supplemental Brief.Following briefing and oral argument, the Court of Appeals on April 5,2005 reversed the Circuit Court judgment in favor of the Company and remandedthe case to the Circuit Court for further proceedings. On April 20, 2005,the Company filed with the Court of Appeals a motion for rehearing and analternative application to transfer the case to the Missouri Supreme Court. TheCourt of Appeals denied this motion and the transfer application onMay 31, 2005. On May 31, 2005, the Court of Appeals also filedmodified Opinion, which again reversed the Circuit Court judgment in favor ofthe Company and remanded the case to the Circuit Court for further proceedings.On June 15, 2005, the Company filed with the Missouri Supreme Court anapplication to transfer the case to that court. On August 30, 2005, theMissouri Supreme Court denied the application for transfer. The case wasreturned to the Circuit Court for trial on plaintiffs’ claim that LOCIperformed construction services on, or that benefited, the property of variousdefendants, including the Company. A trial date has not yet been set. At thistime, the Company is unable to assess the likely outcome of this litigation.

***Ordinary Course Litigation***

Ownersand operators of golf courses are subject to a variety of legal proceedingsarising in the ordinary course of operating a golf course, including proceedingsrelating to personal injury and property damage. Since the Company is noweither the owner and/or the operator of its remaining golf courses, the Companymaintains insurance for these purposes. The Company is not currently subject toany material claims of this type.

*Westin and TroonManagement Fees*

TheJuly 15, 2004 Management Agreement between the Company’s subsidiary,GTA-IB, LLC and Westin provides that Westin will manage the Resort for a feeequal to 2.2% of gross revenue of the Resort. Contemporaneously with thesigning of that Management Agreement, Westin, and GTA-IB, LLC for limitedpurposes described in the contract, entered into a management contract withTroon which provides that Troon shall manage the golf facilities of the Resortfor a fee, paid by the GTA-IB, LLC, equal to 2% of gross golf revenue. Theseagreements also provide for the opportunity for Westin and Troon to earnsupplemental fees based on financial performance metrics. The ManagementAgreement with Westin has a termination date of December 31, 2017. SeeNote 10, Subsequent Events, for recent update on the Management Agreement withWestin. Troon’s contract with Westin has a termination date of July 15,2009.

*Refundable InitiationFees*

Certainmembership initiation fees at the Country Club at Wildewood and Woodcreek(collectively known as Stonehenge) are refundable based on specific conditions.The estimated present value of the potential refunds over the thirty-yearrequired membership term, as defined in the Club Membership Manual, is recordedas an accrued liability on the Company’s books at June 30, 2006 and is valuedat $125,000. Additionally, certain initiation fees may be refundable priorto the expiration of the thirty-year term under specific membership replacementconditions. There is no liability recorded to consider the refundability ofrefunds issued under these conditions due to the fact that four new membershave to join in the specific membership category for a resigned member toreceive a refund. A refund issued under these specific circumstances would beconsidered a reduction of membership revenue for that period. All newinitiation fees received are initially recorded as deferred revenue andamortized over the average life of a membership which, based on historicalinformation, is deemed to be nine years.

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** **

**5.  Receivables—net**

Receivables—net consists of the following:

|                                                    | ** ** | **June 30, 2006**  | ** ** | **December 31, 2005** | ** ** |
|----------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                         | ** ** | **(Liquidation Basis)** | ** ** |
| Notes receivable  taken in sale of asset           |       | $                            | 3,407,000  |                            | $          | 2,326,000 |   |
| Member, trade  and other miscellaneous receivables |       | 2,309,000                    |       | 3,480,000                       |       |
| Total                                              |       | $                            | 5,716,000  |                            | $          | 5,806,000 |   |

 

Thenotes receivable represent (a) the $2.5 million note the Company receivedfrom the buyer of the Eagle Ridge Inn & Resort and any accrued intereston that note, less a discount reserve of $200,000 (i.e., in the eventthat the borrower has not caused any uncured event of default to occur underthe note up to its maturity which is February 1, 2007, the borrower shallhave the right to reduce its payment obligations under the note by $200,000plus any interest paid on that sum during the term of the note upon borrower’spayment of the balance of the note, subject to certain prepayment prohibitions)and (b) the $1.063 million note the Company received from the buyer of theTierra Del Sol Country Club, plus accrued interest.  See Note 10, Subsequent Events, for recentupdate on the Tierra Del Sol note.

**6.  Debt**

 

|                            | ** ** | **June 30, 2006** | ** ** | **December 31, 2005** | ** ** |
|----------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Revolving line  of credit  |       | $                           | 4,100,000  |                            | $          | 4,100,000 |   |
| Note payable               |       | 799,000                     |       | 769,000                         |       |
| Capital lease  obligations |       | 933,000                     |       | 961,000                         |       |
| Total                      |       | $                           | 5,832,000  |                            | $          | 5,830,000 |   |

 

*Revolving Line of Credit*

OnMarch 18, 2004, the Company entered into a loan agreement and relatedmortgage with Textron Financial Corporation, or Textron, for a revolving lineof credit with a maximum permissible outstanding loan amount of $2,100,000. OnAugust 4, 2005, the line was increased to $4,200,000 and the term wasextended to March 18, 2009. This loan is collateralized by a securityinterest in the Company’s golf courses in Columbia, South Carolina, located atthe Country Club at Wildewood and the Country Club at Woodcreek, collectivelyknown as Stonehenge. The interest rate is the prime rate plus 1.75% per annumpaid monthly. This loan requires that the operations at Stonehenge for theimmediately preceding twelve month period be sufficient to meet a debt servicecoverage ratio, as defined in the mortgage of at least 1.20, as measuredmonthly. At June 30, 2006, the Company was in compliance with the debt servicecoverage ratio covenant.

Incertain instances, the loan may be assumed by a buyer of Stonehengepursuant to assumption provisions in this loan amendment. The interest ratecontinues to be the prime rate (8.25% per annum at June 30, 2006) plus 1.75%per annum, paid monthly. The Company paid a one-time commitment fee to Textronof $42,000 to obtain the increase in this credit line.  In addition, the Company will pay to Textrona fee of 0.25% per annum of the unused balance of this line of credit.

Inconnection with the execution of the loan amendment, the Company, through itssubsidiaries Stonehenge LLC and Golf Trust of America, L.P., collectively theBorrower, entered into a Notice of Future Advance, Note, Mortgage and LoanModification Agreement with Textron, or the Amended Mortgage, modifying theMarch 2004 Mortgage, Security Agreement and Fixture Filing (as modified bythe Amended Mortgage, the “Security Agreement”). The Security Agreementcontains events of default that include, among others, non-payment ofprincipal, interest or fees, violation of covenants, inaccuracy ofrepresentations and warranties, cross defaults, bankruptcy and insolvencyproceedings, termination, dissolution or liquidation of Stonehenge LLC of GolfTrust of America, L.P., failure to cure the loss of certain licenses, permitsor contracts, curtailment of utilities or services at Stonehenge, and materialjudgments. Upon occurrence of a default, Textron is entitled to, among other things,accelerate all obligations of the Borrower and sell certain of the Borrower’sassets to satisfy the Borrower’s obligations under the Security Agreement andthe Amendment.

*Note Payable*

Inconnection with the Settlement Agreement, Elk Funding, L.L.C., or Elk Funding,provided a $2,000,000 loan to the Company in the form of two promissorynotes, known as Promissory Note A and Promissory Note B.  Promissory Note B was repaid pursuant to itterms in September 2004, but Promissory Note A remains outstanding.Pursuant to the Company’s 

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agreement with ElkFunding, these loans were to fund the Resort’s current working capital needs.Promissory Note A is a non-recourse loan in the original principal amountof $700,000, and the Company’s obligations under that note are collateralizedby a security interest in the Company’s portion of the net proceeds from theultimate sale of Parcel F. Interest accrues on the unpaid balance of PromissoryNote A at a rate of prime plus 1% until the closing of the sale of Parcel F, atwhich time the principal and accrued interest under Promissory Note A willbe immediately due and payable. There are no specific financial reportingcovenants in Promissory Note A or the related loan documents.

*Capital Lease Obligations*

AtJune 30, 2006, the Company had capital lease agreements for certain golf courseand other Resort equipment. These lease agreements expire at various datesthrough 2009.

**7.  Accounts payable and other liabilities**

Accountspayable and other liabilities consist of the following:

|                                | ** ** | **June 30, 2006** | ** ** | **December 31, 2005** | ** ** |
|--------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Accounts payable               |       | $                           | 5,291,000  |                            | $          | 5,208,000 |   |
| Accrued payroll                |       | 1,410,000                   |       | 1,701,000                       |       |
| Accrued expenses               |       | 2,342,000                   |       | 2,201,000                       |       |
| Deferred revenue  and deposits |       | 3,899,000                   |       | 3,970,000                       |       |
| Total                          |       | $                           | 12,942,000 |                            | $          | 13,080,000 |   |

 

**8.  Investment in Resort and related obligations**

Certaincondensed balance sheet information regarding the Resort, adjusted for theliquidation basis of accounting, is provided below:
| ** **                                                                                             | ** ** | **June 30, 2006** | ** ** | **December 31, 2005** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Assets                                                                                                 |       |                        |       |                            |       |
| Current assets                                                                                         |       | $                           | 8,434,000  |                            | $          | 6,491,000 |   |
| Real estate and Resort assets                                                                          |       | 50,854,000                  |       | 50,626,000                      |       |
| Other assets                                                                                           |       | 2,471,000                   |       | 2,647,000                       |       |
| Total assets                                                                                           |       | 61,759,000                  |       | 59,764,000                      |       |
| Liabilities                                                                                            |       |                        |       |                            |       |
| Accounts payable and accrued expenses                                                                  |       | 7,937,000                   |       | 8,862,000                       |       |
| Long term refurbishment                                                                                |       | 4,464,000                   |       | 4,647,000                       |       |
| Capital lease obligations                                                                              |       | 933,000                     |       | 961,000                         |       |
| Westin Termination Fee                                                                                 |       | 5,673,000                   |       | 5,673,000                       |       |
| Troon Supplemental Fee                                                                                 |       | 800,000                     |       | 800,000                         |       |
| Note Payable collateralized by Resort assets (Note  6)                                                 |       | 799,000                     |       | 769,000                         |       |
| Reserve/adjustment for projected operating results  through the   contemplated holding period (Note 2) |       | 2,310,000                   |       | (824,000                        | )          |
| Total  liabilities                                                                                     |       | 22,916,000                  |       | 20,888,000                      |       |
| Net investment  in subsidiary                                                                          |       | 38,843,000                  |       | 38,876,000                      |       |
| Write-down to  estimated value                                                                         |       | (2,421,000                  | )          | (2,421,000                      | )          |
| Net investment in  subsidiary adjusted for write-down                                                  |       | $                           | 36,422,000 |                            | $          | 36,455,000 |   |

 

Thedecrease in the Company’s net investment in its subsidiary fromDecember 31, 2005 to June 30, 2006 is due to the operating performance ofthe Resort for the six months ended June 30, 2006.  The first quarter of the year is typicallythe most profitable quarter of the Resort’s fiscal year, so typically thereserve created by the performance in the first quarter is absorbed by the endof the third quarter.  As more fullydescribed in Note 2, at June 30, 2006, the Company has recorded a reserve of$2,310,000 to reflect the estimated operating results during the remainingcontemplated holding period.

*Master LeaseRefurbishment Obligation*

Inconnection with taking control of the Resort effective July 16, 2004, theCompany recorded a liability to recognize its obligations under the MasterLease Agreement, or MLA, refurbishment program. This program entitles condominium 

 

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owners who participate in the Rental Pool to 50%reimbursement of the refurbishment costs of their unit subject to the terms andconditions of the MLA. Interest on this liability is accrued at a rate of 5%and is paid quarterly. Principal payments began in the first quarter of 2005and will be paid quarterly through the fourth quarter of 2009.  In addition, the Company’s subsidiary, GTAIB, LLC, agreed to provide refurbishment reimbursement for units placed intothe rental pool during 2005 at a level of 25% of the applicable condominiumowner’s investment in the refurbishment. The Company refers to this program asPhase 5. Interest on the Phase 5 liability is accrued at a rate of 2.5% perannum and paid quarterly. Principal payments for Phase 5 begin in the firstquarter of 2008 and will be paid quarterly through the fourth quarter of 2012.As of June 30, 2006, the Company estimates the settlement value of thisliability upon sale of the Resort to be $4,463,000.

Minimum principalpayments on the refurbishment program are as follows:

 

| Year                                       | ** ** | **Amount** | ** ** |
|--------------------------------------------|------------|------------|------------|
| July 1 —  December 31, 2006 |       | $          | 532,000    |   |
| 2007                                       |       | 1,417,000  |       |
| 2008                                       |       | 1,781,000  |       |
| 2009                                       |       | 2,140,000  |       |
| 2010                                       |       | 18,000     |       |
| Thereafter                                 |       | 50,000     |       |
| **Total**                                  |       | $          | 5,938,000  |   |

* *

*Westin Termination Fee*

TheManagement Agreement that the Company executed with Westin on July 15,2004 provides that the Company shall pay to Westin, subject to the terms andconditions set-forth in that agreement, a termination fee. This fee is reducedby $365 (three hundred sixty-five dollars) per day  for each day elapsed from the effective dateuntil the termination date; provided, however, that the termination fee shallnot be reduced below $5,500,000. The estimated settlement value of thisliability upon sale of the Resort is approximately $5,673,000 as of June 30,2006.  See Note 10, Subsequent Events,for an update regarding Westin’s allegations that GTA-IB, LLC is in default ofits obligations under the Management Agreement.

*Troon Supplemental Fee*

Thefacility Management Agreement that Westin executed with Troon was effective asof July 15, 2004. That agreement provides that the Company shall pay toTroon, subject to the terms and conditions set-forth in that agreement, asupplemental fee of $800,000 for outstanding management fees prior toJuly 15, 2004.

**9.  Preferred Stock**

*Series A CumulativeConvertible Redeemable Preferred Stock*

OnApril 2, 1999, the Company completed a registered offering of 800,000shares of 9.25% Series A Cumulative Convertible Preferred Stock, par value$0.01 per share, or series A preferred stock, at a price of $25.00 pershare.  All shares of series A preferredstock were sold to AEW Targeted Securities Fund, L.P., or AEW. Theseries A preferred stock is convertible, in whole or in part, at theoption of the holder at any time into the Company’s common stock at an implicitconversion price of $26.25 per share of common stock, subject to adjustment incertain circumstances. The Company contributed the net proceeds to the Company’soperating partnership in exchange for 800,000 series A preferred OP unitswith analogous terms.

Aggregateseries A preferred stock dividends accrued, until July 20, 2003, at arate of $462,500 per quarter. Effective July 21, 2003, the rate increasedto $625,000 per quarter (see further discussion of this increase below). As ofJune 30, 2006, the Company had not paid twenty quarters of series Apreferred stock dividends (including the dividend otherwise payable in respectof the quarter ended December 31, 2005). Under the Company’s series Acharter document, because the Company has at least six quarters of unpaidSeries A preferred stock dividends, the holder of the series Apreferred stock, AEW or its transferee, had the right to elect two additionaldirectors to the Company’s board of directors at its annual meeting that washeld on November 17, 2003, whose terms as directors would continue untilthe Company fully pays all accrued but unpaid series A dividends. AlthoughAEW did not exercise this right, it may do so in the future in accordancewith the terms of the Company’s charter and the voting agreement.

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OnFebruary 22, 2001, the Company entered into a voting agreement with AEW,which continues to hold all shares of the series A preferred stock. Thatagreement required AEW to vote in favor of the plan of liquidation and requiredthe Company to redeem all of the shares of series A preferred stock (for$25 per share plus dividends accrued and unpaid thereon through the date of thefinal redemption payment) promptly after the Company determines in good faiththat it has received sufficient net proceeds from the disposition of theCompany’s assets and/or operations to redeem all of the preferred shareswithout violating any legal or contractual obligations.

Moreover,under the Company’s voting agreement with AEW, since the Company did not fullyredeem the series A preferred stock by May 22, 2003, AEW or itstransferee had the right to require the Company to redeem the series Apreferred stock in full within 60 days which right they exercised. Sincethe Company defaulted on that obligation, from July 21, 2003 until theseries A preferred stock is redeemed, the stated dividend rate of theseries A preferred stock increased from 9.25% to 12.50% per annum(equivalent to a quarterly dividend of $625,000). Although the Company ispermitted to continue to accrue such dividends without paying them on a currentbasis, they must be paid in full prior to any distribution to the Company’scommon stockholders, which will reduce its cash available for liquidatingdistributions to common stockholders.

On May 6, 2005, the Company executed an optionagreement with AEW which granted the Company the right to repurchase all800,000 shares of the Company’s series A preferred stock held by AEW at afixed price.   AEW and the Company haveentered into a series of agreements granting the Company the right torepurchase AEW’s preferred stock, each of which has expired by its terms.  In particular, on April 12, 2006  the Company entered into a new optionagreement with AEW.  In this optionagreement AEW granted the Company the option, exercisable by the Company in itssole discretion, to purchase, on or before June 30, 2006, all 800,000shares of the Company’s series A preferred stock held by AEW including,without limitation, all of AEW’s rights to Liquidation Preferences (as definedin the Company’s Articles Supplementary, including, without limitation,Liquidation Preferences in respect of any accrued and unpaid dividends) payablein respect of such shares as of the Company’s exercise of the option for aprice of $20,000,000. The option to repurchase AEW’s preferred stock was onlyexercisable in the event that the business of the Resort is purchased for cashconsideration of no more than $35 million. This option agreement expired onJune 30, 2006 pursuant to its terms.  SeeNote 10 for further discussion.

**10.  Subsequent Events**

The Company is currently negotiating with AEW theterms of an amendment of an existing agreement or a new agreement which willallow the Company to repurchase all of AEW’s series A preferred stock plusaccrued dividends for a price of $20 million or less.  The Company anticipates that the terms of anyagreement that it may enter with AEW would include, among other terms andconditions, a provision that all or a portion of its obligations to AEW aresecured by the Resort, which the Company believes provides AEW with morefavorable remedies against it than AEW currently possesses.

As aresult of the Company’s assumption that these negotiations will lead to anexecuted agreement, the Company has not recorded in its net assets for thequarter ended June 30, 2006 either (i) a liability of $11,164,000 for theaccrual of quarterly preferred dividends for the period July 1, 2001 to June30, 2006 or (ii) additional dividend accruals of $625,000 for each subsequentquarter through the date that the exit transaction is ultimately consummatedand liquidation payments are made to AEW.   Further, the carryingamount of the preferred shares remains at $20 million on the accompanyingstatement of net assets; however, absent either an agreement by a third partyto assume all or a portion of the Company’s accrued preferred dividendobligation or an agreement by AEW to forgive all or a portion of the Company’spreferred dividend obligations, (neither of which have occurred), the Companywill be required to accrue, and ultimately pay in liquidatingdistributions to AEW, these preferred dividends.  Any preferred dividends which the Company isrequired to pay to AEW ultimately would reduce the net assets available tostockholders in liquidation and correspondingly the estimated liquidationdistribution per common share.  If theCompany were required to pay to AEW dividends accrued through As of June 30,2006,, the Company’s liquidating distributions would be reduced by $1.52 percommon share or OP unit of the Operating Partnership outstanding on that date.

At thepresent time, the Company has not yet executed a binding agreement withAEW.  There are no assurances that theCompany will successfully execute such an agreement with AEW, or that the termsof any agreement that the Company may execute with AEW will not be more onerousto the Company than the Company currently anticipates.  Further, even ifthe Company is able to execute an agreement with AEW which permits the Companyto repurchase the series A preferred stock at $20 million or less, the Companymay be unable to negotiate a financing arrangement through its existing lenderrelationships or otherwise procure sufficient funding to permit it to exercisethat repurchase right and close the repurchase prior to its expiration. In the event that the Company executes an agreement with AEW and it is unableto repurchase AEW’s series A preferred stock in accordance with the terms ofthat agreement, in addition to the requirement that the Company pay accrueddividends to AEW, the Company expects that the agreement also would subject theCompany to penalties or grant AEW additional rights with respect to the Companyand its remaining assets which will be prejudicial to the Company and itsassets. 

17

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OnJuly 31, 2006, the purchaser of the Tierra Del Sol Country Club repaid to theCompany the principal and interest due from the purchaser under the terms ofthe $1.063 million note receivable issued to the Company in connection with thesale.   On August 2, 2006, upon receiptof these funds, the Company paid approximately $183,000 to satisfy in full theCompany’s final obligation under the Agreement for Marketing and Joint Sale ofTierra Del Sol.

