SECURITIES AND EXCHANGE COMMISSION

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DM2YCFsAIiLqA9rJ7UzzitciwPI3vkRnrELxSKr30ktbJV8nZSjn5d9qtjmwqogg wuWx8kJpZDCjwJ5IWwobAg== 0001065645-02-000021.txt : 20021114 0001065645-02-000021.hdr.sgml : 20021114 20021114101203 ACCESSION NUMBER: 0001065645-02-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN COMMUNITY PROPERTIES TRUST CENTRAL INDEX KEY: 0001065645 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 522058165 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14369 FILM NUMBER: 02822266 BUSINESS ADDRESS: STREET 1: 222 SMALLWOOD VILLAGE CENTER CITY: ST. CHARLES STATE: MD ZIP: 20602 BUSINESS PHONE: 3018438600 MAIL ADDRESS: STREET 1: 222 SMALLWOOD VILLAGE CENTER CITY: ST. CHARLES STATE: MD ZIP: 20602 10-Q 1 sept02.htm 9/30/02 FORM 10-Q FOR ACPT SECURITIES AND EXCHANGE COMMISSION SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

/X/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002, OR
/ /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO _________________

Commission file number 1-14369

AMERICAN COMMUNITY PROPERTIES TRUST
(Exact name of registrant as specified in its charter)

MARYLAND
(State or other jurisdiction of incorporation or organization)

52-2058165
(I.R.S. Employer Identification No.)

222 Smallwood Village Center
St. Charles, Maryland 20602
(Address of principal executive offices)(Zip Code)
(301) 843-8600
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days.

Yes /X/ No / /

Indicate the number of shares outstanding of each of the issuer's classes of stock, as of the latest practicable date.

5,191,554 Common Shares

AMERICAN COMMUNITY PROPERTIES TRUST
FORM 10-Q
INDEX

		Page Number
PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Statements of Income for the Nine Months Ended September 30, 2002 and 2001 (Unaudited)	3
	Consolidated Statements of Income for the Three Months Ended September 30, 2002 and 2001 (Unaudited)	4
	Consolidated Balance Sheets at September 30, 2002 (Unaudited) and December 31, 2001 (Audited)	5
	Consolidated Statements of Cash Flow for the Nine Months Ended September 30, 2002 and 2001 (Unaudited)	7
	Notes to Consolidated Statements (Unaudited)	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations for the Nine and Three Month Periods Ended September 30, 2002 and 2001	18
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	26
Item 4.	Controls and Procedures	26
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 2	Changes in Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Submission of Matters to a Vote of Security Holders	28
Item 5.	Other Information	28
Item 6.	Exhibits and Reports on Form 8-K	28
	Signatures	29

AMERICAN COMMUNITY PROPERTIES TRUST CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, (In thousands, except per share amounts) (Unaudited)



	2002	2001

Revenues
Community development-land sales	$ 6,873	$ 14,373
Homebuilding-home sales	1,395	-
Equity in earnings from partnerships and developer fees	1,461	1,695
Rental property revenues	8,138	7,653
Management and other fees, substantially all from related entities	2,382	2,376
Gain from expropriation	-	630
Reimbursement of expenses related to managed entities	4,707	4,360
Interest and other income	550	762
Total revenues	25,506	31,849

Expenses
Cost of land sales	4,983	10,222
Cost of home sales	1,131	-
Selling and marketing	108	49
Rental properties expenses:
Operating	3,460	2,998
Interest	1,616	1,799
Depreciation and amortization	1,265	1,237
Expenses reimbursed from managed entities	4,707	4,360
General and administrative	4,631	4,856
Interest expense	445	1,246
Depreciation and amortization	151	115
Write-off of deferred project costs	-	126
Total expenses	22,497	27,008

Income before provision for income taxes and minority interest	3,009	4,841
Provision for income taxes	1,418	1,294

Income before minority interest	1,591	3,547
Minority interest	(204)	(259)
Net income	$ 1,387	$ 3,288
Basic and fully diluted net income per share	$ 0.27	$ 0.63
Weighted average shares outstanding-basic	5,192	5,192
Weighted average shares outstanding-diluted	5,233	5,196




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

AMERICAN COMMUNITY PROPERTIES TRUST CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, (In thousands, except per share amounts) (Unaudited)



	2002	2001

Revenues
Community development-land sales	$ 2,186	$ 9,067
Homebuilding-home sales	1,395	-
Equity in earnings from partnerships and developer fees	476	520
Rental property revenues	2,780	2,545
Management and other fees, substantially all from related entities	823	834
Reimbursement of expenses related to managed entities	1,632	1,505
Interest and other income	171	209
Total revenues	9,463	14,680

Expenses
Cost of land sales	1,712	6,617
Cost of home sales	1,131	-
Selling and marketing	72	18
Rental properties expense:
Operating	1,202	1,068
Interest	537	587
Depreciation and amortization	422	412
Expenses reimbursed from managed entities	1,632	1,505
General and administrative	1,348	1,635
Interest expense	115	360
Depreciation and amortization	44	34
Write-off of deferred project costs	-	126
Total expenses	8,215	12,362

Income before provision for income taxes and minority interest	1,248	2,318
Provision for income taxes	410	549

Income before minority interest	838	1,769
Minority interest	(66)	(74)
Net income	$ 772	$ 1,695
Basic and fully diluted net income per share	$ 0.15	$ 0.33
Weighted average shares outstanding-basic	5,192	5,192
Weighted average shares outstanding-diluted	5,215	5,198





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

AMERICAN COMMUNITY PROPERTIES TRUST CONSOLIDATED BALANCE SHEETS (In thousands) ASSETS


	September 30,	December 31,
	2002	2001
	(Unaudited)	(Audited)


Cash and Cash Equivalents
Unrestricted	$ 3,107	$ 4,871
Restricted	1,212	1,216
	4,319	6,087
Assets Related to Investment Properties
Operating properties, net of accumulated depreciation of
$25,999 and $25,071, respectively	33,955	34,044
Investment in unconsolidated apartment partnerships, net of
deferred income of $172 and $380, respectively	9,012	8,452
Investment in unconsolidated commercial property partnerships	5,126	5,021
Other receivables, net of reserves of $183 and $203, respectively	1,169	1,238
	49,262	48,755
Assets Related to Community Development
Land and development costs
Puerto Rico	27,779	26,133
St. Charles, Maryland	26,464	27,317
Notes receivable on lot sales and other	4,552	5,861
	58,795	59,311
Assets Related to Homebuilding
Homebuilding construction and land	14,097	6,929

Other Assets
Receivables and other	2,514	2,293
Property, plant and equipment, less accumulated depreciation
of $1,819 and $1,911, respectively	562	665
	3,076	2,958
Total Assets	$ 129,549	$ 124,040










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

AMERICAN COMMUNITY PROPERTIES TRUST CONSOLIDATED BALANCE SHEETS (In thousands) LIABILITIES AND SHAREHOLDERS' EQUITY


	September 30,	December 31,
	2002	2001
	(Unaudited)	(Audited)

Liabilities Related to Investment Properties
Recourse debt	$ 109	$ 427
Non-recourse debt	36,606	37,102
Accounts payable, accrued liabilities and deferred income	3,505	2,772
	40,220	40,301

Liabilities Related to Community Development
Recourse debt	34,559	37,327
Accounts payable, accrued liabilities and deferred income	3,623	3,442
	38,182	40,769

Liabilities Related to Homebuilding
Recourse debt	11,673	6,194
Accounts payable and accrued liabilities	2,127	576
	13,800	6,770

Other Liabilities
Accounts payable and accrued liabilities	1,602	1,933
Notes payable and capital leases	447	576
Accrued income tax liability-current	530	1,179
Accrued income tax liability-deferred	4,247	3,378
	6,826	7,066
Total Liabilities	99,028	94,906

Shareholders' Equity
Common shares, $.01 par value, 10,000,000 shares authorized,
5,191,554 shares issued and outstanding	52	52
Treasury stock, 17,359 shares at cost, $5	(87)	(87)
Additional paid-in capital	18,354	18,354
Retained earnings	12,202	10,815
Total Shareholders' Equity	30,521	29,134
Total Liabilities and Shareholders' Equity	$ 129,549	$ 124,040






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

AMERICAN COMMUNITY PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE NINE MONTHS ENDED SEPTEMBER 30, (In thousands) (Unaudited)


	2002	2001
Cash Flows from Operating Activities
Net income	$ 1,387	$ 3,288
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization	1,416	1,352
Provision for deferred income taxes	869	107
Equity in earnings-unconsolidated apartment partnerships and developer fees	(897)	(1,086)
Distributions-unconsolidated apartment partnerships	492	1,118
Equity in earnings-unconsolidated commercial property partnerships	(564)	(609)
Distributions-unconsolidated commercial property partnerships	459	840
Cost of sales-community development	4,983	10,222
Cost of sales-homebuilding	1,131	-
Homebuilding-construction expenditures	(8,299)	(1,839)
Changes in notes and accounts receivable	1,452	(2,689)
Changes in accounts payable, accrued liabilities and deferred income	1,485	(228)
Net cash provided by operating activities	3,914	10,476

Cash Flows from Investing Activities
Investment in land development	(5,776)	(8,152)
Change in investments-unconsolidated rental property partnerships	(155)	(72)
Change in restricted cash	4	(400)
Additions to rental operating properties, net	(1,176)	(1,190)
(Acquisitions) dispositions of other assets	(343)	65
Net cash used in investing activities	(7,446)	(9,749)

Cash Flows from Financing Activities
Cash proceeds from debt financing	11,383	10,381
Payment of debt	(9,615)	(13,903)
Issuance of warrants	-	77
Payment to acquire treasury stock	-	(87)
Net cash provided by (used in) financing activities	1,768	(3,532)

Net Decrease in Cash and Cash Equivalents	(1,764)	(2,805)
Cash and Cash Equivalents, Beginning of Year	4,871	5,867
Cash and Cash Equivalents, September 30	$ 3,107	$ 3,062






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

AMERICAN COMMUNITY PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)

(1)

ORGANIZATION

American Community Properties Trust ("ACPT" or the "Company") was formed on March 17, 1997 as a real estate investment trust under Article 8 of the Maryland Trust Law. ACPT was formed to succeed most of Interstate General Company L.P.'s ("IGC" or "Predecessor") real estate operations.

On October 5, 1998 IGC transferred to ACPT the common shares of four subsidiaries that collectively comprised the majority of the principal real estate operations and assets of IGC. In exchange, ACPT issued to IGC 5,207,954 common shares of ACPT, all of which were distributed ("the Distribution") to the partners of IGC. IGC distributed to its partners the 5,207,954 shares of common stock of ACPT, resulting in the division of IGC's operations into two companies. The shares were distributed on a basis of one ACPT share for every two IGC Units and a proportionate share to IGC's general partners.

ACPT is a self-managed holding company that is primarily engaged in the investment of rental properties, community development and management services. These operations are concentrated in the Washington, D.C. metropolitan area and Puerto Rico and are carried out through American Rental Properties Trust ("American Rental"), American Rental Management Company ("American Management"), American Land Development U.S., Inc. ("American Land") and IGP Group Corp. ("IGP Group") and their subsidiaries. ACPT is taxed as a partnership. American Rental, American Management and American Land are taxed as U.S. Corporations and IGP Group's income is subject to Puerto Rico income taxes.

(2)

BASIS OF PRESENTATION AND PRINCIPLES OF ACCOUNTING

The accompanying consolidated financial statements include the accounts of American Community Properties Trust and its majority owned and controlled subsidiaries and partnerships, after eliminating all intercompany transactions. All of the entities included in the consolidated financial statements are hereinafter referred to collectively as the "Company" or "ACPT".

The accompanying consolidated financial statements are unaudited but include all adjustments (consisting of normal recurring adjustments) which the Company's management considers necessary for a fair presentation of the results of operations for the interim periods. The operating results for the nine months ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year. Net income per share is calculated based on weighted average shares outstanding. Weighted average shares were adjusted during the three and nine months ended September 30, 2002 and 2001 to reflect dilutive common shares related to outstanding warrants.

The Company's management agreements require the rental partnerships to pay a management fee plus reimburse the Company for certain payroll and out of pocket expenses incurred on behalf of the partnerships. Consistent with EITF Topic D-103, "Income Characterization of Reimbursements Received for Out of Pocket Expenses Incurred", which became effective January 1, 2002, the Company has presented these reimbursements as revenues.

These unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles ("GAAP") have been condensed or omitted. While Management believes that the disclosures presented are adequate to make the information not misleading, it is suggested that these financial statements be read in conjunction with the financial statements and the notes included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 2001.

(3)

INVESTMENT IN UNCONSOLIDATED PARTNERSHIPS

Apartment Partnerships

The following information summarizes financial data and principal activities of unconsolidated apartment partnerships, which the Company accounts for under the equity method. The information is presented to segregate operating properties from the two projects that were converted and sold as condominiums (in thousands):

	Operating	Condo
	Properties	Conversions	Total
Summary Financial Position:
Total Assets
September 30, 2002	$ 87,070	$ 50	$ 87,120
December 31, 2001	88,733	79	88,812
Total Non-Recourse Debt
September 30, 2002	96,029	-	96,029
December 31, 2001	98,400	-	98,400
Total Other Liabilities
September 30, 2002	11,230	12	11,242
December 31, 2001	10,841	29	10,870
Total Equity
September 30, 2002	(20,189)	38	(20,151)
December 31, 2001	(20,508)	50	(20,458)
Company's Investment
September 30, 2002	8,968	44	9,012
December 31, 2001	8,350	102	8,452

Summary of Operations:
Total Revenue
Three Months Ended September 30, 2002	7,095	-	7,095
Three Months Ended September 30, 2001	7,099	9	7,108
Nine Months Ended September 30, 2002	21,074	-	21,074
Nine Months Ended September 30, 2001	21,036	785	21,821
Net Income (Loss)
Three Months Ended September 30, 2002	331	(1)	330
Three Months Ended September 30, 2001	506	(36)	470
Nine Months Ended September 30, 2002	1,396	(12)	1,384
Nine Months Ended September 30, 2001	1,297	80	1,377
Company's recognition of equity in earnings
And developer fees
Three Months Ended September 30, 2002	288	-	288
Three Months Ended September 30, 2001	353	(18)	335
Nine Months Ended September 30, 2002	954	(57)	897
Nine Months Ended September 30, 2001	1,046	40	1,086

	Operating	Condo
	Properties	Conversions	Total
Summary of Cash Flows:
Cash flows from operating activities
Three Months Ended September 30, 2002	1,331	1	1,332
Three Months Ended September 30, 2001	1,532	(72)	1,460
Nine Months Ended September 30, 2002	4,135	(26)	4,109
Nine Months Ended September 30, 2001	4,378	196	4,574
Company's share of cash flows from
Operating activities
Three Months Ended September 30, 2002	506	-	506
Three Months Ended September 30, 2001	604	(36)	568
Nine Months Ended September 30, 2002	1,602	(13)	1,589
Nine Months Ended September 30, 2001	1,719	98	1,817
Operating cash distributions
Three Months Ended September 30, 2002	474	-	474
Three Months Ended September 30, 2001	110	-	110
Nine Months Ended September 30, 2002	1,076	-	1,076
Nine Months Ended September 30, 2001	1,094	1,300	2,394
Company's share of cash distributions
Three Months Ended September 30, 2002	238	-	238
Three Months Ended September 30, 2001	110	-	110
Nine Months Ended September 30, 2002	492	-	492
Nine Months Ended September 30, 2001	468	650	1,118

The unconsolidated apartment partnerships as of September 30, 2002 include 15 partnerships owning 3,767 rental units situated in 18 apartment complexes. These complexes are owned by Alturas Del Senorial Associates Limited Partnership, Bannister Associates Limited Partnership, Bayamon Gardens Associates Limited Partnership, Brookside Gardens Limited Partnership, Carolina Associates Limited Partnership, Colinas de San Juan Associates Limited Partnership, Crossland Associates Limited Partnership, Essex Apartments Associates Limited Partnership, Huntington Associates Limited Partnership, Jardines de Caparra Associates Limited Partnership, Lakeside Apartments Limited Partnership, Monserrate Associates Limited Partnership, San Anton Associates Limited Partnership, Turabo Limited Dividend Partnership and Valle del Sol Limited Partnership. In addition, the Company holds an ownership interest in a partnership, New Center Associates Limited Partnership, whose rental units were converted into condominiums, all of which have been sold. When all the affairs of this partnership are concluded, the partnership will be liquidated. The Company holds a general partner interest in these partnerships and generally shares in zero to 5% of profits, losses and cash flow from operations until such time as the limited partners have received cash distributions equal to their capital contributions. Thereafter, the Company generally shares in 50% of cash distributions from operations. Pursuant to certain partnership agreements, the general partners of the unconsolidated partnerships are prohibited from selling or refinancing the apartment complexes without majority limited partner approval. Due to the absence of control and/or non-majority ownership, these partnerships are accounted for under the equity method of accounting.

