Commission file number 1-14369

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

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.

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants' 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. / /

As of March 15, 2001 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 was $12,262,149. As of March 15, 2001, there were 5,191,554 common shares outstanding.

Portions of the Proxy Statement to be filed with the Securities and Exchange Commission for Registrant's 2001 Annual Meeting of Shareholders to be held in June 2001 are incorporated by reference into Part III.

On March 17, 1997, American Community Properties Trust ("ACPT"), a wholly owned subsidiary of Interstate General Company L.P. ("IGC" "Predecessor"), was formed as a real estate investment trust under Article 8 of the Maryland Corporation Associations Code (the "Maryland Trust Law"). ACPT was formed to succeed to most of IGC's real estate assets.

On October 5, 1998, IGC transferred to ACPT the common shares of four subsidiaries that collectively comprised the principal real estate operations and assets of IGC. In exchange, ACPT issued to IGC 5,207,954 common shares of ACPT, all of which were distributed to the partners of IGC.

ACPT is a self-managed holding company that owns all of the outstanding equity interests in American Rental Management Company ("American Management"), American Land Development U.S., Inc. ("American Land"), and IGP Group Corp. ("IGP Group") and all of the common stock of American Rental Properties Trust ("American Rental").

ACPT is engaged in four principal lines of business: (i) ownership of rental apartment properties in the United States and Puerto Rico, (ii) community development in the United States and Puerto Rico, (iii) property management services in the United States and Puerto Rico, and (iv) development of commercial rental properties and/or ground leases in Puerto Rico. In addition, ACPT is engaged in limited condominium building operations in Puerto Rico. Set forth below is a brief description of these businesses.

ACPT, indirectly through its subsidiary, American Rental, and American Rental's limited partnership subsidiary, American Housing, hold interests in 13 U.S. apartment partnerships that own and operate apartment facilities in Maryland and Virginia. The U.S. apartment partnerships own a total of 2,246 rental units. Each of the apartment properties is financed by a mortgage that is non-recourse to the apartment partnership. Under non-recourse mortgages, the partners are not jointly and severally liable for the debt. HUD provides rent subsidies to residents of 993 of the apartment units and interest subsidies to projects comprising 415 units. In addition, 110 units are leased pursuant to HUD's Low Income Housing Tax Credit program, and 200 other units are leased under income guidelines set by the Maryland Community Development Administration. The remaining 528 units are leased at market rates.

The partnership agreements of nine of the U.S. apartment partnerships provide that American Housing will receive between 50% and 99.9% of distributable surplus cash from operations, refinancings or dispositions as general partner. In two of those partnerships, American Housing also receives 25.5% of the distributable surplus cash from operations as a limited partner. In three partnerships, American Housing receives 0% to 5% of the distributable surplus cash from operations as general partner until the limited partners have received cash distributions equal to their contributed capital. Thereafter, American Housing as general partner will receive 50% of the distributable cash flow from operations, refinancings and dispositions. In two of these partnerships, American Housing also receives 51% of the cash distributions as limited partner. Once the limited partners have received cash distributions equal to their contributions, American Housing's general partner's distributions increase to 50% and its share of capital limited partnership distributions decreases to 25.5%. In one of these partnerships, American Housing directly and indirectly will receive 100% of the distributable cash flow from operations.

The table below sets forth the name of each U.S. apartment partnership; the number of rental units in the property owned by such partnership; the project cost; the percentage of such units under lease; and the expiration date for any subsidy contract:

In addition, ACPT, indirectly through its partnership subsidiary IGP Group, and IGP Group's partnership subsidiary IGP, holds interests in 9 Puerto Rico apartment partnerships which collectively own and operate a total of 12 apartment facilities in Puerto Rico. The Puerto Rico apartment partnerships own a total of 2,653 rental units, all of which receive rent subsidies from HUD. The properties held by the Puerto Rico apartment partnerships, with the exception of an $8,000,000 guarantee on two properties, are financed by non-recourse mortgages.

