form10-k2008.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-K

(Mark One)
/X/
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
 
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)

Securities registered pursuant to Section 12(b) of the Act:

TITLE OF EACH CLASS
Common Shares, $.01 par value
NAME OF EACH EXCHANGE ON WHICH REGISTERED
NYSE Amex

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Exchange Act.Yes / /No /x/

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act.Yes / /No /x/

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 reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes /x/                      No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Yes /x/                      No / /

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  / /                                                      Accelerated filer  / /   Non-accelerated filer  / /    Smaller Reporting Company /x/

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  / /    No  /x/

As of June 30, 2008 the aggregate market value of the common shares held by non-affiliates of the registrant, based on the closing price reported on the American Stock Exchange (currently the NYSE Amex) on that day of $13.75, was $30,330,121.  As of March 1, 2009, there were 5,229,954 common shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of American Community Properties Trust to be filed with the Securities and Exchange Commission with respect to the 2009 Annual Meeting of Shareholders, to be held on June 3, 2009, are incorporated by reference into Part III of this report.


AMERICAN COMMUNITY PROPERTIES TRUST

2008 Form 10-K Annual Report

TABLE OF CONTENTS



   
Page
 
PART I
 
 
Item 1.
4
Item 1A.
18
Item 1B.
24
Item 2.
24
Item 3.
25
Item 4.
25
Item 4A.
25
     
 
PART II
 
 
Item 5.
26
Item 6.
27
Item 7.
29
Item 8.
43
Item 9.
 78
Item 9A(T).
 78
Item 9B.
 78
     
 
PART III
 
 
Item 10.
 79
Item 11.
 79
Item 12.
 79
Item 13.
 79
Item 14.
 80
     
 
PART IV
 
 
Item 15.
 80
     
Signatures
Signatures
 84



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Annual Report on Form 10-K contains various “forward-looking statements.”  Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.  In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “would,” “could,” “should,” “seeks,” “intends,” “plans,” “projects,” “estimates” or anticipates” or the negative of these words and phrases or similar words or phrases.  Statements regarding the following subjects may be impacted by a number of risks and uncertainties:

·  
our business and investment strategy;
·  
our projected results of operations;
·  
our ability to manage our anticipated growth;
·  
our ability to obtain future financing arrangements;
·  
our estimates relating to, and our ability to pay, future distributions;
·  
our understanding of our competition and our ability to compete effectively;
·  
real estate market and industry trends in the United States, and particularly in the St. Charles, Maryland marketplace and its surrounding areas, and Puerto Rico;
·  
projected capital and operating expenditures;
·  
availability and creditworthiness of current and prospective tenants;
·  
interest rates; and
·  
lease rates and terms.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us.  These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us.  If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements.  You should carefully consider these risks before you make an investment decision with respect to our common stock, along with the following factors that could cause actual results to vary from our forward-looking statements:

·  
the factors referenced in this Annual Report on Form 10-K, including those set forth under the sections captioned “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations;”
·  
changes in our business and investment strategy;
·  
default by our tenants;
·  
availability, terms and deployment of capital;
·  
general volatility of the capital markets;
·  
availability of qualified personnel;
·  
perception of the real estate industry;
·  
changes in supply and demand dynamics within the real estate industry;
·  
environmental effects;
·  
changes in interest rates;
·  
the degree and nature of our competition;
·  
changes in applicable laws and regulations; and
·  
state of the general economy and the local economy in which our properties are located.

We cannot guarantee future results, levels of activity, performance or achievements.  You should not place undue reliance on these forward-looking statements, which apply only as of the date of this report.  We do not intend, and disclaim any duty or obligation, to update or revise any industry information or forward-looking statements set forth in this report to reflect new information, future events or otherwise.




 
-3-



PART I

ITEM 1.
References to “we”, “us”, “our”, “ACPT” or the “Company” refer to American Community Properties Trust and our business and operations conducted through our subsidiaries.

GENERAL
ACPT is a self-managed holding company that is primarily engaged in the business of investing in and managing multifamily rental properties as well as community development and homebuilding.  ACPT’s operations are primarily concentrated in the Washington, D.C. metropolitan area and Puerto Rico and are carried out through its U.S. subsidiaries, American Rental Properties Trust (“ARPT”), American Rental Management Company (“ARMC”), American Land Development, Inc. (“ALD”) and their subsidiaries and its Puerto Rican subsidiary, IGP Group Corp. (“IGP Group”).

ACPT was formed on March 17, 1997 as a Maryland real estate investment trust.  ACPT is taxed as a U.S. partnership and its taxable income flows through to its shareholders.  ACPT’s U.S. subsidiaries, ARPT, ARMC, and ALD are taxed as U.S. corporations.  ACPT is subject to Puerto Rico income taxes on IGP Group’s taxable income, which generates foreign tax credits that have been passed through to ACPT’s shareholders.  A federal tax regulation has been proposed that could eliminate ACPT’s ability to pass through these foreign tax credits to its shareholders.  Comments on the proposed regulation are currently being evaluated, and the final regulation will be effective for tax years beginning after the final regulation is ultimately published in the Federal Register.  ACPT’s income consists of (i) certain passive income from IGP Group, (ii) additional distributions from IGP Group including Puerto Rico taxes paid on behalf of ACPT and (iii) dividends from ACPT’s U.S. subsidiaries.  Other than Interstate Commercial Properties (“ICP”), which is a subsidiary of IGP Group and is taxed as a Puerto Rico corporation, the income from the remaining Puerto Rico operating entities passes through to IGP Group or ALD.  Of this income, only the portion attributable to the profits, losses or gains on the residential land sold in our Parque Escorial property passes through to ALD. 

ARPT
ARPT holds partnership interests in entities that own 21 multifamily rental properties in Maryland and Virginia (the “U.S. Apartment Properties”) indirectly through American Housing Properties L.P. (“AHP”), a Delaware limited partnership, in which ARPT has a 99% limited partner interest and American Housing Management Company, a wholly owned subsidiary of ARPT, has a 1% general partner interest.

ARMC
ARMC performs property management services in the United States for the U.S. Apartment Properties and until March 1, 2009 performed property management services for one third-party owned apartment community, Capital Park Apartments.

ALD
ALD owns interests in and operates developments, including the following:
                1.  
a 100% ownership interest in St. Charles Community LLC ("SCC LLC"), which holds approximately 3,790 acres of land in St. Charles, Maryland;
                2.  
the Class B interest in Interstate General Properties Limited Partnership S.E., a Maryland limited partnership ("IGP"), that represents IGP's rights to income, gains and losses associated with the balance of the residential land in our Parque Escorial property in Puerto Rico held by Land Development Associates, S.E. ("LDA"), a wholly owned subsidiary of IGP;
                3.  
through November 19, 2008, a 50% interest, through SCC LLC, in a land development joint venture, St. Charles Active Adult Community, LLC (“Active Adult Community”).  ACPT sold its interest in Active Adult Community to Lennar Corporation (“Lennar”) in the fourth quarter of 2008; and
                4.  
effective on October 28, 2008, a 50% interest in Surrey Homes, LLC (“Surrey Homes”), which is a homebuilding company that was created to meet the needs of developing communities in central Florida with a lot option, low overhead model.

IGP Group
IGP Group owns and operates the assets of ACPT's Puerto Rico division indirectly through a 99% limited partner interest and a 1% general partner interest in IGP (excluding the Class B interest in IGP transferred to ALD). IGP's assets and operations include:
                1.  
a 100% ownership interest in LDA, a Puerto Rico special partnership which holds 120 acres of land in the planned community of Parque Escorial in Carolina, Puerto Rico (“Parque Escorial”) and 490 acres of land in Canovanas, Puerto Rico;
                2.  
general partner interests in nine partnerships, which collectively own and operate a total of 12 multifamily rental facilities in Puerto Rico (the “Puerto Rico Apartment Properties”), and a limited partner interest in two of these partnerships;
                3.  
a 100% ownership interest in Escorial Office Building I, Inc. (“EOBI”), and through LDA and IGP, a 100% ownership interest in a Puerto Rico corporation that operates a three-story, 56,000 square foot office building in Carolina, Puerto Rico;
                4.  
a 100% ownership interest in ICP, an entity that holds the partnership interest in El Monte Properties S.E. (“EMP”) which was sold and is wrapping up operations in 2009;
                5.  
a limited partner interest in ELI, S.E. ("ELI"), an entity that holds a 45.26% share in the future cash flow generated from a 30-year lease of an office building to the State Insurance Fund of the Government of Puerto Rico; and
                6.  
an indirect 100% ownership interest, through LDA and IGP, in Torres del Escorial, Inc. ("Torres"), a  Puerto Rico corporation organized to build 160 condominium units.

 
-4-

ACPT operated in two principal lines of business in 2008: Operating Real Estate and Land Development.  The Operating Real Estate segment is comprised of ACPT’s investments in rental properties and property management services; whereas, the Land Development segment is comprised of ACPT’s community development and homebuilding services. This represents a change from ACPT’s historical financial reporting practice of evaluating the Company solely based on geographical location.  During the fourth quarter of 2008, the Company had a change in senior management.  With this change came a new perspective on evaluating the Company’s performance, developing goals, and the use of various generally accepted industry financial measures to assess the performance and financial condition of the business, including net operating income ("NOI") (a supplemental measure to operating income) and Funds From Operations (“FFO”) (a supplemental measure to net income).

NOI, defined as real estate rental revenue less real estate operating expenses, is the primary performance measure we use to assess the results of our operations.  When considered with the financial statements prepared in accordance with principles of accounting generally accepted in the United States (“GAAP”), it is helpful to investors in understanding our performance because it captures the performance of our real estate operations in a measure that is comparable with other entities that have a different capitalization.  We provide NOI as a supplement to operating income calculated in accordance with GAAP.  NOI is a non-GAAP financial measure and does not represent operating income or net income calculated in accordance with GAAP. As such, it should not be considered an alternative to operating income or net income as an indication of our operating performance.

FFO is a non-GAAP financial measure that we believe, when considered with the financial statements prepared in accordance with GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance.  Real estate generally appreciates over time or maintains residual value to a much greater extent than do other depreciable assets such as machinery, computers or other personal property.  We compute FFO in accordance with the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income (loss), computed in accordance with GAAP, excluding gains (or losses) from sales of depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

While ACPT continues to report operating results on a consolidated basis, it also now reports separately the operating results of its two lines of business within the segment disclosures and in the notes to the Company's consolidated financial statements.  The Company has reclassified its segment disclosures for 2007 to include the results of these segments.  Please see Note 13 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K for certain financial information related to these segments.  Set forth below is a brief description of these businesses within each of our segments.

U.S. OPERATING REAL ESTATE OPERATIONS – Ownership in Multifamily and Commercial Properties and Property Management

Multifamily Rental Properties
ACPT, indirectly through ARPT and AHP, holds interests in the U.S. Apartment Properties.  The U.S. Apartment Properties include a total of 3,366 rental units and are financed by a non-recourse mortgage whereby the owners are not jointly and severally liable for the debt.  The U.S. Department of Housing and Urban Development ("HUD") provides rent subsidies to the U.S. Apartment Properties for residents of 973 apartment units.  In addition, 110 units are leased pursuant to HUD's Low Income Housing Tax Credit (“LIHTC”) program, and 139 other units are leased under income guidelines set by the Maryland Community Development Administration.  The remaining 2,144 units are leased at market rates. During the first quarter of 2009, the Company executed purchase agreements for the sale of three of five U.S. Apartment Properties in Baltimore, Maryland for $29,200,000.  The Company has received non-binding offers of $6,598,000 and is negotiating agreements for the remaining two properties.  These properties contain an aggregate of 642 apartment units.  The primary factor driving the decision to sell these properties was the strategic disposition of underperforming assets.  These contracts are subject to certain customary closing conditions, including lender consent to allow the purchaser to assume the loans.  We anticipate closing on the sale of these properties in the second quarter of 2009.  There can be no assurance that these transactions will occur.