Unconsolidated Commercial Property Partnership

In December 1998, the Company obtained a limited partner interest in ELI, S.E. ("ELI"), a partnership formed for the purpose of constructing a building to lease to the State Insurance Fund of the Government of Puerto Rico. ACPT contributed the land in exchange for $700,000 and 27.82% ownership interest in the partnership's assets equal to producing a 45.26% interest in cash flow generated by the thirty-year lease of the building. The following tables summarize ELI's financial information (in thousands):

SUMMARY OF FINANCIAL POSITION:
	As of
	September 30,	December 31,
	2002	2001

Total assets	$ 29,453	$ 28,837
Total liabilities	26,292	25,907
Total equity	3,161	2,930
Company's investment	5,126	5,021


SUMMARY OF OPERATIONS:
	For the Nine Months		For the Three Months
	Ended September 30,		Ended September 30,
	2002	2001	2002	2001

Total revenue	$ 2,741	$ 2,791	$ 895	$ 915
Net income	1,244	1,347	416	410
Company's recognition of equity in earnings	564	609	188	185


SUMMARY OF OPERATING
CASH FLOWS:
	For the Nine Months		For the Three Months
	Ended September 30,		Ended September 30,
	2002	2001	2002	2001

Cash flows from operating activities	$ 1,605	$ 1,257	$ 662	$ 856
Company's share of cash flows
from operating activities	728	569	301	388
Operating cash distributions	1,013	1,838	339	355
Company's share of operating
cash distributions	459	840	153	168

(4)

DEBT

The Company's outstanding debt is collateralized primarily by land, land improvements, housing, receivables, investments in partnerships, and rental properties. The following table summarizes the indebtedness of the Company at September 30, 2002 and December 31, 2001 (in thousands):

	Maturity	Interest	Outstanding
	Dates	Rates (a)	September 30,	December 31,
	From/To	From/To	2002	2001
Related to community development:
Recourse debt	02-28-03/	Non-interest	$ 34,559	$ 37,327
	02-15-06	bearing/6%

Related to homebuilding:
Recourse debt	08-31-03	P	11,673	6,194

Related to investment properties:
Recourse debt	12-15-02	5.12%	109	427
Non-recourse debt	10-01-19/	6.6%/	36,606	37,102
	10-01-28	7.75%
General:
Recourse debt	02-01-03/	5.9%/	447	576
	02-01-06	18.5%
Total debt			$ 83,394	$ 81,626

"P" = Prime lending interest rate.

As of September 30, 2002, the $34,559,000 of recourse debt related to community development assets is fully collateralized by substantially all the community development assets. The non-recourse investment properties debt is collateralized by apartment projects and secured by the Federal Housing Administration ("FHA") or the Maryland Housing Fund. Mortgage notes payable of $6,524,000 have stated interest rates of 7.5% and 7.75%; however, after deducting interest subsidies provided by HUD, the effective interest rate over the life of the loans is 1%. The Company's loans contain various financial, cross collateral, cross default, technical and restrictive provisions. As of September 30, 2002 the Company is in compliance with the provisions of its loan agreements.

(5)

RELATED PARTY TRANSACTIONS

ACPT, certain officers and trustees of ACPT, IGC and a general partner of IGC, Interstate Business Corporation ("IBC"), have ownership interests in various entities that conduct business with the Company. The financial impact of the related party transactions on the accompanying consolidated financial statements are reflected below (in thousands):

CONSOLIDATED STATEMENT OF INCOME:
		Nine Months Ended		Three Months Ended
		September 30,		September 30,
		2002	2001	2002	2001
Management and Other Fees (A)
Unconsolidated subsidiaries with third party partners		$ 1,328	$ 1,380	$ 446	$ 473
Affiliates of James Michael Wilson, CEO and Trustee		657	659	220	259
		$ 1,985	$ 2,039	$ 666	$ 732
Interest and Other Income
Unconsolidated subsidiaries with third party partners		$ 37	$ 37	$ 13	$ 12
		$ 37	$ 37	$ 13	$ 12
General and Administrative Expense
Affiliates of James Michael Wilson, CEO and Trustee	(B1)	$ 315	$ 292	$ 125	$ 103
Reserve additions and other write-offs-
Unconsolidated subsidiaries with third party partners	(A)	(21)	3	(10)	3
Reimbursement to IBC for ACPT's share of
J. Michael Wilson's salary		145	68	45	23
Reimbursement of administrative costs-
Affiliates of James Michael Wilson, CEO and Trustee		4	(39)	3	(9)
IGC	(B4)	(18)	(22)	(5)	(6)
James J. Wilson, IGC chairman and director	(B3)	150	150	50	50
Thomas J. Shafer, Trustee	(B5)	32	23	11	8
		$ 607	$ 475	$ 219	$ 172
Interest Expense
KEMBT Corporation	(B2)	$ -	$ 89	$ -	$ -
		$ -	$ 89	$ -	$ -

BALANCE SHEET IMPACT:
				Balance	Balance
				September 30,	December 31,
				2002	2001
Assets Related to Rental Properties
Receivables-All unsecured and due on demand
Unconsolidated subsidiaries with third party partners				$ 978	$ 866
Affiliates of James Michael Wilson, CEO and Trustee				215	193
				$ 1,193	$ 1,059
Other Assets
Receivables-All due on demand
IGC	(B4)			$ 169	$ 150
Affiliate of James Michael Wilson, CEO and Trustee	(B4)			53	77
IBC				8	9
				$ 230	$ 236

Liabilities Related to Community Development
Notes payable-KEMBT Corporation	(B2)			$ 6,629	$ 6,839

(A) Management and Other Services

The Company provides management and other support services to its unconsolidated subsidiaries and other related entities in the normal course of business. These fees are typically collected on a monthly basis, one month in arrears. These receivables are unsecured and due on demand. Certain partnerships experiencing cash shortfalls have not paid timely. These receivable balances are reserved until satisfied or the prospect of collectibility improves. The collectibility of management fee receivables is evaluated quarterly. Any increase or decrease in the reserves is reflected accordingly as additional expenses or recovery of such expenses.

(B) Other

Other transactions with related parties are as follows:

(1)	The Company rents executive office space and other property from affiliates both in the United States and Puerto Rico pursuant to leases that expire through 2005. In management's opinion, all leases with affiliated persons are on terms at least as favorable as those generally available from unaffiliated persons for comparable property. On April 1, 2001 IGP assumed the office space previously occupied by an affiliated company.
(2)	Pursuant to the terms of IGC's restructuring, IGC retained a note receivable due from Land Development Associates S.E. ("LDA") payable from LDA's cash flow. The note bore interest at a rate of prime plus 1.5% subject to a 6% floor and 9% ceiling with a maturity date of August 2, 2009. Effective June 6, 2001 the LDA Note was modified in two respects: (1) Up to 28% of net proceeds from LDA land sales was to be used to make principal payments on the note, and (2) the note became non-interest bearing as of June 6, 2001. The Company's independent Trustees unanimously approved the modification. In July 2001 IGC assigned the note to KEMBT Corporation ('KEMBT"), wholly owned by Wilson Securities Corporation, and then pledged by KEMBT as collateral for a $7,000,000 credit agreement from FirstBank Puerto Rico ('FirstBank"). In March 2002 the Company's senior management in the United States learned that in July 2001, an officer of the Company in Puerto Rico signed a letter on the stationery of LDA purportedly agreeing that an event of default under the KEMBT credit agreement would constitute an event of default under the Loan agreement between LDA and FirstBank, giving the bank the right to foreclose on collateral securing the LDA loan agreement. The letter was not authorized by the Company's chairman or president, who had no knowledge of the letter, nor was the undertaking approved by the independent trustees of the Company as required under the Company's Declaration of Trust. After discussions with the Company, FirstBank agreed to rescind the cross-collateralization and cross-default retroactive to the date of the letter and the Company agreed that (i) The LDA Note will be secured by the collateral under LDA's loan agreement with the bank, (ii) an event of default under the LDA Note will be a default under LDA's loan agreement with the bank, (iii) upon prepayment of all or part of LDA's obligations to the bank under the LDA loan agreement a proportionate amount of the outstanding balance of the LDA Note will be paid; (iv) the due date of the LDA Note will be June 30, 2003, or such later date as shall apply to LDA's other obligations to the bank under the LDA loan agreement, and (v) at the request of the bank, LDA will prepay to the bank the outstanding balance of the LDA Note, up to the outstanding balance of the KEMBT obligation, from the proceeds of an additional credit facility provided by the bank. In consideration of LDA's undertakings to the bank with regard to the LDA Note, entities controlled by the Wilson family have agreed: (i) to pay any and all interest on any new obligations incurred by the Company to FirstBank in full or partial extinguishment of the related party obligation to the bank; (ii) reimburse the Company for all loan fees, legal costs and other expenses incurred by the Company in conn ection with this matter, and (iii) to pay an annual fee of one percent of the outstanding balance of any new obligations incurred by the Company to the bank in full or partial extinguishment of the related party obligation to the bank. The foregoing undertakings of the Wilson family are guaranteed by entities controlled by the Wilson family including James J. Wilson individually for which consulting payments to be made to him under a Consulting Agreement with the Company entered into in 1998, discussed below, are to serve as security. In addition, the Company will receive a discount of approximately $430,000 on the LDA Note. In connection with this transaction, Thomas B. Wilson tendered his resignation as a trustee which was accepted by the Board of Trustees on April 9, 2002, and certain disciplinary action was taken with respect to two of the Company's officers in Puerto Rico.
(3)	Fees paid to James J. Wilson pursuant to a consulting and retirement agreement. Effective October 5, 1998, the consulting agreement provides for annual cash payments for the first two years of $500,000 and annual cash payments for eight years thereafter of $200,000. Currently the consulting fees are being applied to satisfy the terms of the KEMBT transaction discussed above. At Mr. Wilson's request, any additional payments will be made to IGC.
(4)	During the transition period after the Distribution, the Company provided land development, accounting, tax, human resources, payroll processing and other miscellaneous administrative support services to IGC. After the transition period, ACPT agreed to continue to provide human resources, payroll processing and tax services to IGC on a cost reimbursement basis. Currently the Company is providing minimal support services to IGC. The receivables for these services and similar services provided in the past to Equus Gaming Company L.P. are guaranteed by IBC.
(5)	Fees paid to Thomas J. Shafer, a trustee, pursuant to a consulting agreement.

(6)

SEGMENT INFORMATION

The U.S. operations and Puerto Rico operations are managed as separate profit centers. The U.S. operations include investments in rental properties, community development and management services. The Puerto Rico operations include investments in rental properties, investments in commercial properties, community development, management services and homebuilding.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The following presents the segment information for the nine months ended September 30, 2002 and 2001 (in thousands):

	United	Puerto	Inter-
	States	Rico	Segment	Total
Nine Months

2002:

Total revenues	$ 18,563	$ 7,429	$ (486)	$ 25,506
Interest income	138	712	(484)	366
Interest expense	2,120	353	(412)	2,061
Depreciation and amortization	1,346	70	-	1,416
Income taxes (benefit)-current	711	(163)	-	548
Income taxes (benefit)-deferred	704	166	-	870
Income before income taxes and minority interest	2,958	123	(72)	3,009
Net income	1,339	120	(72)	1,387
Total assets	72,632	70,702	(13,785)	129,549
Additions to long lived assets	5,248	1,704	-	6,952

2001:

Total revenues	$ 16,896	$ 11,213	$ (620)	$ 27,489
Interest income	98	1,066	(620)	544
Interest expense	2,895	710	(560)	3,045
Depreciation and amortization	1,263	89	-	1,352
Income taxes (benefit)-current	279	907	-	1,186
Income taxes (benefit)-deferred	414	(306)	-	108
Income before income taxes and minority interest	2,267	2,634	(60)	4,841
Net income	1,315	2,033	(60)	3,288
Total assets	73,491	63,501	(12,654)	124,338
Additions to long lived assets	3,815	4,337	-	8,152

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The following presents the segment information for the three months ended September 30, 2002 and 2001 (in thousands):

	United	Puerto	Inter-
	States	Rico	Segment	Total
Three Months

2002:

Total revenues	$ 6,171	$ 3,458	$ (166)	$ 9,463
Interest income	50	221	(164)	107
Interest expense	687	105	(140)	652
Depreciation and amortization	448	18	-	466
Income taxes (benefit)-current	356	(84)	-	272
Income taxes (benefit)-deferred	35	103	-	138
Income before income taxes and minority interest	1,054	218	(24)	1,248
Net income	597	199	(24)	772
Total assets	72,632	70,702	(13,785)	129,549
Additions to long lived assets	1,813	603	-	2,416

2001:

Total revenues	$ 5,370	$ 8,029	$ (224)	$ 13,175
Interest income	65	287	(224)	128
Interest expense	936	193	(182)	947
Depreciation and amortization	422	24	-	446
Income taxes (benefit)-current	92	581	-	673
Income taxes (benefit)-deferred	(70)	(54)	-	(124)
Income before income taxes and minority interest	297	2,063	(42)	2,318
Net income	201	1,536	(42)	1,695
Total assets	73,491	63,501	(12,654)	124,338
Additions to long lived assets	1,530	1,758	-	3,288

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

General:

Historically, the Company's financial results have been significantly affected by the cyclical nature of the real estate industry. Accordingly, the Company's historical financial statements may not be indicative of future results.

For the Nine Months Ended September 30, 2002 and 2001
U.S.

Community Development Operations.

During the first nine months of 2002, 47 standard size single-family lots were sold for an average sales price of $53,000, 49 small single-family lots for an average sales price of $43,000 and 20 townhome lots for an average sales price of $35,000, compared to 71 standard size family lots sold for an average sales price of $51,000 and 20 townhome lots sold for an average sales price of $33,000 during the same period of 2001. The residential lot prices increased pursuant to the escalation provisions in the sales contracts. During the first nine months of 2002, 13 acres of commercial land were sold for an average sales price of $2.83 per square foot compared to 27 acres sold for an average sales price of $2.79 per square foot during the first nine months of 2001. The average sales price of these parcels differs due to their location, use and level of development.

During 2002, the Company received a $350,000 note as partial payment toward a $1,600,000 commercial sale and the remainder in cash. The note is personally guaranteed by the purchaser and a deed of trust subordinate to an acquisition and construction loan. Per the terms of the deed of trust, the purchaser is required to subdivide the property and obtain a release from the acquisition loan eliminating the subordination on a one-acre out parcel. The sale was recorded using the cost recovery method requiring the full amount of the note to be deferred for revenue recognition purposes in the second quarter of 2002.

The combined gross profit margin for the nine months ended September 30, 2002 decreased to 28%, compared to 31% in the same period of 2001. The decrease was primarily attributable to the $350,000 deferred revenue and the mix of sales between residential and commercial. The average gross profit on commercial sales during the first nine months of 2002 was 51% compared to 46% in the first nine months of 2001. This increase is primarily attributable to use and location of the land. The significant parcel sold in 2002 is located in an existing developed area for a small commercial center anchored with a major chain grocery store compared to the large parcel sold in 2001 located next to a landfill. Fairway Village's residential lot sales gross margin increased 1.8% to 31% as a direct reflection of the increase in the lot sales prices.

Rental Property Revenues and Operating Results.

The Company's share of the consolidated housing partnerships' net income (rental property revenue net of operating expenses, interest expense, depreciation and amortization and minority interest) increased 17% to $1,593,000 for the nine months ended September 30, 2002, compared to $1,360,000 in the same period in 2001. The increase is primarily due to a 6% increase in rental revenue, 10% reduction in interest expense, 21% reduction in minority interest, offset in part by a 15% increase in operating expenses and a 2% increase in depreciation and amortization. The increase in rental revenue is a result of increased rental rates primarily in non-subsidized properties. The increase in operating expenses is primarily attributable to a 102% increase in hazard insurance premium effective October 1, 2001 and increased maintenance costs. In addition, New Forest Apartments incurred a $25,000 loss, the insurance deductible, when four units were damaged by fire.

Equity in Earnings from Partnerships and Developer Fees.

Equity in earnings decreased 35% to $447,000 during the first nine months of 2002, compared to $684,000 during the first nine months of 2001. The decrease is primarily attributable to the combined effect of reduced developer fees and the reduction in earnings from the partnerships. Sponsor and development fees reduce annually as they are amortized. In addition, the deferred developer fee of one partnership was fully amortized during 2001. The combined effect resulted in a $133,000 decrease in revenue recognized in the first nine months of 2002. The earnings from the partnerships were down due to a $25,000 fire loss at Huntington Apartments, increased insurance premiums and repair expenses during 2002 combined with a timing difference of a retroactive rent increase pursuant to a subsidy contract recognized in 2001. These decreases were partially offset by increased rental rates primarily in non-subsidized properties.

Management and Other Fees.

Management and other fees increased 11% to $985,000 in the first nine months of 2002, compared to $885,000 in the same period in 2001. The Company purchased a new fully integrated computer system that provides the managed properties with a more efficient way to process subsidy contracts and other basic property functions. The properties are charged additional fees for their portion of the additional costs related to these new computer services generating increased management and other fees in 2002. In addition, management fees increased due to a modification to the management contract with one non-owned partnership increasing the management fee and increased rents during the nine months ended September 30, 2002, compared to the nine months ended September 30, 2001.

Interest Expense.

Interest expense decreased 54% to $504,000 during the nine months ended September 30, 2002, compared to $1,097,000 for the nine months ended September 30, 2001. This decrease is primarily attributable to the overall reduction in the prime lending interest rate, refinanced debt at a reduced interest rate and a $3,129,000 decrease in outstanding debt during the first nine months of 2002 compared to the first nine months of 2001.

General and Administrative Expense.

General and administrative expenses decreased 17%, to $1,724,000 for the nine months ended September 30, 2002, compared to $2,069,000 for the same period of 2001. The decrease is attributable to an increase in allocated corporate costs charged to the Puerto Rico operations, a reduction in group insurance, the recovery of a note receivable previously written off as uncollectible, and the effect of the decrease in the Company's stock price on outstanding share incentive rights. During 2002, the corporate staff located at the St. Charles, Maryland office provided additional services to the Puerto Rico operations. The decreases in general and administrative expense was offset in part by increased compensation expense, stock exchange fees and board of trustee fees, compared to the first nine months in 2001.

Puerto Rico

Community Development Operations.