On July 10, 2006,GTA-IB, LLC and the Company received a notice of default from Westin.  Thedefault notice related to GTA-IB, LLC’s alleged failure to provide certainrequested funding to the Resort.  Westin’snotice alleged, among other things, that if GTA-IB, LLC failed to cure thedefault by August 1, 2006, then Westin would have the right to (i) terminatethe Management Agreement on not less than five (5) days notice and (ii) pursueavailable remedies following an event of default.  The Company hascontested, and continues to contest, the defaults that Westin claims that theCompany and GTA-IB, LLC have committed, including the defaults alleged byWestin in the notice of default and related correspondence from Westin. Moreover, the Company  believes that if athird party determines that the Company or GTA-IB, LLC has not complied withall of the obligations under the Management Agreement, it is in part because ofWestin’s non-compliance with its obligations thereunder.

The Management Agreementprovides that the Company shall pay to Westin, subject to the terms of theManagement Agreement, a termination fee. The Management Agreement provides thatthe termination fee shall be reduced by $365 per day for each day elapsed fromthe effective date of the Management Agreement until the termination date;provided, however, that the termination fee shall not be reduced below$5,500,000.  See note 8 for the carrying value of the Westin terminationfee as of June 30, 2006.  The Company hasnot received from Westin a notice of termination of the ManagementAgreement.  The parties mutually agreedupon a process to seek to negotiate a resolution of each party’s respectiveclaims.

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**GOLF TRUST OFAMERICA, INC.Form 10-Q Quarterly ReportFor the Three and Six Months Ended June 30, 2006 and 2005**

**ITEM 2. MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

Wewere incorporated in Maryland on November 8, 1996. We are currentlyengaged in a liquidation of our assets pursuant to a plan of liquidationapproved by our stockholders. We were originally formed to be a real estateinvestment trust, or REIT; however, as of fiscal year 2002 we no longer haveour REIT status as a result of our repossession and operation of certain golfcourses following the default of their original third-party lessees. As ofAugust 16, 2006, we own two properties, held by us in fee simple.  These two properties represent six golfcourses. Two of the six golf courses are managed by us and four (namely, thegolf courses at the Resort) are managed by Westin pursuant to our ManagementAgreement with Westin, or the Management Agreement. Four of our golf coursesare located in Florida and two are located in South Carolina. Golf Trust ofAmerica, L.P., a Delaware limited partnership holds title to the golf courseswhich are located in South Carolina. Title to the Resort is held by GTA-IB,LLC, a wholly-owned subsidiary of GTA-IB Golf Resort, LLC. GTA-IB Golf Resort,LLC is 100% owned by our operating partnership, Golf Trust of America, L.P. Inthis Quarterly Report, we refer to Golf Trust of America, L.P. as “ouroperating partnership” or “OP,” and we refer to the operating partnership andourselves (together with all subsidiaries) collectively as “we,” “us” or “ourcompany”. Through our wholly owned subsidiaries, GTA GP, Inc. and GTALP, Inc., we held a 99.6 percent interest in our operatingpartnership as of August 16, 2006. GTA GP is the sole general partner of ouroperating partnership and owns a 0.2 percent interest therein. GTA LP is alimited partner in the operating partnership and owns a 99.4 percentinterest therein. These percentages give effect to all outstanding preferred OPunits on an as-converted basis as of August 16, 2006.

**Significant Events since thefiling of our Quarterly Report on Form 10-Q on May 15, 2006**

Significant events occurringsince May 15, 2006 (the filing date of our quarterly report onForm 10-Q) include:

·                                          OnJuly 31, 2006, the buyer of the Tierra Del Sol Country Club paid the Company’s$1.063 million note receivable taken in connection with the sale.  In connection with the collection of thisnote, on August 2, 2006, the Company paid from these proceeds its finalobligation under the Joint Marketing Agreement for the Sale of Tierra Del Solof approximately $183,000.

·                                          As discussed in greater detail below, we failed tocure the defaults that Westin alleges that we have made under the ManagementAgreement by the stated expiration date of the cure period.  In the event that we are in default under theManagement Agreement as Westin alleges, Westin has the right to terminate thatagreement on five days notice and we will be required to pay to Westin atermination fee. This termination fee shall be reduced by $365 per dayfor each day elapsed from the effective date of the Management Agreement untilthe termination date; provided, however, that the termination fee shall not bereduced below $5,500,000.  As of August16, 2006, the termination fee that would be due would be approximately$5,622,000.  We have not received from Westin a notice of termination of themanagement agreement. The parties have mutually agreed upon a process to seekto negotiate a resolution of each party’s respective claims which is currentlyongoing.

·                                          Weare currently negotiating with AEW,  theholder of all of our series A preferred stock, the terms of an amendment of anexisting agreement or a new agreement which will allow us to repurchase all ofAEW’s series A preferred stock for a price of $20,000,000 or less. As a resultof our assumption that these negotiations will lead to an executed agreement,we have not recorded in our net assets a liability for the accrual of preferreddividends payable for the quarter beginning July 1, 2001 or for subsequentquarters.  In the event that either weare unable to reach an agreement with AEW, or we are unable to exercise anyrepurchase right and close the repurchase under any agreement we may reach withAEW, we may be required to pay AEW all or a portion of the preferred dividendsfor which we have not recorded a liability, reducing our liquidatingdistributions to holders of our common stock. See further discussion in Notes 9 and 10 to the Condensed ConsolidatedFinancial Statements referred to in Item 1 of this quarterly report andbelow  in Part II, Item IA of thisQuarterly Report under the caption “*Risk Factors*.”

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**Assetsheld for sale**

Thefollowing chart identifies each of our unsold properties as of August 16, 2006:

 
| **Property**                                | ** ** | **Location**    | ** ** | **Number of  Golf Courses** | ** ** |
|---------------------------------------------|------------|-----------------|------------|---------------------------------------|------------|
| The Resort                                  |       | Palm Harbor, FL |       | 4                                     |       |
| Stonehenge (Wildewood  and Woodcreek Farms) |       | Columbia, SC    |       | 2                                     |       |
| Total                                       |       |            |       | 6                                     |       |

As of August 16, 2006, we have not entered into any binding agreements withprospective purchasers of the foregoing assets.

**TheResort**

***Status of the Sale of the Resort***

We terminatedour month-to-month engagement with Houlihan Lokey on June 29, 2006 because anexit transaction had not occurred.  Eventhough we terminated our engagement letter with Houlihan Lokey, subject tocertain terms and conditions of that agreement, the transaction fee may stillbe due to Houlihan Lokey if a closing of an exit transaction were to occursubject to certain terms of the engagement. We continue to market the Resort for sale on our own behalf. As of thedate of this report, a definitive agreement for the purchase of the Resort hasnot been executed.

Seefurther discussion below  inPart II, Item IA of this Quarterly Report under the caption “*Risk Factors*.”

***Potential use of a Liquidating Trust***

As wecontemplate the sale of our remaining assets and the wind-up of our company, asexpressly contemplated by our plan of liquidation, we may elect tocontribute our remaining assets and liabilities to a liquidating trust. For amore complete description of our potential use of a liquidating trust, pleaserefer to “Potential use of a Liquidating Trust; Related Income Tax Risks to ourStockholders” in Part 1, Item 1 of our Form 10-K for the year endedDecember 31, 2005 filed on April 17, 2006.

***Rental Pool***

Inconnection with the Settlement Agreement, we assumed control and operation ofthe Resort Rental Pool Lease Operation at the Resort. Approximately half of thecondominium owners at the Resort provide their units as resort accommodationsunder rental pool lease agreements. We refer to this arrangement as the RentalPool.  We are the lessee under the leaseoperation agreements, which provide for the distribution of a percentage ofroom revenues to participating condominium owners. Accordingly, we do notbear the expense of certain operating and financing costs of the rental units.However, we do bear the expense of all other operating aspects of the Resort.

The condominium owners at the Resort have establishedan Association of Condominium Owners, or the Association, to administer andmaintain certain of the common areas of the Resort and to conduct the businessof the condominium owners, such as maintaining insurance on the real property,upkeep of the structures, maintenance of the grounds, electricity for thecommon areas, water/sewer and security services. In addition to the currentrental pool agreement dated January 1, 2002, the former owner of theResort agreed with the Association that the former owner of the Resort wouldreimburse 50% of the refurbishment costs plus accrued interest (at 5% per annum)expended in the refurbishment of the condominium units by the condominiumowners. As reflected in the table below, this amount will be reimbursed toparticipating condominium owners (or any parties to whom the participatingcondominium owners transfer their condominium units) over the five-year periodbeginning in 2005. In addition, we, through GTA-IB, LLC, agreed to providerefurbishment reimbursement for units placed into the Rental Pool after January1, 2005 and before December 31, 2005 at a level of 25% of the condominium owner’sinvestment in the refurbishment. We refer to this program as Phase 5. Intereston the Phase 5 liability accrues at a rate of 2.5% per annum and is paidquarterly. Principal payments for Phase 5 begin in the first quarter of 2008and will be paid quarterly through December 31, 2012. As of June 30, 2006, theestimated settlement value of the refurbishment liability upon sale of theResort is $4,463,000.

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The reimbursement due to the owner of each unit iscontingent on the unit remaining in the rental pool from the time of therefurbishment of such unit until the end of the reimbursement period (2009 or2012, as applicable). If the unit does not remain in the pool during theapplicable reimbursement period, the owner or successor owner forfeits anyunpaid installments at the time the unit is removed from the pool.

As ofAugust 16, 2006, 612 units were participating in the Rental Pool. Minimumundiscounted principal and interest payments on the refurbishment program areas follows:

 
| **Year**                              | ** ** | **Principal** | ** ** | **Interest** | ** ** |
|---------------------------------------|------------|---------------|------------|--------------|------------|
| July 1 —  December 31, 2006 |       | $             | 532,000    |         | $          | 141,000 |   |
| 2007                                  |       | 1,417,000     |       | 233,000      |       |
| 2008                                  |       | 1,781,000     |       | 153,000      |       |
| 2009                                  |       | 2,140,000     |       | 55,000       |       |
| 2010                                  |       | 18,000        |       | 1,000        |       |
| Thereafter                            |       | 50,000        |       | 1,000        |       |
| **Total**                             |       | $             | 5,938,000  |         | $          | 584,000 |   |

 

**Applicationof Critical Accounting Policies**

Uponapproval by our stockholders of the plan of liquidation on May 22, 2001,we adopted the liquidation basis of accounting for periods beginning afterMay 22, 2001. The changes in Net Assets in Liquidation for Golf Trust ofAmerica, Inc. excluding the Resort and Golf Host Securities, are discussedbelow. This discussion of changes in net assets, instead of a discussion ofoperating results, is consistent with the presentation of the liquidation basisfinancial statements in Item 1 of this Quarterly Report on From 10-Q. Theresults of operations for the Resort are discussed separately below under thecaption “Resort results of operations for the three and six months ended June30, 2006 and 2005.” Please refer to “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations—Application of CriticalAccounting Policies” in our Form 10-K for the year ended December 31,2005 filed on April 17, 2006 for a complete description of our criticalaccounting policies.

***Reserve for Estimated Costs During the Period of Liquidation***

Thechange in our reserve for estimated liquidation costs for the three and sixmonths ended June 30, 2006 is summarized in Note 2 to our condensedconsolidated financial statements contained in Item 1 above.

**Changes in Net Assets inLiquidation**

***January 1, 2006 toJune 30, 2006***

Forthe three months ended June 30, 2006, net assets in liquidation reflectsapproximately $34,000 in additional realized gain upon closing the sale ofTierra Del Sol offset by an increase in the provision for projected capitalexpenditures of approximately $34,000.

Forthe six months ended June 30, 2006, net assets in liquidation decreased by$350,000 during the period from January 1, 2006 to June 30, 2006.Operating income was $2,872,000 and included (i) the net income from ourproperties (primarily the Resort) and (ii) net interest expense on corporateand property-specific debt. We closed on the sale of Tierra Del Sol CountryClub on May 9, 2006 and recognized a gain of approximately $374,000($340,000 of this total gain was recorded as an increase to the carrying valueof our assets in the three months ended March 31, 2006). There were no otheradjustments to the estimated fair value attributed to the remaining propertiesheld for sale at March 31, 2006. The reserve for estimated liquidation costs and projected capitalexpenditures increased by approximately $3,596,000 due primarily to the accrualof anticipated operating results and projected capital expenditures of theResort, our other golf course assets and the corporate operations through theanticipated holding period of our remaining assets and conclusion of our planof liquidation.  Also contributing to theincrease in the reserve for estimated liquidation costs and projected capitalexpenditures was an increase of approximately $415,000 in the provision forlegal fees that we expect to be incur in connection with (i) thenegotiation of an asset purchase agreement and consummation of the sale of theResort, (ii) litigating the proceedings to which we are currently a partyand (iii) the administrative conclusion of our plan of liquidation.

Forthe three months ended June 30, 2006, net assets in liquidation reflects thegain of approximately $34,000 upon closing the sale of Tierra Del Sol, offsetby an increase in the provision for capital expenditures of approximately$34,000.  For the six months ended June30, 2006,  net assets in liquidationdecreased by approximately $350,000. This decrease resulted from (a) an increase in the carrying value ofTierra Del Sol to reflect the estimated gain on the sale of Tierra Del Sol 

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of approximately$340,000 plus (b) the additional gain realized upon the actual closing of thesale of Tierra Del Sol of approximately $34,000 offset by (x) an increase inthe provision for capital expenditures of approximately $44,000, (y) legal feesof approximately $415,000 and (z) corporate operating costs of approximately$265,000 to be incurred in (i) the negotiation of an asset purchase agreementand consummation of the sale of the Resort, (ii) litigating the proceedings towhich the Company is currently a party and (iii) the administrative conclusionof the Company’s plan of liquidation.

Ournet assets in liquidation of approximately $13,432,000 at June 30, 2006 wouldresult in a liquidation distribution per share of approximately $1.85. This$1.85 estimate for the liquidation distribution per share includes projectionsof costs and expenses expected to be incurred during the period required tocomplete the plan of liquidation, that is, until we sell our two remainingassets, including the Resort. These actual per share distributions that we maketo the holders of our common stock could be materially lower than we currentlyestimate due to factors such as (i) the timing of any sale of the properties,(ii) the performance of the underlying assets, and (iii) a change in theunderlying assumptions of the cash flow amount projected. The $1.85 estimate isderived by dividing the net assets in liquidation by the number of shares ofcommon stock and common operating partnership units outstanding (7,353,000 less85,000) after consideration of those shares that will be cancelled prior to thedistribution of the net assets. A total 85,000 shares of common stock pledgedto us as security for the payment and performance of the obligations andliabilities of the pledgor under a common stock redemption agreement executedconcurrently with a 2001 asset sale. Because this redemption agreement providesin part that these shares will be tendered to us if and when the totalamount of liquidating distributions paid to its holders of common stockpursuant to the plan of liquidation is less than $10.74 per share, we expectthese shares to be canceled.

Since we arepresenting liquidation basis financial statements that only reflect the changesin net assets in liquidation, the operating results of our company aresummarized and reflected in the table below.
| ** **                                                      | ** ** | **For the three months  ended June 30,** | ** ** | **For the six months  ended June 30,** | ** ** |
|-----------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **2006**                                                          | ** ** | **2005**                                                        | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                      | ** ** | **(in thousands)**                                           | ** ** |
| Revenues                                                        |       |                                                              |       |                                                            |       |   |   |   |   |
| Revenue from  Resort and managed golf course operations         |       | $                                                                 | 13,155     |                                                            | 12,082     |   | $ | 31,161 |   | 28,509 |   |
| Expenses                                                        |       |                                                              |       |                                                            |       |   |   |   |   |
| General and  administrative                                     |       | 248                                                               |       | 251                                                             |       | 500 |   | 531 |   |
| Direct expenses  from Resort and managed golf course operations |       | 12,885                                                            |       | 11,358                                                          |       | 27,142 |   | 24,358 |   |
| Total operating  expenses                                       |       | 13,133                                                            |       | 11,609                                                          |       | 27,642 |   | 24,889 |   |
| Operating income                                                |       | 22                                                                |       | 473                                                             |       | 3,519 |   | 3,620 |   |
| Interest expense—net                                       |       | (330                                                              | )          | (284                                                            | )          | (648 | ) | (627 | ) |
| Operating (loss) income                                         |       | ($308                                                             | )          | $                                                               | 189        |   | $ | 2,871 |   | $ | 2,993 |   |
|                                                                 |            |                                                                   |            |                                                                 |            |  |  |  |  |  |  |  |  |

 

***Resort results of operations for the threeand six months ended June 30, 2006 and 2005 (in thousands except forutilization statistics and percentages)              ***Because the Resort is a destination golf resort,we believe it appeals to a different market than the market to which stand-alonehotels located in downtown metropolitan areas would appeal. The Resort providesrecreation, food and beverages to business meeting or group travelers,transient guests who play golf, guests who purchase golf packages and guestswho bring their families to the Resort. As a destination golf resort, theResort’s performance is sensitive to weather conditions and seasonality. TheResort had higher realized revenue and fewer room nights during the first sixmonths of 2006 than during the corresponding period in 2005. We believe thatthe increase in realized revenue resulted when continuing sales and marketingefforts directed towards attracting group and transient guests and a continuedfocus on sales of golf packages and golf memberships at the Resort, offset therevenue lost due to the reduction in room nights.  During the six months ended June 30, 2006,each of these market segments produced a greater aggregate spending level perroom night as compared to the six months ended June 30, 2005.  While overall room nights and golf roundswere down 10.9% and 7.2%, respectively, during the first six months of 2006 ascompared to the same period of 2005, overall gross revenue per room nightincreased by $70.86 to $494.11.  Thefluctuation is discussed in further detail below.

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The following table showsutilization of the Resort facilities broken into facility type, results ofoperations and selected Rental Pool statistical data during the three and sixmonth period ended June 30, 2006 and June 30, 2005:

 
| ** **                                  | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|---------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                  | ** ** | **2006**                                            | ** ** | **2005**                                          | ** ** | **Increase  (decrease)** | ** ** | **Percentage  Change** | ** ** | **2006** | ** ** | **2005** | ** ** | **Increase  (decrease)** | ** ** | **Percentage  Change** | ** ** |
| ** Utilization of Resort facilities:** |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Available room nights                       |       | 53,108                                              |       | 54,489                                            |       | (1,381 | ) | (2.5 | )% | 104,175 |   | 106,647 |   | (2,472 | ) | (2.3 | )% |
| Actual room nights                          |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Group.                                      |       | 14,768                                              |       | 16,640                                            |       | (1,872 | ) | (11.3 | )% | 37,861 |   | 37,769 |   | 92 |   | 0.2 | % |
| Transient                                   |       | 8,650                                               |       | 11,779                                            |       | (3,129 | ) | (26.6 | )% | 17,333 |   | 24,147 |   | (6,814 | ) | (28.2 | )% |
| Total room  nights                          |       | 23,418                                              |       | 28,419                                            |       | (5,001 | ) | (17.6 | )% | 55,194 |   | 61,916 |   | (6,722 | ) | (10.9 | )% |
| Food and beverage meals                     |       | 96,548                                              |       | 107,630                                           |       | (11,082 | ) | (10.3 | )% | 255,257 |   | 250,647 |   | 4,610 |   | 1.8 | % |
| Golf rounds                                 |       |                                                |       |                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Resort guests.                              |       | 20,290                                              |       | 24,023                                            |       | (3,733 | ) | (15.5 | )% | 43,711 |   | 49,396 |   | (5,685 | ) | (11.5 | )% |
| Member/guests                               |       | 8,711                                               |       | 9,363                                             |       | (652 | ) | (6.9 | )% | 21,569 |   | 20,945 |   | 624 |   | 2.9 | % |
| Total golf rounds                           |       | 29,001                                              |       | 33,386                                            |       | (4,385 | ) | (13.1 | )% | 65,280 |   | 70,341 |   | (5,061 | ) | (7.2 | )% |

 

