10-Q

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 JUNE 30, 2005, 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, and (2) has been subject to such filing requirements for the past 90 days.

Yes /X/ No / /

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes / / No /X/

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

As of August 5, 2005, there were 5,197,954 Common Shares outstanding

AMERICAN COMMUNITY PROPERTIES TRUST
FORM 10-Q

JUNE 30, 2005
TABLE OF CONTENTS

		Page Number
PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Statements of Income for the Six Months Ended June 30, 2005 (Unaudited) and June 30, 2004 (Unaudited & Restated)	3
	Consolidated Statements of Income for the Three Months Ended June 30, 2005 (Unaudited) and June 30, 2004 (Unaudited & Restated)	4
	Consolidated Balance Sheets as of June 30, 2005 (Unaudited) and December 31, 2004 (Audited)	5
	Consolidated Statement of Changes in Shareholders' Equity for the Six Months Ended June 30, 2005 (Unaudited)	7
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 (Unaudited) and June 30, 2004 (Unaudited & Restated)	8
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations for the Six and Three Month Periods Ended June 30, 2005 and 2004	26
Item 3.	Qualitative and Quantitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	41
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 2	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Submission of Matters to a Vote of Security Holders	42
Item 5.	Other Information	42
Item 6.	Exhibits	42
	Signatures	43

AMERICAN COMMUNITY PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30,
(In thousands, except per share amounts)
(Unaudited)
	2005	2004
		(Restated)
Revenues
Community development-land sales	$ 12,721	$ 4,914
Homebuilding-home sales	-	9,309
Rental property revenues	10,828	8,998
Management and other fees, substantially all from related entities	1,697	1,936
Reimbursement of expenses related to managed entities	3,227	3,394
Total revenues	28,473	28,551
Expenses
Cost of land sales	8,880	3,459
Cost of home sales	21	7,042
Rental property operating expenses	4,374	3,735
General, administrative, selling and marketing	5,415	4,887
Depreciation and amortization	1,950	1,522
Expenses reimbursed from managed entities	3,227	3,394
Total expenses	23,867	24,039
Operating income	4,606	4,512
Other income (expense)
Interest and other income	646	226
Equity in earnings from unconsolidated entities	628	937
Interest expense	(3,257)	(2,768)
Minority interest in consolidated entities	(238)	(447)
Income before provision for income taxes	2,385	2,460
Provision for income taxes	480	592
Net income	$ 1,905	$ 1,868
Earnings per share
Basic and diluted	$ 0.37	$ 0.36
Weighted average shares outstanding
Basic and diluted	5,192	5,192
Cash dividends per share	$ 0.20	$ 0.15
The accompanying notes are an integral part of these consolidated statements.

AMERICAN COMMUNITY PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30,
(In thousands, except per share amounts)
(Unaudited)
	2005	2004
		(Restated)
Revenues
Community development-land sales	$ 8,973	$ 4,786
Homebuilding-home sales	-	3,960
Rental property revenues	5,487	4,587
Management and other fees, substantially all from related entities	970	943
Reimbursement of expenses related to managed entities	1,650	1,759
Total revenues	17,080	16,035
Expenses
Cost of land sales	6,236	3,155
Cost of home sales	11	2,969
Rental property operating expenses	2,281	1,899
General, administrative, selling and marketing	2,711	2,520
Depreciation and amortization	942	761
Expenses reimbursed from managed entities	1,650	1,759
Total expenses	13,831	13,063
Operating income	3,249	2,972
Other income (expense)
Interest and other income	521	145
Equity in earnings from unconsolidated entities	283	223
Interest expense	(1,555)	(1,119)
Minority interest in consolidated entities	(212)	(119)
Income before provision for income taxes	2,286	2,102
Provision for income taxes	608	665
Net income	$ 1,678	$ 1,437
Earnings per share
Basic and diluted	$ 0.32	$ 0.28
Weighted average shares outstanding
Basic and diluted	5,192	5,192
Cash dividends per share	$ 0.10	$ 0.05
The accompanying notes are an integral part of these consolidated statements.

AMERICAN COMMUNITY PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
ASSETS
	As of	As of
	June 30,	December 31,
	2005	2004
	(Unaudited)	(Audited)
Cash and Cash Equivalents
Unrestricted	$ 18,602	$ 16,138
Restricted	2,555	2,667
	21,157	18,805
Assets Related to Investment Properties
Operating real estate, net of accumulated depreciation
of $45,273 and $43,464, respectively	67,118	65,071
Other operating assets, net of amortization of $715
and $412, respectively	8,332	7,844
Investment in unconsolidated apartment partnerships	3,082	3,942
Investment in unconsolidated commercial property partnerships	4,888	4,872
Other receivables	388	641
Development cost and construction	11,009	9,052
	94,817	91,422
Assets Related to Community Development
Land and development costs
Puerto Rico	18,616	25,078
St. Charles, Maryland	32,240	24,444
Receivable from bond proceeds	9,391	4,810
Notes receivable on lot sales and other	318	301
Investment in joint venture	4,465	5,625
	65,030	60,258
Assets Related to Homebuilding
Condominiums under construction	16,630	10,675
Other Assets
Deferred tax assets	4,857	1,362
Receivables and other	808	873
Property, plant and equipment, less accumulated depreciation
of $1,672 and $1,580, respectively	848	632
	6,513	2,867
Total Assets	$ 204,147	$ 184,027
The accompanying notes are an integral part of these consolidated statements.

AMERICAN COMMUNITY PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY
	As of	As of
	June 30,	December 31,
	2005	2004
	(Unaudited)	(Audited)
Liabilities Related to Investment Properties
Recourse debt	$ 4,867	$ 1,896
Non-recourse debt	107,273	98,879
Accounts payable and accrued liabilities	8,419	7,617
Deferred income	495	417
	121,054	108,809
Liabilities Related to Community Development
Recourse debt	1,000	8,709
Recourse debt-County Bonds	13,590	7,795
Accounts payable and accrued liabilities	5,588	4,485
Deferred income related to joint venture	4,277	4,277
	24,455	25,266
Liabilities Related to Homebuilding
Recourse debt	13,533	8,792
Accounts payable and accrued liabilities	2,691	1,998
	16,224	10,790
Other Liabilities
Accounts payable and accrued liabilities	3,572	3,171
Notes payable and capital leases	194	202
Accrued income tax liability-current	3,498	1,622
	7,264	4,995
Total Liabilities	168,997	149,860
Shareholders' Equity
Common shares, $.01 par value, 10,000,000 shares authorized,
5,197,954 and 5,191,554 shares issued and outstanding as of
June 30, 2005 and December 31, 2004, respectively	52	52
Treasury stock, 67,709 shares at cost	(376)	(376)
Additional paid-in capital	17,066	16,964
Retained earnings	18,408	17,527
Total Shareholders' Equity	35,150	34,167
Total Liabilities and Shareholders' Equity	$ 204,147	$ 184,027
The accompanying notes are an integral part of these consolidated statements.

AMERICAN COMMUNITY PROPERTIES TRUST
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands, except share amounts)
	Common Shares			Additional
		Par	Treasury	Paid-in	Retained
	Number	Value	Stock	Capital	Earnings	Total
Balance December 31, 2004 (Audited)	5,191,554	$ 52	$ (376)	$ 16,964	$ 17,527	$ 34,167
Net income	-	-	-	-	1,905	1,905
Dividends declared	-	-	-	-	(1,024)	(1,024)
Issuance of shares to Trustees	6,400	-	-	102	-	102
Balance June 30, 2005 (Unaudited)	5,197,954	$ 52	$ (376)	$ 17,066	$ 18,408	$ 35,150
The accompanying notes are an integral part of these consolidated statements.

AMERICAN COMMUNITY PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(In thousands)
(Unaudited)
	2005	2004
		(Restated)
Cash Flows from Operating Activities
Net income	$ 1,905	$ 1,868
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization	1,950	1,522
Benefit for deferred income taxes	(3,495)	(1,079)
Equity in earnings-unconsolidated entities	(628)	(937)
Cost of sales-community development	8,880	3,459
Cost of sales-homebuilding	21	7,042
Stock based compensation expense	655	197
Minority interest in consolidated entities	238	447
Amortization of deferred loan costs	312	504
Changes in notes and accounts receivable	291	(1,920)
Additions to community development assets	(10,214)	(5,092)
Homebuilding-construction expenditures	(5,976)	(3,825)
Changes in accounts payable, accrued liabilities	4,109	2,271
Net cash (used in)/provided by operating activities	(1,952)	4,457
Cash Flows from Investing Activities
Investment in office building and apartment construction	(1,957)	(1,827)
Distribution from land real estate joint venture	1,160	-
Change in investments-unconsolidated apartment partnerships	1,116	745
Change in investments-unconsolidated commercial partnerships	356	(1,127)
Change in restricted cash	112	(1,177)
Additions to rental operating properties, net	(2,043)	(842)
Other assets	(347)	(223)
Net cash used in investing activities	(1,603)	(4,451)
Cash Flows from Financing Activities
Cash proceeds from debt financing	18,245	21,252
Payment of debt	(12,416)	(17,751)
County Bonds proceeds, net of undisbursed funds	1,214	-
Dividends paid to shareholders	(1,024)	(768)
Net cash provided by financing activities	6,019	2,733
Net Increase in Cash and Cash Equivalents	2,464	2,739
Cash and Cash Equivalents, Beginning of Year	16,138	13,716
Cash and Cash Equivalents, June 30,	$ 18,602	$ 16,455
The accompanying notes are an integral part of these consolidated statements.

AMERICAN COMMUNITY PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2005
(Unaudited)

(1) ORGANIZATION

American Community Properties Trust ("ACPT") 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 to 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 to the partners of IGC, 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, property management services, community development, and homebuilding. These operations are concentrated in the Washington, D.C. metropolitan area and Puerto Rico and are carried out through American Rental Properties Trust ("ARPT"), American Rental Management Company ("ARMC"), American Land Development U.S., Inc. ("ALD"), IGP Group Corp. ("IGP Group") and their subsidiaries. All of the entities included in the consolidated financial statements are hereinafter referred to collectively as the "Company" or "ACPT". ACPT is taxed as a partnership. ARPT, ARMC and ALD 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

Restated and Reclassified Financial Data

As more fully described in Notes 14 and 15 of the Company's Annual Report filed on Form 10-K for the year ended December 31, 2004, the Company restated its audited financial results of the fiscal years ended December 31, 2003 and 2002, and its unaudited quarterly results for the periods ended March 31, 2004, June 30, 2004 and September 30, 2004 to reflect the following:

• The Company corrected its accounting for cash distributions received from unconsolidated limited partnerships in which the Company is a general partner. Previously, the Company recorded cash distributions received from limited partnerships financed with non-recourse mortgages that were in excess of its investment basis as income. As part of the restatement and for future distributions, the Company will defer recognition of distributions received in excess of basis from limited partnerships in which the Company is the general partner.
• The Company commenced recording minority interest expense for cash distributions paid to the minority limited partners in our consolidated partnerships when those partners no longer had any basis in those consolidated partnerships. Previously, the distributions reduced the aggregate minority interest obligation recorded by the Company.
• The Company changed its accounting method for its general partner interest in Crossland Associates Limited Partnership ("Crossland"). Prior to the restatement, the Company's investment in Crossland had been recorded under the equity method due to certain important rights previously held by the limited partners. One of those rights expired in a year prior to the restatement period. As a result, the Company became the controlling partner and was required to consolidate the partnership. The adjustment to consolidate Crossland reflects the effects of excess cash distributions previously recognized as income and the expensing of excess distributions to minority partners as described above.

The adjustments resulted in the following (decrease) in net income and earnings per share - basic and diluted (in thousands except per share data):

	For the Six Months	For the Three Months
	Ended	Ended
	June 30, 2004	June 30, 2004
Net income	$ (845)	$ (45)
Earnings per share - basic and diluted	$ (0.16)	$ (0.01)

Basis of Presentation

The accompanying consolidated financial statements include the accounts of ACPT and its majority owned subsidiaries and partnerships, after eliminating all intercompany transactions. As of June 30, 2005, the consolidated group includes ACPT and its four major subsidiaries, ARPT, ARMC, ALD and IGP Group. In addition, the consolidated group includes American Housing Management Company, American Housing Properties L.P., St. Charles Community, LLC, Interstate General Properties Limited Partnership, S.E., Land Development Associates S.E., LDA Group LLC, Torres del Escorial, Inc., Escorial Office Building I, Inc., Interstate Commercial Properties, Inc., Bannister Associates Limited Partnership, Coachman's Limited Partnership, Crossland Associates Limited Partnership, Fox Chase Apartments General Partnership, Headen House Associates Limited Partnership, Lancaster Apartments Limited Partnership, New Forest Apartments General Partnership, Nottingham South LLC, Owings Chase LLC, Palmer Apartments Associates Lim ited Partnership, Prescott Square LLC, Village Lake L.P., Wakefield Terrace Associates Limited Partnership, and Wakefield Third Age Associates Limited Partnership. The assets and liabilities of the partnerships contributed to ACPT were transferred at their cost basis because of affiliate ownership and common management.

The Company's investment in the partnerships that it does not control, or for which it is not the primary beneficiary if such entity is a variable interest entity, are recorded using the equity method of accounting. Refer to Note 3 for further discussion regarding investments in unconsolidated real estate entities.

These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and 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 GAAP have been condensed or omitted. The Company has no items of other comprehensive income for any of the periods presented. In the opinion of management, these unaudited financial statements reflect all adjustments (which are of a normal recurring nature) necessary to present a fair statement of results for the interim period. While management believes that the disclosures presented are adequate to make the information not misleading, these financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 200 4.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements, and accompanying notes and disclosures. These estimates and assumptions are prepared using management's best judgment after considering past and current events and economic conditions. Actual results could differ from those estimates and assumptions.

The operating results for the six and three months ended June 30, 2005 and 2004 are not necessarily indicative of the results that may be expected for the full year. Net income per share is calculated based on weighted average shares outstanding. Weighted average shares outstanding for the six and three months ended June 30, 2005 and 2004 were not adjusted for the diluted calculation.

Summary of Significant Accounting Policies

Operating Real Estate and Depreciation

The Company's operating real estate is stated at cost and includes all costs related to acquisitions, development and construction. The Company makes assessments of the useful lives of our real estate assets for purposes of determining the amount of depreciation expense to reflect on our income statement. Maintenance and other repair costs are charged to operations as incurred. The assessments, all of which are judgmental determinations, are as follows:

• Buildings and improvements are depreciated over five to forty years using the straight-line or double declining balance methods,
• Furniture, fixtures and equipment are depreciated over five to seven years using the straight-line method
• Leasehold improvements are capitalized and depreciated over the life of the lease or their estimated useful life, whichever is shorter.

The table below presents the major classes of depreciable assets as of June 30, 2005 and December 31, 2004 (in thousands):

	June 30,	December 31,
	2005	2004
	(unaudited)	(audited)
Land	$ 8,468	$ 8,110
Building	93,905	91,319
Building improvements	3,980	3,616
Equipment	6,038	5,490
	112,391	108,535
Accumulated depreciation	45,273	43,464
Operating properties, net	$ 67,118	$ 65,071

In addition, the Company owned other property and equipment of $848,000 and $632,000, net of accumulated depreciation, respectively, as of June 30, 2005 and December 31, 2004. Total depreciation expense was $1,950,000 and $1,522,000 for six months ended June 30, 2005 and 2004, respectively, and $942,000 and $761,000 for the three months ended June 30, 2005 and 2004, respectively.

Acquired Real Estate Properties

On October 29, 2004, the Company, through its subsidiary AHP, completed the acquisition of the assets of two apartment properties in Pikesville, Maryland containing a total of 307 apartment units. The properties were purchased for approximately $20,000,000.

On May 23, 2005, the Company, through its subsidiary AHP, completed the acquisition of an apartment property in Baltimore, Maryland containing 85 units for approximately $3,000,000. The acquisition was financed through a combination of cash and non-recourse debt financing.

We allocated the purchase price of acquired properties to the related physical assets (land and building) and in-place leases based on the fair values of each component, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations." The value ascribed to in-place leases is based on the rental rates for the existing leases compared to market rent for leases of similar terms and present valuing the difference based on tenant credit risk rates. In preparing this calculation, we considered the estimated costs to make an apartment unit rent ready, the estimated costs and lost income associated with executing a new lease on an apartment unit, and the remaining terms of leases in place. The Company depreciates the amounts allocated to building and improvements over 40 years on a straight-line basis and amortizes the amounts allocated to intangible assets relating to in-place leases, totaling $483,000 for the October acquisition and $104,000 for the May acquisition, which are included in other operating assets in the accompanying balance sheet, over the remaining term of the related leases, which term is no longer than one year.

Reclassification

Certain amounts from the prior year have been reclassified to conform to our current year's presentation.

Impact of Recently Issued Accounting Standards

SFAS 123(R)

In December 2004, the FASB issued SFAS No. 123(R), "Share Based Payment," a revision of SFAS No. 123. Statement 123(R) addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments. SFAS 123(R) is similar in concept to SFAS No. 123, but requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. In addition, companies must also recognize compensation expense related to any awards that were not fully vested as of July 1, 2005. Pro forma disclosure is no longer an alternative. This revision is effective in the first interim or annual reporting period beginning after January 1, 2006. This revision is not expected to hav e a material impact on the Company's financial condition of results of operations.

SFAS 154

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections," which replaces APB Opinion No. 20 and SFAS No. 3, and changes the requirements for the accounting for and reporting of a change in accounting principle.  This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005, although early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the dates FAS 154 was issued.  We do not anticipate that the adoption of SFAS 154 will have a material impact on our financial condition or results of operations.

FIN 46

In January 2003, the FABS issued Interpretation No. 46 (revised December 2003) ("FIN 46-R"), "Consolidation of Variable Interest Entities." FIN 46-R clarifies the application of Accounting Research Bulletin 51, "Consolidated Financial Statements," for certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties or in which equity investors do not have the characteristics of a controlling financial interest ("variable interest entities"). Variable interest entities within the scope of FIN 46-R are required to be consolidated by their primary beneficiary. The objective of FIN 46-R is to improve financial reporting by companies involved with variable interest entities by requiring the variable interest entities to be consolidated with the results of the primary beneficiary if the primary beneficiary absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. We adopted FIN 46-R as of March 31, 2004. Its adoption did not have a material impact on our financial position, results of operations or cash flows.

As discussed in Note 3, our Company holds interests in and acts as the managing agent of certain partnerships established for the purpose of constructing and renting residential housing. We have determined that two of our unconsolidated apartment partnerships, Brookside Gardens Limited Partnership ("Brookside") and Lakeside Apartments Limited Partnership ("Lakeside"), are variable interest entities under FIN 46-R, however, the Company is not required to consolidate the partnerships due to the fact that it is not the primary beneficiary and does not bear the majority of the expected losses. The Company is exposed to losses for Brookside of $205,000 and Lakeside of $171,000, consisting of our net investment, loans and unpaid fees. All amounts are fully reserved. Pursuant to the partnership agreement for Brookside, the Company, as general partner, is responsible for providing operating deficit loans to the partnership in the event that it is not able to generate sufficient cash flows from its operating activ ities.

EITF Issue 04-5

In June 2005, the FASB ratified Emerging Issues Task Force Issue 04-5, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights," or EITF 04-5.  EITF 04-5 provides an accounting model to be used by a general partner, or group of general partners, to determine whether the general partner(s) controls a limited partnership or similar entity in light of certain rights held by the limited partners and provides additional guidance on what constitutes substantive kick-out rights and substantive participating rights.  EITF 04-5 is being applied after June 29, 2005 for (a) general partners of all newly formed limited partnerships and (b) existing limited partnerships for which the partnership agreements have been modified. For general partners in all other limited partnerships, the consensus will be applied no later than the beginning of the first reporting period in fiscal years beginning after December 15, 2005. There are two transition method alternatives available upon adoption; one involves a cumulative effect of a change in accounting principle recorded in opening retained earnings and the other involves restatement.   We have not yet determined the financial impact or method of adoption of EITF 04-5; however, we believe most of the apartment partnerships reflected in Note 3, Investment in Unconsolidated Real Estate Entities, will be consolidated.

(3) INVESTMENT IN UNCONSOLIDATED REAL ESTATE ENTITIES

The Company accounts for investments in unconsolidated real estate entities that are not considered variable interest entities under FIN 46 in accordance with SOP 78-9 "Accounting for Investments in Real Estate Ventures" and APB Opinion No. 18 "The Equity Method of Accounting for Investments in Common Stock". The Company's investments in unconsolidated real estate entities accounted for under the equity method of accounting consisted of general partnership interests in 13 limited partnerships which own apartment properties in the United States and Puerto Rico; a limited partnership interest in a limited partnership that owns a commercial property in Puerto Rico; and a 50% ownership interest in a limited liability company.

The Company considers many factors in determining whether or not an investment should be recorded under the equity method, such as economic and ownership interests, authority to make decisions, and contractual and substantive participating rights of the partners. Income and losses are recognized in accordance with the terms of the partnership agreements and any guarantee obligations or commitments for financial support.

Apartment Partnerships

The unconsolidated apartment partnerships as of June 30, 2005 include 13 partnerships owning 3,463 rental units in 16 apartment complexes. These complexes are owned by Alturas Del Senorial Associates Limited Partnership, Bayamon Garden Associates Limited Partnership, Brookside Gardens Limited Partnership, Carolina Associates Limited Partnership S.E., Colinas de San Juan 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 S.E., Turabo Limited Dividend Partnership and Valle del Sol Associates Limited Partnership. The Company holds less than a 20% economic interest in Brookside and Lakeside. As a general partner, we have significant influence over operations of Brookside and Lakeside that is disproportionate to our economic ownership in these two partnerships. In accordance with SOP 78-9 and APB No. 18, these investments are accounted for under the equity method. The Company holds a general partner interest in the remaining partnerships listed above and pursuant to the terms of the partnership agreement, has significant influence over the operations of the partnership's operations. The general partner 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 profits, losses and cash distributions from operations. Pursuant to the partnership agreements, the general partners of the unconsolidated partnerships are prohibited from selling or encumbering their general partner interest or selling the apartment complex without majority limited partner approval. The limited partners of certain partnerships have additional rights including that the partnership cannot be terminated without their approval and the ability to remove the general partner under certain default conditions. Depending on the partnership, the limited partners may have additional participating rights, which include the right to approve the managing agent, to approve the budget, and to prohibit the general partner from refinancing the property. As such, in accordance with SOP 78-9, the limited partners have important rights and the general partner is considered a noncontrolling partner. Accordingly, the partnerships are accounted for under the equity method.

Commercial Partnerships

The Company holds a limited partner interest in a commercial property in Puerto Rico which it accounts for under the equity method. ELI, S.E. ("ELI") is a partnership formed for the purpose of constructing a building for 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 a 45.26% interest in cash flow generated by the thirty-year lease of the building.