There was no community development land sales revenue during the nine months ended September 30, 2002, compared to sales of $6,813,000 during the nine months ended September 30, 2001. During the nine months of 2001, sales revenue was reduced by $227,000 to reflect the discount for the imputed interest on a note taken as partial payment for the sale of a parcel of 220 condominium units. During the same period, one parcel was transferred to our wholly owned subsidiary to construct and sell 208 units. Residential lots in Puerto Rico are sold in bulk and, like commercial sales, are cyclical in nature.

The gross profit margin for sales during the nine months ended September 30, 2001, was 27%. During the first nine months of 2001, the Company incurred $169,000 of costs associated with the clean up of unsuitable materials located beneath the surface of a parcel sold in 2000. In addition, the Company paid to a contractor $699,000 for cost overruns at issue in the Wal-Mart litigation. In February 2002, the Company paid Wal-Mart $233,000 for additional cost overruns resolving this litigation.

The maturity date of a $5,632,000 note receivable related to a 2001 land sale was extended from March 31, 2002 to December 31, 2002 upon receipt of a $2,000,000 principal payment in August 2002.

Homebuilding Operations.

During September 2002, the first eight units in Brisas de Parque Escorial closed generating $1,395,000 of sales revenue. As of September 30, 2002, 45 units were under contract with an average sales price of $172,000. These sales are backed by a $4,000 deposit and non-contingent sales contract. The gross profit for the period was 19%. There were no home sales during 2001.

Equity in Earnings from Partnerships and Developer Fees.

Equity in earnings from partnerships increased less than one percent to $1,014,000 during the first nine months of 2002, compared to $1,011,000 during the first nine months of 2001. The increase in earnings from partnerships is primarily a result of increased rents, reduced vacancies, reduced operating and financial expenses, offset in part by increased insurance premiums. This increase in earnings from partnerships was partially offset by the reduction in earnings from ELI, S.E. and in sponsor and developer fees amortization.

Management and Other Fees.

Management and other fees decreased by 6% to $1,400,000 during the nine months ended September 30, 2002, compared to $1,491,000 for the nine months ended September 30, 2001. The decrease is primarily attributable to special management fees recognized during the nine months of 2001 from the two partnerships that converted their rental units into condominiums, all of which have been sold. Also, during the nine months of 2001, additional management fees were earned as the result of a HUD authorized adjustment to the gross income of various non-owned properties. There were no similar fees in 2002. These decreases were partially offset by management fees received from the property owner associations in Parque Escorial with no comparable fees earned during the nine months of 2001.

Gain from Expropriation.

During the nine months ended September 30, 2001, the Puerto Rico Highway Authority ("PRHA") and the Company executed a settlement agreement as a final condemnation award on 54 cuerdas expropriated located in Parque El Comandante. The agreement increased the condemnation award per cuerda to $35,000 and provided for the payment of interest on the additional condemnation award from the date of expropriation in 1998. This transaction resulted in a $630,000 gain and the recognition of $152,000 of interest accrued through September 30, 2001. There were no similar transactions during the comparable period in 2002.

Interest Expense.

Interest expense decreased 50% to $353,000 during the first nine months of 2002, compared to $710,000 during the same period in 2001. The decrease is primarily attributable to the reduced outstanding debt balance and the overall reduction in the prime lending rate.

General and Administrative Expense.

General and administrative expenses increased 4% to $2,910,000 during the nine months ended September 30, 2002, compared to $2,787,000 for the nine months ended September 30, 2001. The increase is primarily attributable to the increase in the corporate cost allocation during 2002. Due to staffing changes and certain transactions, the Puerto Rico staff received additional support from the corporate office. This increase was partially offset by reduced compensation expense and consulting fees combined with the additional municipal taxes from prior years recognized in 2001.

For the Three Months Ended September 30, 2002 and 2001
U.S.

Community Development Operations.

Community development land sales revenue decreased $68,000 to $2,186,000 during the three months ended September 30, 2002, compared to sales revenue of $2,254,000 during the three months ended September 30, 2001. During the third quarter of 2002, 25 standard size single-family lots were sold for an average sales price of $54,000, 16 small single-family lots for an average sales price of $44,000 and 4 townhome lots for an average sales price of $35,000, compared to 27 standard size single-family lots sold for an average sales price of $51,000 and 14 townhome lots for an average sales price of $33,000 during the third quarter of 2001. During the third quarter of 2001, 1 acre of commercial land was sold for a sales price of $12 per square foot, with no comparable sale in the third quarter of 2002.

The gross profit margin for the three months ended September 30, 2002 increased 4% to 23% from 19% in the same period of 2001. The increase was primarily attributable to the increase in the residential lot sales prices and a 4.9% decrease in the period cost incurred during the third quarter of 2002 offset by an 8% increase in the expected cost to complete the development of the Huntington Ridge townhome lots.

Rental Property Revenues and Operating Results.

The Company's share of the consolidated housing partnerships' net income (rental property revenue net of operating expenses, interest expense, depreciation and amortization and minority interest) increased 37% to $553,000 for the three months ended September 30, 2002, compared to $404,000 in the same period in 2001. The increase is primarily attributable to a 9% increase in rental revenue, 9% reduction in interest expense, 11% reduction in minority interest, offset in part by a 13% increase in operating expenses and a 2% increase in depreciation and amortization. The supply of housing in Charles County has been tight in 2002, allowing the steady rent increases in our non-subsidized rental properties. The increase in operating expenses is primarily due to a 102% increase in insurance premiums. Increases in insurance costs are expected to continue for 2003.

Equity in Earnings from Partnerships and Developer Fees.

Equity in earnings decreased 40% to $119,000 during the three months ended September 30, 2002, compared to $199,000 during the three months ended September 30, 2001. This decrease is primarily attributable to a $44,000 reduction in the recognition of developer fees during the third quarter of 2002, compared to the third quarter of 2001 and fire damage to 38 units in one apartment complex.

Management and Other Fees.

Management and other fees increased 15% to $350,000 for the three months ended September 30, 2002, compared to $304,000 in the same period in 2001. The Company purchased a new fully integrated computer system that provides managed properties with a more efficient way to process subsidy contracts and other basic property functions. The properties are charged a fee for their portion of the additional costs related to these new computer services, generating increased management and other fees in 2002. In addition, management fees increased due to a modification to the management contract with one non-owned partnership increasing the management fee and to an overall increase in rents.

Interest Expense

Interest expense decreased $200,000 to $150,000 during the three months ended September 30, 2002, compared to $350,000 for the three months ended September 30, 2001. This decrease is primarily due to the decrease in outstanding loan balances and the prime lending interest rate during the third quarter of 2002 compared to the third quarter of 2001.

General and Administrative Expense.

General and administrative expenses decreased 42%, to $392,000 for the three months ended September 30, 2002, compared to $680,000 for the same period of 2001. The reduction is primarily attributable to the recovery of a note receivable previously written off as uncollectible and increased corporate costs allocated to the Puerto Rico operations during the third quarter 2002, compared to the same period in 2001 and the effect of the decrease in the Company's stock price during the third quarter of 2002 on compensation expense recorded related to outstanding share incentive rights.

Puerto Rico

Community Development Operations.

There were no land sales during the third quarter of 2002, compared to sales of $6,813,000 during the third quarter of 2001. During the third quarter of 2001, the Company sold land for 220 condominium units at $32,000 per unit. The revenue recognized was discounted by the imputed interest on the note taken back for 80% of the sales price, $5,632,000. During the same period, the Company transferred one parcel to a wholly owned subsidiary to construct and sell 208 units.

The gross profit margin for the sale during the third quarter of 2001 was 27%. During the same period of 2001, the Company agreed to pay a contractor $699,000 for cost overruns at issue in the Wal-Mart litigation.

Homebuilding Operations.

Equity in Earnings from Partnerships and Developer Fees.

Equity in earnings increased 11% to $357,000 during the three months ended September 30, 2002, compared to $321,000 during the three months ended September 30, 2001. The increase is primarily attributable to an increase in earnings generated by the rental properties due to increased rents, reduced repairs and maintenance, reduced interest expense, offset in part by increased insurance premiums.

Management and Other Fees.

Management and other fees decreased 10% to $476,000 during the three months ended September 30, 2002, compared to $529,000 for the three months ended September 30, 2001. The decrease is primarily attributable to additional management fees earned during the third quarter of 2001 as the result of a HUD authorized adjustment to the gross income of various non-owned properties and the reduction of management fees from a commercial non-owned property due to the loss of a major tenant. These decreases were partially offset with management fees received from property owner associations in Parque Escorial with no comparable fees earned during the three months ended September 30, 2001.

Interest Expense.

Interest expense decreased 46% to $104,000 during the third quarter of 2002, compared to $193,000 during the same period in 2001. This decrease is primarily attributable to the overall reduction in the prime-lending rate during the third quarter of 2002, compared to the same quarter of 2001.

General and Administrative Expense.

General and administrative expenses increased less than one percent to $959,000 during the three months ended September 30, 2002, compared to $955,000 for the three months ended September 30, 2001. The increase is primarily attributable to the increase in the corporate expense allocation to the Puerto Rico operations during the third quarter of 2002. This increase was partially offset by reduced compensation expense and transfer of guard and other services provided Parque Escorial to the property owner associations.

Liquidity and Capital Resources

Cash and cash equivalents were $3,107,000 and $4,871,000 at September 30, 2002 and December 31, 2001, respectively. This decrease was attributable to $7,446,000 used in investing activities, offset by $1,768,000 provided by financing activities and $3,914,000 provided by operations. The cash outflow for investing activities was primarily attributable to $5,776,000 of land improvements put in place for future land sales. During the first nine months of 2002, $9,615,000 of debt repayments was made compared to $11,383,000 of debt advances received. The cash outflow from operating activities was primarily $8,271,000 of improvements to the condominium project in Parque Escorial. Sales commenced in the third quarter of 2002.

The Company and the Charles County commissioners have reached a settlement that will provide guaranteed school allocation permits for 255 new dwelling units per year, cumulative through December 2005; sewer connection fees for the next 2000 units in Fairway Village, $1,608 less per unit than the fee charged builders outside of St. Charles; a refund to ACPT's predecessor for certain water and sewer fees previously paid; and the possibility of annexing additional contiguous land to St. Charles. The County agreed to issue general obligation bonds to finance the construction of certain infrastructure needed to develop St. Charles. In exchange, the Company agreed to provide letters of credit to secure the bonds and accelerate the construction of two major roadway links to the Charles County road system and dismiss all pending water and sewer litigation.

In 1999 the Company sold land intended for the development of a 1650-megawatt power plant. Pursuant to the Contract of Sale, the purchaser entered into a Utility Agreement, which required them to provide funding for certain infrastructure that would benefit Fairway Village and other land in St. Charles. Due to the decrease in capital funds available to the energy industry, the purchaser has delayed their development plans and is seeking an extension to their contract in order that they may pursue this power plant when the financial climate changes. In response to this delay, the Company's outside engineers are designing a temporary pump station and other utilities that will accommodate development in St. Charles over the next 5 years. In the event the purchaser does not pursue the construction of the power plant, the County has agreed to provide financing for this infrastructure as part of the settlement agreement discussed above.

The Company has historically met its liquidity requirements from cash flow generated from residential and commercial land sales, property management fees, distributions from residential rental partnerships and from bank financing providing funds for development and working capital. The Company has sufficient loans in place to develop the projects currently underway in St. Charles and Parque Escorial.

The Company's principal demands for liquidity are expected to be the continued funding of its current debt service, development costs in Fairway Village and Parque Escorial and other normal operating costs. The Company does not expect to generate significant cash flows in excess of its existing obligations. Anticipated cash from operations, new and existing financing facilities, and extension or refinancing of $38,387,000 of required principal payments and loans that mature in the next twelve months are expected to meet the Company's financial requirements for the year. However, there are no assurances that these expectations will be met.

Debt Summary

Substantially all of ACPT's assets are encumbered by approximately $47,000,000 of recourse debt and $37,000,000 of non-recourse debt. The non-recourse debt is attributable to the mortgages of consolidated rental property partnerships. The significant terms of ACPT's other debt financing arrangements are shown below (dollars in thousands):

				Balance
	Maximum	Interest	Maturity	Outstanding
	Borrowings	Rate (a)	Date	9/30/02

SouthTrust	$ 6,000	P+.75%	11/26/04	$ 6,000
First Bank-phase III	4,589	P+1.0%	6/30/03	2,090
First Bank-office park	4,961	P+1.0%	6/30/03	4,961
First Bank-working capital loan	5,474	P+1.0%	6/30/03	5,474
First Bank-homebuilding	23,710	P	8/31/03	11,673
The Columbia Bank	3,500	P+1.25%	2/15/06	3,500
The Columbia Bank	2,000	P+1.25%	8/15/04	909
The Columbia Bank	2,500	P+1.25%	10/15/04	596
BankTrust	109	5.12%	12/15/02	109
Banco Popular	4,400	P+1.0%	2/28/03	4,400
KEMBT Corporation	6,629	N/A	6/30/03	6,629
Other miscellaneous	447	Various	Various	447
	$ 64,319			$ 46,788

P = Prime lending interest rate.

On August 7, 2002, the Company closed a $2,000,000 development loan for the next parcel in Fairway Village. The Banco Popular loan due on July 31, 2002 was extended until February 28, 2003 in exchange for a $11,000 loan fee and $200,000 principal curtailment. Management expects to refinance this loan through another lender prior to its maturity date.

On October 28, 2002, the Company signed a commitment letter with a financial institution to refinance an unconsolidated-apartment partnership's current mortgage with a non-recourse loan. The new loan proceeds will repay the current mortgage balance of $7,725,000 and provide a bridge loan facility of $826,000 to fund the transaction costs, and establish a replacement reserve and debt service reserve funds. The term credit facility will be for the life of our current HAP Contract, maturing in March 2006, with an amortization of 20-year and interest at floating 90-day LIBOR rate plus 2.00%. The bridge loan facility shall be repaid in full by the earlier of: (i) 90 days from the closing date; or (ii) when the existing restricted reserves of approximately $4,600,000 are released by Puerto Rico Housing Finance Corporation.

Forward-Looking Statements

Certain matters discussed and statements made within this Form 10-Q are forward-looking statements within the meaning of the Private Litigation Reform Act of 1995 and as such may involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of the company to be different from any future results, performance or achievements expressed or implied by such forward-looking statements. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. These risks are detailed from time to time in the Company's filings with the Securities and Exchange Commission or other public statements.

ITEM 3.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to certain financial market risks, the most predominant being fluctuations in interest rates. Interest rate fluctuations are monitored by the Company's management as an integral part of the Company's overall risk management program, which recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effect on the Company's results of operations.

As of September 30, 2002, there have been no material changes in the Company's financial market risk since December 31, 2001 as reported in the Company's Annual Report on Form 10-K.

ITEM 4.

CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision of the Company's Chief Executive Officer and Chief Financial Officer and with the participation of the Company's management, including the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company's periodic Securities and Exchange Commission filings. No significant changes were made in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

PART II

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

Langley, et al vs. St. Charles Associates Limited Partnership, et al, No. 08-C-00-269 (Circuit Court for Charles County, Maryland). In 2000, the owners of a parcel of land located in Charles County sued the Company and one of its officers in the Circuit Court for Charles County, Maryland. The complaint claimed damages allegedly flowing from trespass and restrictions of access to property resulting from the construction of a county road in Charles County. The construction in question was completed by St. Charles Community, LLC by agreement with and permission from the County. The first and second counts of the complaint sought $10,000,000 in compensatory damages and $10,000,000 in punitive damages. The third and final count sought an easement and right of way to the county road. On April 13, 2001, the Circuit Court dismissed all individual corporate officers from the lawsuit and dismissed the second and third counts. The Circuit Court also ordered that the County Commissioners of Charles County be joined as defendants in the case. The plaintiffs responded by filing an amended complaint purporting to cure the defects prompting the dismissals and adding the County Commissioners as defendants. On October 12, 2001, the Circuit Court again dismissed the individual corporate officers and dismissed the second and third counts with prejudice. Accordingly, the only remaining claim against the Company is the trespass count. The case is scheduled to go to trial in December 2002.

St. Charles Planning & Design Review Board-Smallwood Village vs. George C. Vann, et al., No. 08-C-01-264 (Circuit Court for Charles County, Maryland). The Company was named as a third-party defendant in a three count complaint alleging that the Company schemed with the County Commissioners, one employee of the County, the St. Charles Planning & Design Review Board ("PDRB"), and the managing agent for the PDRB to prevent him from obtaining signage for one of his lots and the development of a second lot. Each of the three counts seeks actual and compensatory damages in an amount to be proven at trial, plus punitive damages in the amount of $3,000,000. The trial judge granted the Company's Motion to Dismiss all counts of the complaint at a May 2002 hearing. Vann appealed the dismissal and the appellate court dismissed the appeal as premature. Once the underlying claim between PDRB and Vann is tried, Vann has the right to refile his appeal. The Company will continue to defend against thes e charges.

Nissan Auto, Inc. vs. Departamento de Transportacion Publica, et al, No. KDP97-2292, Superior Court of San Juan, Puerto Rico. On November 17, 1997, Nissan Auto, Inc. filed a claim in the Superior Court of San Juan, Puerto Rico against the Company and eighteen other parties. The charges stem from the construction of an overpass. Nissan Auto alleges that the construction material and heavy equipment blocked the entrances to their business causing irreparable damage. Plaintiff is seeking $2,000,000 in compensatory damages for lost business, additional damages not to be determined until the problem is cured and $120,000 for other damages costs. On February 11, 2000, IGP filed suit in the Superior Court of San Juan adding General Accident Insurance Company and Royal Insurance Company, IGP's insurance companies, as third party defendants to the suit. On May 24, 2000, General Accident Insurance Company undertook to cover IGP in this case up to the limit of its policy of $2,000,000.