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| ** **                                  | ** ** | **Three Months Ended June 30** | ** ** | **Six Months Ended June 30** | ** ** |
|---------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                  | ** ** | **2006**                                           | ** ** | **2005**                                         | ** ** | **Increase  (decrease)** | ** ** | **Percentage  Change** | ** ** | **2006** | ** ** | **2005** | ** ** | **Increase  (decrease)** | ** ** | **Percentage  Change** | ** ** |
| **Results of operations (in  thousands):**  |       |                                               |       |                                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                                    |       |                                               |       |                                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Hotel                                       |       | $                                                  | 3,444      |                                             | $          | 3,452 |   | $ | (8 | ) | (.2 | )% | $ | 9,289 |   | $ | 8,733 |   | $ | 556 |   | 6.4 | % |
| Food and  beverage                          |       | 2,686                                              |       | 2,816                                            |       | (130 | ) | (4.6 | )% | 7,818 |   | 7,060 |   | 758 |   | 10.7 | % |
| Golf                                        |       | 3,527                                              |       | 3,392                                            |       | 135 |   | 4.0 | % | 8,616 |   | 8,058 |   | 558 |   | 6.9 | % |
| Other                                       |       | 602                                                |       | 1,064                                            |       | (462 | ) | (43.4 | )% | 1,549 |   | 2,354 |   | (805 | ) | (34.2 | )% |
| Total revenues                              |       | 10,259                                             |       | 10,724                                           |       | (465 | ) | (4.3 | )% | 27,272 |   | 26,205 |   | 1,067 |   | 4.1 | % |
| Expenses                                    |       |                                               |       |                                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Hotel                                       |       | 2,843                                              |       | 3,030                                            |       | (187 | ) | (6.2 | )% | 6,950 |   | 6,915 |   | 35 |   | .5 | % |
| Food and  beverage                          |       | 1,878                                              |       | 1,968                                            |       | (90 | ) | (4.6 | )% | 5,011 |   | 4,578 |   | 433 |   | 9.5 | % |
| Golf                                        |       | 1,911                                              |       | 1,823                                            |       | 88 |   | 4.8 | % | 3,767 |   | 3,662 |   | 105 |   | 2.9 | % |
| Other                                       |       | 2,540                                              |       | 2,621                                            |       | (81 | ) | (3.1 | )% | 5,377 |   | 5,143 |   | 234 |   | 4.5 | % |
| General and  administrative                 |       | 1,410                                              |       | 1,067                                            |       | 343 |   | 32.1 | % | 3,152 |   | 2,670 |   | 482 |   | 18.0 | % |
| Depreciation and  amortization              |       | 533                                                |       | 537                                              |       | (4 | ) | (.7 | )% | 1,024 |   | 1,335 |   | (311 | ) | (23.3 | )% |
| Total expenses                              |       | 11,115                                             |       | 11,046                                           |       | 69 |   | .6 | % | 25,281 |   | 24,303 |   | 978 |   | 4.0 | % |
| Operating income                            |       | (856                                               | )          | (322                                             | )          | (534 | ) | (165.8 | ) | 1,991 |   | 1,902 |   | 89 |   | 4.7 | % |
| Interest expense, net                       |       | 370                                                |       | 375                                              |       | (5 | ) | (1.3 | ) | 743 |   | 814 |   | (71 | ) | (8.7 | )% |
| Net (loss) income                           |       | $                                                  | (1,226     | )                                                | $          | (697 | ) | $ | (529 | ) | (75.9 | )% | $ | 1,248 |   | $ | 1,088 |   | $ | 160 |   | 14.7 | % |
| ** **                                  | ** ** | ** **                                         | ** ** | ** **                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Selected Rental Pool  statistical data:** |       |                                               |       |                                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Average daily  distribution                 |       | $                                                  | 22.65      |                                             | $          | 22.70 |   | $ | (.05 | ) | (0.2 | )% | $ | 31.17 |   | $ | 29.40 |   | $ | 1.77 |   | 6.0 | % |
| Average room rate                           |       | $                                                  | 147.04     |                                             | $          | 121.46 |   | $ | 25.58 |   | 21.1 | % | $ | 168.29 |   | $ | 141.04 |   | $ | 27.25 |   | 19.3 | % |
| Occupancy percentage                        |       | 44.1                                               | %          | 52.2                                             | %          | (8.10 | )% |   |   |   |   | 53.0 | % | 58.1 | % | (5.1 | )% |
| Average number of available units           |       | 584                                                |       | 589                                              |       | (5 | ) | (.8 | )% | 576 |   | 589 |   | (13 | ) | (2.2 | )% |

 

***Three months ended June 30, 2006 and 2005.***

During the three months endedJune 30, 2006, there were 5,001, or 17.6%, fewer occupied room nights ascompared to the three months ended June 30, 2005.  There were 3,129 fewer transient room nightsand 1,872 less group room nights during the three months ended June 30, 2006 ascompared to the three months ended June 30, 2005.  Group room nights consist of conference roomnights, or room nights which are booked and correlate to a meeting orconvention at the Resort, and transient room nights, which are room nightswhich are booked and do not correlate to a meeting or convention at theResort.  Transient room nights are oftenbooked 24 hours or less from the date of the visit, while group roomnights are typically booked no less than 120 days in advance of the dateof a visit.  Larger groups typically book16 to 18 months in advance of a stay. Transient room nights are often booked as part of golf packages andInternet bookings, among others, but during the first three months of June 30,2005, a significant number of transient rooms were attributable to theactualization of golf packages at the Resort. Management believes that transient room nights were lower in the threemonths ended June 30, 2006 than in the corresponding period in 2005, dueprimarily to warmer weather conditions in the northern states during theperiod.  In particular, the spring monthswere much warmer in the northern states during the three months ended June 30,2006 than in the corresponding period of 2005, and as a result we believetransient guests and golf package guests were less motivated to visit thesouthern states.  This, in turn, resultedin a decline in the transient business in the three months ended June 30, 2006.

The effect of the decline inoccupied room nights on revenues during the three months ended June 30, 2006was mitigated by improved average room rates and ancillary spending patterns ofthe guests, coupled with increases in banquet and catering sales. Total revenuefor the Resort was $465,000 less during the three months ended June 30, 2006than in the same period of 2005. An overall increase in spending by the Resort’sguests, both for rooms and by package guests for food and beverages, helped tomitigate the reduction in gross revenue that resulted from the lower number ofroom nights in three months

 

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ended June 30, 2006 as compared to same period of2005.  During the same periods, theaverage room rate increased from $121.46 in 2005 to $147.06 in 2006.  Aggregate spending per room night during thethree months ended June 30, 2006 was $438.08, as compared to $377.35 for thesame period in 2005.   The mostsignificant decrease in revenues at the Resort during the three months endedJune 30 2006 occurred in the Other department. Revenues attributable to thatcategory for the three months ended June 30, 2006 decreased by approximately$462,000, or 43.4%, as compared to the same period in 2005. Other Revenuedecreased primarily because the Resort no longer charges a resort fee.  Food and Beverage revenues decreased byapproximately $130,000, or 4.6%, as a result of 11,082, or 10.3%, fewer meals(covers) served as compared to the three months ended June 30, 2005.   This aggregate decrease in covers served wasprimarily attributable to the Resort’s banquets, catering and room service,with a combined decrease of approximately 8,762 covers. Covers attributed tothe Resort’s casual restaurants and pool service also decreased byapproximately 2,320. Although the aggregate number of covers decreased, revenueper cover increased by $1.64, or from $26.17 to $27.81.  The combination of decreased number of coversand increased revenue per cover produced the $130,000 negative variance for theperiod ended June 30, 2006 versus June 30, 2005.  Golf revenue increased by approximately$135,000, primarily as a result of improved capture of revenue per round ofgolf.  Golf revenue for the quarter endedJune 30, 2006 averaged $121.62 per round, as compared to $101.60 per round forthe comparative period in 2005.  Althoughin the aggregate golf rounds were down by 4,385, golf revenues were higher as aresult of the capture of increased greens fees and ancillary spending in thepro shops. The net decrease in aggregate rounds played was attributed to 3,733fewer rounds played by the Resort’s transient guests, including packages, coupledwith an aggregate decrease of 652 rounds played by Resort members.  The number of total golf rounds played in thethree months ended June 30, 2006 was 29,001, compared to 33,386 rounds playedin the same period of 2005. Golf revenue does not necessarily increase ordecrease exactly in proportion to occupied room nights because golf revenuealso includes member dues and fees and day golf group fees, neither of which isdirectly related to occupied room nights.

Consistent with past periods, wecontinue to monitor total operating expenses in an attempt to insure that theWestin controls expenses and that the expenses bear a direct correlation to theroom nights, food and beverage covers and golf round demand. Aggregate totaloperating expenses do not generally increase or decrease on a one-to-one basiswith total operating revenue because the Resort must carry a minimum fixedoperating staff and other support expenses at all times. In those operating departmentswhere the variable costs can best be managed, we manage these costs consistentwith room, food and beverage and golf demand. Total Resort operating expenses,before depreciation and amortization and excluding the Rental Pool amortizationin hotel operations, increased by approximately $73,000, or 0.7%, for the threemonths ended June 30, 2006 as compared to the corresponding period in the prioryear.

Depreciation and amortizationexpense, excluding the Rental Pool amortization included in hotel expenses, wasapproximately $533,000 and $537,000 for the three months ended June 30, 2006and 2005, respectively.

Interest expense, net of interestincome, was approximately $370,000 and $375,000 for the three months ended June30, 2006 and 2005, respectively, and reflects amortization of the discount of(i) our Rental Pool refurbishment liability, (ii) our long-term liability toWestin and (iii) our long-term liability to Troon. The participating mortgageloan that was assumed by us from GHR was amended to adjust the outstandingbalance to $39,240,000. That note is non-interest bearing.

The net loss for the three monthsended June 30, 2006 was approximately $1,226,000, compared to a net loss forthe three months ended June 30, 2005 of approximately $697,000.

During the three months endedJune 30, 2006, approximately $292,000 of the capital reserve funds weredisbursed. Of those disbursed funds, $212,000 was used to pay lease payments onexisting and additional equipment consisting of bellman vehicles, golf cartleases, golf course equipment leases, telephone equipment leases and cableleases and the balance was for various capital improvement projects andreplacements throughout the Resort.

***Six months ended June 30, 2006 and 2005.***

During the six months ended June30, 2006, there were 6,722, or 10.9%, fewer occupied room nights than therewere for the six months ended June 30, 2005. During the six months ended June 30, 2006, there were 6,814 fewertransient room nights and 92 greater group room nights, resulting in anaggregate of 6,722 fewer occupied room nights as compared to the same period ofthe prior year. The decrease in transient room nights could be attributed tothe mild weather in the winter and spring months experienced during 2006 in thenorthern states.  Because the winter andspring months were much warmer in the northern states during 2006 than in 2005,we believe that transient guests and golf package guests were less inclined tovisit the southern states.  We believethat this, in turn, resulted in reduced transient business during the sixmonths ended June 30, 2006.

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The decline in the occupied roomnights during the six months ended June 30, 2006 was offset by improved averageroom rates and ancillary spending patterns of the Resort’s guests, coupled withincreases in banquet and catering sales. Total revenue for the Resort was$1,067,000 greater during the six months ended June 30, 2006 than in the sixmonths ended June 30, 2005. An overall increase in spending by the Resort’sguests, both for rooms and by package guests for food and beverages, offset thereduction in gross revenue that resulted from the lower number of room night inthe six months ended June 30, 2006 as compared to the same period of 2005.  The average room rate increased from $141.04in 2005 to $168.29 in 2006.  Aggregatespending per room night during the six months ended June 30, 2006 was $494.11,as compared to $423.30 during the same period in 2005.   The most significant increase in revenues atthe Resort during the six months ended June 30, 2006 occurred in the Food andBeverage department. Revenues of that department increased by approximately$758,000, or 10.7%, for the six months ended June 30, 2006, as compared to thesame period in 2005.  Overall food andbeverage revenues increased as the food and beverage total covers (meals)increased by 4,610.  This net increase incovers served was primarily attributed to the Resort’s banquets, catering, roomservice and pool service with a combined increase of approximately 9,149covers. Covers attributed to the Resort’s casual restaurants decreased byapproximately 4,539 covers. This reduction of restaurant covers is reflectiveof the reduced transient room nights noted above.  Food and Beverage revenue per cover increasedfrom $28.17 during the six months ended June 30, 2005 to $30.63 for the sixmonths ended June 30, 2006, or 8.7% per cover. Golf revenue increased by approximately $558,000, primarily as a resultof improved capture of revenue per round of golf.  Golf revenue for the six months ended June30, 2006 averaged $131.99 per round, as compared to $114.56 per round for thecomparative period in 2005, while the number of rounds played decreased for theperiod.   In the aggregate, while therewere 5,061, or 7.2%, fewer golf rounds, revenues were higher as a result of thecapture of higher greens fees and ancillary spending in the pro shops. The netdecrease in aggregate rounds played was attributable to 5,686 fewer roundsplayed by the Resort’s transient guests, including packages, offset by an increaseof 625 rounds played by Resort members. The number of total golf rounds played in the six months ended June 30,2006 was 65,280, as compared to 70,341 in the same period of 2005. Golf revenuedoes not necessarily increase or decrease exactly in proportion to occupiedroom nights because golf revenue also includes member dues and fees and daygolf group fees, neither of which is directly related to occupied room nights.Increases in total revenue due to improved spending of the Resort’s guests inthe six months ended June 30, 2006 as compared to the same period in 2005 wereoffset by a decrease in Other Revenue of approximately $805,000.  Other Revenue decreased primarily because theResort no longer charges a resort fee.

Consistent with past periods, wecontinue to monitor total operating expenses in an attempt to insure that theWestin controls expenses and that the expenses bear a direct correlation to theroom nights, food and beverage covers and golf round demand.  Aggregate total operating expenses do notgenerally increase or decrease on a one-to-one basis with total operatingrevenue because the Resort must carry a minimum fixed operating staff and othersupport expenses at all times. In those operating departments where thevariable costs can best be managed, we manage these costs consistent with room,food and beverage and golf demand. Total Resort operating expenses, beforedepreciation and amortization and excluding the Rental Pool amortization inhotel operations, increased by approximately $1,289,000, or 5.0%, for the sixmonth period ended June 30, 2006 as compared to the corresponding period in theprior year. This increase of 5.0% is primarily attributable to the increase intotal operating revenue of approximately 4.1% during the six-monthcomparative period.

Depreciation and amortizationexpense, excluding the Rental Pool amortization included in hotel expenses, wasapproximately $1,024,000 and $1,335,000 for the six months ended June 30, 2006and 2005, respectively.

Interest expense, net of interestincome, was approximately $743,000, and $814,000 for the six months ended June30, 2006 and 2005, respectively, and reflect amortization of the discount on(i) our Rental Pool refurbishment liability, (ii) our long-term liability toWestin and (iii) our long-term liability to Troon**.**  The participating mortgage loan that wasassumed by us from GHR was amended to adjust the outstanding balance to$39,240,000. That note is now non-interest bearing.

The net income for the six monthsended June 30, 2006 was approximately $1,248,000, compared to a net income forthe six months ended June 30, 2005 of approximately $1,088,000.

During the six months ended June30, 2006, approximately $518,000 of the capital reserve funds were disbursed.Of those disbursed funds, $418,000 was used to pay lease payments on existingand additional equipment consisting of bellman vehicles, golf carts, golfcourse equipment, telephone and cable equipment and the balance was for variouscapital improvement projects and replacements throughout the Resort.

The preceding information may contain forward-lookingstatements within the meaning of Section 27A of the Securities Act, andSection 21E of the Exchange Act. Such statements may be identified by theinclusion of terms such as “suggests,” “believe,” “expect,” “hope” or “may” orother similar words. Although we believe that such forward-lookingstatements are based upon sound and reasonable assumptions, given thecircumstances in which the statements are made, the actual results could differsignificantly from those described in the forward-looking statements. 

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Certain factors that might causesuch a difference include, among others, the following: changes in generaleconomic conditions that may influence group conferences and guests’ vacationsplans; changes in travel patterns; changes in consumer tastes in destinationsor accommodations for group conferences and vacations; changes in rental poolparticipation by the current condominium owners; settlement of the class actionlawsuit involving the rental pool agreements; our ability to continue tooperate the Resort under our management contracts; and the resale ofcondominiums to owners who elect neither to participate in the Rental Pool norto become Club members. Given these uncertainties, readers are cautioned not toput undue reliance on such statements.

**Liquidity and Capital Resources**

Our only sources of cash flow (other than the netproceeds from asset sales from time to time) are the monthly interest income wereceive on a note receivable (approximately $26,000 per month), a distributionof net operating income from the one remaining golf property that we own andmanage and profitable operations of the Resort, if any. We discuss the Resort’scash position below. As a result of our need for liquidity, on March 18,2004 we entered into a loan agreement and related mortgage with TextronFinancial Corporation, or Textron, for a revolving line of credit. OnAugust 4, 2005, we executed loan documents with Textron to amend the termsof the existing revolving loan. Pursuant to this amendment, the maximumpermissible outstanding loan amount was increased from $2,100,000 to$4,200,000. The interest rate pursuant to the amended Textron loan documentscontinues to be the prime rate plus 1.75% per annum, paid monthly. Theamendment extended the term of the loan from March 18, 2006 to March 18,2009. This loan is collateralized by a security interest in our golf coursescollectively known as Stonehenge. The loan requires that the operations atStonehenge for the immediately preceding twelve month period must be sufficientto meet a monthly debt service coverage ratio, as defined in the mortgage, ofat least 1.20.   At June 30, 2006, wewere in compliance with the debt service coverage ratio covenant.

Subjectto certain conditions, a buyer of Stonehenge may assume this loan pursuantto the loan assumption provisions in the amendment. We paid a one-timecommitment fee to Textron of $42,000, which represents 2% of the new fundsapproved to obtain the increase in this credit line.  In addition, we will pay to Textron a fee of0.25% per annum of the unused balance of the available line. As of the date ofthis report, we have drawn down a total of $4,100,000 on the line ofcredit.  Subject to our satisfaction ofthe applicable terms, conditions and covenants of this loan, there is $100,000available that could be drawn under this loan.

As ofJune 30, 2006, the Resort has a working capital deficit of approximately$5,372,000.  This working capital deficitresulted primarily from the reclassification of the Westin termination fee andrelated deferred management fees from long term to short term obligations.  The reclassified termination fee and deferredmanagement fees are approximately $5,628,000 in the aggregate as of June 30,2006*. * See further discussion in Note 10 to theCondensed Consolidated Financial Statements referred to in Item 1 of thisquarterly report.  Before thisreclassification, the Resort had working capital of approximately$256,000.  The Resort’s  member deficit at June 30, 2006 is$7,241,000. The Resort reported net income of approximately $1,248,000 for thesix months ended June 30, 2006.* *The Resort continues to experienceseasonal fluctuations in its net working capital position due to theseasonality of the golf industry in Florida. This seasonality impacts ourliquidity. In particular, there is generally more available cash during thewinter months, specifically in the first quarter. Cash generally becomes verylimited in the late summer months. Revenues decline at the Resort during thesummer months because the hot Florida weather makes the Resort less appealingfor group golf outings and vacation destination golfers. Additionally, unusualweather patterns, such as the hurricanes experienced in Florida in 2004 andthose that affected the east coast in 2005, negatively impacted revenues for the Resort in the late summer-earlyfall season of 2005 as groups and guests were hesitant to book reservations onthe East Coast during the hurricane season. Weather-related concernsmay continue to negatively impact reservations in comparable periods(July through September) of 2006 and subsequent years. The Resort usesseasonal pricing (peak, shoulder and off-peak) to maximize revenues. Generally,the Resort’s only source of cash is from its profitable operations, if any.While the financial performance of the Resort has shown signs of recovery sincethe Company assumed title to the Resort on July 15, 2004, current projectionsprovided by Westin indicate an operational cash flow shortfall of approximately$750,000 in the aggregate is likely to occur at some point in the fourthquarter of 2006.  Further, if or when theWestin Management Agreement terminates, we would be required to replace certaincomponents of the technological infrastructure of the Resort which areproprietary to Westin.  Our projectionsindicate that the replacement of these components could require us to make aninvestment in the range of $1.0 to $2.0 million.  The Resort’s credit capacity is limited.**We continue to work diligently with the Resort’s managementteam to identify opportunities to improve the cash flow situation at theResort. Further, we continue to seek a buyer for the Resort. We madeintercompany advances to the Resort to support working capital needs in theamounts of $2,000,000, $400,000 and $650,000 in July 2004,September 2005 and November 2005, respectively. In the event that wemust advance additional capital to fund operations at the Resort or our otheroperations, we may experience severe liquidity problems. 

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While we continue to contest Westin’s allegations thatwe have defaulted in our obligations under the Management Agreement, Westin’sdelivery to us of Westin Notices increases the likelihood that Westin mayterminate the Management Agreement in the near term in accordance with itsterms.  While we have not received from Westin a notice of termination ofthe Management Agreement and are seeking to negotiate a successful resolutionof our respective claims, our relationship with Westin may be terminated in thenear term either as a result action by Westin or otherwise.  In thatevent, we may be required to pay to Westin a termination fee of at least$5,500,000, and any deferred management fees. As of August 16, 2006, the terminationfee that would be due would be approximately $5,622,000.  We do not have sufficient funding availableto make these payments absent a concurrent sale of the Resort, so if thesepayments become due prior to the sale of the Resort, we would be forced to seekthird party funding or to otherwise gain liquidity with respect to our existingilliquid assets.

We currently hold a note receivable from the sale ofone of our golf properties. The amount outstanding under this note atDecember 31, 2005 was approximately $2,326,000, which represents$2,500,000  principal on the note, plus accrued interest, less a $200,000discount reserve. On January 30, 2006, the borrower exercised its secondoption for a one-year extension on the maturity of the note. As a result of theextension of the term of this note,the maturity date is now February 1, 2007. The borrower paid an extensionfee of 50 basis points on the principal amount of the note, $2,500,000. Thisnote accrues interest at prime plus 5% (13.25% at August 16, 2006) until thenew maturity date of February 1, 2007.

