**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 
| **(Mark One)** | ** ** | ** **                                                                                                                                                                                                                                              |
|----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **ý**     | ** ** | **Quarterly  report pursuant to section 13 or 15(d) of the Securities Exchange  Act of 1934**                                                                                                                                                 |
| ** **     | ** ** | ** **                                                                                                                                                                                                                                              |
| ** **     | ** ** | **for the quarterly period ended: March 31,  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 Number 000-22091**

 

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**GOLF TRUST OF AMERICA, INC.**

(Exact name of registrant as specified in itscharter)

 

| **Maryland**                                                    | ** ** | **33-0724736**                           |
|-----------------------------------------------------------------|------------|------------------------------------------|
| (State or other jurisdiction of  incorporation or organization) | ** ** | (I.R.S. Employer  Identification Number) |
| ** **                                                      | ** ** | ** **                               |
| **10 North Adger’s Wharf,  Charleston, South Carolina**    | ** ** | **29401**                                |
| (Address of principal executive offices)                        | ** ** | (Zip Code)                               |

 

**(843) 723-4653**

(Registrant’stelephone number, including area code)

 

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Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such report(s) and (2) hasbeen subject to such filing requirements for the past 90 days. Yes ýNo o.

 

Indicate by check mark whether the registrant is a large  accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Act.

 
|   |   | Large accelerated filer | o |   | Accelerated filer  o |   | Non-accelerated filer ý |
|--------|--------|-------------------------|---|--------|---------------------------|--------|-----------------------------------|

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act). Yes oNo ý

 

On May 8, 2006, there were 7,317,163 common shares outstanding ofthe registrant’s only class of common stock. On May 8, 2006, therewere 800,000 shares outstanding of the registrant’s 9.25% Series ACumulative Convertible Preferred Stock, which is the registrant’s only class ofoutstanding preferred stock.

 

The Exhibit Index begins on page 54.

 

 

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**GOLF TRUST OF AMERICA, INC.**

 

**Form 10-Q Quarterly Report**

**For the Three Months Ended March 31,2006**

 

**INDEX**

 
| **PART I. FINANCIAL INFORMATION** |       |                                                                                                                            |
|----------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------|
| **Item 1.**                            | ** ** | **Liquidation Basis Financial Statements**                                                                                      |   |   |   |
|                                   |       | Condensed Consolidated Statements of Net Assets as of March 31,  2006 (unaudited) and December 31, 2005               |   |   |   |
|                                   |       | Condensed Consolidated Statements of Changes in Net Assets  (unaudited) for the Three Months Ended March 31, 2006 and 2005 |   |   |   |
|                                   |       | Condensed Consolidated Statements of Cash Flows (unaudited) for the  Three Months Ended March 31, 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**                                                                                                                    |   |   |
| **Signatures**                         |       |                                                                                                                            |
| **Exhibit Index**                 |       |                                                                                                                            |
|                                        |            |                                                                                                                                 |  |  |  |  |  |  |

 

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**Cautionary Note Regarding Forward-LookingStatements**

 

The following report contains forward-looking statements within themeaning of Section 27A of the Securities Act of 1933, as amended, or theSecurities Act, and Section 21E of the Securities Exchange Act of 1934, asamended, or the Exchange Act. Forward-looking statements are statements thatpredict or describe future events or trends and that do not relate solely tohistorical matters. 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-looking statementsas statements containing the words “believe,” “expect,” “will,” “anticipate,” “intend,”“estimate,” “project,” “assume” or other similar expressions. You should notplace undue reliance on our forward-looking statements because the matters theydescribe are subject to known (and unknown) risks, uncertainties and otherunpredictable factors, many of which are beyond our control. Our forward-lookingstatements are based on the limited information currently available to us andspeak only as of the date on which this Quarterly Report was filed with theSecurities and Exchange Commission, or the SEC. Our continued internet postingor subsequent distribution of this dated report does not imply continuedaffirmation of the forward-looking statements included in it. We undertake noobligation, and we expressly disclaim any obligation, to issue any updates toour forward-looking statements, even if subsequent events cause ourexpectations 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 suchdifferences might be significant and harmful to our stockholders’ interests.Many important factors that could cause such a difference are described underthe caption “Risk Factors,” in Part II, Item 1A of this Quarterly Report,which you should review carefully.

 

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**GOLF TRUST OF AMERICA, INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF NET ASSETS (LIQUIDATION BASIS)**

**AS OF MARCH 31, 2006 AND DECEMBER 31,2005**

 
| ** **                                                                                            | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                                                                            | ** ** | **(unaudited)**              | ** ** | ** **                      | ** ** |
| ** **                                                                                            | ** ** | **(in thousands)**      | ** ** |
| **ASSETS**                                                                                            |       |                         |       |                            |       |
| Real estate—held for sale                                                                        |       | $                            | 56,866     |                            | $          | 56,506 |   |
| Cash and cash equivalents                                                                             |       | 5,316                        |       | 2,822                           |       |
| Receivables—net                                                                                  |       | 6,760                        |       | 5,806                           |       |
| Other assets                                                                                          |       | 4,659                        |       | 4,597                           |       |
| Total assets                                                                                          |       | 73,601                       |       | 69,731                          |       |
| **LIABILITIES**                                                                                       |       |                         |       |                            |       |
| Debt                                                                                                  |       | 5,773                        |       | 5,830                           |       |
| Accounts payable and other liabilities                                                                |       | 14,533                       |       | 13,080                          |       |
| Other obligations                                                                                     |       | 11,060                       |       | 11,120                          |       |
| Reserve for estimated costs during the  period of liquidation                                         |       | 8,803                        |       | 5,919                           |       |
| **Total  liabilities**                                                                                |       | 40,169                       |       | 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                                                                 |       | 60,169                       |       | 55,949                          |       |
| **NET  ASSETS IN LIQUIDATION**(available to holders of  common stock and OP units)                    |       | $                            | 13,432     |                            | $          | 13,782 |   |

 

See accompanying notes to condensedconsolidated financial statements.

 

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**GOLF TRUSTOF AMERICA, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES**

**IN NET ASSETS (LIQUIDATION BASIS)**

**FOR THE THREE MONTHS ENDED MARCH 31,2006 AND 2005**

 
| ** **                                                                    | ** ** | **Three Months Ended  March 31, 2006** | ** ** | **Three Months Ended  March 31, 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                                                              |       | 3,498                                                      |       | 3,147                                                      |       |
| Net interest expense                                                          |       | (318                                                       | )          | (343                                                       | )          |
| Increase in fair value of real estate                                         |       | 340                                                        |       | —                                                     |       |
| Increase in reserve for estimated  liquidation costs and capital expenditures |       | (3,870                                                     | )          | (2,804                                                     | )          |
| Subtotal of adjustments to liquidation  reserve                               |       | (350                                                       | )          | —                                                     |       |
| Value of common stock redeemed                                                |       | —                                                     |       | (104                                                       | )          |
| **Changes  in net assets in liquidation**                                     |       | (350                                                       | )          | (104                                                       | )          |
| **Net  assets in liquidation, end of period**                                 |       | $                                                          | 13,432     |                                                       | $          | 14,941 |   |

 

See accompanying notes to condensedconsolidated financial statements.

 

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**GOLF TRUST OF AMERICA, INC.**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (LIQUIDATION BASIS)**

**FOR THE THREE MONTHS ENDED MARCH 31,2006 AND 2005**

 
| ** **                                                                                                            | ** ** | **Three Months Ended  March 31, 2006** | ** ** | **Three Months Ended  March 31, 2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------|------------|------------------------------------------------------------|------------|
| ** **                                                                                                            | ** ** | **(in thousands, unaudited)**                    | ** ** |
| **Cash  flows from changes in net assets in liquidation and operating activities:**                                   |       |                                                       |       |                                                       |       |
| Change in net assets in liquidation                                                                                   |       | $                                                          | (350       | )                                                          | $          | (104 | ) |
| Adjustments to reconcile change in net  assets in liquidation to net cash used in operating activities:               |       |                                                       |       |                                                       |       |
| Increase in liquidation reserve and  (decrease) increase in the fair value of real estate and non-real estate  assets |       | 3,530                                                      |       | 2,805                                                      |       |
| Cancellation value of common stock and OP  units                                                                      |       |                                                       |       | 104                                                        |       |
| Provision for bad debts                                                                                               |       | 164                                                        |       | —                                                     |       |
| Non-cash interest                                                                                                     |       | 193                                                        |       | 236                                                        |       |
| Other changes in operating assets and  liabilities                                                                    |       | 267                                                        |       | (1,079                                                     | )          |
| Decrease in liquidation liabilities                                                                                   |       | (960                                                       | )          | (617                                                       | )          |
| Net cash from operating activities                                                                                    |       | 2,844                                                      |       | 1,345                                                      |       |
| **Cash  flows from investing activities:**                                                                            |       |                                                       |       |                                                       |       |
| Resort and golf course improvements                                                                                   |       | (46                                                        | )          | (169                                                       | )          |
| **Cash  flows from financing activities:**                                                                            |       |                                                       |       |                                                       |       |
| Repayments on debt and capital lease and  other obligations                                                           |       | (304                                                       | )          | (232                                                       | )          |
| Net increase in cash                                                                                                  |       | 2,494                                                      |       | 944                                                        |       |
| Cash and cash equivalents, beginning of  period                                                                       |       | 2,822                                                      |       | 3,919                                                      |       |
| Cash and cash equivalents, end of period                                                                              |       | $                                                          | 5,316      |                                                       | $          | 4,863 |   |
| **Supplemental  Disclosure of Cash Flow Information:**                                                                |       |                                                       |       |                                                       |       |
| Interest paid during the period                                                                                       |       | $                                                          | 190        |                                                       | $          | 141 |   |
| **Non-cash  transactions:**                                                                                           |       |                                                       |       |                                                       |       |
| Cancellation of note receivable                                                                                       |       | $                                                          | —     |                                                       | $          | 99 |   |

 

See accompanying notes to condensedconsolidated financial statements.

 

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**GOLF TRUST OF AMERICA, INC.**

**Form 10-Q Quarterly Report**

**For the Three Months Ended March 31, 2006 and 005**

**Notes toCondensed Consolidated Financial Statements**

 

**(Unaudited)**

 

**1.****             Plan of Liquidationand the Resort**

 

OnFebruary 25, 2001, our board of directors adopted, and on May 22,2001 our common and preferred stockholders approved, a plan of liquidation forus. The plan of liquidation contemplates the sale of all of our assets and thepayment of, or provision for, our liabilities and expenses, and authorizes usto establish a reserve to fund our contingent liabilities. As of May 9,2006, we had sold 41 of the 47 (eighteen-hole equivalent) golf courses in whichwe once held interests pursuant to the plan of liquidation.

 

On July 15, 2004, the Company entered into a settlement agreement,or the Settlement 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 Host Condominium, Inc. and Golf Host Condominium, LLC and tookcontrol of the Westin Innisbrook Golf Resort, or the Resort. The settlement wasaccounted for using methods consistent with purchase accounting in accordancewith Statement of Financial Accounting Standards, or SFAS, No. 141 “BusinessCombinations”. As a result of the settlement, the financial results of GTA-IB,our wholly owned subsidiary that now holds title to the Resort, areconsolidated in our financial statements commencing July 16, 2004.

 

On January 21, 2005, in the interest of seeking to accelerate thefinalization of our 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 liquidation may occurthrough the sale of its assets, a merger or otherwise in order to allow it tomaximize value to its stockholders. In addition, subject to appropriateapprovals, the Company may pursue a recapitalization. In this QuarterlyReport, the Company refers to the type of transaction discussed in the priortwo sentences as an exit transaction. The initial term of Houlihan Lokey’sengagement was nine months which has currently been extended on amonth-to-month basis. In the event of a sale of the Resort with net proceeds tous of up to $38.0 million, Houlihan Lokey will receive a transaction feeof $1.0 million of which the Company has paid $100,000. If the Companyreceives net proceeds from $38 million up to $50 million, thetransaction fee will be $1.0 million plus 3.0% of such incremental value.If the Company receives net proceeds in excess of $50.0 million, thetransaction fee will 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.

 

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 Houlihan Lokey’s services in evaluating an exit transaction.Houlihan Lokey’s work as the Company’s financial advisor in furtherance ofaccelerating the finalization of its liquidation is ongoing. The Company, withthe assistance of Houlihan Lokey, continues to negotiate with prospectivebuyers of the Resort and related business. As of the filing date of this quarterlyreport, the Company has not entered into a definitive agreement for the sale ofthe Resort.

 

**2.****             Organization andBasis of Presentation**

 

The Company was incorporated in Maryland on November 8, 1996 as areal estate investment trust, or REIT. As of fiscal year 2002 the Company nolonger has its REIT status as a result of its repossession and operation ofgolf courses following the default of its original third-party lessees. As of May 9,2006, the Company owns two properties which represent six golf courses. One ofthese properties (2.0 golf courses) are owned and managed by the

 

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Company, while the Resort is managed by Westin. The four golf coursesat the Resort are currently managed by Troon Golf, L.L.C., or Troon, throughWestin. Prior to July 15, 2004, the Resort served as collateral for a30-year participating mortgage wherein the Company was the lender. Upon theexecution of the Settlement Agreement with its former borrower on July 15,2004, the Company obtained ownership of the Resort. The Company presently holdsits two properties (6.0 golf courses) in fee simple. Four of the Company’s golfcourses are located in Florida and two are in South Carolina. Title to theCompany’s golf courses, except in the case of the Resort, is generally held byGolf Trust of America, L.P., a Delaware limited partnership. The Company refersto Golf Trust of America, L.P. as its “operating partnership” or “OP” and theCompany refers to the operating partnership and itself (together with allsubsidiaries) collectively as “we”, “us” or our “Company.” The title to theResort is held by GTA-IB, LLC, a wholly owned subsidiary of GTA-IB Golf Resort,LLC, which in turn is 100% owned by Golf Trust of America, L.P. Through itswholly owned subsidiaries GTA GP, Inc., or GTA GP, and GTA LP, Inc.,or GTA LP, the Company holds a 99.6 percent interest in our operatingpartnership as of May 9, 2006. GTA GP is the sole general partner of itsoperating 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.