Prior period results reflect the Company's 50% limited partnership interest in El Monte Properties, S.E. ("El Monte") that it purchased from Insular Properties Limited Partnership ("Insular") on April 30, 2004 for $1,462,500. Insular is owned by the J. Michael Wilson Family, a related party. In December 2004, a third party purchased El Monte for $20,000,000, $17,000,000 in cash and $3,000,000 in notes. The net cash proceeds from the sale of the real estate were distributed to the partners. As a result, the Company received $2,500,000 in cash and recognized $986,000 of income in 2004. The gain on sale was reduced by the amount of the seller's note which is subject to future subordination. In the first quarter 2005, El Monte distributed to the Company $30,000 cash and its 50% share of the $3,000,000 note. The Company will recognize income as it receives cash payments on the note. The note is due in installments over a three year period beginning in December 2007. El Monte expects to wind up its affairs in 2 005.

Land Development Joint Venture

In September 2004, the Company entered into a joint venture agreement with Lennar Corporation ("Lennar") for the development of a 352-unit, active adult community located in St. Charles, Maryland. At that time, a joint venture, St. Charles Active Adult Community, LLC, was formed to carry out the terms of the joint venture. Lennar and the Company each hold a 50% ownership interest in the limited liability company. The operating agreement calls for the joint venture to develop 352 lots and to deliver the lots to Lennar, starting at the end of 2005. The Company will manage the project's development for a market rate fee pursuant to a management agreement. In September 2004, the Company transferred land to the joint venture in exchange for a 50% ownership interest and $4,277,000 in cash. The Company's investment in the joint venture was recorded at the historical cost basis of the land, with the proceeds received reflected as deferred revenue which will be recognized into income as the joint venture sells lots to Lennar. In March 2005, the joint venture closed a non-recourse development loan. Per the terms of the loan, both the Company and Lennar provided development completion guarantees for the project with an estimated cost to complete of approximately $10,000,000 as of June 30, 2005.

The following table summarizes the financial data and principal activities of the unconsolidated real estate entities for which the Company accounts under the equity method. The information is presented to segregate the apartment partnerships from both the commercial partnerships accounted for within the investment properties caption on the balance sheet, and our 50% ownership interest in the land development joint venture that is accounted for within the community development caption on the balance sheet.

			Land
			Development
	Apartment	Commercial	Joint
	Partnerships	Partnerships	Venture	Total
	(In thousands)
Summary Financial Position:
Total Assets
June 30, 2005	$ 79,732	$ 28,911	$ 11,005	$ 119,648
December 31, 2004	81,538	31,821	9,489	122,848
Total Non-Recourse Debt
June 30, 2005	103,379	24,025	-	127,404
December 31, 2004	102,924	24,975	-	127,899
Total Recourse Debt
June 30, 2005	-	-	3,794	3,794
December 31, 2004	-	-	-	-
Total Other Liabilities
June 30, 2005	8,873	1,125	280	10,278
December 31, 2004	9,673	3,231	235	13,139
Total (Deficit) Equity
June 30, 2005	(32,520)	3,761	6,931	(21,828)
December 31, 2004	(31,059)	3,615	9,254	(18,190)
Company's Investment
June 30, 2005	3,082	4,888	4,465	12,435
December 31, 2004	3,942	4,872	5,625	14,439

			Land
			Development
	Apartment	Commercial	Joint
	Partnerships	Partnerships	Venture	Total
	(In thousands)
Summary of Operations:
Total Revenue
Six Months Ended June 30, 2005	13,871	1,827	-	15,698
Six Months Ended June 30, 2004 (Restated)	13,573	3,396	-	16,969
Three Months Ended June 30, 2005	6,956	913	-	7,869
Three Months Ended June 30, 2004 (Restated)	6,836	2,484	-	9,320
Net Income
Six Months Ended June 30, 2005	1,017	898	(3)	1,912
Six Months Ended June 30, 2004 (Restated)	83	932	-	1,015
Three Months Ended June 30, 2005	361	466	(3)	824
Three Months Ended June 30, 2004 (Restated)	270	539	-	809
Company's Recognition of Equity in Earnings
Six Months Ended June 30, 2005	256	372	-	628
Six Months Ended June 30, 2004 (Restated)	618	319	-	937
Three Months Ended June 30, 2005	104	179	-	283
Three Months Ended June 30, 2004 (Restated)	47	176	-	223
Summary of Cash Flows:
Cash Flows from Operating Activities
Six Months Ended June 30, 2005	3,196	875	42	4,113
Six Months Ended June 30, 2004 (Restated)	2,404	1,222	-	3,626
Three Months Ended June 30, 2005	1,020	7	42	1,069
Three Months Ended June 30, 2004 (Restated)	846	340	-	1,186
Company's Share of Cash Flows from Operating Activities
Six Months Ended June 30, 2005	1,014	396	21	1,431
Six Months Ended June 30, 2004 (Restated)	562	561	-	1,123
Three Months Ended June 30, 2005	313	(3)	21	331
Three Months Ended June 30, 2004 (Restated)	176	162	-	338
Operating Cash Distributions
Six Months Ended June 30, 2005	2,478	753	2,320	5,551
Six Months Ended June 30, 2004 (Restated)	884	702	-	1,586
Three Months Ended June 30, 2005	993	341	2,320	3,654
Three Months Ended June 30, 2004 (Restated)	266	374	-	640
Company's Share of Operating Cash Distributions
Six Months Ended June 30, 2005	1,075	356	1,160	2,591
Six Months Ended June 30, 2004 (Restated)	290	304	-	594
Three Months Ended June 30, 2005	398	154	1,160	1,712
Three Months Ended June 30, 2004 (Restated)	83	155	-	238
Refinancing Cash Distributions
Six Months Ended June 30, 2005	100	-	-	100
Six Months Ended June 30, 2004 (Restated)	2,526	-	-	2,526
Three Months Ended June 30, 2005	100	-	-	100
Three Months Ended June 30, 2004 (Restated)	-	-	-	-
Company's Share of Refinancing Cash Distributions
Six Months Ended June 30, 2005	1	-	-	1
Six Months Ended June 30, 2004 (Restated)	1,249	-	-	1,249
Three Months Ended June 30, 2005	1	-	-	1
Three Months Ended June 30, 2004 (Restated)	-	-	-	-

(4) DEBT

The Company's outstanding debt is collateralized primarily by land, land improvements, homebuilding assets, receivables, investment properties, investments in partnerships, and rental properties. The following table summarizes the indebtedness of the Company at June 30, 2005 and December 31, 2004 (in thousands):

	Maturity	Interest	Outstanding As Of
	Dates	Rates (a),(b)	June 30,	December 31,
	From/To	From/To	2005	2004
			(unaudited)	(audited)
Related to community development:
Recourse debt (c)	06-30-06/	Non-interest	$ 14,590	$ 16,504
	03-01-20	bearing/P+1%
Related to homebuilding:
Recourse debt (d)	03-31-07	P	13,533	8,792
Related to investment properties:
Recourse debt (e)	05-15-07/	6.98%/P+1.25%	4,867	1,896
	01-23-13
Non-recourse debt (f)	10-31-05/	LIBOR	107,273	98,879
	02-01-39	+2.25%/7.85%
General:
Recourse debt (g)	07-04-05/	Non-interest	194	202
	06-01-09	bearing/10.95%
Total debt			$ 140,457	$ 126,273

1. "P" = Prime lending interest rate.  (The prime rates at June 30, 2005 and December 31, 2004 were 6.25%

       and 5.25% respectively).

2. LIBOR = London Inter Bank Offer Rate.  It is a standard financial index used in U.S. capital markets and can be found in the Wall Street Journal.  It is an index that is used to set the cost of various variable-rate loans.  The three-month LIBOR rates at June 30, 2005 and December 31, 2004 were 3.50 % and 2.56%, respectively.
3. As of June 30, 2005, $13,590,000 of the community development recourse debt relates to the general obligation bonds with the Charles County Government as described in detail under the heading "Financial Commitments" in Footnote 5.  The remainder of the outstanding balance is fully collateralized by approximately 500 acres within Parque El Commandante. On April 29, 2005, the LDA land loans due to FirstBank and to KEMBT Corporation were repaid in full. As a result, the balance of the land inventory in Parque Escorial is unencumbered as of June 30, 2005.
4. The outstanding recourse debt related to the homebuilding operations is composed of a $26,000,000 revolving construction loan with a maximum outstanding balance limited to $15,000,000 for Torres Del Escorial.  This loan is secured by a mortgage on the property and will be repaid primarily by the proceeds from home sales, which are scheduled to begin in the fourth quarter of 2005.
5. As of June 30, 2005 and December 31, 2004, the outstanding recourse debt within the investment properties is comprised of a loan borrowed to finance the acquisition of Village Lake and Coachman's.

In June 2005, the Company signed a 2 year, $3,000,000 recourse note with Columbia Bank.  The loan carries a fixed interest rate of 6.98% and requires the Company to pay monthly principle and interest payments until its maturity on May 15, 2007 and is collateralized by the Company's cash receipts from the two apartment properties acquired in 2004 and two parcels of land acquired in the second quarter of 2005.

6. The non-recourse investment properties' debt is collateralized by the apartment projects. As of June 30, 2005, approximately $51,236,000 of this debt is secured by the Federal Housing Administration ("FHA") or the Maryland Housing Fund. As of June 30, 2005, a portion of the outstanding balance is composed of a mortgage loan of $4,079,000 that has a stated interest rate of 7.5%; however, after deducting interest subsidy provided by HUD, the effective interest rate over the life of the loan is 1%. The non-recourse debt balance is also composed of a $7,968,000 construction loan for an office building in Parque Escorial that matures on October 31, 2005.
7. The general recourse debt outstanding as of June 30, 2005 is made up of various capital leases outstanding within our US and Puerto Rico operations as well as vehicle notes.

                The Company's loans contain various financial, cross collateral, cross default, technical and restrictive provisions.  As of June 30, 2005, the Company was in compliance with the provisions of its loan agreements.

(5) COMMITMENTS AND CONTINGENCIES

Financial Commitments

Pursuant to an agreement reached between ACPT and the Charles County Commissioners in 2002, the Company agreed to accelerate the construction of two major roadway links to the Charles County (the "County") road system. Also, as part of the agreement, the County agreed to issue general obligation public improvement bonds to finance this construction and the Company obtained letters of credit to guarantee the repayment of these bonds. In March 2004, the Charles County Commissioners issued an $8,000,000 Consolidated Public Improvement Bond (the "2004 Bonds") on behalf of the Company. The 2004 Bonds bear an interest rate between 4% and 5% and call for semi-annual interest payments and annual principal payments and mature in 2019. In October 2004, we formalized an agreement with the County that stipulates the borrowing and repayment provisions for the funds advanced. Under the terms of the agreement, the Company is obligated to pay interest and principal on the full amount of the 2004 Bonds; as s uch, the Company recorded the full amount of the debt and a receivable from the County, which is included within our Community Development assets, representing the remaining 2004 Bond proceeds to be advanced to the Company over an eighteen month period by the Charles County Commissioners as major infrastructure development within the project occurs. To the extent not all the proceeds are used to fund development, any unused funds will be used to repay the 2004 Bonds. As part of the agreement, the Company will pay the County Commissioners a monthly payment equal to one-sixth of the semi-annual interest payments due on the 2004 Bonds and one-twelfth of the annual principal payment due on the 2004 Bonds. In connection with the arrangement, the Company is required to provide a letter of credit to secure the repayment of the 2004 Bonds. This letter of credit was issued by Lennar as part of a residential lot sales contract for 1,950 lots in Fairway Village.

In March 2005, the Charles County Commissioners issued another series of 15 year public improvement general obligation bonds (the "2005 Bonds"), raising $6,000,000, on behalf of the Company. The 2005 Bonds bear an interest rate escalating from 5% to 5.125% and call for semi-annual interest payments and annual principal payments. The Charles County Commissioners will provide proceeds from the issuance of the 2005 Bonds to the Company when certain major development occurs for the County's road projects over an eighteen-month period. The Company will pay the County Commissioners a monthly payment equal to one-sixth of the semi-annual interest payments due on the 2005 Bonds and one-twelfth of the annual principal payment due on the 2005 Bonds. A formal agreement with the County was executed in May 2005.

As of June 30, 2005, ACPT is guarantor of $14,367,000 of surety bonds for the completion of land development projects with Charles County, substantially all of which are for the benefit of the Charles County Commissioners.

Consulting Agreement and Arrangement

ACPT entered into a consulting and retirement compensation agreement with IGC's founder and Chief Executive Officer, James J. Wilson, effective October 5, 1998 which provides for annual cash payments of $200,000 through October 2008.

Guarantees

ACPT and its subsidiaries typically provide guarantees for another subsidiary's loans. In many cases more than one company guarantees the same debt. Since all of these companies are consolidated, the debt or other financial commitment made by the subsidiaries to third parties and guaranteed by ACPT, is included within ACPT's consolidated financial statements. As of June 30, 2005, ACPT has guaranteed $18,457,000 of outstanding debt owed by its subsidiaries. IGP has guaranteed $14,533,000 of outstanding debt owed by its subsidiaries. LDA guaranteed $13,533,000 of outstanding debt owed by its subsidiary. In addition, St. Charles Community LLC guaranteed $4,867,000 of outstanding debt owed by AHP. The guarantees will remain in effect until the debt service is fully repaid by the respective borrowing subsidiary. The terms of the debt service guarantees outstanding range from one to nine years. We do not expect the guarantees to impair the individual subsidiary's or the Company's ability to conduct business or to pursue its future development plans.

Legal Matters

The Company was named as a third-party defendant in a three count complaint alleging that the Company schemed with the Charles County Commissioners, one employee of Charles County, the St. Charles Planning & Design Review Board ("PDRB"), and the managing agent for the PDRB to prevent the plaintiff 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. The Plaintiff appealed the dismissal and the appellate court dismissed the appeal as premature. The underlying claim filed by the PDRB against the Plaintiff was tried on February 4, 2004, and by Order of the Circuit Court of Charles County, Maryland dated April 8, 2004, the PDRB was successful and all claims filed by the Plaintiff were denied. The Plaintiff has filed an app eal to the Court of Special Appeals concerning both the May 2002 Order and the April 8, 2004 Order, which granted relief to the PDRB. Argument has been held before the Court of Special Appeals on March 4, 2005. This Court issued its opinion on or about April 20, 2005 affirming the trial court's dismissal of all counts as to the Company. Vann filed a petition for certiorari with the Court of Appeals, Maryland's highest court, in mid June 2005.

On February 3, 2004, Constance and Joseph Stephenson filed a suit arising largely out of disruptions caused by renovation of the premises located at 201 I Street, SW, Washington, DC (the "Premises"). Affiliates of J. Michael Wilson, the Company's Chief Executive Officer, own the Premises and are named as defendants. The Company was the managing agent of the Premises. Plaintiffs alleged that the Defendants (including the Company) failed to address various alleged security and safety conditions at the Premises and also failed to supervise or monitor the activities of construction workers on site. The complaint contains four counts alleged against Defendants including the Company. Those four counts are for violation of the District of Columbia Consumer Protection Procedures Act, breach of implied warranty of habitability, negligence, and intentional infliction of emotional distress. As relief, Plaintiffs seek a temporary restraining order, compensatory damages of $3,000,000, as well as unquantified punitive damages, declaratory judgment, which, among other things would relieve them of their obligations under their respective leases, preliminary injunction, attorneys' fees and an injunction requiring the inspection and remediation of mold within the Plaintiffs' apartment. A motion for partial summary judgment was filed and denied by the court. An agreement has been reached to settle all claims. The Company's portion of the settlement will be paid by its insurer.

On October 7, 2003, New Capitol Park Plaza Tenants Association and several individual tenants filed a suit against a number of parties including the Company arising largely out of disruptions caused by renovation of the premises at 201 I Street, SW, Washington, DC (the "Premises"). Affiliates of J. Michael Wilson, the Company's Chief Executive Officer, own the Premises, hired and supervised the construction contractor also named as a defendant. The Company was the managing agent of the Premises. Plaintiffs allege that the Defendants, including ARMC, failed to address various alleged security, safety and health conditions at the Premises. It also alleges that ARMC and other Defendants failed to supervise or monitor the activities of employees of ARMC and employees of other Defendants, as well as construction workers on site, allegedly resulting in the loss of personal property. The complaint contains eleven counts, three of which are alleged against ARMC only (two counts of negligence and one count of negl igent entrustment) and six of which are alleged against ARMC and other Defendants (three counts for violations of the District of Columbia Consumer Protection Procedures Act; one count for breach of contract; one count for negligent retention of employees and construction contractors; and one count for intrusion upon seclusion -- privacy violations). In addition to the other relief requested, Plaintiffs sought a temporary restraining order. A hearing has already been held on Plaintiffs' motion for a temporary restraining order, which motion has been denied. Other relief sought by the Plaintiffs includes a preliminary injunction; a declaratory judgment, which, among other things, would relieve the tenants of their obligations under their respective leases; unquantified compensatory damages; attorneys' fees; punitive damages; and the greater of compensatory or liquidated damages pursuant to their claims under the Consumer Protection Procedures Act. A motion for partial summary judgment was filed by the Defenda nts, including ARMC. Additionally, Plaintiff filed a motion to compel discovery from ARMC, including, but not limited to what are likely thousands of pages of documents. The motion for partial summary judgment was granted in part:  Judgment was entered in favor of ARMC as to the three counts (I, II, and III) alleging violations of the Consumer Protection Procedures Act.  Additionally, judgment was granted in favor of ARMC as to the claims asserted by the Tenants Association.  Plaintiffs' counsel moved to add twenty-eight individual present and former tenants as plaintiffs (in addition to the two original individual plaintiffs) but the court denied that motion.    The court then dismissed one of the two remaining individual Plaintiffs, ordering that his case be tried in landlord-tenant court.  The court also dismissed the claims for punitive damages.  Thus, the case will now be tried for the remaining plaintiff.

On February 3, 2004, Karen Stephenson filed a suit arising largely out of disruptions caused by renovation of the premises located at 201 I Street, SW, Washington, DC (the "Premises"). Affiliates of J. Michael Wilson, the Company's Chief Executive Officer, own the Premises and are named as defendants. The Company was the managing agent of the Premises. Plaintiff alleged that the Defendants (including the Company) failed to address various alleged security and safety conditions at the Premises and also failed to supervise or monitor the activities of construction workers on site. The complaint contains four counts alleged against Defendants including the Company. Those four counts are for violation of the District of Columbia Consumer Protection Procedures Act, breach of implied warranty of habitability, negligence, and intentional infliction of emotional distress. As relief, Plaintiff seeks a temporary restraining order, compensatory damages of $1,000,000, as well as unquantified punitive damages, declara tory judgment, which, among other things would relieve her of her lease obligations, preliminary injunction, attorneys' fees and an injunction requiring the inspection and remediation of mold within the Plaintiff's apartment. A motion for partial summary judgment was filed and denied by the court. An agreement has been reached to settle all claims. The Company's portion of the settlement will be paid by its insurer.

On February 10, 2004, nine tenants filed a suit against a number of parties including the Company as a result of various health and safety hazards arising largely out of disruptions caused by renovations at the premises located at 101 and 103 G Street, SW, Washington, DC (the "Premises"). Affiliates of J. Michael Wilson, the Company's Chief Executive Officer, own the Premises, hired and supervised the construction contractor and are named as a defendant. The Company was the managing agent of the Premises. Plaintiffs allege that the Defendants, including ARMC, failed to address various alleged security, safety and health conditions at the Premises. The complaint contains nine counts alleged against Defendants including the Company. The nine counts are for violation of the District of Columbia Consumer Protection Procedures Act, breach of express warranty, breach of implied warranty of habitability, actual fraud, constructive fraud, negligence, negligent misrepresentation, breach of contract and intentional infliction of emotional distress. As relief, the Plaintiffs are seeking $8,200,000 of compensatory and punitive damages in addition to attorneys' fees and court costs and a remediation of the mold problems within each Plaintiff's apartment. A motion for partial summary judgment was filed and is pending. An agreement has been reached to settle all claims. The Company's portion of the settlement will be paid by its insurer.

On August 30, 2004, Arthur Simpson filed a suit arising largely out of disruptions caused by renovation of the premises located at 201 I Street, SW, Washington, DC (the "Premises"). Affiliates of J. Michael Wilson, the Company's Chief Executive Officer, own the Premises and are named as Defendants. ARMC (the "Company") was the managing agent of the Premises. Plaintiff alleged that the Defendants (including the Company) failed to address various alleged security and safety conditions at the Premises and also failed to supervise or monitor the activities of construction workers on site. The complaint contains four counts alleged against the Defendants including the Company. Those four counts are for nuisance, breach of implied warranty of habitability, negligence, and intentional infliction of emotional distress. For relief, Plaintiff seeks an injunction prohibiting Defendants from facilitating access to Plaintiff's apartment without adequate notice or lawful excuse, compensatory damages of $10,000,000, as well as unquantified punitive damages, declaratory judgment, which, among other things would relieve him of his lease obligations, preliminary injunction, attorney's fees and an injunction requiring the inspection and remediation of mold within the Plaintiff's apartment. Discovery is on going.

On January 25, 2005, Myriet Jno-Lewis filed a suit arising largely out of disruptions caused by renovation of the premises located at 201 I Street, SW, Washington, DC (the "Premises"). Affiliates of J. Michael Wilson, the Company's Chief Executive Officer, own the Premises and are named as Defendants. ARMC (the "Company") was the managing agent of the Premises. Plaintiff alleged that the Defendants (including the Company) failed to address various alleged security and safety conditions at the Premises and also failed to supervise or monitor the activities of construction workers on site. The complaint contains five counts alleged against the Defendants including the Company. Those five counts are for nuisance, breach of implied warranty of habitability, negligence, invasion of privacy, and intentional infliction of emotional distress. For relief, Plaintiff seeks an injunction prohibiting Defendants from facilitating access to Plaintiff's apartment without adequate notice or lawful excuse, compensatory dam ages of $1,000,000, as well as unquantified punitive damages, declaratory judgment, which, among other things would relieve him of his lease obligations, preliminary injunction, attorney's fees and an injunction requiring the inspection and remediation of mold within the Plaintiff's apartment. Discovery is ongoing.