In the event that we are unable to sell our remainingassets as contemplated, we may be unable to pay our obligations as theybecome due. In addition, our ability to pay our obligations as they become duewould be compromised if our chief executive officer requires payment ofoutstanding performance milestone payments owed by us to him before we are ableto realize net cash proceeds from asset sales sufficientto repay him. As of August 16, 2006, we owed our two most senior executiveofficers a total of approximately $1,794,000 in milestone payments and accruedinterest on such milestone payments. We also owed approximately $3,250,000 inlegal fees which are included in our estimate of the costs to be incurred priorto our liquidation. We expect to incur additional fees and costs in connectionwith closing the sales of our two remaining golf properties. Our ability to payour obligations as they become due will depend on cash flow from the Resort,and forbearance by our senior executive officers and our counsel with respectto sums that we owe to them. In the event that we experience lower revenues, orhigher costs, with respect to the Resort, we may need to seek to findalternative funding in order to pay our obligations. Further, should our seniorexecutive officers or our counsel require payment of funds owed to them, wemay need to find alternative funding in order to pay our obligations. Thisfunding, if available, may not be offered on reasonable terms.

See discussion of our obligation to the holder of ourpreferred stock in Notes 9 and 10 to the Condensed Consolidated FinancialStatements referred to in Item 1 and also in Item 1A under the caption “RiskFactors” in this Quarterly Report on this Form 10-Q.

If we experience significant liquidity problems, wemay be required to seek financing or raise further capital in order tomeet our obligations when they come due. There is no assurance that we will be able to obtain additionalfinancing, raise further capital or that any funding that we receive will notcontain restrictive covenants or other onerous terms. At the present time, weonly have $100,000 available in our line of credit with Textron, and thisavailable amount may only be drawn upon our satisfactionof the applicable terms, conditions and covenants in the loan documentsregarding revolver advances.  We expectthat the cash flow that we receive on our note receivable and the net operatingincome of the Stonehenge golf courses, if any, will not be substantial.

*Six months ended June 30,2006 and 2005*

Cash flow from operating activities for the six monthsended June 30, 2006 was $2,822,000, compared to cash flow from operatingactivities for the six months ended June 30, 2005 of $1,491,000. The primarycomponents of the cash fluctuations in operating activities were liquidationliability payments and adjustments and working capital changes. The increase inthe cash flow from operating activities for the six months ended June 30,2006 as compared to the six months ended June 30, 2005 primarily resultedbecause more room nights were realized in May and June of 2005 as compared toMay and June of 2006.  Because more roomnights were realized in May and June of 2005 than in May and June of 2006, ahigher balance of  accounts receivableand accounts payable (from the purchases of goods and services to service theseguests) existed at June 30, 2005 than existed at June 30, 2005.  Liquidation liability payments increased forthe six months ended June 30, 2006 as compared to the six months ended June 30,2005, primarily due to an increase in legal fees incurred in connection withnegotiations with potential purchasers of the Resort.

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We made $97,000 in capital expenditures at the Resortand $46,000 at the other golf courses that we owned and managed during the sixmonths ended June 30, 2006, as compared to $450,000 at the Resort and $42,000at the other golf courses in the sixmonths ended June 30, 2005. We incurredapproximately $450,000 in capital expenditures at the Resort and $42,000 incapital expenditures at the other golf courses that we owned and managed duringthe six months ended June 30, 2005. In addition our investing activities for the six months ended June 30,2006 provided approximately $1,038,000 from the sale of one of our golfcourses.

During the six months ended June 30, 2006, the Resortpaid approximately $159,000 to satisfy its capital lease obligations and approximately $542,000against its refurbishment obligation to certain Rental Pool participants. During the six months ended June 30, 2005,the Resort paid approximately $545,000 to satisfy its capital leaseobligations.

**TaxConsideration**

We donot currently project any income tax liability for the remainder of ourliquidation as a result of our net operating loss carryforwards, which wecurrently expect to be sufficient to offset any taxable income for theremainder of our liquidation.

**OffBalance Sheet Arrangements**

As of June 30, 2006, we have no unconsolidatedsubsidiaries.

We donot have any relationships with unconsolidated entities or unconsolidatedfinancial partnerships of the type often referred to as structured finance orspecial purpose entities, i.e., unconsolidated entities established forthe purpose of facilitating off-balance sheet arrangements or othercontractually narrow or limited purposes. Further, we have not guaranteed anyobligations of unconsolidated entities nor do we have any commitment or intentto provide additional funding to any such entities (except potentially inconnection with the Resort as discussed previously). Accordingly, we believe weare not materially exposed to any market, credit, liquidity or financing riskthat could arise if we had engaged in such relationships.

**ContractualObligations, Contingent Liabilities and Commitments**

Thefollowing table summarizes our contractual obligations at June 30, 2006, andthe effect such obligations are expected to have on our liquidity and cash flow(or upon our successors in interest under the applicable contracts, if thecontracts are not terminated) in future periods:
| ** **                                                                                                                                | ** ** | **Payments Due by Period** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| **Contractual Obligation**                                                                                                           | ** ** | **Total**                                 | ** ** | **Less than  1 year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **More than 5  Years** | ** ** |
| ** **                                                                                                                                | ** ** | **(in thousands)**                   | ** ** |
| Employment  Agreements and Employment   Security Agreements                                                                               |       | $                                         | 2,258      |   | $ | 1,810 |   | $ | 448 |   | $ | — |   | $ | — |   |
| Series A  preferred stock and accrued   dividends(1)                                                                                      |       | 20,000                                    |       | 20,000 |   | — |   | — |   | — |   |
| Elk Funding Loan                                                                                                                          |       | 800                                       |       | 800 |   | — |   | — |   | — |   |
| Textron  revolving line of credit                                                                                                         |       | 5,228                                     |       | 410 |   | 4,818 |   | — |   | — |   |
| Operating lease  agreements at the managed   golf courses                                                                                 |       | 268                                       |       | 165 |   | 103 |   | — |   | — |   |
| Advertising,  service, equipment maintenance   and other contracts and software license   and support agreements at the managed   courses |       | 13                                        |       | 13 |   | — |   | — |   | — |   |
| Lease agreements  for GTA corporate office                                                                                                |       | 6                                         |       | 6 |   | — |   | — |   | — |   |
| Subtotal of our  obligations excluding those   of the Resort                                                                              |       | 28,573                                    |       | 23,204 |   | 5,369 |   | — |   | — |   |
| Master lease  agreement (with the   condominium owners)                                                                                   |       | 6,464                                     |       | 1,059 |   | 5,337 |   | 41 |   | 27 |   |
| Management  agreements(2)                                                                                                                 |       | 20,685                                    |       | 7,400 |   | 5,585 |   | 3,300 |   | 4,400 |   |
| Troon  supplemental fee                                                                                                                   |       | 800                                       |       | — |   | — |   | — |   | 800 |   |
| Operating and  capital leases                                                                                                             |       | 1,619                                     |       | 344 |   | 1,273 |   | 2 |   | — |   |
| Service  agreements and other                                                                                                             |       | 2,212                                     |       | 629 |   | 1,528 |   | 55 |   | — |   |
| Subtotal of the  Resort’s obligations                                                                                                |       | 31,780                                    |       | 9,432 |   | 13,723 |   | 3,398 |   | 5,227 |   |
| Total of our  consolidated obligations                                                                                                    |       | $                                         | 60,353     |   | $ | 32,636 |   | $ | 19,092 |   | $ | 3,398 |   | $ | 5,227 |   |

 

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(1)             Theseries A preferred stock is reflected in the “Less than 1 year” column ofthis table above due to the fact that this obligation is expected to be paidupon the sale of the Resort. See further discussion below under the caption “Series APreferred Stock.”

(2)             Ifthe Westin Management Agreement is terminated pursuant to its terms prior toits expiration date of December 31, 2017, a termination fee of will be due at termination in lieu of fees otherwisepayable to Westin pursuant to that management agreement (see Note 10).  As of August 16, 2006, the termination feethat would be due  approximately$5,622,000 which is included in the “Less than 1 year” column.

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Interestis reflected, as applicable, in the commitments and obligations listed above.The above table does not give effect to the anticipated sale of the Resort.

Pleaserefer to “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Contractual Obligations, Contingent Liabilities andCommitments” in our Form 10-K for the year ended December 31, 2005filed on April 17, 2006 for a description of our contractual obligations.

**Commitments**

***Series APreferred Stock.***See discussion of our obligations to ourholder of the series A preferred stock in Item 1, notes 9 and 10 above toour condensed consolidated financial statements herein and also inPart II, Item 1A of this Quarterly Report under the caption “Risk Factors”.

**Inflation**

Webelieve that inflation does not pose a material risk to us. Our main source ofcash flow is golf course dispositions which are not particularly vulnerable toinflation because we can adjust our asking prices if supply/demand factorssupport an interest in the particular golf course. Although some of ourobligations (such as the salary of our chief executive officer) automaticallyadjust for inflation, some of our rights are similarly indexed. Ourroom rates at the Resort and our golf course fees at the Resort and at theother properties that we own and manage are relatively flexible and can beincreased, subject to constraints imposed by competition and, in some cases,patrons’ yearly membership privileges.

**Seasonality**

Thegolf industry is seasonal in nature. Revenues generally decline at the Resortduring the summer months because the hot Florida weather makes the Resort lessappealing for group golf outings and vacation destination golfers.Additionally, unusual weather patterns, such as the tropical storm weather andhurricanes experienced in Florida in 2004 and 2005, may reduce revenuesfor the Resort in the period from late summer through early fall in 2006 andfuture years by negatively impacting reservations in comparable periods.

TheResort hosted in October 2003, October 2004 and October 2005, and we expect theResort to host in October 2006, a nationally televised PGA event, the ChryslerChampionship, that brings some of the highest profile golfers to the Resort forseveral days for the tournament, as well as high profile golf industry sponsorsand vendors.  We do not expect to hostthe Chrysler Championship after this year. On April 25, 2006, we entered into an agreement with Suncoast Charities,Inc., or Suncoast, which provides that Suncoast will lease the Copperhead golfcourse at the Resort for seven and one half days during the month of March fora PGA TOUR event.  Our agreement withSuncoast provides that the tournament will occur each year in March beginningin March 2007 and ending in March 2012. The agreement also provides, among other things, that we will receive abase fee and that we may receive a participation fee in the event the aggregateticket sales during any tournament year exceed 115% of the greater of the 2005tournament ticket sales or the 2006 tournament ticket sales.

Historically,revenues increase in the fourth quarter; however, revenues are generally thegreatest during the first quarter as guests arrive from the northeast and otherregions to enjoy the warm weather at the Resort. The Resort uses seasonalpricing (peak, shoulder and off-peak) to maximize revenues. The effects ofseasonality at our golf courses can be partially offset at daily-fee golfcourses by varying greens fees based on changes in demand.

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** **

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

Wehave not entered into any transactions using derivative financial instruments.We are subject to market risk associated with changes in interest ratesapplicable to the revolving line of credit that we obtained on March 18,2004 and amended on August 4, 2005 and the promissory note payable to ElkFunding. At August 16, 2006, the total outstanding debt subject to interestrate exposure is $4,800,000. A 25 basis point movement in the interest rate onthe floating rate debt would result in an approximate $12,000 annualizedincrease or decrease in interest expense and cash flows. We have not enteredinto any transactions using derivative commodity instruments.

Referenceis made to Note 6 to the Condensed Consolidated Financial Statements of Item 1for additional debt information.

**ITEM 4.CONTROLS AND PROCEDURES**

Wemaintain disclosure controls and procedures that are designed to ensure thatinformation required to be disclosed in our Exchange Act reports is recorded,processed, summarized and reported within the time periods specified in the SEC’srules and forms, and that such information is accumulated and communicatedto our management, including our chief executive officer and our chieffinancial officer, as appropriate, to allow timely decisions regarding requireddisclosure. Our management assesses the costs and benefits of such controls andprocedures based upon the prevailing facts and circumstances, includingmanagement’s reasonable judgment of such facts. As we neither controlled normanaged the Resort prior to July 16, 2004, our disclosure controls andprocedures with respect to the manager and the Resort were necessarily morelimited than those we maintained with respect to our own corporate operations.At the close of business on July 15, 2004, we took title to the Resort;however, despite the fact that our Management Agreement with Westin provides uswith heightened control and access to information, we do not directly assemblethe financial information for the Resort although we have taken steps that wedeem to be reasonable under the circumstances to seek to verify such financialinformation. Consequently, our disclosure controls and procedures with respectto the Resort, while strengthened as a relative matter, remain necessarily morelimited than those we maintain with respect to our own corporate operations.Since taking title to the Resort, we have focused upon integrating operationsat the Resort into our disclosure controls and procedures and internal controlprocedures. In particular, those controls and procedures have been updated toaccount for the challenges presented by the increased size and scope of ouroperations now that we own the Resort.

Theintegration of a business much larger in size and scope of operations increasesthe risk that conditions may have been introduced that we did notanticipate in our design of our systems of control. Any pre-existingdeficiencies in the predecessor owner’s financial systems, processes andrelated internal controls increase the risk that the historical unauditedfinancial statements of the Resort’s operations and cash flows which thepredecessor owner has provided to us may not be accurate. We have ofnecessity placed a certain amount reliance on the historical financialinformation and reports of the Resort’s predecessor owner for the periods priorto July 16, 2004 and continue to rely on the information provided byWestin as manager of the Resort.

As ofJune 30, 2006, we carried out an evaluation, under the supervision and with theparticipation of our management, including our chief executive officer and ourchief financial officer, of the effectiveness of the design and operation ofour disclosure controls and procedures pursuant to Exchange ActRule 13a-15. Subject to the limitations mentioned above, our chiefexecutive officer and our chief financial officer concluded that as of June 30,2006, our disclosure controls and procedures are effective in timely alertingthem to material information relating to us (including our consolidated subsidiaries)required to be included in our Exchange Act reports.

Therehas been no change in our internal control over financial reporting during ourmost recent fiscal quarter that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.

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** **

**PART II. OTHER INFORMATION**

**ITEM 1:Legal Proceedings.**

We arecurrently involved in (or affected by) the following legal proceedings:

***Young Complaints***

OnMarch 22, 2004, a lawsuit was filed (and was served on our agent forservice of process on March 25, 2004) in the U.S. District Court for theDistrict of South Carolina, Florence Division, by one of our prior directors,Larry D. Young (together with Danny L. Young, Kyle N. Young, the Young FamilyIrrevocable Trust and The Legends Group, Ltd.), against our independentauditors, BDO Seidman, LLP (together with three former BDO partners) and us(together with our executive officers).

Thecomplaint alleges that the BDO defendants engaged in professional malpractice,misrepresentation, breach of fiduciary duty and fraud by counseling plaintiffsto participate in a type of tax shelter transaction, allegedly held illegal bythe Internal Revenue Service. The complaint has seven counts, the last of whichapplies to all defendants (the first six apply only to BDO and its partners).The seventh count alleges that we conspired with BDO to convince Mr. Youngthat he would realize a large projected tax gain in order to induceMr. Young (and the other plaintiffs) to enter into the failed tax sheltertransactions. The plaintiffs are seeking damages of at least $3.7 million,together with legal expenses and other costs.

Defendants BDO Seidman,LLP (together with three former BDO partners) filed a motion to compelarbitration and dismiss the complaint, and we and our executive officers, asdefendants, filed a motion to stay, and for extension of time in which toanswer or otherwise respond to plaintiffs’ complaint. The plaintiffs’ filedmemoranda opposing the aforementioned motions. A hearing on these motions washeld in Florence, South Carolina on October 19, 2004. At the conclusion ofthat hearing, the judge indicated that the former motion would be taken underadvisement, while the GTA defendants’ motion would be granted in part anddenied in part. As a result, the court declined to stay the litigation pendingthe outcome of the arbitration, but granted the motion extending time andgiving the GTA defendants additional time to serve their answer. OnNovember 4, 2004, we filed our answer and counterclaims (ninecounterclaims against some or all of the plaintiff parties). OnJanuary 21, 2005, the magistrate judge issued a report and recommendation,recommending that the BDO defendant’s Motion to Compel Arbitration be granted,and that the claims pending against the BDO defendants be stayed pendingarbitration. On February 14, 2005, the District Judge accepted themagistrate’s report and recommendation, and granted the BDO defendants’ Motionto Compel Arbitration, staying the claims pending against the BDO defendants.The plaintiffs and the GTA defendants have since agreed upon a proposedschedule for their part of the litigation, which was jointlysubmitted to the court on March 11, 2005, and thereafter accepted andentered as an order on or about April 19, 2005. The scheduling order wasentered, and the parties conducted discovery until on or about August 2,2005 when the parties agreed to informally stay all activity in this litigationto pursue the possibility of settlement. There is as yet no settlement. Whilewe may be willing to enter into a settlement with the plaintiffs in whichthe plaintiffs dismiss their claims in exchange for our dismissal of ourcounterclaims, we intend to meet our deadlines and litigate this matter. Tothat end, before the deadline for doing so, we filed and served our motion forsummary judgment as to the plaintiffs’ claims on December 23, 2005. Theplaintiffs did not file any dispositive motion within the time permitted,either with respect to their own claims or to our counterclaims, nor did theplaintiffs timely file any written response to the motion for summary judgment.Instead they filed a motion to re-open discovery and for leave to file a lateresponse to the motion for summary judgment by the GTA defendants. OnMarch 21, 2006, at a hearing held on the plaintiffs’ motion, the courtdenied the plaintiffs’ motion to re-open discovery, with the exception thatlimited discovery was allowed until June 19, 2006 only on the question ofthe damages sought by the GTA defendants in their counterclaims against theplaintiffs. The court allowed the plaintiffs to file a late response to themotion for summary judgment, which the plaintiffs did on March 31, 2006.GTA Defendants filed a reply thereto.  OnJuly 7, 2006, the plaintiff moved for summary judgment on GTA Defendants’counterclaims, to which GT Defendants responded with a motion to strike ongrounds of gross untimeliness.  The Courtdecided not to dismiss the complain on Rule 12 grounds, but has requested thatthe December 23, 2005 motions be refiled, and has granted leave to refile, as amotion on the Rule 56 summary judgment grounds to facilitate the Court’sconsideration of the motion.  The GTADefendants filed an amended motion for summary judgment on August 10,2006.  The court has determined that thetrial date for this matter will not occur before October 1, 2006. At thistime, the Company is unable to assess the likely outcome of this litigation**.**

***BlackBear Golf Course***

Theaction entitled *Ashley Fields, L.L.C. v. Golf Trust ofAmerica, L.P. and GTA-Black Bear, LLC,* Case No. 05-CA-207, wasfiled on January 24, 2005, in the Circuit Court of the Fifth JudicialCircuit in Lake County, Florida. The plaintiff is seeking damages against usbased upon alleged breach of contract, fraudulent concealment, fraudulentinducement and 

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tortuous interference by the defendants. The plaintiffhas alleged that we have breached certain representations related to the stormwater permit issued at the property and that we have failed to pay certainaccounts payable at the property arising out of the sale of the Black Bear GolfClub to them on September 25, 2004. The plaintiff has not stated theamount of its demand for damages related to the storm water retention andconstruction deficiencies. Our counsel estimates the plaintiffs’ claims to beapproximately $250,000. Plaintiff’s claim for post-closing adjustments has notbeen stated in detail but appears to be less than $5,000. The prevailing partyin the litigation will recover attorney’s fees and costs. On February 22,2005, the defendants filed a motion to dismiss the lawsuit. A hearing wasscheduled for March 29, 2005 but prior to the hearing, the partiesresolved the issues in the motion to dismiss by stipulation that the plaintiffwould amend the exhibits to its complaint so the hearing was cancelled.Plaintiff amended its complaint in June 2005. In January 2006, wefiled a motion for partial summary judgment. On March 31, 2006, theCompany received a memorandum in opposition to the motion for partial summaryjudgment. The plaintiff objected to proceeding to summary judgment based uponthe fact that the plaintiff had not taken certain depositions. The courtordered that such depositions must be taken by the plaintiff within the next 30days. A hearing was expected to be scheduled in May 2006 on this motionfor partial summary judgment. The Company asked the Court to enter summaryjudgment on the alleged fraud and tortuous interference claims. Subsequently, asettlement, effective June 8, 2006, was reached at mediation, which provides,among other things, that the defendants pay the plaintiff $62,500.  This settlement agreement was executed andthe settlement amount paid on August 11, 2006. We are currently awaiting the filing of the joint notice of voluntarydismissal with prejudice of the Plaintiff’s amended complaint and ourcounterclaims which we expect will occur by August 31, 2006.