 

*Principles of Consolidation*

 

The accompanying condensed consolidated financial statements includethe accounts of GTA GP, GTA LP, the operating partnership and their wholly-ownedsubsidiaries. All significant intercompany transactions and balances have beeneliminated in consolidation.

 

*Adjustments to Liquidation Basis of Accounting*

 

As a result of the adoption by the Company’s board of directors of ourplan of liquidation and approval of that plan by the Company’s stockholders,the Company adopted the liquidation basis of accounting for all periodssubsequent to May 22, 2001. Accordingly, on May 22, 2001, the Company’sassets were adjusted to their estimated fair value and our liabilities,including estimated costs associated with implementing the plan of liquidation,were adjusted to their estimated settlement amounts. The valuation of realestate held for sale as of March 31, 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 March 31, 2006.

 

The change in net assets in liquidation of approximately $350,000 forthe three months ended March 31, 2006 reflects the estimated gain on thesale of Tierra Del Sol of approximately $340,000 offset by an increase in theprovision for legal fees of approximately $415,000 and corporate operatingcosts of approximately $275,000 to be incurred in (i) the negotiation of  an asset purchase agreement through andincluding the consummation of the sale of the Resort, (ii) litigating theproceedings to which the Company is currently a party and (iii) theadministrative conclusion of our plan of liquidation.

 

The net assets of approximately $13,432,000 at March 31, 2006would result in a liquidation distribution per share of approximately $1.85.This $1.85 estimate for 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 the Company sells itsremaining two assets, including the Resort. These projections could decrease materiallybased on the timing of any sale, the performance of the underlying assets, and 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. The number ofshares expected to be cancelled total 85,000 shares of common stock pledged to theCompany 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. This redemption agreement provides in part thatthis security will be tendered to us if and when the total amount ofliquidating distributions paid to its holders of common stock pursuant to theplan of liquidation is less than $10.74 per share.

 

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*Reserve for Estimated Costs During the Period of Liquidation*

 

Underthe liquidation basis of accounting, the Company is required to estimate andaccrue the costs associated with implementing and completing the plan ofliquidation. These amounts can vary significantly due to, among other things,the timing and realized proceeds from golf course sales, the costs of retainingpersonnel and others to oversee the liquidation, including the costs ofinsurance, the timing and amounts associated with discharging known andcontingent liabilities and the costs associated with cessation of the Company’soperations. These costs are estimates and are expected to be paid out over theliquidation period which contemplates an anticipated sale of the Resort by June 30,2006 and the transfer of our remaining assets to a liquidation trust by September 30,2006. 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 assetsas contemplated in the Company’s engagement with Houlihan Lokey. The Companyhas also accrued the projected operating results of the Resort and the othertwo properties that the Company owns and manages through the projectedremaining holding period. The Company has not recorded a liability for theaccrual of quarterly preferred dividends from July 1, 2001 to date in theCompany’s net assets pursuant to the executed letter agreement with AEW (seeNote 10) on April 12, 2006. In the event that the Company does not closeon an exit transaction by June 30, 2006 as contemplated in the AEW letteragreement, the Company may be required to accrue approximately $9,914,000to reflect quarterly preferred dividends for the period from July 1, 2001through December 31, 2005, plus an additional accrual of $625,000 perquarter for preferred dividends through the date that the exit transaction isultimately consummated and liquidation payments are made to AEW. However, thisaccrual would not be necessary if AEW agreed to extend the option exercise datein the letter agreement beyond the current expiration date of June 30,2006. These preferred dividends would reduce the net assets available to stockholdersin liquidation and correspondingly the estimated liquidation distribution pershare. These projections could change materially based on the timing of anyanticipated sale, the performance of the underlying assets, and change in theunderlying assumptions of the cash flow amount projected. These accruals willbe adjusted from time to time as projections and assumptions change.

 

The following is a summary of the changes in the Reserve for EstimatedCosts During the Period of Liquidation (Liquidation Reserve) (unaudited):

 
| ** **             | ** ** | ** **          | ** ** | ** **             | ** ** | **Increases in the  Liquidation Reserve** | ** ** | ** **      | ** ** |
|------------------------|------------|---------------------|------------|------------------------|------------|----------------------------------------------------------|------------|-----------------|------------|
| ** **             | ** ** | ** **          | ** ** | ** **             | ** ** | **Operating**                                            | ** ** | ** **      | ** ** | ** ** | ** ** |
| ** **             | ** ** | **January 1,** | ** ** | **Transfers and** | ** ** | **Income(Loss)**                                         | ** ** | ** **      | ** ** | **March 31,** | ** ** |
| ** **             | ** ** | **2005**            | ** ** | **Payments**           | ** ** | **and Interest**                                    | ** ** | **Adjustments** | ** ** | **2006** | ** ** |
| ** **             | ** ** | ** **          | ** ** | ** **             | ** ** | ** **                                               | ** ** | ** **      | ** ** | ** ** | ** ** |
| Severance              |       | $                   | 1,847,000  |                   | $          | —                                                   |       | $               | —     |   | $ | — |   | $ | 1,847,000 |   |
| Professional fees      |       | 1,565,000           |       | (826,000               | )          | —                                                   |       | 415,000         |       | 1,154,000 |   |
| Financial advisor fees |       | 911,000             |       | (8,000                 | )          | —                                                   |       | —          |       | 903,000 |   |
| Capital expenditures   |       | 26,000              |       | (26,000                | )          | —                                                   |       | 10,000          |       | 10,000 |   |
| Other                  |       | 1,570,000           |       | (126,000               | )          | 3,180,000                                                |       | 265,000         |       | 4,889,000 |   |
| Total                  |       | $                   | 5,919,000  |                   | $          | (986,000                                                 | )          | $               | 3,180,000  |   | $ | 690,000 |   | $ | 8,803,000 | . |

 

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Included in the accrued severance amounts above are performancemilestone payments due, but not yet paid, to the Company’s executives pursuantto their amended and restated employment agreements. The Company expects thatthe performance milestone payments aggregating approximately $1,399,000, plusaccrued interest, will be paid in due course; however, there are no remainingconditions to such payment. Any severance payments otherwise payable by theCompany under the amended and restated employment agreements will be reduced bythe amount of all earlier performance milestone payments made. The increase inthe adjustments to the liquidation reserve is to provide a provision for legalfees and corporate operating costs to be incurred in (i) the negotiationof an asset purchase agreement and through and including the consummation of asale of the Resort, (ii) litigating the proceedings to which the Companyis currently a party and (iii) the administrative conclusion of theCompany’s plan of liquidation.

 

Since the Company is presenting liquidation basis financial statementsthat only reflect the changes in net assets in liquidation, the operatingresults of the Company are summarized and reflected in the table below:

 
| ** **                                                      | ** ** | **For the three months ended** | ** ** |
|-----------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                      | ** ** | **March 31,**                                 | ** ** |
| ** **                                                      | ** ** | **2006**                                           | ** ** | **2005** | ** ** |
| ** **                                                      | ** ** | **(unaudited)**                                    | ** ** |
| Revenues                                                        |       |                                               |       |   |   |
| Revenue from Resort and managed golf course  operations         |       | $                                                  | 18,006,000 |   | $ | 16,427,000 |   |
| Expenses                                                        |       |                                               |       |   |   |
| General and administrative                                      |       | 251,000                                            |       | 280,000 |   |
| Direct expenses from Resort and managed  golf course operations |       | 14,257,000                                         |       | 13,000,000 |   |
| Total operating expenses                                        |       | 14,508,000                                         |       | 13,280,000 |   |
| Operating income                                                |       | 3,498,000                                          |       | 3,147,000 |   |
| Interest expense—net                                       |       | (318,000                                           | )          | (343,000 | ) |
| Operating income and interest                                   |       | $                                                  | 3,180,000  |   | $ | 2,804,000 |   |

 

**3.****             Summary ofSignificant Accounting Policies**

 

*Interim Statements*

 

The accompanying condensed consolidated financial statements for thethree months ended March 31, 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 footnote disclosures normally included infinancial statements in accordance with GAAP have been omitted as allowed inquarterly reports by the rules of the SEC. Management believes that thedisclosures included in the accompanying interim financial statements andfootnotes are adequate to make the information not misleading, but alsobelieves that these statements should be read in conjunction with the summaryof significant accounting policies and notes to financial statements includedin our annual report on Form 10-K for the year ended December 31, 2005.

 

10

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**4.****             Commitments andContingencies**

 

***YoungComplaints***

*** ***

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.), against theCompany’s independent auditors, BDO Seidman, LLP (together with three formerBDO partners) and the Company (together with the Company’s 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 the Company conspired with BDO to convince Mr. Youngthat he would realize a large projected tax gain in order to induce Mr. Young(and the other plaintiffs) to enter into the failed tax shelter transactions.The plaintiffs are seeking damages of at least $3.7 million, together withlegal 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 GTA (together with the Company’s executive officers) to stay, and forextension of time in which to answer or otherwise respond to plaintiffs’complaint. The plaintiffs’ filed memoranda opposing the aforementioned motions.A hearing on these motions was held in Florence, South Carolina on October 19,2004. At the conclusion of that hearing, the judge indicated that the formermotion would be taken under advisement, while the GTA defendants’ motion wouldbe granted 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 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. While theCompany remains open to the possibility of settlement on the basis of mutualdismissals, the Company also intends on meeting its deadlines and litigatingvigorously. To that end, before the deadline for doing so, the Company filedand served its motion for summary judgment as to the plaintiffs’ claims on December 23,2005. The plaintiffs did not file any dispositive motion within the timepermitted to do so, either with respect to their own claims or to the Company’scounterclaims, nor did the plaintiffs timely file any written response to themotion for summary judgment. On March 21, 2006, at a hearing held on theplaintiffs’ motion, the court denied the plaintiffs’ motion to re-opendiscovery, with the exception that limited discovery was allowed until June 19,2006 only on the question of the damages sought by the GTA defendants in theircounterclaims against the plaintiffs. The court allowed the plaintiffs to filea late response to the motion for summary judgment, which the plaintiffs did onMarch 31, 2006. Trial of this matter is currently set for a date notbefore July 1, 2006. At this time, the Company is unable to assess thelikely 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 theCompany based upon alleged breach of contract, fraudulent

 

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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. In January 2006,the Company filed a motion for partial summary judgment. On March 31,2006, the Company received a memorandum in opposition to the motion for partialsummary judgment. The plaintiff objected to proceeding to summary judgmentbased upon the fact that the plaintiff had not taken certain depositions. Thecourt ordered that such depositions must be taken by the plaintiff within thenext 30 days. A hearing is now expected to be scheduled in May 2006 onthis motion for partial summary judgment. The Company is asking the Court toenter summary judgment on the alleged fraud and tortuous interference claims.If the Company is unsuccessful on summary judgment, this case will be sent tonon-binding mediation sometime before June 30, 2006. If a settlement isnot reached at mediation, this case will go to trial beginning on August 29,2006. The Company continues to investigate both the liability and damageaspects of this case, but it does not expect to find any liability. Formaldiscovery will commence soon. At this time, the Company is unable to assess thelikely outcome of this litigation.

 

***LandUse Lawsuits***

*** ***

OnMarch 10, 2005 in the Circuit Court of the Sixth Judicial Circuit, in andfor Pinellas County, Florida, Civil Division, the Company filed a Motion toIntervene in the lawsuit titled Innisbrook Condominium Association, Inc.,C. Frank Wreath, Meredith P. Sauer, and Mark Banning, Plaintiffs (the “Plaintiffs”)vs. Pinellas County, Florida, Golf Host Resorts, Inc. and Innisbrook FLLC, Defendants (the “Defendants”), Case No. 043388CI-15. The Companyrefers to this lawsuit as the Initial Land Use Lawsuit. The Plaintiffs filed amulti-count complaint, or the Complaint, seeking injunctive and declaratoryrelief with respect to the land use and development rights of a tract of landknown as Parcel F. Parcel F is a parcel of land located within the Resort. ThePlaintiffs allege that there was no remaining development units (residential units)available to be developed within the Resort property. On March 29, 2005, theCompany filed a Motion to Intervene as a defendant in the Initial Land UseLawsuit in order to protect its property, and its land use and developmentrights with respect to Parcel F and the Company’s property. A hearing on theMotion to Intervene was held on April 4, 2005, after which the courtgranted the Company’s Motion to Intervene. On Friday, January 6, 2006, thecourt ruled in favor of all defendants and against all plaintiffs as to eachcount in both cases. Subsequent to the court’s oral rulings, defense counselprepared a proposed final judgment which reflects the court’s factual findingsand legal conclusions. 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. On March 31,2006, the Plaintiffs in the consolidated cases filed a notice of appeal.

 

Asan intervenor in the Initial Land Use Lawsuit, the Company sought to obtain aruling from the court which preserves and protects the Company’s property, and theland use and development rights with respect to Parcel F and the Company’sproperty in order to maximize the value of those rights as they relate both toParcel F and the Resort in general. The Company refers to these two matterscollectively as the Land Use Lawsuits.