 
-5-

The following table sets forth the name of each U.S. Apartment Property, the number of rental units in each property, the total portfolio percentage of each property, the project cost, the percentage of units under lease, and the expiration date and maximum benefit for any subsidy contract:

                                     
                                     
U.S. APARTMENT PROPERTIES
 
Number of
Apartment
Units
   
Percentage of
Portfolio
   
12/31/2008
Project Cost (A)
(in thousands)
   
Occupancy
at
12/31/2008
   
Expiration
Of Subsidy
Contract
Maximum
Subsidy
(in thousands)
Consolidated Partnerships
                                   
Bannister – Non-subsidized Apartments
    167       5 %   $ 8,981       88 %     N/A     $ -  
Bannister – Subsidized Apartments
    41       1 %                  
2009
      536  
Coachman's
    104       3 %     8,005       92 %     N/A       -  
Crossland
    96       3 %     3,483       95 %     N/A       -  
Essex
    496       15 %     21,220       97 %  
2009
      4,672  
Fox Chase
    176       5 %     8,990       95 %     N/A       -  
Headen House
    136       4 %     8,610       97 %  
2009
      1,689  
Huntington
    204       6 %     10,134       97 %  
2009
      2,496  
Lancaster
    104       3 %     6,042       87 %     N/A    
(B)
 
Milford Station I (D)
    200       6 %     13,271       90 %     N/A       -  
Milford Station II (D)
    50       1 %     1,879       94 %     N/A       -  
New Forest
    256       8 %     15,513       93 %     N/A       -  
Nottingham South (D)
    85       3 %     3,070       94 %     N/A       -  
Owings Chase (D)
    234       7 %     15,922       91 %     N/A       -  
Palmer – Non-subsidized Apartments
    96       3 %     9,185       94 %     N/A       -  
Palmer – Subsidized Apartments
    56       2 %                  
2009
      732  
Prescott Square (D)
    73       2 %     4,788       88 %     N/A       -  
Sheffield Greens
    252       7 %     25,999       93 %     N/A       -  
Village Lake
    122       3 %     7,994       96 %     N/A       -  
Wakefield Terrace – Non-subsidized   Apartments
    164       5 %     11,301       90 %     N/A       -  
Wakefield Terrace – Subsidized Apartments
    40       1 %                  
2011
      541  
Wakefield Third Age (Brookmont)
    104       3 %     5,572       96 %     N/A       -  
   Total Consolidated
    3,256       96 %     189,959                       10,666  
Unconsolidated Partnerships
                                               
Brookside Gardens
    56       2 %     2,696       96 %     N/A    
(C)
 
Lakeside Apartments
    54       2 %     4,131       100 %     N/A    
(C)
 
  Total Unconsolidated
    110       4 %     6,827                          
      Total
    3,366       100 %   $ 196,786                     $ 10,666  

(A)  
Project costs represent inception-to-date capitalized costs for each respective property as per Schedule III “Real Estate and Accumulated Depreciation” in Item 8 of this Annual Report on Form 10-K.
(B)  
Not subsidized, however, 54 units are subject to household income restrictions set by the Maryland Community Development Administration (“MCDA”).
        (C)  
Not subsidized, but all units are set aside for low to moderate income tenants over certain age limitations under provisions set by the LIHTC program.
        (D) 
During the first quarter of 2009, the Company executed purchase agreements for the sale of three of the five U.S. Apartment Properties in Baltimore, Maryland for $29,200,000.  The Company has received non-binding offers of $6,598,000 and is negotiating agreements for the remaining two properties. 

    The following table sets forth the operating results, mortgage balances and our economic interest in the U.S. Apartment Properties by location ($ amounts in thousands, all other figures are actual):
 
U.S. APARTMENT PROPERTIES
 
Number of Apartment Units
   
Operating Revenues
   
Operating Expenses (a)
   
 
Net Operating Income
   
Non-Recourse Mortgage Outstanding
   
Economic Interest Upon Liquidation (b)
   
Consolidated Partnerships
                                     
Charles County, Maryland
                                     
 Bannister
    208     $ 2,587     $ 1,201     $ 1,386     $ 12,301       100.0 %  
 Coachman's
    104       1,718       665       1,053       10,740       95.0 %  
 Crossland
    96       1,205       598       607       4,034       60.0 %  
 Fox Chase
    176       2,286       876       1,410       12,685       99.9 %  
 Headen House
    136       1,641       659       982       6,828       75.5 %  
 Huntington
    204       2,397       1,368       1,029       9,104       50.0 %  
 Lancaster
    104       1,541       671       870       8,355       100.0 %  
 New Forest
    256       4,082       1,506       2,576       22,445       99.9 %  
 Palmer
    152       1,912       802       1,110       6,649       75.5 %  
 Sheffield Greens
    252       4,346       1,882       2,464       26,749       100.0 %  
 Village Lake
    122       1,589       671       918       9,088       95.0 %  
 Wakefield Terrace
    204       2,292       1,110       1,182       9,897       75.5 %  
 Wakefield Third Age (Brookmont)
    104       1,332       528       804       7,180       75.5 %  
                                                   
Baltimore County, Maryland
                                                 
 Milford Station I (f)
    200       1,911       1,005       906       10,491       100.0 %  
 Milford Station II (f)
    50       410       271       139       1,345       100.0 %  
 Nottingham South (f)
    85       638       468       170       2,543       100.0 %  
 Owings Chase (f)
    234       2,408       1,238       1,170       12,208       100.0 %  
 Prescott Square (f)
    73       738       431       307       3,541       100.0 %  
                                                   
Henrico County, Virginia
                                                 
 Essex
    496       4,482       2,239       2,243       13,766       50.0 %
(c)
      Total Consolidated
    3,256       39,515       18,189       21,326       189,949            
                                                   
Unconsolidated Partnerships
                                                 
Charles County, Maryland
                                                 
Brookside Gardens
    56       325       282       43       1,202          
(d)
Lakeside
    54       502       284       218       1,921          
(e)
      Total Unconsolidated
    110       827       566       261       3,123            
Grand Total
    3,366     $ 40,342     $ 18,755     $ 21,587     $ 193,072            
(a)  
Amounts exclude management fees eliminated in consolidation.
(b)  
Unless stated otherwise, surplus cash from operations and proceeds from sale or liquidation are allocated based on the economic interest.
(c)  
Upon liquidation, the limited partners have a priority distribution equal to their unrecovered capital.  As of December 31, 2008, the unrecovered limited partner capital for Essex was $1,890,000.  The Company’s receivable of $2,958,000 is the second priority of proceeds from the sale or liquidation on the property.  Until the limited partners have recovered their capital contributions, any surplus cash is distributed first to the limited partners up to $100,000, then a matching $100,000 to the general partner, with any remaining split between the general partner and the limited partners.
(d)  
The Company’s share of the economic ownership is immaterial.
(e)  
The Company is currently eligible to receive $363,000 in distributions related to the payment of a development fee.  This amount receives priority over return of equity to the partners but is subordinate to a $3,000 per year preferred return to the minority partners.  Upon settlement of all priority items, balance is split 70% to the Company and 30% to the minority partners.
(f)  
During the first quarter of 2009, the Company executed purchase agreements for the sale of three of the five U.S. Apartment Properties in Baltimore, Maryland for $29,200,000.  The Company has received non-binding offers of $6,598,000 and is negotiating agreements for the remaining two properties. 

 
-7-

New Multifamily Rental Property Construction
In 2008, ACPT commenced the construction of a 184 unit luxury apartment complex within St. Charles, Maryland called Gleneagles Apartments.  Gleneagles Apartments is expected to consist of one, two and three bedroom units ranging in size from 905 to 1,840 square feet.  ACPT currently anticipates average monthly rents of approximately $1,625 per unit.  Pre-leasing efforts are currently scheduled to commence during the third quarter of 2009, and delivery of the initial units is expected to occur during the fourth quarter of 2009.  ACPT has received all county permits, and the HUD insured loan, totaling $25,045,200, closed on January 22, 2009.

Property Management
ACPT, indirectly through ARMC, operates a property management business that manages 3,654 rental apartment units located in the Washington, D.C. metropolitan area, Baltimore, Maryland and Richmond, Virginia, 3,366 of which ACPT holds an ownership interest.  Management fees for the 3,366 units are based on a percentage of rents ranging from 4% to 6.5%.  The management contracts for these properties have terms of one or two years and are automatically renewed upon expiration but, may be terminated on 30 days notice by either party.  ARMC is entitled to receive an aggregate incentive management fee of $40,000 annually from two of the properties that it manages, as well as the potential to receive an incentive management fee of $100,000 from another property that it manages.  However, the payment of these fees is subject to the availability of surplus cash.  Management and other fees earned from properties included within the consolidated financial statements are eliminated in consolidation.  As of December 31, 2008, management fees from third-party owned apartment properties equaled 3% of rents.  Effective March 1, 2008, the Company’s management agreement with one of the third-party owned apartment properties, G.L. Limited Partnership, was terminated.  Effective March 1, 2009, the Company’s management agreement with the final third-party owned rental property, Capital Park Towers Apartments, was terminated.

Competition
ACPT's investment properties that receive rent subsidies are not subject to the same market conditions as properties charging market rents.  The U.S. Apartment Properties located in St. Charles, Maryland have market rents that are impacted by the supply and demand for competing rental apartments in the area, as well as the local housing market.  When housing becomes more affordable due to lower mortgage interest rates or softening home prices, the performance of our rental apartments can be adversely impacted. Conversely, the performance of the rental apartment market typically improves when mortgage interest rates rise, home prices increase, or economic conditions and the credit markets become depressed.

ACPT has historically been the only source for multifamily apartment living in St. Charles, Maryland and its surrounding areas.  In the winter of 2008, Archstone-Smith opened “Westchester at the Pavilions,” a luxury apartment community in St. Charles, Maryland.  Currently, the rents within this new facility are higher than those charged for ACPT’s apartments.  It is currently unclear to what extent occupancy levels at our higher end fair market properties will be impacted by the addition of these units into the St. Charles market.

PUERTO RICAN OPERATING REAL ESTATE OPERATIONS – Ownership in Multifamily and Commercial Properties and Property Management

Multifamily Rental Properties
             ACPT, indirectly through IGP, holds interests in the Puerto Rico Apartment Properties.  The Puerto Rico Apartment Properties comprise a total of 2,653 rental units, all of which receive rent subsidies from HUD and are financed by non-recourse mortgages.  During the first quarter of 2009, the Company executed a non-binding letter of intent to sell the Puerto Rico Apartment Properties.  The letter of intent is subject to customary closing conditions, including the ability of the purchaser to obtain financing, and we anticipate closing on the sale of these properties in the second quarter of 2009.


 
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     The table below sets forth the name of each Puerto Rico Apartment Property, the number of rental units in each property, the percentage of total Puerto Rico Apartment Property units held by each property, the project cost, the percentage of such units under lease, and the expiration date and maximum benefit for any subsidy contract:
 
     
12/31/2008
     
 
Number of
Percentage
Project Cost
Occupancy
Expiration
Maximum
 
Apartment
of
(B) (in
at
of Subsidy
Subsidy
 
Units
Portfolio
thousands)
12/31/2008
Contract
(in thousands)
Consolidated Partnerships
           
San Anton
184
7%
 $          5,643
100%
2010
 $         1,342
Monserrate Associates
304
11%
12,944
99%
2009
2,700
Alturas del Senorial
124
5%
5,191
99%
2009
1,096
Jardines de Caparra
198
7%
8,157
99%
2010
1,662
Colinas de San Juan
300
11%
12,702
100%
2011
2,144
Bayamon Garden
280
11%
14,311
100%
2011
2,085
Vistas del Turabo
96
4%
3,589
100%
2021
726
Monserrate Tower II (A)
304
11%
13,666
100%
2020
2,554
Santa Juana (A)
198
7%
8,230
99%
2020
1,685
Torre De Las Cumbres (A)
155
6%
7,155
100%
2020
1,350
De Diego (A)
198
8%
8,222
100%
2020
1,670
Valle del Sol
312
12%
15,885
100%
2013
2,491
   Total
2,653
100%
 $      115,695
   
 $       21,505
 
        (A)  This property is owned by Caroline Associates L.P., a Maryland limited partnership in which IGP holds a 50% interest.
        (B)   Project costs represent total capitalized costs for each respective property as per Schedule III "Real Estate and Accumulated
                Depreciation" in Item 8 of this Annual Report on Form 10-K.
 