Antonio Santiago Rodriguez, et als. vs. Municipio de Carolina; ELI G.P. Inc., Et als, No. FDP2000-0265(403), Superior Court of Carolina, Puerto Rico. On May 13, 2002, Antonio Santiago Rodriguez, et als filed a claim in the Superior Court of Carolina, Puerto Rico against the Company and twelve other parties. The charges stem from the construction of a local baseball park to be donated by ELI, S.E. to the Municipality of Carolina as part of the agreement to construct a building for the State Insurance Fund of Puerto Rico. Plaintiff alleges that during the construction of the park from May 1999 to July 2000, the site grading work caused rain waters to flood its place of business. Subsequently the Municipality of Carolina expropriated the land occupied by the Plaintiff who is seeking $813,500 in compensatory damages for lost business, equipment and property, and $250,000 for mental anguish and moral damages. The Company is a limited partner in ELI and, as such, should have no liability.

St. Charles Associates Limited Partnership, et al. v. County Commissioners of Charles County, et al., No. 89-720 (Circuit Court for Charles County, Maryland). In this case, which was filed in 1989, the Company sought, among other things, a court ruling that Charles County was not entitled to impose sewer and water connection fees at the then-existing level upon residential units in St. Charles Communities. That aspect of the litigation was settled by a Settlement Agreement dated November 1989, which was confirmed in a Consent Decree entered in March 1990.

During the course of subsequent litigation over the interpretation of the 1989 Settlement Agreement, the County appealed an injunction issued by the Circuit Court for Charles County limiting the amount the County may charge for sewer connection fees on residential properties located in St. Charles Communities. On December 5, 2000, the Maryland Court of Special Appeals confirmed the Circuit Court on this issue, and held that the sewer connection fee limitation is a covenant that runs with the land in St. Charles Communities, and therefore, the right to reduced sewer connection fees extends to all those to whom land is sold in the St. Charles Communities. In November 2001, the Court of Appeals of Maryland affirmed that decision.

On October 19, 2000, the County submitted to the Company a new sewer connection fee study (dated October 12, 2000) which the County claimed justified increasing sewer connection fees in St. Charles Communities. The Company filed objections to the County's 2000 sewer connection fee study, and challenged its validity under the 1989 Agreement, in the Circuit Court for Charles County.

The Circuit Court referred the matter to mediation. After several mediation sessions, and subsequent unmediated negotiations, the Company and the County reached a settlement addressing sewer connection fees and other matters.

Under the settlement, (i) the County will provide guaranteed school allocations for 255 new dwelling units per year, cumulative through December 2005; (ii) sewer connection fees for the next 2000 units in Fairway Village will be $1,608 less per unit than the fee charged to builders outside of St. Charles; (iii) a refund has been made to ACPT's predecessor for certain water and sewer fees previously paid; and (iv) the County has agreed to open the possibility of the Company's being allowed to annex additional contiguous land to St. Charles.

The County also conditionally agreed to issue municipal bonds to finance the construction of certain infrastructure needed to develop St. Charles. In exchange, the Company agreed to obtain letters of credit to guarantee repayment of the bonds. The Company also agreed to accelerate the construction of two major roadway links to the Charles County road system and dismiss all pending water and sewer litigation.

The complete terms of the settlement are contained in an Amended Order in Docket 90 before the County Commissioners of Charles County, a Consent Judgment in the Circuit Court, an Indenture, and a Settlement Agreement.

ITEM 2.

CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5.

OTHER INFORMATION

None.

ITEM 6(a).

EXHIBITS

Exhibit Number and Description

10.1	Property Management Agreement by and between Capital Park Apartments Limited Partnership and American Rental Management Company dated October 29, 2002.
10.2	Amended Order to Docket #90 dated July 22, 2002.
99.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

ITEM 6(b).

REPORTS ON FORM 8-K

None

SIGNATURES

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

		AMERICAN COMMUNITY PROPERTIES TRUST
		(Registrant)

Dated: November 14, 2002	By:	/s/ J. Michael Wilson
		J. Michael Wilson Chairman and Chief Executive Officer

Dated: November 14, 2002	By:	/s/ Cynthia L. Hedrick
		Cynthia L. Hedrick Chief Financial Officer

CERTIFICATION

I, J. Michael Wilson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Community Properties Trust;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:	November 14, 2002	/s/ J. Michael Wilson
		J. Michael Wilson
		Chairman and Chief Executive Officer

CERTIFICATION

I, Cynthia L. Hedrick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Community Properties Trust;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

Date:	November 14, 2002	/s/ Cynthia L. Hedrick
		Cynthia L. Hedrick
		Chief Financial Officer

EX-10.1 3 capital.htm PROPERTY MANAGEMENT AGREEMENT PROPERTY MANAGEMENT AGREEMENT Exhibit 10.1

PROPERTY MANAGEMENT AGREEMENT

BY AND BETWEEN

Capital Park Apartments Limited Partnership

("Owner")

AND
American Rental Management Company

("Manager")

Capital Park Twin Towers

Capital Park Plaza Apartments

PROPERTY MANAGEMENT AGREEMENT

TABLE OF CONTENTS

		PAGE

ARTICLE 1.	TERM	1

ARTICLE 2.	APPOINTMENT OF MANAGER, INDEPENDENT CONTRACTOR	1
2.1	Appointment and Engagement of Manager	2
2.2	General Duties and Standards	2
2.3	Independent Contractor	2

ARTICLE 3.	DUTIES OF MANAGER	2
3.1	Commencement of Services	2
3.2	Initial and Ongoing Reporting Requirements	3
3.3	Lease Administration	5
3.4	Management	6
3.5	Administrative	8
3.6	Marketing	10
3.7	Requirements of Project Loans, Tax Credits and other Property Encumbrances	11
3.8	Environmental Risk Management	12
3.9	Notification of Litigation	12
3.10	Tax Filings	12
3.11	Media	12
3.12	Delivery of Notice	12
3.13	Additional Services	13
3.14	Limitation of Authority	13
3.15	Compliance with Laws	14
3.16	Tax Credit Requirements	14

ARTICLE 4.	COMPENSATION	15
4.1	Management Fee	15
4.2	Additional Services	16
4.3	Reimbursements	16

ARTICLE 5.	INSURANCE	17
5.1	Insurance Specifications	17
5.2	Fidelity Bond	17
5.3	Specific Requirements	17
5.4	Notice	17
5.5	Compliance with Insurance Requirements	18
5.6	Mutual Waiver of Subrogation	18
5.7	Manager and Contractors' Insurance	18

ARTICLE 6.	INDEMNIFICATION	19
6.1	Indemnification of Owner	19
6.2	Indemnification of Manager by Owner	19
6.3	Survival	20

ARTICLE 7.	TERMINATION	20
7.1	Termination by Owner for Cause	20
7.2	Termination by Owner for Other Events	20
7.3	Termination by Manager	21
7.4	Procedures on Cancellation or Termination	21

ARTICLE 8.	REPRESENTATIONS AND WARRANTIES OF MANAGER	22
8.1	Organization and Authorization	22
8.2	Manner of Performance	23
8.3	Licenses	23

ARTICLE 9.	MISCELLANEOUS, GENERAL PROVISIONS	23
9.1	Tax Credit Consultant	23
9.2	No Assignment by Manager	23
9.3	Assignability by Owner	24
9.4	No Non-Compete	24
9.5	Successors and Assignors	24
9.6	Estoppel Certificate	24
9.7	Notices	24
9.8	No Waiver	25
9.9	Approvals	25
9.10	Rights Cumulative	25
9.11	No Third-Party Beneficiary	25
9.12	No Oral Modification	25
9.13	Counterparts	26
9.14	Governing Law	26
9.15	Complete Agreement	26
9.16	Amendments	26
9.17	Confidentiality	26
9.18	Waiver of Jury Trial	26
9.19	Choice of Jurisdiction and Venue	26
9.20	Reservation of Right	26
9.21	Nondiscrimination	26
9.22	Construction of Agreement with HUD Rights	27
9.23	Drug Free Workplace	27
9.24	Duty to Cooperate	27
9.25	Definitions	27

PROPERTY MANAGEMENT AGREEMENT

THIS PROPERTY MANAGEMENT AGREEMENT (this "Agreement") is made and entered into as of October 29, 2002, by and between Capital Park Apartments Limited Partnership, a District of Columbia limited partnership ("Owner"), and American Rental Management Company, a Delaware corporation ("Manager").

WITNESSETH

WHEREAS, Owner is 95% tenant in common owner of certain real property (the "Real Property"), with improvements thereon (the "Improvements"), known as Capital Park Twin Towers and Capital Park Plaza Apartments located at 201 I Street, Southwest and 101-103 "G" Street Southwest, in Washington D.C. (the Real Property and the Improvements being sometimes referred to collectively as the "Property");

WHEREAS, pursuant to that certain Tenancy In Common Agreement dated as of October ___, 2002, Owner has the exclusive right to contract for management of the Property and Capitol Park Associates and Capitol Park Land Corporation have no such right and therefore will not be recognized by Owner or Manager except as expressly provided herein; and

WHEREAS, Owner desires to employ Manager as exclusive manager for the Property during the term of this Agreement, and Manager desires to accept such responsibilities and duties, in accordance with the terms and provisions contained herein.

NOW, THEREFORE, in consideration of the premises and the mutual promises of the parties hereto, Owner and Manager hereby covenant and agree as follows:

TERM

Subject to HUD approval, the term of this Agreement shall commence on the date Owner notifies Manager to commence management of the Property (the "Commencement Date") and shall expire on the 12-month anniversary of the Commencement Date, unless sooner terminated in accordance with this Agreement (the "Initial Term"). The Initial Term shall be automatically extended for consecutive periods of twelve (12) months each (each a "Renewal Term", and together with the Initial Term, collectively referred to as the "Term"), unless either party notifies the other party in writing, on or before the date which is sixty (60) days prior to the end of the then-current term of its election not to so extend the term, or unless terminated in accordance with the other provisions of this Agreement, in which event the term shall expire at the expiration of the Initial Term or the then current Renewal Term, as applicable.

APPOINTMENT OF MANAGER, INDEPENDENT CONTRACTOR

Appointment and Engagement of Manager. Subject to the terms and conditions hereof, Owner hereby engages Manager, and Manager hereby accepts such engagement, as the exclusive manager for the Property and leasing agent for the Property. Manager, by its execution hereof, hereby accepts such appointment and engagement upon and in accordance with the terms hereof. Manager shall have no right or authority, express or implied, to commit or otherwise obligate Owner in any manner whatsoever, except to the extent specifically provided herein or to the extent necessary to carry out the specific authority given to Manager, and Manager shall not hold itself out as having authority to act on behalf of Owner in any manner which is beyond the scope of this Agreement.

General Duties and Standards. Manager shall use reasonable efforts to perform and provide the services required by this Agreement in an efficient, expeditious and economical manner, consistent with the industry standards for management of similar Washington, D.C. metropolitan area HUD and Tax Credit apartment communities, in accordance with any applicable standards established by Owner and agreed to by Manager, and in accordance with Manager's standard policies and procedures ("Policy and Procedures"), a copy of which has been provided to Owner. Manager, on behalf of Owner, shall implement, or cause to be implemented, the decisions of Owner and shall conduct the ordinary and usual business affairs of Owner with respect to the Property as provided in this Agreement. Manager shall at all times conform to the policies and programs established by Owner, and the scope of Manager's authority shall be limited to said policies and programs and as otherwise provided for in this Agreemen t.

Independent Contractor. In the performance of its services hereunder, Manager shall be and act as an independent contractor; therefore, Manager agrees that:

Nothing in this Agreement, or in the relationship between Owner and Manager, shall be deemed to constitute a partnership, joint venture or any other similar relationship and each party agrees that it will not make any contrary assertion, contention, claim or counterclaim in any action, suit or other legal proceeding involving Owner and Manager.
No federal or state income tax, Social Security deductions or any other deductions or contributions will be withheld by Owner from the payments made to Manager by Owner.
All persons providing services under this Agreement shall be either employees of Manager or of Manager's contractors or suppliers, but such persons shall not be, or become, employees of Owner by virtue of any provision of this Agreement. Owner will not maintain worker's compensation insurance for Manager or its employees and Manager shall be responsible for maintenance of worker's compensation for all employees of Manager.

DUTIES OF MANAGER

Commencement of Services. Beginning on the Commencement Date, Manager shall continually manage and operate the Property during the Term, and shall, within the limitations of the Approved Budget (as herein defined), perform those acts necessary or desirable for the operation of the Property in accordance with the scope of services and standards set forth in this Agreement, including, without limitation, all services, functions, and responsibilities set forth in this Article 3, as such may be supplemented, enhanced, modified or replaced during the Term.

Initial and Ongoing Reporting Requirements.

Rent Roll: On the Commencement Date, Manager shall provide Owner with a current rent roll (in form reasonably approved by Owner) covering the current calendar month. From and after the Commencement Date, Manager shall update such rent roll monthly on or before the 5^th day of each month.

Budget: On the Commencement Date, Manager shall prepare and provide for Owner's approval the annual budget (as described in Sections 3.5.5 and 3.5.6 hereof) covering the period from the Commencement Date through the end of the current calendar year. On or before November 1^st of each year in the Term, Manager shall update such budget on a calendar year basis and deliver such update to Owner, for Owner's review. Owner shall present any comments on the updated annual budget to Manager, and Manager shall revise such updated budget accordingly and deliver a revised updated budget to Owner on or before the later of (a) twenty (20) days after receipt by Manager of Owner's comments or (b) December 15^th.

Property Inspection: Within ninety (90) days following the Commencement Date, Manager shall complete and deliver to Owner a report (in form reasonably approved by Owner) summarizing Manager's in-depth on-site inspection of the Property addressing issues related to deferred maintenance, tenant problems, general appearance, service contracts, and market conditions (the "Property Inspection Report"). Manager shall update such Property Inspection Report quarterly, on or before January 15, April 15, July 15 and October 15 of each year.

Transfer of Utility Billings: Within fifteen (15) days following the Commencement Date, Manager shall transfer utility billings to Manager's address (if different from current billing address) and review all utility services being provided. All utilities will be in the name of the Property or the Owner d/b/a the Property.

Preventive Maintenance Plan: Within ninety (90) days following the Commencement Date, Manager shall prepare and deliver to Owner for Owner's approval a plan (in form reasonably approved by Owner) for preventive and scheduled maintenance and testing for all mechanical equipment and systems within the Property, which shall include the development of forms, schedules, procedures, frequencies, filing requirements and reporting functions for maintenance on an anticipatory basis, minimizing inconvenience to employees, invitees and guests (once approved by Owner, the "Preventive Maintenance Plan"). The frequencies and procedures set forth in the Preventive Maintenance Plan shall (a) follow the manufacturer's recommendations, as well as historical experience, and (b) focus toward achieving optimal efficiency based on cost effectiveness and reliability from each piece of equipment. The initial Preventive Maintenance Plan shall cover the period from the Commencement Date throug h the end of the current calendar year. Manager shall update the Preventive Maintenance Plan annually.

Budget vs. Actual Reporting: Manager shall prepare and deliver to Owner on the 20^th of each month a monthly statement for the prior month comparing the monthly budgeted amounts collected and disbursed as set forth in the budget described in Section 3.2.2, and once approved pursuant to Sections 3.5.5 and 3.5.6, the Approved Budget, against the actual amounts collected and disbursed (the "BVA Report") of the Property, on an accrual basis, in a form reasonably approved by Owner, including a written explanation of monthly and year to date material variances between such budgeted and actual collections and disbursements (specifically including those variances of which Owner has notified Manager that Owner deems to be material), physical vacancy factors, and an accounts receivable report (including an aging receivable report) on the Property. Manager shall furnish to Owner at such time: (a) a list of all disbursements including vendor name, amount, check number an d a brief description; (b) a list of all occupied units showing prior delinquencies or prepaid amount, monthly billings, rents received, and current delinquencies or prepaid amounts; (c) a summary of monthly receipts less monthly disbursements; (d) copies of monthly bank statements (including the Security Deposit Account), with reconciliations of each; (e) Management Fee computations; (f) details of upcoming capital improvement projects, including timing, budgets and expected source of funds for payment; (g) a narrative report of significant property management activities; and (h) a detailed project activity ledger print out.

Financial Statements: Manager shall prepare and deliver to Owner on the 20^th of the month after the close of each quarter a quarterly financial statement of the Property, prepared in accordance with accrual method reporting systems for residential properties, including a reconciliation to the net cash for the same period reported in the BVA Report and including any expenses relating to the Property or ownership of the Property paid directly by Owner of which Owner timely notifies Manager.

Reports. By the 12^th day of each month, Manager shall furnish to Owner a statement of receipts and disbursements from the operation of the Project during the prior calendar or fiscal month, certified true and correct by the property manager. In addition, Manager shall, on a mutually acceptable schedule, prepare and submit to Owner such other reports as Owner shall specify, including, but not limited to, the following:

a) Weekly occupancy, leasing status, traffic reports, and collection reports.

b) Monthly market comparable rent survey.

c) Monthly bank reconciliations.

d) Rent roll and delinquent accounts including write offs, if any.

e) Escrow and trust accounts.

f) List of all security deposits held.

Lease Administration.

Exclusive Representation. Subject to Owner's approval, during the Term Manager shall serve as Owner's exclusive representative and agent in all dealings with existing and future tenants at the Property. Manager shall have the authority to negotiate and execute leases in accordance with minimum leasing requirements. The Property contains residential units (the "Units"). Manager shall operate the Project in accordance with the documents evidencing the Tax Credits and Project Loans (including, without limitation, the Regulatory Agreement), and shall cause the Property to comply at all times with the Minimum Set-Aside Test and the Rent Restriction Test.