 

***LakeOzark Industries, Inc. and Everett Holding Company, Inc. v. GolfTrust 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 Holding Company, Inc.,in the Fall of 1999 against numerous defendants, including Golf Trust ofAmerica, L.P. Plaintiffs

 

12

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assertLOCI performed construction services on, or that benefited, the property ofvarious defendants, including Golf Trust of America, L.P. So far as the actionconcerns Golf Trust of America, L.P., plaintiffs seek to foreclose a mechanic’slien upon property formerly owned by Golf Trust of America, L.P. The lien isfor the principal amount of approximately $1,276,000, plus interest at 10% perannum and attorney fees. Plaintiffs calculate interest to May 20, 1999,just prior to the lien filing, to be approximately $151,000 and interestthereafter to be $354 per day. In March 2002 the Court orally granted amotion for summary judgment filed by Golf Trust of America, L.P., ruling thatplaintiffs’ claimed lien does not comply with requirements of the Missourimechanic’s lien statute and is invalid. The court entered its written ordergranting Golf Trust of America, L.P.’s motion for summary judgment in April 2002.Since not all claims involved in this lawsuit were disposed of by that ruling,Plaintiffs’ time to appeal this ruling did not begin to run. In November 2003the court entered a final judgment, and plaintiffs appealed the ruling in favorof Golf Trust of America, L.P. to the Missouri Court of Appeals. The briefs inthe appeal 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, theCompany 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 on May 31,2005. On May 31, 2005, the Court of Appeals also filed modified Opinion,which again reversed the Circuit Court judgment in favor of the Company andremanded the case to the Circuit Court for further proceedings. On June 15,2005, the Company 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 theCompany. A trial date has not yet been set. At this time, the Company is unableto assess the likely outcome of this litigation.

 

***OrdinaryCourse Litigation***

*** ***

Ownersand operators of golf courses are subject to a variety of legal proceedingsarising in the ordinary course of operating a golf course, includingproceedings relating to personal injury and property damage. Since the Companyis now either the owner and/or the operator of its remaining golf courses, theCompany maintains insurance for these purposes. The Company is not currentlysubject to any material claims of this type.

 

*Westinand Troon Management Fees*

* *

TheCompany entered into the management agreement with Westin on July 15,2004, to manage the Resort for a fee of 2.2% of gross revenues.Contemporaneously with the signing of that agreement, Westin entered into amanagement contract with Troon to manage the golf facilities of the Resort fora fee of 2% of gross golf revenue. These agreements also provide for theopportunity to earn supplemental fees based on financial performance. Themanagement agreement has a termination date of December 31, 2017. Troon’scontract with Westin has a termination date of July 15, 2009.

 

*RefundableInitiation Fees*

* *

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 our books at March 31, 2006 and is valued at$125,000. Additionally, certain initiation fees may be refundable prior tothe 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 and amortizedover the average life of a membership which, based on historical information,is deemed to be nine years.

 

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**5.****             Receivables—net**

 

Receivables—netconsists of the following:

 
| ** **                                         | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|----------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                         | ** ** | **(Liquidation Basis)** | ** ** |
| Note receivable taken in sale of asset             |       | $                            | 2,327,000  |                            | $          | 2,326,000 |   |
| Member, trade and other miscellaneous  receivables |       | 4,433,000                    |       | 3,480,000                       |       |
| Total                                              |       | $                            | 6,760,000  |                            | $          | 5,806,000 |   |

 

Thenote receivable represents the $2.5 million note the Company received fromthe buyer of the Eagle Ridge Inn & Resort, plus accrued interest lessa discount reserve of $200,000 (i.e., in the event that the borrower has notcaused any uncured event of default to occur under the note up to its maturitywhich is February 1, 2007, the borrower shall have the right to reduce itspayment obligations under the note by $200,000 plus any interest paid on thatsum during the term of the note upon borrower’s payment of the balance of thenote, subject to certain prepayment prohibitions).

 

**6.**             Debt

 
| ** **                | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|---------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Revolving line of credit  |       | $                            | 4,100,000  |                            | $          | 4,100,000 |   |
| Note payable              |       | 784,000                      |       | 769,000                         |       |
| Capital lease obligations |       | 889,000                      |       | 961,000                         |       |
| Total                     |       | $                            | 5,773,000  |                            | $          | 5,830,000 |   |

 

*RevolvingLine 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. On August 4,2005, the line was increased to $4,200,000 and the term was extended to March 18,2009. This loan is collateralized by a security interest in the Company’s golfcourses in Columbia, South Carolina, located at the Country Club at Wildewoodand the Country Club at Woodcreek, collectively known as Stonehenge. Theinterest rate is the prime rate plus 1.75% per annum paid monthly. This loanrequires that the operations at Stonehenge for the immediately preceding twelvemonth period be sufficient to meet a debt service coverage ratio, as defined inthe mortgage of at least 1.20, as measured monthly. Due to increasing interestrates coupled with a lack of membership growth at Stonehenge in the threemonths ended March 31, 2006, the operations at Stonehenge for theimmediately preceding twelve month period as of March 31, 2006 resulted ina debt service coverage ratio of 1.02 which did not meet the required debtservice coverage ratio of 1.20; however, the lender waived the debt servicecoverage ratio covenant through May 31, 2006.

 

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 (7.75% per annum at March 31, 2006) plus1.75% per annum, paid monthly. The Company paid a one-time commitment fee toTextron of $42,000 to obtain the increase in this credit line and the Companywill pay to Textron a fee of 0.25% per annum of the unused line balance.

 

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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 the March 2004Mortgage, Security Agreement and Fixture Filing (as modified by the AmendedMortgage, the “Security Agreement”). The Security Agreement contains events ofdefault that include, among others, non-payment of principal, interest or fees,violation of covenants, inaccuracy of representations and warranties, crossdefaults, bankruptcy and insolvency proceedings, termination, dissolution orliquidation of Stonehenge LLC of Golf Trust of America, L.P., failure to curethe loss of certain licenses, permits or contracts, curtailment of utilities orservices at Stonehenge, and material judgments. Upon occurrence of a default,Textron is entitled to, among other things, accelerate all obligations of theBorrower and sell certain of the Borrower’s assets to satisfy the Borrower’sobligations under the Security Agreement and the Amendment. See violation offinancial covenant above.

 

*NotePayable*

* *

In connection with the Settlement Agreement, Elk Funding, L.L.C., orElk Funding, provided a $2,000,000 loan to the Company in the form of twopromissory notes, know as Promissory Note A and Promissory Note B,the latter of which was repaid pursuant to it terms in September 2004.Pursuant to the Company’s agreement with Elk Funding, these loans were to fundthe Resort’s current working capital needs. Promissory Note A is anon-recourse loan in the original principal amount of $700,000, which sum iscollateralized by a security interest in our portion of the net proceeds fromthe ultimate sale of Parcel F. Interest accrues on this unpaid balance at arate of prime plus 1% until the closing of the sale of Parcel F, at which timethe principal and accrued interest under Promissory Note A will be due.There are no specific financial reporting covenants in Promissory Note A.

 

*CapitalLease Obligations*

* *

AtMarch 31, 2006, we had capital lease agreements for certain golf courseand related equipment. These lease agreements expire at various dates through2009.

 

**7.****             Accounts payable andother liabilities**

 

Accountspayable and other liabilities consists of the following: 

 
| ** **                    | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|-------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Accounts payable              |       | $                            | 7,456,000  |                            | $          | 5,208,000 |   |
| Accrued payroll               |       | 1,085,000                    |       | 1,701,000                       |       |
| Accrued expenses              |       | 2,482,000                    |       | 2,201,000                       |       |
| Deferred revenue and deposits |       | 3,510,000                    |       | 3,970,000                       |       |
| Total                         |       | $                            | 14,533,000 |                            | $          | 13,080,000 |   |

 

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**8.****             Investment in Resortand related obligations**

 

Certaincondensed balance sheet information regarding the Resort, adjusted for theliquidation basis of accounting, is provided below: 

 
| ** **                                                                                                                 | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Assets                                                                                                                     |       |                         |       |                            |       |
| Current assets                                                                                                             |       | $                            | 10,350,000 |                            | $          | 6,491,000 |   |
| Real estate and Resort assets                                                                                              |       | 50,646,000                   |       | 50,626,000                      |       |
| Other assets                                                                                                               |       | 2,584,000                    |       | 2,647,000                       |       |
| Total assets                                                                                                               |       | 63,580,000                   |       | 59,764,000                      |       |
| Liabilities                                                                                                                |       |                         |       |                            |       |
| Accounts payable and accrued expenses                                                                                      |       | 9,412,000                    |       | 8,862,000                       |       |
| Long term refurbishment                                                                                                    |       | 4,587,000                    |       | 4,647,000                       |       |
| Capital lease obligations                                                                                                  |       | 889,000                      |       | 961,000                         |       |
| Other long term liabilities                                                                                                |       | 6,473,000                    |       | 6,473,000                       |       |
| Total liabilities                                                                                                          |       | 21,361,000                   |       | 20,943,000                      |       |
| Net investment in subsidiary                                                                                               |       | 42,219,000                   |       | 38,821,000                      |       |
| Write-down to estimated value                                                                                              |       | (2,421,000                   | )          | (2,421,000                      | )          |
| Net investment in subsidiary adjusted for  write-down                                                                      |       | $                            | 39,798,000 |                            | $          | 36,400,000 |   |
| Reserve for projected operating results  through the contemplated holding period (Note 2)                                  |       | (3,398,000                   | )          | —                          |       |
| Net investment in subsidiary adjusted for  reserve for projected operated results through the contemplated holding  period |       | $                            | 36,400,000 |                            | $          | 36,400,000 |   |

 

Otherobligations consists of the following:

 
| **Estimated fair value at:** | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Master Lease Refurbishment Obligation       |       | $                            | 4,587,000  |                            | $          | 4,647,000 |   |
| Westin Termination Fee                      |       | 5,673,000                    |       | 5,673,000                       |       |
| Troon Supplemental Fee                      |       | 800,000                      |       | 800,000                         |       |
|                                        |       | $                            | 11,060,000 |                            | $          | 11,120,000 |   |

 

The increase in the Company’s net investmentin its subsidiary from December 31, 2005 to March 31, 2006 is due tothe operating performance of the Resort for the three months ended March 31,2006 which is typically the most profitable quarter of the Resort’s fiscal year. As more fully described in Note 2, theCompany has recorded a reserve of $3,398,000 to reflect the estimated operatingresults during the remaining contemplated holding period.

 

*MasterLease Refurbishment Obligation*

* *

Inconnection with taking control of the Resort, effective July 16, 2004, theCompany recorded a liability in recognition of the Master Lease Agreement, orMLA, refurbishment program which entitles condominium owners who participate inthe Rental Pool to 50% reimbursement of the refurbishment costs of their unitsubject to the terms and conditions of the MLA. Interest on this liability isaccrued at a rate of 5% and paid quarterly. Principal payments began in thefirst quarter of 2005 and will be paid quarterly through the fourth quarter of2009.  In addition, the Resort agreed toprovide refurbishment reimbursement for units placed into the rental poolduring 2005 at a level of 25% of the condominium owners investment in therefurbishment. The Company refers to this program as Phase 5. Interest on thePhase 5 liability is accrued at a rate of 2.5% and paid quarterly. Principal

 

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paymentsfor Phase 5 begin in the first quarter of 2008 and will be paid quarterlythrough the fourth quarter of 2012. The estimated settlement value of thisliability upon sale of the Resort is $4,587,000 as of March 31, 2006.

 

Minimum principal payments on the refurbishment program are as follows:

 
| **Year**                                   | ** ** | **Amount** | ** ** |
|--------------------------------------------|------------|------------|------------|
| April 1 – December 31, 2006 |       | $          | 804,000    |   |
| 2007                                       |       | 1,428,000  |       |
| 2008                                       |       | 1,789,000  |       |
| 2009                                       |       | 2,148,000  |       |
| 2010                                       |       | 7,000      |       |
| Thereafter                                 |       | 20,000     |       |
| **Total**                                  |       | $          | 6,196,000  |   |

* *

*WestinTermination 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 of $5,900,000. Thisamount is reduced by $365 per day (three hundred sixty-five dollars) for eachday elapsed from the effective date until the termination date; provided,however, that the termination fee shall not be reduced below $5,500,000. Theestimated settlement value of this liability upon sale of the Resort is$5,673,000 as of March 31, 2006.

 

*TroonSupplemental Fee*

* *

Thefacility management agreement that the Company executed with Troon was effectiveas of 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 to July 15,2004.

 

**9.****             Preferred Stock**

 

*Series ACumulative Convertible 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 to a single purchaser, AEW Targeted Securities Fund, L.P., or AEW. The series Apreferred stock is convertible, in whole or in part, at the option of theholder at any time into the Company’s common stock at an implicit conversionprice of $26.25 per share of common stock, subject to adjustment in certaincircumstances. 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 of December 31,2005, the Company had accrued and not paid eighteen 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 accrued andunpaid Series 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 until theCompany fully pays all accrued but unpaid series A dividends. Although AEWdid not exercise this right, it may do so in the future in accordance withthe 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 of the shares of the Series A preferred stock.That agreement required AEW to vote in favor of the plan of liquidation andrequired the Company to redeem all of the shares of Series A preferredstock (for $25 per share plus dividends accrued and unpaid thereon through thedate of the final redemption payment) promptly after the Company determines ingood faith that it has received sufficient net proceeds from the disposition ofthe Company’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. Since theCompany defaulted on that obligation, from July 21, 2003 until the series APreferred Stock is redeemed, the stated dividend rate of the series Apreferred stock increased from 9.25% to 12.50% per annum (equivalent to aquarterly dividend of $625,000). Although the Company is permitted to continueto accrue such dividends without paying them on a current basis, they must bepaid in full prior to any distribution to the Company’s common stockholders,which will reduce its cash available for liquidating distributions to commonstockholders.