Five of the Puerto Rico partnership agreements require that IGP receive 50% of the net cash flow from operations. In the remaining four partnerships, IGP receives a 0% to 5% interest in profits, losses and net cash flow from operations until the limited partners have received cash distributions equal to their capital contributions. Thereafter, IGP will share in 50% to 60% of cash distributions from operations, refinancing and disposition. As a result of loans made to various Puerto Rico apartment partnerships, IGP also holds notes payable from the partnerships. The notes are required to be paid prior to paying partnership distributions from refinancing, sale or other capital events.

Puerto Rico is estimated to have approximately 3.7 million inhabitants, and the Puerto Rico Planning Board projects the population will continue to grow. Construction in the residential sector has shifted from single-family homes to multi-family dwellings such as walk-up condominiums. Per capita personal income increased to $9,800 in fiscal year 1999 from $9,000 in fiscal 1998, $7,882 in 1996 and $7,374 in 1995. The economy of Puerto Rico registered a real growth in its gross product of 4.2% in 1999. ACPT may benefit from the continuation of these trends.

The table below sets forth the name of each apartment property owned by the Puerto Rico apartment partnerships; the number of rental units in the property owned by such partnership; the project cost; the percentage of such units under lease; and the expiration date for any subsidy contract:

Government Regulation.

HUD subsidies are provided principally under Sections 8 and 236 of the National Housing Act. Under Section 8, the government pays to the applicable apartment partnership the difference between market rental rates (determined in accordance with government procedures) and the rate the government deems residents can afford. Under Section 236, the government provides interest subsidies directly to the applicable apartment partnership through a reduction in the property's mortgage interest rate. The partnership provides a corresponding reduction in resident rental rates. In compliance with the requirements of Section 8 and Section 236, residents are screened by American Management or IGP for eligibility under HUD guidelines. Subsidies are provided under long-term contracts between the federal government and the apartment partnerships.

Cash flow from projects whose mortgage loans are insured by the Federal Housing Authority ("FHA"), or financed through the housing agencies in Maryland, Virginia or Puerto Rico (the "State Financing Agencies,") are subject to guidelines and limits established by the apartment partnerships' regulatory agreements with HUD and the State Financing Agencies. The regulatory agreements 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 applicable State Financing Agency. Funds in these restricted escrow accounts may be used for maintenance and capital improvements with the approval of HUD and/or the State Finance Agency.

The federal government has virtually eliminated subsidy programs for new construction of low and moderate income housing by profit-motivated developers such as ACPT. As a result, no new construction of apartment projects is expected in Puerto Rico. Any new apartment properties developed by ACPT in the U.S. will likely offer market rate rents.

Subsidy contracts for ACPT's investment apartment properties are scheduled to expire between 2001 and 2021. HUD will be processing the application for the extension of the subsidy contracts that expire in 2001. In addition, long-term subsidy contracts for two Puerto Rico properties that expire in 2011 and 2021 may be cancelled by the applicable Puerto Rico apartment partnership in 2001 and thereafter every five years until expiration. ACPT intends to seek the renewal of expiring subsidy contracts for its properties. HUD finalized new subsidy contracts for five-year terms, renewable annually, with the exception of one Puerto Rico property, which HUD is in the process of finalizing. The Section 8 contracts within the 236 communities will be renewed annually. Section 8 contracts renewed in 2001 will probably be for five-year terms subject to certain requirements, including rent comparability studies.

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 is likely to include the dwelling unit in which they currently reside. This may impact the income stream of certain properties. However, ACPT intends to actively maintain its properties in a manner designed to preserve their values and retain residents.

HUD'S "Mark to Market" program is now referred to as Section 8 Renewal Policy. The contract renewal process has been revised annually. There are six options in which a Section 8 contract can be renewed. Owners must meet the eligibility criteria when selecting their option. Our Section 8 contracts have met the criteria necessary to renew the contracts.

Competition.

ACPT's investment properties that receive rent subsidies are not subject to market conditions affecting occupancy at properties with market rate rents. These subsidized properties average approximately 98% occupancy year round. ACPT's apartments in St. Charles that have market rate rents are impacted by the supply and demand for competing rental apartments in the area, as well as the local housing market. When for sale housing becomes more affordable due to lower mortgage interest rates or softening home prices, this can adversely impact the performance of rental apartments. Conversely, when mortgage interest rates rise or home prices increase, the market for rental units typically benefits.