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 and costs. On February 11, 2000, IGP filed suit in the Superior Court of San Juan, Puerto Rico adding General Accident Insurance Company and Royal Insurance Company, IGP's insurance companies, as third party defendants to the action. On May 24, 2000, General Accident Insurance Company indicated it would cover IGP in this case up to the limit of its policy of $2,000,000 and, therefore, no loss contingency has been recorded. During 2003, the insurance company's lawyer held several depositions with the experts of both parties. In October 2003, a new or amended loss of earnings report subscribed by the Plaintiff's expert witness states that after a reevaluation of the Plaintiff's account statements the new "adjusted loss earnings" amounts to $600,214 instead of $1,193,092 claimed in their first report. In November 2003, the Defendant's expert witness filed a report regarding the Plaintiff's economic damages or loss of earnings claims. Pursuant to the expert witness' report, the Plaintiff's loss of earnings/economic damages does not exceed $17,800. A status conference was held on March 15, 2004 and the Court appointed a new expert witness as the Special Commissioner to evaluate Plaintiff and Defendant's expert witnesses' reports.  In a status conference held on October 18, 2004, the Special Commissioner informed the Court that he expects to complete in January 2005 a preliminary report regarding the expert witnesses' reports previously presented. This report, along with recommendations by the Special C ommissioner have been postponed.  The Court rescheduled a status hearing for September 30, 2005 and a status conference is scheduled for November 2005 to schedule pending discovery. 

On May 13, 2002, Antonio Santiago Rodriguez, and others 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 to the Municipality of Carolina as part of the agreement to construct a building for the State Insurance Fund of Puerto Rico. Plaintiffs allege 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 not have any liability. During a status conference held in January 2004, Plaintiff's attorney announced his resignation as legal counsel and requested an extension of time in order to allow the Plaintiff to hire a new legal counsel. On October 6, 2004 the Defendants' attorney filed a motion to dismiss the action. On November 30, 2004, the Defendants' attorney filed another motion in support of the motion filed on October 6, 2004. The court is in the process of evaluating the motions.

On November 24, 1997, the Plaintiffs, resident owners of Urbanización Loiza Valley in Canovanas, Puerto Rico, a neighborhood consisting of 56 houses near the property owned by LDA, filed a claim against Cantera Hipodromo, Inc. (the "lessee" who operates a quarry on the land owned by LDA), the owners of the lessee, the lessee's Insurance Companies and LDA. The Plaintiffs allege that as a result of certain explosions occurring in the quarry, their houses have suffered different types of damages and they have also suffered physical injuries and mental anguish. The damages claimed exceed $11,000,000. The physical damage to the property is estimated at less than $1,000,000. The lease agreement contains an indemnification clause in favor of LDA. The lessee has public liability insurance coverage of $1,000,000 through Integrand Assurance Company and an umbrella insurance coverage of $2,000,000 through American International Insurance Company. Integrand's legal counsel has provided the legal defense for al l parties to date but in September 2003 declared that the allegations in the complaint regarding public nuisance do not fall under their policy. In November 2003 the lessee's legal counsel filed a motion in opposition to such allegation. On January 28, 2005, the appellate court in Puerto Rico confirmed the trial court and Integrand is forced to provide coverage and pay attorneys' fees to LDA and to Cantera Hipodromo. On February 11, 2005, Integrand filed a reconsideration motion in the appellate court and on February 28, 2005 the same court dismissed the motion presented by Integrand. On March 17, 2005, Integrand filed a request of certiorari in the Supreme Court of Puerto Rico and on March 23, 2005, an opposition to the expedition of the certiorari was filed.  On June 6, 2005, the Supreme Court denied the request.  The trial court scheduled a status hearing for August 10, 2005.

Due to the inherent uncertainties of the judicial process and the early stage of certain of these actions, we are unable to either predict the outcome of or estimate a range of potential loss associated with, these matters. While we intend to vigorously defend these matters and believe we have meritorious defenses available to us, there can be no assurance that we would prevail. If any of these matters are not resolved in our favor, it could have a material adverse effect on our financial condition and results of operations.

In the normal course of business, ACPT is involved in various pending or unasserted claims. In the opinion of management, these are not expected to have a material impact on the financial condition or future operations of ACPT.

(6) 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 is reflected below (in thousands):

CONSOLIDATED STATEMENT OF INCOME:
		Six Months Ended		Three Months Ended
		June 30,		June 30,
		2005	2004	2005	2004
			(Restated)		(Restated)
Management and Other Fees (B)
Unconsolidated subsidiaries with third party partners		$ 1,135	$ 1,253	$ 683	$ 588
Affiliates of J. Michael Wilson, CEO and Chairman		244	380	122	192
		$ 1,379	$ 1,633	$ 805	$ 780
Interest and Other Income
Unconsolidated real estate entities with third
party partners		$ -	$ 24	$ -	$ 12
General and Administrative Expense
Affiliates of J. Michael Wilson, CEO and Chairman	(B1)	$ 69	$ 204	$ 37	$ 108
Reserve additions and other write-offs-
Unconsolidated real estate entities with third
party partners	(A)	(18)	163	(8)	(16)
Affiliates of J. Michael Wilson, CEO and Chairman		-	102	-	45
Reimbursement to IBC for ACPT's share of
J. Michael Wilson's salary		175	145	87	73
Reimbursement of administrative costs-
Affiliates of J. Michael Wilson, CEO and Chairman		(9)	(11)	(5)	(6)
IGC		-	(1)	-	(1)
James J. Wilson, IGC chairman and director	(B3)	100	100	50	50
Thomas J. Shafer, Trustee	(B4)	21	21	10	10
		$ 338	$ 723	$ 171	$ 263
BALANCE SHEET IMPACT:
				Balance	Balance
				June 30,	December 31,
				2005	2004
Assets Related to Rental Properties
Receivables-All unsecured and due on demand
Unconsolidated real estate entities with third party
partners, net of reserves				$ 388	$ 641
Other Assets
Receivables-All unsecured and due on demand
Affiliate of J. Michael Wilson, CEO and Chairman				$ 138	$ 72
IGC				-	3
IBC				3	5
				$ 141	$ 80
Liabilities Related to Community Development
Notes payable-KEMBT Corporation	(B2)			$ -	$ 2,728

(A) Management and Other Services

The Company provides management and other support services to its unconsolidated subsidiaries and other affiliated entities in the normal course of business. The fees earned from these services are typically collected on a monthly basis, one month in arrears. Receivables are unsecured and due on demand. Certain partnerships experiencing cash shortfalls have not paid timely. Generally, receivable balances of these partnerships are fully 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 bad debt expenses or recovery of such expenses.

On September 21, 2004, ARMC exercised its rights under the management agreement with Capital Park Apartments Limited Partnership to terminate the agreement effective October 11, 2004. Management fees generated by this property represented less than 1% of the Company's total revenue.

The management contracts for two commercial properties managed in Puerto Rico were terminated when the properties were sold in December 2004 and April 2005. Management fees generated by these properties represent less than 1% of the Company's total revenue.

(B) Other

Other transactions with related parties are as follows:

(1)	The Company rents executive office space and other property from affiliates in the United States pursuant to leases that expire through 2010. 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.
(2)	The Company repaid the loan, net of a $430,000 discount, on April 29, 2005.
(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 of $200,000 through October 2008. At Mr. Wilson's request, payments are made to IGC.
(4)	Fees paid to Thomas J. Shafer, a trustee, pursuant to a consulting agreement.

Related Party Acquisition and Disposition

El Monte

On April 30, 2004, the Company purchased a 50% limited partnership interest in El Monte Properties S.E. ("El Monte") from Insular Properties Limited Partnership ("Insular") for $1,462,500. Insular is owned by the J. Michael Wilson Family. Per the terms of the agreement, the Company was responsible to fund $400,000 of capital improvements and lease stabilization costs, and had a priority on cash distributions up to its advances plus accrued interest at 8%, investment and a 13% cumulative preferred return on its investment. The purchase price was based on a third party appraisal of $16,500,000 dated April 22, 2003. The Company's limited partnership investment was accounted for under the equity method of accounting.

In December 2004, a third party buyer purchased El Monte for $20,000,000, of which $17,000,000 was paid in cash and $3,000,000 in notes. The net cash proceeds from the sale of the real estate were distributed to the partners. As a result, the Company received $2,500,000 in cash and recognized $986,000 of income in 2004. El Monte distributed $30,000 in cash and the $1,500,000 note to the Company in the first quarter 2005. The note bears interest at a rate of prime plus 2% and matures on December 3, 2009. The note is payable in three installments, the first installment of $250,000 is due on December 3, 2007, the second installment of $250,000 is due on December 3, 2008 and the balance on December 3, 2009. The Company will recognize income as the cash payments on the note are received. As of June 30, 2005, the note and its related deferred income are shown net on the balance sheet. El Monte is expected to wind up its affairs in 2005 and distribute any remaining cash at the time of liquidation.

(7) SEGMENT INFORMATION

ACPT has two reportable segments: U.S. operations and Puerto Rico operations. The Company's chief decision-makers allocate resources and evaluate the Company's performance based on these two segments. The U.S. segment is comprised of different components grouped by product type or service, including investments in rental properties, community development and property management services. The Puerto Rico segment entails the following components: investment in rental properties, community development, homebuilding and management services. 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 six months ended June 30, 2005 and 2004 (in thousands):

	United	Puerto	Inter-
Six Months (Unaudited)	States	Rico	Segment	Total
2005:
Land sales revenue	$ 2,324	$ 10,397	$ -	$ 12,721
Cost of land sales	1,547	7,492	(159)	8,880
Home sales revenue	-	-	-	-
Cost of home sales	-	21		21
Rental property revenues	10,828	-	-	10,828
Rental property operating expenses	4,374	-	-	4,374
Management and other fees	505	1,194	(2)	1,697
General, administrative, selling and marketing expense	3,731	1,686	(2)	5,415
Depreciation and amortization	1,888	62	-	1,950
Operating income	2,117	2,330	159	4,606
Interest income	91	371	(382)	80
Equity in earnings from unconsolidated entities	73	555	-	628
Interest expense	3,544	23	(310)	3,257
Minority interest in consolidated entities	238	-	-	238
Income (loss) before provision for income taxes	(1,499)	3,796	88	2,385
Income tax (benefit) provision	(548)	1,028	-	480
Net income (loss)	(951)	2,768	88	1,905
Gross profit on land sales	777	2,905	159	3,841
Gross profit (loss) on home sales	-	(21)	-	(21)
Total assets	146,083	68,122	(10,058)	204,147
Additions to long lived assets	14,428	2,055	-	16,483

	United	Puerto	Inter-
Six Months (Unaudited)	States	Rico	Segment	Total
2004 (Restated):
Land sales revenue	$ 2,237	$ 2,677	$ -	$ 4,914
Cost of land sales	1,488	1,971	-	3,459
Home sales revenue	-	9,309	-	9,309
Cost of home sales	-	7,042	-	7,042
Rental property revenues	8,998	-	-	8,998
Rental property operating expenses	3,735	-	-	3,735
Management and other fees	842	1,102	(8)	1,936
General, administrative, selling and marketing expense	3,121	1,774	(8)	4,887
Depreciation and amortization	1,470	52		1,522
Operating income	2,263	2,249	-	4,512
Interest income	99	301	(302)	98
Equity in earnings from unconsolidated entities	(371)	1,308	-	937
Interest expense	2,958	40	(230)	2,768
Minority interest in consolidated entities	447	-	-	447
Income (loss) before provision for income taxes	(1,410)	3,943	(73)	2,460
Income tax (benefit) provision	(536)	1,128	-	592
Net income (loss)	(874)	2,815	(73)	1,868
Gross profit (loss) on land sale	749	706	-	1,455
Gross profit on home sales	-	2,267	-	2,267
Total assets	99,703	65,144	(15,349)	149,498
Additions to long lived assets	4,858	2,878	-	7,736

The following presents the segment information for the three months ended June 30, 2005 and 2004 (in thousands):

	United	Puerto	Inter-
Three Months (Unaudited)	States	Rico	Segment	Total
2005:
Land sales revenue	$ 1,525	$ 7,448	$ -	$ 8,973
Cost of land sales	1,025	5,329	(118)	6,236
Home sales revenue	-	-	-	-
Cost of home sales	-	11		11
Rental property revenues	5,487	-	-	5,487
Rental property operating expenses	2,281	-	-	2,281
Management and other fees	264	707	(1)	970
General, administrative, selling and marketing expense	1,862	850	(1)	2,711
Depreciation and amortization	911	31	-	942
Operating income	1,197	1,934	118	3,249
Interest income	42	166	(191)	17
Equity in earnings from unconsolidated entities	49	234	-	283
Interest expense	1,705	11	(161)	1,555
Minority interest in consolidated entities	212	-	-	212
Income (loss) before provision for income taxes	(630)	2,827	89	2,286
Income tax (benefit) provision	(216)	824	-	608
Net income (loss)	(414)	2,003	89	1,678
Gross profit on land sales	500	2,119	118	2,737
Gross profit (loss) on home sales	-	(11)	-	(11)
Total assets	146,083	68,122	(10,058)	204,147
Additions to long lived assets	10,687	890	-	11,577
2004 (Restated):
Land sales revenue	$ 2,109	$ 2,677	$ -	$ 4,786
Cost of land sales	1,229	1,926	-	3,155
Home sales revenue	-	3,960	-	3,960
Cost of home sales	-	2,969	-	2,969
Rental property revenues	4,587	-	-	4,587
Rental property operating expenses	1,899	-	-	1,899
Management and other fees	396	551	(4)	943
General, administrative, selling and marketing expense	1,609	915	(4)	2,520
Depreciation and amortization	734	27	-	761
Operating income	1,621	1,351	-	2,972
Interest income	52	171	(151)	72
Equity in earnings from unconsolidated entities	(40)	263	-	223
Interest expense	1,214	20	(115)	1,119
Minority interest in consolidated entities	119	-	-	119
Income before provision for income taxes	301	1,838	(37)	2,102
Income tax provision	119	546	-	665
Net income	182	1,292	(37)	1,437
Gross profit on land sale	880	751	-	1,631
Gross profit on home sales	-	991	-	991
Total assets	99,703	65,144	(15,349)	149,498
Additions to long lived assets	2,727	1,304	-	4,031

(8) SUBSEQUENT EVENTS

Memorandum of Understanding with Charles County

On July 28, 2005, the Company signed a memorandum of understanding (MOU) with the Charles County Commissioners regarding a land donation that will house a planned minor league baseball stadium and entertainment complex. Under the terms of the MOU, ACPT will donate 42 acres in St. Charles to Charles County. ACPT also agreed to expedite off-site utilities, stormwater management and road construction improvements that will serve the entertainment complex and future portions of St. Charles so that the improvements will be completed concurrently with the entertainment complex. Charles County will be responsible for infrastructure improvements on the site of the complex.  In return, Charles County will issue the sale of general obligation bonds to finance the infrastructure improvements. The bonds will be repaid by ACPT over a 15-year period. In addition, the County agreed to update a June 2002 Amended Order regarding the number of units developed in St. Charles on an annual basis; with the update, the County will issue an additional 100 allocations a year to St. Charles commencing with the issuance of the bonds. The County will also require ACPT to fund an escrow account from lot sales that will be used to repay these bonds.

Cash Dividend

On August 11, 2005, the Board of Trustees declared a $0.10 per share cash dividend on the 5,197,954 common shares outstanding, payable on September 8, 2005 to shareholders of record on August 25, 2005.

Creation of a Direct Financial Obligation

On August 11, 2005, the Company secured a construction loan of $27,000,000 with GMAC Commercial Mortgage Bank to fund the construction costs for a new apartment complex in Fairway Village. The Company plans to construct a 252 unit apartment complex offering one and two bedroom units at market rate. The construction loan will mature in August 2007 and at such time will convert into a 40-year non-recourse permanent mortgage. Occupancy in the first of the nine buildings is projected for the third quarter of 2006.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Certain matters discussed and statements made within this Form 10-Q contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These include statements about our business outlook, assessment of market and economic conditions, strategies, future plans, anticipated costs and expenses, capital spending, and any other statements that are not historical. The accuracy of these statements is subject to a number of unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements of the Company to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following:

• National, regional and local economic and business conditions that will, among other things, affect:

Demand for residential lots, commercial parcels and multifamily housing

• The real estate industry is sensitive to changes in economic conditions such as the level of employment, consumer confidence, availability of financing and interest rate levels as well as other market conditions such as oversupply or reduction in demand for commercial, industrial or multifamily properties. Adverse changes in any of these conditions generally, or in the market regions where we operate, could decrease demand for our residential lots, commercial parcels and homes, which could adversely affect our revenues and earnings.

The ability of the general economy to recover timely from an economic downturn

• Although the real estate business historically has been cyclical, it has not undergone an economic down cycle in a number of years. This has led some people to assert that real estate prices may be inflated and may decline if demand weakens. A decline in the prices for real estate could adversely affect our home and land sales revenues and margins.

Availability and creditworthiness of tenants

• We are exposed to customer risk. Our performance depends on our ability to collect rent from our customers. General economic conditions and an increase in unemployment rates could cause the financial condition of a large number of our tenants to deteriorate. While no tenant in our wholly owned portfolio accounted for a significant amount of the annualized rental revenue of these respective properties at December 31, 2004, our financial position may be adversely affected by financial difficulties experienced by our tenants, including bankruptcies, insolvencies or general downturns in business.

The availability of financing for both our customers and us

• Our business and earnings are also substantially dependent on the ability of our customers to finance the purchase of our land or homes. Limitations on the availability of financing or increases in the cost of such financing could adversely affect our operations. Our business and earnings is also substantially dependent on our ability to obtain financing for our development activities as well as refinancing our properties' mortgages. Increases in interest rates, concerns about the market or the economy, or consolidation or dissolution of financial institutions could increase our cost of borrowing, reduce our ability to obtain the funds required for our future operations, and limit our ability to refinance existing debt when it matures. Changes in competition, availability of financing, customer trends and market conditions may impact our ability to obtain loans to finance the development of our future communities.

• Adverse changes in the real estate markets, including, among other things:

Competition with other companies

• We operate in a very competitive environment, which is characterized by competition from a number of other land developers. Actions or changes in plans by competitors may negatively affect us.

Risks of real estate acquisition and development (including our ability to obtain governmental approvals for development projects and to complete our current development projects on time and within budget)

• Our plans for future development of our residential communities can be affected by a number of factors including time delays in obtaining necessary government permits and approvals and legal challenges to our planned communities.
• The agreements we execute to acquire properties generally are subject to customary conditions to closing, including completion of due diligence investigations which may be unacceptable; it may be difficult to identify and complete targeted acquisitions, acquired properties may fail to perform as we expect in analyzing our investments; our estimates of the costs of repositioning or redeveloping acquired properties may be inaccurate; the development opportunity may be abandoned after expending significant resources; and our post development occupancy rates and rents at the newly completed property may not meet the expected levels and could be insufficient to make the property profitable.
• The development of our residential communities may be affected by circumstances beyond our control, including weather conditions, work stoppages, labor disputes, unforeseen engineering, environmental or geological problems and unanticipated shortages of or increases in the cost of materials and labor. Any of these circumstances could give rise to delays in the completion of, or increase the cost of, developing one or more of our residential communities.

• Ability to renew HUD subsidy contracts and availability of federal funds on a timely basis to service these contracts

As of June 30, 2005, we owned an equity interest in, and managed for third parties and affiliates, properties that benefit from governmental programs intended to provide housing to people with low or moderate incomes. These programs, which are usually administered by HUD or state housing finance agencies, typically provide mortgage insurance, favorable financing terms or rental assistance payments to the property owners. As a condition of the receipt of assistance under these programs, the properties must comply with various requirements, which typically limit rents to pre-approved amounts. If permitted rents on a property are insufficient to cover costs, our cash flow from these properties will be negatively impacted, and our management fees may be reduced or eliminated.

• Ability to obtain insurance at a reasonable cost

We may experience economic harm if any damage to our properties is not covered by insurance. We carry insurance coverage on our properties of the type and in amounts that we believe is in line with coverage customarily obtained by owners of similar properties. We believe all of our properties are adequately insured. However, we cannot guarantee that the limits of our current policies will be sufficient in the event of a catastrophe to our properties. We may suffer losses that are not covered under our comprehensive liability, fire, extended coverage and rental loss insurance policies. If an uninsured loss or a loss in excess of insured limits should occur, we could lose capital invested in a property, as well as any future revenue from the property. We would nevertheless remain obligated on any mortgage indebtedness or other obligations related to the property.

• Environmental and safety requirements

Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem. When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold at any of our properties could require us to undertake a costly remediation program to contain or remove the mold from the affected property. In addition, the presence of significant mold could expose us to liability from our tenants, employees of our tenants and others if property damage or health concerns arise. In addition, we are required to operate our properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to our properties. We may be required to make substantial capital expenditures to comply with those requirements and these expenditures could have a material adverse effect on our operating results and financial condition, as well as our ability to make distributions to shareholders.

• Ability to retain senior management and key employees

We could be hurt by the loss of key management personnel. Our future success depends, to a significant degree, on the efforts of our senior management. Our operations could be adversely affected if key members of senior management cease to be active in our company.

ACPT and its representatives may from time to time make written and oral forward looking statements, including statements contained in press releases, in its filings with the Securities and Exchange Commission, in its reports to shareholders and in its meetings with analysts and investors. The forward-looking statements included in this Form 10-Q are subject to additional risks and uncertainties further discussed under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2004.

The words "believes", "expects", "estimates", "anticipates" and other similar expressions are intended to identify 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. Such forward-looking statements are based on current expectations and speak only as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. Given these uncertainties, readers are cautioned not to place undue reliance on such statements.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States, which we refer to as GAAP, requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied resulting in a different presentation of our financial statements.

Refer to the Company's 2004 Annual Report on Form 10-K for a discussion of critical accounting policies, which include profit recognition, cost capitalization, investment in unconsolidated real estate entities, impairment of long-lived assets, depreciation of real estate investments, income taxes and contingencies. For the six months ended June 30, 2005 there were no material changes to our policies.

RESULTS OF OPERATIONS

The following discussion is based on the consolidated financial statements of the Company. It compares the results of operations of the Company for the six and three months ended June 30, 2005 (unaudited) with the results of operations of the Company for the six and three months ended June 30, 2004 (unaudited). 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. The information should be read in conjunction with the accompanying consolidated financial statements and notes included elsewhere in this report.

As more fully described in the notes to our consolidated financial statements, we have restated our previously issued consolidated financial statements to correct our accounting treatment including the accounting for distributions in excess of basis from our unconsolidated entities, distributions in excess of basis to the minority owners in our consolidated entities and the consolidation of one limited partnership previously recorded under the equity method. All financial information contained herein has been revised to reflect the restatements.

Non-GAAP Measures

The following discussions refer to certain non-GAAP measurements, gross profit and gross margin. Gross profit is defined as land or home sales revenue less the related cost of sales, and gross margin is defined as gross profit divided by sales revenue. Gross profit excludes the following items included in the determinations of net income: rental property revenue, rental operating expense, equity in earnings, management and other fees, interest income, interest expense, general, administrative, selling and market expense, depreciation and amortization, minority interest, write-off of deferred project costs, other income, and income tax expense. Management uses these measures to compare a product's sales price in relationship to its cost when making product design and pricing determinations and evaluating the product's performance. These measurements are not intended to be used as a replacement for sales revenue, cost of sales or net income.