***Stonehenge(Country Club at Wildewood and Country Club at Woodcreek Farms)***

OnApril 22, 2002, we filed an action entitled *Golf Trustof America, L.P. and GTA Stonehenge, LLC v. Lyndell Lewis Young and StonehengeGolf Development, LLC* in the Court of Common Pleas for RichlandCounty. We had asserted causes of action against the defendant for breach of contract,fraud and unfair trade practices. We were seeking damages of approximately$172,000, which represents prepaid dues that were not disclosed by thedefendants. A counterclaim for payment under a consulting agreement, along withclaims for payment of operating/maintenance and insurance expenses was filed bythe defendant against us on June 20, 2002; our reply was filed onJuly 22, 2002 denying the claims and, alternatively, seeking a set-off orrecoupment against the defendant’s alleged claim for the amount of our claimagainst the defendant. The Court dismissed the case on May 28, 2003. OnMarch 15, 2005, we took action to restore the case. The Court of CommonPleas for Richland County has ordered the case restored to the roster.  Awritten order will be issued once it is agreed between counsel.  As ofAugust 16, 2006, the trial date has not yet been set.

***Land Use Lawsuits***

OnMarch 10, 2005 in the Circuit Court of the Sixth Judicial Circuit, in andfor Pinellas County, Florida, Civil Division, we filed a Motion to Intervene inthe lawsuit titled Innisbrook Condominium Association, Inc., C. FrankWreath, Meredith P. Sauer, and Mark Banning, as the Plaintiffs vs. PinellasCounty, Florida, Golf Host Resorts, Inc. and Innisbrook F LLC, as the Defendants,Case No. 043388CI-15. We refer to this lawsuit as the Initial Land UseLawsuit. The Plaintiffs have filed a multi-count complaint, or the Complaint,seeking injunctive and declaratory relief with respect to the land use anddevelopment rights of a tract of land known as Parcel F. Parcel F is a parcelof land located within the Resort. The Plaintiffs allege that there are noremaining development units (residential units) available to be developedwithin the Resort property. On March 29, 2005, we filed a Motion toIntervene as a defendant in the Initial Land Use Lawsuit in order to protectour property, and our land use and development rights with respect to Parcel Fand our property. A hearing on the Motion to Intervene was held onApril 4, 2005, after which the court granted our Motion to Intervene. OnApril 5, 2005, we joined in the filing of a Motion to Dismiss and Motionto Strike three of the seven counts of the Complaint. The court granted theMotion to Dismiss on April 26, 2005. On that same date, four individuals(Joseph E. Colwell, Marcia G. Colwell, Kirk E. Covert, Deborah A. Covert) andAutumn Woods Homeowner’s Association, Inc. moved to intervene in theInitial Land Use Lawsuit. The court has not ruled on that motion. OnApril 8, 2005, a separate suit, or the Subsequent Land Use Lawsuit, wasfiled by James M. and Mary H. Luckey and Andrew J. and Aphrodite B. McAdams.That suit seeks injunctive and declaratory relief in six separate counts, allrelating to the land use and development rights of Parcel F. This suit wasconsolidated with the Initial Land Use Lawsuit on May 3, 2005. AfterMay 6, 2005 we filed a Motion to Dismiss the Subsequent Land Use Lawsuit.The motion was heard by the court on May 31, 2005. Since that hearing, wehave filed our Answer and Affirmative Defenses to both complaints that havebeen filed in the consolidated action. On August 3, 2005, a casemanagement conference was held before the judge who is now presiding over thiscase. At that hearing, the court scheduled a hearing on the defense motions forsummary judgment for August 30, 2005, and a trial startingDecember 12, 2005. On August 30, 2005, the judge heard extensiveargument on the defense motions for summary judgment and entered a number ofrulings in the defendants’ favor. In summary, the court dismissed those claimsin the Initial Land Use Lawsuit and the Subsequent Land Use Lawsuit which arefounded upon the theory that the proposed development is inconsistent with the 

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Pinellas Countywide Plan and Rules adoptedpursuant to Chapter 73-594, Laws of Florida. The court further dismissed forlack of jurisdiction those claims of the plaintiffs in the Subsequent Land UseLawsuit that are based on the theory that the proposed development isinconsistent with the Pinellas Comprehensive Plan. The court entered a similarruling on Counts I, II, VIII-XV of the Third Amended Complaint as to some(but not all) of the Plaintiffs in the Initial Land Use Lawsuit.

Thedefendants in the Initial Land Use Lawsuit also filed a Motion to Strike thePlaintiffs’ Demand for Jury Trial. In the face of that motion, the Plaintiffsdropped their jury trial demand and the court confirmed by order datedSeptember 21, 2005 that this case will not be tried by a jury. The courtthen entered an order scheduling the remaining claims for non-jury trial duringDecember 2005.

Inaddition, the Plaintiffs in the Initial Land Use Lawsuit have filed a motionfor summary judgment. The court set the hearing date for the summary judgmentreview for December 7, 2005. From December 19 throughDecember 23, 2005, the court tried these consolidated cases in a non-jurytrial. At the conclusion of the evidentiary portion of the trial, the courtdeferred final argument until Friday, January 6, 2006. On that date, finalargument took place before the court at the conclusion of which the courtrendered its decision. The court ruled in favor of all defendants and againstall plaintiffs as to each count in both cases. Subsequent to the court’s oralrulings, defense counsel prepared a proposed final judgment which reflects thecourt’s factual findings and legal conclusions. On March 8, 2006, thecourt formally entered its final judgment on the record ruling in favor of thedefendants on all counts and denying all claims asserted by the plaintiffs inboth cases. On March 31, 2006, the Plaintiffs in the consolidated casesfiled a notice of appeal.  There havebeen no material actions taken on this case since that date.

As anintervenor in the Initial Land Use Lawsuit, we will seek to obtain a rulingfrom the court which preserves and protects our property, the land use anddevelopment rights with respect to Parcel F and our property in order tomaximize the value of those rights as they relate both to Parcel F and theResort in general. We refer to these two matters as the Land Use Lawsuits. Seefurther discussion of the Land Use Lawsuits under the heading “Risk Factors” inPart I, Item 1A of this report.

In theevent that the defendants in the Land Use Lawsuits do not prevail in the appeal,the owner of Parcel F may lose all or substantially all of its land useand development rights with respect to Parcel F. As a result, wemay experience reduced club memberships at the Resort, and our ability torealize the benefits from proposed development of Parcel F would be adverselyimpacted. In addition, failure by the defendants to prevail in the Land UseLawsuits could jeopardize our land use and development rights in the remainingunits that we may have the opportunity to develop at the Resort if a courtsubsequently applied a similar interpretation of our rights with respect tothose units. In that instance, we might lose all or substantially all of thoserights with respect to the remaining units. As a result of a successfulchallenge to our land use and development rights relating to the remainingunits at the Resort, our ability to develop the Resort would be adverselyaffected.

***Property Tax Lawsuit***

OnDecember 10, 2004, our indirect subsidiary, GTA-IB, LLC filed a lawsuitagainst the property appraiser of Pinellas County Florida, or Pinellas County,to challenge the 2004 real estate assessment on the Resort property. PinellasCounty filed a motion to dismiss, which was denied by the court. No trial datehas been set. If Pinellas County were to prevail, there would be no materialadverse effect upon our financial statements, as the assessment is fullyaccrued and accounted for in our books and records.

***Lake Ozark Industries, Inc. and Everett HoldingCompany, Inc. v. Golf Trust of America, et al.***

Thisis an action initiated in the Circuit Court of Miller County, Missouri, by acontractor, Lake Ozark Construction Industries, Inc., or LOCI, and itsasserted assignee of lien and account rights, Everett HoldingCompany, Inc., in the Fall of 1999 against numerous defendants, includingGolf Trust of America, L.P. Plaintiffs assert LOCI performed constructionservices on, or that benefited, the property of various defendants, includingGolf Trust of America, L.P. So far as the action concerns Golf Trust ofAmerica, L.P., plaintiffs seek to foreclose a mechanic’s lien upon propertyformerly owned by Golf Trust of America, L.P. The lien is for the principalamount of approximately $1,276,000, plus interest at 10% per annum and attorneyfees. Plaintiffs calculate interest to May 20, 1999, just prior to thelien filing, to be approximately $151,000 and interest thereafter to be $354per day. In March 2002 the Court orally granted a motion for summaryjudgment filed by Golf Trust of America, L.P., ruling that plaintiffs’ claimedlien does not comply with requirements of the Missouri mechanic’s lien statuteand is invalid. The court entered its written order granting Golf Trust ofAmerica, L.P.’s motion for summary judgment in April 2002. Since not allclaims involved in this lawsuit were disposed of by that ruling, Plaintiffs’time to appeal this ruling did not begin to run. In November 2003 thecourt entered a final judgment, and plaintiffs appealed the ruling in favor ofGolf Trust of America, L.P. to the Missouri Court of Appeals. The briefs in theappeal were filed and the case was argued to the court of appeals onOctober 19, 2004. On November 9, 2004, we filed with the Court ofAppeals a

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Motion to File Supplemental Brief, along with a copyof a Supplemental Brief. Following briefing and oral argument, the Court ofAppeals on April 5, 2005 reversed the Circuit Court judgment in favor ofus and remanded the case to the Circuit Court for further proceedings. OnApril 20, 2005, we filed with the Court of Appeals a motion for rehearingand an alternative application to transfer the case to the Missouri SupremeCourt. The Court of Appeals denied this motion and the transfer application onMay 31, 2005. On May 31, 2005, the Court of Appeals also filedmodified Opinion, which again reversed the Circuit Court judgment in favor ofus and remanded the case to the Circuit Court for further proceedings. OnJune 15, 2005, we filed with the Missouri Supreme Court an application totransfer the case to that court. On August 30, 2005, the Missouri SupremeCourt denied the application for transfer. The case was returned to the CircuitCourt for trial on plaintiffs’ claim that LOCI performed construction serviceson, or that benefited, the property of various defendants, including us. Thetrial date has not yet been set. At this time, we are unable to assess thelikely outcome of this litigation.

***Agreement for Marketing and Joint Sale of Tierra DelSol***

On September 20, 2000, Terence Mulvihill, aprincipal in the lessee and in the entity which previously owned the Tierra DelSol Country Club, attempted to terminate our water rights lease agreement atthe Tierra Del Sol Country Club. The termination was allegedly based upon(a) the existence of an unauthorized assignment, which Mr. Mulvihillclaimed was the result of allowing GTA Tierra Del Sol, LLC to operate the golfcourse; (b) use of the water on the golf course in a manner which wascontrary to the purposes authorized under the water rights lease agreement;(c) use of the water in amounts in excess of the amounts permitted underthe terms of the water rights lease agreement; and (d) non-payment of 1999taxes under the water rights lease agreement. We responded in writing toMr. Mulvihill disputing the termination of the water rights leaseagreement. We also filed a complaint on January 15, 2002 in the ThirteenthJudicial District Court, County of Valencia, State of New Mexico, against theMulvihill Estate (Mr. Mulvihill died in December 2000) and GolfClassic Resorts, LLC. Our complaint sought various forms of relief in relationto the water rights lease agreement and the underlying purchase of Tierra DelSol, including, but not limited to, requesting a determination that:(1) the water rights lease agreement has not been terminated and remainsin effect; (2) the lease, in essence, constitutes a transfer of a feeinterest in the water rights; or (3) alternatively requesting a rescissionof the 1998 contribution and leaseback agreement pursuant to which the waterrights were assigned to Mr. Mulvihill, based upon the fraud andmisrepresentation of the seller and Mr. Mulvihill. On February 21,2003, we entered into an agreement for marketing and joint sale of the propertywith Mary Louise Mulvihill Skalkos, the executor of the Mulvihill Estate andGolf Classic Resorts, LLC. In that agreement, the parties agreed jointly tomarket the assets at the Tierra Del Sol Golf & Country Club in Belen,New Mexico, which assets include a 9-hole executive golf course, water rights,and tennis courts, in addition to the country club. Our agreement for themarketing and joint sale of the property will expire on September 21,2006. Since we closed on the sale of Tierra Del Sol on May 8, 2006, weapplied the terms of this agreement to this transaction. On July 31, 2006, thebuyer of the Tierra Del Sol Country Club paid the Company’s $1.063 million notereceivable taken in connection with the sale. In connection with the collection of this note, on August 2, 2006, theCompany paid from these proceeds its final obligation under the Joint MarketingAgreement for the Sale of Tierra Del Sol of approximately $183,000.

**Routine Litigation**

Inaddition to litigation between a lessor (such as our operating partnership) andour former lessees (and their affiliates), owners and operators of golf coursesare subject to a variety of legal proceedings arising in the ordinary course ofoperating a golf course, including proceedings relating to personal injury andproperty damage. We have in the past been, and expect to continue in the futureto be, subject to proceedings relating to personal injury and property damage.Such proceedings are generally brought against the operator of a golf course,but may also be brought against the owner of the golf course. Since we arenow either the operator or owner of our remaining golf courses, we maintaininsurance to defend against certain of these actions

**ITEM 1A.RISK FACTORS**

**Risks that might Delay orReduce 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 August 16, 2006; however,we can provide no assurance that these estimates reflect the actual current marketvalue for the applicable courses. As a result of our inability to provide anyassurance regarding the estimates of the fair value of our assets, includingthe probability of negotiating and closing a sale of the Resort, at the presenttime, we do not believe 

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that we are able to reliably project the amount of thetotal liquidating distributions we will make to the holders of our common stockover the remainder of the liquidation period and the amounts may besignificantly less than our earlier projections. Further, while we haveprovided in this report estimated adjustments to net assets in liquidationbased upon the sale of the Resort and our interest in Parcel F for aggregateconsideration of approximately $36.4 million, there can be no assurances thatwe will be able to close a sale of the Resort for a price that will allow us torealize the estimated proceeds for the Resort, if at all. Further, in the eventthat we are unsuccessful in negotiating the terms of an amendment of anexisting agreement or a new agreement which will allow us to repurchase all ofAEW’s series A preferred stock for a price of $20,000,000 or less, or if wenegotiate such an agreement and are unable to repurchase AEW’s preferred stockfor any reason, the assets available for distribution to the holders of ourcommon stock, and the ultimate liquidating distributions to the holders of ourcommon stock, will be reduced by the amount of any accrued dividends throughthe date that we redeem AEW’s shares. Even if we are able to successfulnegotiate an agreement with AEW which would allow us to repurchase AEW’spreferred stock at a price that excludes dividends on the preferred stock, wemay either be unable to sell the Resort at a time or under conditions which donot permit us to exercise our option.  Asa result of these factors, the estimated adjustments to net assets inliquidation provided in this report may prove incorrect and the amounts,if any, that we ultimately distribute as liquidating distributions may besignificantly less than estimated.

***In the event that our Management Agreement with Westin is terminated,in addition to our obligation to pay termination fees to Westin, we will berequired to find a third party to manage the Resort or manage the Resortourselves.***

While wecontinue to contest Westin’s allegations that we have defaulted on ourobligations under the Management Agreement, Westin’s delivery to us of WestinNotices increases the likelihood that Westin may terminate the ManagementAgreement in the near term in accordance with its terms.  The ManagementAgreement provides that we shall pay to Westin, subject to the terms of theManagement Agreement termination fee of at least $5,500,000. The ManagementAgreement provides that the maximum termination shall be reduced by $365 perday for each day elapsed from the effective date of the Management Agreementuntil the termination date.  As of August16, 2006, the termination fee would be approximately $5,622,000.  Seedisclosure of this obligation as accrued at June 30, 2006 in note 9 to ourcondensed consolidated financial statements contained in Part 1, Item 1 of thisQuarterly Report.  While we have notreceived a notice of termination of the Management Agreement from Westin andare seeking to negotiate a successful resolution of our respective claims, ourrelationship with Westin may be terminated in the near term.

Inaddition to any termination fees and deferred management fees which we may berequired to pay to Westin pursuant to the Management Agreement, we may beforced to either find a new manager for the Resort or manage the Resortourselves.  Further, it is possible that Westin will terminate theManagement Agreement on five days notice, in which case we will need to makeimmediate provision for the management of the Resort. Whether we managethe Resort or hire a third party to manage it, there is a substantiallikelihood that the new manager will experience a learning curve related tomanaging the daily operations at the Resort.   We cannot guaranteethat a new manager will be as successful in managing the Resort as Westin hasbeen.   In addition, a third party manager may fail perform, ordefault on its obligations to us.  In the event that any new manager ofthe Resort proves less successful than Westin or defaults in its obligations tous, our results of operations and financial condition could be adverselyaffected.

***If we are not able to sell the Resort and our otherremaining golf property in a timely manner, obtain liquidity with respect tocertain other non-real estate assets such as our note receivable, or obtainsome form of additional financing, we may experience severe liquidityproblems, not be able to meet the demands of our creditors, and ultimatelybecome subject to bankruptcy proceedings.***

In theevent that we are unable to sell the Resort and our other remaining golfproperty as planned, obtain liquidity with respect to certain other non-realestates assets such as our note receivable, or obtain some form ofadditional financing, we may be unable to pay our obligations as theybecome due or upon demand. In addition, our ability to pay our obligationsmay be compromised if our chief executive officer requires payment ofoutstanding performance milestone payments owed by us to him before we are ableto realize net cash proceeds from asset sales sufficient to discharge thoseobligations. As of August 16, 2006, we owed our two most senior executiveofficers a total of approximately $1,794,000 in milestone payments and accruedinterest on such milestone payments. We also owe a substantial sum in legalfees, including fees incurred in connection with the negotiation of agreementsproviding for the sale of the Resort.

Further,given that the Resort’s only source of cash is from any profitable operationsof the 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 2005 and 

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November 2005, respectively. While the financialperformance of the Resort has shown signs of recovery since the Company assumedtitle to the Resort on July 15, 2004, current projections provided by Westinindicate that an operational cash flow shortfall of approximately $750,000 inthe aggregate is likely to occur at some point in the fourth quarter of 2006.   Further, the Resort’s credit capacity islimited. There are no assurances that additional intercompany advances will notbe necessary prior to the consummation of a sale of the Resort. In the eventthat we must advance additional capital to fund operations at the Resort or ourother operations, we may be required to seek financing or raise furthercapital in order to meet our obligations when they come due. Further, wemay also be required to use proceeds from the sale of our other assets tofund our operations and the operations of the Resort. There is no assurancethat we will be able to obtain liquidity with respect to certain other non-realestate assets, obtain additional financing, raise further capital or that wewill have sufficient proceeds from assets sales from which to draw, or that anyfunding that we receive will not contain restrictive covenants or other onerousterms. Additionally, we expect that the cash flow that we receive on theinterest income from our note receivable and the net operating income of theStonehenge golf courses, if any, will not be substantial

While we continue to contest Westin’s allegations thatwe have defaulted in our obligations under the Management Agreement, Westin’sdelivery to us of Westin Notices increases the likelihood that Westin mayterminate the Management Agreement in the near term in accordance with itsterms.  While we have not received a notice of termination of theManagement Agreement from Westin and are seeking to negotiate a successfulresolution of our respective claims, our relationship with Westin may beterminated in the near term either as a result action by Westin or us.  Inthat event, we may be required to pay to Westin a termination fee of at least$5,500,000 along with any deferred management fees. As of August 16, 2006, thetermination fee that would be due would be approximately $5,622,000.We do nothave sufficient funding available to make these payments absent a concurrentsale of the Resort, so if these payments become due prior to the sale of theResort, we would be forced to seek third party funding or to otherwise gainliquidity.

In theevent we are not able to sell our remaining assets within a reasonable periodof time and for reasonable amounts, obtain liquidity with respect to certainother non-real estate assets, or obtain additional financing, or if ourexpenses exceed our estimates, we may experience severe liquidity problemsand not be able to meet our financial obligations of our creditors. If wecannot meet our obligations to our creditors, we could ultimately becomesubject to bankruptcy proceedings.

***Our estimate of the Resort’s fair value, as recordedon our books for accounting purposes, is based on forward-looking estimateswhich are subject to change. We might sell the Resort for an amount less thanour current estimate of its fair value, which could significantly reduce ourliquidating distributions to holders of our common stock.***

We donot 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:

·       improvement in thefinancial performance of the Resort that we have observed since we took titlein July 2004 may not continue;

·       despite our execution of anew Management Agreement with Westin at the Resort providing for increasedcontrol by us over accounting and marketing and improved provisions governingWestin’s reporting to us, we do not directly manage the Resort;

·       our Settlement Agreementwith our former borrower and related agreements that we entered with Westinmay prove less successful than anticipated, and the performance of theparties to the Settlement Agreement may fall short of our expectations;

·       historical uncertaintysurrounding the future of the Resort and the level of Westin’s involvement uponthe prospective sale of the Resort may create uncertainty for corporatemeeting planners contracting for large corporate groups, and any suchuncertainty may be used as a competitive advantage by our competitors whenmarketing their hotels against the Resort; and

·       uncertainty about ourability to close the transactions contemplated in any asset purchase agreementwe may execute.

As aresult of the foregoing, at the present time we will refrain from either makingany 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. 

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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.