Initial Leasing. Manager shall undertake a program to lease and re-lease the Units at the Property to tenants, including preparing for Owner an overall leasing program, reporting monthly to the Owner the leasing status of the Units, preparing rent rolls, advertising the availability for rental of the Units or any portion thereof, preparing (in conjunction with the Owner's counsel, such counsel to be paid by the Owner) a standard form of lease, to be approved by the Owner before submission to prospective tenants and quarterly (on or before thirty (30) days prior to the end of each quarter) preparing for Owner a schedule of asking rents for the Units for the coming quarter to be approved by Owner; Manager shall also originate, negotiate (with Owner's participation, at Owner's election) and execute, all leases for the Units in accordance with Owner pre-approved terms and in accordance with minimum leasing requirements.

Cancellation of Residential Leases. Consistent with the terms hereof and the Policy and Procedures, Manager has the authority to cancel leases for the Units, to terminate tenancies for the Units, and to sign and serve the required notices in the name of the Owner.

Report of Default. Manager shall promptly report to Owner the receipt of any formal notice of landlord default received from any tenant and any other notice of a material nature from any such tenant.

Legal Actions. Consistent with the terms hereof and the Policy and Procedures and with respect to all Units, Manager has the authority to institute and prosecute legal actions, evict tenants and recover possession of the premises, sue for and in the name of Owner to recover rents and other sums due, when deemed expedient, and settle (if amount in dispute is less than $5,000), compromise and release such actions or suits and/or reinstate such tenancies; provided, however, that in no event shall any settlement, release or compromise exceed $5,000 without the prior written consent of Owner. In connection with any collection efforts or other legal action, only legal counsel or collection firm designated by Owner shall be retained. All legal expenses incurred in bringing such approved suit or proceeding shall be paid by Owner or from the Operating Account.

Subleasing. Consistent with Policy and Procedures, Manager shall have the authority to approve or deny approval of subleases submitted by residential tenants.

Management.

Implementation of Owner's Decisions. Manager shall implement any and all decisions of Owner made known to Manager relating to the management of the Property and shall initiate and take such other actions in the management and administration of the Property as are consistent with this Agreement and necessary or desirable for achieving maximum efficiency and success of the Property for the benefit of Owner.

Vendor Contracts. Within the limitations of the Approved Budget and Preventative Maintenance Plan, Manager shall coordinate, supervise, arrange for and/or direct the management and physical operation of the Property, including but not limited to, building cleaning, maintenance and general building repairs and maintenance, trash hauling, equipment maintenance and window cleaning. In connection with the foregoing, Manager shall arrange for such services on behalf of Owner (contracts must be assigned to Owner or Owner's nominee), but shall not, without the prior written authorization of Owner, enter into any contract or obligation therefor (a) unless the identity of the contractor or service provider has been approved by Owner and (b) that is not included in the Approved Budget, or is in excess of $5,000.00. No such Owner authorization is necessary if the contract is within the Approved Budget, is with a contractor or service provider approved by Owner, and is cancelable on 30 days notice . As a condition to obtaining any required Owner authorization, Manager shall supply Owner with a copy of the proposed contract and shall state to Owner the relationship, if any, between Manager and the party proposed to supply such goods and/or services.

Contract Limitations. Unless otherwise approved in writing by Owner, each service contract entered into by Manager shall not extend for more than one year (with the exception of service contracts that are routinely more than one year, such as laundry contracts, etc.), and shall include a provision of cancellation thereof upon not more than thirty (30) days written notice, and shall require that all contractors provide evidence of sufficient insurance. All service contracts shall be approved by Owner and entered into by Manager for the account and in the name of the Property (or the Owner d/b/a the Property), and the funds necessary to pay for the services so obtained shall be paid from the Operating Account (hereinafter defined). Manager shall review all service contracts on an annual basis, determine whether to retain or cancel the services being provided.

Market Rate Services. The Owner and Manager agree that all goods and services purchased from individuals or companies with which the Owner or Manager has an identity of interest shall be purchased at costs not in excess of those that would be incurred in making purchases from any individual or company not affiliated with Owner or Manager.

Property Employees. Consistent with Policy and Procedures, Manager shall hire, discharge, supervise, and screen (including criminal background checks and drug testing to the extent deemed appropriate by Manager) all employees required for the operation and maintenance of the Property in the name of Manager ("Property Employees"), it being agreed that all such operations and maintenance personnel whose regular daily work station is (in whole or in part) at the Property shall be employees of Manager. Manager agrees to identify in the Approved Budget all positions whose salaries or wages may from time to time be charged as employed for direct services rendered to the Property. The total of all employee wages and benefits-shall be billed to and paid to Manager out of the Operating Account, including without limitation (i) all wages, bonuses and benefits (which shall include any contributions made by or on behalf of Manager to a pension or profit sharing plan for the benefit of such Property Employees); and (ii) any training services provided to the Property Employees and from such payment Manager shall then be responsible for paying each such employee directly (no such payments to individual employees shall be made by checks from the Operating Account). Notwithstanding anything in the foregoing to the contrary, it is agreed that Manager shall be required to bear the costs of all salaries of Manager's executive personnel from the compensation to be paid Manager pursuant to the terms of this Agreement. No general, administrative or overhead costs of Manager's executive personnel shall be passed through to Owner. If any costs of the Property Employees, including off-site employees providing services for the Manager in connection with the Project, are incurred in part for the Property and in part for other properties (e.g. the salary of a Portfolio Manager, Maintenance Director, or Property Accountant), such cost shall be prorated between the Property and such other propertie s, using a method reasonably selected by Manager and subject to the reasonable review and approval by Owner.

Purchase of Supplies. Manager shall purchase all supplies incidental to building operation and maintenance in accordance with the Approved Budget.

Resident Requests. Consistent with Policies and Procedures, Manager shall systematically and promptly receive and investigate all service requests from tenants, take such action thereon as may be justified, and keep records of the same. Emergency requests will be received and serviced on a twenty-four (24) hour basis. Complaints of a serious nature will be reported immediately to Owner after investigation and Owner will be provided quarterly a list of serious tenant complaints and the measures taken to respond thereto.

Preparation of Units. Manager shall see that each space available for lease is placed in good rentable order after being vacated by a tenant and that any chargeable damage is collected from the vacating tenant by charging the security deposit or otherwise collecting monies due.

Lease Enforcement. Manager shall enforce the terms and conditions of tenant leases and to this end Manager shall see that all tenants are informed with respect to such rules, regulations, and notices as may be reasonably promulgated by Owner from time to time.

Sale of Property. Manager shall cooperate fully with Owner in any attempt(s) by Owner to effectuate a sale of the Property or to obtain financing secured by the Property including, without limitation, assisting Owner in (i) answering any reasonable questions posed by prospective purchasers and lenders with respect to matters within the scope of Manager's duties hereunder, and (ii) preparing lists and schedules of leases, concessions, operating equipment, operating supplies and similar items.

Administrative.

Bank Accounts.

Manager shall use commercially reasonable efforts to collect when due all rents and other receipts due and owing from tenants of the Property and any other amounts and charges which may become due from time to time from tenants or any other parties with respect to the Property, and promptly deposit all rents and other receipts collected for Owner in an interest-bearing account or accounts separate from all other accounts and funds of Manager, with a financial institution whose deposits are insured by an agency of the United States government (the "Operating Account"). The Operating Account shall be the sole and exclusive property of Owner, and Manager shall retain no interest therein. The Operating Account shall be established in the name of the Manager to be held in Trust for the Owner. Manager shall use the Operating Account to pay all approved and authorized expenses, as set forth herein, incurred by the Property. Signature authority for the Operating Account shall be vested in Man ager and Manager shall possess and maintain sole responsibility over the Operating Account.
Manager shall use commercially reasonable efforts to collect, deposit, and disburse security deposits, if required, in accordance with the terms of each tenant's lease and in accordance with applicable law. Manager shall maintain detailed records of all security deposits collected. Security deposits will be deposited by Manager in an interest bearing escrow account, separate from all other accounts and funds, with a financial institution whose deposits are insured by an agency of the United States Government (the "Security Deposit Account").
Manager shall set up and maintain appropriate reserve accounts for deferred and contingency expenditures for the Property in accordance with the Approved Budget.

Emergency Disbursements. Emergency repairs, involving manifest danger to life or property, or immediately necessary for the preservation and safety of the Property, or for the safety of the tenants or required to avoid the suspension of any necessary service to the Property as required by provision of tenant lease agreements may be made by Manager as is necessary, at Owner's expense, and Manager shall make commercially reasonable efforts to notify Owner within twenty-four (24) hours after the occurrence of an event of an emergency nature, the nature of the remedy implemented by Manager, and the cost of implementing such remedy. Actual and reasonable expenses for materials and labor for such emergency purposes shall be paid for from the Operating Account or by Owner, at Owner's discretion.

Review of Accounts Payable. Manager shall review and approve all accounts payable invoices or bills to determine whether the invoice or bill is valid for payment in accordance with the Approved Budget and pay, to the extent that funds of Owner are in the Operating Account or are made available by Owner to Manager, all debts, expenses and other obligations, including all real estate taxes (or escrows therefor), utilities, insurance premiums, required mortgage debt service and other operating and rental expense of the Property reflected on the Approved Budget or required for emergencies as reflected above. All such payments shall be made prior to the time that any penalties or interest would accrue upon such sums. Manager shall use reasonable efforts to minimize operating expenses by obtaining competitive pricing on all services and obtaining at least three bids on expenditures exceeding $10,000 (a "major expenditure"). Manager shall use reasonable efforts to comply with the limitations on expend itures set forth in the Budget. Manager shall obtain Owner's prior written consent before incurring on behalf of Owner any single expenditure in excess of twelve thousand dollars ($12,000) excluding utility bills and other normal and recurring expenses included in the Budget, except in an emergency in which case Manager may incur such expenses as are to protect life and property. Manager shall notify Owner of any such emergency expenses as soon as practicable after they are incurred but in no event later than three (3) days thereafter. Manager shall not request payment of any invoices, whether to itself or a third party, marked up above actual cost, nor shall Manager request payment of any compliance fees, marketing fees, mark-up on employees' salary or travel or fees marked up above actual cost.

Distribution of Cash Flow. Manager shall distribute cash flow from the operation of the Property to the extent available in accordance with all regulatory agreements applicable to the Property and the Owner's limited partnership agreement, and as and when directed by Owner.

Submission of Annual Budget. Manager shall prepare and submit to Owner for Owner's written approval an annual budget setting forth estimated receipts and expenditures for the Property for the forthcoming calendar year. The annual operating budget (with revenue and expenses allocated by month) shall detail all sources of revenue and categories of expenses and shall be prepared on an accrual basis and shall include a statement outlining a plan of operation and supporting the estimates made therein. Without limitation, the operating budget shall include the following items:

Repairs and maintenance of the Property.
Charges for utility services.
Charges for landscaping, janitorial, extermination and security services.
Charges for supplies used exclusively for maintenance, such as light bulbs, air filters and cleaning supplies.
Management Fee (as hereinafter defined)
Reimbursement for salary and payroll expenses for Property Employees as defined in Section 3.4.5 above.
Advertising and promotional expenses associated with the Marketing Plan (as defined below).
Training and information technology expenses.
Other expenses and capital expenditures approved in writing by Owner.

Approved Budget. Manager shall implement and administer the budget described in Paragraph 3.6.5 as approved by Owner (the "Approved Budget").

Books and Records.

Maintenance of Books and Records. Manager shall set up and maintain all books of account and other appropriate and necessary records of Owner relative to the Property. Manager shall maintain original accounting records for the Property for three (3) years, or such longer period of time as is required under Owner's financing or the Partnership Agreement. Upon termination of this agreement accounting records will be transferred to Owner without obligation on Manager to thereafter maintain such records.

Examination by Owner. Owner or its representatives may conduct examinations upon reasonable prior notice (except in the case of an emergency in which case such examination may be conducted immediately and without notice), during business hours, of the books and records maintained for Owner by Manager, and such books and records shall be deemed owned by Owner.

Audits. Manager shall coordinate with Owner, if requested and approved by Owner, an annual audit of the books of account for the Property made within sixty (60) days after the end of each year by an independent auditor designated by Owner, which audit must be certified to Owner and shall, at Owner's request, include a balance sheet, operating expense statement, capital accounts statement, income and expense statement, cash flow statement, certificate of the accountants (who shall be the accountant approved or selected by Owner) covering the results of the audit and confirming that such statements were prepared in accordance with generally accepted accounting principles, and such other statements as are necessary to satisfy the lender(s) under the terms of the loan agreements; to coordinate the federal, state and local income tax returns relative to the Property prepared by an accountant approved or selected by Owner at least forty-five (45) days prior to the statutory date for filing, including e xtensions thereof, if any, but not later than March 1^st of each year; and to furnish to Owner such other reports on the operation of the Property and its physical or financial condition as Owner may require. In connection therewith, Manager shall endeavor to cause the fees of the independent certified public accountants (if any is approved and required by Owner) to be competitive in the marketplace. Except as set forth in the next sentence of this Section 3.5.7(c), the cost of and any expenses relating to the annual audit shall be paid for from the Operating Account.

Marketing.

Annual Marketing Plan. Manager shall establish an annual Marketing Plan to be prepared and submitted with the Approved Budget for Owner approval providing the following information: (i) analysis of market for current year providing overview of regional, submarket and neighborhood markets; (ii) area map identifying the Property, (iii) general property advantages/disadvantages, and (iv) competing properties/market condition report.

General Marketing Duties. Manager has the following responsibilities in providing marketing information to Owner: (i) evaluate existing marketing materials, (ii) define current and anticipated quarterly market conditions and costs, (iii) define targeted tenants, (iv) list promotional materials and costs, (v) estimate lease-up time with projected occupancy rates at six month intervals until 90 percent occupancy is obtained, (vi) anticipate completion dates to achieve marketing plan goals, (vii) monitor activity within immediate market area and assess market conditions affecting Property reporting on a quarterly basis, and (viii) identify how the Property's marketability can be maintained or enhanced. The Plan shall include, at a minimum, the following:

(a) Minimum Leasing Guidelines: Minimum Leasing Guidelines established jointly by Owner and Manager, setting forth target rental rates and premiums for each unit type and amenity package, together with maximum leasing incentive allowances for promotional purposes. Such guidelines shall incorporate the terms of the Regulatory Agreement, the Project Loan documents and the Tax Credit documents, as well as the requirements of Section 42 ("Section 42") of the Internal Revenue Code of 1986, as amended ("Code"). Manager acknowledges that a certain amount of federal low-income housing tax credits have been allocated to the Property pursuant to Section 42 (the "Project Tax Credits") and that Owner is required to lease at least 65% of the housing units in the Project to tenants whose income and rent levels qualify such apartments for inclusion in determining the amount of Tax Credits actually available to Owner each year. This means that at least 422 of the total 648 housing units must be occupied by individuals with income less than or equal to sixty percent (60%) of area median gross income, as adjusted for family size. In no event will Manager execute any lease (or any renewal or extension thereof) on terms which (i) vary from the minimum leasing guidelines, or (ii) cause the Owner to violate the Minimum Set-Aside Test, the Rent Restriction Test or any other document executed in connection with the Tax Credits or the Project Loans.

Requirements of Project Loans, Tax Credits and other Property Encumbrances. Manager shall assist Owner to comply with, and, in the performance of its services hereunder, shall itself comply with, all obligations of Owner arising under or in connection with any loan agreement and other loan documents, and all leases, all easements, covenants and restrictions and other similar agreements, provided such obligations as applied to Manager are consistent with this Agreement, and have been previously disclosed to Manager. Manager shall comply with the leasing and other requirements contained in (i) Section 42 of the Code with respect to rental units eligible for Tax Credits; and (ii) any documents executed by the Owner in connection with the acquisition, financing, and ownership of the Property, including, but not limited to, the Owner's Partnership Agreement and the Project Documents (as such term is defined in the Owner's Partnership Agreement). The Manager acknowledges that obtaining the Tax Credits will have substantial economic value to the Owner and its partners. The Manager shall familiarize itself with the requirements set forth in Section 42 of the Code as they relate to the Manager's leasing and management duties under the Agreement, and shall comply with such requirements.

Environmental Risk Management. Manager shall notify Owner of all legal requirements pertaining to the Property of which it becomes aware regarding hazardous materials, as the same may be defined by federal, state or local statute, regulation, rule or ordinance ("Hazardous Materials") and agrees to notify Owner immediately (within a 24 hour period) if it becomes aware of any violation of any such laws regarding Hazardous Materials or the existence of any Hazardous Materials on the Property. Owner acknowledges that Manager is not an expert in Hazardous Materials, and Manager's role shall be limited to assisting and coordinating with applicable federal, state and local authorities to effectuate a cleanup of any Hazardous Materials on the Property. Manager further agrees to timely assist and cooperate with Owner in working with applicable federal, state or local authorities to effectuate a cleanup of any Hazardous Materials on the Property, with all such decisions and actions being subject to Owner's prior written approval. Notwithstanding any termination of this Agreement, Owner agrees to indemnify, defend and save Manager harmless from and against any claim demand, liability, loss, damages, expenses (including without limitation court costs and reasonable attorneys' fees) based on or arising out of the presence or removal of, or failure to remove, Hazardous Materials generated, used, stored or disposed of in, on or about the Property; provided, however, that such indemnity shall not extend to any gross negligence by Manager with respect to such Hazardous Materials.

Notification of Litigation. If Manager shall be apprised of any claim, demand, suit or other legal proceeding made or instituted or threatened against Owner on account of any matter connected with the Property, Manager shall immediately give Owner all information in its possession in respect thereof, and shall timely assist and cooperate with Owner in all reasonable respects in the defense of any such suit or other legal proceedings.