Gross profit or gross margin does not represent cash generated from operating activities in accordance with GAAP. Therefore, gross profit and gross margin should not be considered an alternative to net income as an indication of our performance. Also, gross profit and gross margin should not be considered an alternative to net cash flow from operating activities, as determined under GAAP, as a measure of liquidity. A calculation of gross profit and gross margin for the six and three months ended June 30, 2005 and 2004, along with a reconciliation to net income for each year, is provided in the following tables.

A reconciliation of gross profit to net income for the six and three months ended June 30, 2005 and 2004 is as follows:

	For the Six Months
	Ended June 30,
	2005	2004
	(Unaudited)	(Unaudited and
		restated)
Gross profit on land sales	$ 3,841	$ 1,455
Gross profit (loss) on home sales	(21)	2,267
Rental property revenues	10,828	8,998
Rental property operating expenses	4,374	3,735
Management and other fees	1,697	1,936
General, administrative, selling and marketing expense	5,415	4,887
Depreciation and amortization	1,950	1,522
Interest and other income	646	226
Equity in earnings from unconsolidated entities	628	937
Interest expense	3,257	2,768
Minority interest in consolidated entities	238	447
Income tax (benefit) expense	480	592
Net income	$ 1,905	$ 1,868

	For the Three Months
	Ended June 30,
	2005	2004
	(Unaudited)	(Unaudited and
		restated)
Gross profit on land sales	$ 2,737	$ 1,631
Gross profit (loss) on home sales	(11)	991
Rental property revenues	5,487	4,587
Rental property operating expenses	2,281	1,899
Management and other fees	970	943
General, administrative, selling and marketing expense	2,711	2,520
Depreciation and amortization	942	761
Interest and other income	521	145
Equity in earnings from unconsolidated entities	283	223
Interest expense	1,555	1,119
Minority interest in consolidated entities	212	119
Income tax expense	608	665
Net income	$ 1,678	$ 1,437

Calculation of Gross Profit and Gross Margin is as follows:

Six Months Ended June 30, 2005	U.S.	Puerto Rico	Total
Land sales revenue	$ 2,324	$ 10,397	$ 12,721
Less cost of land sales	1,547	7,333	8,880
Gross profit on land sales	777	3,064	3,841
Gross profit on land sales	777	3,064	3,841
Land sales revenue	2,324	10,397	12,721
Gross margin on land sales	33%	29%	30%
Home sales revenue	-	-	-
Less cost of home sales	-	21	21
Gross profit (loss) on home sales	-	(21)	(21)
Gross profit (loss) on home sales	-	(21)	(21)
Home sales revenue	-	-	-
Gross margin on home sales	-	-	-
Six Months Ended June 30, 2004	U.S.	Puerto Rico	Total
Land sales revenue	$ 2,237	$ 2,677	$ 4,914
Less cost of land sales	1,488	1,971	3,459
Gross profit on land sales	749	706	1,455
Gross profit on land sales	749	706	1,455
Land sales revenue	2,237	2,677	4,914
Gross margin on land sales	33%	26%	30%
Home sales revenue	-	9,309	9,309
Less cost of home sales	-	7,042	7,042
Gross profit on home sales	-	2,267	2,267
Gross profit on home sales	-	2,267	2,267
Home sales revenue	-	9,309	9,309
Gross margin on home sales	-	24%	24%

Three Months Ended June 30, 2005	U.S.	Puerto Rico	Total
Land sales revenue	$ 1,525	$ 7,448	$ 8,973
Less cost of land sales	1,025	5,211	6,236
Gross profit on land sales	500	2,237	2,737
Gross profit on land sales	500	2,237	2,737
Land sales revenue	1,525	7,448	8,973
Gross margin on land sales	33%	30%	31%
Home sales revenue	-	-	-
Less cost of home sales	-	11	11
Gross profit (loss) on home sales	-	(11)	(11)
Gross profit (loss) on home sales	-	(11)	(11)
Home sales revenue	-	-	-
Gross margin on home sales	-	-	-
Three Months Ended June 30, 2004	U.S.	Puerto Rico	Total
Land sales revenue	$ 2,109	$ 2,677	$ 4,786
Less cost of land sales	1,229	1,926	3,155
Gross profit on land sales	880	751	1,631
Gross profit on land sales	880	751	1,631
Land sales revenue	2,109	2,677	4,786
Gross margin on land sales	42%	28%	34%
Home sales revenue	-	3,960	3,960
Less cost of home sales	-	2,969	2,969
Gross profit on home sales	-	991	991
Gross profit on home sales	-	991	991
Home sales revenue	-	3,960	3,960
Gross margin on home sales	-	25%	25%

Results of Operations - U.S. Operations:

For the six months ended June 30, 2005, our U.S. segment generated $2,117,000 of operating income compared to $2,263,000 of operating income generated by the segment for the same period in 2004. For the three months ended June 30, 2005, our U.S. segment generated $1,197,000 of operating income compared to $1,621,000 of operating income generated by the segment for the same period in 2004.  Additional information and analysis of the U.S. operations can be found below.

Community Development - U.S. Operations:

Land sales revenue in any one period is affected by the mix of lot sizes and, to a greater extent, the mix between residential and commercial sales. Residential lots are sold to homebuilders in bulk pursuant to the terms of options contracts that are secured by cash deposits or letters of credit. Sales are closed on a lot by lot basis at the time when the builder purchases the lot. Residential lots can vary in size and location resulting in pricing differences. Gross profit margins of residential lots are fairly consistent within any given village in St. Charles. Commercial land is typically sold by contract that allows for a study period and delayed settlement until the purchaser obtains the necessary permits for development. The sales prices and gross margins for commercial parcels vary significantly depending on the location, size, extent of development and ultimate use. Commercial land sales are cyclical and usually have a noticeable positive effect on our earnings in the p eriod they reach settlement.

Community development land sales were $2,324,000 for the six months ended June 30, 2005 and $1,525,000 for the three months ended June 30, 2005. For the six month and three month periods ended June 30, 2004, community development land sales were $2,237,000 and $2,109,000 respectively.

Residential Land Sales

During the first six months of 2005, we sold 10 standard size single-family lots to Lennar Corporation ("Lennar") at an initial selling price of $100,000 per lot. For the first six months of 2004 we sold 23 standard size single-family lots at an average price of $90,000. The lots sales took place in the second quarter of each of the respective periods discussed herein. The amount of land sales and the profitability of such sales will vary from quarter to quarter depending upon the timing of the delivery of the specific land parcels sold

In March 2004, the Company executed an agreement with Lennar to sell 1,950 residential lots (1,359 single-family lots and 591 town home lots) in Fairway Village in St. Charles, Maryland. The agreement requires Lennar to provide $20,000,000 in letters of credit to secure the purchase of the lots. Under the agreement, Lennar's homebuilding companies are required to purchase, at a minimum, 200 residential lots, provided that they are developed and available for delivery, per year on a cumulative basis. Assuming 200 lot sales per year, it is estimated that lot settlements will take place over the next ten years. The Company expects to deliver a total of 110 lots to Lennar in 2005. The ultimate selling price per lot of our lot sales to Lennar may exceed the amount recognized at closing since the final lot price is equal to 30% of the base price of the home sold on the lot. Additional revenue exceeding the initial price per lot will be recognized upon Lennar's settlement with the respective homebuyers. Prices for our current residential lots reflect the healthy housing market and its upward trend in home prices. Single-family homes built by Lennar on the settled lots in Fairway Village are selling at an average base price of $408,000. For the six and three months ended June 30, 2005, Lennar settled on 39 and 16 homes respectively, providing the Company with $1,248,000 and $499,000 of additional sales revenue for each respective period for lots purchased from the Company in 2004.

As of June 30, 2005, we had 18 residential lots in backlog that were available for delivery to Lennar, of which 15 were sold subsequent to June 30, 2005.

Commercial Land Sales

For the six months ended June 30, 2005, we sold 0.3 acres of commercial land for $50,000 ($3.83 per square foot) compared to 1.07 acres of commercial land for $128,000 ($2.75 per square foot) in the six months of 2004. The average sales prices of these parcels differ due to their location, use and level of development. As of June 30, 2005, our backlog consisted of 16.88 of commercial acres under contract for a total selling price of $3,824,000.

Gross Profit

The gross profit margin for the six and three months ended June 30, 2005 was 33% while the combined gross profit margin for the six and three months ended June 30, 2004 was 33% and 42% respectively. The gross profit margin for the second quarter of 2005 was affected by increases in the costs for the development of lots in Fairway Village offset by the additional sales revenue earned from our residential lot sales to Lennar. Our development costs have been directly affected by the limited supply of laborers as well as the increase in the price of steel, oil and fuel.

Rental Property Revenues and Operating Results - U.S. Operations:

Certain of the U.S. based apartment properties in which we hold an ownership interest qualify for the consolidation method of accounting. As a result, we include within our financial statements the consolidated apartment properties' total revenue and operating expenses. The portion of net income attributable to the interests of the outside owners of some of these properties and any losses and distributions in excess of the minority owners' basis in those properties are reflected as minority interest. As of June 30, 2005, ten of the consolidated properties are market rent properties, allowing us to determine the appropriate rental rates. Even though we can determine the rents, a portion of our units must be leased to tenants with low to moderate income. HUD subsidizes two of the properties and the two remaining properties are a mix of subsidized units and market rent units. HUD dictates the rents of the subsidized units.

Apartment Acquisitions

On October 29, 2004, the Company acquired the assets of two apartment properties, Owings Chase LLC and Prescott Square LLC, located in Pikesville, Maryland. On May 23, 2005, the Company acquired the assets of another apartment property, Nottingham Apartments LLC, in Baltimore, Maryland. Each of the three apartment properties provides for market rent allowing us to determine the appropriate rental rates based on market conditions.

The following table presents the results of rental property revenues and operating expenses for the six and three months periods ended June 30, 2005 and 2004 ($ in thousands):

	For the Six Months Ended		For the Three Months Ended
	6/30/2005	6/30/2004	6/30/2005	6/30/2004
		(Restated)		(Restated)
Rental Property - Revenues	$ 10,828	$ 8,998	$ 5,487	$ 4,587
Rental Property - Operating Expenses	4,374	3,735	2,281	1,899

Rental property revenues increased $1,830,000 for the six months ended June 30, 2005 and increased $900,000 for the three months ended June 30, 2005 compared to the respective periods in the prior year. Rental property revenue earned in the six and three months of 2005 has been directly impacted by the apartment acquisitions in October 2004 and May 2005, an overall rent increase of 4% as well as an increase in rent generated by one of our properties that converted from a fully subsidized property to a 100% market rate property in July 2004.

Rental property operating expenses increased $639,000 for the six months ended June 30, 2005 and increased $382,000 for the three months ended June 30, 2005 compared to the respective periods in 2004.  The year to date and quarter to date increases in our rental property operating expenses are the result of the apartment acquisitions in October 2004 and May 2005. The increases attributable to the acquisitions were offset in part by a slight reduction in operating expenses at our apartment properties as a result of improved existing operating efficiencies. 

Management and Other Fees - U.S. Operations:

We earn monthly management fees from all of the apartment properties that we own as well as apartment properties owned by third parties and affiliates of J. Michael Wilson. We receive an additional fee from the properties that we manage for their use of the property management computer system that we purchased at the end of 2001 and a fee for vehicles purchased by the Company for use on behalf of the properties. The cost of the computer system and vehicles are reflected within depreciation expense. This section includes only the fees earned from the non-controlled properties; the fees earned from the controlled properties are eliminated in consolidation. Within this section we also recognize the amortized portion of sponsor and developer fees.

For the six months ended June 30, 2005, management and other fees were $505,000, a decrease of $337,000 from the $842,000 recognized in the comparable period of fiscal 2004. For the three months ended June 30, 2005, management and other fees were $264,000, a decrease of $132,000 from the $396,000 recognized in the comparable period of fiscal 2004.

The decrease in our management fees is primarily due to the recognition of a $144,000 special management fee earned on the refinancing of Huntington Associates Limited Partnership, one of our unconsolidated entities in the first quarter of 2004, with no comparable fee in 2005 and the recognition of a $100,000 incentive management fee from another one of our unconsolidated entities in the second quarter of 2004 with no comparable fee earned in 2005. The decrease is also the result of our termination of a management contract with a non-owned property in October 2004 as well as a reduction in fees earned from our managed properties in connection with their use of the computer system.

General, Administrative, Selling and Marketing Expenses - U.S. Operations:

The costs associated with the oversight of our U.S. operations, accounting, human resources, office management and technology, as well as corporate and other executive office costs are included in this section. ARMC employs the centralized office management approach for its property management services for our 14 properties located in St. Charles, Maryland, 3 properties located in Pikesville, Maryland and to a lesser extent the other properties that we manage. The apartment properties reimburse ARMC for certain costs incurred at the central office that are attributable to the operations of those properties. In accordance with EITF Topic 01-14, "Income Statement Characterization of Reimbursements Received for Out of Pocket Expenses Incurred" the cost and reimbursement of these costs are not included in general and administrative expenses, but rather they are reflected as separate line items on the consolidated income statement.

General, administrative, selling and marketing costs incurred within our U.S. operations increased $610,000 to $3,731,000 for the six months ended June 30, 2005, compared to $3,121,000 for the same period of 2004.   For the three month period ended June 30, 2005, general, administrative, selling and marketing costs increased $253,000 to $1,862,000 compared to $1,609,000 for the three month period ended June 30, 2004. 

The 20% increase in general, administrative, selling and marketing costs for the six months ended June 30, 2005 is primarily attributable to $465,000 of additional professional services fees including audit, tax compliance, corporate costs and legal fees incurred in the first half of the fiscal year as a result of the restatement, additional corporate governance and price increases in excess of inflation. Our year to date increase is also attributed to a $216,000 increase in salaries and benefits, including bonuses, $102,000 in compensation expense for shares that were awarded to our non-employee trustees in June and $78,000 in additional charges related to our outstanding share appreciation rights.  The increases noted above were offset by a $298,000 reduction in bad debt expense that was recorded in 2004 on the outstanding accounts receivable balances due from two apartment properties for which we serve as the general partner and one affiliated property that we managed at that time.

The 16% increase in general, administrative, selling and marketing costs for the three months ended June 30, 2005 is primarily attributable to $102,000 in compensation expense for shares that were awarded to our non-employee trustees in June, corporate governance related consulting fees, legal fees, an increase in salaries and benefits, and additional charges related to our outstanding share appreciation rights.  The quarter-to-date increases were offset slightly by a reduction in bad debt expense and a reduction in accounting and auditing related fees.

Depreciation Expense - U.S. Operations:

Depreciation expense increased $418,000 to $1,888,000 for the first six months of 2005 compared to $1,470,000 for the same period in 2004. Depreciation expense increased $177,000 to $911,000 for the three months ended June 30, 2005 compared to the same period in 2004.  Depreciation expense for the six and three month periods ended June 30, 2005 was directly affected by the apartment acquisitions in October 2004 and May 2005 as well as capital improvements made to our rental properties.

Equity in Earnings from Unconsolidated Entities - U.S. Operations:

The results of our share of earnings from the real estate entities that we do not control are reflected in this section. (See Note 3 to the Consolidated Financial Statements, "Investments in Unconsolidated Real Estate Entities" for more information regarding our investments in and commitments to these entities.) Earnings from these entities will vary from quarter to quarter depending on the level of activity each entity during the period, where the entity is in the earnings stream, and whether or not the limited partners have recovered their capital contribution.

For the six months ended June 30, 2005, the Company recognized earnings of $73,000 for its investments in its unconsolidated real estate entities. For the same period in 2004, the Company recognized a loss of $371,000 in its investments in its unconsolidated real estate entities. The increase was principally the result of the write-off of deferred finance fees in one of our unconsolidated partnerships in 2004 with no comparable write-offs in 2005.

For the three months ended June 30, 2005, the Company recognized earnings of $49,000 in its investments in its unconsolidated real estate entities compared to a loss of $40,000 for the same period in 2004. The Company recognized earnings in the current fiscal year due to cost saving efforts over the partnerships' operating expenses in 2005 in addition to higher interest expense and prepayment penalties recognized in the prior fiscal year from the refinancing of one of our unconsolidated partnerships.

Interest Expense - U.S. Operations:

The interest related to the U.S. recourse debt, exclusive of the recourse debt related to the investmentproperties, is subject to capitalization and is allocated to the qualifying land inventory within our community development land assets based on its book balance. Any excess interest, interest related to the debt within our investment properties, interest on capital leases and amortization of certain loan fees are reflected as interest expense. This section reflects all interest expense incurred.

Interest expense increased 20% for the first six months of 2005 to $3,544,000 compared to $2,958,000 for the first six months of 2004. Interest expense for the three months ended June 30, 2005 increased 40% to $1,705,000 compared to $1,214,000 for the three months ended June 30, 2004.  We experienced an overall increase in our average debt outstanding due to the increased loan amounts of the mortgages refinanced, the acquisition of three apartment properties and the servicing obligation of the bonds issued by the Charles County Government in March 2004 and 2005.  This year's increase was offset by loan fees amortized in 2004 for loans that were paid off by December 31, 2004 as well as loan fees and prepayment penalties paid in connection with the refinancing of one of our apartment properties mortgages in January 2004.

Minority Interest in Consolidated Entities - U.S. Operations:

Minority interest in consolidated entities includes the minority partner's share of the consolidated partnerships earnings and distributions to minority partners in excess of their basis in the consolidated partnership, even though these distributions have no economic effect or cost to the Company. Losses charged to the minority interest are limited to the minority partner's basis in the partnership.

Minority interest for the six months ended June 30, 2005 was $238,000 compared to $447,000 for the six months ended June 30, 2004. Minority interest for the three months ended June 30, 2005 increased $93,000 to $212,000 compared to $119,000 for the same period in 2004.  The minority partners' excess basis charged to minority interest expense during the first six months of 2005 was $423,000 less than the comparable 2004 period principally due to distributions to the minority partner in 2004 when the property was refinanced. This decrease was offset by the impact of the increased earnings generated by the partnerships. The minority owners' share of income increased $214,000 during the first half of 2005 primarily as a result of deferred financing fees written off in the first quarter 2004, rent increases and operating cost reductions.  The minority owners' share of income increased 78% during the three months ended June 30, 2005 primarily due to distributions in excess of basis.

Benefit for Income Taxes - U.S. Operations:

The effective tax rate for the six months ended June 30, 2005 is 37% compared to 38% for the six months ended June 30, 2004. The effective tax rates for the three months ended June 30, 2005 and 2004 are 34% and 40%, respectively. The federal and state statutory rate is 39%. The effective rate for 2005 differs from the statutory rate primarily due to the effect of permanent items and the taxation of foreign source interest income with a corresponding foreign tax credit. The primary difference between the 2004 effective rate and the statutory rate is related to the distortion caused by a small amount of income whereby book to tax differences produce a disproportionate increase or decrease in the effective tax rate. The first six months of 2005 and 2004 reflects a tax benefit of $548,000 and $536,000, respectively. The tax benefit in the first six months is primarily due to net operating losses the Company expects to fully utilize; whereas the tax benefit for the first six months of 2004 is princip ally the result of temporary book to tax differences.

Results of Operations - Puerto Rico Operations:

For the six months ended June 30, 2005, our Puerto Rico segment generated $2,330,000 of operating income compared to $2,249,000 of operating income for the same period in 2004. For the three months ended June 30, 2005, our Puerto Rico segment generated $1,934,000 of operating income compared to $1,351,000 of operating income for the same period in 2004. Additional information and analysis of the Puerto Rico operations can be found below.

Community Development - Puerto Rico Operations:

Total land sales revenue in any one period is affected by the mix of residential and commercial sales. Residential and commercial land sales are cyclical in nature and usually have a noticeable positive impact on our earnings in the period in which settlement is made.

Community development land sales during the six and three months ended June 30, 2005 were $10,397,000 and $7,448,000, respectively, as compared to land sales revenue of $2,677,000 for the six and three month periods ended June 30, 2004. In February 2005, the Company sold 2.5 commercial acres in the master-planned community of Parque Escorial for $2,949,000 and in April 2005, the Company sold another 7.2 commercial acres in Parque Escorial for $7,448,000. In April 2004, the Company sold 2.4 commercial acres for $2,752,000 in Parque Escorial. The gross profit margin for the six and three months ended June 30, 2005 was 29% and 30%, respectively, as compared to 26% and 28% for the same periods in 2004.

There were no commercial acres in backlog at June 30, 2005.

Homebuilding - Puerto Rico Operations:

The Company organizes corporations as needed to operate each individual homebuilding project. During 2004, the Company completed and closed out its 208 unit complex known as Brisas de Parque Escorial ("Brisas"). In April 2004, the Company commenced the construction of a new 160-unit mid-rise condominium complex known as Torres del Escorial ("Torres"). The condominiums went on the market in January 2005 with expected delivery to commence in the fourth quarter of 2005. The condominium units are sold individually from an onsite sales office to pre-qualified homebuyers.

During the six and three months of 2004, 52 and 22 units, respectively, of Brisas project were closed generating an aggregate $9,309,000 and $3,960,000, respectively, with no comparable home sales revenue generated for the same periods in 2005. The gross profit margin for the six and three months ended June 30, 2004 was 24% and 25% respectively. As of June 30, 2005, 36 units of Torres were under contract at an average selling price of $238,000 per unit. Each sales contract is non-contingent and is backed by a $6,000 deposit.

Management and Other Fees - Puerto Rico Operations:

We earn a monthly fee from each of the apartment properties in which we hold an ownership interest, as well as four properties owned by non-affiliates. In addition to the monthly fee, we earn incentive management fees from six of the properties as well as property-owner association fees from four of the properties operating in Parque Escorial. Fees earned from apartment property refinancing are also reflected in this section. We defer the portion of the refinancing fees related to our ownership interest in those partnerships and amortize them into income over the term of the loans. In prior periods we managed two commercial properties owned by the Wilson Family. The Wilson Family properties were sold in December 2004 and April 2005. Management fees earned from these properties represented less than 1% of the Company's 2004 consolidated revenue.

Management and other fees increased 8% to $1,194,000 during the six months ended June 30, 2005, as compared to $1,102,000 for the same period in 2004 and increased 28% to $707,000 for the three months ended June 30, 2005 as compared to $551,000 for the same period of 2004. In April 2005, we earned a special management fee of $139,000 from the sale of one of the non-owned commercial properties that we managed. Our year-to-date and quarter-to-date management fees were positively affected by the increases in the annual rents of the apartment properties. The increases were offset by a reduction of management fees from the commercial properties sold in December 2004 and April 2005.

General, Administrative, Selling and Marketing Expenses - Puerto Rico Operations:

The costs associated with the oversight of our operations, accounting, human resources, office management and technology are included in this section. The apartment properties reimburse IGP for certain costs incurred at IGP's office that are attributable to the operations of those properties. The amounts reflected in this section are net of the reimbursements that are back-charged to the properties.