 



     The table below sets forth the operating results, mortgage balances and our economic interest in the Puerto Rico Apartment Properties by location ($ amounts in thousands, all other figures are actual):

P.R. APARTMENT PROPERTIES
 
Number of Apartment Units
   
Operating Revenues
   
Operating Expenses (a)
   
Net Operating Income
   
Non-Recourse Mortgage Outstanding
   
Economic Interest Upon Liquidation (b)
       
                                           
Consolidated Partnerships
                                         
Carolina, Puerto Rico
                                         
Monserrate Associates
    304     $ 2,785     $ 1,472     $ 1,313     $ 6,816       52.50 %      
Monserrate Tower II (c)
    304       2,637       1,420       1,217       9,861       50.00 %  
(e)
 
San Anton
    184       1,492       961       531       4,091       49.50 %      
                                                       
San Juan, Puerto Rico
                                                     
Alturas Del Senorial
    124       1,120       643       477       3,449       50.00 %      
Colinas San Juan
    300       2,164       1,072       1,092       9,380       50.00 %      
De Diego (c)
    198       1,748       995       753       5,457       50.00 %  
(e)
 
Torre de Las Cumbres (c)
    155       1,425       777       648       5,067       50.00 %  
(e)
 
                                                       
Caguas, Puerto Rico
                                                     
 Santa Juana (c)
    198       1,832       1,042       790       7,036       50.00 %  
(e)
 
 Vistas Del Turabo (f) (g)
    96       715       398       317       798       52.45 %  
(d,e)
                                                         
Bayamon, Puerto Rico
                                                       
Bayamon Garden (f) (g)
    280       2,113       1,064       1,049       9,151       50.00 %   (d,e)
Jardines De Caparra
    198       1,756       964       792       6,233       50.00 %  
(e)
 
Valle Del Sol (f) (g)
    312       2,522       1,052       1,470       10,430       50.00 %  
(d)
 
  Total
    2,653     $ 22,309     $ 11,860     $ 10,449     $ 77,769                  

(a)  
Amounts exclude management fees eliminated in consolidation.
(b)  
Surplus cash from operations and proceeds from sale or liquidation are allocated based on the economic interest except those identified by additional description.
(c)  
Owned by Carolina Associates
(d)  
Upon liquidation, the limited partners have a priority distribution equal to their unrecovered capital.  As of December 31, 2008, the unrecovered limited partner capital in Bayamon Garden, Valle Del Sol and Vistas Del Turabo were $918,000, $445,000, and $618,000, respectively.
(e)  
In addition to normal operating receivables between the Company and the Puerto Rico Apartment Properties, the Company has a receivable for incentive management fees of $59,000 for Bayamon Gardens, $12,000 for Jardines de Caparra, $47,000 for Torre de Las Cumbres, $60,000 for De Diego Apartments, $60,000 for Santa Juana Apartments and $90,000 for Monserrate Towers II.
(f)  
In addition to the receivable noted in (e) above, the Company has a notes receivable from Valle del Sol and Vistas del Turabo amounting to $928,000 and $46,000, respectively.  These receivables are the result of unsecured development cost loans made to the Partnership to cover acquisition and construction costs of the rental property in excess of the permanent financing.  Pursuant to the terms of the Partnership agreement, the notes are non-interest bearing and are payable only by proceeds from mortgage refinancing, partial condemnations, sales of easements or similar interests or proceeds from sale of the properties, but only after the payment of the debt and liabilities due to outsiders and expenses of liquidation.
(g)  
Distributions from these partnerships are limited to an annual amount of $10,000, $118,000 and $146,000 for Vistas Del Turabo, and Bayamon Gardens and Valle del Sol, respectively.



Commercial Rental Properties
In September 2005, the Company commenced the operations of its first Puerto Rico commercial rental property in the community of Parque Escorial, known as Escorial Building One, in which it holds a 100% ownership interest.  Escorial Building One is a three-story building with approximately 56,000 square feet of leasable office space.  The Company moved its Puerto Rico corporate office to the new facility in the third quarter of 2005.  As of December 31, 2008, approximately 76% of the building was leased, of which 43% of the office space was occupied.  The University of Phoenix will occupy the other 33% once tenant improvements are completed, which is expected to occur during April 2009.  The Company signed an agreement with the University of Phoenix pursuant to which it has agreed to pay up to $20 per square foot for improvements, or an aggregate of $368,000.  Any additional costs of improvements will be picked up by the lessee. The Company continues to focus on leasing the balance of available space in Escorial Building One.

In December 1998, LDA transferred title of a seven-acre site in Parque Escorial's office park to ELI on which a 150,000 square foot building was constructed. ELI is a partnership in which LDA holds a 45.26% interest in future cash flow generated by the building lease.  The building is leased to the State Insurance Fund of Puerto Rico, a government agency and such lease will terminate on June 30, 2030 at which point the lessee has the right to acquire it for one dollar.  ELI accounted for the transaction as a sales type lease, and a significant portion of the lease payments consist of tax-free interest due from a government agency.  The tax-free status stays intact when ELI distributes its income to LDA.

Property Management
IGP operates a property management business whereby it earns fees from the management of 2,653 of the Puerto Rico Apartment Properties that are based on a percentage of rents ranging from 2.85% to 9.25%.  The management contracts for these properties have terms of three years and are customarily renewed upon expiration.  IGP is also entitled to receive up to an aggregate of $192,000 annually in certain incentive management fees with respect to six of the Puerto Rico Apartment Properties.  IGP is also entitled to receive an additional incentive management fee from available net income on four of these properties, up to the maximum total management fee of 6.5% of gross income of these projects.  For 2008, the additional incentive fees amounted to $156,000, which will be paid during the first quarter of 2009.  The payment of these fees is subject to availability of surplus cash.  Management and other fees earned from properties included within the consolidated financial statements are eliminated in consolidation.

In addition, IGP currently manages 918 rental apartments owned by a third-party, non-profit entity, which acquired the units from IGP in 1996 under the provisions of the Low Income Housing Preservation and Resident Home Ownership Act (also known as "LIHPRHA").  The management fees from these apartments are based on a percentage of rents ranging from 8.0% to 9.25%.  The management agreements for these properties expire March 15, 2010.

Competition
The Puerto Rico Apartment Properties all receive rent subsidies and are therefore not subject to the same market conditions as properties charging market rate rents.  Our competition is within the subsidized markets.  We have been able to maintain an average annual occupancy of approximately 99.5%.

U.S. and Puerto Rico Operating Real Estate Government Regulation
HUD subsidies are provided principally under Section 8 of the National Housing Act (“Section 8”).  Under Section 8, the U.S. Government pays to the applicable apartment partnership the difference between market rental rates (determined in accordance with U.S. Government procedures) and the rate the U.S. Government deems residents can afford.  In compliance with the requirements of Section 8, we screen residents for eligibility under HUD guidelines.  Subsidies are provided under contracts between the U.S. Government and the owners of the apartment properties.

Subsidy contracts for the U.S. and Puerto Rico Apartment Properties are scheduled to expire between 2009 and 2011. ACPT currently intends to seek the renewal of expiring subsidy contracts for its properties based on the most advantageous options available at the time of renewal.  Please refer to the table shown on page 6 of this Annual Report on Form 10-K for the expiration dates and amounts of subsidies for the respective properties.  We initiate the HUD contract renewal process annually.  For contracts where we have elected five-year terms, we are limited to increases based on an Operating Cost Adjustment Factor (“OCAF”).  At the end of the five-year term, or annually if a five-year term is not elected, we will have six options for renewing Section 8 contracts depending upon whether we can meet the eligibility criteria.  Historically, we have met the criteria necessary to renew our Section 8 contracts.

Some of the U.S. Apartment Properties and Puerto Rican Apartment Properties have mortgage loans that are insured by the Federal Housing Authority (“FHA”), or financed through the housing agencies in Maryland, Virginia (the “State Financing Agencies”), or Puerto Rico (the “Puerto Rico Financing Agency”). These properties are subject to guidelines and limits established by the U.S. and Puerto Rico Apartment Properties’ regulatory agreements with HUD and the State Financing Agencies or the Puerto Rico Financing Agency.  Three of the regulatory agreements in Puerto Rico also require that if cash from operations exceeds the allowable cash distributions, the surplus must be deposited into restricted escrow accounts held by the mortgagee and controlled by HUD or the Puerto Rico Financing Agency.  Funds in these restricted escrow accounts may be used for maintenance and capital improvements.

Three of our partnerships are limited distribution partnerships in that annual distributions cannot exceed certain pre-determined amounts.  For Vistas Del Turabo, distributions are limited to $10,000 per year.  For Bayamon Gardens, distributions are limited to $118,000 per year.  For Valle del Sol distributions are limited to $146,000 per year.  Any surplus cash generated by these properties must be deposited in a residual receipts account that with HUD approval, can be used for repairs to the property.

Our regulatory contracts with HUD and/or the mortgage lenders generally require that certain escrows be established as replacement reserves.  The balance of the replacement reserves is available to fund capital improvements as approved by HUD or the mortgage lender.  As of December 31, 2008, a total of $7.7 million was designated as replacement reserves for the U.S. and Puerto Rico Apartment Properties and $3.4 million as debt service reserves for the Puerto Rico Apartment Properties.

 
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HUD has received congressional authority to convert expired contracts to resident-based vouchers.  This would allow residents to choose where they wish to live, which may include the dwelling unit in which they currently reside.  If these vouchers result in our tenants moving from their existing apartments, this may negatively impact the income stream of certain properties.  However, we intend to continue to maintain our properties in order to preserve their values and retain residents to the greatest extent possible.

The U.S. Government has virtually eliminated subsidy programs for new construction of low and moderate income housing by profit-motivated developers such as ACPT.  Any new multifamily rental properties developed by ACPT in the U.S. are expected to offer market rate rents and no new construction of multifamily rental properties is expected in Puerto Rico.

U.S. LAND DEVELOPMENT OPERATIONS

Community Development
ACPT, indirectly through ALD, owns approximately 3,950 undeveloped acres of land in the planned community of St. Charles, Maryland (“St. Charles”), which is comprised of a total of approximately 9,100 acres (approximately 14 square miles) located in Charles County, Maryland, and is located approximately 23 miles southeast of Washington, D.C.  The land in St. Charles is being developed by ACPT for a variety of residential uses, including single-family homes, town homes, condominiums and apartments, as well as commercial and industrial uses.

St. Charles is comprised of five separate villages: Smallwood Village (completed), Westlake Village (substantially completed), Fairway Village (currently under development), Piney Reach (undeveloped except for certain infrastructure improvements) and Wooded Glen (undeveloped except for certain infrastructure improvements).  Each of the developed villages consists of individually planned neighborhoods, and includes schools, churches, recreation centers, sports facilities, and a shopping center.  Other amenities include parks, lakes, hiking trails and bicycle paths.  St. Charles also has an 18-hole public golf course in its Fairway Village community.  Each community is planned for a mix of residential housing, including detached single-family homes, town homes, multiplex units and rental apartments.  Typical lot sizes for detached homes range from 6,000 to 8,000 square feet.

The development of St. Charles as a planned unit development ("PUD") began in 1972 when the Charles County government (the “County”) approved a comprehensive PUD agreement for St. Charles.  This master plan allows for the construction of 24,730 housing units and approximately 1,390 acres of commercial and industrial development.  As of December 31, 2008, there were 11,900 housing units remaining in St. Charles.  In addition, St. Charles has schools, recreation facilities, commercial, office and retail space occupying in excess of 4.4 million square feet.  ACPT, through outside planners, engineers, architects and contractors, obtains necessary approvals for land development, plans individual neighborhoods in accordance with regulatory requirements, constructs roads, utilities and community facilities.  In St. Charles, ACPT currently develops lots for sale for detached single-family homes, town homes, apartment complexes, and commercial and industrial development.