Most of the apartment properties in Puerto Rico were designed, located and maintained with the expectation that they might be converted into condominiums upon the expiration of subsidy contracts 20 to 40 years after construction. The existing debt on most of the Puerto Rico apartment properties is low when compared to present values. In addition, the demand for centrally located residential units within the San Juan metropolitan area, coupled with the acceptance of the condominium concept in Puerto Rico, make condominium conversions of the Puerto Rico apartment units an attractive strategy.

ACPT's subsidiary, IGP, has a record of success in this conversion procedure, having previously converted 1,800 units in Puerto Rico owned by IGP and certain affiliates. These properties were unsuccessful as market rent apartments. Their conversion to condominiums permitted IGP and the affiliates to profit from these properties.

IGP completed the process of converting two former apartment properties, Monte de Oro and New Center, into condominiums. All but nine condominium units had been sold as of December 31, 2000.

ACPT does not intend to convert other properties at this time, and will pursue extensions of the subsidy contracts as they mature.

ACPT currently does not intend to convert any of the properties owned by the U.S. Apartment Partnerships into condominiums.

ACPT's community development assets consist of more than 4,700 acres of developed and undeveloped land in the master planned communities of St. Charles, Maryland, and Parque Escorial, in Carolina, Puerto Rico. The land in both communities is being developed by ACPT and its affiliates for a variety of residential uses, including single-family homes, townhomes, condominiums and apartments, as well as commercial and industrial uses. ACPT may also develop for residential use certain land adjacent to the site of a planned commercial development in Canovanas, Puerto Rico.

ACPT, indirectly through American Land, owns more than 4,500 acres for development in the planned community of St. Charles. St. Charles contains a total of approximately 9,100 acres (approximately 14 square miles) located in Charles County, Maryland, 23 miles southeast of Washington, D.C.

Based on figures prepared by the Charles County Department of Planning and Growth Management ("DPGM"), the population of Charles County rose to 124,145 in 2000, up from 101,000 in 1990, and is projected to increase to 169,300 by 2015. The 2000 average household income in Charles County is estimated at $77,400. The County issued permits for 382,843 square feet of new commercial/industrial construction in 2000 maintaining a steady level exhibited over the past several years. Building permit activity for new residential structures fell slightly, a total of 1,037 permits were issued during 2000.

St. Charles is comprised of five separate villages: Smallwood Village (completed), Westlake Village (which has been substantially completed), Fairway Village (currently under development), and Piney Reach and Wooded Glen, both undeveloped. Each village 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 includes an 18-hole public golf course. Each community is planned for a mix of residential housing, including detached single-family homes, townhomes, multiplex units and rental apartments. Typical lot sizes for detached homes range from 5,000 to 8,000 square feet.

IGC's development of St. Charles as a planned unit development ("PUD") began in 1972 when a comprehensive planned unit development agreement for St. Charles was approved by Charles County. This master plan contemplates construction of approximately 24,730 housing units and 1,390 acres of commercial and industrial development. As of December 31, 2000, there were more than 11,000 completed housing units in St. Charles, including Carrington neighborhood, which began prior to 1972 and is not included in the PUD. In addition there are schools, recreation facilities, commercial, office and retail space in excess of 4.4 million square feet. In St. Charles, 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. ACPT develops lots for sale for detached single-family homes, townhomes, apartment complexes, and commercial and industrial development.

Fairway Village, named for the existing 18-hole public golf course it surrounds, is currently being developed. Its master plan provides for 3,346 dwelling units on 1,287 acres of land, including an industrial park and a 40-acre commercial center. Since the grand opening of Fairway Village in 1999, buyer activity and home sales have increased steadily. The model home park now has four completed units. The newest addition to Fairway's list of builders, Washington Homes, has begun construction of their model, which will open in April 2001. Fifty-nine of the 79 fully developed single-family detached lots in the first phase and 8 of the 72 developed lots in the second phase have been settled by builders as of December 31, 2000. Construction on the next 98 single-family lots is expected to begin in the spring of 2001, concurrent with the development of 61 small single-family detached lots to be delivered in the summer. The engineering of an additional 77 lots is well underway. Infrastructure construction may begin late in the year for lot delivery in the spring of 2002.