***We are currently negotiating with AEW,  the holder of all of our series A preferredstock, the terms of an amendment of an existing agreement or a new agreementwhich will allow us to repurchase all of AEW’s series A preferred stock for aprice of $20,000,000 or less. As a result of our assumption that thesenegotiations will lead to an executed agreement, we have not recorded in ournet assets a liability for the accrual of preferred dividends payable for thequarter beginning July 1, 2001 or for subsequent quarters. We can provide no assurance, however, that a finalagreement will be executed with AEW. Further, even if we successfully execute such an agreement with AEW, wemay be unable to negotiate a financing arrangement through our existing lenderrelationships or otherwise procure sufficient funding to permit us to exercisethat repurchase right and close the repurchase prior to its expiration. In the event that either we are unable to reach an agreement with AEW, or we areunable to exercise any repurchase right and close the repurchase under anyagreement we may reach with AEW, we may be required to pay AEW all or a portionof the preferred dividends for which we have not recorded a liability, reducingour liquidating distributions to holders of our common stock.***

On April 12, 2006, we executed an Option Agreementwith AEW, the holder of all of our series A preferred stock, in which AEWgranted us an option to purchase, on or before June 30, 2006, the 800,000shares of our series A preferred stock held by AEW, including, withoutlimitation, all of AEW’s rights to due and unpaid principal, accrued and unpaiddividends and liquidation preferences. The exercise price of this option wasapproximately $20 million, and excluded dividends that would accrue to theseries A preferred stock pursuant to existing contractual obligations. Aspreviously reported, this option expired by its terms on June 30, 2006.

We are currently negotiating with AEW the terms of anamendment of an existing agreement or a new agreement which will allow us torepurchase all of AEW’s series A preferred stock plus accrued dividends for aprice of $20 million or less.  Weanticipate that the terms of any agreement that we may enter with AEW wouldinclude, among other terms and conditions, a provision that all or a portion ofour obligations to AEW are secured by the Resort, which we believe provides AEWwith more favorable remedies against us than AEW currently possesses.

As aresult of our assumption that these negotiations will lead to an executedagreement, we have not recorded in our net assets for the quarter ended June30, 2006 either (i) a liability of $11,164,000 for the accrual of quarterlypreferred dividends for the period July 1, 2001 to June 30, 2006 or (ii)additional dividend accruals of $625,000 for each subsequent quarter throughthe date that the exit transaction is ultimately consummated and liquidationpayments are made to AEW.   Absent either an agreement by a thirdparty to assume all or a portion of our accrued preferred dividend obligationor an agreement by AEW to forgive all or a portion of our preferred dividendobligations, (neither of which have occurred), we will be required toaccrue, and ultimately pay in liquidating distributions to AEW, these preferreddividends.  Any preferred dividends whichwe are required to pay to AEW ultimately would reduce the net assets availableto stockholders in liquidation and correspondingly the estimated liquidationdistribution per common share.  As ofJune 30, 2006, if we were required to pay AEW accrued dividends through thatdate, our liquidating distributions would be reduced by $1.52 per common shareor OP unit of the Operating Partnership outstanding on that date.

       Atthe present time, we have not executed a binding agreement with AEW.  There are no assurances that we willsuccessfully execute such an agreement with AEW, or that the terms of anyagreement that we may execute with AEW will not be more onerous to us than wecurrently anticipate.  Further, even if we are able to execute anagreement with AEW which permits us to repurchase the series A preferred stockat $20 million or less, we may be unable to negotiate a financing arrangementthrough our existing lender relationships or otherwise procure sufficientfunding to permit us to exercise that repurchase right and close the repurchaseprior to its expiration.  In the event that we execute an agreement withAEW and we are unable to repurchase AEW’s series A preferred stock in accordancewith the terms of that agreement, in addition to the requirement that we payaccrued dividends to AEW, we expect that agreement also would subject us topenalties or grant AEW additional rights with respect to us and our remainingassets which will be prejudicial to us and our assets.

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***We cannotguarantee that we will be able to enter into a binding agreement for the saleor other disposition of the Resort.***

Inconnection with our efforts to sell the Resort, we intend to negotiate andexecute a binding asset purchase agreement. 

Thereafter, any closing pursuant to an executed assetpurchase agreement will be conditioned upon, among other things, considerationand approval of the transaction by the Special Committee of our Board and thereceipt of a satisfactory fairness opinion. We cannot assure you that we willenter into an asset purchase agreement for the Resort or, if we do so, that allconditions to closing will be satisfied and the Resort will be sold. Further,the price that we receive if we sell the Resort might be less than the thenapplicable carrying value of the Resort on our financial statements.Significant legal and other costs and expenses will be incurred in connectionwith the negotiation of any sale of the Resort, and these costs and expenseswill further reduce the liquidating distributions that we make to the holdersof our common stock.

***We took ownership of the Resort on July 16, 2004pursuant to a global Settlement Agreement providing for the assumption ofcertain existing or modified financial obligations of our former borrower. Weare now responsible for any negative cash flow of the Resort. If the amount ofassumed liabilities and expenditures with respect to the Resort exceed ourexpectations, our liquidating distributions to common stockholders could bereduced.***

OnJuly 15, 2004, we entered a Settlement Agreement relating to ourJune 1997 $79.0 million loan to our former borrower. This loan wassecured by a mortgage on the Resort. As part of the Settlement Agreement,we assumed certain financial obligations of the borrower, such as refurbishmentexpenses paid 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. We expect that additional intercompany advances totalingapproximately $750,000 in the aggregate will be necessary at some point in thefourth quarter of 2006 to fund projected operating cash shortfalls.

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, or the future success of the Resort.

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

Extraordinarycorporate actions, such as our plan of liquidation, often lead to securitiesclass action lawsuits and derivative litigation being filed againstcompanies such as ours. We became involved in this type of litigation inconnection with our plan of liquidation (and the transactions associated withit) in a legal action we refer to as the *Crossley*litigation. During the second quarter of 2003, the *Crossley*claim was dismissed with prejudice on our motion for summary judgment.Accordingly, the lawsuit was dismissed and the plaintiff will not be allowed torefile the claim, although the plaintiff could appeal the dismissal. Wesubsequently entered into a non-monetary settlement with the plaintiff wherebythe plaintiff agreed not to appeal the dismissal and we agreed not to seekreimbursement of our legal costs from the plaintiff. Even though the *Crossley* litigation has been dismissed, we face the riskthat other claims might be brought against us. Any such litigation would likelybe expensive and, even if we ultimately prevail, the process would divertmanagement’s attention from implementing the plan of liquidation and otherwiseoperating our business. If we do not prevail in any such litigation, we mightbe liable for damages. It is not possible to predict the amount of suchpotential damages, if any, but they might be significant. Any damage liabilitywould reduce our cash available for distribution and the ultimate amount of ourliquidating distributions to holders of our common stock.

***If we are unable to retain at least one of our keyexecutives and sufficient staff members to complete the plan of liquidation ina reasonably expeditious manner, our liquidating distributions might be delayedor reduced.***

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 andMr. Peters are currently serving us on a reduced schedule basis. Webelieve our liquidation has progressed to the point that the resignation ofone, but not both, of our executives would not likely cause significant adverseconsequences. However, a loss of the services of both of these individuals couldmaterially harm our ability to complete the plan of liquidation in a reasonablyexpeditious manner and our prospects of selling our assets at the bestpotential prices. 

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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 of liquidationin a reasonably expeditious manner, liquidating distributions might be delayedor reduced.

***If we are unable to consummate a sale of the Resort orour other remaining golf courses at our revised estimates of their respectivevalues, our liquidating distributions might be delayed or reduced.***

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 carrying value,  in order to find a buyer in a reasonablyexpeditious manner, we might be required to lower our asking price for theResort and our other remaining property below our estimate of their fair value.If we are not able to find new buyers for these assets in a reasonablyexpeditious manner, or if we have overestimated the sales prices we willultimately receive, our liquidating distributions to the holders of our commonstock will be significantly delayed or reduced.

At thepresent time, we do not believe we are able to reliably project the amount ofthe total liquidating distributions we will make to the holders of our commonstock over the remainder of the liquidation period. Accordingly, you should notrely on the valuations or ranges earlier provided as representative of ourcurrent views on the subject.

***If we are unable to realize the value of a promissorynote taken as part of any purchase price, our liquidating distributionsmight be reduced.***

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.

***Decreases in golf course values caused by economicrecession and/or additional terrorist activity might reduce the amount forwhich we can sell our assets.***

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:

·       adverse changes in theeconomy, prolonged recession and/or additional terrorist activity against theUnited States or our allies, or other war-time activities might increase publicpessimism and decrease travel and leisure spending, thereby reducing golfcourse operators’ revenues (particularly destination-resort golf courserevenues) and diminishing the resale value of the affected golf courses;

·       increased competition,including, without limitation, increasing numbers of golf courses being offeredfor sale in our markets or nationwide;

·       continuing imbalance insupply and demand in the golf course industry; and

·       changes in real estate taxrates 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.

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***If our liquidation costs or unpaid liabilities aregreater than we expect, our liquidating distributions might be delayed orreduced, potentially in a substantial manner.***

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 boardmay also decide to acquire one or more additional insurance policiescovering unknown or contingent claims against us, including, withoutlimitation, additional directors’ and officers’ liability insurance, for whichwe would pay an additional premium based upon market prices prevailing at thetime of any such purchase. In addition, if we form a liquidating trust, wemay have additional expenses for items such as insurance for the trustees.We have estimated such transaction costs in calculating the amount of ourprojected liquidating distributions. To the extent that we have underestimatedcosts and expenses in calculating our historical projections, our actualaggregate liquidating distributions will be lower than we have historicallyprojected, and perhaps by substantial amounts.

***The holder of our series A preferred stock mightexercise its right to appoint two directors to our board of directors, whichmight result in decisions that prejudice the economic interests of our commonstockholders in favor of our preferred stockholders.***

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 ourseries A preferred stock by May 22, 2003, the holder of the preferredstock would be entitled to require us to redeem the preferred stock. Wereceived such a demand from the holder of our preferred stock on May 23,2003; however, we do not have cash available to redeem the holder of ourpreferred stock. Our default in making a timely redemption payment gives theholder of our preferred stock the right under the voting agreement to appointtwo new directors to our board. Our charter also gives the holder of our preferredstock the right to elect two new directors if and when dividends on itsseries A preferred stock are in arrears for more than six quarters.Currently, dividends on the series A preferred stock are twenty quartersin arrears. These director election rights are not cumulative, which means thatthe holder of our preferred stock may elect two, but not four, newdirectors. The current holder of our preferred stock, AEW, informed uspreviously that it does not currently intend to exercise its director electionrights. However, it might decide to exercise such right at any time in thefuture. The appointment of such directors to our board might reduce theefficiency of our board’s decision-making or result in decisions that prejudicethe economic interests of the holders of our common stock in favor of theholder of our preferred stock.

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

As wecontemplate the sale of our remaining assets and the wind-up of our company, asexpressly 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 liquidatingtrust unless and until our preferred stock has been redeemed in full or untilsuch time 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.

If wedo not distribute our assets to a liquidating trust and, instead, continue tooperate 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 

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year before consideration of net operating losscarryovers, we could be subject to alternative minimum tax. Generally, for taxyears ending after December 31, 2002, the use of net operating losscarryovers to reduce alternative minimum taxable income is limited to 90% ofalternative minimum taxable income. Therefore, tax at a rate of 20% could beimposed on our alternative minimum taxable income that cannot be reduced by netoperating loss carryovers. If a liquidating trust is formed, our net operatingloss carryovers will not be available to reduce any gains recognized within thetrust. However, the trust will have a tax basis equal to the fair market valueof its assets at the date the liquidating trust is formed. Any gain recognizedby the trust would thus be the result of either appreciation in the value ofthe assets during the time that they are owned by the trust, or an initialunderestimation of the fair market value of the assets at the time the trust isformed.

***Our stock may be de-listed from American StockExchange, which would make it more difficult for investors to sell theirshares.***

Currently,our common stock trades on the American Stock Exchange, or Amex. We cannotassure you 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-list fromthe 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.

***We and our subsidiary, GTA-IB LLC, expect to incursignificant compliance costs relating to the Exchange Act and Sarbanes-OxleyAct.***

We andour 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 requirements applicableto public companies, including the Sarbanes-Oxley Act and new SEC regulationshave increased the costs of corporate governance, reporting and disclosurepractices which are now required of us and of GTA-IB. We were formed prior tothe enactment of these new corporate governance standards, and as a result, wedid not have all necessary procedures and policies in place at the time oftheir enactment. Our efforts to comply with applicable laws and regulations,including requirements of the Exchange Act and the Sarbanes-Oxley Act, areexpected to involve significant, and potentially increasing, costs. Costsincurred in complying with these regulations may reduce the amount of cashavailable 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.

**Risks Relating to theResort**

***In the event that the Resort does not providesufficient cash flow to us, we may be forced to reduce capitalexpenditures and improvements at the Resort, diminishing the value of theResort.***

As theowner of the Resort, we are responsible for any negative cash flow associatedwith its operation. As a result of our assumption of these liabilities and ourresponsibility for any negative cash flow of the Resort, we may be exposedto liabilities and expenditures exceeding our expectations or ability to pay.In the event cash flow is insufficient to fund planned improvements, ourability to rent the units in the Rental Pool may decline. A decline in therental rates that can be charged for the units or related vacancies resultingfrom our inability to make necessary capital expenditures may cause thevalue of the Rental Pool units, and the Resort, to decline.

***The Resort’s performance may not provide adequateresources to fund the refurbishment reimbursement to the Rental Poolparticipants.***

Pursuantto GHR’s arrangement with many of the persons who own condominium units at theResort, the condominiums owned by these participating persons are placed in asecuritized pool and rented as hotel rooms to guests of the Resort. We refer tothis securitized pool of participating condominiums as the Rental Pool. Inaddition to the current Rental Pool agreement, GHR agreed with the Associationthat GHR would reimburse 50% of the refurbishment costs, plus accrued 

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interest at 5% per annum on the unpaid balance of thatportion of the unpaid refurbishment costs which we are required to reimburse.This amount will be reimbursed to participating condominium owners (ortransferees of their condominium unit(s)) over the five-year period beginningin 2005. The reimbursement is contingent on the units remaining in the RentalPool from the time of their refurbishment through 2009. If the unit does notremain in the Rental Pool during the reimbursement period from 2005 through2009, the owner or successor owner forfeits any unpaid installments at the timethe unit is removed from the Rental Pool.

Accordingly,maintaining condominium owner participation in the Rental Pool is veryimportant to the continued economic success of the Resort. We assumed certainexisting or modified financial obligations of GHR, including itsresponsibilities regarding the administration of the condominium unit RentalPool, when we took ownership of the Resort pursuant to the SettlementAgreement. Also as part of the Settlement Agreement, we assumed GHR’sobligation to reimburse the refurbishment expenses paid by the condominiumowners.

Asowner of the Resort, we are responsible for any negative cash flow associatedwith the ownership and operation of the Resort. As a result of the assumptionof these liabilities and our responsibility for any negative cash flow, we facethe risk that our ultimate liabilities and expenditures might be greater thanwe expected. In that case, we may not have sufficient cash available forthe payment of the refurbishment expenses relating to the Rental Pool units, orwe may otherwise decide not to use our funds in this manner. If thisoccurs, a disagreement involving the funding for the Rental Poolmay arise, and this disagreement could both divert our management’sattention from the operation of the Resort and prove costly to the parties toany such dispute.

***The number of Rental Pool units may decline ifcurrent owners find alternative uses of the units more attractive thanparticipating in the Rental Pool, reducing the number of available Rental Poolunits and diminishing the value of the remaining units.***

Participantsin the Rental Pool may decide that alternative uses of their condominiumunits are more attractive than participating in the Rental Pool. In particular,condominium owners may determine that it is more financially advantageousto rent their units to longer term tenants, or to live in their units ratherthan paying to live elsewhere and allowing their units to participate in theRental Pool. Any such reduction in the number of participants in the RentalPool may result in increased pro-rata costs and reduced revenues for theremaining Rental Pool participants. In particular, a decrease in the number ofparticipants in the Rental Pool will result in higher per capita costs relatingto fixed costs that are incurred in connection with the administration of theRental Pool. In the event that the number of units in the Rental Pool declinesbelow 575, our obligation to reimburse refurbishment expenses for the unitswill be abated until the number of units in the Rental Pool is restored to 575or higher. As of August 16, 2006, the number of units participating in theRental Pool is 612.

***Severe weather patterns experienced by Florida during2004 and the southeastern portion of the United States during 2005 could resultin depressed bookings, adversely affecting the Resort’s results of operationsand reducing proceeds to the participants in the Rental Pool.***

Weexpect that bookings at the Resort during the late summer and early fall offuture years may be adversely affected as a result of a series ofhurricanes that affected Florida during 2004 and the southeastern portion ofthe United States during 2005. Our management detected such an adverse effectin 2005. In particular, the hurricanes that occurred during 2005 may haveincreased the awareness of potential guests, particularly those not residing inthe southeastern portion of the United States, to the danger that hurricanesand tropical storms present. We expect that potential guests may be morereluctant to book rooms in regions subject to such weather patterns. Inparticular, it is possible that groups will choose alternative destinations fortravel during the hurricane season. In the event that potential guests andgroups choose alternative destinations as a result of these weather-relatedconcerns, the Resort may experience lower bookings and reduced revenues,which in turn will result in reduced distributions to the Rental Poolparticipants.

***Recent severeweather patterns could further intensify the seasonal nature of the results ofthe Resort.***

Thehotel industry is cyclical in nature. Our business has historically been weakerduring the third quarter of each year. In the event that we suffer from reducedbookings during the third quarter as a result of hurricane-related concerns ofpotential guests, this effect could reduce the revenues to the Resort in thethird quarter of each year, increasing the disparity between our results in thethird quarter as compared to other quarters. This increased cyclicality couldmake it more difficult for us to project the results of the Resort, andmay result in a lower than expected percentage of the Resort’s fixed costsbeing offset by revenue during the third quarter.

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*** ***

***We are subject to all the operating risks common to thehotel industry which could adversely affect our results of operations.***

Operatingrisks common to the Resort include:

·       changes in general economicconditions, including the timing and robustness of the apparent recovery in theUnited States from the recent economic downturn and the prospects for improvedperformance in other parts of the world;

·       the impact of war andterrorist activity (including threatened terrorist activity) and heightenedtravel security measures instituted in response thereto;

·       domestic and internationalpolitical and geopolitical conditions;

·       decreases in the demand fortransient rooms and related lodging services, including a reduction in businesstravel as a result of general economic conditions;

·       the impact of internetintermediaries on pricing and our increasing reliance on technology;

·       cyclical over-building inthe hotel industry which increases the supply of hotel rooms;

·       changes in travel patterns;

·       changes in operating costs,including, but not limited to, energy, labor costs (including the impact ofunionization), workers’ compensation and health-care related costs, insuranceand unanticipated costs such as acts of nature and their consequences;

·       disputes with the managersof the Resort which may result in litigation;

·       the availability of capitalto allow us to fund renovations and investments at the Resort; and

·       the financial condition ofthe airline industry and the impact on air travel.

***General economic downturns, or an increase in labor orinsurance costs, may negatively impact our results.***

Moderateor severe economic downturns or adverse conditions may negatively affectthe operations of the Resort. These conditions may be widespread orisolated to one or more geographic regions. A tightening of the labor markets inFlorida may result in fewer and/or less qualified applicants for jobopenings at the Resort. Higher wages, related labor costs and the increasingcost trends in the insurance markets may negatively impact our results asthese costs increase. A general economic downturn, or increase in expenditureson insurance and labor costs, would adversely impact the operations of theResort, potentially reducing funding that we provide to the Rental Pool andnegatively impacting our results.

***If we are unableto successfully compete for customers, it may adversely affect ouroperating results.***

Thehotel industry is highly competitive. The Resort competes for customers withother hotel and resort properties. Some of our competitors may havesubstantially greater marketing and financial resources than we do, and theymay improve their facilities, reduce their prices, or expand or improvetheir marketing programs in ways that adversely affect the Resort and ouroperating results.

***Internetreservation channels may negatively impact our bookings and results ofoperations.***

Internettravel intermediaries such as Travelocity.com®, Expedia.com® andPriceline.com® are attempting to commoditize hotel rooms byincreasing the importance of price and general indicators of quality at theexpense of brand or property-specific identification. These travelintermediaries hope that consumers will eventually develop brand loyalties totheir reservations system rather than to lodging brands. Although we expect toderive most of our business from traditional channels, if the amount of salesmade through internet intermediaries increases significantly, our business andprofitability may be significantly harmed.