Fairway Village, named for the existing 18-hole public golf course it surrounds, is currently under development.  The master plan for Fairway Village provides for 3,346 dwelling units on 1,645 acres, including a business park and a 68-acre village center.  Opened in 1999, development of Fairway Village continues to progress as evidenced by the 119 lots settled in 2008 and the 158 completed lots in inventory as of December 31, 2008.  All settlements made in 2008 were the result of our March 2004 agreement with Lennar discussed below under “Customer Dependence”.  Since inception of Fairway Village, builders have settled 878 fully developed lots.  In addition to lots in inventory, infrastructure construction is nearly complete on the next 68 single family lots with completion expected in May 2009.  Development is complete for the Company to have access to the parcel designated for our Gleneagles Apartment complex.  Additional parcels are in the engineering phase.

Wooded Glen and Piney Reach comprise approximately 3,180 acres, and are planned for development near the completion date of Fairway Village. The County must approve the total number and mix of residential units before development can begin.  There can be no assurances that the remaining 11,900 units in St. Charles' master plan can be attained within the remaining acreage currently owned.

In 2008, the Company constructed a two story, 23,000 square foot commercial building located in the O’Donnell Lake Restaurant Park within St. Charles’ Westlake Village.  This commercial building has 20,000 square feet of net rentable space, 10,000 square feet on the first floor designated for two restaurant or retail tenants and 10,000 square feet on the second floor designated as office space.  We believe that the restaurant and retail space on the first floor is considered a prime location as it is adjacent to the promenade and board walk, two of the unique amenities of the restaurant park.  In addition, we expect that the inclusion of a hotel and another office building on adjacent lots will offer potential tenants opportunities for significant pedestrian traffic at the site.  As of December 31, 2008, none of the building was sold or leased.  The Company listed the building with a brokerage firm for sale or lease in early 2009.  The Company has experienced favorable traffic at the site considering the difficult commercial real estate market.  The Company is pursuing potential buyers or tenants aggressively.  However, there can be no assurance that the Company will be able to locate a buyer or lease the facility during 2009.

 
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As of December 31, 2008, the Company owned 31.1 acres of developed commercial land and 158 residential lots were available for delivery.  The following table is a more detailed summary of the land inventory available in St. Charles as of December 31, 2008:

   
Lot Type
Estimated Number of Lots
Approximate Acreage
Entitlements
Estimated Expected Date of Sale
Estimated Aggregate Sales Price
SMALLWOOD VILLAGE
           
 
Commercial, Retail, Office:
           
 
Henry Ford Circle
Commercial
6
6.86
A
2010 - 2011
$1.2 - $1.4 million
 
Industrial:
           
 
Industrial Park North Tract 21, Parcel F
Light Industrial
1
7.67
A
TBD
408K
 
Industrial Park North Tract 23, Parcel A
Light Industrial
1
2.27
A
TBD
229K
WESTLAKE VILLAGE
           
 
Commercial, Retail, Office:
           
 
Town Center Parcel A3
Restaurant, Office, Retail
3
4.37
A
2009 - 2012
$3.6 million
 
Parcel M
Office, Retail
1
2.61
A
2009
$450,000
 
Hampshire Commercial Parcel Q
Commercial
1
9.94
C
TBD
$1.6 million
FAIRWAY VILLAGE
           
 
Residential Lots:
           
 
Sheffield Parcel G/M1
SF Detached
57
15.41
A
2009 – 2010
*
 
Sheffield Parcel J
SF Attached
98
22.71
B
2009
*
 
Gleneagles Parcel A
Multi-Family
120
12.40
B
Internal Use
N/A
 
Gleneagles Parcel B
Multi-Family
184
13.00
B
Internal Use
N/A
 
Gleneagles Parcel D
SF Detached
68
28.40
B
2009 - 2011
*
 
Gleneagles Parcel E
SF Detached
117
53.70
B
2009 - 2011
*
 
Gleneagles Parcel C
SF Attached
128
21.20
B
2010 - 2011
*
 
Gleneagles Parcel F
SF Detached
84
31.00
B
2009 - 2010
*
 
Gleneagles South Neighborhood
SF Attached
194
25.00
C
2011 - 2013
*
 
Gleneagles South Neighborhood
SF Detached
642
224.40
C
2010 - 2013
*
 
Gleneagles South Neighborhood
Multi-Family
165
14.00
C
Internal Use
N/A
 
Commercial, Retail, Office:
           
 
Middle Business Park Parcel D
Office, Commercial
14
22.5
B
TBD
TBD
 
Fairway Village Center
Retail, Commercial
1
93.90
B
TBD
TBD
 
Middle Business Park Parcel B
Office, Commercial
4
31.84
B
TBD
TBD
 
Middle Business Park Parcel C
Office, Commercial
3
15.48
B
TBD
TBD
VILLAGE OF WOODED GLEN
           
 
Residential Parcels
TBD
7,155
1810.40
D
TBD
TBD
 
Wooded Glen Village Center
Retail, Commercial
1
30.00
C
TBD
TBD
VILLAGE OF PINEY REACH
           
 
Residential Parcels
TBD
2,921
666.60
D
TBD
TBD
 
Piney Reach Village Center
Retail, Commercial
1
37.30
C
TBD
TBD
 
Piney Reach Industrial Park
Industrial
1
76.18
C
2010
$13.0 million
 
Piney Reach Industrial Park
Industrial
66
506.59
C
TBD
TBD
TOTAL
   
12,037
3,785.73
     
(A) Sites are fully developed and ready for sale
       
(B) Completed master plan approval including all entitlements and received preliminary site plan approval for development
   
(C) Completed master plan approval including all entitlements
     
(D) Completed master plan approval including all entitlements excluding school allocations
 
TBD means To Be Determined.
 
*Price determined as a percentage of the "Base Selling Price" of the new home constructed and sold on the lot per the terms of the sales agreement with Lennar Corporation.

Homebuilding
In October 2008, the Company entered into an agreement with Surrey Homes in central Florida to contribute $2,000,000 to Surrey Homes over the next year in exchange for a 50% ownership interest in Surrey Homes.  During the fourth quarter of 2008, ACPT contributed $500,000 to Surrey Homes with the remainder to be contributed during the first three quarters of 2009.  Surrey Homes’ business model is focused on providing affordable quality homes with the lowest ongoing cost of ownership through a maintenance program of energy efficiency and other green initiatives.  Surrey Homes is establishing itself as a low overhead, lot option home builder and has obtained lot option contracts in certain developments within central Florida that we believe are currently experiencing good sales activity.  Early operations of Surrey Homes are designed to create a scalable, low overhead business that can quickly expand when the central Florida market turns around.  Surrey Homes is led by Jay Lewis who has 23 years of experience in the home building and residential development industries.  Mr. Lewis was previously a Vice-President and Division Manager for a publicly traded homebuilder.

Customer Dependence
In March 2004, the Company executed development and purchase agreements with Lennar’s homebuilding subsidiary to develop and sell approximately 1,950 residential lots, consisting of approximately 1,359 single-family lots and 591 town home lots in Fairway Village (the “Lennar Agreements”).  The Lennar Agreements require Lennar’s homebuilding subsidiary to provide $20,000,000 of letters of credit to secure the purchase of the lots.  The letters of credit will be used as collateral for major infrastructure loans from the County of up to $20,000,000 and will be reduced as the Company repays the principal of these loans.  As security for the Company’s obligations to Lennar, a junior lien was placed on the residential portion of Fairway Village.  For each lot sold in Fairway Village, the Company will deposit $10,300 in an escrow account to fund the principal payments due to the County at which time the lot is released from the junior lien.  Under the Lennar Agreements, the Company is responsible for making developed lots available to Lennar on a monthly basis, and subject to availability, the builder is required to purchase a minimum of 200 residential lots developed by the Company per year.  However, the continued slowing of the new homes sales market in the United States, and more specifically in the Washington D.C. suburban area, has adversely impacted Lennar’s willingness or ability to purchase the required lots.  Consequently, amendments to the Lennar Agreement have been agreed to as follows:

·  
In December 2007, the Company executed the second amendment to the Lennar Agreements (the “December Amendment”) whereby the Company agreed to accept 51 lot settlements in December 2007 in satisfaction of Lennar’s lot purchase requirement for 2007, resulting in 78 total lots purchased by Lennar during 2007.  In addition, the Company agreed to temporarily reduce the final lot price for 100 lots (51 purchased in December 2007 and 49 purchased during the first six months of 2008) from 30% to 22.5% of the base price of the home sold on the lot, with guaranteed minimum prices of $78,000 per single family lot and $68,000 per town home lot.

·  
In November 2008, the Company entered into the third amendment to the Lennar Agreements modifying the minimum number of lots that Lennar is required to purchase annually to 100 units, and increasing the minimum purchase price for such lots from 22.5% to 25% from January 2009 until December 31, 2011.  The amendment ended the exclusive relationship between Lennar and the Company.  With the termination of the exclusive relationship between Lennar and the Company in November, 2008, we have executed sales agreements with NVR, Inc., Richmond American Homes of Maryland, Inc., and Riverview Builders, LLC for the sale of additional lots in the first quarter of 2009.  During 2008, 119 lots were purchased by Lennar, which comprised 61 single-family lots and 58 town home lots.  All of the 2008 lot purchases were under the terms of the December Amendment.

In September 2004, the Company entered into a joint venture agreement with Lennar for the development of a 352-unit, active adult community located in St. Charles, Maryland; and transferred land to the joint venture in exchange for a 50% ownership interest in it and $4,277,000 in cash.  Lennar and the Company each had an equal interest in the joint venture.  The joint venture's operating agreement called for the development of 352 lots and delivery of these lots began in the fourth quarter of 2005.  The Company also managed the project's development for a market rate fee pursuant to a management agreement.  On November 19, 2008, the Company sold to Lennar the Company’s 50% interest in the joint venture and its property management rights for $3,467,000 in cash.  

Revenues from Lennar include residential land sales as well as certain management fees.  Total revenues from Lennar for our U.S. Land Development segment were $12,438,000 for the year ended December 31, 2008, which represented 84% of the U.S. Land Development segment's total revenue and 15% of our consolidated revenue for the year ended December 31, 2008.  No other customers accounted for more than 10% of our consolidated revenue for the year ended December 31, 2008.

Government Approvals
The St. Charles master plan has been incorporated into the County's comprehensive zoning plan. In addition, the County has agreed to provide sufficient water and sewer connections for the balance of the housing units to be developed in St. Charles.  Specific development plans for each village in St. Charles are subject to approval of the County Planning Commission. Such approvals have previously been received for the villages of Smallwood, Westlake and Fairway.  Approvals have not yet been sought on the final two villages, Wooded Glen and Piney Reach. In 2001, the County enacted the Adequate Public Facilities Policy, which limits the number of residential building permits issued to the amount of school allocations calculated in a given period.

Under a settlement agreement reached with the County in 2001, the County agreed to utilize a base line assumption of 200 school allocations per year; however, there are no guarantees that additional allocations will be granted in future years.  The County provided guaranteed school allocations to St. Charles for 898 new dwelling units.  The County subsequently granted allocations for an additional 200 dwelling units in 2005, 300 for 2006, 300 for 2007 and 300 units for 2008.  As of December 31, 2008, we have recorded 1,230 dwelling units with the County leaving us with a balance of 764 school allocations available for new dwelling units.  School allocations are used when the Company records the subdivision plats with the County.  The Company anticipates using 302 allocations in 2009 related to additional lot development in the Gleneagles Neighborhood.

 
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As further stipulated in the settlement agreement, the County will also provide sewer connection for the next 2,000 units in Fairway Village at fees that will be $1,608 less per unit than the fee charged to builders outside of St. Charles.  As of December 31, 2008, approximately 1,350 of the sewer connections were available for use.  Our agreement reached with the County also provides for the possibility that we will be allowed to annex additional contiguous land to St. Charles.

Also pursuant to the settlement agreement, the Company agreed to accelerate the construction of two major roadway links to the County’s road system.  In return, the County agreed to issue general obligation public improvement bonds to finance $20,000,000 of this construction guaranteed by letters of credit provided by Lennar.  As of December 31, 2008, the County issued three separate Consolidated Public Improvement Bonds (the “Bonds”) totaling $20,000,000 on behalf of the Company.  The Bonds bear an interest rate between 4% and 8% and call for semi-annual interest payments and annual principal payments and mature in fifteen years.  The Bond Repayment Agreements with the County stipulate the borrowing and repayment provisions for the funds advanced.  Total cost of the construction project was approximately $31,138,000.