General, administrative, selling and marketing expenses decreased 5% to $1,686,000 during the six months ended June 30, 2005, as compared to $1,774,000 for the same period of 2004 and decreased 7% to $850,000 during the three months ended June 30, 2005, as compared to $915,000 for the three months ended June 30, 2004.

The year to date decrease is primarily attributable to a $100,000 reduction in expenses related to outstanding share appreciation rights compared to the same period in the prior year. The decrease is also the result of a $100,000 reduction in legal, tax consulting, municipal taxes, worker's compensation insurance expenses, miscellaneous expenses, advertising and bad debt expenses in addition to a $50,000 reduction in selling and marketing expenses in our homebuilding operations due to the completion of the Brisas project. The decreases we experienced in 2005 were offset in part by increases in salaries and fringe benefits of $184,000 and accounting and auditing fees of $19,000.

The 7% decrease in our quarter to date general and administrative expenses is the result of a reduction in the charge to our share appreciation rights, a reduction in consulting and outside personnel service fees, property taxes, bad debt expense and other miscellaneous expenses. The three month decreases were offset by increases in salaries and bonuses.

Equity in Earnings from Unconsolidated Entities - Puerto Rico Operations:

Our investments in our HUD-subsidized apartment properties in Puerto Rico are accounted for under the equity method of accounting. We also account for our limited partner investment in the commercial rental property owned by ELI under the equity method of accounting. The earnings from our investments in the apartment properties and the commercial property are reflected within this section. The recognition of earnings varies from partnership depending on our investment basis in the property, where the partnership is in the earnings stream, and whether or not the limited partners have recovered their capital.

Equity in earnings from partnerships decreased 58% to $555,000 during the first six months of 2005, as compared to $1,308,000 during the same period of 2004 and decreased 11% to $234,000 during the second quarter of 2005 compared to $263,000 in 2004. The six-month decrease is the result of $785,000 of distributions received in excess of our investment basis from one of our partnerships, for which the Company has no funding obligation, out of the refinancing of its partnership's mortgage in March 2004 offset in part by cash distributions of $30,000 received in the first quarter from El Monte Properties. The 11% decrease in the second quarter of 2005 is the result of increases in financial and operating expenses incurred within our apartment properties offset by an increase in earnings from the commercial property.

Interest Expense - Puerto Rico Operations:

Interest on the community development, homebuilding and office building construction loans is capitalized.  Other bank charges, interest on capital leases and the amortization of certain loan fees are reflected on our financial statements as interest expense.

Interest expense decreased 43% for the six months of 2005 to $23,000, as compared to $40,000 for the six months ended June 30, 2004 and decreased 45% to $11,000 during the second quarter of 2005 as compared to $20,000 of interest expense for the same period of 2004. The year to date and quarter to date decrease is attributable to a reduction in the amortization of deferred financing costs.

Provision for Income Taxes - Puerto Rico Operations:

The effective tax rates for the first six months ended June 30, 2005 and 2004 are 27% and 29%, respectively. The effective tax rates for the three months ended June 30, 2005 and 2004 are 29% and 30%, respectively. The Puerto Rico statutory tax rate is 29%. The effective rate for 2005 differs from the statutory rate primarily due to permanent differences. The slightly higher effective rate for 2004 relates to the U.S. taxation of the residential land profits created by Brisas condo sales at a rate higher than the offsetting foreign tax credit.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically met its liquidity requirements from cash flow generated from residential and commercial land sales, home sales, property management fees, and rental property revenue. Anticipated cash flow from operations, existing loans, refinanced or extended loans, and new financing are expected to meet our financial commitments for the year. However, there are no assurances that these funds will be generated. The following table sets forth the changes in the Company's cash flows ($ in thousands):

	Six Months Ended June 30,
	2005	2004
		(Restated)
Operating Activities	$ (1,952)	$ 4,457
Investing Activities	(1,603)	(4,451)
Financing Activities	6,019	2,733
Net Increase in Cash	$ 2,464	$ 2,739

For the six months ended June 30, 2005, the Company used $1,952,000 in net cash for its operating activities compared to $4,457,000 of cash flows provided by its operating activities for the six months ended June 30, 2004. The $6,409,000 decrease in cash flows from operating activities for the first six months of 2005 compared to the first six months of 2004 is primarily due to the different phases of our community development and homebuilding projects for the respective periods presented.  Within our community development operations in the U.S., the Company continues to develop residential lots for delivery to Lennar as part of its March 2004 agreement.  Also, in accordance with an agreement with the Charles County government, the Company is accelerating the construction of two major roadway links to the Charles County roadway system.  The infrastructure expansion is supported by the issuance of two separate general obligation public improvement bonds offered by the county government in Ma rch 2005 and 2004.  Within our homebuilding operations in Puerto Rico, the Company is currently in the construction phase of its next homebuilding project and is expected to begin selling finished units in the fourth quarter of 2005; during the first six months of 2004, the Company sold 52 units from its previous project. From period to period, cash flows from operating activities also depends upon changes in our net income, as discussed more fully above under "Results of Operations," as well as changes in our receivables and payables.

For the six months ended June 30, 2005, the Company used $1,603,000 of net cash in investing activities compared to $4,451,000 of net cash used by investing activities during the same period in 2004. Cash provided by or used in investing activities generally relates to increases in our investment portfolio through acquisition, development or construction of rental properties and land held for future use, net of returns on our investments. For the six month periods ended June 30, 2005 and 2004, our development activity outpaced the distributions received from our real estate investments. During the first half of 2005, the Company invested $2,000,000 in its existing properties and approximately $2,000,000 in the construction of a 57,000 square foot office building in Parque Escorial, Puerto Rico. The total cost of the office building is expected to be $11,100,000.  As of June 30, 2005, the building is 32% leased.  The office building is scheduled to be available for occupancy in the third quarter of 2005. For the six months ended June 30, 2004, the Company invested $842,000 in existing properties and $1,800,000 in the construction of the office building in Puerto Rico.

                For the first six months of 2005, $6,019,000 of cash was provided by financing activities compared to $2,733,000 of cash provided by financing activities during the first six months of 2004. Cash provided by or used in financing activities generally relates to dividend distributions to our shareholders, and advances and repayment of debt. Generally, new debt incurred during a period depends upon the net effect of our acquisition, development and refinancing activity. For the six months ended June 30, 2005, we received approximately $8,800,000 of cash proceeds from the refinancing of one of our apartment properties mortgage in March 2005 (Lancaster), $8,000,000 of development loan proceeds received during the first six months in conjunction with construction of the office building in Puerto Rico, and the development of our homebuilding project in Parque Escorial, and a $3,000,000  loan with Columbia Bank for our equi ty portions of our apartment acquisitions in October 2004.  Our year-to-date proceeds received from debt financing in 2005 were offset by $12,416,000 of debt curtailments, including Lancaster's original loan of $3,800,000, and $8,000,000 of community development recourse debt as well as $1,024,000 of cash dividends distributed to our shareholders on March 10, 2005 and June 8, 2005.

The following chart reflects our contractual financial obligations as of June 30, 2005:

	Payments Due By Period
		Less Than			After
	Total	1 Year	1-3 Years	4-5 Years	5 Years
	(In thousands)
Total recourse debt - community
development and homebuilding	$ 28,123	$ 710	$ 16,803	$ 1,655	$ 8,955
Total recourse debt - investment properties	4,867	252	3,006	157	1,452
Total non-recourse debt - investment properties	107,273	9,198	4,812	3,873	89,390
Capital lease obligations	106	13	54	39	-
Operating lease obligations	1,355	340	771	244	-
Purchase obligations	21,460	8,268	13,192	-	-
Total contractual cash obligations	$ 163,184	$ 18,781	$ 38,638	$ 5,968	$ 99,797

Recourse Debt - U.S. Operations

During 2002, we settled our long-standing disputes with the Charles County Government. As part of that settlement, the County agreed to issue tax-exempt bonds to fund certain major infrastructure in St. Charles and we agreed to provide letters of credit to secure the bonds and escalate our development pace. The bonds will be repaid from future lot sales in St. Charles. In March 2004, the Charles County Commissioners issued an $8,000,000 Consolidated Public Improvement Bond (the "2004 Bonds") on behalf of the Company. The 2004 Bonds bear an interest rate between 4% and 5% and call for semi-annual interest payments and annual principal payments and mature in 2019. In October 2004, we formalized an agreement with the County that stipulates the borrowing and repayment provisions for the funds advanced. Under the terms of the agreement, the Company is obligated to pay interest and principal on the full amount of the 2004 Bonds; as such, the Company recorded the full amount of the debt. As part of the agree ment, the Company will pay the County Commissioners a monthly payment equal to one-sixth of the semi-annual interest payments due on the 2004 Bonds and one-twelfth of the annual principal payment due on the 2004 Bonds. In connection with the arrangement, the Company is required to provide a letter of credit to secure the repayment of the 2004 Bonds. This letter of credit was issued by Lennar as part of a residential lot sales contract for 1,950 lots in Fairway Village.

In March 2005, the Charles County Commissioners issued another series of 15 year public improvement general obligation bonds (the "2005 Bonds"), raising $6,000,000, on behalf of the Company. The 2005 Bonds bear an interest rate escalating from 5% to 5.125% and call for semi-annual interest payments and annual principal payments. The Charles County Commissioners will provide proceeds from the issuance of the 2005 Bonds to the Company when certain major development occurs for the County's road projects over an eighteen-month period.

In June 2005, the Company signed a two year, $3,000,000 recourse note with Columbia Bank.  The loan carries a fixed interest rate of 6.98%, requires the Company to pay monthly principle and interest payments until its maturity on May 15, 2007 and is collateralized by the Company's cash receipts from the two apartment properties acquired in 2004 and two parcels of land acquired in the second quarter of 2005.

Recourse Debt - Puerto Rico Operations

Substantially all of the Company's homebuilding assets and 540 acres of community development land assets within its Puerto Rico segment are encumbered by recourse debt.  The Company obtained a construction loan in March 2004 for its next homebuilding project, Torres del Escorial. The construction loan with FirstBank carries a $26,000,000 revolving line of credit with aggregate advances not to exceed $15,000,000 outstanding at any one time. The loan is secured by a mortgage on the property and will be repaid by the proceeds of the home sales, which are scheduled to begin in the fourth quarter of 2005. Construction loan advances of $12,467,000 remain available under this credit facility.  On April 29, 2005, the LDA land loans due to FirstBank and to KEMBT Corporation, were repaid in full.  As a result, the balance of the land inventory in Parque Escorial is unencumbered as of June 30, 2005.

Non-Recourse Debt - U.S. Operations

As more fully described in Note 4 of the Notes to Consolidated Financial Statements, the non-recourse apartment properties' debt is collateralized by apartment projects.  As of June 30, 2005, approximately 48% of this debt is secured by the Federal Housing Administration ("FHA") or the Maryland Housing Fund.

We are actively seeking additions to our rental property portfolio. We are currently pursuing various opportunities to purchase apartment properties in the Baltimore, Maryland and Washington, D.C. areas. Future acquisitions may be financed through a combination of Company equity, third party equity and market rate mortgages.

Non-Recourse Debt - Puerto Rico Operations

A construction loan of $8,625,000 from Banco Popular of Puerto Rico was secured to fund the development and construction costs of the office building in Parque Escorial. The construction loan is scheduled to convert into a 30-year term loan prior to its maturity on October 31, 2005. As of June 30, 2005, the outstanding balance on the construction loan was $7,968,000. 

Purchase Obligations

In addition to our contractual obligations described above we have other purchase obligations consisting primarily of contractual commitments for normal operating expenses at our apartment properties, recurring corporate expenditures including employment, consulting and compensation agreements and audit fees, non-recurring corporate expenditures such as improvements at our investment properties and costs associated with developing our land in the U.S. and Puerto Rico. Our U.S. and Puerto Rico land development contracts are subject to increases in cost of materials and labor and other project overruns. Our overall capital requirements will depend upon acquisition opportunities, the level of improvements on existing properties and the cost of future phases of residential and commercial land development.

For the remaining six months in 2005, we will seek additional development loans, construction loans and permanent mortgages for continued development and expansion of St. Charles, a new apartment project in St. Charles, the new office building in Puerto Rico and other potential rental property opportunities. We expect that our financing efforts will be successful but there can be no assurances that we will be able to obtain necessary financing on acceptable terms or at all.  The Company will evaluate and determine on a continuing basis, depending upon market conditions and the outcome of events described as "forward-looking statements," the most efficient use of the Company's capital, including acquisitions and dispositions, purchasing, refinancing, exchanging or retiring certain of the Company's outstanding debt obligations or repurchasing shares of its common stock in privately negotiated transactions, open market transactions or by other direct or indirect means to the extent permitted by law and its existing contractual obligations

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 June 30, 2005 there have been no material changes in the Company's financial market risk since December 31, 2004 as reported in the Company's Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

In connection with the preparation of this Form 10-Q, as of June 30, 2005, an evaluation was performed under the supervision and with the participation of the Company's management, including the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. In performing this evaluation, management reviewed the selection, application and monitoring of our historical accounting policies. Based on that evaluation, the CEO and CFO concluded that these disclosure controls and procedures were effective and are properly designed to ensure that the information required to be disclosed in our reports filed with the SEC is recorded, processed, summarized and reported on a timely basis.

As discussed more fully in our 2004 Annual Report on Form 10-K, we restated certain of our previously issued financial statements to correct our accounting treatment for distributions in excess of basis from our unconsolidated entities, distributions in excess of basis to the minority owners in our consolidated entities and the consolidation of one limited partnership previously recorded under the equity method. The Company further concluded that this control deficiency represented a material weakness in its internal controls over financial reporting, and accordingly, that its disclosure controls and procedures were not effective as of December 31, 2004.

In the second quarter of fiscal 2005, the Company remediated these deficiencies by implementing the formalization of processes, review procedures and documentation standards over the selection and monitoring of appropriate assumptions affecting the accounting treatment for our investments in our real estate entities. As a result of these and other measures we have taken to date, we believe the material weakness described above has been remediated.

There have been no other changes during the Company's fiscal quarter ended June 30, 2005 in the Company's internal controls over financial reporting that have materially affected, or is reasonably likely to materially affect, the Company's internal controls over financing reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See the information under the heading "Legal Matters" in Note 5 to the consolidated financial statements in this Form 10-Q for information regarding legal proceedings, which information is incorporated by reference in this Item 1.

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

ACPT held its 2005 Annual Meeting of Shareholders on June 8, 2005. At the meeting, shareholders elected two individuals to serve as trustees for a term to expire at the Annual Meeting in the year 2008. The results of the voting were as follows:

	Votes For	Votes Withheld
Trustee
Thomas S. Condit	5,044,072	785
T. Michael Scott	5,044,072	785

The terms of Antonio Ginorio, Edwin L. Kelly, Thomas J. Shafer and J. Michael Wilson continued after the meeting and each continue to serve as a trustee.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(A)	Exhibits
10.1	Lease Agreement dated April 15, 2005 between Smallwood Village Associates LP and American Rental Management Company
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chairman and Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chairman and Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer

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: August 11, 2005	By: /s/ J. Michael Wilson
	J. Michael Wilson Chairman and Chief Executive Officer
Dated: August 11, 2005	By: /s/ Cynthia L. Hedrick
	Cynthia L. Hedrick Chief Financial Officer

EX-10.1

Exhibit 10.1

STORE

LEASE

SMALLWOOD VILLAGE ASSOCIATES LP

LANDLORD

and

AMERICAN RENTAL MANAGEMENT COMPANY

(TENANT)

for

SPACE 139

SMALLWOOD VILLAGE CENTER

EXHIBITS
and
ATTACHMENTS

EXHIBIT A Site Plan

2. EXHIBIT B Tenant Fit-Up Specifications 1.

3. EXHIBIT C Common Area Cost

4. EXHIBIT D Rules and Regulations

5. EXHIBIT E Lease Guaranty

6. EXHIBIT F Architectural Covenants

Declaration of Easements, Covenants, Conditions and Restrictions

INDEX

Article Title

1 Demised Premises

2 Ingress and Parking

3 Tenant Pans

4 Lease Term

5 Fixed Minimum Rent

6 Percentage Rent

7 Deposit 8 Gross Sales Report

9 Audit

10 Definition of Gross Sales

11 Taxes and Assessments

12 Laws and Ordinances3

13 Furniture and Fixtures

14 Repairs

15 Alterations

16 Damage

17 Eminent Domain

18 Roof Rights

19 Store Purpose

20 Signs

21 Hours of Lighting

22 Parking and Common Use Areas

23 Utilities: General

24 Utilities: Separate Meter

25 Trash

26 Keep Clean

27 Hold Harmless

28 Property at Tenant's Risk

29 Insurance Risk

30 Landlord Access

'31 Bankruptcy

32 Repossession

33 Reletting

34 Hold-Over

35 Rental Sign

36 Subordination

37 Notices

38 Assigns and Successors

39 Subletting and Assignment

40 Not Partners

41 Promotional Service

42 Continuous Occupancy 43 Maintenance and Operation of Common Areas

44 Cost of Maintenance and Operation of Common Areas

45 Insurance

46 Additional Rent

47 Quiet Enjoyment

48 Transfer of Landlord's Interest

49 No Waiver

50 Partial Invalidity

51 Rules and Regulations

52 Applicable Law

53 Captions and Headings

54 Joint and Several Liability

55 Modification

56 No Discrimination

57 Delay

58 Store Front

59 Estoppel Certificates

60 Outparcel

61 Waiver of Jury Trial

62 No Option

63 Security Deposit

64 Broker's Commission

65 Master Lease/Addenda

66 Landlord's Right to Change or Alter Stores

or Shopping Center

67 Late Charges

68 Subordination

LEASE

THIS LEASE, made this 15th day of April 2005, by and between SMALLWOOD VILLAGE ASSOCIATES LP, a Maryland Limited Partnership, 222 Smallwood Village Center, St. Charles, Maryland 20602, hereinafter designated "Landlord," and AMERICAN RENTAL MANAGEMENT COMPANY hereinafter designated "Tenant".

WITNESSETH:

DEMISED PREMISES. 1. In consideration of all Tenant's undertakings hereinafter set forth, including payment of rent as hereinafter specified. Landlord hereby leases to Tenant the building area located in a shopping center development known as 139 Smallwood Village Center, St. Charles, Maryland containing approximately 1525 square feet, marked Exhibit "A" and made a part hereof (herein called the "demised premises").

INGRESS & PARKING 2. Together with the building herein demised. the Landlord grants to the Tenant a right of ingress and egress and free parking of vehicles of the Tenant's invitees in the parking areas, and including a right for ingress and egress to and from the adjoining public streets, highways and/or service area.

Taken "as is"

FIT-UP REQUIREMENTS 3. The premises are to be constructed in accordance with the attached Tenant fit-up specifications, marked Exhibit "B" and made a part hereof, for which Landlord will provide "as-is" drawings. Any additional Tenant requirements and costs over and above such Tenant fit-up specifications set forth in Exhibit "B" will be the responsibility of and at the expense of the Tenant. If the Landlord agrees to make any additions to or modifications of Exhibit "B" at Tenant's expense, Tenant agrees to pay the Landlord in full prior to construction of the additions or modifications. It is agreed that no later than ten (10) days from date of execution of this Lease, the Tenant will furnish to Landlord its partition, electric, telephone, and all other additions or modifications to Tenant fit-up requirements beyond those set forth on Exhibit "B", in drawings prepared by a certified architect or engineer suitable to obtain a building permit from Charles County. In the event T enant fails to comply with the aforesaid by the date specified, then Tenant shall pay to Landlord, in addition to the rent commencing as of the Rent Commencement Date, daily rent for the number of days' delay resulting from Tenant's failure to comply with the provisions of this Article 3, computed at the rate of one-thirtieth (1/30th) of the fixed monthly rental per day. The Landlord shall approve or disapprove the drawings of Tenant's additions or modifications to the fit-up requirements in writing within five (5) days of Tenant's submission thereof. Within five (5) days of Landlord's approval of the drawings, Tenant shall apply for a building permit and diligently pursue obtaining the building permit from the appropriate authorities of Charles County. In the event Tenant fails for any reason to obtain a building permit within thirty-five (35) days of the date of execution of this Lease, the Landlord shall complete the Demised Premises in accordance with Exhibit "B" and tender to the Tenant for occupancy.< /P>

LEASE TERM 4a. The term of this Lease shall commence on the date hereof. and shall end on the date here of, and shall end April 15, 2007 after the "Rent Commencement Date". The "Rent Commencement Date" shall be the 15^TH of APRIL 2005, for a period extending TWO (2) years from the first day of the calendar month following the Rent Commencement Date.

FIXED MINIMUM RENT 5. Commencing with the Rent Commencement Date, Tenant shall pay as fixed minimum annual rental for the premises the sum of SEVEN THOUSAND SIX HUNDRED TWENTY NINE DOLLARS ($7629.00) per annum, payable in equal monthly installments SIX HUNDRED THIRTY FIVE DOLLARS AND 42/100 ($635.42) each. All such monthly installments of the fixed minimum rental shall be payable to Landlord, in addition, without previous notice or demand therefor, and without diminution, counterclaim, deduction or set-off whatsoever, with the first monthly installment to be due and payable upon execution hereof, and each subsequent monthly installment to be due and payable on the first day of each and every month following the Rent Commencement Date during the term hereof. If the Rent Commencement Date is a date other than the first day of a month, rent for the period commencing with and including the Rent Commencement Date until the first day of the following month s hall be prorated at the rate of one-thirtieth (1/30th) of the fixed monthly rental.

PERCENTAGE RENT 6(a). Intentionally left blank.

6(b). Intentionally left blank.

6(c). Intentionally left blank.

6(d). Intentionally left blank.

6(e). At the expiration of said lease year, the Fixed Minimum Annual Rental herein provided for shall be adjusted by the Consumer Price Index as defined in Article 6(f). Any such adjustment shall be accomplished by multiplying the Fixed Minimum Annual Rental then in effect by a fraction, the numerator of which shall be the Consumer Price Index as of the most recent date prior to the date of such adjustment, and the denominator of which shall be the Consumer Price Index as of the date nearest the beginning of such lease year (but in no event shall the Fixed Minimum Annual Rent be reduced as a result of any such adjustment below the Fixed Minimum Annual Rent specified in Article 5 hereof), and the increased Fixed Minimum Annual Rental thereby established shall continue in effect as the Fixed Minimum Annual Rental until again adjusted as herein provided. The term "sufficient percentage rental" as used herein is defined as such Percentage Rent for any lease year, whether or not actually paid or payable, w hich, when added to the Fixed Minimum Annual Rental set forth in Article 5 would equal or exceed such Fixed Minimum Annual Rental if adjusted to the Consumer Price Index (applied as aforesaid) at the end of such lease year to reflect changes therein since the beginning of such lease year. For example, if the Consumer Price Index increases by 4% in the first lease year, then "sufficient percentage rental" for that lease year would be an amount equal to or in excess of 4% of the Fixed Minimum Annual Rental. If the Fixed Minimum Annual Rental set forth in Article 5, or otherwise in this lease shall provide for different fixed sums to be paid during certain lease years, or portions thereof (other than as may result from the application of this Section 6(e) hereof), then in each and every instance that the Fixed Minimum Annual Rental shall be adjusted pursuant to this Section 6(e), all other fixed sums payable as Fixed Minimum Annual Rental at some future time thereafter shall likewise be adjusted in the same pr oportion.