***The Resort placessignificant reliance on technology.***

The hospitalityindustry continues to demand the use of sophisticated technology and systemsincluding technology utilized for property management, procurement, reservationsystems, operation of customer loyalty programs, distribution and guestamenities. These technologies can be expected to require refinements and thereis the risk that advanced new technologies will be introduced. There can be noassurance that as various systems and technologies become outdated or newtechnology is required we will be able to replace or introduce them as quicklyas our competition or within budgeted costs for such 

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technology.Further, there can be no assurance that we will achieve the benefits thatmay have been anticipated from any new technology or system. If or whenthe Westin Management Agreement terminates, we would be required to replacecertain components of the technological infrastructure of the Resort which areproprietary to Westin.  Our projectionsindicate that the replacement of these components could require us to make aninvestment in the range of $1.0 to $2.0 million.  Additionally, there are risks associated withtransferring the data and ensuring that there are no interruptions in theoperations of the Resort.  There are noassurances that such technological components can be identified, purchased andimplemented in a cost effective and efficient manner.

***The Resort iscapital intensive, and may become uncompetitive in the event thatsufficient financing is not available.***

Forthe Resort to remain attractive and competitive, we must spend moneyperiodically to keep the properties well maintained, modernized andrefurbished. These expenditures result in an ongoing need for cash. From timeto time, it may also be necessary to undertake material capitalexpenditure projects at the Resort such as the replacement of the technologicalinfrastructure at the Resort if or when Westin’s management contract isterminated . To the extent we cannot fund expenditures from cash generated bythe Resort’s operations, we must seek to obtain funds by borrowing orotherwise. We may be unable to find such financing on favorable terms, ifat all. To the extent that we are unsuccessful in obtaining such financing, itcould adversely impact the Resort’s results from operations.

***Our investment inthe Resort is subject to numerous risks, which could adversely affect ourincome.***

As aresult of our ownership of the Resort, we are subject to the risks thatgenerally relate to investments in real property. The investment returnsavailable from equity investments in real estate such as the Resort depends inlarge part on the amount of income earned and capital appreciationgenerated by the Resort, reduced by the expenses incurred to operate it. Inaddition, a variety of other factors affect both income from the Resort and theResort’s real estate value, including governmental regulations, real estate,insurance, zoning, tax and eminent domain laws, interest rate levels and theavailability of financing. When interest rates increase, the cost ofdeveloping, expanding or renovating real property increases and real propertyvalues may decrease as the number of potential buyers decreases. Any ofthese factors could have a material adverse impact on our results of operationsor financial condition. If the Resort does not generate revenue sufficient tomeet operating expenses, including debt service and capital expenditures, ourincome will be adversely affected.

***Environmentalregulations may increase the Resort’s costs, or limit our ability todevelop, use or sell the Resort.***

Environmentallaws, ordinances and regulations of various federal, state, local and foreigngovernments impact our properties and could make us liable for the costs ofremoving or cleaning up hazardous or toxic substances on, under, or in propertywe currently own or operate. These laws could impose liability without regardto whether we knew of, or were responsible for, the presence of hazardous ortoxic substances. The presence of hazardous or toxic substances, or the failureto properly clean up such substances when present, could jeopardize our abilityto develop, use, sell or rent the real property or to borrow using the realproperty as collateral. If we arrange for the disposal or treatment ofhazardous or toxic wastes, we could be liable for the costs of removing orcleaning up wastes at the disposal or treatment facility, even if we neverowned or operated that facility. Other laws, ordinances and regulations couldrequire us to manage, abate or remove lead or asbestos containing materials.Certain laws, ordinances and regulations, particularly those governing themanagement or preservation of wetlands, coastal zones and threatened orendangered species, could limit our ability to develop, use, or sell theResort. Further, in the event that environmental obligations prevent us fromdeveloping, using or selling the Resort, distributions that we are able to payto the holders of our stock could be reduced.

***Although the courts have recently delivered favorablerulings in the Land Use Lawsuits to which we are a party, in the event that theultimate rulings in these matters are unfavorable to us, the value of Parcel Fand the Resort would be adversely effected.***

Asdiscussed in further detail under the heading “Legal Matters” in Part IIItem 1 of this report, on March 10, 2005 we filed a motion to intervene asa defendant in the lawsuit styled Innisbrook CondominiumAssociation, Inc., C. Frank Wreath, Meredith P. Sauer, and Mark Banning(as plaintiffs) vs. Pinellas County, Florida, Golf Host Resorts, Inc. andInnisbrook F LLC (as defendants), Case No. 043388CI-15. This matterrelates to a tract of land within the Resort known as Parcel F. InApril 2005, a subsequent lawsuit relating to this matter was filed. We arealso a defendant in this subsequent lawsuit. In this report, we refer to theMarch 2005 and the April 2005 lawsuits collectively as the Land UseLawsuits.

OnJanuary 6, 2006, the court ruled in favor of all defendants and againstall plaintiffs as to each count in both cases. While we believe that the January 6,2006 ruling is a favorable result for us and for the other defendants, theplaintiffs in the Land Use Lawsuits have the right to appeal or otherwisechallenge that ruling. On March 8, 2006, the court formally entered itsfinal judgment on the record ruling in favor of the defendants on all countsand denying all claims asserted by the plaintiffs in both cases. OnMarch 31, 2006, the Plaintiffs in the consolidated cases filed a notice ofappeal.

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In theevent that the plaintiffs convince a court to overturn the January 6, 2006ruling, we could lose all or substantially all of our land use and developmentrights with respect to Parcel F. Such an unfavorable result could also cause usto experience reduced club memberships at the Resort and could adversely impactour ability to realize the benefits from the proposed development of Parcel F.In addition, if the defendants do not ultimately prevail in the Land UseLawsuits and a court subsequently applies a similar interpretation of ourrights with respect to the remaining developable units at the Resort, our landuse and development rights in those remaining units could be jeopardized,adversely effecting both our ability to develop the Resort and the value of theRental Pool units.

***So-called acts ofGod, terrorist activity and war could adversely affect the Resort.***

TheResort’s financial and operating performance may be adversely affected byso-called acts of God, such as natural disasters, in Florida and in areas ofthe world from which we draw a large number of guests. Similarly, wars(including the potential for war), terrorist activity (including threats ofterrorist activity), political unrest and other forms of civil strife andgeopolitical uncertainty have caused in the past, and may cause in thefuture, our results to differ materially from anticipated results. The returnsto participants in the Rental Pool could be adversely impacted in the eventthat acts of God, war or terrorism impact the Resort’s ability to attractguests.

***Some potential lossesof the Resort are not covered by insurance.***

Wecarry comprehensive insurance coverage for general liability, property,business interruption and other risks with respect to the Resort. Our policiesoffer coverage features and insured limits that we believe are customary forsimilar types of property. Generally, our “all-risk” property policies providethat coverage is available on a per occurrence basis and that, for eachoccurrence, there is a limit as well as various sub-limits on the amount ofinsurance proceeds we can receive. In addition, there may be overalllimits under the policies. Sub-limits exist for certain types of claims such asservice interruption, abatement, expediting costs or landscaping replacement,and the dollar amounts of these sub-limits are significantly lower than thedollar amounts of the overall coverage limit.

Inaddition, there are also other risks such as war, certain forms of terrorismsuch as nuclear, biological or chemical terrorism, acts of God such ashurricanes and earthquakes and some environmental hazards that may bedeemed to fall completely outside the general coverage limits of our policiesor may either be uninsurable or too expensive to justify insuring against.

***Our operations at the Resort are dependent upon outsidemanagers, and if those managers are less successful than expected, the Resort’sresults of operations will be adversely affected, potentially in a materialway.***

Westinmanages the daily operations of the Resort pursuant to the ManagementAgreement, and Troon manages the golf facilities at the Resort pursuant torelated contractual commitments with both Westin and us. In the event thatthese third party managers fail to perform under their respectivecontracts as expected, or in the event that they default on their obligations,the Resort’s results of operations will be adversely affected, potentially in amaterial way.  Further should ourexisting disagreement with Westin continue, both Troon and Westin may devoteless time and resources to the Resort, potentially impacting its performance.

***A sustained increase in energy costsmay negatively impact the Resort’s results by increasing itsenergy-related costs and by discouraging potential guests from traveling andtaking part in recreational activities.***

During the pastyear, energy costs in the United States have increased substantially. Energycosts represent an increasingly larger percentage of the costs of the Resort,and we expect energy costs to increase in both absolute and relative terms infuture periods. In addition, we expect that higher energy costs will negativelyaffect the Resort by discouraging travel and recreational activities. Inparticular, potential guests of the Resort are less likely to travel as theybear the affects of higher energy costs as either higher airline fares or in anincreased cost per gallon of gasoline. In addition, higher energy costsmay reduce the disposable income of potential guests, making them lesslikely to spend money for travel and recreational activities. As a result ofthese factors, a sustained increase in energy costs may negatively impactthe Resort’s results by increasing its energy-related costs and by discouragingtraveling and taking part in recreational activities.

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

None.

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** **

**ITEM 3.DEFAULTS UPON SENIOR SECURITIES**

As previouslyreported, on July 21, 2003 we defaulted on our obligation, under ourvoting agreement with the holder of our series A preferred stock, toredeem the series A shares within 60 days of the holder’sMay 23, 2003 demand. As a result, the aggregate series A dividendrate increased from $462,500 per quarter to $625,000 per quarter and thepreferred stock holder has a right to appoint two directors to our board ofdirectors. The preferred stock holder has that same right under our theSeries A Articles Supplementary (our charter document relating to thepreferred stock) because we have not paid a preferred stock dividend since thethird quarter of 2001 and such right arises when preferred stock dividends arein arrears for six or more quarters. The holder of our preferred stock hasinformed us that it does not currently intend to exercise that right. However,it remains free to do so at any time (pursuant to the procedures specified inour charter and the voting agreement).

On April 12,2006, we entered into a new option agreement with AEW in which AEW grants usthe option, exercisable by us in our sole discretion, to purchase, on or beforeJune 30, 2006, all 800,000 shares of the our series A preferred stockheld by AEW including, without limitation, all of AEW’s rights to LiquidationPreferences (as defined in the ours Articles Supplementary, including, withoutlimitation, Liquidation Preferences in respect of any accrued and unpaiddividends) payable in respect of such shares as of our exercise of the optionfor a price of $20,000,000. The option to repurchase AEW’s preferred stock isonly exercisable in the event that the business of the Resort is purchased forcash consideration of no more than $35 million. This option agreement expiredpursuant to its terms on June 30, 2006; however, we are currently negotiatingwith AEW the terms of an amendment of the existing agreement or a new agreementwhich will allow us to repurchase all of AEW’s series A preferred stock for aprice of $20,000,000 or less.  At thepresent time, we have not executed a binding agreement with AEW.

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

No matters weresubmitted to a vote of security holders during the three months ended June 30,2006.

**ITEM 5.OTHER INFORMATION**

On July 10, 2006,GTA-IB, LLC, our wholly-owned subsidiary, received from Westin, in accordancewith the Management Agreement dated as of July 15, 2004 by and between Westinand GTA-IB, LLC, a second notice of default. In accordance with the Management Agreement, Westin previously had sentto GTA-IB, LLC a first notice of default. We refer to the first and second notice of default as the WestinNotices.

The Westin Noticesrelate to GTA-IB, LLC’s alleged failure to provide certain requested funding tothe Westin Innisbrook Resort.  The WestinNotices alleged, among other things, that if GTA-IB, LLC failed to cure thedefault by August 1, 2006, then Westin would have the right to (i) terminatethe Management Agreement on not less than five (5) days notice and (ii) pursueavailable remedies following an event of default.  GTA-IB, LLC has contested, and continues tocontest the defaults that Westin claims that GTA-IB, LLC has committed,including the defaults alleged by Westin in the Westin Notices. Moreover, theCompany believes that if a third party determines that GTA-IB, LLC has notcomplied with all of their obligations under the Management Agreement, it is inpart because of Westin’s non-compliance with its obligations thereunder.

The ManagementAgreement provides that GTA-IB, LLC shall pay to Westin, subject to the termsof the Management Agreement, a termination fee. The Management Agreementprovides that the termination fee shall be reduced by $365 per day for each dayelapsed from the effective date of the Management Agreement until thetermination date; provided, however, that the termination fee shall not bereduced below $5,500,000.  As of August16, 2006, the termination fee that would be due would be approximately$5,622,000.  GTA-IB, LLC has not receivedfrom Westin a notice of termination of the Management Agreement. The partieshave mutually agreed upon a process to seek to negotiate a resolution of eachparty’s respective claims.

**ITEM 6.EXHIBITS**

***Exhibits***

The exhibitslisted on the Exhibit Index, which appears after the signature page, areincluded or incorporated by reference in this Quarterly Report.

 

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.
|                             | ** ** | ** ** | **GOLF TRUST OF AMERICA, INC.,**registrant     |
|-----------------------------|------------|------------|-----------------------------------------------------|
| Date:  August 21, 2006 |       | By:        | /s/ W. Bradley Blair, II                  |
|                        |       | * *   | W. Bradley Blair, II                           |
|                        |       |       | *President and Chief Executive Officer*             |
|                        |       |       | * *                                            |
| Date:  August 21, 2006 |       | By:        | /s/ Scott D. Peters                            |
|                        |       | * *   | Scott D. Peters                                     |
|                        |       | * *   | *Senior Vice President and Chief Financial Officer* |

 

 

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**EXHIBIT INDEX**

 

Pursuantto Item 601(a)(2) of Regulation S-K, this exhibit indeximmediately precedes the exhibits.

 

The following exhibitsare part of this Quarterly Report on Form 10-Q (and are numbered inaccordance with Item 601 of Regulation S-K). Items marked with an asterisk(*) are filed with this quarterly report.

 
| No.    | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1    |       | Plan of  Liquidation and Dissolution of Golf Trust of America, Inc., as approved  by stockholders on May 22, 2001 and as currently in effect (previously  filed as Exhibit 2.1 to our company’s Current Report on Form 8-K,  filed May 30, 2001, and incorporated herein by reference).                                                                                                      |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.1.1  |       | Articles of  Amendment and Restatement of Golf Trust of America, Inc., as filed with  the State Department of Assessments and Taxation of Maryland on  January 31, 1997, (previously filed as Exhibit 3.1A to our  company’s Registration Statement on Form S-11 (Commission File  No. 333-15965) Amendment No. 2 (filed January 30, 1997) and incorporated  herein by reference). |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.1.2  |       | Articles of  Amendment of Golf Trust of America, Inc., as filed with the State  Department of Assessments and Taxation of Maryland on June 9, 1998  (previously filed as Exhibit 3.2B to our company’s Quarterly Report on  Form 10-Q, filed August 14, 1998 and incorporated herein by  reference).                                                                                         |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.1.3  |       | Articles of  Amendment of Golf Trust of America, Inc. dated May 22, 2001, as  filed with the State Department of Assessments and Taxation of Maryland on  May 25, 2001 (previously filed as Exhibit 3.1 to our company’s  Current Report on Form 8-K, filed May 30, 2001, and incorporated  herein by reference).                                                                       |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.2.1  |       | Articles  Supplementary of Golf Trust of America, Inc. relating to the  Series A Preferred Stock, as filed with the State Department of Assessments  and Taxation of the State of Maryland on April 2, 1999 (previously filed  as Exhibit 3.1 to our company’s Current Report on Form 8-K, filed  April 13, 1999, and incorporated herein by reference).                                |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.2.2  |       | Articles  Supplementary of Golf Trust of America, Inc. relating to the  Series B Junior Participating Preferred Stock, as filed with the State  Department of Assessments and Taxation of the State of Maryland on  August 27, 1999 (previously filed as Exhibit 3.1 to our company’s  Current Report on Form 8-K, filed August 30, 1999, and incorporated  herein by reference).       |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.3.1  |       | Bylaws of Golf  Trust of America, Inc., as amended and restated by the Board of  Directors on February 16, 1998 (previously filed as Exhibit 3.2 to  our company’s Quarterly Report on Form 10-Q, filed May 15, 1998 and  incorporated herein by reference).                                                                                                                                 |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.3.2  |       | Bylaws of Golf  Trust of America, Inc., as amended and restated by the Board of  Directors on March 27, 2001 (previously filed as Exhibit 3.3 to our  company’s Quarterly Report on Form 10-Q, filed May 15, 2001 and  incorporated herein by reference).                                                                                                                                    |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.3.3  |       | Bylaws of Golf  Trust of America, Inc., as amended and restated by the Board of  Directors on August 20, 2001 and as currently in effect (except for the  provision amended by the following exhibit 3.3.4) (previously filed as  Exhibit 3.3 to our company’s Current Report on Form 8-K, filed  August 30, 2001 and incorporated herein by reference).                                |

 

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| No.        | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                      |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.3.4      |       | Bylaws Amendment of Golf Trust of America, Inc.,  as adopted by the Board of Directors on February 9, 2004 (previously  filed as Exhibit 3.3.4 to our company’s Annual Report on Form 10-K,  filed March 30, 2004 and incorporated herein by reference).                                                                                               |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                 |
| 3.3.5      |       | Bylaws Amendment of Golf Trust of America, Inc.,  as adopted by the Board of Directors on January 5, 2005 and as currently  in effect (previously filed as Exhibit 3.3.4 to our company’s Current  Report on Form 8-K, filed January 10, 2005 and incorporated herein  by reference).                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                 |
| 3.3.6      |       | Bylaws Amendment of Golf Trust of  America, Inc., as adopted by the Board of Directors on March 8,  2006 and as currently in effect (previously filed as Exhibit 3.2 to our  company’s Current Report on Form 8-K, filed March 13, 2006 and incorporated  herein by reference).                                                                        |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.1        |       | Form of Share Certificate for Golf Trust of  America, Inc. Common Stock (previously filed as Exhibit 4.3 to our  company’s Current Report on Form 8-K, filed August 30, 1999, and  incorporated herein by reference).                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.2        |       | Form of Share Certificate for Golf Trust of  America, Inc. Series A Preferred Stock (previously filed as  Exhibit 3.2 to our company’s Current Report on Form 8-K, filed  April 13, 1999, and incorporated herein by reference).                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.3        |       | Shareholder Rights Agreement, by and between Golf  Trust of America, Inc. and ChaseMellon Shareholder Services, L.L.C., as  rights agent, dated August 24, 1999 (previously filed as  Exhibit 4.1 to our company’s Current Report on Form 8-K, filed  August 30, 1999, and incorporated herein by reference).                                          |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.4†  |       | Voting Agreement, between Golf Trust of  America, Inc. and the holder of all of its outstanding shares of  Series A Preferred Stock, AEW Targeted Securities Fund, L.P., dated  February 22, 2001 (previously filed as Exhibit 4.2 to our company’s  Current Report on Form 8-K, filed March 12, 2001, and incorporated  herein by reference).    |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                 |
| 4.5        |       | Voting Agreement, by and among Golf Trust of  America, Inc., Golf Trust of America, L.P., GTA GP, Inc. and the  holders of operating partnership units named therein, dated as of  February 14, 2001 (previously filed as Exhibit 4.3 to our company’s  Current Report on Form 8-K, filed March 12, 2001, and incorporated  herein by reference). |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.1.1     |       | First Amended and Restated Agreement of Limited  Partnership (the “Partnership Agreement”) of Golf Trust of America, L.P.,  dated February 12, 1997 (previously filed as Exhibit 10.1 to our  company’s Annual Report on Form 10-K, filed March 31, 1997, and  incorporated herein by reference).                                                 |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.1.2     |       | First Amendment to the Partnership Agreement of Golf  Trust of America, L.P., dated as of February 1, 1998 (previously filed  as Exhibit 10.1.2 to our company’s Annual Report on Form 10-K,  filed March 31, 1998, and incorporated herein by reference).                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.1.3     |       | Second Amendment and Consent to the Partnership  Agreement of Golf Trust of America, L.P., as amended, dated as of  February 14, 2001 (previously filed as Exhibit 10.3 to our  company’s Current Report on Form 8-K, filed March 12, 2001, and  incorporated herein by reference).                                                                         |
|       |       |                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.1.4**** |       | Exhibit A to the Partnership Agreement  (Schedule of Partnership Interests) of Golf Trust of America, L.P., as  revised through August 16, 2006.                                                                                                                                                                                                                           |

 