In August 2005, the Company signed a memorandum of understanding (“MOU”) with the Charles County Commissioners regarding a land donation that, as of 2008, houses a minor league baseball stadium and an entertainment complex.  Under the terms of the MOU, the Company donated 42 acres of land in St. Charles to the County on December 31, 2005.  The Company also agreed to expedite off-site utilities, storm-water 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.  The County will be responsible for infrastructure improvements on the site of the complex.  In return, the County will issue the general obligation bonds to finance the infrastructure improvements.  In March 2006 and 2007, $4,000,000 and $3,000,000 of bonds were issued for this project, respectively.  In March 2008, an additional $3,000,000 of bonds were issued for completion of required stadium improvements.  As per the stipulations provided for in the Bond Repayment Agreement with the County, the funds for this project will be repaid by ACPT over a 15-year period.  In addition, the County agreed to increase the base line assumption from 200 to 300 school allocations per year commencing with the issuance of these bonds and continuing until such bonds are repaid in full.  The price of a school allocation is based on negotiations with the County; however, historically, the price has been approximately $16,500 per allocation for the Company.

Competition
Competition among residential communities in Charles County, Maryland is intense. Currently, there are approximately 30 subdivisions competing for new homebuyers within a five-mile radius of St. Charles.  The largest competing housing developments are Charles Crossing, a 451-unit project being developed by a local developer; approximately 400 active adult units being developed by Slenker Land Corporation; Avalon, a 264-unit project being developed by Centex Homes; and Autumn Hills, a 390-unit project being developed by Elm Street Development.  Smaller projects are being developed by more than 20 other developers.  The marketplace attracts major national and regional homebuilders.  In this very price sensitive market, ACPT continues to position St. Charles to provide what it believes to be affordable building lots and homes while offering more amenities than the competition.  The overall market conditions have slowed the growth of new residential construction and we believe the guaranteed school allocations discussed above provide the Company with a competitive advantage.

Environmental Impact
Management believes that the St. Charles master plan can be completed without material adverse environmental impact and in compliance with U.S. Governmental regulations.  In preparation for immediate and future development, Phase I Environmental Site Assessments have been prepared for substantially all of the undeveloped parcels.  Historically, the land has been used for farming, sand and gravel mining and forestry and no significant environmental concerns were found.  Jurisdictional determinations for wetlands have been approved by the Army Corps of Engineers for the Sheffield Neighborhood as well as parts of the Gleneagles Neighborhood in Fairway Village, the current phase of residential development.  The Company has developed an Environmental Policy Manual and has established an Environmental Review Committee and appointed an Environmental Coordination Officer to anticipate environmental impacts and avoid regulatory violations.  However, development can be delayed while local, state and federal agencies are reviewing plans for environmentally sensitive areas.

The ongoing process of land development requires the installation, inspection and maintenance of erosion control measures to prevent the discharge of silt-laden runoff from areas under construction.  The capital expenditures for these environmental control facilities varies with the topography, proximity to environmental features, soil characteristics, soil erosion, and duration of construction.  In 2008, we spent nearly $80,000 for these costs.  As land development continues, an annual cost of approximately $100,000 can be expected.

 
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PUERTO RICAN LAND DEVELOPMENT OPERATIONS

Community Development
The Puerto Rican Land Development Operation’s assets consist of more than 600 acres of developed and undeveloped land in the master planned communities of Parque Escorial in Carolina, Puerto Rico and Parque El Comandante in Canovanas, Puerto Rico (“Parque El Comandante”).  The land in Parque Escorial is being developed by the Company for a variety of residential uses, including condominiums as well as commercial and industrial uses.

The master plan for Parque Escorial was approved in 1994.  Parque Escorial is located approximately six miles from the central business district in San Juan, Puerto Rico.  It includes the construction of 2,700 dwelling units of various types on 282 acres of land and the development of 145 acres of land for commercial, office and light industrial uses.  The commercial site is anchored by a Wal-Mart and Sam's Club, each consisting of approximately 125,000 square feet.  LDA has developed and sold 255 acres of land in this community, and continues to own 120 acres of developed and undeveloped land.  Currently, LDA is developing the infrastructure of the fourth residential phase in Parque Escorial which will be developed in two phases.

As of December 31, 2008, site improvements for the first three residential phases of Parque Escorial, comprising 2,252 units, were completed and either sold to third party homebuilders or used by the Company’s homebuilding operations for the construction of condominiums.  The next residential phase in Parque Escorial, comprising approximately 220 units, is in the beginning stage of infrastructure development, and we expect to develop the last phase, comprising approximately 228 units, in the future.  There were no commercial land sales in backlog as of December 31, 2008.

In 1989, LDA acquired the 427-acre site of the former El Comandante Race Track in Carolina, Puerto Rico.  LDA also owns approximately 490 acres of land adjacent to the new El Comandante Race Track in Canovanas, Puerto Rico.  As of December 31, 2008, this land is the collateral supporting Puerto Rico's $10,000,000 credit facility, which matures in August 2009.  (While the Company will seek to refinance the line into a construction loan for the development of residential condominiums or extend the term of the facility, the current state of the credit market may prevent these plans from occurring.)  Currently, LDA is in the process of obtaining zoning approvals to convert the property into a master plan mixed-use community, Parque El Comandante, similar to Parque Escorial.  As part of the rezoning process in Parque El Commandante, in December 2007, a government agency requested the preparation of an Environmental Impact Statement which was submitted during the first quarter of 2008.  In March 2009, a public hearing was conducted with responses anticipated from the government agency during the second quarter of 2009.

Condominium pricing in Puerto Rico has declined similar to the United States’ market.  However, construction pricing has not declined in a similar manner as we are experiencing in the United States market.  The Company has considered the Hilltop project in the Parque Escorial property (“Hilltop”) to be the premier parcel in the portfolio due to the views of the island that will be enjoyed by future residents.  Accordingly, the Company had previously intended to build condominiums with expected selling ranging from $350,000 to $400,000.  However, sales of condominiums in excess of $350,000 are not occurring in the areas immediately surrounding Parque Escorial.  The Company believes that construction of a $350,000 product is no longer prudent and believes that construction financing could not be obtained at that level.  The Company is now anticipating construction of a product similar to Torres.  Due to increased cost of construction, decline in sales prices and the per unit land basis, the Company noted that the expected total costs of the project exceeded the expected sales proceeds.  The Company has recorded an impairment charge of $6,200,000 in the fourth quarter of 2008 based on an assessment of discounted cash flows assuming that the Company will build and sell condominium units at Hilltop similar to those built at Torres.

 
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    The following table is a summary of the land inventory available in Puerto Rico as of December 31, 2008:

   
 
Current Zoning
 
Lot Type
Estimated Number of Units/Parcels
Approximate Acreage
 
Entitlements
Expected
Date of Sale
Estimated
Asking Sales Price
PARQUE ESCORIAL
             
 
Office Park:
             
 
   Lot IV-3b
Office
Office
1
2.7
A
TBD
$3.5 million
 
Residential:
             
 
   Hilltop Phase I - 220 units
Residential
Residential
220
21.19
B
TBD
N/A
 
   Hilltop Phase II - 228 units
Residential
Residential
228
95.81
B
TBD
N/A
                 
PARQUE EL COMANDANTE
             
 
Mixed-use Lots:
             
 
   Phase I - Quarry Site
Residential
Mixed-use commercial
TBD
50.79
C
TBD
TBD
 
   Phase II - Route 66 North
Agricultural
Mixed-use
TBD
165.83
C
TBD
TBD
 
Residential Lots:
             
 
   Phase I - Quarry Site
Commercial
Residential
TBD
26.11
C
TBD
TBD
 
   Phase III - Route 66 South
Agricultural
Residential
TBD
209.14
C
TBD
TBD
 
   Phase IV - Out-Parcel
Agricultural
Residential
TBD
38.85
C
TBD
TBD
 
Total
     
610.42
     
 
           
(A) Sites are fully developed and ready for sale
(B) Completed master plan approval including all entitlements and received preliminary site plan approval for development
(C) Proposed master plan
 
 
Homebuilding
During the first quarter of 2004, IGP formed Torres to construct and sell a 160-unit residential project within Parque Escorial.  The project consists of a four tower condominium with 40 units in each tower (160 total units).  The construction of the four-tower condominium was completed in December 2006.  As of December 31, 2008, 154 units were sold.  However, sales of the remaining units have slowed substantially, and the Company sold three units during the last six months of 2008.  Of the remaining six unsold units, one unit was under contract as of December 31, 2008.  In 2008, the Puerto Rico real estate market suffered its worst year in the last three decades; however, we continued to sell units in our condominium complex at favorable prices, but at a slower pace than anticipated.  Assisting with these sales, the Puerto Rican government offered homebuyers a $25,000 incentive from the fourth quarter of 2007 through the fourth quarter of 2008.  This incentive is no longer available to homebuyers but the U.S. Government has offered first time homebuyers an $8,000 income tax credit, and the Company intends to offer certain incentives to homebuyers in order to sell the remaining six units, three of which are penthouse units.

 Government Approvals
Parque Escorial's master plan has been approved but specific site plans are subject to the planning board review and approval.  Recently, the Company obtained approval from the Puerto Rico Department of Natural and Environmental Resources (the “DNER”) for the infrastructure development of 220 residential units in Parque Escorial.

Parque El Comandante is in the planning stage and will require significant government approvals throughout the development process.  The master plan approval process is generally an 18 to 24 month process.  However, there can be no assurance that approvals for such development will be obtained, or if obtained, that the Company will be able to successfully develop such land.  Significant progress was made with the re-zoning application of the first phase of approximately 80 acres in El Comandante in 2008.  In March 2009, a public hearing was conducted with responses anticipated from the government agency during the second quarter of 2009.

 
Competition
The Company believes that the scarcity of developable land in the San Juan, Puerto Rico metropolitan area creates a favorable market for condominium unit sales at Parque Escorial.  Competition for condominium unit sales is expected to come primarily from condominium projects in areas that the Company believes to be similar or less desirable than Parque Escorial.  Nearby projects provide for larger units, which are more costly than our units.  There are no other projects in Parque Escorial offering units that are the same size, quality and in the same price range as our units.  In addition, no other community developers are currently developing projects similar to Parque Escorial in the area.

Environmental Impact
We believe that the Parque Escorial master plan can be completed without material adverse environmental impact and in compliance with government regulations.  All of the necessary agencies have endorsed Parque Escorial's environmental impact statement.  Wal-Mart has provided mitigation for 12 acres of wetlands impacted by its development of the shopping center site and other land.  An erosion and sedimentation control plan must be obtained prior to construction.  This plan specifies the measures to be taken to prevent the discharge of silt-laden runoff from areas under construction. In 2008, we did not incur any of these costs.  Once we begin development of the next phase, we expect to incur an estimated $10,000 per year during the development period.  We are in the planning stage of Parque El Comandante and will not have estimates for such costs until we are further in the design stage.

 
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The DNER has enacted Regulation #25 whereby it requires the replacement of trees removed during land development of the proposed Hilltop project on a two-to-one basis.  In February 2006, IGP's agronomist submitted to DNER a tree mitigation plan.  On December 13, 2006, IGP received from DNER's the approval and permit, under certain conditions, to proceed with the tree mitigation plan.  As part of this mitigation plan, in September 2007, the Company signed a Mitigation Agreement with DNER which requires the Company to plant 10,900 trees in the Parque Escorial community over the next three years.  In addition, the Company segregated and donated 44 acres of land to the Municipality of Carolina, Puerto Rico to get the final approval to begin the land development at the Hilltop.  In addition, the Company paid $275,000 to the Municipality of Carolina, Puerto Rico for future maintenance costs of the urban forest.  These parcels of land will be a conservation area for an urban forest.

GENERAL
Employees
ACPT had 217 full-time employees as of December 31, 2008, 104 in the United States and 113 in Puerto Rico.  In Puerto Rico, 26 employees, or 11.9%, of the Company’s total workforce, were subject to a Collective Bargaining Agreement which expired in February 2007, and was currently under negotiations as of December 31, 2008.  Employees performing non-supervisory services through the Company's property management operations receive salaries funded by the properties.