6(f). For all purposes of the Lease Agreement, the "Consumer Price Index" is hereby defined to be the index for the Washington, D.C.-Maryland-Virginia area, now known as the United States Bureau of Labor Statistics, Consumer Price Index, for Urban Wage Earners and Clerical Workers (revised) - U.S. City Average, and selected areas

(1982/84 =100) all items; and if the Consumer Price Index shall be discontinued or altered, then any successor Consumer Price Index of the United States Bureau of Labor Statistics or successor agency thereto, for the Washington, D.C. Metropolitan area, shall be used, and if there is no such successor Consumer Price Index, Landlord and Tenant shall attempt to agree upon a substitute index or formula, and if said parties are not able to agree upon such substitute, the matter shall be referred to binding arbitration in accordance with the rules of the American Arbitration Association in the State of Maryland then prevailing.

6(g). No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of rent or other charges herein stipulated shall be deemed to be other than on account of the earliest stipulated rent or other charges, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check for payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy in this lease provided.

6(h). The Tenant also agrees to pay and the Landlord agrees to accept as additional rental for each lease year of the term the Tenant's proportionate share of any real estate or other taxes as defined in Article 11 and the Tenant's proportionate share of the cost of maintenance and operation of common areas as defined in Article 44.

DEPOSIT 7. Landlord hereby acknowledges receipt from Tenant of the sum of ________________ _____________________ which shall constitute prepayment of the first months' rental. This will be paid when due as normal monthly rent.

GROSS SALES REPORT 8. Intentionally left blank.

AUDIT 9. Intentionally left blank.

DEFINITION OF GROSS 10. Intentionally left blank.

SALES

TAXES AND ASSESSMENTS 11(a). For the purposes of this paragraph, the term "Real Estate Taxes" means all taxes, rate and assessments, general and special, levied or imposed with respect to the land, buildings and improvements located or built within the Shopping Center, including all taxes, rates and assessments, general and special levied or imposed for school, pubic betterment, general or local improvements and operations and taxes imposed in connection with any special taxing district. If the system of Real Estate Taxation shall be altered or varied and any new tax or levy shall be levied or imposed on said land, buildings and improvements, and/or Landlord in substitution for Real Estate Taxes presently levied or imposed on immovable in the jurisdiction where the demised premises is located, then any such new tax or levy shall be included within the term "Real Estate Taxes." Should any governmental taxing authority acting under any regulation, levy, assess, or impose a tax, excise a nd/or assessment, however described (other than an income or franchise tax) upon, against, on account of, or measured by, in whole or in part, the rent expressly reserved hereunder, or upon the rent expressly reserved under any other leases or leasehold interest in the Shopping Center, as a substitute (in whole or in part) or in addition to any existing Real Estate Taxes on land and buildings and otherwise, such tax or excise on rents shall be included within the term "Real Estate Taxes."

11(b). The term "Base Year" means the 2005-2006 real estate tax year. The term "Real Estate Tax Year" means each successive twelve (12) month period following and corresponding to the Base Year, irrespective of the period or periods which may from time-to-time in the future be established by competent authority for the purposes of levying or imposing Real Estate Taxes.

11(c). Each Real Estate Tax Year after the Base Year, Tenant shall pay to Landlord within ten (10) days after demand in writing thereof (accompanied by a statement showing the computation of same) as additional rent and in addition to Fixed Minimum Rental, Percentage Rent and all other payments provided for herein, Tenant's Percentage Share (hereafter defined) of the amount by which (i) the Real Estate Taxes for such tax year exceed (ii) the Real Estate Taxes for the Base Year. The term "Tenant's Percentage Share," for all purposes of this Lease, is hereby defined to be that percentage representing the proportion that the total gross rentable square feet contained within the leased premises bears to the total gross rentable square feet contained within the Shopping Center.

11(d). Reasonable expenses, consisting of attorneys' fees, expert witness fees and similar costs, incurred by Landlord in obtaining or attempting to obtain a reduction of any Real Estate Taxes shall be added to and included in the amount of any such Real Estate Taxes. Real Estate Taxes which are being contested by Landlord shall nevertheless be included for purposes of the computation of the liability of Tenant under the above paragraph, provided, however, that in the event that Tenant shall have paid any amount of increased rent pursuant to this Article 11 and the Landlord shall thereafter receive a refund of any portion of any Real Estate Taxes on which such payment shall have been based, Landlord shall pay to Tenant the appropriate portion of such refund. Landlord shall have no obligation to contest, object or litigate the levying or imposition of any Real Estate Taxes and may settle, compromise, consent to, waive or otherwise determine in its discretion to abandon any contest with respect to the a mount of any Real Estate Taxes without consent or approval of the Tenant.

Nothing contained in this section shall be construed at any time to reduce the monthly installments of rent payable hereunder below the amount specified in Articles 5 and 6 of this Lease

If the termination date of this Lease shall not coincide with the end of a Real Estate Tax fiscal year, then in computing the amount payable under this Article 11 for the period between the commencement of the applicable Real Estate Tax fiscal year in question and the termination date of this Lease, Tenant's Percentage Share of the Real Estate Taxes for the applicable Real Estate Tax fiscal year shall be equitably apportioned (on a per diem basis) so that Tenant shall pay only such portion of such Real Estate Taxes as is attributable to the portion of such Real Estate Tax fiscal year occurring during the term of this Lease. Tenant's obligation to pay Real Estate Taxes under this Article 11 for the final period of the Lease shall survive the expiration of the term of this Lease.

A tax bill or true copy thereof, together with any explanatory statement of the area or property covered thereby submitted by Landlord to Tenant shall be conclusive evidence of the amount of taxes assessed or levied, as well as of the items taxes. If any real property tax or assessment levied against the land, building or improvements covered hereby or the rents reserved therefrom, shall be evidenced by improvement bonds or other bonds, or in any other form, which may be paid in annual installments, only the amount paid or payable in any real estate tax fiscal year shall be included as Real Estate Taxes for that real estate tax year for the purposes of this Article 11.

LAWS AND ORDINANCES 12. At the time when Landlord tenders possession, in accordance with its obligations under this Lease, to Tenant, Landlord shall certify in writing that said premises and all of the work Landlord has

performed therein is in accordance with all state, county, and municipal building and safety requirements. From that point forward, Tenant will, at its own costs, promptly comply with and carry out all orders, requirements or conditions now or hereafter imposed upon it by the ordinances, laws and/or regulations of the municipality, county and/or state in which the premises are located, whether required of the Landlord or otherwise, in the conduct of Tenant's business, except that Landlord shall comply with any orders affecting structural walls and columns unless due to Tenant's particular business or use of the premises. Tenant will indemnify and save Landlord harmless from all penalties, claims, and demands resulting from Tenant's failure or negligence in this respect.

FURNITURE AND FIXTURES 13. Tenant shall have the privilege of installing, subject to the written approval of the Landlord which shall not be unreasonably withheld, any furniture, fixtures and machinery necessary to the conduct of its business and the same shall remain the property of the Tenant, provided they be removed by the Tenant before the expiration of its tenancy, and further provided that in the event any damage is done to said premises in the removal of said furniture, fixtures or machinery, Tenant will promptly reimburse Landlord for the cost of such repairs as are necessary to restore said premises to their original condition. In the event of failure of Tenant to remove said furniture, fixtures and machinery from said premises before expiration of this Lease, it is agreed that Tenant is abandoning said furniture, fixtures and machinery and same shall become the property of Landlord, who shall have the right to use, remove or dispose of said furniture, fixtures and machinery at the Tenant's expense.

REPAIRS 14. The Tenant agrees to maintain the premises in good repair during the term of this Lease, at his own expense, including the floors, walls, ceiling, inside plumbing, heating, ventilating, air conditioning and other equipment and fixtures installed by the Landlord. Landlord agrees within a reasonable time after receipt of written notice from the Tenant to make all repairs necessary to the structural portion and roof, including gutters and downspouts of the demised premises. The Tenant also agrees, at his own expense, to replace all plate glass in the demised premises which shall be damaged or broken from any cause, except where due to building settlement. The Tenant also agrees at his own cost and expense to maintain exterior sign face, sign box and sign lighting. The Tenant also agrees at his own cost and expense to keep in effect during the term of this Lease and any extension or renewal thereof a full parts and labor maintenance contract on the heating, ventilating and air co nditioning equipment, servicing the demised premises with a contractor licensed in this area, approved by the Landlord, which approval shall not be unreasonably withheld. The Tenant agrees to provide the Landlord with a copy of this contract upon request.

ALTERATIONS 15. Tenant shall not do any construction work or make any alterations, modifications or changes to any part of the demised premises either exterior or interior, without Landlord's written consent which shall not be unreasonably withheld. Landlord may condition its consent upon Tenant's delivery to Landlord of a policy or policies of workmen's compensation, liability and property damage insurance, naming Landlord as additional insured, in limits and with companies acceptable to the Landlord. In the event of any such approved work or changes, Tenant shall have all work done at its own expense. Request for such consent shall be accompanied by plans stating in detail precisely what is to be done. Tenant and Tenant's contractors (who shall be licensed) shall comply with the building codes, regulations and laws now or hereafter to be made or enforced in the municipality, county and/or state in which said premises are located and which pertain to such work. Any additions, improvemen ts, alterations and/or installations made by Tenant (except only movable store and office furniture and fixtures) shall become and remain a part of the building and be and remain Landlord's property upon the termination of Tenant's occupancy of said premises; provided, however, that if Landlord gives written notice to Tenant at the expiration or prior termination of this Lease to such effect, it may require Tenant to restore said premises to their original condition. Tenant shall save Landlord harmless from and against all expenses, liens, claims or damages to either property or person which may or might arise by reason of the making of any such additions, improvements, alterations and/or installations.

DAMAGE 16. If the demised premises shall be partially or totally damaged or destroyed by any risk covered by Landlord's insurance as provided for in Article 45(a) of this Lease, then Landlord shall diligently and as soon as practicably after such damage occurs (taking into account the time necessary to effectuate a satisfactory settlement with any insurance company, and reasonable delay on account of "labor troubles" or any other cause beyond Landlord's control) repair or rebuild the demised premises, provided, however, that in no event shall Landlord be obligated to expend in such repair or rebuilding any sums in

excess of the amount of insurance proceeds paid to Landlord in connection therewith. The foregoing notwithstanding, in no event shall Landlord be required to repair, restore or rebuild any portions of the demised premises constituting a part of Tenant's leasehold improvements or other tenant work, trade fixtures, equipment and personal property. If the demised premises are rendered wholly or partially untenantable by such damage or destruction, and such damage and destruction was without the fault or neglect of the Tenant, his servants, employees, agents, visitors or licensees, then the rent payable by Tenant under this Lease during the period in which the demised premises are so untenantable shall be equitably abated. Except as set forth in this Article, Landlord shall not be liable for any damages (including without limitation, business interruption) that may be suffered by Tenant by reason of any casualty to the demised premises and/or Landlord's repairing or rebuilding thereof and/or the deprivation o f Tenant's use and possession of the demised premises. All of the foregoing provisions of this Article 16 notwithstanding, if the demised premises are rendered wholly untenantable by fire or other cause, and the Landlord shall decide not to rebuild the same, or if the Shopping Center be so damaged that the Landlord shall decide to demolish it or not to rebuild it, then, or in any of such events, the Landlord may, at its option, cancel and terminate this Lease by giving to the Tenant, within sixty (60) days from the date of such damage, notice in writing of its intention to cancel this Lease, whereupon the term of this Lease shall cease and determine upon the tenth day after such notice is given, and the Tenant shall vacate the demised premises and surrender the same to the Landlord.

EMINENT DOMAIN 17. If the Shopping Center or any part thereof shall be taken by any governmental or quasi-governmental authority pursuant to the power of eminent domain or deed in lieu thereof, Tenant agrees to make no claim for compensation in the proceedings and hereby assigns to Landlord any rights which Tenant may have to any portion of any award made as a result of such taking, and this Lease shall terminate as to the portion of the premises taken by the condemning authority and rental shall be adjusted to such date. The foregoing notwithstanding, Tenant shall be entitled to claim, prove and receive in the condemnation proceedings such awards as may be allowed for relocation expenses and for fixtures and other equipment installed by it which shall not, under the terms of this Lease, be or become the property of Landlord at the termination hereof, but only if such awards shall be made by the condemnation court in addition to and stated separately from the award made by it for the lan d and the building or part thereof so taken.

If the nature, location or extent of any proposed condemnation affecting the Shopping Center is such that the Landlord elects in good faith to demolish all or substantially all of the buildings in the Shopping Center, then the Landlord may terminate this Lease by giving at least sixty (60) days' written notice of termination to the Tenant at any time after such condemnation and this Lease shall terminate on the date specified in such notice.

ROOF RIGHTS 18. Landlord shall have the exclusive right to use all or any portion of the roof of the leased premises for any purposes, and shall have the right to erect additional stories or other structures over all or any part of said premises.

STORE PURPOSE 19(a). The demised premises shall be used only for the purpose of STORAGE. Tenant shall not use all or any portion of the demised premises for any other purpose.

19(b). Tenant affirmatively agrees and represents that it understands and accepts the following as terms of this Lease.

1. The use of the demised premises solely for the above-mentioned purpose was critical to Landlord's decision to enter into this Lease. Landlord, in reaching its decision concerning the use of the demised premises, considered and was influenced by the tenant mix in the Shopping Center and the socio-economic status of the community in which the demised premises are located. Such decision by Landlord would not have been made if Tenant intended to use any portion of the demised premises for any purpose other than that specified herein.

2. Landlord is acutely aware of its standing and reputation in the community, and any use of the demised premises reflects on that standing and reputation. For this reason also, use of the demised premises was critical to Landlord's decision to enter into this Lease and to Landlord's continued good standing and reputation in the community.

3. No deviation whatsoever from the use specified herein shall be allowed for any portion of the demised premises without the prior written consent of Landlord, which consent may be withheld for any reason, or without reason, in the sole, absolute, and arbitrary discretion of Landlord.

4. The terms of this Article 19 including, but not limited to, any questions concerning the use for which all or any portion of the demised premises are being employed, shall be strictly enforced and any questions arising hereunder shall be resolved by Landlord in its sole and absolute discretion

19(c). In addition to the provisions of Article 19(a) and (b) above, and in no way in limitation thereof, Tenant agrees not to commit waste on the demised premises and not to use the demised premises for any unlawful purpose, or in violation of any certificate of occupancy, nor suffer any dangerous article to be brought on the demised premises unless safeguarded as required by law. Moreover, no nuisances, public or private, shall be allowed on the demised premises nor shall any use be allowed which is a source of annoyance or embarrassment to Landlord or the other Tenants of the Shopping Center, or which is deemed by Landlord as not in keeping with the character of the neighborhood, nor shall the demised premises be used for any unlawful, immoral or improper purpose. Without limiting the generality of the foregoing, in no event shall all or any portion of the demised premises be used as a so-called "adult bookstore" selling obscene or pornographic books or magazines, or for the sale of drug paraphern alia or related items, nor operate in the Demised Premises or in any part of the Shopping Center any coin or token operated vending machines or similar device for sale of any merchandise service (including pay lockers, pay toilets, scales. amusement devices and machines for the sale of beverages, foods, candy or other commodities) except that one cigarette vending machine may be installed in the Demised Premises unless otherwise approved by the Landlord in writing.

19(d) In addition to, and not in limitation of, the foregoing subparagraphs of this Article 19 comply with and observe all restrictive covenants of record (as outlined in Exhibit "E" attached hereto and hereby made a part hereof) which affect or are applicable to the Shopping Center and/or the Demised Premises and/or the common areas, provided the same do not prohibit Tenant's permitted use of the Demised Premises specified in Section 19 hereof.

SIGNS 20. Tenant shall provide one (two in specified locations) signboard, sign or signs of such size, design and character, and in such location(s) only, as Landlord shall approve in writing in its sole discretion. Tenant hereby agrees that such sign shall, unless otherwise expressly permitted, also comply in all respects with the provisions and requirements of the sign regulations hereinafter adopted from time to time by Landlord. Tenant shall obtain and pay for all permits and license's required in connection with such sign and shall be responsible for the proper installation thereof. It is further understood that all signs placed by Tenant on the demised premises shall be erected and maintained in accordance with the County, State and/or other ordinances in force or effect at the time, and at the sole cost and expense of Tenant. Tenant agrees to maintain all signs in good condition and repair at all times to the reasonable satisfaction of Landlord. Except as expressly permitted by Landlord, no other signs, lights, lettering or other forms of inscription of advertising of display devices shall be displayed on the exterior of the demised premises or on or in immediate proximity to the inner or outer face of the show windows, entrances, doors or transoms nor shall the same be displayed in any other location within the demised premises from which said signs, lights, or other forms of inscription or advertising or display devices may readily be seen from outside the demised premises without prior written approval of Landlord as to size, material, design and neatness thereof. It is further agreed that Tenant shall not use sidewalks, parking areas, and alleys for displays, wares, or signs of any kind. The Landlord shall determine during what hours the Shopping Center and any signs shall be lit. Any tenant directory provided by Landlord shall be at the sole cost and expense of Landlord.

HOURS OF LIGHTING 21. If requested by Landlord, Tenant shall keep the display windows in the demised premises well-lighted from dusk until 10:00 p.m., or such other reasonable time as determined by Landlord, during each and every day.

PARKING AND COMMON

USE AREAS 22. All automobile parking areas, driveways, and other facilities furnished by Landlord in or near the Shopping Center, including employee parking areas, the truckway or truckways, loading docks, package pick-up stations, pedestrian sidewalks and ramps, landscaped areas, exterior stairways, and other areas and improvements provided by Landlord for the general use, in common, of Tenants, their officers, agents, employees, and customers, shall at all times be subject to the exclusive control and management of the Landlord, and Landlord shall have the right from time to time to establish, modify and enforce reasonable rules and regulations with respect to all facilities and areas, the right to construct, maintain and operate lighting facilities on all said areas and improvements, the right to change the area, level, location and arrangement of parking areas and other facilities hereinabove referred to, and the right to restrict parking by tenants, their officers, agents and employees to employee parking areas. Landlord shall not, however, have any duty to police the traffic in the parking areas. However, if a parking lot attendant be required as determined by the Landlord or by ordinance, regulation or law, Landlord shall provide same. and the cost of such attendant shall be considered part of the cost of maintenance and operation of common areas as provided for in Article 44. The Landlord is obligated to hard surface, stripe and light the parking areas.

Tenant further agrees that its employees will not park their cars or other vehicles on the streets adjacent to the leased premises, or in the space provided for public use, but will use such space as Landlord shall designate from time to time as parking space for the use of Tenants and employees. Landlord may designate spaces provided for public parking for employee or Tenant parking at specific times. At Landlord's request, Tenant shall supply Landlord with the names of all employees assigned to the demised premises, along with the license number of their respective automobiles or vehicles. In addition, Tenant agrees to supply Landlord with the license numbers of all vehicles owned or operated by Tenant.

The parties agree that damages will accrue from the breach of the covenant relating to parking, and that the amount of such damage will be difficult to establish, and that by reason thereof liquidated damages in the amount of $10.00 per day, per vehicle, parked in violation of said covenant may be recovered by Landlord from Tenant, following written notification to Tenant naming the vehicles in violation.

Tenant agrees to prohibit the loading or unloading of delivery vans, trucks, carts, or vehicles of any sort by, through, into, or from the front door or doors or the demised premises after 10:00 a.m., during each seven (7) days of the week; except that retail customers may load or unload into or from the front door or doors of the demised premises purchases made by said retail customers.

The parties agree that damages will accrue from the breach of the covenant relating to loading or unloading of deliveries and that the amount of such damage will be difficult to establish; that by reason thereof liquidated damages in the amount $10.00 per day, per vehicle, loaded or unloaded in violation of said covenant may be recovered by Landlord from Tenant, following written notification to Tenant naming the supplier violating this covenant.

UTILITIES: GENERAL 23. Tenant shall, at its sole cost and expense, pay all charges when due for water, sewer, gas, electricity, heat, air-conditioning and any other utility or energy charges and taxes incurred by Tenant in the use of the demised premises.

UTILITIES:

SEPARATE METER 24(a). Tenant shall pay to Landlord, within 10 days after rendition of a bill therefor by Landlord of the Charles County Department of Public Works, or successor, in addition to all other charges provided herein and as additional rent, a sum equal to the amount (or Tenant's pro rata share, as reasonably determined by Landlord) of any water or sewer rent or charge, or any other tax, rent, fee, levy or charge, imposed in connection with Tenant's use, consumption of supply of water, or Tenant's water system, or Tenant's sewerage connection or system.

24(b). If Landlord, in its sole discretion, determines at the inception of or during the term of this Lease that Tenant is a heavy water user, then Landlord will install at Tenant's expense, a submeter for the demised premises. Tenant shall keep such meter and any installation equipment in good order and repair; repay Landlord on receipt of a bill for its' installation and Tenant shall pay for all water consumed as shown on the meter together with the concomitant sewer charge within ten (10) days after rendition of a bill therefor.

24(c). The total charges for all Tenants in the Shopping Center coming within the purview of Article 24(b) shall be deducted from the charges pertaining to Tenants referred to in Article 24(a).

25. Tenant will keep the premises in a clean, orderly and sanitary condition and free of insects, rodents, vermin, other pests, trash and dirt accumulations and shall furnish adequate and proper receptacles for trash and garbage in location designated by the Landlord. Landlord shall maintain and keep in good repair the parking lot, pedestrian walkways and driveways, keeping them clean, free of snow and ice, orderly, properly lighted and marked. Landlord will provide garbage and trash collection service for the demised premises. Tenant shall cooperate with Landlord in the scheduling of such collection service and Tenant shall not use any other garbage or trash collection service at the premises. The cost of any such service shall be included in the Landlord's common area costs or shall be billed monthly to Tenant, based on the ratio of the floor area of the demised premises to the aggregate floor area of all tenants to whom Landlord furnishes suc h service. Landlord may at any time change such collection methods, and will give reasonable notice to Tenant.

KEEP CLEAN 26. The Tenant agrees to keep the sidewalks abutting the demised premises in a clean and orderly fashion, and agrees not to use any space, other than within the walls of the demised premises, for the sale or storage of merchandise or for service of any kind.