The last two villages, Wooded Glen and Piney Reach, comprise approximately 3,000 acres, and are planned for development after the completion of Fairway Village. The total number and mix of residential units must be approved by the County Commissioners before development can begin. There can be no assurances that the total 24,730 units in St. Charles' master plan can be attained.

The St. Charles master plan has been incorporated in Charles County's comprehensive zoning plan. In addition, the Charles County government 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 is 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.

The Charles County government has continued to administer its newly adopted school allocation policy that links available school capacity prior to the recording of final plats. St. Charles has received allocation approval for all of the next 98 lots, as well as allocation for all of the 61 small lots. Additional allocation capacity is expected in July 2001. The allocation system is based upon the distribution of available school capacity within each of the County's high school districts. Land development projects receive available allocation based upon the approval date of the preliminary plan of subdivision. Because Fairway Village received preliminary plan approval in August 1994, it is the oldest approved plan and therefore remains at the top of the allocation list. During each six month cycle, Fairway Village is always the first project offered any available allocation within its high school district.

Competition among residential communities in Charles County is intense. Currently, there are approximately 30 subdivisions competing for new home buyers within a five-mile radius of St. Charles. The largest competing housing developments are Kingsview, a 640-unit project being developed by Miller & Smith and Southwinds, a 367-unit project being developed by Washington Homes. Smaller projects are being developed by more than 20 other developers. Major national and regional homebuilders are attracted by the growing marketplace. In this very price sensitive market, ACPT attempts to position St. Charles to provide affordable building lots and homes while offering more amenities than the competition. ACPT intends to continue this strategy.

Management of ACPT believes that the St. Charles master plan can be completed without material adverse environmental impact and in compliance with 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 and forestry and no significant environmental concerns were found. Jurisdictional determinations for wetlands have been approved by the Army Corps of Engineers for Sheffield Neighborhood in Fairway Village, the next phase of residential development. Management has developed an Environmental Policy Manual and has established an Environmental Review Committee and an Environmental Coordination Officer to anticipate environmental impacts and avoid regulatory violations. However, development can be delayed while plans are being reviewed by local, state and federal agencies for environmentally sensitive areas.

ACPT's predecessor, IGC, settled the ongoing litigations regarding the disturbance of wetlands. The property held by ACPT in St. Charles was not subject to that litigation.

ACPT, indirectly through American Land, IGP Group and IGP holds a 100% interest in Land Development Associates ("LDA"), which in 1989 acquired the 432-acre site of the former El Comandante Race Track. The master plan for Parque Escorial was approved in 1992 and contemplates the construction of 2,700 dwelling units of various types on 312 cuerdas and the development of 120 cuerdas for commercial, office and light industrial uses. LDA has developed and sold 182 cuerdas, and continues to own 250 cuerdas of developed and undeveloped land at this site. A cuerda is the equivalent of .9712 acres. Parque Escorial is located approximately six miles from the central business district in San Juan, Puerto Rico.

Development of Parque Escorial began in 1994 with the sale of 61 acres of commercial land to Wal-Mart. Wal-Mart and Sam's Club stores, each consisting of 125,000 square feet, opened in 1995. Since then 200,000 square feet of commercial space has opened. An additional 14 acres of commercial land have been sold for prices up to $1.1 million per acre. Residential development began in 1996 and 1,096 units have been constructed to date. Of these, 216 units are "walk-up" condominiums built and sold by a joint venture 50% owned by IGP Group.

In January 1998, construction of the office park encompassing 23 acres of saleable land began. In December 1998, LDA transferred title to a 7-acre site on which a 150,000 square foot building was built by ELI S.E., a special 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, for thirty years at the end of which the lessee can acquire it for $1. For income tax purposes, the lease is considered a finance lease; therefore, the lease payments are treated as mortgage payments. A significant portion of the lease payments consist of interest due from a government agency which when received by ELI are tax-free. The tax-free status stays intact when ELI distributes its income to the Company.

Site improvements for the next residential phase, comprising approximately 1,007 units, commenced in August 1999. The first 360 units have been sold.