 

OnMarch 24, 2005, the Company executed a letter with the holder of its series Apreferred stock, AEW Targeted Securities Fund, L.P., referred to in this reportas AEW, in which AEW agreed that it will execute for the Company’s benefit anoption to purchase, on or before November 30, 2005, the 800,000 shares of theCompany’s 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 payable in respect of such series Apreferred shares as of the Company’s exercise of the option. This letteragreement was executed in contemplation of an exit transaction of the typecontemplated by the engagement letter with Houlihan Lokey. The exercise priceof this option was approximately $24,914,000. This exercise price excludesdividends that would accrue to the series A preferred stock during 2004and subsequent periods. Although this option expired on November 30, 2005because the Company did not close on a sale of the Resort by that date, AEW hasrecently executed a similar option letter.

 

OnNovember 11, 2005, the Company and AEW entered into a letter agreement, orthe Amendment, amending the terms of the Option Agreement by and between theCompany and AEW. The Amendment, among other things, extended the terminationdate of the Option from November 30, 2005 to December 30, 2005,provided that the $4,500,000 deposit, which was then held in escrow, under anasset purchase agreement would become non-refundable to the potential buyer by December 9,2005. In the event that the potential buyer’s $4,500,000 deposit did not becomenon-refundable by December 9, 2005, the Amendment would automaticallyterminate. Pursuant to the Amendment, the $24,914,000 Exercise Price of theOption was to bear interest at a rate of 10% per annum from December 1,2005 until the Company delivered to AEW notice of its exercise of the Option.Pursuant to the terms of the asset purchase agreement, the potential buyer’spurchase price would be adjusted upwards by the amount of interest accrued upto and including the closing date. A closing did not occur and the amendedagreement with AEW expired on December 9, 2005. See Note 10, SubsequentEvents, for recent updates involving AEW.

 

**10.****          Subsequent Events**

 

OnApril 12, 2006, the Company entered into a new option agreement with AEWin which AEW grants 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 is onlyexercisable in the event that the business of the Resort is purchased for cash

 

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considerationof no more than $35 million. This option agreement was executed incontemplation of an exit transaction as contemplated by the engagement letterwith Houlihan Lokey.

 

Thereare no assurances that the transaction contemplated in the Option Agreementwill close. In the event that the transactions contemplated by the OptionAgreement do not close, the Company will develop a business plan to address thefuture operating plans for the Resort and the Company until an exit transactioncan be completed. As part of this business plan, the Company would need tofactor in estimated costs of liquidation and the accrual of preferred dividendswhich will occur through the completion of the Company’s liquidation. As aresult of the execution by the Company of the Option Agreement, the Company hasnot recorded a liability for the accrual of quarterly preferred dividendssubsequent to the quarter ended June 30, 2001. In the event that thetransactions contemplated in the Option Agreement are not consummated pursuantto the terms of the Option Agreement, absent either an agreement by a thirdparty to 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 Company may berequired to accrue, and ultimately pay in its liquidating distributions to AEW,$9,914,000 to reflect quarterly preferred dividends for the period July 1,2001 to December 31, 2005, plus an additional dividend accrual of $625,000per quarter for preferred dividends through the date that the exit transactionis ultimately consummated and liquidation payments are made to AEW.

 

OnMay 8, 2006, the Company closed on the sale of the Tierra Del Sol CountryClub to Encargo Limited, LLC, a New Mexico limited liability company,  or its permitted assigns, for a price of$2.125 million. The net proceeds from the sale of Tierra Del Sol CountryClub are subject to an Agreement for Marketing and Joint Sale of Property. TheAgreement for Marketing and Joint Sale of Property provides that 17.5% of thenet proceeds of a sale will be paid to the Estate of Terrence J. Mulvihill andGolf Classic Resorts, LLC, the owner of the water rights and the executive 9-holegolf course at Tierra Del Sol. The purchase and sale agreement requires thatthe buyer assume certain liabilities, including a liquor license note payablefor $125,000. Under the terms of the purchase and sale agreement, the purchaseprice will be paid $1,062,500 in cash at closing and the remaining balance willbe financed by the Company pursuant to the following terms:  a promissory note, or note, with a twelvemonth term secured by a first mortgage on the property accruing interest at primeplus 3% and paid quarterly. If the note is paid off within three months thenthe accrued interest is waived. If the note is paid off within six months thenthe accrued interest will be discounted by 50%. The estimated gain ofapproximately $340,000 on this sale was recorded as of March 31, 2006 andis reflected in the net assets at March 31, 2006 as an increase in thecarrying  value of Tierra Del Sol.

 

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**GOLF TRUST OF AMERICA, INC.**

**Form 10-Q Quarterly Report**

**For the Three Months Ended March 31,2006 and  2005**

 

**ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

We were incorporated in Maryland on November 8, 1996. We arecurrently engaged in a liquidation of our assets pursuant to a plan ofliquidation approved by our stockholders. We were originally formed to be areal estate investment trust, or REIT; however, as of fiscal year 2002 we nolonger have our REIT status as a result of our repossession and operation ofgolf courses following the default of their original third-party lessees. As ofMay 9, 2006, we own two properties, held by us in fee simple, whichrepresent six golf courses. Two of the six golf courses are managed by us andfour (namely, the Resort golf courses) are pursuant to a management contractwith an unaffiliated third-party, Westin. Four of our golf courses are locatedin Florida and two in South Carolina. Title to our golf courses is generallyheld by Golf Trust of America, L.P., a Delaware limited partnership. Title tothe Resort is held by GTA-IB, LLC, a wholly-owned subsidiary of GTA-IB GolfResort, LLC. GTA-IB Golf Resort, LLC is 100% owned by our operatingpartnership, Golf Trust of America, L.P. In this Quarterly Report, we refer toGolf Trust of America, L.P. as “our operating partnership” or “OP,” and werefer to the operating partnership and ourselves (together with allsubsidiaries) collectively as “we,” “us” or “our company”. Through our whollyowned subsidiaries, GTA GP, Inc. and GTA LP, Inc., we held a99.6 percent interest in our operating partnership as of May 9, 2006.GTA GP is the sole general partner of our operating partnership and owns a0.2 percent interest therein. GTA LP is a limited partner in the operatingpartnership and owns a 99.4 percent interest therein. These percentagesgive effect to all outstanding preferred OP units on an as-converted basis asof May 9, 2006.

 

**Significant Events since the filing of our Annual Report on Form 10-Kon April 17, 2006**

 

Significantevents occurring since April 17, 2006 (the filing date of our annualreport on Form 10-K) include:

 

 On May 8, 2006, the Company closed on thesale of the Tierra Del Sol Country Club to Encargo Limited, LLC, a New Mexicolimited liability company,  or its permittedassigns, for a price of $2.125 million. The net proceeds from the sale ofTierra Del Sol Country Club are subject to an Agreement for Marketing and JointSale of Property. The Agreement for Marketing and Joint Sale of Propertyprovides that 17.5% of the net proceeds of a sale will be paid to the Estate ofTerrence J. Mulvihill and Golf Classic Resorts, LLC, the owner of the waterrights and the executive 9-hole golf course at Tierra Del Sol. (See Part II,Item I of this quarterly report under the caption “Agreement for Marketing andJoint Sale of Tierra Del Sol” for further discussion). The purchase and saleagreement requires that the buyer assume certain liabilities including a liquorlicense note payable for $125,000. Under the terms of the purchase and saleagreement, the purchaser price will be paid $1,062,500 in cash at closing andthe remaining balance will be financed by the Company pursuant to the followingterms:  a promissory note, or the note,with a twelve month term secured by a first mortgage on the property accruinginterest at prime plus 3% and paid quarterly. If the note is paid off withinthree months then the accrued interest is waived. If the note is paid offwithin six months then the accrued interest will be discounted by 50%. Theestimated gain of approximately $340,000 on this sale was recorded as of March 31,2006 and is reflected in the net assets at March 31, 2006 as an increasein the carrying  value of Tierra Del Sol.

 

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**Assets held for sale**

 

The following chart identifies each of our unsold properties as of May 9,2006:

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

 

As of May 9, 2006, we have not entered into any executed bindingagreements with prospective purchasers of the foregoing assets.

 

**The Resort**

 

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

 

HoulihanLokey continues to market the Resort for sale on our behalf. As of the date ofthis report, a definitive agreement for the purchase of the Resort has not beenexecuted.

 

OnApril 12, 2006, we executed a letter agreement with AEW in which AEWgranted us the option to purchase, on or before June 30, 2006, 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 payable in respect of such series Apreferred shares as of the date of our exercise of the option. The exerciseprice of the option is $20 million. The option is only exercisable if thebusiness of the Resort is sold for cash consideration of no more than $35million. We will attempt to complete the sale of the Resort prior to the terminationdate of the option agreement, however, we can provide no assurances guaranteethat such sale will be consummated on or before the termination date. In theevent that the consideration exceeds this threshold, then we would seek torenegotiate with AEW regarding the repurchase price of the series Apreferred stock.  AEW may beunwilling to renegotiate with us.

 

Thereare no assurances that the transactions contemplated by the letter agreementwith AEW will close; therefore, no reliance should be placed on theseestimates. Further, there are no assurances that these estimates will notchange materially prior to or upon a sale of the Resort.

 

Seefurther discussion in Notes 9 and 10 to the Condensed Consolidated FinancialStatements referred to in Item 1 of this quarterly report and below  in Part II, Item IA of this QuarterlyReport under the caption “*Risk Factors*.”

 

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

 

As we contemplate the sale of our remaining assets and the wind-up of theCompany, as expressly contemplated by our plan of liquidation, we may electto contribute our remaining assets and liabilities to a liquidating trust. Fora more 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 ended December 31,2005 filed on April 17, 2006.

 

***Rental Pool***

 

In connection with the Settlement Agreement, we assumed control andoperation of the Resort Rental Pool Lease Operation at the Resort.Approximately half of the condominium owners at the Resort provide their unitsas resort accommodations under rental pool lease agreements. We are the lesseeunder the lease operation agreements, which provide for the distribution of apercentage of room revenues to participating condominium owners.Accordingly, we do not bear the expense of certain operating and financingcosts of the rental units. However, we do bear the expense of all otheroperating aspects of the Resort.

 

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Thecondominium owners at the Resort have established an Association of CondominiumOwners, or the Association, to administer and maintain certain of the commonareas of the Resort and to conduct the business of the condominium owners, suchas maintaining insurance on the real property, upkeep of the structures,maintenance of the grounds, electricity for the common areas, water/sewer andsecurity services. In addition to the current rental pool agreement dated January 1,2002, the former owner of the Resort agreed with the Association that theformer owner of the Resort would reimburse 50% of the refurbishment costs plusaccrued interest (at 5% per annum) expended in the refurbishment of the condominiumunits by the condominium owners. This amount will be reimbursed toparticipating condominium owners (or transferees of their condominium unit)over the five-year period beginning in 2005 as reflected in the table below. Inaddition, the Resort agreed to provide refurbishment reimbursement for unitsplaced into the rental pool during 2005 at a level of 25% of the condominiumowners investment in the refurbishment. We refer to this program as Phase 5. Intereston the Phase 5 liability accrues at a rate of 2.5% and paid quarterly. Principalpayments for Phase 5 begin in the first quarter of 2008 and will be paidquarterly through the fourth quarter of 2012. The estimated settlement value ofthe refurbishment liability upon sale of the Resort is $4,587,000 as of March 31,2006.

 

The reimbursement attributable to each unit is contingent on the unitremaining in the rental pool from the time of the refurbishment of such unitthroughout the reimbursement period (2005 to 2009 or 2005 to 2012, asapplicable). If the unit does not remain in the pool during the applicable reimbursementperiod, the owner or successor owner forfeits any unpaid installments at thetime the unit is removed from the pool.

 

Asof May 9, 2006, 612 units were participating in the Rental Pool. Minimumundiscounted principal and interest payments on the refurbishment program areas follows:

 
| **Year**                                   | ** ** | **Principal** | ** ** | **Interest** | ** ** |
|--------------------------------------------|------------|---------------|------------|--------------|------------|
| April 1 – December 31, 2006 |       | $             | 804,000    |         | $          | 217,000 |   |
| 2007                                       |       | 1,428,000     |       | 233,000      |       |
| 2008                                       |       | 1,789,000     |       | 153,000      |       |
| 2009                                       |       | 2,148,000     |       | 54,000       |       |
| 2010                                       |       | 7,000         |       | 1,000        |       |
| Thereafter                                 |       | 20,000        |       | —       |       |
| **Total**                                  |       | $             | 6,196,000  |         | $          | 658,000 |   |

 

**Application of Critical Accounting Policies**

 

Upon approval by our stockholders of the plan of liquidation on May 22,2001, we adopted the liquidation basis of accounting for periods beginningafter May 22, 2001. The changes in Net Assets in Liquidation for GolfTrust of America, Inc. excluding the Resort and Golf Host Securities, arediscussed below. This discussion of changes in net assets, instead of a discussionof operating results, is consistent with the presentation of the liquidationbasis financial 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  months ended March 31, 2006 and 2005.”Please refer to “Management’s Discussion and Analysis of Financial Conditionand Results of Operations—Application of Critical Accounting Policies” in our Form 10-Kfor the year ended December 31, 2005 filed on April 17, 2006 for acomplete description of our critical accounting policies.

 

***Reserve for Estimated Costs During the Periodof Liquidation***

 

The change in our reserve for estimated liquidation costs for the threemonths ended March 31, 2006 is summarized in Note 2 to our condensedconsolidated financial statements contained in Item 1 above.