Available Information
ACPT files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC").  These filings are available to the public over the Internet at the SEC's web site at http://www.sec.gov.  You may also read and copy any document the Company files at the SEC's public reference room located at 100 F Street, NE, Washington, DC 20549.  Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.

Our principal Internet address is www.acptrust.com.  We make available, free of charge, on or through www.acptrust.com our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.  Copies of the Company's Annual Report or Code of Ethics for Senior Financial Officers can be requested at no cost by writing to the following address or telephoning us at the following telephone number:
American Community Properties Trust
222 Smallwood Village Center
St. Charles, MD  20602
Attention:  Director of Investor Relations
(301) 843-8600
 
ITEM 1A.
   You should carefully consider the risks described below and all of the other information contained in this Annual Report on Form 10-K, including the financial statements and the notes thereto included in Part II, Item 8, of the Annual Report on Form 10-K.  If any of the following risks occurs, our business, financial condition or results of operations could be materially and adversely affected.

If current adverse global market and economic conditions continue or worsen, our business, results of operations, cash flows and financial condition may be adversely affected.
Recent market and economic conditions have been unprecedented and challenging, with significantly tighter credit markets and a recession that is expected to continue into the second half of 2009.  These conditions, combined with the deteriorating financial conditions of numerous financial institutions, rising unemployment and declining residential and commercial real estate markets, among other things, have contributed to increased market volatility and diminished expectations for the U.S. and other economies.

As a result of these conditions, the cost and availability of credit has been and may continue to be adversely affected in the markets in which we own properties and we and our tenants conduct operations.  Concern about the stability of the markets generally and the strength of numerous financial institutions specifically has led many lenders and institutional investors to reduce, and in some cases, cease, to provide funding to borrowers.  Continued turbulence in the U.S. and international markets and economies may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our tenants and our lenders.  If these market and economic conditions continue, they may limit our ability, and the ability of our tenants, to replace or renew maturing liabilities on a timely basis, access the capital markets to meet liquidity and capital expenditure requirements and may result in adverse effects on our and our tenants’ financial condition and results of operations.  If our tenants’ businesses or ability to obtain financing deteriorates further, they may be unable to pay rent to us, which could have a material adverse effect on our cash flows.

We cannot assure you that continuing long-term disruptions in the global economy and the continuation of tighter credit conditions among, and potential failures of, third party financial institutions as a result of such disruptions, will not have an adverse effect on our lenders.  If our lenders are not able to meet their funding commitment to us, our business, results of operation, cash flows and financial condition could be adversely affected.

In response to the deteriorating market and economic conditions in the U.S. and international markets, U.S. and foreign governments, central banks and other governmental and regulatory bodies have taken or are considering taking other actions to help stabilize the banking system and financial markets and to reduce the severity and length of the recession.  We cannot predict the duration or severity of the current economic challenges, nor can we provide assurance that our responses to the current economic downturn, or the U.S. and foreign governments, central banks and other governmental and regulatory bodies attempts to stabilize the banking system and financial markets and to stimulate the economy, will be successful.

 
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The recent downturn in the commercial and residential real estate market has substantially reduced real estate values, which may cause us to not be able to sell developed property or cause us to sell such property at a loss.
The real estate business is a cyclical business.  Currently, weak economic conditions in the United States and Puerto Rico have substantially slowed residential and commercial property sales, which have caused a reduction in property values.  Continued significant declines in the prices for real estate could cause us not to be able to sell developed property or to have to sell such property at a loss, which could adversely affect our business and operations and our ability to make distributions to our shareholders.

We depend on our tenants to pay rents, and their inability to pay rents may substantially reduce our revenues and cash available for distributions to our shareholders.
Our investments in residential apartment properties are subject to varying degrees of risk that generally arise from the ownership of real estate. The underlying value of our properties and the ability to make distributions to our shareholders depend upon the ability of the tenants of our properties to generate enough income to pay their rents in a timely manner. Their inability to do so may be impacted by employment and other constraints on their personal finances, including debts, purchases and other factors. Changes beyond our control may adversely affect our tenants’ ability to make lease payments and consequently would substantially reduce both our income from operations and our ability to make distributions to our shareholders. These changes include, among others, the following:
 
               changes in national, regional or local economic conditions;
               changes in local market conditions; and
               changes in federal, state or local regulations and controls affecting rents, prices of goods, interest rates, fuel and
                   energy consumption.
 
               Due to these changes or others, tenants and lease guarantors, if any, may be unable to make their lease payments. A default by a tenant, the failure of a tenant’s guarantor to fulfill its obligations or other premature termination of a lease could, depending upon the size of the leased premises and our advisor’s ability to successfully find a substitute tenant, have a materially adverse effect on our revenues and the value of our common shares or our cash available for distribution to our shareholders.

If we are unable to find tenants for our properties, or find replacement tenants when leases expire and are not renewed by the tenants, our revenues and cash available for distribution to our shareholders will be substantially reduced.

Our revenue and cash available for distributions to shareholders could be materially adversely affected if any significant tenant or tenants were to become bankrupt or insolvent, or suffer a material adverse event or a downturn in their business.
           The bankruptcy or insolvency of a major tenant may adversely affect the income produced by our properties.  If any tenant becomes a debtor in a case under the Bankruptcy Code, we cannot evict the tenant solely because of the bankruptcy.  In addition, the bankruptcy court might authorize the tenant to reject and terminate its lease with us.  Our claim against the tenant for unpaid and/or future rent would be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease, and our claim for unpaid rent would likely not be paid in full.  Our revenue and cash available for distributions to our shareholders could be materially adversely affected if our significant tenants were to become bankrupt or insolvent or suffer a downturn in their business.

We may be unable to renew expiring leases or re-lease vacant space on a timely basis or on attractive terms, which could significantly decrease our cash flow.
Current tenants may not renew their leases upon the expiration of their terms.  Alternatively, current tenants may attempt to terminate their leases prior to the expiration of their current terms.  If non-renewals or terminations occur, we may not be able to locate qualified replacement tenants and, as a result, we could lose a significant source of revenue while remaining responsible for the payment of our obligations.  Moreover, the terms of a renewal or new lease may be less favorable than the current lease terms.  Any of these factors could cause a decline in lease revenue, which would have a negative impact on our profitability.

We may be subject to risks with respect to our acquisition and development activities.
            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.  Acquired properties may fail to perform as we expected in analyzing our investments.

We engage in development of certain types of properties for lease or sale. Development involves many risks, including the following:
 
                 we may be unable to obtain, or may suffer delays in obtaining, necessary zoning, land-use, building, occupancy and other
                    required governmental permits and authorizations, which could result in increased costs, modification or
                    abandonment of these projects;
                 ● we may incur construction costs for property which exceed our original estimates due to increased costs for materials or labor or
                    other costs that we did not anticipate;
                 we may not be able to obtain financing on favorable terms or at all, which may render us unable to proceed with our development
                    activities;
                 we may be unable to complete construction and lease-up of a property on schedule, which could result in increased debt service
                    expense or construction costs; and
                 ● 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 bulk of our operations are concentrated in Maryland and Puerto Rico, making us particularly vulnerable to changes in local economic conditions.  In addition, if weather conditions, or a natural disaster such as a hurricane or tornado, were to impact those regions, our results of operations could be adversely impacted.  Although insurance could mitigate some amount of losses from a catastrophe in those regions, it might not fully compensate us for our opportunity costs or our projected results of future operations in those regions, the market acceptance of which might be different after a catastrophe.

 
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             Additionally, the time frame required for development, construction and lease-up of these properties means that we may have to wait years for significant cash returns and may never realize cash returns.  Because we anticipate paying cash distributions to our shareholders, if the cash flow from operations or refinancing is not sufficient, we may be forced to borrow additional money to fund such distributions.

Newly developed and acquired properties may not produce the returns that we expect, particularly in the current global economic environment, which could adversely affect our overall financial performance.
In deciding whether to acquire or develop a particular property, we make assumptions regarding the expected future performance of that property.  In particular, we estimate the return on our investment based on expected occupancy and rental rates. Some of these estimates were made in advance of the recent economic downturn, and we cannot assure you that our operations at these properties will not be adversely affected by the current global economic environment relative to our original estimates.  Additionally, we have acquired, and may continue to acquire, properties not fully leased, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service associated with that property until the property is more fully leased at favorable rental rates.  If our estimated return on investment for the property proves to be inaccurate and the property is unable to achieve the expected occupancy and rental rates, it may fail to perform as we expected in analyzing the investment.
 
The recent credit crisis may adversely affect potential homebuyers’ ability to obtain financing and our ability to obtain development financing or refinance current mortgage loans.
Our business is substantially dependent on the ability of our customers to finance the purchase of our land or homes.  The current credit crisis has increased lender scrutiny of potential borrowers and has made it difficult for some potential homebuyers to obtain financing.  Continued or increasing limitations on the availability of financing or increases in the cost of such financing could adversely affect our operations.  Our business 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 credit 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 also impact our ability to obtain loans to finance the development of our future communities.
 
The Company has two lines of credit and one non-recourse mortgage that mature in 2009.  In the United States, a $14,000,000 revolving line of credit loan that was set to mature on April 14, 2009 has been extended to March 31, 2010 with quarterly scheduled payments as follows:  first quarter payment of $2,200,000 on March 31, 2009; second quarter payment of $1,300,000 on June 30, 2009; third quarter payment of $300,000 on September 30, 2009; fourth quarter payment of $2,200,000 on December 31, 2009; and the remaining balance of approximately $571,000 in the first quarter of 2010.  Although the Company has extended this line of credit, the Company continues to work with other lenders to replace this facility entirely.  The Company has certain financial covenants related to this revolving line of credit.  As of December 31, 2008, the Company failed to meet the Minimum Net Worth covenant at the ACPT level as tangible net worth was $1,341,000.  The Company has received a waiver of this covenant requirement through March 31, 2010.  The failure to meet this covenant did not impact any other debt agreements.

In Puerto Rico, a $10,000,000 credit facility, with an outstanding balance of $4,327,000 as of December 31, 2008, matures on August 31, 2009.  The Company anticipates that the balance outstanding on this facility will be approximately $8,300,000 as of August 31, 2009.  While the Company will seek to refinance the line into a construction loan for the development of residential condominiums or extending the term of the facility, the current state of the credit market may prevent these plans from occurring.  IGP provided a guarantee on this credit facility; however, the lender's recourse under this guarantee is limited to the collateral, except in the case of fraud, intentional misrepresentation, or misappropriation of income associated with the collateral.  In the event of a default, the lender's sole recourse is to foreclose on the property.  An event of default on this facility will not affect any other debt facility held by the Company.  The collateral to support the line of credit consists of 427 acres of land, which has a cost basis of $11,500,000 at December 31, 2008.  There is no income generated from this property as it is in the planning stages for the development of the Company’s second planned community in Puerto Rico.

Also in Puerto Rico, the Company has a mortgage balance maturing on April 30, 2009.  As of December 31, 2008, the balance due was $6,816,000.  The Company is in the process of refinancing this mortgage.  However, should the Company be unable to negotiate or refinance with acceptable terms, the sole collateral for this mortgage is the Monserrate Associates apartment property, which has a cost basis of $3,785,000 at December 31, 2008.  This property generated approximately $2,700,000 of revenue and $400,000 of pre-tax income in 2008.
 
Borrowing increases our business risks.
Debt service increases the expense of operations since we are responsible for retiring the debt and paying the attendant interest, which may result in decreased cash available for distribution to our shareholders. In the event the fair market value of our properties was to increase, we could incur more debt without a commensurate increase in cash flow to service the debt. In addition, our trustees can change our policy relating to the incurrence of debt at any time without shareholder approval.

We may incur indebtedness secured by our properties, which subjects those properties to foreclosure.
             Incurring mortgage indebtedness increases the risk of possible loss.  Most of our borrowings to acquire properties are secured by mortgages on our properties.  If we default on our secured indebtedness, the lender may foreclose and we could lose our entire investment in the properties securing such loan which could adversely affect distributions to shareholders.  For federal tax purposes, any such foreclosure would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage and, if the outstanding balance of the debt secured by the mortgage exceeds our basis of the property, there could be taxable income upon a foreclosure.  To the extent lenders require us to cross-collateralize our properties, or our loan agreements contain cross-default provisions, a default under a single loan agreement could subject multiple properties to foreclosure.