HOLD HARMLESS 27. Tenant agrees that it will indemnify and save the Landlord harmless from any and all liabilities, damages, causes of action, suits, claims, judgments, costs and expenses of any kind (including attorneys' fees) (i) relating to or arising from or in connection with the possession, use, occupation, management, repair, maintenance or control of the demised premises, or any portion thereof, or (ii) arising from or in connection with any act or omission of Tenant or Tenant's agents, employees or invitees, or (iii) resulting from any default, violation or nonperformance of this Lease by Tenant, or (iv) resulting in injury to person or property or loss of life sustained in or about the demised premises. To assure such indemnity, Tenant shall carry and keep in full force and effect at all times during the term of this Lease for the protection of the Landlord and Tenant herein, public liability insurance with limits of at least One Million Dollars ($1,000,000.00) for each accide nt and Five Hundred Thousand Dollars ($500,000.00) for each separate injury, and property damage insurance In the amount of Fifty Thousand Dollars ($50,000,00), with an approved insurance company and to deliver to Landlord a copy of said policy or a certificate showing the same to be in force and effect. In the event Tenant shall fail to maintain such policy of insurance then Landlord may, after three (3) days' written notice to Tenant obtain such policy and pay the premium thereon and the amount so paid shall be added to the next installment of rent.

PROPERTY ATTENANT'S RISK 28. It is understood and agreed that all personal property, goods, wares and merchandise in said premises shall be and remain at the Tenant's sole risk and the Landlord shall not be liable for any damage to or loss of such personal property, goods and merchandise arising from the bursting, overflowing or leaking of the roof or of water, sewer, or steam pipes, or from wires or fixtures or from any other cause whatsoever, unless said damages are caused through the negligence of the Landlord, its servants, employees and contractors.

INSURANCE RISK 29. The Tenant shall not keep gasoline or other inflammable material or any other explosive in the demised premises or use the demised premises in any manner which will increase the rate of fire insurance on the Shopping Center or any part thereof beyond the ordinary risk established for the type of business hereinabove provided to be conducted therein, and any such increase in the insurance rate shall be borne by the Tenant. Tenant shall not do any act or thing upon the premises or in or about the Shopping Center or any part thereof which may make void or voidable any insurance on the demised premises or Shopping Center, and the Tenant expressly agrees to conform to all rules and regulations from time to time established by the Maryland Insurance Rating Bureau.

LANDLORD ACCESS 30. The Landlord and its Agent shall have access to the demised premises at any and all reasonable times for the purpose of protecting said premises against fire, for the prevention of damage and injury to the leased premises, or for the purpose of inspecting the same.

BANKRUPTCY 31(a). In the event the Tenant shall be adjudicated bankrupt or adjudged to be insolvent, or if Tenant shall file or acquiesce in a petition in any court in any bankruptcy, reorganization, composition, extension, arrangement or insolvency proceedings, or if Tenant shall make an assignment or other conveyance in trust for the benefit of its creditors, or if any execution or attachment shall be issued against Tenant or Tenant's property whereupon the demised premises shall be taken or occupied or attempted to be taken or occupied by someone other than Tenant and such execution or attachment shall not be dismissed, vacated, discharged or bonded within sixty (60) days' after issuance of same, or if a receiver of Trustee shall be appointed for the property and assets of the Tenant and such receivership be not discharged within twenty (20) days from the date of such appointment, then upon the happening of any of said events, the term hereby demised shall, at the option of the Landlo rd, cease and determine, it being expressly agreed that the covenant hereinafter contained against the assignment of this Lease shall cover the case of the assignment of this Lease by operation of law as well as the assignment of this Lease by a voluntary act of the Tenant.

31(b). If this Lease shall be so canceled and terminated, neither Tenant nor any person claiming through or under Tenant by virtue of any statute or order of any court shall be entitled to remain in possession of the demised premises but shall forthwith quit and surrender the demised premises. In no event, without the written approval of Landlord which approval may be granted or withheld at its sole discretion, shall this Lease be or be considered an asset of Tenant's estate in bankruptcy, or insolvency, or receiver or trustee (hereafter referred to as a "Trustee") with respect thereto.

31(c). To the extent that Landlord's right to cancel this Lease in accordance with the provisions of subsections (a) and (b) of this Article 31 is invalid or enforceable under the Bankruptcy Reform Act of 1978 (the "Act") or any other statute or rule of law, then the following provisions shall apply, to the extent valid and enforceable.

31(c)1. If there has been a Default by Tenant under any provision of this Lease (other than this Article 31), the Trustee may not assume this Lease, unless, at the time of assumption of this Lease, the Trustee:

31(c)1A cures, or provides adequate assurance (to Landlord's reasonable satisfaction) that the Trustee will promptly cure such default; and

31(c)1B provides adequate assurance (to Landlord's reasonable satisfaction) of future performance under the Lease, which shall include, without limitation, adequate assurance:

31(c)1Bi of the source of rent and other consideration due under such Lease;

31(c)1Bii that the Percentage Rent will not decline substantially;

31(c)1Biii that assumption or assignment of such Lease will not breach substantially any provision, such as a radius, location, use, or exclusivity provision, In any other lease, financing agreement, or master agreement relating to the Shopping Center; and

31(c)1Bvi that assumption or assignment of this Lease will not disrupt substantially any tenant mix or balance in the Shopping Center.

31 (c)2 If there has been a default by Tenant, the Trustee may not require the Landlord to provide services or supplies incidental to this Lease before assumption of this Lease unless the Landlord is compensated under the terms of this Lease for any services and supplies provided under this Lease before assumption of this Lease.

31(d) If this Lease is terminated under the provisions of this Article 31, or by reason of rejection by the Trustee, Landlord shall be entitled to the recovery of damages, and such other remedies, as are provided for in Article 33. The foregoing sentence shall not, however, limit or prejudice the right of Landlord to petition for and obtain as liquidated damages in any bankruptcy, insolvency, receivership, reorganization, or arrangement proceeding an amount equal to the maximum allowed by the Act or any other statute or rule of law governing such proceedings and in effect at the time when such damages are to be proved, whether or not such amount be greater, equal to or less than the amount of the excess referred to in the preceding sentence.

REPOSSESSION 32. This Lease is subject to the limitation that if at any time either of the following events (herein called a "Default") shall occur:

(i) if Tenant shall fail to pay any installment of rent or any other charge required to be paid by Tenant hereunder, when the same shall become due and payable (it being specifically understood and agreed that the term rent includes the minimum rental, the Percentage Rent, the share of real estate or other taxes and the share of cost of maintenance and operation of common areas, as referred to in this Lease or any other consideration under the Lease that is identified as rent in this Lease), and such failure shall continue for five (5) days; or

(ii) if Tenant shall fail to perform or observe any other term, provision, covenant, condition or requirement of this Lease on the part of Tenant to be performed or observed, and such failure shall continue for ten (10) days after written notice from Landlord;

then upon the happening of either of the aforementioned defaults, this Lease shall, at Landlord's option, cease and determine and shall operate as a Notice to Quit, any written Notice to Quit being hereby expressly waived. Landlord may proceed to recover possession of said premises by virtue of any legal process as may at the time be in operation and force in like cases relative to proceedings between Landlord and Tenant, and Tenant shall pay for any court costs relative to such proceedings and a reasonable attorneys' fee, or Landlord may at its option re-enter and re-rent the demised premises for the account of the Tenant, and in such event, Tenant shall remain liable to Landlord for any and all deficiencies in the rent under this Lease.

RELETTING 33. Should Landlord elect to re-enter, as herein provided, or should it take possession pursuant to legal proceedings or pursuant to any notice provided by law, it may either terminate this Lease or it may from time to time without terminating this Lease, make such reasonable alterations and reasonable repairs as may be necessary in order to relet the premises, and relet said premises or any part thereof for such term or terms (which may be for a term of less than as extending beyond the term of this Lease) and at such rental or rentals and upon other terms and conditions as Landlord in its discretion may deem advisable; upon each such reletting all rentals received by the Landlord from such reletting shall be applied first, to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, including brokerage fees and attorneys' fees and of costs of such reasonable alterations and reasona ble repairs; third, to the payment of rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. If such rentals received from such reletting during any month be less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No such re-entry or taking possession of said premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for any such previous breach. Should Landlord at any time terminate this Lease for any breach, in addition to any other remedies it may have, it may recover from Tenant damages i t may incur by reason of such breach, including any unpaid rent (or other amounts due under this Lease) which is due and owing at the time of termination, repairing and redecorating the premises to a

condition sufficient for reletting same. In addition, in the event of termination by Landlord as aforesaid, if Landlord at its sole option so elects, Tenant shall pay to Landlord, on demand, as liquidated, agreed final damages, the following:

1. The difference between: (i) the rent and all other charges which would have been payable from the date of such demand to the date when this Lease would have expired if it had not been terminated as aforesaid, and (ii) the fair rental value of the demised premises for the same period, with said difference being discounted at the rate of six percent (6%) per annum to present worth, and

2. commissions, advertising, cost of repairs and other expenses incidental to the reletting of the demised premises

For purposes of the foregoing sentence, the term rent shall include fixed minimum rental, Percentage Rent, additional rent, and all other charges and pass-through provided herein. For the purpose of computing Percentage Rent after a Default, the monthly percentage rent shall be deemed to be equal to the average monthly Percentage Rent paid hereunder for the twenty-four (24) months during the term preceding such termination the entire preceding portion of the term if less than twenty-four months).

HOLDOVER 34. If the Tenant shall not immediately surrender said premises on the day after the end of the term hereby created, then the Tenant shall, by virtue of this agreement, become Tenant by the month at twice the rental agreed by the said Tenant to be paid as aforesaid, commencing said monthly tenancy with the first day next after the end of the term above demised; and said Tenant as monthly Tenant, shall be subject to all of the conditions and covenants of this Lease as though the same had originally been a monthly tenant, and the said Tenant shall give to the Landlord at least thirty (30) days' written notice to quit said premises, except in the event of non-payment of minimum rent in advance or of Percentage Rent when due or of the other additional rents, as provided for in Article 6 hereof, when due, or of the breach of any other covenant by the said Tenant, in which event the said Tenant shall not be entitled to any notice to quit, the usual thirty (30) days' notice to quit bein g expressly waived; provided, however, that in the event that the Tenant shall hold over after the expiration of the term hereby created, and if the said Landlord shall desire to regain possession of said premises promptly at the expiration of the term aforesaid, then at any time prior to the acceptance of the minimum rent by the Landlord from the Tenant, as monthly tenant hereunder, the Landlord, at its election or option, may re-enter and take possession of said premises forthwith, without process, or by any legal action or process in force in the State of Maryland.

RENTAL SIGN 35. The Tenant agrees to give Landlord permission to place a "For Rent" sign in the window sixty (60) days before termination of the lease term.

SUBORDINATION 36. Paragraph 36 of the Lease is hereby amended by deleting the existing text in it's entirety and inserting in lieu of the following: Paragraph 68.

NOTICES 37. All notices, demands. requests, approval, consents or other instruments required or desired to be given hereunder by either party to the other shall be given by certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

If to Landlord. If to Tenant:

Smallwood Village Associates American Rental Management Company

222 Smallwood Village Center 222 Smallwood Village Center

St Charles, Maryland 20602 Waldorf MD 20602

ASSIGNS AND SUCCESSORS 38. Feminine or neuter pronouns shall be substituted for those of the masculine form, and the plural may be substituted for the singular number, in any place or places herein in which the context may require such substitution or substitutions; and the covenants and agreements herein contained shall, wherever appropriate, be binding upon the heirs, administrators, executors, personal representatives, successors and assigns of the parties hereto.

SUBLETTING

AND ASSIGNMENT 39. Tenant will not sublet demised premises or any part thereof, or transfer possession or occupancy thereof to any person (including but not by way of limitation, concessionaires or licensees of Tenant) firm or corporation or transfer, assign mortgage or encumber this Lease without the prior written consent of Landlord in each instance, nor shall any subletting or assignment hereof be effected by merger, liquidation or otherwise by operation of law or otherwise than by the prior written consent of the Landlord. Any attempted transfer, assignment, subletting, license or concession agreement or hypothecation shall be void and confer no rights upon any third party. If Landlord shall refuse to consent to any request of Tenant for the proposed assignment, sale, or other transfer of Tenant's interest in and to this Lease and/or the demised premises, Landlord may, if it so elects, but only with the consent of Tenant, terminate this Lease as of a mutually agreeable termination date, in which event (i) this Lease shall expire and come to an end with the same force and effect as if said date were originally set forth in this Lease for expiration of the Term, (ii) Tenant agrees Landlord shall have the absolute right, with no consent required from Tenant, to relet the demised premises for its own account to Tenant's prospective assignee at such rentals and upon such other terms and conditions as Landlord shall desire If, without Landlord's prior written consent, there shall be an attempted assignment or subletting or if the demised premises shall be occupied by anybody other than Tenant, whether as a result of act or omission by Tenant, or by operation of law, or otherwise, Landlord, may. in addition to, and not in diminution of or substitution for, any other rights and remedies under this Lease or pursuant to law to which Landlord may be entitled as a result thereof, collect rent from the proposed assignee, subtenant or occupant and apply the net amount collected to the rent herein reserved, but no such assignment, subletting, occupancy or collection shall be deemed a waiver of this covenant or the acceptance of the assignee, subtenant, or occupant as a tenant, or a release of Tenant hereunder from the further performance by Tenant of the covenants on the part of Tenant herein contained. If Landlord shall consent to any requested transfer, assignment, mortgage, hypothecation, encumbrance, subletting, license and/or concession, such consent shall be deemed consent to that particular transaction only and shall not be deemed consent to any other or future transfer, assignment, mortgage, hypothecation, encumbrance, subletting, license and/or concession, as the case may be. Any permitted transfer, assignment, mortgage, hypothecation, encumbrance, subletting, license and/or concession shall be expressly subject to each and every term, covenant and condition of this Lease, unless otherwise specifically provided in writing, and Tenant shall remain fully liable and obligated under all of such terms, co venants and conditions.

If Tenant is a corporation, unincorporated association or partnership, and Tenant shall, without the prior written consent of Landlord, transfer, assign or hypothecate any stock or interest in such corporation, association or partnership so as to result in a change in the control thereof by the person, persons or entities owning a controlling interest therein as of the date of this Lease, then Landlord shall have the option to terminate this Lease at any time after actual notice of such change by giving Tenant at least sixty (60) days' prior written notice and, on the date fixed in such notice for termination of this Lease, this Lease shall expire and come to end with the same effect as if said date were originally set forth in this Lease for expiration of the term. The mere receipt by Landlord of rent from a party other than Tenant shall not be deemed actual notice of any change in control or ownership of Tenant. This provision shall not be applicable to the transfer of any stock or interest in such corp oration, association or partnership to a member of the immediate family of any person(s) now owning a controlling interest therein (i.e.. the spouse and direct lineal ancestor or descendent of such person or such person's spouse).

NOT PARTNERS 40. The parties hereto by this agreement expressly do not intend as a matter of fact or law to create or constitute a partnership.

PROMOTIONAL SERVICE 41. Intentionally left blank.

CONTINUOUS OCCUPANCY 42(a). On the Rent Commencement Date, Tenant shall occupy the premises and promptly open for business, at which time the premises shall be fully fixture, fully stocked and fully staffed. Tenant acknowledges that it has been informed that its obligation to open for business promptly on the Rent Commencement Date has been and will be relied upon by the Landlord in dealing with other tenants in the Shopping Center, and failure of Tenant to open for business as above specified shall constitute a Default under this Lease, and may cause substantial damages to Landlord. Tenant shall defend, indemnify and save Landlord harmless from any damages which may be claimed against Landlord and shall indemnify Landlord for any losses suffered because of Tenant's failure to comply with its obligations under the first sentence of this Article.

42(b). Throughout the term, Tenant shall continuously conduct in the premises, with a full stock of merchandise and full staff of personnel, the business permitted under Article 19 (and no other business. including specifically any business or use prohibited by the terms of this Lease) on all business days and during such hours as are kept by a majority of the tenants in the Shopping Center (excluding the Tenant hereunder) and at least 66 hours per week (unless fewer hours per week are agreed to by a majority of the tenants in the Shopping Center (excluding the Tenant hereunder). Regardless of the minimum number of hours per week Tenant is open for business, and regardless of which additional hours Tenant is open, Tenant shall in all events remain open for business during the hours of 10:00 A.M. to 5:30 P.M. Monday through Saturday. Tenant acknowledges that its obligation to continuously and actively conduct business in the premises in the manner prescribed in this Article is for the purpose of enhanc ing the business activity and public patronage of all stores in the Shopping Center in order to produce for Landlord the maximum possible percentage rents from all stores in the Shopping Center as well as from the premises and to enhance the leaseability of floor space in the Shopping Center, and Tenant acknowledges that failure on its part to comply with the provisions of this Article shall constitute a Default under this Lease, and would cause Landlord substantial damages which might be difficult or insusceptible of exact proof. Accordingly, the parties have agreed that if Tenant fails to comply with the provisions of this Article, then Landlord shall not be required to prove its actual damages for breach of this Article, but in lieu thereof Tenant shall pay Landlord as liquidated damages, and not as a penalty, an additional monthly rent equal to the monthly minimum rent payable under Article 5 hereof, which liquidated damage payments shall continue from the date of breach until such breach is cured or unt il the end of the then current term of this Lease, whichever is first. Said liquidated damages shall be paid monthly, concurrently with the monthly payments of minimum rent reserved under this Lease. Nothing in this Article shall be construed as a limitation upon Tenants obligations to continuously conduct business in the manner herein specified or upon Landlord's remedies under Articles 32 and 33 or upon Landlord's right to recover any other provable monetary damages. A breach by Tenant of its obligations under subsection (a) of this Article shall also constitute a breach of this subsection (b) and entitle Landlord not only to its claims under subsection (a), but also to liquidated damages under this subsection (b) for so long as the breach of this subsection continues.

MAINTENANCE AND

OPERATION OF

COMMON AREAS 43. Landlord agrees to keep the parking areas in the Shopping Center and the other common areas (excepting service areas immediately adjacent and contiguous to the demised premises, the maintenance of which shall be Tenant's responsibility) reasonably free of snow, ice and debris and to keep the same lighted during the business hours of a majority of the tenants in the Shopping. Landlord further agrees to keep the parking areas in the Shopping Center and other common areas are in good repair and order.

COST OF MAINTENANCE

AND OPERATION OF

COMMON AREAS 44(a). Common area maintenance costs are defined as costs and expenses incurred by Landlord, or others on Landlord's behalf, in operating, maintaining, repairing and replacing those areas to the entire Shopping Center, for the benefit of the entire Shopping Center. These costs include, but are not limited to, the costs set out in Exhibit "C" attached hereto. Common areas are defined as all areas, facilities and improvements provided, from time to time, in the Shopping Center (except those within any store premises) for the mutual convenience and use of tenants or other occupants of the Shopping Center, their respective agents, employees, customers and invitees and shall include, if provided, but not be limited to, parking areas and facilities, including, without limitation, roadways, entrances, sidewalks, stairways, service corridors, truckways, ramps, loading docks, delivery areas, landscaped areas, package pickup stations, public restrooms and comfort stations, access and interio r roads, retaining walls, and lighting facilities.

44(b). Subject to adjustment as herein provided, Tenant shall pay Landlord on the Rent Commencement Date and on the first day of each calendar month during the term hereof the amount set forth in the next succeeding sentence and estimated by Landlord to be Tenant's monthly Percentage Share of the common area maintenance costs; and Landlord may adjust said amount at the end of any calendar month on the basis of Landlord's experience and reasonably anticipated costs. For the first full calendar year of this Lease, and for the period between the Rent Commencement Date and such first calendar year, Tenant's monthly share of common area maintenance costs shall be an amount equal to $0.00 per square foot of floor area in the demised premises, and for each full calendar year thereafter, Tenant's monthly share shall be determined on the basis of one-twelfth (1/12th) of Tenant's actual Percentage Share of common area maintenance costs for the preceding calendar year (or if Tenant was not a tenant in the Shoppi ng Center for the full preceding calendar year, then 1/12th of what would otherwise have been Tenant's pro-rata share had Tenant been such a tenant.)

44(c) Within ninety (90) days following the end of each calendar year, Landlord shall furnish Tenant a statement covering such calendar year just expired in reasonable detail, prepared in accordance with generally accepted accounting and/or auditing principles and certified as correct by a certified public accountant or any authorized representative of Landlord, showing the common area maintenance costs and the amount of Tenant's Percentage Share of such costs for such year computed in accordance with Article 44(a) above, and the payments made by Tenant with respect to such year as set forth in Article 44(b) above. If Tenant's Percentage Share of such costs is less than Tenant's payments so made, Tenant shall be entitled to a credit of the difference, or if such share is greater than Tenant's said payments, Tenant shall pay Landlord the difference. Tenant and Landlord shall adjust and make refunds or pay the deficiency, as the case may be, within thirty (30) days after receipt of such statement. Tena nt's Percentage Share of the common area costs shall be adjusted proportionately for any partial lease year.

INSURANCE 45(a). Landlord shall obtain and maintain in effect during the term of this Lease a policy or policies of insurance (i) covering the improvements constituting the Shopping Center (including the common areas, but excluding Tenant's leasehold improvements, trade fixtures and other property required to be insured by Tenant) in an amount not less than eighty percent (80%) of the full replacement cost (exclusive of the cost of excavations, foundations and footings), providing protection against perils included within the standard Maryland form of fire and extended coverage insurance policy, togetherwith such other risks, and with such deductibles, as Landlord may from time to time determine, and (ii) public liability insurance covering the parking areas and other common areas in an amount not less than $500,000 for injury to any one person, $1,000,000 for injuries arising out of one accident, and $50,000 for property damage coverage. The cost of the premiums for any such policies shall be included in the Landlord common area maintenance costs. Any such insurance may be effected by a policy or policies of blanket insurance, covering additional items or locations or assureds. Tenant shall have no rights in any policy maintained by Landlord and shall not, by reason of payment by Tenant, as part of common area maintenance costs, of its pro rata share of Landlord's premium therefor, be entitled to be a named assured thereunder.

45(b). Tenant, at Tenant's sole cost and expense, shall obtain and maintain in effect at all times during the term of this Lease, policies providing the following coverage:

(i) a comprehensive policy of general liability insurance, covering the demised premises and Tenant's use thereof against claims for personal injury or death or property damage occurring upon, in or about the demised premises, in the limits stipulated in Article 27;

(ii) insurance covering Tenant's leasehold improvements, trade fixtures, equipment and personal property from time to time in, on or upon the demised premises, in an amount of not less than eighty percent (80%) of the full replacement value of said items, providing protection against perils included within the standard Maryland form of fire and extended coverage insurance policy, together with insurance against sprinkler damage, vandalism, and malicious mischief. Any policy proceeds from such insurance, so long as this Lease shall remain in effect, shall be held in trust by Tenant's insurance company first for the repair, reconstruction, restoration or replacement of the property damaged or destroyed, and

(iii) plate glass insurance covering all plate glass in the demised premises. Tenant shall be and remain liable for the repair and restoration of all such plate glass.