Tax Filings. Manager, unless otherwise instructed, shall obtain and verify bills for real estate and personal property taxes, improvement assessments and other like charges which are or may become liens against the Property and recommend appeal as in its best judgment it may decide. Manager shall pay taxes and mortgages from the Operating Account unless otherwise directed.

Media. If Manager is, at any time, contacted by any media (e.g., television, radio, newspaper, magazine) regarding the Property, tenants or other occupants of the Property, the management of the Property or the ownership of the Property, Manager shall keep a record of such inquiry and report the same to Owner. Manager shall use its good faith and reasonable discretion in responding to such inquiries provided that if in Owner's opinion such inquiry or response may be sensitive, controversial or otherwise not in the normal course of operating the Property, and Owner makes its opinion known to Manager, Manager shall make no response and shall immediately notify Owner.

Delivery of Notices. Manager shall promptly deliver to Owner all notices received from any mortgagees, ground lessor, governmental or official entity or other party with respect to the Property.

Additional Services. Manager shall provide such other services as are required under the terms of this Agreement or as are customarily provided by management companies of similar properties in the area of the Property.

Limitation Of Authority. Notwithstanding any provision of this Agreement to the contrary, in addition to all other restrictions on the authority of Manager set forth in this Agreement, Manager shall not, without the prior written approval of Owner, which Owner may withhold in its sole discretion, perform or take any of the following actions in connection with the Property and/or on behalf of or burdening Owner:

Make any expenditure or incur any obligation on behalf of Owner, except for expenditures made and obligations incurred in accordance with this Agreement;
Convey or otherwise transfer, pledge or encumber any portion of the Property or any other asset of Owner or permit any of the foregoing to occur;
Retain architects, engineers, attorneys, accountants or other professionals on behalf of Owner to supply goods or service in excess of $5,000 except in accordance with this Agreement;
Institute or defend lawsuits or other legal proceedings on behalf of Owner if amounts in dispute exceed $5,000;
Terminate or modify leases (except in accordance with any guidelines approved by Owner for the enforcement of leases as set forth in this Article 3 hereof);
Pledge the credit of Owner for purchases made by Manager in excess of $5,000;
Obligate Owner for the payment of any fee or commissions in excess of $5,000 with any real estate agent or broker;
Borrow money or execute any promissory note or obligation or mortgage, deed of trust, security agreement or other encumbrance in the name of or on behalf of Owner;
Enter into any contract, agreement, sale, purchase or understanding between Manager and an affiliated or related entity of Manager for goods or services on behalf of the Property without the prior written consent of Owner (an affiliated or related entity is an entity in which Manager or any of its affiliates, directors, or employees or any family member thereof owns or has any direct or indirect proprietary or financial interest) unless in accordance with the procedures set forth in Sections 3.4.1, 3.4.2 and 3.4.3 above;
Authorize the connection or disconnection of Internet, broadband, DSL, cable, or other communication services (whether similar or dissimilar to the foregoing) to the Property, with the exception of antennae agreements relating to the Property;
Adopt or change any policy relating to the management, operation, repair, or maintenance of the Property that would be inconsistent with Manager's obligations under this Agreement;
Undertake any significant alteration, reconstruction, reconfiguration, or other physical change to the Property;
Take any action or permit any action to be taken that would violate any provision of the Property financing or any law, rule, regulation or governmental requirement applicable to the Property;
Take any action that would (i) cause the termination or discontinuance of the qualification of any of the 422 Low-Income Units in the Property as "Qualified Low-Income Housing" under Section 42 of the Code; (ii) cause the termination or discontinuance of the Property as a "Qualified Low-Income Housing Project" under Section 42 of the Code; or (iii) cause Owner to fail to qualify for (or cause a recapture of) Tax Credits;
Incur any expense on behalf of Owner or pay any expenses from the operating account in excess of $5,000, which is not permitted in the Project Budget or under the Plan;
Enter into any contract or arrangement with any party that would either (i) have a term of more than one year or (ii) would not be cancelable without penalty upon not more than sixty (60) days' notice or upon a sale or other disposition of the Project or partnership interests in Owner; or
Take any other action in connection with the Project that is either prohibited or not expressly permitted under this Agreement or the Plan.

Compliance with Laws. Manager shall comply with and obey in all material respects all present and future laws, ordinances, orders, rules, regulations, and requirements of every governmental authority, agency, or board, commission, office or department having jurisdiction over the Property with respect to the property management duties of Manager set forth in this Agreement. All costs related to such compliance shall be paid for from the Operating Account. Notwithstanding the above, Manager shall not be responsible or liable for the failure to comply with the Americans with Disabilities Act of 1990 ("ADA") or other similar laws and regulations as, such laws relate to the design and compliance of the Property, and/or building and zoning codes and local laws and ordinances not relating to property management duties of Manager described in this Agreement. Manager shall make commercially reasonable efforts to notify Owner promptly if Manager becomes aware of any violation of any su ch above described laws. In the event of any violation of laws not related to the property management duties of Manager described in this Agreement, Owner shall promptly cure such violation at its own expense and not from the Approved Budget.

Tax Credit Requirements. Manager acknowledges the Owner's objective of obtaining Tax Credits for 422 Units in the Property. Manager represents and warrants that it is familiar with Section 42 of the Code and the requirements thereto including without limitation (i) the Minimum Set-Aside Test, (ii) the Rent Restriction Test, (iii) the requirements in Section 42(g)(2)(D) that the next available unit must be rented to a low-income tenant if income rises above 140 percent of income limit; (iv) rules and regulations regarding qualification for Tax Credits where units are vacant; and (v) rules and regulations by the Agency, HUD and the Project Lenders (collectively referred to herein as the "Regulatory Requirements"). Manager agrees to operate the Property in a manner which meets the Regulatory Requirements, including but not limited to the following:

To cause the required number of apartment units in the Property to be leased to suitable tenants who comply with all regulations regarding eligibility of the Property for the Tax Credits;
To obtain from all qualified tenants in the Property the right to receive annual reports from such tenants concerning their incomes and family sizes and any other information needed to verify eligibility;
To execute a lease for any rental unit in respect of which Tax Credits have been allocated to the Owner only upon first obtaining certification from the tenant, and such other information as may be necessary for the Manager to determine income criteria for low-income housing, that he or she satisfies the income criteria for low-income housing;
To prepare for Owner's signature, and then to file in a proper manner, the annual certifications required by the provisions of law referred to in Code Section 42(l)(2); and
To cause the Property to be operated in a manner that complies with all other statutes, regulations and agreements which must be complied with in order for Owner to obtain the Tax Credits with respect to 422 Units in the Property.

The responsibilities and services included in this Article III are part of Manager's duties and shall not entitle Manager to any additional compensation over and above the Management Fee; provided, however, that the Manager shall be reimbursed for reasonable costs and expenses incurred by it in connection with any sale or refinancing of the Property.

COMPENSATION

Management Fee.

Amount of Management Fees. During the term of this Agreement, Manager shall be entitled to receive, as compensation for services performed by Manager pursuant to this Agreement during each operating month, an amount equal to three percent (3%) of the Effective Gross Income for such operating month (the "Management Fee"), payable in arrears on the first day of each month. Manager shall be entitled to disburse and pay the Management Fee to itself from the Operating Account. Owner and Manager agree that the payment of Management Fees shall be computed and paid according to HUD requirements and in accordance with the Owner's Partnership Agreement. Manager shall submit to Owner an invoice detailing the calculation of the Management Fee each month, no later than the fifth day of the next succeeding month. If the first or last month of this Agreement is not a complete calendar month, the Management Fee for such month shall be calculated on the basis of Gross Operating Revenues for the entire month, and the amount payable for such month shall then be prorated based on the number of days during such month that this Agreement was in effect.

Definition of Effective Gross Income. As used herein, the term "Effective Gross Income" shall mean for any operating month, the aggregate amount of all rent actually paid under all of the leases for the Units or any part of the Property for such operating month. Effective Gross Income shall not include : (i) the value of rental concessions, (ii) any rent accruing during such operating month but not actually paid by a tenant during such operating month or not actually collected by Manager or otherwise on behalf of Owner during such operating, month; (iii) rent in the nature of any reimbursements for damage to the Property; (iv) any rental income taxes; or (v) any security, utility or other deposits. Effective Gross Income shall also include all ancillary income actually received from the Property including but not limited to cancellation fees, cable fees, telephone fees, laundry income, parking income, administrative fees, move-in fees, pet fees, late ch arges, transfer fees, interest income and any other amounts paid pursuant to or in connection with the leases that constitute or are considered in the ordinary course of business to be a payment of anything other than rent paid under residential apartment leases (including, without limitation, any proceeds received in connection with any hazard or casualty insurance policy or condemnation proceeding relating to the Property). Effective Gross Income shall also include corporate apartment income and application fees, net of related expenses for these items.

Additional Services. The parties recognize that certain services which could potentially be required by, or be of value to, Owner are outside of the scope of the services contemplated by this Agreement. If Owner requests Manager to provide such services the parties shall negotiate reasonable additional compensation based on the fees which would be charged by third parties performing comparable services. Examples of services outside the scope of this Agreement include (a) substantial construction management services for tenant construction, building retrofits or major capital improvements, (b) substantial assistance with due diligence efforts of a potential purchaser in connection with a sale of the Property, and (c) substantial assistance in connection with an audit of a ground lessor under a ground lease, (d) the negotiation of cable, phone and internet contracts with third-party providers, and (e) the negotiation of any leasing or licensing of rooftop space.

Reimbursements. In addition to the Management Fee provided for herein, Manager shall be entitled to monthly reimbursement in arrears for reasonable costs and expenses incurred in performing its duties and responsibilities and providing services required by the terms of this Agreement and the Approved Budget and subject to Section 3.4.4. Manager shall reimburse itself in accordance with Section 3.5.3. Such reimbursement shall include but are not limited to the following: (a) all personnel and related operating costs and expenses applicable to all Property Employees to the extent not already paid out of the Operating Account, specifically excluding the general overhead expenses of Manager's executive personnel; (b) advertising costs to include marketing brochures and similar collateral materials, incurred in connection with Manager's leasing of the Property; (c) administrative costs to include telephone, bank fees, computers/software, IT support, data processing, training, office eq uipment and supplies to the extent used for the Property; (d) costs for supplies used for maintenance of the Property; and (e) utilities. Said reimbursements shall also include the appropriate portion of the costs and expenses incurred in connection with any management office(s) maintained to provide services to the Property (or to provide services to the Property as well as other nearby properties managed by Manager or an affiliate thereof), such appropriate portion to be determined by prorating the cost thereof between the Property and such other properties using a method reasonably selected by Manager and subject to reasonable review and approval by Owner.

INSURANCE

5.1 Insurance Specifications. Manager shall, on behalf and in the name of Owner as primary beneficiary, place and maintain such insurance coverage on the Property, which shall be paid for from the Operating Account, as may be required pursuant to Section 6.5B of the Partnership Agreement and as set forth below:

5.1.1 Real Estate Error and Omissions. Real estate errors and omissions insurance applicable to acts of Manager in an amount of not less than $2,000,000

5.2 Fidelity Bond. Manager shall obtain a Blanket Fidelity Bond in connection with the operation of the Property for all management personnel who handle project funds in such amount or amounts as Owner may determine at all times such Blanket Fidelity Bond shall in no event be in an amount of less than $250,000 or two months' gross income.

5.3 Specific Requirements. All policies of insurance required hereunder shall (a) be issued by insurers and in form and for amounts approved by Owner, and (b) except with respect to the insurance required under Section 5.1.1, be treated as a cost and expense of Owner. Without limiting the foregoing, all insurance shall be effective under valid and enforceable policies issued by insurers of recognized responsibility, and shall, to the extent obtainable, provide that (i) such policies shall not be canceled without at least 90 days' prior written notice to each insured named therein and to the holder of any mortgage to whom loss thereunder may be payable, and (ii) any loss be payable to Owner or to the holder of any mortgage, notwithstanding any act or negligence on the part of Owner or Manager which might otherwise result in forfeiture of said insurance.

5.4 Notice. Whether or not any of the risks described in this Article 5 are self-insured or covered by insurance, Manager shall:

5.4.1 Notify Owner and the insurance carrier within twenty-four (24) hours after Manager receives notice of any such loss or injury;

5.4.2 Take no action (such as admission of liability) which might bar Owner from obtaining any protection afforded by any policy Owner may hold or which might prejudice Owner in its defense to a claim based on such loss, damage or injury; and

5.4.3 Agree that Owner or its insurance carrier shall have the exclusive right, at its option, to conduct the defense to any claim, demand or suit.

5.5 Compliance with Insurance Requirements. Manager shall review and familiarize itself with the terms and conditions of all such policies and shall make commercially reasonable efforts to take all action necessary to avoid impairing the rights of Owner or any other person or entity covered by such policies. Manager shall cause the Property to be in compliance with the terms of any insurance policies affecting the Property. Manager shall not use the Property, and shall make commercially reasonable efforts to ensure the same is not used, for any purpose that would violate the terms of any such insurance policies or that might increase the premiums payable under any such insurance policies. Manager shall not keep, and shall make commercially reasonable efforts to prevent from being kept, at the Property any material, machinery, equipment, substance or other thing that would violate the terms of such insurance policies. Manager shall provide reasonable access to the Property to agents of any a nd all insurance companies who may, from time to time, be involved with the issuance of insurance policies for the Property or with inspections of the Property in connection with insurance policies then in force.

5.6 Mutual Waiver of Subrogation. Manager releases Owner and its authorized representatives and agents from any claims for damage or loss to any person or to the Property that is caused by or results from risks insured under any insurance policies carried by Owner and in force at the time any such damage occurs, to the extent that such release does not impair the insurance coverage then in effect. Owner releases Manager and its authorized representatives and agents from any claims for damage or loss to any person or to the Property that is caused by or results from risks insured under any insurance policies carried by Manager and in force at the time any such damage occurs, to the extent that such release does not impair the insurance coverage then in effect.

5.7 Manager's Insurance. Manager shall require that all independent contractors performing work at the Property (including, without limitation, Manager) maintain insurance coverage at such contractors' expense. At a minimum, such insurance shall include the following, unless otherwise approved in writing by Owner:

5.7.1 Workers' compensation and all other insurance pertaining to employees as required by governmental requirements;

5.7.2 Primary comprehensive general liability and automobile liability insurance covering owned, hired and non-owned vehicles with liability limits of not less than $1,000,000, combined single limit coverage for each occurrence or in such greater amount as Owner may direct. Higher coverage may be required if the work to be performed is sufficiently hazardous.

5.7.3 Umbrella/Excess --- $4,000,000 per occurrence;

5.7.4 Crime Insurance --- $1,000,000;

5.7.5 Employer's Liability --- $500,000

5.7.6 Such additional coverage as Owner may reasonably direct.

The insurance referred to in this Section 5.7 shall, without additional cost to Owner, include Owner as an additional insured. The costs of Manager's insurance under this Section 5.7 shall be an operating expense paid for from the Operating Account. Manager shall obtain and keep on file for Manager and for each such contractor a certificate of insurance evidencing the above requirements. Manager shall provide Owner with a copy of Manager's insurance certificate simultaneously with the execution of this Agreement. Manager's certificate of insurance shall have attached thereto an endorsement that Owner will be given at least thirty (30) days prior written notice of cancellation of or any material change in Manager's insurance policies. Manager's insurance under this Section 5.7 shall be primary for any occurrences excluded in Section 5.3 above.

Notwithstanding anything to the contrary set forth in this Section 5.7, Manager may waive and/or modify any of the insurance requirements described above on a case by case basis.

INDEMNIFICATION

6.1 Indemnification of Owner. Manager shall indemnify, protect, defend (with legal counsel approved by Owner) and hold harmless Owner and Owner's partners, together with their respective officers, directors, agents, employees and affiliates (collectively "Indemnitees") from and against any and all claims, demands, actions, liabilities, losses, costs, expenses, damages, penalties, interest, fines, injuries and obligations, including reasonable attorneys' fees, court costs and litigation expenses ("Claims") incurred by any Indemnitee as a result of (a) any act by Manager (or any officer, agent, employee or contractor of Manager) outside the scope of Manager's authority hereunder, (b) any act or failure to act by Manager (or any officer, agent, employee or contractor of Manager) constituting (i) gross negligence, willful misconduct, or fraud, (ii) a breach or other violation of this Agreement, the Regulatory Agreement and/or the Project Loan documents, or (ii i) a violation of applicable federal, state or local law (including without limitation, any violation of Section 42 of the Code, fair housing laws, leasing claims and labor laws), other than as covered by Owner's insurance (for gross negligence or willful misconduct only) and to the extent Owner's insurance is available, (c) Claims made by current or former employees or applicants for employment arising from hiring, supervising or firing same, or (d) any act or omission by Manager, its employees, officers, agents or contractors in violation of any applicable law.

6.2 Indemnification of Manager by Owner. Owner shall indemnify, protect, defend and hold harmless Manager from and against any and all Claims incurred by Manager resulting from performance of its obligations under this Agreement, except that this indemnification shall not apply with respect to any Claims (a) resulting from any act by Manager outside the scope of Manager's authority hereunder, (b) resulting from any act or failure to act constituting (i) gross negligence, willful misconduct, or fraud, or (ii) a breach or other violation of this Agreement, the Regulatory Agreement and/or the Project Loan documents, (c) resulting from Claims made by current, former employees or applicants for employment arising from hiring, supervising or firing same, or (d) any act by Manager, its employees, agents or contractors in violation of any applicable federal, state or local law (including without limitation, any violation of Section 42 of the Code, fair housing laws, leasing c laims and labor laws). Owner shall have the right (but not the obligation) control, without recourse, all aspects of Manager's defense against any Claims in matters in which Manager is entitled to indemnification under this Paragraph 6.2. If at any time during the course of such defense Owner determines, in its reasonable judgment, that such Claim results from an event, action or nonaction for which Manager is not entitled to indemnification hereunder, Owner shall automatically be entitled to immediate reimbursement for all losses, costs and expenses incurred on behalf of itself and of Manager incurred to the date of such determination.