 
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Increases in interest rates could increase the amount of our debt payments and adversely affect our results of operations and our ability to make cash distributions to our shareholders.
             Higher interest rates could increase debt service requirements on variable rate debt and could adversely affect our results of operations and reduce the amounts available for distribution to our shareholders.  Additionally, such change in economic conditions could cause the terms on which borrowings become available to be unfavorable.  In such circumstances, if we are in need of capital to repay indebtedness in accordance with its terms or otherwise, we could be required to liquidate one or more of our investments in properties at times which may not permit realization of the maximum return on such investments.

Increased construction of similar properties that compete with our properties in any particular location could adversely affect the operating results of our properties and our cash available for distribution to our stockholders.
We may acquire properties in locations which experience increases in construction of properties that compete with our properties.  This increased competition and construction could:
 
                 make it more difficult for us to find tenants to lease units in our apartment communities;
                 force us to lower our rental prices in order to lease units in our apartment communities; and
                 substantially reduce our revenues and cash available for distribution to our shareholders.

Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our
properties and harm our financial condition.
Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties in our portfolio in response to adverse changes in the performance of such properties may be limited, thus harming our financial condition.  The real estate market is affected by many factors that are beyond our control, including:
 
                 adverse changes in national and local economic and market conditions;
                  changes in interest rates and in the availability, cost and terms of debt financing;
                 changes in governmental laws and regulations, fiscal policies and zoning ordinances and costs of compliance with laws and
                     regulations, fiscal policies and ordinances;
                 the ongoing need for capital improvements, particularly in older buildings;
                 ● changes in operating expenses; and
                 civil unrest, acts of war and natural disasters, including earthquakes and floods, which may result in uninsured and
                     underinsured losses.
 
        We cannot predict whether we will be able to sell any property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us.  We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property.
 
                We may be required to expend funds to correct defects or to make improvements before a property can be sold.  We cannot assure you that we will have funds available to correct those defects or to make those improvements.  In acquiring a property, we may agree to lock-out provisions that materially restrict us from selling that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property.  We may also acquire properties that are subject to a mortgage loan that may limit our ability to sell the properties prior to the loan’s maturity.  These factors and any others that would impede our ability to respond to adverse changes in the performance of our properties could have a material adverse effect on our operating results and financial condition, as well as our ability to make distributions to our security holders.

Lack of geographic diversity may expose us to regional economic downturns that could adversely impact our operations or our ability to recover our investment in one or more properties.
           Geographic concentration of properties exposes us to economic downturns in the areas where our properties are located.  Because we mainly operate in the suburban areas surrounding Washington D.C. and Puerto Rico, our portfolio of properties may not be geographically diversified.  A regional recession in any of these areas could adversely affect our ability to generate or increase operating revenues, attract new tenants or dispose of unproductive properties.

Competition with entities that have greater financial resources could make it more difficult for us to acquire attractive properties and achieve our investment objectives.
               We compete for investment opportunities with entities with substantially greater financial resources.  These entities may be able to accept more risk than our board of trustees believes is in our best interests.  This competition may limit the number of suitable investment opportunities offered to us.  This competition also may increase the bargaining power of property owners seeking to sell to us, making it more difficult for us to acquire properties.  In addition, we believe that competition from entities organized for purposes similar to ours may increase in the future.

Our revenue and cash available for distributions to shareholders could be materially adversely affected if Lennar or any other significant customer were to become bankrupt or insolvent, or suffer a material adverse event or a downturn in their business.
    Revenues from Lennar include residential land sales as well as certain management fees.  Total revenues from Lennar within our U.S. Land Development segment were $12,438,000 for the year ended December 31, 2008 which represented 84% of the U.S. Land Development segment’s revenue and 15% of our consolidated revenue for the year ended December 31, 2008.  No other customers accounted for more than 10% of our consolidated revenue for the year ended December 31, 2008.  Loss of all or a substantial portion of our land sales, as well as our joint venture’s land sales, to Lennar would have a significant adverse effect on our financial results.
 
       Although Lennar was contractually obligated to purchase 200 lots per year, the market is not currently sufficient to absorb this sales pace.  Accordingly, Lennar’s management requested and the Company granted a reduction of the 200 lot requirement for 2008 through 2011.  Management agreed to accept a total of 119 lots as satisfaction of their lot takedown requirement for 2008 and 100 lots per year for 2009 through 2011.  In addition, the Company agreed to a temporary price reduction to 25% of the selling price of the home for 2009 through 2011.  Should Lennar not comply with their obligations pursuant our amended contract or there be a reduced demand for our commercial property our revenue and cash available for distributions to our shareholders would be adversely impacted.

 
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We may be unable to renew our HUD subsidy contracts and may lose federal funding to service these contracts.
 As of December 31, 2008, we owned equity interests in multifamily rental 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.  Historically, there have been delays in the receipt of subsidy payments which generally occur upon contract renewal and HUD’s annual budget renewal process.  For HUD properties held in partnerships in which we serve as General Partner, we may be required to fund operating cash deficits when these delays occur.  General Partner advances or loans to the partnerships may then become subject to the repayment provisions required by the respective partnership agreements which may impede the timing of repayment.  Furthermore, 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.

An uninsured loss or a loss that exceeds the insurance policies on our properties could subject us to lost capital or revenue on those properties.
 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. We would nevertheless remain obligated on any mortgage indebtedness or other obligations related to the property.  If an uninsured loss or a loss in excess of insured limits should occur, we could lose all or part of our capital invested in a property, as well as any future revenue from the property, which could adversely affect our results of operations and financial condition, and our ability to pay distributions to our shareholders.

The costs of compliance with, or liabilities under, environmental laws may adversely affect our operating results.
           Our operating expenses could be higher than anticipated due to the cost of complying with existing or future environmental laws and regulations.  An owner of real property can face liability for environmental contamination created by the presence, release or discharge of hazardous substances on the property.  We may face liability regardless of:
 
                our lack of knowledge of the contamination;
                the timing of the contamination;
                the cause of the contamination; or
                the party responsible for the contamination of the property.
 
            There may be environmental problems associated with our properties of which we are unaware.  If environmental contamination exists on our properties, we could become subject to strict, joint and several liability for the contamination by virtue of our ownership interest.
 
                The presence of hazardous substances on a property may adversely affect our ability to sell the property, and we may incur substantial remediation costs, thus harming our financial condition. In addition, although many of our leases generally require our tenants to operate in compliance with all applicable laws and to indemnify us against any environmental liabilities arising from a tenant’s activities on the property, we could nonetheless be subject to strict liability by virtue of our ownership interest for environmental liabilities created by our tenants, and we cannot be sure that our tenants would satisfy their indemnification obligations under the applicable sales agreement or lease.  Certain leases with significant tenants do not indemnify us against environmental liabilities arising from these tenants’ activities on the property.  The discovery of material environmental liabilities attached to our properties could have a material adverse effect on our results of operations, financial condition and ability to pay distributions to our shareholders.

Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem.
    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 a similar manner, the existence of a significant amount of lead based paint at our properties could result in costly remediation efforts.  In addition, the presence of significant mold or lead based paint 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.

Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make unintended expenditures that adversely impact our ability to pay distributions to our shareholders.
        Under the Americans with Disabilities Act of 1990, or ADA, all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons.  These requirements became effective in 1992.  A number of additional U.S. federal, state and local laws may also require modifications to our properties or restrict certain further renovations of the properties, with respect to access thereto by disabled persons.  Noncompliance with the ADA could result in the imposition of fines or an award of damages to private litigants and an order to correct any non-complying feature, which may require substantial capital expenditures.  We have not conducted an audit or investigation of all of our properties to determine our compliance, and we cannot predict the ultimate cost of compliance with the ADA or other legislation.  If one or more of our properties is not in compliance with the ADA or other legislation, then we would be required to incur additional costs to bring the property into compliance.

 
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            In addition, our properties are subject to various other federal, state and local regulatory requirements, such as state and local fire and life safety requirements.  If we fail to comply with various requirements, we might incur governmental fines or private damage awards.  In addition, we do not know whether existing requirements will change or whether future requirements will require us to make significant unanticipated expenditures.

                 If we incur substantial costs to comply with the ADA or any other legislative or regulatory requirements, our financial condition, results of operations, cash flow, market price of our common stock and our ability to satisfy our debt service obligations and to pay distributions to our shareholders could be adversely affected.

Our business could be harmed if key personnel terminate their employment with us.
    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.
 
Terrorist attacks and other acts of violence or war may affect any market on which our securities trade, the markets in which we operate, our operations and our profitability.
    Terrorist attacks may negatively affect our operation and profitability.  These attacks or armed conflicts may directly impact the value of our properties through damage, destruction, loss or increased security costs.  The terrorism insurance that we obtain may not be sufficient to cover loss for damages to our properties as a result of terrorist attacks.  In addition, certain losses resulting from these types of events are uninsurable and others would not be covered by our current terrorism insurance.  Additional terrorism insurance may not be available at a reasonable price or at all.  If the properties in which we invest are unable to obtain sufficient and affordable insurance coverage, the value of these investments could decline, and in the event of an uninsured loss, we could lose all or a portion of an investment.
 
    The United States may enter into armed conflicts in the future.  The consequences of any armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business.

    Any of these events could result in increased volatility in or damage to the United States and worldwide financial markets and economy.  They also could result in a continuation of the current economic uncertainty in the United States or abroad.  Adverse economic conditions could affect the ability of our tenants to pay rent, which could have a material adverse effect on our operating results and financial condition, as well as our ability to make distributions to our security holders, and may adversely affect and/or result in volatility in the market price for our securities.

If we were to be taxed as a corporation rather than a partnership, we would experience adverse tax consequences with respect to the income earned from our Puerto Rico operations.
         The Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), provides that publicly traded partnerships such as ACPT will, as a general rule, be taxed as corporations for U.S. federal income tax purposes, subject to certain exceptions.  We have relied in the past, and expect to continue to rely on an exception to this general rule for publicly traded partnerships that earn 90% or more of their gross income for every taxable year from specified types of “qualifying income,” including dividends.  If we fail to meet this “qualifying income” exception or are otherwise treated as a corporation for federal income tax purposes, the income we earn from our Puerto Rico operations would be subject to increased taxes.

 We do not believe that there would be an increase in the U.S. income taxes that would be imposed on our U.S. operations if ACPT were not to qualify as a partnership for U.S. federal income tax purposes because our U.S. operations are conducted through U.S. corporations that are subject to U.S. federal income tax.  However, our classification as a partnership does permit us to reduce the overall taxes that the Company pays on the operations of our Puerto Rican subsidiary (because, in ACPT’s current partnership tax structure, ACPT is taxed in Puerto Rico, but not in the United States, on those operations).  If we were not able to qualify as a partnership for U.S. federal income tax purposes, the net result would be an incremental increase in ACPT’s total tax expense on income for operations in Puerto Rico, although it is not practicable to quantify that potential impact.  In addition, if we were not to qualify as a partnership for U.S. federal income tax purposes, any foreign tax credits generated by our Puerto Rico operations would be used by us and would no longer be passed through to our shareholders.

The tax liabilities of our shareholders may exceed the amount of the cash distributions we make to them.
A shareholder generally will be subject to U.S. federal income tax on his or her allocable share of our taxable income, whether or not we distribute that income to the shareholders.  We intend to make elections and take other actions so that, to the extent possible, our taxable income will be allocated to individual shareholders in accordance with the cash received by them.  In addition, we are generally required by our Declaration of Trust to make minimum aggregate distributions, in cash or property, each year to our shareholders equal to 45% of our net taxable income, reduced by the amount of Puerto Rico taxes we pay.

If our income consists largely of cash distributions from our subsidiaries, as expected, it is likely that we will have sufficient cash to distribute to shareholders.  There can be no assurance, however, that our income allocations to the individual shareholders will be respected or that we will be able to make distributions in any given year that provide each individual shareholder with sufficient cash to meet his or her federal and state income tax liabilities with respect to his or her share of our income.  However, there is a proposed Treasury regulation that may affect the ability of our shareholders to claim foreign tax credits attributable to their investment in us under Section 901 of the Internal Revenue Code.  On November 19, 2007, IRS Notice 2007-95 provided a delay of the effective date of proposed amendments to the foreign tax credit regulations.  The regulations, with or without changes, will be effective for tax years beginning after the final regulations are published in the Federal Register.