 

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**Changes in Net Assets in Liquidation**

 

***January 1, 2006 to March 31, 2006***

 

Net Assets in Liquidation decreased by $350,000 during the period from January 1,2006 to March 31, 2006. Operating income, including the net income fromour properties, primarily the Resort, including net interest expense oncorporate and property specific debt, was $3,180,000. We closed on the sale ofTierra Del Sol Country Club on May 9, 2006 with an estimated gain ofapproximately $340,000, therefore, we increased the carrying value of TierraDel Sol at March 31, 2006 to reflect this approximate increase in value inour net assets at March 31, 2006. There were no other adjustments to the estimatedfair value on the remaining properties held for sale at March 31, 2006.  The reserve for estimated liquidation costsand projected capital expenditures increased approximately $3,870,000 dueprimarily to the accrual of anticipated operating results for our consolidatedcompany including the Resort through the anticipated holding period andconclusion of our plan of liquidation coupled with an increase in the provisionfor legal fees of approximately $415,000 to be incurred in (i) thenegotiation of  an asset purchaseagreement through and including the consummation of the sale of the Resort, (ii) litigatingthe proceedings to which the Company is currently a party and (iii) theadministrative conclusion of our plan of liquidation.

 

Our net assets in liquidation of approximately $13,432,000 at March 31,2006 would result in a liquidation distribution per share of approximately $1.85.This $1.85 estimate for 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 projections could decrease materially basedon the timing of any sale, the performance of the underlying assets, and a changein the underlying assumptions of the cash flow amount projected. The $1.85estimate is derived by dividing the net assets in liquidation by the number ofshares of common stock and common operating partnership units outstanding7,353,000 less 85,000 of shares that we expect will be cancelled prior to thedistribution of the net assets. The 85,000 shares of common stock that weexpect will be cancelled were pledged to us 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. Thisredemption agreement provides, in part, that those 85,000 shares of our CommonStock will be tendered to us if and when the total amount of liquidatingdistributions paid to our holders of common stock pursuant to the plan ofliquidation is less than $10.74 per share.

 

Since the Company is presenting liquidation basis financial statementsthat only reflect the changes in net assets in liquidation, our operatingresults of our company are summarized and reflected in the table below:

 
| ** **                                                      | ** ** | **For the three months ended ** | ** ** |
|-----------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                                      | ** ** | **March 31,**                                       | ** ** |
| ** **                                                      | ** ** | **2006**                                                 | ** ** | **2005** | ** ** |
| ** **                                                      | ** ** | **(unaudited)**                                          | ** ** |
| Revenues                                                        |       |                                                     |       |   |   |
| Revenue from Resort and managed golf course  operations         |       | $                                                        | 18,006,000 |   | $ | 16,427,000 |   |
| Expenses                                                        |       |                                                     |       |   |   |
| General and administrative                                      |       | 251,000                                                  |       | 280,000 |   |
| Direct expenses from Resort and managed  golf course operations |       | 14,257,000                                               |       | 13,000,000 |   |
| Total operating expenses                                        |       | 14,508,000                                               |       | 13,280,000 |   |
| Operating loss                                                  |       | 3,498,000                                                |       | 3,147,000 |   |
| Interest expense—net                                       |       | (318,000                                                 | )          | (343,000 | ) |
| Operating loss and interest                                     |       | $                                                        | 3,180,000  |   | $ | 2,804,000 |   |

 

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***Resort results of operations for the threemonths ended March 31, 2006 and 2005 (in thousands except for utilizationstatistics and percentages)***

 

Because the Resort is a destination golf resort, we believe it appealsto a different market than the market to which a stand-alone hotel located in adowntown metropolitan area appeals. The Resort provides recreation, food andbeverages to business meeting or group travelers, transient guests who playgolf and golf package purchasers and guests who bring their families to theResort. As a destination golf resort, the Resort’s performance is sensitive toweather conditions and seasonality. The Resort had higher realized revenue andfewer room nights during the first three months of 2006 than during thecorresponding period in 2005. We believe that this increase in realizedrevenue, even though room nights were down, resulted from continuingimproved sales and marketing efforts directed towards improving retail sales togroup and transient business in addition to increasing sales of golf packagesand golf memberships at the Resort. These market segments produce agreater  aggregate spending level per room night.While overall room nights and golf rounds were down 5.1% and 1.8%,respectively, overall gross revenue per room night increased by $73.25 to$535.40.

 

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The following table shows utilization of the Resort facilities brokeninto facility type, results of operations and selected Rental Pool statisticaldata during the three month period ended March 31, 2006 and March 31,2005:

 
| ** **                                 | ** ** | **Three Months Ended March 31,** | ** ** |
|--------------------------------------------|------------|----------------------------------|------------|
| ** **                                 | ** ** | **2006**                         | ** ** | **2005** | ** ** | **Increase  (decrease)** | ** ** | **Percentage  Change** | ** ** |
| **Utilization of Resort facilities:**      | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Available room nights                 |       | 51,067                           |       | 52,158 |   | (1,091 | ) | (2.1% | ) |
| Actual room nights                    |       |                             |       |   |   |   |   |   |   |
| Group                                      |       | 23,093                           |       | 21,129 |   | 1,964 |   | 9.3 | % |
| Transient                                  |       | 8,683                            |       | 12,368 |   | (3,685 | ) | (29.8% | ) |
| Total room nights                     |       | 31,776                           |       | 33,497 |   | (1,721 | ) | (5.1% | ) |
| Food and beverage meals                    |       | 158,709                          |       | 143,017 |   | 15,692 |   | 11.0 | % |
| Golf rounds                                |       |                             |       |   |   |   |   |   |   |
| Resort guests                              |       | 23,421                           |       | 25,373 |   | (1,952 | ) | (7.7% | ) |
| Member/guests                              |       | 12,858                           |       | 11,582 |   | 1,276 |   | 11.0 | % |
| Total golf rounds                          |       | 36,279                           |       | 36,955 |   | (676 | ) | (1.8% | ) |
| **Results of operations (in thousands):**  | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenues                                   |       |                             |       |   |   |   |   |   |   |
| Hotel                                      |       | $                                | 5,845      |   | $ | 5,281 |   | $ | 564 |   | 10.7 | % |
| Food and beverage                          |       | 5,132                            |       | 4,244 |   | 888 |   | 20.9 | % |
| Golf                                       |       | 5,089                            |       | 4,666 |   | 423 |   | 9.1 | % |
| Other                                      |       | 946                              |       | 1,289 |   | (343 | ) | (26.6% | ) |
| Total revenues                             |       | 17,012                           |       | 15,480 |   | 1,532 |   | 9.9 | % |
| Expenses                                   |       |                             |       |   |   |   |   |   |   |
| Hotel                                      |       | 4,107                            |       | 3,885 |   | 222 |   | 5.7 | % |
| Food and beverage                          |       | 3,133                            |       | 2,610 |   | 523 |   | 20.1 | % |
| Golf                                       |       | 1,856                            |       | 1,839 |   | 17 |   | 0.9 | % |
| Other                                      |       | 2,835                            |       | 2,523 |   | 312 |   | 12.4 | % |
|                                       |       |                             |       |   |   |   |   |   |   |
| General and administrative                 |       | 1,742                            |       | 1,601 |   | 141 |   | 8.8 | % |
| Depreciation and amortization              |       | 491                              |       | 798 |   | (307 | ) | (38.5% | ) |
| Total expenses                             |       | 14,164                           |       | 13,256 |   | 908 |   | 6.8 | % |
| Operating income                           |       | 2,848                            |       | 2,224 |   | 624 |   | 28.0 | % |
| Interest expense, net                      |       | 373                              |       | 439 |   | (66 | ) | (15.0% | ) |
| Net income                                 |       | $                                | 2,475      |   | $ | 1,785 |   | $ | 690 |   | 38.7 | % |
| **Selected Rental Pool statistical data:** | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Average Daily Distribution                 |       | $                                | 40.03      |   | $ | 36.40 |   | $ | 3.63 |   | 10.0 | % |
| Average Room Rate                     |       | $                                | 183.95     |   | $ | 157.66 |   | $ | 26.30 |   | 16.7 | % |
| Occupancy percentage                       |       | 62.2                             | %          | 64.2 | % | (2.0% | ) | (3.1% | ) |
| Average number of available units          |       | 567                              |       | 580 |   | (13 | ) | (2.2% | ) |

 

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***Three months ended March 31,2006 and 2005.***

 

During the first quarter of 2006, there were 1,721, or 5.1%, feweroccupied room nights than there were for the first quarter of 2005. Ascompared to the first  quarter of 2005,during the first quarter of 2006 there were 3,685 fewer transient room nightsand 1,964 more group room nights, resulting in an aggregate of 1,721 feweroccupied room nights. Occupied room nights consist of group room nights,or room nights which are booked and correlated to a meeting or conventionat the Resort, and transient room nights, which are room nights whichare booked and do not correlate to a meeting or convention at the Resort. Transientroom nights are often booked 24 hours or less from the date of stay,while group room nights are typically booked no less than 120 days inadvance of the date of a stay, with larger groups typically booking 16 to18 months in advance of a stay. Transient room nights are oftenbooked as part of golf packages and Internet bookings, among others, butduring the first quarter of 2005 a significant number of transient rooms wereattributable to the consumption of golf packages at the Resort. Managementbelieves that transient room nights were lower in the first quarter of2006 than in the corresponding period in 2005, due primarily to the mild wintermonths experienced during 2006 in the northern states. Because the wintermonths were much warmer in the northern states during the first quarter of 2006than in 2005, we believe the desire of the transient guest and moreparticularly the golf package guest, to “get away” was reduced. This, in turn,resulted in reduced transient business in the first quarter of 2006. Currentbooking patterns for 2006 continue to suggest that group business is returningto the Resort. Booked group and conference room nights at the Resort forthe quarter ended March 31, 2006 have increased by approximately 1,964, or9.3%, as compared to the same period last year.

 

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The effect of the reduction in the occupied room nights during thefirst quarter of 2006 was offset by improved average room rates andancillary spending patterns of the guests, specifically, increased golf packagenights with their significantly higher food and beverage spending, coupled withincreases in banquet sales. Total revenue for the Resort was greater during thethree months ended March 31, 2006 than in the three months ended March 31,2005. An overall increase in spending by the Resort’s guests, for rooms andfood and beverage spending attributable to package nights, offset the reductionin gross revenue that resulted from the lower number of room nights in thefirst quarter of 2006 as compared to the first quarter of 2005. The average room rateincreased from $157.66 in 2005 to $183.95 in 2006. Aggregate spending duringthe first quarter of  2006, per room nightwas, as compared to the same period in 2005, was $535.40 versus $462.14.  The most significant increase in revenues atthe Resort occurred in the food and beverage department. Revenues of thatdepartment increased by approximately $888,000, or 21%, for the three monthsended March 31, 2006, as compared to the same period in 2005. Overall foodand beverage revenues increased as the food and beverage total covers (meals)increased by 15,692 or 11.0%. This aggregate increase in covers served wasprimarily attributed to the Resort’s banquets, catering and room service,with a combined increase of approximately 16,034 covers. Covers attributed tothe Resort’s casual restaurants and pool service decreased by approximately 342.Golf revenue increased by approximately $423,000, primarily as a result of theutilization of the specific golf-marketing fund to promote the sale of golfpackages throughout the eastern United States. As a result, golf packagebusiness increased by 801 rounds or 7.0% for the three months ended March 31,2006 as compared to the three months ended March 31, 2005.  In the aggregate, golf rounds were down by 676while revenues were higher as a result of the capture of higher greens fees andancillary spending in the pro shops. The net reduction in aggregate roundsresulted primarily from 2,221 fewer rounds played by the transient resortguest, while other player categories, including packages, experienced increasesin round play in the aggregate of 1,545 rounds played. The number of total golfrounds played in the three months ended March 31, 2006 was 36,279 comparedto 36,955 in the same period of 2005. Golf revenue does not necessarilyincrease or decrease exactly in proportion to occupied room nights becausegolf revenue also includes member dues and fees and day golf group fees,neither of which is directly related to occupied room nights. Increases intotal revenue due to improved spending of the Resort’s guests in the firstquarter or 2006 as compared to the first quarter of 2005 were offset by adecrease in Other Revenue of approximately $343,000, primarily as a result ofthe Resort no longer charging a resort fee.

 

We continue to monitor total operating expenses in an attempt to insurethat the Resort manager controls expenses and that the expenses bear a directcorrelation to the room nights, food and beverage covers and golf rounddemand. Aggregate total operating expenses do not generally increase ordecrease on a one-to-one basis with total operating revenue because the Resortmust carry a minimum fixed operating staff and other support expenses at alltimes. In those operating departments where the variable costs can best bemanaged, we manage these costs consistent with room, food and beverage and golfdemand. Total Resort operating expenses, before depreciation and amortizationand excluding the Rental Pool amortization in hotel operations, increased byapproximately $1,215,000, or 9.9%, for the three month period ended March 31,2006 as compared to the corresponding period in the prior year. This increaseof 9.9% is primarily attributable to of the increase in total operating revenueof approximately 9.9% during the three-month comparative period.

 

Depreciation and amortization expense, excluding the Rental Poolamortization included in hotel expenses, was approximately $491,000 and$798,000 for the three months ended March 31, 2006 and 2005, respectively.The net decrease in this expense is primarily related to certain intangibleassets being fully amortized prior to the three months ended March 31,2006.

 

Interest expense, net of interest income, was approximately $373,000and $439,000 for the three months ended March 31, 2006 and 2005,respectively, and reflect amortization of the discount on the Rental Poolobligation, Westin long-term liability and the Troon long-term liability. Theparticipating mortgage loan that was assumed by us from GHR was amended toadjust the outstanding balance to $39,240,000. That note is now non-interestbearing.

 

The net income for the three months ended March 31, 2006 wasapproximately $2,475,000, compared to a net income for the three months ended March 31,2005 of approximately $1,785,000.