6.3 Survival. The provisions of this Article VI shall survive the termination of this Agreement.

TERMINATION

7.1 Termination by Owner for Cause. This Agreement may be terminated by Owner at any time prior to the expiration of the Term if Owner reasonably determines that Manager has materially breached this Agreement. In the event Owner is of the view that any act or failure to act by Manager constitutes a material breach of this Agreement, Owner shall give written notice thereof to Manager, which notice shall state in full the nature of the breach(es) of this Agreement. In the event of a breach (other than in the case of fraud, theft, negligence, misconduct, criminal acts or any event set forth in Section 7.2), if Manager cures such breach(es) within thirty (30) days after receiving the written notice from Owner, (or in cases where the breach(es) cannot be cured within thirty (30) days, but are susceptible of cure, and Manager begins to cure such breach(es) within thirty (30) days after receiving the written notice from Owner and thereafter diligently pursues such cure to completion), this Agree ment shall not be terminated and shall continue in full force and effect in accordance with its terms. No notice shall be required with respect to any breach due to fraud, theft, gross negligence, willful misconduct, criminal acts or any event set forth in Section 7.2, compliance sanctions or loss of credits attributable to Manager's actions or omissions, or criminal acts or any breach that Manager received written notice of but that is repeated more than twice within twelve (12) months of the original notice.

7.2 Termination by Owner for Other Events. Owner may also immediately terminate this Agreement by written notice to Manager upon the occurrence of the following events:

7.2.1 Bankruptcy. Immediately, if Manager or a service company owned in whole or in part by Manager files a petition under any bankruptcy or insolvency statute or similar statue, or enters into a general arrangement with its creditors, or if any action is commenced against Manager or such service company under any such statute and such action is not dismissed or discharged within ninety (90) days from the date of its filing; or

7.2.2 Sale of Property. Upon 30 days written notice and payment of all sums due Manager hereunder, if Owner sells or otherwise disposes of the Property, other than to a subsidiary or affiliate including a sale or conveyance by foreclosure or deed in lieu of foreclosure or a transfer of a controlling interest in Owner; or

7.2.3 Assignment of Agreement. Upon 30 days written notice, if Manager assigns or subcontracts all or a substantial part of its obligation under this Agreement unless otherwise permitted by this Agreement, or if the current ownership and control of Manager changes in any material respect, such as the transfer of ownership or control of Manager to any person or entity not an affiliate of Manager, it being understood that Manager shall have the right to subcontract certain services customarily performed by third parties such as accounting services and security services; or

7.2.4 Condemnation. Immediately, if all or substantially all of the Property is condemned or acquired by eminent domain or deed in lieu thereof, or

7.2.5 Damage. Immediately, if all or substantially all of the Property is destroyed by fire or other casualty, and Owner notifies Manager that the Property will not be restored.

7.2.6 HUD Termination. The U.S. Department of Housing and Urban Development ("HUD") may terminate the Agreement: (a) immediately, in the event a default under the Mortgage, Note, Regulatory Agreement or Subsidy Contract attributable to the Manager occurs, or (b) for failure of the Manager to comply with the provisions of the Project Owner's/Management Agent's Certification (form HUD-9839-B), or other good cause, upon thirty (30) days after HUD has mailed the Owner a written notice of its desire to terminate the Agreement.

7.2.7 Management After HUD Termination. If HUD terminates the Agreement, the Owner will promptly make arrangements for providing management that is satisfactory to HUD.

7.2.8 Turnover of Records and Accounts. If the Agreement is terminated, Manager agrees to turnover to Owner all of the Property's cash, trust accounts, investments and records no later than thirty (30) days after the date the Agreement is terminated and all sums due to Manager have been paid.

7.3 Termination by Manager. Manager may terminate this Agreement upon sixty (60) days prior written notice upon any of the events set forth in Section 7.2 or in the event Owner materially breaches any obligation hereunder and such obligation is not cured within thirty (30) days following written notice to Owner. Manager shall also have the right to terminate this Agreement for no reason upon sixty (60) days written notice.

7.4 Procedures on Cancellation or Termination.

7.4.1 Deliveries. Upon the expiration or earlier termination of this Agreement as provided above:

(a) Manager shall deliver to Owner, or such other person or entity designated by Owner, (i) within thirty (30) days after the effective date of termination, all books and records of, and all other documents, agreements, leases, insurance policies, correspondence, and plans relating to, the Property, and (ii) on the next business day after the effective date of termination, all funds in its possession belonging to Owner or received by Manager to make payments on behalf of Owner in connection with the Property and not theretofore expended or remitted to Owner in accordance with the terms of this Agreement;

(b) Manager shall deliver to Owner, or such other person or entity designated by Owner, within thirty (30) days after the date of expiration or termination of this Agreement, the following: (a) an accounting reflecting the balance of income and expenses of the Property to the date of termination or expiration of this Agreement; and (b) a financial statement, prepared in accordance with- generally accepted accounting principles, covering the period from the last financial statement until all cash held by Manager has been delivered to Owner;

(c) Manager shall assign, transfer or convey to Owner, or such other person or entity designated by Owner, within five (5) days after the effective date of termination, Manager's rights pursuant to any service contracts, and operation and maintenance agreements between Manager and a third party pertaining to the Property; and

(d) Owner shall deliver to Manager, within thirty (30) days after the effective date of termination, a final statement outlining any Management Fees and reimbursements due to Manager through the effective date of termination or any refund of Management Fees due to Owner hereunder in connection with the Property. Owner shall pay Manager such fees and reimbursements or Manager shall pay Owner the amount of such refund, to the extent applicable.

7.4.2 No Releases. The termination of this Agreement under any of the provisions of this Article shall not release either party hereto from liability for breach of this Agreement with respect to the Property based on events theretofore occurring or its indemnification obligations under this Agreement or confidentiality requirements under this Agreement. Upon any termination, the obligations of the parties hereto shall cease with respect to the Property, except that Manager shall not be relieved of its obligations under, and shall comply with, the provisions of this Article.

REPRESENTATIONS AND WARRANTIES OF MANAGER

To induce Owner to enter into this Agreement, Manager makes the following representations and warranties, which shall survive the execution and termination of this Agreement:

8.1 Organization and Authorization. Manager is duly formed, validly existing and in good standing under the laws of the state of Manager's formation, and is qualified to do business in the state where the Property is located. Manager has all power and authority required to execute, deliver and perform this Agreement. Manager is knowledgeable and experienced in management of Section 42 properties. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of Manager.

8.2 Manner of Performance. Manager has sufficient staff and other resources to carry out its duties under this Agreement in a prompt, efficient and diligent manner. Manager will operate and maintain the Property according to standards consistent with similar properties in Washington, D.C., and shall cause the Property to be operated in a manner so that all requirements shall be met which are necessary to obtain or achieve (i) compliance with the Minimum Set-Aside Test, the Rent Restriction Test, and any other requirements necessary for the Property to initially qualify, and to continue to qualify, for Tax Credits, including all applicable requirements set forth in the Regulatory Agreement, (ii) issuance of IRS Forms 8609, and (iii) issuance of all necessary permanent unconditional certificates of occupancy, including all governmental approvals required to permit occupancy of all of the apartment units in the Apartment Complex;

8.3 Licenses. Manager has or will timely obtain, at its expense, all licenses and permits necessary to perform its obligations under this Agreement and shall pay all taxes, fees or charges imposed on the business engaged in by Manager hereunder.

MISCELLANEOUS, GENERAL PROVISIONS

9.1 Tax Credit Consultant. The Manager shall employ a tax credit consultant (the "Tax Credit Consultant) at the cost of the Project for a period of time determined by the Owner if in the judgment of the Owner such assistance is desirable to assure proper compliance with Tax Credit requirements. The Tax Credit Consultant shall be an organization recognized as a national expert in managing Section 42 properties, and the selection of the Tax Credit Consultant shall be subject to the Consent of the Owner and the Special Limited Partner of the Owner. The Tax Credit Consultant shall assist the Management Agent in its responsibility of managing the Property in accordance with the requirements of the Tax Credit program. Such assistance shall include, but not be limited to, the following: (1) preparing and implementing a formal marketing plan and management plan; (2) hiring a talented and experience professional as the property manager for the Property who shall be on-site during normal busines s hours; (3) preparing a formal compliance program containing written policies and procedures which incorporate standardized documentation; (4) providing initial and ongoing compliance training to management personnel; and (5) review and reasonable approval, prior to signing of the tenant lease, of each tenant file for Tax Credit Units for accuracy and compliance with Tax Credit requirements. The cost of any Tax Credit Consultant retained by the Owner pursuant to this Section 9.1 shall be paid from Project funds.

9.2 No Assignment by Manager. This Agreement may not be assigned by Manager nor may Manager subcontract all or part of its obligations under this Agreement, subject to the provision in Section 7.2.3, without the prior written consent of Owner and the Special Limited Partner of the Partnership, which may be granted or withheld for any reason whatsoever, or for no reason.

9.3 Assignability by Owner. Owner may sell, assign, delegate, transfer, convey, or encumber (each, a "Transfer") all or a portion of its rights or duties under this Agreement to any person or entity to whom Owner Transfers its interest in the Property in Owner's sole discretion. If Owner shall collaterally assign this Agreement in connection with a mortgage, Manager shall execute such documents as are reasonably requested by the mortgagee or beneficiary concerning Manager's consent to Owner's collateral assignment of this Agreement and evidencing the subordination of this Agreement to any such mortgage and shall execute any amendment hereto reasonably requested by such lender that does not alter in any material respect the obligations, rights, or compensation of Manager hereunder,

9.4 No Non-Compete. Manager may enter into other agreements to manage other office, retail or residential buildings without the prior consent of Owner.

9.5 Successors and Assigns. The terms, covenants, agreements, representations and warranties contained herein shall inure to the benefit of the respective permitted successors and assigns of the parties hereto and their constituent entities and shall be binding upon all successors and assigns of the parties hereto.

9.6 Estoppel Certificate. Manager and Owner hereby covenant that each (the "Certifier"), upon at least ten (10) days' prior written request of the other (the "Requestor"), Certifier will issue to Requestor, and/or to any prospective mortgagee, transferee, assignee, or purchaser, an estoppel certificate stating: (a) whether Certifier has given or received any notice of default that has not been cured or knows of any other uncured default by either party under this Agreement, and if there are known defaults, specifying the nature thereof; (b) whether to its knowledge this Agreement has been assigned, modified or amended in any way (and if it has, then stating the nature thereof); (c) that to Certifier's knowledge, this Agreement is as of that date in full force and effect; and (d) such other matters as Requestor shall reasonably request. Such certificate shall act as a waiver of any claim by Certifier to the extent such claim is based upon fa cts which are contrary to those asserted in the certificate.

9.7 Notices. Whenever any notice, demand or request is required or permitted under this Agreement, such notice, demand or request shall be in writing, unless otherwise set forth herein, and shall be delivered by hand, be sent by registered or certified mail, postage prepaid, return receipt requested, or be sent by nationally recognized commercial courier for next business day delivery, to the addresses set forth below or to such other addresses as are specified by written notice given in accordance herewith, or shall be transmitted by facsimile to the number for each party set forth below or to such other numbers as are specified by written notice given in accordance herewith:

Owner: Capital Park Apartments Limited Partnership

c/o CP Capitol Corporation

222 Smallwood Village Center

St. Charles (Waldorf), Maryland 20602

Attention: J. Michael Wilson

Facsimile Number: (301)-843-2519

With copy to: SCDC, LLC

c/o Red Capital Markets, Inc.

150 East Gay Street, 22^nd floor

Columbus, Ohio 43215

Attention: David C. Martin

Facsimile Number: (614) 857-1430

Manager: American Rental Management Company

222 Smallwood Village Center

St. Charles (Waldorf), Maryland 20602

Attention: Paul Resnik

Facsimile Number: (301) 870-8481

All notices, demands or requests delivered by hand shall be deemed given upon the date delivered. Any notice, demand or request not received because of changed address or facsimile number of which no notice was given as above provided or because of refusal to accept delivery shall be deemed received by the party to whom addressed on the date of hand delivery, on the date of facsimile transmittal, on the first calendar day after deposit with commercial courier, or on the third calendar day following deposit in the United States Mail, as the case may be.

9.8 No Waiver. The failure of Owner or Manager to seek redress for violation, or to insist upon the strict performance of any covenant, agreement, provision or condition of this Agreement shall not constitute a waiver thereof, and Owner and Manager shall have all remedies provided herein and by applicable law with respect to the same or any subsequent act which would have originally constituted a violation. No waiver of any provision hereof shall be binding unless in writing and signed by the party waiving such provision.

9.9 Approvals. Whenever an approval, concurrence or agreement is sought from either party pursuant to the terms of this Agreement, the requesting party shall transmit in writing to the other party its request for approval, concurrence or agreement, and shall attach to each such transmittal the information, documentation and relevant facts necessary or appropriate to permit consideration of the matter for which approval, concurrence or agreement is sought.

9.10 Rights Cumulative. Except as otherwise expressly provided herein, no remedy conferred upon a party in this Agreement is intended to be exclusive of any other remedy provided or permitted herein or by law or in equity, but each shall be cumulative and shall be in addition to every other remedy provided herein now or hereafter existing at law or in equity.

9.11 No Third-Party Beneficiary. This Agreement is intended for the exclusive benefit of the parties hereto and, except as otherwise expressly provided herein, shall not be for the benefit of, and shall not create any rights in, or be enforceable by, any other Person.

9.12 No Oral Modification. This Agreement may not be modified, supplemented or terminated, nor may any of the obligations of the parties hereunder be waived, except by a written instrument executed by the parties hereto.

9.13 Counterparts. This Agreement may be executed in one or more counterparts, each of which when so executed and delivered shall be deemed an original, but all of which taken together shall constitute but one and the same original.

9.14 Governing Law. This Agreement shall be governed in accordance with the laws of the state in which the Property is located.

9.15 Complete Agreement. This document forms the complete Agreement and represents the full arrangement between Owner and Manager for all property management services for the Property.

9.16 Amendments. Manager agrees to enter into any amendments to this Agreement reasonably requested by HUD, the Special Limited Partner of the Owner and the Owner's present or future lenders, provided such amendments do not adversely affect, in any material respect, the obligation of Manager under this Agreement This Agreement shall not be amended without the prior written consent of the Special Limited Partner of the Owner.

9.17 Confidentiality. Manager shall treat this Agreement as confidential and shall not disclose its contents. Manager shall treat as confidential and shall not disclose, advertise or publicize any information with respect to the Property, Owner, its partners, officers and agents without the prior written consent of Owner. Manager shall use such information only for Owner's benefit in connection with Manager's performance of its obligations hereunder. Manager's obligations under this Section shall survive expiration or termination of this Agreement,

9.18 Waiver of Jury Trial. EACH PARTY HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER PARTY IN CONNECTION WITH ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE RELATIONSHIP OF OWNER AND MANAGER HEREUNDER, OWNER'S OWNERSHIP OR USE OF THE PROPERTY, AND/OR ANY CLAIMS OF INJURY OR DAMAGE. EACH PARTY HEREBY CONSENTS TO SERVICE OF PROCESS AND ANY PLEADING RELATING TO ANY SUCH ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM AT THE ADDRESS SET FORTH FOR SUCH PARTY IN SECTION 9.8 HEREOF; PROVIDED, HOWEVER, THAT NOTHING HEREIN SHALL BE CONSTRUED AS REQUIRING SUCH SERVICE AT SUCH ADDRESS.

9.19 Choice of Jurisdiction and Venue. Any dispute concerning this agreement should be subject to jurisdiction in Washington, D.C.

9.20 Reservation of Right. Owner specifically reserves the right to enter into and upon the Property at any and all times during the term of this Agreement for any purpose.

9.21 Nondiscrimination. In the performance of its obligations under this Agreement, the Manager will comply with the provisions of any federal, state or local law prohibiting discrimination in housing on the grounds of race, color, sex, creed or national origin, including Title VI of the Civil Rights Act of 1964 (Public Law 88-352-78 Stat. 241), all requirements imposed by or pursuant to regulations of HUD (24 C.F.R., Subtitle A, Part 1) issued pursuant to that Title, regulations issued pursuant to Executive Order II 063 and Title VIII of the 1968 Civil Rights Act.

9.22 Construction of Agreement with HUD Rights. If there is a conflict between any provision of this Agreement and HUD's rights and requirements, HUD's rights and requirements shall prevail.

9.23 Drug Free Workplace. Neither Manager nor any employee of Manager shall at any time fail to comply with the Federal Drug Free Workplace Act of 1988 or any regulations promulgated thereunder.

9.24 Duty to Cooperate. The Manager agrees to cooperate with all requests from the limited partners of the Owner and their affiliates (collectively, "Red Capital") in connection with the exercise by the limited partners of their rights set forth in the Owner's Partnership Agreement. Such obligation to cooperate shall include, but not be limited to, providing to Red Capital or making available to Red Capital, as and when required by Red Capital, all reports and information required to be provided or made available to Owner under this Agreement.

9.25 Definitions. Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them on Exhibit I.

IN WITNESS WHEREOF, the parties have executed this Property Management Agreement on the day and year first hereinabove written.

OWNER:

CAPITAL PARK APARTMENTS LIMITED
PARTNERSHIP

By:

CP Capitol Corporation, its General Partner

By:

Name: J. Michael Wilson

Title: President

MANAGER:

AMERICAN RENTAL MANAGEMENT COMPANY

By:

/s/ Paul Resnik

Name: Paul Resnik

Title: Senior Vice President

EXHIBIT I

DEFINITIONS

"Agency" means the District of Columbia Housing Finance Agency, in its capacity as the designated agency of the District of Columbia to allocate Tax Credits, acting through any authorized representative.