A portion of the proceeds from the sale of our shares may be taxed as ordinary income.
A shareholder will generally recognize gain or loss on the sales of our shares equal to the difference between the amount realized and the shareholder’s tax basis in the shares sold.  Except as noted below, the gain or loss recognized by a shareholder, other than a “dealer” in our shares, on the sale or exchange of shares held for more than one year, will generally be taxable as a capital gain or loss.  Capital gain recognized by an individual on the sale of shares held more than 12 months will generally be taxed at a maximum rate of 15%.

 
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A portion of this gain or loss, however, may be taxable as ordinary income under Section 751 of the Code to the extent attributable to so-called “unrealized receivables,” which term, for this purpose, includes stock in our Puerto Rican subsidiary to the extent that gain from our sale of that stock would be taxable to our shareholders as a dividend under Section 1248 of the Internal Revenue Code.  The amount of ordinary income attributable to “unrealized receivables” related to stock in our Puerto Rican subsidiary will be determined based on the amount of earnings and profits accumulated by our Puerto Rican subsidiary.  We will provide to each selling shareholder, at the time we send the IRS Schedule K-1 materials, a table showing the earnings and profits accumulated by our Puerto Rican subsidiary by year and the average number of our shares outstanding during the year, so that the shareholder may make a determination of the amount of earnings and profits allocable to him or her and the amount of ordinary income to be recognized on the sale.  Although there is no definitive authority on the question, we believe that it is reasonable to base the allocation on the earnings and profits accumulated during the period that the shareholder held the shares that are sold and the percentage of our average number of shares outstanding that those shares represented.

The amount of unrealized receivables may exceed the net taxable capital gain that a shareholder would otherwise realize on the sale of our shares, and may be recognized even if the shareholder would realize a net taxable capital loss on the sale.  Thus, a shareholder may recognize both ordinary income and capital loss upon a sale of our shares.  Accordingly, a shareholder considering the sale of our shares is urged to consult a tax advisor concerning the portion of the proceeds that may be treated as ordinary income.  In addition, the shareholder is required to report to us any sale of his or her shares, unless the broker effecting the transaction files a Form 1099-B with respect to the sale transaction.

Tax rules relating to the tax basis and holding period of interests in a partnership differ from those rules affecting corporate stock generally, and these special rules may impact purchases and sales of our shares in separate transactions.
 The Internal Revenue Service (“IRS”) has ruled that an investor who acquires interests in an entity taxed as a partnership, such as ACPT, in separate transactions must combine those interests and maintain a single adjusted tax basis for those interests.  Upon a sale or other disposition of less than all of the shares held by a shareholder, a portion of the shareholder’s tax basis in all of his or her shares must be allocated to the shares sold using an “equitable apportionment” method, which generally means that the tax basis allocated to the shares sold bears the same relation to the shareholder’s tax basis in all of the shares held as the value of the shares sold bears to the value of all of the Shares held by the shareholder immediately prior to the sale.  Furthermore, Treasury regulations under Section 1223 of the Internal Revenue Code generally provide that if a shareholder has acquired shares at different times, the holding period of the transferred shares shall be divided between long-term and short-term capital gain or loss in the same proportions as the long-term and short-term capital gain or loss that the shareholder would realize if all of the shareholder’s shares were transferred in a fully taxable transaction immediately before the actual transfer.  The Treasury regulations provide, however, a special rule that allows a selling shareholder who can identify shares transferred with an ascertainable holding period to elect to use the actual holding period of the shares transferred.
 
  Thus, according to the ruling discussed above, a shareholder will be unable to select high or low basis shares to sell as would be the case with shares of entities treated as corporations for U.S. federal income tax purposes, but, according to the Treasury regulations, may designate specific shares for purposes of determining the holding period of the shares transferred.  A shareholder electing to use the actual holding period of shares transferred must consistently use that identification method for all subsequent sales or exchanges of shares.  A shareholder considering the purchase of additional shares or a sale of shares purchased in separate transactions is urged to consult his or her tax advisor as to the possible consequences of the ruling and the application of these Treasury regulations.
 
We would experience adverse tax consequences with respect to the income earned from our Puerto Rico operations if the IRS successfully asserts that the “anti-stapling” rules apply to our investments in IGP Group and our U.S. corporate subsidiaries.
                   If we were subject to the “anti-stapling” rules of Section 269B of the Internal Revenue Code, we would experience adverse tax consequences as a result of owning more than 50% of the value of both a domestic corporate subsidiary and a foreign corporate subsidiary, such as IGP Group.  If the “anti-stapling” rules applied, IGP Group would be treated as a domestic corporation, which would cause IGP Group to be subject to U.S. federal income tax.  The net result would be an incremental increase in ACPT’s total tax expense on income for operations in Puerto Rico, although it is not practicable to quantify that potential impact.  In addition, if the anti-stapling rules applied, we would no longer have foreign tax credits attributable to our Puerto Rico operations to pass through to our shareholders.
 
ITEM 1B.
     None

ITEM 2.

   ACPT owns real property located in the United States and Puerto Rico.  As of December 31, 2008, the Company held investments in multifamily and commercial real estate properties, apartment properties under construction, community development land holdings, and homebuilding units.  Refer to the tables in Item 1 of this Annual Report on Form 10-K for additional information.

 
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ITEM 3.

   Below is a description of all material litigation that ACPT or any of its subsidiaries are a party to.

   Comité Loiza Valley en Acción, Inc. vs. Cantera Hipódromo, Inc., Carlos Ortiz Brunet, his wife Frances Vidal; Land Development Associates, S.E.; Integrand Assurance Company; American International Insurance Company; Et als, No. FPE97-0759(406), Superior Court of Carolina, Puerto Rico.  On November 24, 1997, Comité Loiza Valley en Acción, Inc., 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 in the Superior Court of Carolina, Puerto Rico 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 all 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’s decision and Integrand was 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 said request.  Hence, LDA is an added insured on the damage claims in the complaint.  The trial began in 2007 and continued throughout 2008.  A judgment is expected to be entered near the end of 2009.

     Due to the inherent uncertainties of the judicial process, we are unable to either predict the outcome of or estimate a range of potential loss associated with this matter. While we intend to vigorously defend this matter and believe we have meritorious defenses available to us, there can be no assurance that we would prevail.  If this matter is not resolved in our favor, we are insured for potential losses.  Any amounts that exceed our insurance coverage could have a material adverse effect on our financial condition and results of operations.
 
     Arlena Chanye et al. vs. American Rental Management Company Case No.s RH-TP-06-28366/RH-TP-06-28577.  In 2006, a group of approximately 60 tenants of Capital Park Towers Apartments (“Capital Park”) a property managed, but not owned by ARMC and located at 301 G Street, S.W., Washington, D.C. filed a tenant petition with the Rent Administrator for the District of Columbia challenging increases in rent implemented with respect to said tenants units during the previous three year period (“Initial Case”).  Following the initial petition, a group of 60 additional tenants filed a similar petition in May of 2008.  While the Company has numerous defenses to the claims asserted in both cases, at this time management believes that potential exposure to damages in these cases is probable and estimates the loss at approximately $230,000.  Generally, these types of losses are covered by our insurance policies.  However, the Company has recently been informed that our insurance carrier intends to deny these claims.  We intend to vigorously defend against the claims asserted and will continue to pursue coverage under our insurance policies.  Given the current circumstances, the Company accrued $230,000 in the third quarter 2008 related to the potential losses.  However, absent a settlement of the case, it will likely take a number of years before the case is concluded and a final determination rendered.  The Company's Chairman has an economic interest in the property related to a note receivable from Capital Park.

   The Company and/or its subsidiaries have been named as defendants, along with other companies, in tenant-related lawsuits.  The Company carries liability insurance against these types of claims that management believes meets industry standards.  To date, payments made to the plaintiffs of the settled cases were covered by our insurance policy.  The Company believes it has strong defenses to these ordinary course claims, and intends to continue to defend itself vigorously in these matters.

   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.
 
ITEM 4.
    No matters were submitted to a vote of the shareholders during the fourth quarter of the fiscal year ended December 31, 2008.
 
ITEM 4A.
   The executive officers of the Company are as follows:

Name
Age
Position
     
J. Michael Wilson
43
Chairman
Stephen K. Griessel
49
Chief Executive Officer
Matthew M. Martin
33
Chief Financial Officer and Secretary
Eduardo Cruz Ocasio
62
Senior Vice President and Assistant Secretary
Jorge Garcia Massuet
70
Vice President
Harry Chalstrom
48
Vice President
Mark L. MacFarland
39
Vice President
Rafael Velez
52
Vice President

 
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                   Messrs. Wilson and Griessel are also members of our Board of Trustees.  Brief biographies of Messrs. Wilson and Griessel are incorporated by reference to the Company’s Proxy Statement to be filed with the SEC for its Annual Shareholder’s Meeting to be held in June 2009.  Biographical information for our other executive officers is as follows:

   Matthew M. Martin was appointed Chief Financial Officer of the Company effective October 1, 2008.  Mr. Martin has been employed with the Company since 2005 as Chief Accounting Officer, and has been serving as the Company’s Principal Financial Officer since August 2008.  Prior to joining the Company, he worked for FTI Consulting serving as a Manager in the Forensic and Litigation Consulting practice from 2002 to 2005.  Prior to joining FTI Consulting, he managed audits for Arthur Andersen.  Mr. Martin is a Certified Public Accountant in the State of Maryland and is a Certified Fraud Examiner.

   Eduardo Cruz Ocasio was appointed Senior Vice President of the Company in June 2002 after serving as Vice President and Assistant Secretary of the Company since July 1998.  Prior to that date, he served in various capacities with the predecessor company.

   Jorge Garcia Massuet was appointed Vice President of the Company in June 2002.  Mr. Massuet has been Vice President of IGP since January 1999.  Mr. Masuet served as Vice President and General Manager of Fountainebleu Plaza, S.E., a real estate development firm, from January 1994 to December 1998.

   Harry Chalstrom was appointed Vice President of the Company in January 2004 after serving as Director of Rental Housing of the Company since November 2002.  Prior to that date, he worked for Bozzuto Construction Company from 1997 to 2002.  During his tenure at Bozzuto, he served as a Project Manager for apartment construction projects.
 
   Mark L. MacFarland was appointed Vice President of the Company in January 2006 after serving as the Executive Director of Land Development for the Company since June 2003.  From June 2002 to June 2003, he worked as a consultant for the Charles County Government working on numerous capital improvement projects.  Before serving as a consultant, he worked as an engineer and developer in the power generation industry.

   Rafael Vélez was appointed Vice President of the Company in January 2006.  Mr. Vélez has been with the Company since September of 2001 when he was hired as the Chief Accounting Officer of IGP LP, a wholly owned subsidiary of the Company.  In June 2002, Mr. Vélez was appointed as Vice President of IGP Group and in June 2003 was appointed and currently remains as Vice President, Secretary and Treasurer.  In June 2004, Mr. Vélez was appointed and currently remains as Senior Vice President, Chief Financial Officer, Secretary and Treasurer of IGP LP.  He has more than 30 years experience in public and private accounting in the Real Estate, Development, Construction and Property Management Industries.
 
PART II

ITEM 5.

   The principal market for our Company’s common shares is the NYSE Amex (formerly the American Stock Exchange), where the Company’s common shares are listed under the symbol "APO”.  As of the close of business on March 3, 2009, there were 129 shareholders of record of ACPT’s common shares.  On March 3, 2009 the closing price reported by the NYSE Amex was $3.50.

   The table below sets forth, for the periods indicated, the high and low closing prices of the Company’s shares as reported on the NYSE Amex, and the dividends declared per common share for such calendar quarter.
 
       
Price Range of ACPT Shares
 
Dividends
       
High
 
Low
 
Declared
                 
2008
 
Quarter
           
   
Fourth
 
 $         10.20
 
 $       3.10
 
  $      0.10
   
Third
 
            14.25
 
        10.20
 
                 -
   
Second
 
         &