 

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During the three months ended March 31, 2006, approximately$226,000 of the capital reserve funds were disbursed. Of those disbursed funds,$207,000 was used to pay lease payments on existing and additional equipmentconsisting of bellman vehicles, golf cart leases, golf course equipment leases,telephone equipment leases and cable leases and the balance was for variouscapital improvement projects and replacements throughout the Resort. During thethree months ended March 31, 2005, approximately $319,000 of the capitalreserve funds were disbursed to (i) pay lease payments on existingequipment consisting of bellman vehicles, golf cart leases, golf courseequipment leases, telephone equipment leases and cable leases, (ii) replacecarpet in the Edinburgh conference center, (iii) replace aging fueltanks,  (iv) repair the roof of theHighlands clubhouse and (v) repair to the driving range tents, naturewalks, electrical systems and tennis center air conditioning.

 

**Liquidity and Capital Resources**

 

Ouronly sources of cash flow (other than the net proceeds from asset sales fromtime to time) are the monthly interest income we receive on a note receivable(approximately $26,000 per month), a distribution of net operating income fromthe one remaining golf property that we own and manage and profitableoperations of the Resort, if any. We discuss the Resort’s cash position below.As a result of our need for liquidity, on March 18, 2004 we entered into aloan agreement and related mortgage with Textron Financial Corporation, orTextron, for a revolving line of credit. On August 4, 2005, we executedloan documents with Textron to amend the terms of the existing revolving loan.Pursuant to this amendment, the maximum permissible outstanding loan amount wasincreased from $2,100,000 to $4,200,000. The interest rate pursuant to theamended Textron loan documents continues to be the prime rate plus 1.75% perannum, paid monthly. The amendment extended the term of the loan from March 18,2006 to March 18, 2009. This loan is collateralized by a security interestin our golf courses collectively known as Stonehenge. The loan requires thatthe operations at Stonehenge for the immediately preceding twelve month periodmust be sufficient to meet a monthly debt service coverage ratio, as defined inthe mortgage, of at least 1.20. Due to increasing interest rates coupled with alack of membership growth at Stonehenge in the three months ended March 31,2006, the operations at Stonehenge for the immediately preceding twelve monthperiod as of March 31, 2006 did not meet the required debt servicecoverage ratio of 1.20; however, the lender waived the debt service coverageratio covenant through May 31, 2006.

 

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, and we will pay to Textrona fee of 0.25% per annum of the unused line balance. As of the date of thisreport, we have drawn down a total of $4,100,000 on the line of credit.  Subject to our satisfaction of the applicableterms, conditions and covenants of this loan, there is $100,000 available thatcould be drawn under this loan.

 

Asof March 31, 2006, the Resort’s working capital position is approximately$629,000. The Resort continues to experience seasonal fluctuations in its networking capital position due to the seasonality of the golf industry inFlorida. This seasonality impacts our liquidity. In particular, there isgenerally more available cash during the winter months, specifically in thefirst quarter. Cash generally becomes very limited in the late summer months.Revenues decline at the Resort during the summer months because the hot Floridaweather makes the Resort less appealing for group golf outings and vacationdestination golfers. Additionally, unusual weather patterns, such as thehurricanes experienced in Florida in 2004 and those that affected the EastCoast in 2005,  negatively impactedrevenues for the Resort in the late summer-early fall season of 2005 as groupsand guests were hesitant to book reservations on the East Coast during thehurricane season. Weather-related concerns may continue to negativelyimpact reservations in comparable periods (July through September) of 2006and subsequent years. The Resort uses seasonal pricing (peak, shoulder andoff-peak) to maximize revenues. Generally, the Resort’s only source of cash isfrom its profitable operations, if any. While the financial performance of theResort has shown signs of recovery since the Company assumed title to theResort on July 15, 2004, current projections provided by Westin indicatean operational cash flow shortfall by the end of the summer of 2006. Further,the Resort’s credit capacity is limited. We continue to work diligently withthe Resort’s

 

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manager,Westin, to identify opportunities to improve the cash flow situation at theResort. Further, we are currently seeking 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 2005and November 2005, respectively. In the event that we must advanceadditional capital to fund operations at the Resort or our other operations, wemay be required to seek financing or raise further capital in order tomeet our obligations when they come due. Further, we may also be requiredto utilize proceeds from the sale of our other assets to fund our operationsand the operations of the Resort. There is no assurance that we will be able toobtain additional financing, raise further capital or that we will havesufficient proceeds from assets sales from which to draw, or that any fundingthat we receive will not contain restrictive covenants or other onerous terms.At the present time, we only have $100,000 available in our line of credit withTextron which could only be drawn upon our satisfaction of the applicableterms, conditions and covenants in the loan documents regarding revolveradvances, and we expect that the cash flow that we receive on our note receivableand the net operating income of the Stonehenge golf courses, if any, will not be substantial

 

Wecurrently hold a note receivable from the sale of one of our golf properties.The amount outstanding under this note at December 31, 2005 wasapproximately $2,326,000, which represents $2.5 million principal on thenote, plus accrued interest, less a $200,000 discount reserve. On January 30,2006, the borrower exercised its second option for a one-year extension on thematurity of the note. As a result of the extension 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% (12.75% at May 9, 2006) until thenew maturity date of February 1, 2007.

 

Inthe event that we are unable to sell our remaining assets as contemplated, we may beunable to pay our obligations as they become due. In addition, our ability topay our obligations as they become due would be compromised if our chiefexecutive officer requires payment of outstanding performance milestonepayments owed by us to him before we are able to realize net cash proceeds fromasset sales sufficient to repay him. As of March 31, 2006, we owed our twomost senior executive officers a total of approximately $1,755,000 in milestonepayments and accrued interest on such milestone payments. We also owed asubstantial sum in legal fees which are included in our estimate of the coststo be incurred prior to our liquidation. We expect to incur additional fees andcosts in connection with closing the sales of our two remaining golf properties.Our ability to pay our obligations as they become due will depend on cash flowfrom the Resort, and forbearance by our senior executive officers and ourcounsel with respect to sums that we owe to them. In the event that weexperience lower revenues, or higher costs, with respect to the Resort, we may needto seek to find alternative funding in order to pay our obligations. Further,should our senior executive officers or our counsel require payment of fundsowed to them, we may need to find alternative funding in order to pay ourobligations. This funding, if available, may not be offered on reasonableterms.

 

Seediscussion of our obligation to the holder of our preferred stock inNotes 9 and 10 to the Condensed Consolidated Financial Statements referredto in Item 1 and also in Item 1A under the caption “Risk Factors” in thisQuarterly Report on this Form 10-Q.

 

*Threemonths ended March 31, 2006 and 2005*

* *

Cashflow from operating activities for the three months ended March 31, 2006was $2,844,000, compared to cash flow from operating activities for the threemonths ended March 31, 2005 of $1,345,000. The primary components of thecash fluctuations in operating activities were liquidation liability paymentsand adjustments and working capital changes. The increase in the cash flow fromoperating activities for the three months ended March 31, 2006 was due toan improvement in the operating results of the Resort for the three monthsended March 31, 2006 as compared to the three months ended March 31,2005 along with a decrease in the cash required for working capital. Liquidationliability payments increased for the three months ended March 31, 2006 ascompared to the three months ended March 31, 2005 primarily due to anincrease in legal fees incurred in the process of seeking to sell the Resort.

 

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Wemade $20,000 in capital expenditures at the Resort and $26,000 at the othergolf courses that we owned and managed during the three months ended March 31,2006, as compared to $146,000 at the Resort and $23,000 at the other golfcourses in the three months ended March 31, 2005. There were no otherinvesting activities in the three months ended March 31, 2006. In thethree months ended March 31, 2005, notes receivable increased byapproximately $8,000.

 

Duringthe three months ended March 31, 2006, the Resort paid approximately $72,000against its capital lease obligations and approximately $232,000 against itsrefurbishment obligation to certain rental pool participants. During the threemonths ended March 31, 2005, the Resort paid approximately $52,000 againstits capital lease obligations and approximately $180,000 against itsrefurbishment obligation to certain rental pool participants.

 

**Tax Consideration**

 

We do not currently project any income tax liability for the remainderof our liquidation as a result of our net operating loss carryforwards, whichwe currently expect to be sufficient to offset any taxable income for theremainder of our liquidation.

 

**Off Balance Sheet Arrangements**

 

As of March 31, 2006, we have no unconsolidated subsidiaries.

 

We do not have any relationships with unconsolidated entities orunconsolidated financial partnerships of the type often referred to asstructured finance or special purpose entities, i.e., unconsolidated entitiesestablished for the purpose of facilitating off-balance sheet arrangements orother contractually narrow or limited purposes. Further, we have not guaranteedany obligations of unconsolidated entities nor do we have any commitment orintent to provide additional funding to any such entities (except potentiallyin connection with the Resort as discussed previously). Accordingly, we believewe are not materially exposed to any market, credit, liquidity or financingrisk that could arise if we had engaged in such relationships.

 

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**Contractual Obligations, Contingent Liabilities and Commitments**

 

The following table summarizes our contractual obligations at March 31,2006, and the effect such obligations are expected to have on our liquidity andcash flow (or upon our successors in interest under the applicable contracts,if the contracts 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                                                                            |       | $                                         | 2,257      |   | $ | 1,809 |   | $ | 448 |   | $ | — |   | $ | — |   |
| Series A Preferred Stock and accrued  dividends(1)                                                                                   |       | 20,000                                    |       | 20,000 |   | — |   | — |   | — |   |
| Elk Funding Loan                                                                                                                     |       | 800                                       |       | 800 |   | — |   | — |   | — |   |
| Textron revolving line of credit                                                                                                     |       | 5,269                                     |       | 390 |   | 4,879 |   | — |   | — |   |
| Liquor license note payable (applies to a  certain managed golf course)(2)                                                           |       | 126                                       |       | 126 |   | — |   | — |   | — |   |
| Operating lease agreements at the managed  golf courses                                                                              |       | 391                                       |       | 217 |   | 174 |   | — |   | — |   |
| Advertising, service, equipment maintenance  and other contracts and software license and support agreements at the  managed courses |       | 4                                         |       | 2 |   | 2 |   | — |   | — |   |
| Lease agreements for GTA corporate office                                                                                            |       | 6                                         |       | 6 |   | — |   | — |   | — |   |
| Subtotal of our obligations excluding those  of the Resort                                                                           |       | 28,853                                    |       | 23,350 |   | 5,503 |   | — |   | — |   |
| Master lease agreement (with the  condominium owners)                                                                                |       | 6,854                                     |       | 1,435 |   | 3,739 |   | 1,662 |   | 18 |   |
| Management agreements(3)                                                                                                             |       | 20,685                                    |       | 1,900 |   | 5,585 |   | 3,300 |   | 9,900 |   |
| Troon supplemental fee                                                                                                               |       | 800                                       |       | — |   | — |   | — |   | 800 |   |
| Operating and capital leases                                                                                                         |       | 1,689                                     |       | 530 |   | 1,159 |   | — |   | — |   |
| Service agreements and other                                                                                                         |       | 2,639                                     |       | 1,056 |   | 1,528 |   | 55 |   | — |   |
| Subtotal of the Resort’s obligations                                                                                            |       | 32,667                                    |       | 4,921 |   | 12,011 |   | 5,017 |   | 10,718 |   |
| Total of our consolidated obligations                                                                                                |       | $                                         | 61,520     |   | $ | 28,271 |   | $ | 17,514 |   | $ | 5,017 |   | $ | 10,718 |   |

 

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(1)  The series A Preferred stock isreflected in the “Less than 1 year” column of this table above due to the factthat this obligation is expected to be paid upon the sale of the Resort. Seefurther discussion below under the caption “Series A Preferred Stock.”

 

(2)  Included in accrued expenseson the statement of net assets in liquidation. This note was assumed in the sale of Tierra Del Sol on May 8, 2006.

 

(3)  If the Westin managementagreement is terminated pursuant to its terms prior to its expiration date ofDecember 31, 2017, a minimum termination fee of $5,500 will be due upontermination in lieu of the management agreement fees.

 

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Interest is reflected, as applicable, in the commitments and obligationslisted above. The above table does not give effect to the anticipated sale ofthe Resort.

 

Please refer to “Management’s Discussion and Analysis of FinancialCondition and Results of Operations—Contractual Obligations, ContingentLiabilities and Commitments” in our Form 10-K for the year ended December 31,2005 filed on April 17, 2006 for a description of our contractualobligations.

*** ***

**Commitments**

** **

***Series A Preferred Stock.***Seediscussion of our obligations to our holder of the series A preferredstock in Item 1, notes 9 and 10 above to our condensed consolidated financialstatements herein and also in Part II, Item 1A of this Quarterly Report underthe caption “Risk Factors”.

 

**Inflation**

 

We believe that inflation does not pose a material risk to us. Our mainsource of cash flow is golf course dispositions which are not particularlyvulnerable to inflation because we can adjust our asking prices ifsupply/demand factors support an interest in the particular golf course. Althoughsome of our obligations (such as the salary of our chief executive officer)automatically adjust for inflation, some of our rights are similarly indexed.Our room rates at the Resort and our golf course fees at the Resort and atthe other 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.

 

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**Seasonality**

 

The golf industry is seasonal in nature. Revenues generally decline atthe Resort during the summer months because the hot Florida weather makes theResort less appealing 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. In October 2003,the Resort hosted, and is expected to host thereafter through 2006, anationally televised PGA event, the Chrysler Championship, that brings some ofthe highest profile golfers to the Resort for several days for the tournament,as well as high profile golf industry sponsors and vendors. Further, regardingthis PGA event, on April 25, 2006, the Company entered into an agreementwith Suncoast Charities, Inc., or Suncoast, which provides for Suncoast tolease the Copperhead golf course for seven and one half days during the monthof March for a PGA TOUR event, and for the same period during each of theyears 2007 through 2012. The agreement provides, among other things, for a basefee plus participation fee in the event the aggregate ticket sales during anytournament year exceed the greater of 115% of the 2005 or 2006 tournamentticket sales.