"Code" means the Internal Revenue Code of 1986, as amended from time to time, or any corresponding provision or provisions of succeeding law.

"40-60 Set Aside Test" means the Minimum Set-Aside Test whereby at least 40% of the units in the Property must be occupied by individuals with incomes of 60% or less of area median income, as adjusted for family size.

"HUD" means the Department of Housing and Urban Development of the United States of America, and its successors.

"Minimum Set-Aside Test" means the set-aside test selected by the Partnership pursuant to Section 42(g) of the Code with respect to the percentage of units in its Property to be occupied by tenants with incomes equal to no more than a certain percentage of area median income. The Owner has selected the 40-60 Set Aside Test as the Minimum Set Aside Test.

"Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of the Owner dated as of October 1, 2002, as amended from time to time in accordance with the terms thereof.

"Project Lenders" shall mean any entity in its capacity as a holder of a loan on the Property.

"Project Loans" shall mean the loans and indebtedness of the Owner to the Project Lenders.

"Regulatory Agreement" means, to the extent applicable, and collectively, any regulatory agreements and/or any declaration of covenants and restrictions heretofore or hereafter entered into between the Owner and the Project Lenders or any applicable government agency setting forth certain terms and conditions under which the Property is to be operated.

"Rent Restriction Test" means the test pursuant to Section 42(g) of the Code whereby the gross rent charged to tenants of the low-income units in the Property cannot exceed thirty percent (30%) of the imputed income limitation of the applicable units.

"Tax Credit" means the low-income housing tax credit allowed for low-income housing projects pursuant to Section 42 of the Code.

EX-10.2 4 order.htm AMENDED ORDER DOCKET 90 COUNTY COMMISSIONERS OF CHARLES COUNTY, MARYLAND Exhibit 10.2

COUNTY COMMISSIONERS OF CHARLES COUNTY, MARYLAND

In the Matter of the Petition of
INTERSTATE LAND DEVELOPMENT
COMPANY, INC., for rezoning from R-1,
C, and I, to PUD

Docket #90

AMENDED ORDER

St. Charles Associates Limited Partnership; Interstate General Company L.P. and St. Charles Community LLC (collectively "St. Charles" or "SCA"), having petitioned the County Commissioners of Charles County, Maryland (the "County") for, and the County having considered and agreed to, certain amendments to a previous order herein dated December 13, 1989, as amended on August 15, 1994 (collectively, the "Order"), in connection with the settlement of certain issues regarding the development of the planned unit development ("PUD") that is the subject of this docket, and the matter having been considered.

It is thereupon, this 22^nd day of July, 2002, ORDERED by the County that the Order is hereby amended, at the request of SCA and with its express consent, by adding a new section entitled "2002 Amendments" as set forth below.

2002 AMENDMENTS

1. Good Faith Cooperation

(a) SCA and the County agree that it is in their mutual best interests to accelerate the construction of arterial roads in the PUD to serve future development and to improve the transportation network of the County, especially as these roads relate to the pupil transportation needs of the Charles County Public Schools. To accomplish this, the parties agree to the provisions of paragraph 5 below.

(b) SCA and the County agree that it is in their mutual best interests to provide stable property values by ensuring high quality of development and a mix of housing units that meets the needs of the County. To accomplish this, in addition to the requirements of paragraph 2(a) hereof, the parties shall meet together annually to review commercial and industrial development and the number, size and price of housing units sold during the preceding twelve months and adjust the size and mix of units that will allow a reasonable rate of development and satisfy the requirements of the County.

(c) SCA and the County agree that it is in their mutual best interests to aggressively pursue economic development in the County. To accomplish this, in addition to the requirements of paragraph 4 hereof, SCA and the County shall work with the Charles County Economic Development Commission to begin a targeted marketing program to bring new businesses to the County. SCA and the County further agree that it is in their mutual best interest to provide balanced growth by developing and selling commercial and industrial property, and by ensuring such commercial and industrial development receives adequate and timely water and sewer service.

(d) SCA and the County shall work together to attempt to identify and analyze all problems associated with the present and future capacity of the Piney Branch Interceptor. The County shall use its best efforts to develop a financing plan to address the problems so identified.

(e) In the event that the Kelson Ridge electric project is unduly delayed, the County shall work with SCA to develop a feasible financing mechanism to address necessary upgrades to Pumping Station 3A. To accomplish this, the parties agree to the provisions of paragraph 6.(a) below.

(f) Not later than January 1. 2005, SCA and the County shall meet and determine the number of school allocations in addition to those provided for in paragraph 7(b) hereof to sustain the continued development of the St. Charles PUD. The County shall use its best efforts to accelerate the construction of schools to provide the necessary allocations to SCA. The determination of the number of school allocations to be given to SCA shall be in the County's sole discretion and nothing herein shall entitle SCA to school allocations above those provided in paragraph 7(b) hereof.

(g) SCA and the County agree that the requirement of the Docket 90 Order requiring that 85 percent of Fairway Village be completed before any development in future Villages commences may be revised in light of the fact that the extension of St. Charles Parkway and the Cross County Connector with attendant water and sewer infrastructure will serve those Villages sooner than previously planned. Accordingly, SCA shall be entitled to submit a plan requesting such a revision and the County shall consider such plan.

(h) SCA and the County shall meet at least once annually to present information regarding the implementation of this Order and other matters that may arise concerning the parties, and to review the continuing cooperative relationship between the parties hereunder.

2. Quality of Construction

(a) For the initial phase of Fairway Village (Phases A, B. C, D), at least sixty percent of the single family detached dwellings constructed in SCC shall have a minimum of 2,350 square feet, 20% a minimum of 2,000 square feet, and in no event shall a single family detached house contain less than 1,650 square feet. The mix and size of the units will be reviewed annually in accordance with paragraph 1.(h) above.

(b) The design and siting of housing shall continue to be subject to SCA's Fairway Village Guidelines and the St. Charles Planning and Design Review Board ("SCPDRB").

(c) The County's Site Design & Architectural Review Board shall be entitled to conduct a one-time review of SCA's Fairway Village Guidelines and Commercial and Industrial Guidelines.

(d) The County shall be entitled to appoint two voting members of the SCPDRB.

3. Planning

(a) SCA shall submit a revised preliminary plan for Fairway Village to show the new dwelling mix of a minimum of sixty percent single family detached, and a maximum of twenty percent each for townhouses and apartments. The plan shall show any revised proposed boundaries to accommodate the maximum of 3,346 units set forth in the Order. The plan shall also contain sites for an elementary school and a high school approved by the Board of Education.

(b) SCA agrees to limit the total number of dwelling units on land currently within the PUD and any additional contiguous land purchased and annexed to the PUD to 24,730 units. The County agrees to consider SCA's request for approval of the annexation of additional contiguous parcels of land proposed by SCA, provided that the County reserves the right, if it approves any such request, to impose conditions on any land annexed to ensure that the uses of the land are compatible with the plans of the County.

(c) The Parties agree that the remaining undeveloped land in SCC is exempt from the County's Forest Conservation requirements as long as it meets the State definition of a planned unit development as set forth in Section 5-1601 (ee), Natural Resources Article, Md. Ann. Code, by permanently dedicating 20% of its land to open space.

4. Economic Development.

SCA shall set aside an additional approximately 20 acres of land in Fairway Village for office or commercial development as part of its Fairway Village Center development.

5. Roads

(a) SCA shall construct the second two lanes of the Cross County Connector in St. Charles and extend four lanes of St. Charles Parkway from its present terminus to the property line of SCA's development and will do so in accordance with the following schedule:

Cross County Connector

Initiate Final Design May 15, 2002
Complete Design December 31, 2002
Commence Construction June 30, 2003
Complete Construction June 30, 2004

St. Charles Parkway

Determine Final A1ignment May 15, 2002
Begin Final Design July 1, 2002
Complete Design December 31, 2003
Commence Construction April 1, 2004
Complete Construction December 31, 2005

(b) The schedule set forth in the preceding subparagraph shall be contingent on (1) the timely financing of improvements through the sale of general obligation bonds by the County, and (2) the County undertaking the construction of St. Charles Parkway from the property line to U.S. 301 in approximately the same time period set forth above. With the County's approval, which shall not be unreasonably withheld, these deadlines may be extended for a reasonable period for reasonable cause.

(c) SCA shall provide a letter of credit or other suitable financial instrument that is acceptable to the County in form and content to guarantee the payment of the bonds for the portion of the Cross County Connector and the St. Charles Parkway constructed by SCA. The County shall not unreasonably withhold approval of a letter of credit or other suitable financial instrument proposed by SCA. The current road impact fee of $750 per unit payable by St. Charles shall be increased from time to time as necessary to an amount sufficient to amortize the cost of the bonds over a fifteen year period. The present estimated cost of the roads to be constructed by SCA is $12 million, and the fee to repay the cost of the bonds is estimated to be $6,000 per unit for each single family detached dwelling and townhouse unit and $1,000 for each apartment unit. These funds will be retained by SCA in an interest bearing account and payments will be made to the County in accordance with the stipulated repaym ent schedule for the bonds.

(d) If the County adopts a proposed Traffic Access Management Plan (the "Plan") for the Cross County Connector, St. Charles Parkway, and the realigned DeMarr Road, and SCA' s development submissions are in accordance with the Plan, then no further adequate public facility road studies are required unless the Plan is changed.

(a) Pumping Station 3A

(i) SCA shall construct a new sewage pumping station and associated force main(s) at St. Charles Parkway and Billingsley Road that shall be designed to accommodate the existing flow from Pump Stations 2A, 3 and 5 as well as future flows from units to be constructed in St. Charles and off-site flows from property developed by others. In the event that the Kelson Ridge electric project is unduly delayed, the cost of the Pumping Station 3A and associated force main(s) shall be funded in accordance with subparagraph 6(a)(iii) below.

(ii) The County shall establish a policy to collect a special connection fee for off-site users of Pumping Station 3A in accordance with a Rebate Agreement between the County and SCA for the off-site connections.

(iii) As proposed in subparagraph 6(a)(i) above, the cost of the pumping station and associated force main(s) shall, subject to the requirements and procedures of state and local laws, be funded by general obligation bonds issued by the County. The County shall, subject to appropriation and pursuant to the requirements and procedures of State and Local law, pay that portion of the cost attributable to existing units. SCA shall pay for the proportion of the cost attributable to the new capacity, subject to reimbursement for off-site connections in accordance with the Rebate Agreement. SCA shall guarantee the repayment of its portion of the bonds by a letter of credit or other financial instrument acceptable to the County.

(b) Pumping Station 5A

(i) SCA shall construct a new sewage pumping station at St. Paul's Drive and Piney Church that shall be designed to accommodate the flow from approximately 1,768 existing dwelling units, 430 units to be constructed off-site by others and approximately 340 additional units in Fairway Village. Construction shall begin twelve months prior to the time that the County Department of Public Utilities estimates that the sewage flows will reach the capacity of the existing pumping station and notifies SCA of such determination. If the necessity of expansion at such time is disputed, a neutral third party shall be selected by the County and SCA pursuant to the rules and procedures of the American Arbitration Association to resolve the dispute.

(ii) The County shall establish a policy to collect a special connection fee for off-site users of pumping station 5A in accordance with a Rebate Agreement between the County and SCA for the off site connections.

(iii) The cost of the pumping station shall, subject to the requirements and procedures of state and local laws, be funded by general obligation bonds issued by the County. The County shall, subject to appropriation and pursuant to the requirements and procedures of State and local law, pay that portion of the cost attributable to 1,768 existing units. SCA shall pay for the proportion of the cost attributable to the new capacity, subject to reimbursement for off-site connections in accordance with the Rebate Agreement. SCA shall guarantee the repayment of its portion of the bonds by a letter of credit or other financial instrument acceptable to the County.

(iv) SCA shall pay a fee to the County for each single family detached dwelling and townhouse constructed in the St. Charles Communities PUD in a sufficient amount to amortize its portion of the bonds over a fifteen year period. The fee amount may be changed from time to time by the County as necessary to pay principal and interest on the bonds. The estimated cost of construction of the pumping station is $1.3 million, and the estimated fee is $500 per residential unit. If any required expansion is disputed by the parties, then the parties' engineers shall mutually agree to an objective review and decision by a neutral third party mutually selected by the parties.

7. Adequate Public Facilities Agreement for School Capacity

(a) SCA shall donate school sites in accordance with the original Docket 90 Order.

(b) SCA shall be entitled to a minimum of 894 school allocations over the period beginning January 1, 2002 and ending December 31, 2005 in accordance with the schedule attached hereto as Exhibit A. Not later than January 1, 2005, SCA and the County shall meet and determine the number of school allocations necessary to sustain the continued development of the St. Charles PUD. utilizing a base line assumption of 200 units per year as a measure of probable minimum sustained economic viability.

(c) The Parties understand that SCA plans to develop one or more adults-only communities in SCC in accordance with the current age descriptions in the PRD Zone, and agree that SCA shall not be required to obtain school allocations or pay school impact fees for such adults-only communities, so long as such development complies with the age restriction requirements of the PRD Zone for adults only communities.

8. Miscellaneous

(a) The County is currently holding certain funds advanced by SCA for the widening of Middletown Road. SCA agrees to extend the time to complete this road construction for an additional three years.

(b) The County shall approve the realignment of DeMarr Road requested by SCA in the Fairway Village plan.

(c) As part of the road improvements for the Cross-County Connector as described in paragraph no. 5(a) above, SCA shall install a traffic signal at St. Charles Parkway and the Cross County Connector. SCA may use the funds accumulated in the off-site road fund and pay any additional cost using its own funds.

(d) SCA requests the County to reconsider the access point to Parcel H. The County agrees to consider such request provided that it complies with the County's Access Management Plan.

(e) The requirements of all other orders in this Docket 90 shall remain in full force and effect, the same as if fully set out herein. To the extent that there is any inconsistency between any provision of this Amended Order and any prior order in this Docket 90, the provisions of this Amended Order shall control.

(f) The County reserves the right to impose additional terms, restrictions, limitations and conditions at any time in order to assure that the requirements of the PUD District shall be complied with. If SCA shall fail to comply with any of the terms, restrictions, limitations and conditions herein imposed or subsequently imposed by the County, and/or the Planning Commission, the County may refuse to issue any further building or occupancy permits, any other permit required to be secured by SCA or to approve any plats or plans required to be approved, until such time as SCA shall comply with all terms, conditions, restrictions and limitations herein or hereinafter imposed.

CHARLES COUNTY, MARYLAND
COUNTY COMMISSIONERS OF

/s/ Murray D. Levy
Murray D. Levy, President

/s/ Robert J. Fuller
Robert J. Fuller

/s/ James J. Jarboe
James M. Jarboe

/s/ Wm. Daniel Mayer
Wm. Daniel Mayer

/s/ Allan R. Smith
Allan R. Smith

ATTEST:

/s/ Shirley M. Gore
Shirley M. Gore, Clerk

EXHIBIT A

ST. CHARLES COMMUNITY LLC

SCHOOL ALLOCATION REQUIREMENTS

Scenario I - NOT banking for apartments.

	SFDU	TH	APT	TOTAL
Existing:
Recorded Lots	310			310

Add'l Allocations
Paid For	57			57

Required:
1/02	50	-	-	50
7/02	35	-	-	35

1/03	61	-	204*	265
7/03	66	-	-	66

1/04	65	70	-	135
7/04	60	70	-	130

1/05	77	70	-	147
7/05	-	66	-	66
	781	276	204	1,261

% of Total	62%	22%	16%

Scenario II - Banking for Apartments.

1/02	85	1/04	135
7/02	115*	7/04	130

1/03	150*	1/05	147
7/03	66	7/03	130

*Our objective is to start construction of the apartments in early 2003 with U&O's in early 2004. We only need the full 204 allocations in January if they are necessary to record the plat (which will allow construction to commence).

EX-99 5 cert-ceo.htm CEO CERTIFICATION Exhibit 99

Exhibit 99.1

Certificate of Chief Executive Officer

American Community Properties Trust

(pursuant to 18 U.S.C. Section 1350)

I, J. Michael Wilson, Chief Executive Officer of American Community Properties Trust, certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of American Community Properties Trust for the quarter ended September 30, 2002, filed with the Securities and Exchange Commission on the date hereof (i) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (ii) the information contained therein fairly presents, in all material respects, the financial condition and results of operations of American Community Properties Trust.

/s/ J. Michael Wilson

J. Michael Wilson

Chief Executive Officer

November 14, 2002

EX-99 6 cert-cfo.htm CFO CERTIFICATION Exhibit 99

Exhibit 99.2

Certificate of Chief Financial Officer

American Community Properties Trust

(pursuant to 18 U.S.C. Section 1350)

I, Cynthia L. Hedrick, Chief Financial Officer of American Community Properties Trust, certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of American Community Properties Trust for the quarter ended September 30, 2002, filed with the Securities and Exchange Commission on the date hereof (i) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (ii) the information contained therein fairly presents, in all material respects, the financial condition and results of operations of American Community Properties Trust.

/s/ Cynthia L. Hedrick

Cynthia L. Hedrick

Chief Financial Officer

November 14, 2002

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OWNER:

CAPITAL PARK APARTMENTS LIMITED PARTNERSHIP

By:	CP Capitol Corporation, its General Partner

By:
	Name: J. Michael Wilson
	Title: President

MANAGER:

AMERICAN RENTAL MANAGEMENT COMPANY

By:	/s/ Paul Resnik
	Name: Paul Resnik
	Title: Senior Vice President