45(c). All insurance policies herein required to be procured by Tenant (i) shall be issued in form acceptable to Landlord by good and solvent insurance companies qualified to do business in the State of Maryland and reasonably satisfactory to Landlord, (ii) shall be issued in the names of Landlord, Tenant and any other parties in interest from time to time designated in writing by notice from Landlord to Tenant, (iii) shall be written as primary policy coverage and not contributing with or in excess of any coverage which Landlord may carry; and (iv) shall contain an express waiver of any right of subrogation by the insurance company against Landlord. Neither the issuance of any insurance policy required hereunder, nor the minimum limits specified herein with respect to Tenant's insurance coverage, shall be deemed to limit or restrict in any way Tenant's liability arising under or out of this Lease. With respect to each and every one of the insurance policies h erein required to be procured by Tenant, on or before the Rent Commencement Date and before any such insurance policy shall expire, Tenant shall delivery to Landlord certificates of insurance for, certified copies of, or duplicate originals of, each such policy or renewal thereof, as the case may be, together with evidence of payment of all applicable premiums. Any insurance required to be carried hereunder may be carried under a blanket policy covering the demised premises and other locations of Tenant, and if Tenant includes the demised premises in such blanket coverage Tenant shall deliver to Landlord, as aforesaid, a duplicate original or certified copy of each such insurance policy or a certificate evidencing such insurance. Each and every insurance policy required to be carried hereunder by or on behalf of Tenant shall provide that, unless Landlord shall first have been given ten (10) days' prior written notice thereof: (i) such insurance policy shall not be canceled and shall continue in full force an d effect, (ii) the insurance carrier shall not, for any reason whatsoever, fail to renew such insurance policy, and (iii) no material change may be made in such insurance policy. In the event that Tenant shall fail promptly to furnish any insurance coverage herein required to be procured by Tenant, Landlord, at its sole option, shall have the right to obtain the same and pay the premium therefor for a period not exceeding one (1) year in each instance, and the premium so paid by Landlord shall be immediately payable by Tenant to Landlord as additional rent.

ADDITIONAL RENT 46. If Landlord shall incur any charge or expense on behalf of Tenant under the terms of this Lease, such charge or expense and all other monetary payments due under this Lease to Landlord shall be considered additional rent hereunder; in addition to and not in limitation of any other rights and remedies which Landlord may have in case of the failure by Tenant to pay such sums when due, such nonpayment shall entitle Landlord to the remedies available to it hereunder for non-payment of rent. All such charges or expenses shall be paid to Landlord at its office in St. Charles, Maryland.

RENT 47. Landlord covenants that if Tenant pays the rent and all other charges provided for herein, performs all of its obligations provided for hereunder, and observes all of the other provisions hereof, Tenant shall at all times during the term hereof peaceably and quietly have, hold and enjoy the demised premises, without any interruption or disturbance from Landlord, or anyone claiming through or under Landlord, subject to the terms hereof.

TRANSFER OF

LANDLORD'S INTEREST 48. Notwithstanding any provision of this Lease to the contrary, in the event of the sale or other transfer of Landlord's interest in the demised premises or the Shopping Center, (i) Landlord shall thereupon and without further act by either party hereto be released and discharged of all covenants and obligations of Landlord hereunder thereafter accruing, and (ii) it shall be deemed and construed conclusively, without further agreement between the parties, that the purchaser or other transferee or assignee has assumed and agreed to perform the obligations of Landlord thereafter accruing.

NO WAIVER 49. That no waiver of any breach of any covenant, condition or agreement herein contained shall operate as a waiver of the covenant, condition or agreement itself, or of any subsequent breach thereof.

PARTIAL INVALIDITY 50. If any term, covenant or condition of this Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease or the application of such term, covenant or condition to persons or circumstances other than those s to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant and condition of this Lease shall be valid and enforced to the fullest extent permitted by law.

RULES & REGULATIONS 51. Tenant shall at all times comply with the rules and regulations set forth on Exhibit "D' attached hereto, and with any additions thereto and modifications thereof adopted from time to time by Landlord, and each such rule or regulation shall be deemed as a covenant of this Lease to be performed and observed by Tenant.

APPLICABLE LAW 52. This Lease shall be construed under the laws of the State of Maryland.

CAPTIONS AND HEADINGS 53. Captions and headings are for convenience and reference only.

JOINT AND SEVERAL

LIABILITY 54. If two or more individuals, corporations, partnerships or other business associations (or any combination of two or more thereof) shall sign this Lease as Tenant, the liability of each such individual, corporation, partnership, or other business association to pay rent and perform all other obligations hereunder shall be deemed to be joint and several. In like manner, if the Tenant named in this Lease shall be a partnership or other business association, the members of which are, by virtue of statute or general law, subject to personal liability, the liability of each such member shall be joint and several.

NOTIFICATION 55. This writing is intended by the parties as final expression of their agreement and as a complete and exclusive statement of the terms thereof, all negotiations, considerations and representations between the parties having been incorporated herein. No course of prior dealings between the parties or their affiliates shall be relevant or admissible to supplement, explain, or vary any of the terms of this Lease. Acceptance of, or acquiescence in, a course of performance rendered under this or any prior agreement between the parties or their affiliates shall not be relevant or admissible to determine the meaning of any of the terms of this Lease. No representations, understandings, or agreements have been made or relied upon in the making of this Lease other than those specifically set forth herein. This Lease can only be modified by a writing signed by all of the parties of their duly authorized agents.

NO DISCRIMINATION 56. It is intended that the Shopping Center be developed so that all prospective tenants and all customers, employees, licensees and invitees of all tenants shall have the opportunity to obtain all the goods, services, accommodations, advantages, facilities and privileges of the Shopping Center without discrimination because of race, creed, color, national origin or ancestry. To that end, Tenant will not discriminate in the conduct and operation of its business in the premises against any person or group of persons because of the race, creed, color, national origin or ancestry of such person or group of persons.

DELAY 57. Intentionally left blank.

STORE FRONT 58. The design and construction of the store front for the demised premises will be subject to the Landlord's approval, which shall not be unreasonably withheld.

ESTOPPEL CERTIFICATE 59. Tenant agrees, at any time and from time to time, upon not less than five (5) days prior written notice by Landlord, to execute, acknowledge and deliver to Landlord or to such person(s) as may be designated by Landlord, a statement in writing (i) certifying that Tenant is in possession of the demised premises, has unconditionally accepted the same and is currently paying the rents reserved hereunder, (ii) certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the Lease is in full force and effect as modified and stating the modifications), (iii) stating the dates to which the rent and other charges hereunder have been paid by Tenant, (iv) stating whether or not to the best knowledge of Tenant, Landlord is in default in the performance of any covenant, agreement or condition contained in this Lease, and, if so, specifying each such default of which notices to Tenant sh ould be sent. Any such statement delivered pursuant thereto may be relied upon by any owner of the Shopping Center, any prospective purchaser of the Shopping Center, any mortgagee or prospective mortgagee of the Shopping Center or of Landlord's interest, or any prospective assignee of any such mortgagee.

OUTPARCEL 60. Landlord shall have the right to remove from the Shopping Center, sell, or separately develop any outparcels whereupon such outparcels shall, at the option of the Landlord, be removed from the definition of the Shopping Center.

WAIVER OF JURY TRIAL 61. Tenant hereby waives all right to trial by jury in any claim, action, proceeding or counterclaim by either Landlord or Tenant against the other or any matters arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant and/or Tenant's use or occupancy of the demised premises.

NO OPTION 62. The submission of this Lease for examination does not constitute a reservation of or option for the premises, and this Lease becomes effective only upon execution and delivery thereof by Landlord.

SECURITY DEPOSIT 63. Landlord hereby acknowledges receipt from Tenant of a security deposit in the amount of as security for Tenant's faithful performance of Tenant's obligations hereunder. If Tenant fails to pay rent or other charges due herebunder, or otherwise defaults with respect to any provisions of this Lease. Landlord may use, apply or retain all or any portion of said deposit for the payment of any rent or other charge in default or for the payment of any other sum to which Landlord may become entitled by reason of Tenant's default, or to compensate Landlord for any loss or damage which Landlord may suffer thereby. If Landlord so uses or applies all or any portion of said deposit. Tenant shall within ten (10) days after written demand therefor deposit cash with Landlord in an amount sufficient to restore said depo sit in full to the original amount and Tenant's failure to do so shall be a Default under this Lease. Landlord shall not be required to keep said deposit separate from its general accounts. If Tenant performs all of Tenant's obligations herebunder, said deposit or so much thereof as has not therefore been applied by Landlord shall be returned, without payment of interest or other increment for its use, to Tenant within forty-five (45) days after the expiration of the term of this Lease, or after Tenant has vacated the demised premises, whichever is later.

BROKER'S PERMISSION 64. Landlord and Tenant warrant that they have not negotiated with any broker with regard to this Lease except Baldus Real Estate, who shall be paid a commission by the Landlord.

LESSOR'S RIGHT TO SELL

OR MORTGAGE FEE 65. Nothing contained in this lease shall limit or curtail Landlord's right to sell, mortgage, or otherwise deal with its fee interest in the leased premises, the ground underlying the leased premises, the shopping center and the ground underlying the shopping center, or affect Landlord's right to assign the net rent payable under this Lease either as further collateral security under a fee mortgage or otherwise. Any such assignment of rent shall be honored by Tenant.

STORES OR SHOPPING

CENTER 66. Landlord may from time to time change or alter the size, configuration, partitions or store designations of all or any of the stores in the shopping center and may expand the shopping center by adding thereto additional land and buildings without the consent of, or notice to, Tenant.

LATE PAYMENT CHARGES 67. In the event that any installment or payment of minimum rent, percentage rent, additional rent or any other sum required hereunder to be paid by Tenant to Landlord is not received by Landlord on or before the fifth (5th) calendar day after the same is due and payable, then, for each and every such late payment, in addition to the payment in arrears, Tenant shall immediately pa y to Landlord as additional rent, a service charge equal to whichever is the greater of (I) Twenty Dollars ($20.00); or (ii) one half of one percent (.5%) of such unpaid sum per day for each calendar day after the due date of such payment that such payment has not been received by Landlord. The provision herein for late payment service charges shall not be construed to extend the date for payment of any sums required to be paid by Tenant hereunder or to relieve Tenant of its obligations to pay all such sums at the time or times herein stipulated. Notwithstanding th e imposition of such service charges pursuant to this subsection, Tenant shall be in default under this Lease if any or all payments required to be made by Tenant are not made at the time herein stipulated, and neither the demand for, nor collection by, Landlord of such late payment service charges shall be construed as a cure of such default on part of Tenant.

SUBORDINATION 68. Tenant agrees that this lease shall be subject and subordinate to the lien of any bonafide mortgages or deeds of trust that may now or at any time hereafter be placed against the premises by the Landlord to secure money borrowed from any bonafide lender. Tenant agrees at any time hereafter, on demand, to execute any instrument, release, or other documents that may be required by the Landlord for the purpose of subjecting and subordinating this Lease to the lien of any mortgage or deed of trust, whether original or sustituted. If any person shall succeed to all or any part of the Landlord's interest in the demised premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise, and if such success-in-interest shall request, Tenant shall attorn to such successor-in -interest and shall execute such agreement in confirmation of such attornment as such successor-in-interest shall re quest. Tenant agrees that any suit, action or other proceeding commenced by any mortgagee in order to realize upon Landlord's interest in this Lease, the demised premises, or the Shopping Center of which the demised premises ia a part shall not, by operation of law or otherwise, result in the cancellation or termination of this Lease or of the obligation of Tenant hereunder.

IN WITNESS WHEREOF, and intending that this Lease be a sealed instrument, Landlord and Tenant have executed this Lease under seal on the dates indicated beneath their respective signatures.

	SMALLWOOD VILLAGE ASSOCIATES
	A Maryland Limited Partnership
	INTERSTATE BUSINESS CORPORATION
	General Partner
/s/ Mary L. Sanders	/s/ J. Michael Wilson
WITNESS	LANDLORD
	Date of Execution by Landlord: 4/28/05
/s/ Mayra Torres	/s/ Cheryl Rozanski, Agent for ARMC
WITNESS
	Date of Execution by Tenant: 4/28/05

State of Maryland
SS:
County of Calvert

Before me, a Notary Public in and for the jurisdiction aforesaid, personally appeared this date, J. Michael Wilson, personally well known (or satisfactorily proven) to me to be the President of Interstate Business Corporation, a Delaware corporation, who, being by me first duly sworn, did acknowledge that he/she, as the duly authorized officer of said Corporation, executed the foregoing and annexed Instrument, in the name and on behalf of said Corporation, as its free act and deed for the uses and purposes therein contained.

WITNESS my hand and official seal this J. Michael Wilson personally well known (or satisfactorily proven) to me to be the President of IBC corporation, who, being by me first duly sworn, did acknowledge that he/she, as the duly authorized officer of said Corporation, executed the foregoing and annexed instrument, in the name and on behalf of said Corporation, as its free act and deed for the uses and purposes therein contained.

WITNESS my hand and official seal this 28^th day of April 2005

/s/ Elizabeth Clayton

NOTARY PUBLIC

My Commission Expires; 11/1/06

State of Maryland
SS:
County of Calvert

Before me, a Notary Public in and for the jurisdiction aforesaid, personally appeared this date, Cheryl Rozanski, personally well known (or satisfactorily proven) to me to be the VP of ARMC, a ____________ corporation, who, being by me first duly sworn, did acknowledge that he/she, as the duly authorized officer of said Corporation, executed the foregoing and annexed Instrument, in the name and on behalf of said Corporation, as its free act and deed for the uses and purposes therein contained.

WITNESS my hand and official seal this Cheryl Rozanski personally well known (or satisfactorily proven) to me to be the VP of ARMC corporation, who, being by me first duly sworn, did acknowledge that he/she, as the duly authorized officer of said Corporation, executed the foregoing and annexed instrument, in the name and on behalf of said Corporation, as its free act and deed for the uses and purposes therein contained.

WITNESS my hand and official seal this 28^th day of April, 2005

/s/ Elizabeth Clayton

NOTARY PUBLIC

My Commission Expires; 11/1/06

(13)

EXHIBIT C

COMMON AREA COSTS

Smallwood Village Center

St. Charles, Maryland

Common area maintenance costs shall mean, for the purpose of this Lease, all costs and expenses incurred by Landlord or others on Landlord's behalf, in operating, maintaining, repairing and replacing those areas common to the entire Shopping Center, for the benefit of the entire Shopping Center. Such common area maintenance costs shall include all costs and expenses of every kind and nature as may be paid or incurred by Landlord in operating, policing, protecting, managing, equipping, lighting. repairing, replacing and maintaining the common areas including but not limited to, the cost and expenses of:

1. Operating, maintaining, repairing, replacing, lighting, cleaning, sweeping, painting and resurfacing of the common areas and common area facilities, including but not limited to: paving, vehicle area lighting facilities, lighting and sound facilities, storm and sanitary drainage systems and other utility conduits, systems, ducts, and similar items, fire protection systems, sprinkler systems, utility sprinkler and security alarm systems, Shopping Center signs on and off the Shopping Center site, Shopping Center signs and wiring, retaining walls, curbs, gutters, fences, sidewalks, canopies, steps, and ramps in the common areas, exclusive of casualty loss replacements covered by insurance, and exclusive of the cost for a replacement of an asset (or part) for which a depreciation allowance is included hereunder if such replacement cost may not be treated as an expense deduction under Internal Revenue Service Regulations;
2. Gardening, landscaping, and maintenance of grass, trees, and shrubbery:
3. All premiums for all insurance maintained by Landlord in connection with the Shopping Center, including without limitation: liability for bodily injury, death and property damage; insurance on the Shopping Center (including the common areas) against fire, extended coverage, theft or other casualties; workman's compensation; plate glass insurance for glass exclusively serving the common areas; sign insurance; and loss of rent insurance for up to a 12-month period;
4. Security.
5. Personal property taxes on equipment and systems in, pertaining to, or used in maintaining and operating the common areas and outdoor areas;
6. Utility charges and other costs of lighting the common areas, the vehicle areas, Center signs, and other like facilities;
7. Vehicle area line painting, and removal of snow and ice;
8. Collection and removal of trash from all outdoor areas in the Center.
9. Depreciation of all machinery and equipment used in maintaining and operating the common areas (including cleaning and snow removal equipment) and of Center signs, fixtures and furnishings, traffic signals, which depreciation shall be calculated on a straight line basis and on lives based upon the Internal Revenue Service guidelines from time to time extant;
10. Power and fuel for operating common area equipment and systems and for operating vehicles and equipment used for cleaning, maintenance and snow removal; and
11. Salaries of personnel directly engaged in operating cleaning and maintaining the common areas (including security personnel and parking attendants), and all related payroll charges, benefits and taxes.

EXHIBIT D

RULES AND REGULATIONS

Smallwood Village Center

St. Charles, Maryland

Tenant shall, at all times during the term of the Lease;

1. Use, maintain and occupy the premises in a careful, safe, proper and lawful manner, keep the premises and it's appurtenances in a clean and safe condition;

2. Keep all glass in the doors and windows of the premises clean and in good repair;

3. Not place, maintain or sell any merchandise in any vestibule or entry to the premises, on the sidewalks adjacent to the premises, or elsewhere on the outside of the premises without the prior written consent of Landlord;

4. Keep the premises in a clean, orderly and sanitary condition, free of insects, rodents, vermin and other pests;

5. Not permit undue accumulations of garbage, trash, rubbish and other refuse in the premises, and keep refuse in closed containers within the interior of the premises until removed.

6. Not use, permit or suffer the use of any apparatus or instruments for musical or other sound reproduction or transmission in such manner that the sound emanating therefrom or caused thereby shall be audible beyond the interior of the premises;

7. Not deliver or suffer or permit delivery of merchandise to the premises after 10:00 a.m. on any day;

8. Light the show windows and exterior signs of the premises to the extent required in the Lease;

9. Keep all mechanical apparatus free of vibration and noise which may be transmitted beyond the confines of the premises;

10. Not cause or permit objectionable odors to emanate or be dispelled from the premises;

11. Not overload the floors or electrical wiring and not install any additional electrical wiring or plumbing without Landlord's prior written consent;

12. Not use show windows in the premises for any purpose other than display of merchandise for sale in a neat and attractive manner;

13. Not conduct, permit or suffer any public or private auction sale to be conducted on or from the premises; and

14. Not solicit business in the common areas of the Shopping Center or distribute handbills or other advertising materials in the common areas, and if this provision is violated the Tenant shall pay Landlord the cost of collecting same from the common areas for trash disposal.

15. Maintain an attractive display in the show windows; and

16. Discourage congregations of people in the common areas and outside the store.

LEASE RENEWAL CLAUSE

The following additional provisions are hereby added to the Lease:

(a) Option to Extend

Subject to the satisfaction of the conditions precedent set forth in Paragraph (b) below, Tenant shall have the right, at its option, to extend the term of this Lease for ONE (1) additional period (the "Extension Period") of TWO (2) YEARS. Such extension option shall be exercisable by Tenant giving written notice to Landlord of the exercise of such option only during the three-month period that is at least six (6) months, but not more than nine (9) months, prior to the expiration of the then current term of this Lease; and, upon the exercise of such extension option, the termination date of this Lease shall automatically be extended for ______________. Such Extension Period shall be upon the same terms, covenants, and conditions as set forth in this Lease with respect to the initial term, but subject to the rental adjustment provisions of Paragraph (c) below. With respect to such extension option, and in the event that (i) Tenant shall fail to exercise th e same strictly within the time period and in the manner set forth above, and/or (ii) at the time hereinabove specified for the exercise of such option, all of the conditions precedent set forth in Paragraph (b) below shall not have been satisfied, then such extension option shall automatically expire and be absolutely void and of no force or effect.

(b). Conditions Precedent

The extension option granted to Tenant in Paragraph (a) above, shall be void and of no force and effect unless, at the time above specified for exercising such option, each and every one of the following conditions precedent shall have been fully satisfied:

1. This Lease shall be in full force and effect;

2. Tenant shall be in possession of the demised premises and shall be regularly conducting its normal business operation therein; and

3. Tenant shall not be in default (beyond any grace period granted in this Lease for curing the same) in the performance or observance of any of the terms, provisions, covenants and conditions of this Lease.

(c) Rent Adjustment.

Notwithstanding any other provision of this Lease, in the event the term of this Lease is extended pursuant to the exercise by Tenant of the extension option hereinabove granted in Paragraph (a) above, then, with respect to such Extension Period, the rents, other charges and other economic benefits to be derived by Landlord under this Lease shall be the same as then prevails in the Shopping Center for new leases executed at that time. The foregoing sentence notwithstanding, in no event shall the fixed minimum annual rental (and the monthly installments thereof) payable hereunder during and for the Extension Period be less than the greater of (i) the fixed minimum annual rental in effect immediately prior to the Extension Period or (ii) the fixed minimum annual rental during the Initial term adjusted to the Consumer Price Index (as set forth in the following sentence). Such adjustment shall be accomplished by multiplying the average fixed minimum annual rental in effect during the initial t erm of this Lease by a fraction, the numerator of which shall be the Consumer Price Index as of the most recent date prior to the beginning of the Extension Period, and the denominator of which shall be the Consumer Price Index as of the most recent date prior to the Rent Commencement Date. If the fixed minimum annual rental is established by the aforesaid adjustment pursuant to the preceding sentence, said fixed minimum annual rental shall be effective as of the beginning of the Extension Period and shall thereafter continue in effect as the fixed minimum annual rental required to be paid under this Lease during the entire Extension Period subject to adjustment as described in Article 6E of this Lease

(d) Consumer Price Index.

For all purposes of the Lease Agreement, the Consumer Price Index is hereby defined to be the "United States Bureau of Labor Statistics, Consumer Price Index, for Urban Wage Earners and Clerical Workers (CPl-W)", U.S. City Average, SMSA (1982/84 = 100); and if the Consumer Price Index shall be discontinued or altered, Landlord and Tenant shall attempt to agree upon a substitute index or formula, and if said parties are not able to agree upon such substitute, the matter shall be referred to binding arbitration in accordance with the rules of the American Arbitration Association in the State of Maryland then prevailing.

EX-31.1

Exhibit 31.1

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 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

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

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 3, 2005	/s/ J. Michael Wilson
	J. Michael Wilson
	Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Cynthia L. Hedrick, certify that:

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

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

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

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 3, 2005	/s/ Cynthia L. Hedrick
	Cynthia L. Hedrick
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of American Community Properties Trust (the "Company") on Form 10-Q for the period ending June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, J. Michael Wilson, Chairman and Chief Executive Officer of the Company, certify to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ J. Michael Wilson

J. Michael Wilson

Chairman and Chief Executive Officer

August 3, 2005

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of American Community Properties Trust (the "Company") on Form 10-Q for the period ending June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Cynthia L. Hedrick, Chief Financial Officer of the Company, certify to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Cynthia L. Hedrick

Cynthia L. Hedrick

Chief Financial Officer

August 3, 2005