 

Historically, revenues increase in the fourth quarter; however, theyare generally the greatest during the first quarter with guests coming from thenortheast and other regions to enjoy the warm weather. 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.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

We have not entered into any transactions using derivative financialinstruments. We are subject to market risk associated with changes in interestrates applicable 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 May 9, 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.

 

Reference is made to Note 6 to the Condensed Consolidated FinancialStatements of Item 1 for additional debt information.

 

**ITEM 4. CONTROLS AND PROCEDURES**

 

We maintain disclosure controls and procedures that are designed toensure that information required to be disclosed in our Exchange Act reports isrecorded, processed, summarized and reported within the time periods specifiedin the SEC’s rules and forms, and that such information is accumulated andcommunicated to our management, including our chief executive officer and ourchief financial officer, as appropriate, to allow timely decisions regardingrequired disclosure. Our management assesses the costs and benefits of suchcontrols and procedures based upon the prevailing facts and circumstances,including management’s reasonable judgment of such facts. As we neithercontrolled nor managed the Resort prior to July 16, 2004, our disclosurecontrols and procedures with respect to the manager and the Resort werenecessarily more limited than those we maintained with respect to our own corporateoperations. At the close of business on July 15, 2004, we took title tothe Resort; however, despite the fact that our management agreement with Westinprovides us with heightened control and access to information, we do notdirectly assemble the financial information for the Resort although we havetaken steps that we deem to be reasonable under the circumstances to seek toverify such financial information. Consequently, our disclosure controls andprocedures with respect to the Resort, while strengthened as a relative matter,remain necessarily more limited than those we maintain with respect to our owncorporate operations. Since taking title to the Resort, we have focused uponintegrating operations at the Resort into our disclosure controls and proceduresand internal control

 

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procedures. In particular, those controls and procedures have beenupdated to account for the challenges presented by the increased size and scopeof our operations now that we own the Resort.

 

The integration of a business much larger in size and scope ofoperations increases the risk that conditions may have been introducedthat we did not anticipate in our design of our systems of control. Anypre-existing deficiencies in the predecessor owner’s financial systems,processes and related internal controls increase the risk that the historicalunaudited financial statements of the Resort’s operations and cash flows whichthe predecessor 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 of March 31, 2006, we carried out an evaluation, under thesupervision and with the participation of our management, including our chiefexecutive officer and our chief financial officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures pursuant toExchange Act Rule 13a-15. Subject to the limitations mentioned above, ourchief executive officer and our chief financial officer concluded that as of March 31,2006, our disclosure controls and procedures are effective in timely alertingthem to material information relating to us (including our consolidatedsubsidiaries) required to be included in our Exchange Act reports.

 

There has been no change in our internal control over financialreporting during our most recent fiscal quarter that has materially affected,or is reasonably likely to materially affect, our internal control overfinancial reporting.

 

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**PART II.OTHER INFORMATION**

 

**ITEM 1: Legal Proceedings.**

 

We are currently involved in (or affected by) the following legalproceedings:

 

***YoungComplaints***

*** ***

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 induce Mr. Young(and the other plaintiffs) to enter into the failed tax shelter transactions.The plaintiffs are seeking damages of at least $3.7 million, together withlegal expenses and other costs.

 

DefendantsBDO Seidman, LLP (together with three former BDO partners) filed a motion tocompel arbitration and dismiss the complaint, and we and our executiveofficers, as defendants, filed a motion to stay, and for extension of time inwhich to answer or otherwise respond to plaintiffs’ complaint. The plaintiffs’filed memoranda opposing the aforementioned motions. A hearing on these motionswas held in Florence, South Carolina on October 19, 2004. At theconclusion of that hearing, the judge indicated that the former motion would betaken under advisement, 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. On November 4,2004, we filed our answer and counterclaims (nine counterclaims against some orall of the plaintiff parties). On January 21, 2005, the magistrate judgeissued a report and recommendation, recommending that the BDO defendant’sMotion to Compel Arbitration be granted, and that the claims pending againstthe BDO defendants be stayed pending arbitration. On February 14, 2005,the District Judge accepted the magistrate’s report and recommendation, andgranted the BDO defendants’ Motion to Compel Arbitration, staying the claimspending against the BDO defendants. The plaintiffs and the GTA defendants havesince agreed upon a proposed schedule for their part of thelitigation, which was jointly submitted to the court on March 11, 2005,and thereafter accepted and entered as an order on or about April 19,2005. The scheduling order was entered, and the parties conducted discoveryuntil on or about August 2, 2005 when the parties agreed to informallystay all activity in this litigation to pursue the possibility of settlement.There is as yet no settlement. While we may be willing to enter into asettlement with the plaintiffs in which the plaintiffs dismiss their claims inexchange for our dismissal of our counterclaims, we intend to meet ourdeadlines and litigate this matter. To that end, before the deadline for doingso, we filed and served our motion for summary judgment as to the plaintiffs’claims on December 23, 2005. The plaintiffs did not file any dispositivemotion within the time permitted, either with respect to their own claims or toour counterclaims, nor did the plaintiffs timely file any written response tothe motion for summary judgment. Instead they filed a motion to re-opendiscovery and for leave to file a late response to the motion for summaryjudgment by the GTA defendants. On March 21, 2006, at a hearing held onthe plaintiffs’ motion, the court denied the plaintiffs’ motion to re-opendiscovery, with the exception that limited discovery was allowed until June 19,2006 only on the question of the damages sought by the GTA defendants in theircounterclaims against the plaintiffs. The court allowed the plaintiffs to filea late response to the motion for summary judgment, which

 

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theplaintiffs did on March 31, 2006. Trial of this matter is currently setfor a date not before July 1, 2006. At this time, we are 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 usbased upon alleged breach of contract, fraudulent concealment, fraudulentinducement and tortuous interference by the defendants. The plaintiff hasalleged 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, wereceived a memorandum in opposition to the motion for partial summary judgment.The plaintiff objected to proceeding to summary judgment based upon the factthat the plaintiff had not taken certain depositions. The court ordered thatsuch depositions must be taken by the plaintiff within the next 30 days. Ahearing is now expected to be scheduled in May 2006 on the motion forpartial summary judgment. We asked the court to enter summary judgment on thealleged fraud and tortuous interference claims. If we are unsuccessful onsummary judgment, this case will be sent to non-binding mediation sometimebefore June 30, 2006. If a settlement is not reached at mediation, thiscase is scheduled for trial on August 29, 2006. We continue to investigateboth the liability and damage aspects of this case, but we do not expect tofind any liability. Formal discovery will commence soon. At this time, we areunable to assess the likely outcome of this litigation**.**

 

***Stonehenge (Country Club at Wildewood and CountryClub 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 ofcontract, fraud and unfair trade practices. We were seeking damages ofapproximately $172,000, which represents prepaid dues that were not disclosedby the defendants. A counterclaim for payment under a consulting agreement,along with claims for payment of operating/maintenance and insurance expenseswas filed by the defendant against us on June 20, 2002; our reply wasfiled on July 22, 2002 denying the claims and, alternatively, seeking aset-off or recoupment against the defendant’s alleged claim for the amount ofour claim against the defendant. The Court dismissed the case on May 28,2003. On March 15, 2005, we took action to restore the case. As of May 8,2006, this motion has not yet been heard.

 

***LandUse 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 theDefendants, Case No. 043388CI-15. We refer to this lawsuit as the InitialLand Use Lawsuit. The Plaintiffs have filed a multi-count complaint, or theComplaint, seeking injunctive and declaratory relief with respect to the landuse and development rights of a tract of land known as Parcel F. Parcel F is aparcel of land located within the Resort. The Plaintiffs allege that there areno remaining development units (residential units) available to be developedwithin the Resort property. On March 29, 2005,

 

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wefiled a Motion to Intervene as a defendant in the Initial Land Use Lawsuit inorder to protect our property, and our land use and development rights withrespect to Parcel F and our property. A hearing on the Motion to Intervene washeld on April 4, 2005, after which the court granted our Motion toIntervene. On April 5, 2005, we joined in the filing of a Motion toDismiss and Motion to Strike three of the seven counts of the 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, DeborahA. Covert) and Autumn Woods Homeowner’s Association, Inc. moved tointervene in the Initial Land Use Lawsuit. The court has not ruled on thatmotion. On April 8, 2005, a separate suit, or the Subsequent Land UseLawsuit, was filed by James M. and Mary H. Luckey and Andrew J. and AphroditeB. McAdams. That suit seeks injunctive and declaratory relief in six separatecounts, all relating to the land use and development rights of Parcel F. Thissuit was consolidated with the Initial Land Use Lawsuit on May 3, 2005.After May 6, 2005 we filed a Motion to Dismiss the Subsequent Land UseLawsuit. The motion was heard by the court on May 31, 2005. Since thathearing, we have filed our Answer and Affirmative Defenses to both complaintsthat have been 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 starting December 12,2005. On August 30, 2005, the judge heard extensive argument on thedefense motions for summary judgment and entered a number of rulings in thedefendants’ favor. In summary, the court dismissed those claims in the InitialLand Use Lawsuit and the Subsequent Land Use Lawsuit which are founded upon thetheory that the proposed development is inconsistent with the PinellasCountywide Plan and Rules adopted pursuant to Chapter 73-594, Laws ofFlorida. The court further dismissed for lack of jurisdiction those claims ofthe plaintiffs in the Subsequent Land Use Lawsuit that are based on the theorythat the proposed development is inconsistent with the Pinellas ComprehensivePlan. The court entered a similar ruling on Counts I, II, VIII-XV of theThird Amended Complaint as to some (but not all) of the Plaintiffs in theInitial 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 dated September 21,2005 that this case will not be tried by a jury. The court then entered anorder scheduling the remaining claims for non-jury trial during December 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 through December 23,2005, the court tried these consolidated cases in a non-jury trial. At theconclusion of the evidentiary portion of the trial, the court deferred finalargument until Friday, January 6, 2006. On that date, final argument tookplace before the court at the conclusion of which the court rendered itsdecision. The court ruled in favor of all defendants and against all plaintiffsas to each count in both cases. Subsequent to the court’s oral rulings, defensecounsel prepared a proposed final judgment which reflects the court’s factualfindings and legal conclusions. On March 8, 2006, the court formallyentered its final judgment on the record ruling in favor of the defendants onall counts and denying all claims asserted by the plaintiffs in both cases. On March 31,2006, the Plaintiffs in the consolidated cases filed a notice of appeal.

 

Asan intervenor 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.

 

Inthe event that the defendants in the Land Use Lawsuits do not prevail in theappeal, the owner of Parcel F may lose all or substantially all of its landuse and development rights with respect to Parcel F. As a result, we may experiencereduced club memberships at the Resort, and our ability to realize the benefitsfrom proposed development of Parcel F would be adversely impacted. In addition,failure by the defendants to prevail in the Land Use Lawsuits could jeopardizeour land use and development rights in the remaining units that we may havethe opportunity to develop at the Resort if a court subsequently applied asimilar interpretation of our rights with respect to those units. In thatinstance, we might lose all or substantially all of those rights with respectto the

 

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remainingunits. As a result of a successful challenge to our land use and developmentrights relating to the remaining units at the Resort, our ability to developthe Resort would be adversely affected.

 

***PropertyTax 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.

 

***LakeOzark Industries, Inc. and Everett Holding Company, Inc. v. GolfTrust 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 Holding Company, Inc.,in the Fall of 1999 against numerous defendants, including Golf Trust ofAmerica, L.P. Plaintiffs assert LOCI performed construction services on, orthat benefited, the property of various defendants, including Golf Trust ofAmerica, 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, we filed with the Court of Appeals a Motion toFile Supplemental Brief, along with a copy of a Supplemental Brief. Followingbriefing and oral argument, the Court of Appeals on April 5, 2005 reversedthe Circuit Court judgment in favor of us and remanded the case to the CircuitCourt for further proceedings. On April 20, 2005, we filed with the Courtof Appeals a motion for rehearing and an alternative application to transferthe case to the Missouri Supreme Court. The Court of Appeals denied this motionand the transfer application on May 31, 2005. On May 31, 2005, theCourt of Appeals also filed modified Opinion, which again reversed the CircuitCourt judgment in favor of us and remanded the case to the Circuit Court forfurther proceedings. On June 15, 2005, we filed with the Missouri SupremeCourt an application to transfer the case to that court. On August 30,2005, the Missouri Supreme Court denied the application for transfer. The casewas returned to the Circuit Court for trial on plaintiffs’ claim that LOCIperformed construction services on, or that benefited, the property of variousdefendants, including us. The trial date has not yet been set. At this time, weare unable to assess the likely outcome of this litigation.

 

***Agreementfor Marketing and Joint Sale of Tierra Del Sol***

*** ***

OnSeptember 20, 2000, Terence Mulvihill, a principal in the lessee and inthe entity which previously owned the Tierra Del Sol Country Club, attempted toterminate our water rights lease agreement at the Tierra Del Sol Country Club.The termination was allegedly based upon (a) the existence of anunauthorized assignment, which Mr. Mulvihill claimed was the result ofallowing GTA Tierra Del Sol, LLC to operate the golf course; (b) use ofthe water on the golf course in a manner which was contrary to the purposesauthorized under the water rights lease agreement; (c) use of the water inamounts in excess of the amounts permitted under the terms of the water rightslease agreement; and (d) non-payment of 1999 taxes under the water rightslease agreement. We responded in writing to Mr. Mulvihill disputing thetermination of the water rights lease agreement. We also filed a complaint on January 15,2002 in the Thirteenth Judicial District Court, County of Valencia, State ofNew

 

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Mexico,against the Mulvihill Estate (Mr. Mulvihill died in December 2000)and Golf Classic Resorts, LLC. Our complaint sought various forms of relief inrelation to the water rights lease agreement and the underlying purchase ofTierra Del Sol, 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, we appliedthe terms of this agreement to this transaction. In connection with thisagreement, the parties agreed to forbear from taking further action on theexisting lawsuit during the term of this agreement.