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| No.    | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1.5 |       | Designation of Class B Common OP units of Golf Trust  of America, L.P., dated February 1, 1998, which has been added as the  first entry in Exhibit D to the Partnership Agreement (included within  the First Amendment to the Partnership Agreement, which was previously filed  as Exhibit 10.1.2 to our company’s Annual Report on Form 10-K,  filed March 31, 1998, and incorporated herein by reference).                                                                                                                                                                                                                 |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.1.6 |       | Designation of Series A Preferred OP units of  Golf Trust of America, L.P., dated April 2, 1999, which has been added  to Exhibit D to the Partnership Agreement (previously filed as  Exhibit 10.3 to our company’s Current Report on Form 8-K, filed  April 13, 1999, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                  |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.1.7 |       | Designation of Series B Preferred OP units of  Golf Trust of America, L.P., dated May 11, 1999, which has been added to  Exhibit D to the Partnership Agreement (previously filed as  Exhibit 10.1.6 to our company’s Annual Report on Form 10-K, filed  March 30, 2000, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                 |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.1.8 |       | Designation of Series C Preferred OP units of  Golf Trust of America, L.P., dated July 28, 1999, which has been added  to Exhibit D to the Partnership Agreement (previously filed as  Exhibit 10.1.7 to our company’s Annual Report on Form 10-K, filed  March 30, 2000, and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.2.1 |       | Credit Agreement, dated as of June 20, 1997, by  and among Golf Trust of America, L.P., as Borrower, Golf Trust of  America, Inc., GTA GP, Inc. and GTA LP, Inc., as Guarantors,  the Lenders referred to therein, and NationsBank N.A., as Agent (previously  filed as Exhibit 10.1 to our company’s Current Report on Form 8-K,  dated June 20, 1997 and filed August 12, 1997, and incorporated  herein by reference).                                                                                                                                                                                             |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.2.2 |       | Amended and Restated Credit Agreement, dated as of  July 8, 1998, by and among Golf Trust of America, L.P., as Borrower,  Golf Trust of America, Inc., GTA GP, Inc. and GTA LP, Inc., as  Guarantors, the Lenders referred to therein, and NationsBank N.A., as Agent  (previously filed as Exhibit 10.2.2 to our company’s Amended Annual Report  on Form 10-K/A, filed April 1, 1999, and incorporated herein by  reference).                                                                                                                                                                                            |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.2.3 |       | Amended and Restated Credit Agreement, dated as of  March 31, 1999, by and among Golf Trust of America, L.P., as Borrower,  Golf Trust of America, Inc., GTA GP, Inc. and GTA LP, Inc., as  Guarantors, the Lenders referred to therein, NationsBank, N.A., as  Administrative Agent, First Union National Bank as Syndication Agent, and  BankBoston, N.A., as Documentation Agent (previously filed as  Exhibit 10.2.3 to our company’s Annual Report on Form 10-K, filed  March 30, 2000, and incorporated herein by reference).                                                                                        |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.2.4 |       | Second Amended and Restated Credit Agreement, dated  as of July 25, 2001, by and among Golf Trust of America, L.P., as  Borrower, Golf Trust of America, Inc., GTA GP, Inc., GTA  LP, Inc., Sandpiper-Golf Trust, LLC, GTA Tierra Del Sol, LLC, and GTA  Osage, LLC, as Guarantors, the Lenders referred to therein, and Bank of  America, N.A., as Administrative Agent, First Union National Bank, as  Syndication Agent, and Fleet National Bank, as Documentation Agent  (previously filed as Exhibit 10.1 to our company’s Current Report on  Form 8-K, filed August 1, 2001, and incorporated herein by  reference). |

 

51

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| No.    | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.3   |       | Credit Agreement, dated as of March 31, 1999,  by and among Golf Trust of America, L.P., as Borrower, Golf Trust of  America, Inc., GTA GP, Inc. and GTA LP, Inc., as Guarantors,  the Lenders referred to therein, and NationsBank, N.A., as Administrative Agent  for the Lenders (previously filed as Exhibit 10.3 to our company’s  Annual Report on Form 10-K, filed March 30, 2000, and incorporated  herein by reference). |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.4   |       | Loan Agreement (the “participating mortgage”), dated  as of June 20, 1997, by and between Golf Host Resorts, Inc., as  Borrower, and Golf Trust of America, L.P., as Lender (previously filed as  Exhibit 10.2 to our company’s Current Report on Form 8-K, dated  June 20, 1997 and filed August 12, 1997, and incorporated herein by  reference).                                                                          |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.5   |       | Form of Participating Lease Agreement  (previously filed as Exhibit 10.2 to our company’s Registration  Statement on Form S-11, filed January 15, 1997, and incorporated  herein by reference).                                                                                                                                                                                                                                                  |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.6+  |       | 1997 Non-Employee Directors’ Plan of Golf Trust of  America, Inc. (previously filed as Exhibit 10.7 to our company’s  Registration Statement on Form S-11 (Commission File No. 333-15965)  Amendment No. 1 (filed January 15, 1997) and incorporated herein by  reference).                                                                                                                                                       |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.7+  |       | 1997 Stock Incentive Plan (the “Original 1997 Plan”)  of Golf Trust of America, Inc. (previously filed as Exhibit 10.6 to  our company’s Registration Statement on Form S-11 (Commission File  No. 333-15965) Amendment No. 1 (filed January 15, 1997) and  incorporated herein by reference).                                                                                                                               |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.8+  |       | 1997 Stock-Based Incentive Plan of Golf Trust of  America, Inc. (the “New 1997 Plan”) (previously filed as  Exhibit 10.3 to our company’s Quarterly Report on Form 10-Q  (Commission File No. 000-22091), filed August 15, 1997, and  incorporated herein by reference).                                                                                                                                                          |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.9+  |       | Form of Nonqualified Stock Option Agreement for  use under the New 1997 Plan (previously filed as Exhibit 10.4 to our  company’s Quarterly Report on Form 10-Q (Commission File  No. 000-22091), filed August 15, 1997, and incorporated herein by  reference).                                                                                                                                                                             |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.10+ |       | Form of Employee Incentive Stock Option  Agreement for use under the New 1997 Plan (previously filed as  Exhibit 10.5 to our company’s Quarterly Report on Form 10-Q  (Commission File No. 000-22091), filed August 15, 1997, and incorporated  herein by reference).                                                                                                                                                                       |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.11+ |       | General Provisions Applicable to Restricted Stock  Awards Granted Under the New 1997 Plan (previously filed as  Exhibit 10.14 to our company’s Registration Statement on Form S-11  (Commission File No. 333-36847), dated September 30, 1997 and filed  as of October 1, 1997, and incorporated herein by reference).                                                                                                                      |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.12+ |       | Form of Restricted Stock Award Agreement for  use under the New 1997 Plan (previously filed as Exhibit 10.15 to our  company’s Registration Statement on Form S-11 (Commission File  No. 333-36847), dated September 30, 1997 and filed as of  October 1, 1997, and incorporated herein by reference).                                                                                                                                 |
|   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.13+ |       | 1998 Stock-Based Incentive Plan of Golf Trust of  America, Inc. (previously filed as Exhibit A to our company’s  definitive proxy statement, dated April 1, 1999 and filed March 29,  1999, and incorporated herein by reference).                                                                                                                                                                                                               |

 

52

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| No.      | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                  |
|----------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.14+   |       | Employee Stock Purchase Plan of Golf Trust of  America, Inc. (previously filed as Exhibit 4.1 to our company’s  Registration Statement on Form S-8 (Commission File No. 333-46659),  filed February 20, 1998, and incorporated herein by reference).                                                                                               |
|     |       |                                                                                                                                                                                                                                                                                                                                                                             |
| 10.15+   |       | Subscription Agreement for use with the Employee  Stock Purchase Plan (previously filed as Exhibit 4.2 to our company’s  Registration Statement on Form S-8 (Commission File No. 333-46659),  filed February 20, 1998, and incorporated herein by reference).                                                                                           |
|     |       |                                                                                                                                                                                                                                                                                                                                                                             |
| 10.16.1+ |       | First Amended and Restated Employment Agreement  between Golf Trust of America, Inc. and W. Bradley Blair, II,  dated November 7, 1999 (previously filed as Exhibit 10.15 to our  company’s Annual Report on Form 10-K, filed March 30, 2000, and  incorporated herein by reference).                                                    |
|     |       |                                                                                                                                                                                                                                                                                                                                                                             |
| 10.16.2+ |       | Second Amended and Restated Employment Agreement between  Golf Trust of America, Inc. and W. Bradley Blair, II, dated as  of February 25, 2001 (previously filed as Exhibit 10.4 to our  company’s Current Report on Form 8-K, filed March 12, 2001, and  incorporated herein by reference).                                             |
|     |       |                                                                                                                                                                                                                                                                                                                                                                             |
| 10.16.3+ |       | Letter Agreement to the Second Amended and Restated  Employment Agreement between Golf Trust of America, Inc. and  W. Bradley Blair, II,, dated as of March 22, 2004 (previously  filed as Exhibit 10.16.3 to our company’s Annual Report on Form 10-K filed  March 30, 2004, and incorporated herein by reference).                                    |
|     |       |                                                                                                                                                                                                                                                                                                                                                                             |
| 10.17.1+ |       | Second Amended and Restated Employment Agreement  between Golf Trust of America, Inc. and Scott D. Peters, dated  November 7, 1999 (previously filed as Exhibit 10.16 to our  company’s Annual Report on Form 10-K, filed March 30, 2000, and  incorporated herein by reference).                                                             |
|     |       |                                                                                                                                                                                                                                                                                                                                                                             |
| 10.17.2+ |       | Third Amended and Restated Employment Agreement  between Golf Trust of America, Inc. and Scott D. Peters, dated as  of February 25, 2001 (previously filed as Exhibit 10.5 to our  company’s Current Report on Form 8-K, filed March 12, 2001, and  incorporated herein by reference).                                                        |
|     |       |                                                                                                                                                                                                                                                                                                                                                                             |
| 10.17.3+ |       | Fourth Amended and Restated Employment Agreement and  related General Release between Golf Trust of America, Inc. and  Scott D. Peters, dated as of August 29, 2003 (previously filed as  Exhibits 10.1 and 10.2 to our company’s Current Report on Form 8-K,  filed October 9, 2003, and incorporated herein by reference).                  |
|     |       |                                                                                                                                                                                                                                                                                                                                                                             |
| 10.18    |       | Stock Purchase Agreement, dated April 2, 1999,  by and among Golf Trust of America, Inc., Golf Trust of America, L.P.,  GTA GP, Inc., GTA LP, Inc. and AEW Targeted Securities Fund, L.P.  (previously filed as Exhibit 10.1 to our company’s Current Report on  Form 8-K, filed April 13, 1999, and incorporated herein by  reference). |
|     |       |                                                                                                                                                                                                                                                                                                                                                                             |
| 10.19    |       | Registration Rights Agreement, dated April 2,  1999, by and between Golf Trust of America, Inc. and AEW Targeted  Securities Fund, L.P. (previously filed as Exhibit 10.2 to our company’s  Current Report on Form 8-K, filed April 13, 1999, and incorporated  herein by reference).                                                              |
|     |       |                                                                                                                                                                                                                                                                                                                                                                             |
| 10.20.1  |       | Purchase and Sale Agreement, between Golf Trust of  America, L.P., as seller, and Legends Golf Holding, LLC, as buyer, dated as  of February 14, 2001 (previously filed as Exhibit 10.1 to our  company’s Current Report on Form 8-K, filed August 14, 2001, and  incorporated herein by reference).                                                    |

 

53

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| No.     | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|---------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.20.2 |       | First Amendment to Purchase Agreement, Fifth  Amendment to Lease Agreement (Bonaventure Golf Club) and Settlement Agreement  by and among Golf Trust of America, L.P., Legends Golf Holding, LLC, Legends  at Bonaventure, Inc., Larry Young and Danny Young, dated as of  July 30, 2001 (previously filed as Exhibit 10.2 to our company’s  Current Report on Form 8-K, filed August 14, 2001, and incorporated  herein by reference). |
|    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.21   |       | Confidentiality and Standstill Letter Agreement  between Golf Trust of America, Inc. and The Legends Group, dated as of  February 14, 2001 (previously filed as Exhibit 10.2 to our  company’s Current Report on Form 8-K, filed March 12, 2001, and  incorporated herein by reference).                                                                                                                                                |
|    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.22.1 |       | Loan Agreement, dated as of March 18, 2004, by  and among GTA—Stonehenge, LLC, as Borrower, Golf Trust of America, L.P., as  Guarantor, and Textron Financial Corporation as the Lender (previously filed  as Exhibit 10.22.1 to our company’s Annual Report on Form 10-K filed March  30, 2004, and incorporated herein by reference).                                                                                                                |
|    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.22.2 |       | Mortgage Security Agreement and Fixture Filing,  dated as of March 18, 2004, from Golf Trust of America, L.P. in favor of  Textron Financial Corporation (previously filed as Exhibit 10.22.2 to our  company’s Annual Report on Form 10-K filed March 30, 2004, and incorporated  herein by reference).                                                                                                                                                    |
|    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.22.3 |       | Amended and Restated Loan Agreement, dated as of  August 4, 2005, by and among GTA—Stonehenge, LLC, as Borrower, Golf  Trust of America, L.P., as Guarantor, and Textron Financial Corporation as  the Lender (previously filed as Exhibit 10.22.3 to our company’s Current  Report on Form 8-K, filed August 9, 2005, and incorporated herein  by reference).                                                                          |
|    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.22.4 |       | Notice of Future Advances, Note Mortgage, Security  Agreement, and Fixture Filing, dated as of August 4, 2005, from Golf  Trust of America, L.P. in favor of Textron Financial Corporation (previously  filed as Exhibit 10.22.4 to our company’s Current Report on  Form 8-K, filed August 9, 2005, and incorporated herein by  reference).                                                                                                 |
|    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.23   |       | Settlement Agreement dated July 15, 2004 by and  among Golf Trust of America, L.P., GTA-IB, LLC, Golf Host Resorts, Inc.,  Golf Hosts, Inc., Golf Host Management, Inc., Golf Host  Condominium, Inc. and Golf Host Condominium, LLC (previously filed as  Exhibit 10.1 to our company’s Current Report on Form 8-K, filed  July 29, 2004, and incorporated herein by reference).                                        |
|    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.24   |       | Defense and Escrow Agreement dated July 15,  2004 by and among Golf Host Resorts, Inc., GTA-IB, LLC, Golf Trust of  America, L.P., Golf Trust of America, Inc. and Chicago Title Insurance  Company (previously filed as Exhibit 10.2 to our company’s Current  Report on Form 8-K, filed July 29, 2004, and incorporated herein by  reference).                                                                                   |
|    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.25   |       | Operational Benefits Agreement dated July 15,  2004 by and among Golf Host Resorts, Inc., Golf Hosts, Inc.,  GTA-IB, LLC, and Golf Trust of America, L.P. (previously filed as  Exhibit 10.3 to our company’s Current Report on Form 8-K, filed  July 29, 2004, and incorporated herein by reference).                                                                                                                             |
|    |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.26   |       | Management Agreement dated July 15, 2004 by and  between Westin Management Company South and GTA-IB, LLC (previously filed as  Exhibit 10.4 to our company’s Current Report on Form 8-K, filed  July 29, 2004, and incorporated herein by reference).                                                                                                                                                                                        |

 

54

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| No.      | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                             |
|----------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.27    |       | Assignment, Consent, Subordination and  Nondisturbance Agreement dated July 15, 2004 by and among GTA-IB, LLC,  Golf Trust of America, L.P. and Westin Management Company South (previously  filed as Exhibit 10.5 to our company’s Current Report on Form 8-K,  filed July 29, 2004, and incorporated herein by reference).                                                                       |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.28    |       | Facility Management Agreement dated July 15,  2004 by and among Troon Golf L.L.C., Westin Management Company South and  GTA-IB, LLC (previously filed as Exhibit 10.6 to our company’s Current  Report on Form 8-K, filed July 29, 2004, and incorporated herein by  reference).                                                                                                                   |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.29    |       | Loan Agreement dated July 15, 2004 by and  between Golf Trust of America, L.P. and Elk Funding, L.L.C. and related Notes  A and B (previously filed as Exhibit 10.7 to our company’s Current  Report on Form 8-K, filed July 29, 2004, and incorporated herein by  reference).                                                                                                                     |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.30.1  |       | Parcel F Development Agreement dated  March 29, 2004 by and among Golf Hosts Resorts, Inc., Golf Trust of  America, L.P. and Parcel F, LLC, formerly known as Innisbrook F, LLC,  formerly known as Bayfair Innisbrook, L.L.C. (previously filed as  Exhibit 10.1 to our company’s Current Report on Form 8-K, filed  July 29, 2004, and incorporated herein by reference).         |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.30.2  |       | First Amendment to Parcel F Development  Agreement by and among Golf Hosts Resorts, Inc., Golf Trust of America,  L.P. and Parcel F, LLC (formerly known as Innisbrook F, LLC) (previously  filed as Exhibit 10.30.2 to our company’s Quarterly Report on  Form 10-Q, filed August 15, 2005, and incorporated herein by  reference).                                                          |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.30.3  |       | Second Amendment to Parcel F Development  Agreement by and among Golf Hosts Resorts, LLC (formerly known as Golf Host  Resorts, Inc.), Golf Trust of America, L.P., GTA-IB, LLC and Parcel F,  LLC (formerly known as Innisbrook F, LLC) (previously filed as Exhibit 10.30.3  to our company’s Quarterly Report on Form 10-Q, filed August 15,  2005, and incorporated herein by reference). |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.31    |       | Amendment to Loan Agreement between GTA-IB, LLC and  Golf Trust of America, L.P. (previously filed as Exhibit 10.31 to our  company’s Quarterly Report on Form 10-Q, filed November 22, 2004,  and incorporated herein by reference).                                                                                                                                                                   |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.32    |       | Promissory Note issued by GTA-IB, LLC to Golf Trust  of America, L.P. (previously filed as Exhibit 10.32 to our company’s  Quarterly Report on Form 10-Q, filed November 22, 2004, and  incorporated herein by reference).                                                                                                                                                                              |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.33.1+ |       | Letter Agreement, dated as of March 30, 2005,  amending the fourth amended and restated employment agreement of Scott Peters  (previously filed as Exhibit 10.33 to our company’s Annual Report on  Form 10-K, filed March 30, 2005, and incorporated herein by  reference.                                                                                                                        |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.33.2+ |       | Letter Agreement, dated as of March 31, 2006,  amending the fourth amended and restated employment agreement of  Scott Peters (previously filed as Exhibit 10.35 to our company’s  Current Report on Form 8-K, filed April 6, 2006, and incorporated  herein by reference).                                                                                                                   |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.34*   |       | Letter Agreement, dated March 24, 2005, between  our company and AEW Targeted Securities Fund, L.P. (previously filed as  Exhibit 10.34 to our company’s Annual Report on Form 10-K filed  March 30, 2005, and incorporated herein by reference).                                                                                                                                                  |

 

55

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| No.      | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                    |
|----------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.35*   |       | Option Agreement, dated May 6, 2005, between  our company and AEW Targeted Securities Fund, L.P. (previously filed as  Exhibit 10.35 to our company’s Report on Form 8-K filed May 9,  2005).                                                                                                                                                                                                             |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.36*   |       | Letter Agreement, dated November 11, 2005,  between our company and AEW Targeted Securities Fund, L.P. (previously filed  as Exhibit 10.37 to our company’s Quarterly Report on Form 10-Q  filed November 14, 2005, and incorporated herein by reference).                                                                                                                                                |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.37**  |       | Option Agreement, dated April 12, 2006, between  our company and AEW Targeted Securities Fund, L.P. (previously filed as  Exhibit 10.37 to our company’s Annual Report on Form 10-K filed April 17,  2006, and incorporated herein by reference).                                                                                                                                                                        |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.38*** |       | Asset Purchase Agreement by and between Golf Trust  of America, Inc., Golf Trust of America, L.P., GTA-IB, LLC, GTA-IB Golf  Resort, LLC, GTA-IB Condominium, LLC, GTA-IB Management, LLC and CMI  Financial Network, LLC dated October 27, 2005 (previously filed as  Exhibit 10.36 to our company’s Quarterly Report on Form 10-Q filed  November 14, 2005, and incorporated herein by reference). |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 14.1     |       | Code of Ethics, adopted by the Board of Directors of  Golf Trust of America, Inc. on February 9, 2004 (previously filed  as Exhibit 14.1 to our company’s Annual Report on Form 10-K, filed  March 30, 2004, and incorporated herein by reference).                                                                                                                                                  |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 21.1**** |       | List of Subsidiaries of Golf Trust of  America, Inc.                                                                                                                                                                                                                                                                                                                                                                          |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 24.1**** |       | Powers of Attorney (included under the caption  “Signatures”)                                                                                                                                                                                                                                                                                                                                                            |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 31.1**** |       | Certification of W. Bradley Blair II  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                    |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 31.2**** |       | Certification of Scott D. Peters pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                             |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 32.1**** |       | Certifications under Section 906 of the  Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                          |
|     |       |                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 99.1     |       | Charter of the Audit Committee of the Board of  Directors of Golf Trust of America, Inc. (previously filed as  Appendix A to our company’s definitive proxy statement on  Schedule 14A, filed October 15, 2001, and incorporated herein by  reference).                                                                                                                                                   |

 

----

*                                              Thisagreement expired pursuant to its terms on November 30, 2005.

**                                       Thisagreement was terminated pursuant to its terms on June 30, 2006.

 

***                                Thisagreement was terminated pursuant to its terms on November 23, 2005.

****                         Filedherewith

†                                               Portionsof this exhibit have been omitted pursuant to a request for confidentialtreatment.

+                                              Denotesa management contract or compensatory plan.

56

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