 

**RoutineLitigation**

** **

In addition to litigation between a lessor (such as our operatingpartnership) and our former lessees (and their affiliates), owners andoperators of golf courses are subject to a variety of legal proceedings arisingin the ordinary course of operating a golf course, including proceedingsrelating to personal injury and property damage. We have in the past been, andexpect to continue in the future to be, subject to proceedings relating topersonal injury and property damage. Such proceedings are generally broughtagainst the operator of a golf course, but may also be brought against theowner of the golf course. Since we are now either the operator or owner of ourremaining golf courses, we maintain insurance to defend against certain ofthese actions

 

**ITEM 1A. RISK FACTORS**

 

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

** **

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

 

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

*** ***

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

 

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

 

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

 

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

 

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

*** ***

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

*** ***

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

 

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

 

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

*** ***

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

 

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

*** ***

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

 

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

 

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

 

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

*** ***

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

 

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

 

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

 

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

*** ***

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

 

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

 

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

*** ***

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

 

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***Decreasesin golf course values caused by economic recession and/or additional terroristactivity might reduce the amount for which 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:

 

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

 

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

 

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

 

•       changes inreal estate tax rates and other operating expenses.

 

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

 

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

*** ***

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

 

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

*** ***

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

 

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

*** ***

Aswe contemplate the sale of our remaining assets and the wind-up of our company,as expressly contemplated by our plan of liquidation, we may elect tocontribute our remaining assets and liabilities to a liquidating trust. Ourstockholders would receive interests in the liquidating trust, our corporateexistence would terminate and our shares would no longer trade publicly. Theplan of liquidation prohibits us from contributing our assets to a 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, the stockholderwould recognize a loss in a taxable year subsequent to the taxable year inwhich the gain was recognized, which loss might be limited under the tax code.

 

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

 

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

*** ***

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-listfrom the Amex.

 

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

 

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

*** ***

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

 

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

 

**RisksRelating to the Resort**

** **

***Inthe event that the Resort does not provide sufficient cash flow to us, we may beforced to reduce capital expenditures and improvements at the Resort,diminishing the value of the Resort.***

*** ***

Asthe owner of the Resort, we are responsible for any negative cash flowassociated with its operation. As a result of our assumption of theseliabilities and our responsibility for any negative cash flow of the Resort, wemay be exposed to liabilities and expenditures exceeding our expectationsor ability to pay. In the event cash flow is insufficient to fund plannedimprovements, our ability to rent the units in the Rental Pool may decline.A decline in the rental rates that can be charged for the units or relatedvacancies resulting from our inability to make necessary capital expenditures may causethe value of the Rental Pool units, and the Resort, to decline.

 

***TheResort’s performance may not provide adequate resources to fund therefurbishment reimbursement to the Rental Pool participants.***

*** ***

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 interestat 5% per annum on the unpaid balance of that portion of the unpaidrefurbishment costs which we are required to reimburse. This amount will bereimbursed to participating condominium owners (or transferees of theircondominium unit(s)) over the five-year period beginning in 2005. Thereimbursement is contingent on the units remaining in the Rental Pool from thetime of their refurbishment through 2009. If the unit does not remain in theRental Pool during the reimbursement period from 2005 through 2009, the owneror successor owner forfeits any unpaid installments at the time the unit isremoved from the Rental Pool.

 

Accordingly,maintaining condominium owner participation in the Rental Pool is very importantto the continued economic success of the Resort. We assumed certain existing ormodified financial obligations of GHR,

 

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includingits responsibilities regarding the administration of the condominium unitRental Pool, 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 Pool may arise,and this disagreement could both divert our management’s attention from theoperation of the Resort and prove costly to the parties to any such dispute.

 

***Thenumber of Rental Pool units may decline if current owners find alternativeuses of the units more attractive than participating in the Rental Pool,reducing the number of available Rental Pool units and diminishing the value ofthe 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 May 8, 2006, the number of units participating in theRental Pool is 612.

 

***Severeweather patterns experienced by Florida during 2004 and the southeasternportion of the United States during 2005 could result in depressed bookings,adversely affecting the Resort’s results of operations and reducing proceeds tothe 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.

 

***Recentsevere weather patterns could further intensify the seasonal nature of theresults of the 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, and may resultin a lower than expected percentage of the Resort’s fixed costs being offset byrevenue during the third quarter.

 

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***Weare subject to all the operating risks common to the hotel industry which couldadversely affect our results of operations.***

*** ***

Operatingrisks common to the Resort include:

 

•       changes ingeneral economic conditions, including the timing and robustness of theapparent recovery in the United States from the recent economic downturn andthe prospects for improved performance in other parts of the world;

 

•       the impactof war and terrorist activity (including threatened terrorist activity) andheightened travel security measures instituted in response thereto;

 

•       domestic andinternational political and geopolitical conditions;

 

•       decreases inthe demand for transient rooms and related lodging services, including areduction in business travel as a result of general economic conditions;

 

•       the impactof internet intermediaries on pricing and our increasing reliance ontechnology;

 

•       cyclicalover-building in the hotel industry which increases the supply of hotel rooms;

 

•       changes intravel patterns;

 

•       changes inoperating costs, including, but not limited to, energy, labor costs (includingthe impact of unionization), workers’ compensation and health-care relatedcosts, insurance and unanticipated costs such as acts of nature and theirconsequences;

 

•       disputeswith the managers of the Resort which may result in litigation;

 

•       theavailability of capital to allow us to fund renovations and investments at theResort; and

 

•       thefinancial condition of the airline industry and the impact on air travel.

 

***Generaleconomic downturns, or an increase in labor or insurance costs, may negativelyimpact 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 marketsin Florida 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.

 

***Ifwe are unable to successfully compete for customers, it may adverselyaffect our operating 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 they may improvetheir facilities, reduce their prices, or expand or improve their marketingprograms in ways that adversely affect the Resort and our operating results.

 

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

*** ***

Internettravel intermediaries such as Travelocity.com®, Expedia.com®and Priceline.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.

 

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***TheResort places significant reliance on technology.***

*** ***

Thehospitality industry continues to demand the use of sophisticated technologyand systems including technology utilized for property management, procurement,reservation systems, operation of customer loyalty programs, distribution andguest amenities. These technologies can be expected to require refinements andthere is the risk that advanced new technologies will be introduced. There canbe no assurance 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 technology. Further, therecan be no assurance that we will achieve the benefits that may have beenanticipated from any new technology or system.

 

***TheResort is capital intensive, and may become uncompetitive in the eventthat sufficient 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. To the extent we cannot fund expendituresfrom cash generated by the Resort’s operations, we must seek to obtain funds byborrowing or otherwise. We may be unable to find such financing onfavorable terms, if at all. To the extent that we are unsuccessful in obtainingsuch financing, it could adversely impact the Resort’s results from operations.

 

***Ourinvestment in the Resort is subject to numerous risks, which could adverselyaffect our income.***

*** ***

Asa result 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.

 

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***Althoughthe courts have recently delivered favorable rulings in the Land Use Lawsuitsto which we are a party, in the event that the ultimate rulings in thesematters are unfavorable to us, the value of Parcel F and the Resort would beadversely 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 Condominium Association, Inc.,C. Frank Wreath, Meredith P. Sauer, and Mark Banning (as plaintiffs) vs.Pinellas County, Florida, Golf Host Resorts, Inc. and Innisbrook F LLC (asdefendants), Case No. 043388CI-15. This matter relates to a tract of landwithin the Resort known as Parcel F. In April 2005, a subsequent lawsuitrelating to this matter was filed. We are also a defendant in this subsequentlawsuit. In this report, we refer to the March 2005 and the April 2005lawsuits collectively as the Land Use Lawsuits.

 

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. On March 31,2006, the Plaintiffs in the consolidated cases filed a notice of appeal.

 

Inthe event that the plaintiffs convince a court to overturn the January 6,2006 ruling, we could lose all or substantially all of our land use anddevelopment rights with respect to Parcel F. Such an unfavorable result couldalso cause us to experience reduced club memberships at the Resort and couldadversely impact our ability to realize the benefits from the proposeddevelopment of Parcel F. In addition, if the defendants do not ultimatelyprevail in the Land Use Lawsuits and a court subsequently applies a similarinterpretation of our rights with respect to the remaining developable units atthe Resort, our land use and development rights in those remaining units couldbe jeopardized, adversely effecting both our ability to develop the Resort andthe value of the Rental Pool units.

 

***So-calledacts of God, 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.

 

***Somepotential losses of the Resort are not covered by insurance.***

*** ***

Wecarry comprehensive insurance coverage for general liability, property, businessinterruption and other risks with respect to the Resort. Our policies offercoverage features and insured limits that we believe are customary for similartypes of property. Generally, our “all-risk” property policies provide thatcoverage is available on a per occurrence basis and that, for each occurrence,there is a limit as well as various sub-limits on the amount of insuranceproceeds we can receive. In addition, there may be overall limits underthe policies. Sub-limits exist for certain types of claims such as serviceinterruption, abatement, expediting costs or landscaping replacement, and thedollar amounts of these sub-limits are significantly lower than the dollaramounts 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.

 

50

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***Ouroperations at the Resort are dependent upon outside managers, and if thosemanagers are less successful than expected, the Resort’s results of operationswill be adversely affected, potentially in a material way.***

*** ***

Westinmanages the daily operations of the Resort pursuant to our management agreementwith Westin, and Troon manages the golf facilities at the Resort pursuant torelated contractual commitments with Westin. In the event that these thirdparty managers fail to perform under their respective contracts asexpected, or in the event that they default on their obligations, the Resort’sresults of operations will be adversely affected, potentially in a materialway.

 

***Asustained increase in energy costs may negatively impact the Resort’sresults by increasing its energy-related costs and by discouraging potentialguests from traveling and taking part in recreational activities.***

*** ***

During the past year, energy costs in the United States have increasedsubstantially. Energy costs represent an increasingly larger percentage of thecosts of the Resort, and we expect energy costs to increase in both absoluteand relative terms in future periods. In addition, we expect that higher energycosts will negatively affect the Resort by discouraging travel and recreationalactivities. In particular, potential guests of the Resort are less likely totravel as they bear the affects of higher energy costs as either higher airlinefares or in an increased cost per gallon of gasoline. In addition, higherenergy costs may reduce the disposable income of potential guests, makingthem less likely to spend money for travel and recreational activities. As aresult of these factors, a sustained increase in energy costs may negativelyimpact the Resort’s results by increasing its energy-related costs and bydiscouraging traveling and taking part in recreational activities.

 

**ITEM 2. UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS**

 

None.

 

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES**

 

As previously reported, on July 21, 2003 we defaulted on ourobligation, under our voting agreement with the holder of our series Apreferred stock, to redeem the series A shares within 60 days of theholder’s May 23, 2003 demand. As a result, the aggregate series Adividend rate increased from $462,500 per quarter to $625,000 per quarter andthe preferred stock holder has a right to appoint two directors to our board ofdirectors. The preferred stock holder has that same right under our the Series AArticles Supplementary (our charter document relating to the preferred stock)because we have not paid a preferred stock dividend since the third quarter of2001 and such right arises when preferred stock dividends are in arrears forsix or more quarters. The holder of our preferred stock has informed us that itdoes not currently intend to exercise that right. However, it remains free todo so at any time (pursuant to the procedures specified in our charter and thevoting agreement).

 

On April 12, 2006, we entered into a new option agreement with AEWin which AEW grants us the option, exercisable by us in our sole discretion, topurchase, on or before June 30, 2006, all 800,000 shares of the our series Apreferred stock held by AEW including, without limitation, all of AEW’s rightsto Liquidation Preferences (as defined in the ours Articles Supplementary,including, without limitation, Liquidation Preferences in respect of anyaccrued and unpaid dividends) payable in respect of such shares as of ourexercise of the option for a price of $20,000,000. The option to repurchase AEW’spreferred stock is only exercisable in the event that the business of theResort is purchased for cash consideration of no more than $35 million. Thisoption agreement was executed in contemplation of an exit transaction ascontemplated by the engagement letter with Houlihan Lokey.

 

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

 

No matters were submitted to a vote of security holders during thethree months ended March 31, 2006.

 

**ITEM 5. OTHER INFORMATION**

 

None.

 

**ITEM 6. EXHIBITS**

 

***Exhibits***

 

The exhibits listed on the Exhibit Index, which appears after thesignature page, are included or incorporated by reference in this QuarterlyReport.

 

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**SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
| ** **              | **GOLF TRUST OF AMERICA, INC.,** registrant |
|-------------------------|--------------------------------------------------|
| Date: May 15, 2006 | By:                                              |  /s/ W. Bradley Blair, II |   |
|                    |                                             | W. Bradley Blair, II*President and Chief Executive Officer* |
|                    |                                             |   |
| Date: May 15, 2006 | By:                                              |  /s/ Scott D. Peters |   |
|                    |                                             | Scott D. Peters*Senior Vice President and Chief Financial Officer* |

 

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**EXHIBIT INDEX**

 

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

 

The following exhibits are part of this Quarterly Report on Form 10-Q(and are numbered in accordance with Item 601 of Regulation S-K). Itemsmarked 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 May 9, 2006.                                                                                                                                                                                                                          |

 

55

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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). |

 

56

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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).                                                                                                                                                                                                               |

 

57

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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).                                                    |

 

58

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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).                                                                                                                                                                                       |

 

59

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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).                                                                                                                                                  |

 

60

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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.

 

**                                  Filedherewith

 

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

 

†                                          Portions ofthis exhibit have been omitted pursuant to a request for confidentialtreatment.

 

+                                         Denotes amanagement contract or compensatory plan.

 

61

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