Parque Escorial's master plan has been approved but specific site plans are subject to planning commission review and approval. LDA has secured agreements with the Puerto Rico Aqueduct and Sewer Authority to provide for adequate water and sewer capacity for the first 2,200 units, which includes commercial land development.

ACPT believes that in addition to developing commercial land for sale, opportunities exist to develop commercial rental properties in Puerto Rico, such as the commercial office building in Parque Escorial and the film and television studio in Canovanas that is in development.

The scarcity of developable land in the San Juan metropolitan area creates a favorable market for condominium unit sales at Parque Escorial. Competition for condominium unit sales is expected primarily from small-scale condominium projects in areas considered to be similar or less desirable than Parque Escorial. Furthermore, it is one of only two master planned communities currently under development in the San Juan metropolitan area. The other is the 500-acre Encantada, which is marketed toward higher income homebuyers. Parque Escorial's home prices appeal primarily to entry level purchasers. In addition, Encantada's developer is building all the homes in the community, while Parque Escorial features six different projects in its first phase, providing more variety, and an important competitive advantage.

Management of ACPT believes 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 11.87 acres of wetlands impacted by its development of the shopping center site and other land.

LDA also owns approximately 540 acres adjacent to the El Comandante Race Track in Canovanas, Puerto Rico. At present, LDA is evaluating the viability of developing and/or leasing the land for a fully integrated entertainment complex consisting of movie studios, an amphitheater, and an amusement park. In 1999, the Puerto Rico government enacted Bill 1958, "The Film Industry Law". This law provides tax incentives and credits to producers, film projects and infrastructure developers in an effort to attract the film industry to Puerto Rico. Portions of the land may be developed for residential use if commercial development or land leasing is not feasible. In the fourth quarter of 2000, a land/building lease contract was signed with Flying Horse Productions for the first phase of this project, consisting of 58 acres.

ACPT, indirectly through its subsidiary American Management, operates a property management business in the United States. In connection with this business, American Management will earn fees from the management of 4,176 rental apartment units, including 2,246 units in which ACPT holds an ownership interest. Management fees for the 2,246 units are based on a percentage of rents ranging from 2.5% to 10.4%. 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. Management fees for other apartment properties range from 2.5% to 3.5% of rents.

In addition, IGP earns fees from the management of 2,653 rental apartment units owned by the nine Puerto Rico apartment partnerships in which the Company holds an ownership interest. Management fees for these apartment properties, like those in the U.S., are based on a percentage of rents ranging from 2.25% to 7.5%. The management contracts for these properties have terms of one or two 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 properties owned by the Puerto Rico apartment partnerships. Upon the conversion of units to condominiums, management fees cease. However, IGP customarily receives fees in connection with managing the conversion process.

IGP currently manages 918 rental apartments owned by a non-profit entity, which acquired the units from IGP in 1996 under the provisions of LIHPRHA. The management agreements for these properties expire April 1, 2001. IGP had a management contract with the Puerto Rico Housing Finance Agency for 440 units. These were converted by their owners in 2000 and thus no further fees are to be earned.

ACPT, through IGP Group, held a 50% interest in Escorial Builders S.E. ("Escorial Builders"), which was a construction joint venture at Parque Escorial. The remaining interest in the joint venture was held by an unrelated third party, which was the general contractor for the project. Escorial Builders completed the sale of all 216 "walk-up" condominium units during 1999. IGP Group, on its own or through joint ventures, is planning to construct additional projects beginning in 2001.

ACPT owns real property located in Maryland and Puerto Rico. As of December 31, 2000, the Company's community development land holdings consisted of the following:

Frances Schell Assad vs. Interstate General Properties Limited Partnership S.E., et al., No. 00-1661 filed in the United States District Court for the District of Puerto Rico. On September 18, 2000, the Company was served a summons for a civil action filed on May 30, 2000 against the Company, one of its employees and its insurance company by an ex-employee alleging that she had been sexually harassed by her supervisor. The action sought monetary relief of $5,700,000 plus interest and legal costs. The case was settled on March 21, 2001 for the amount of $20,000.

Langley, et al vs. St. Charles Associates Limited Partnership, et al, No. 08-C-00-000269, Circuit Court for Charles County. On February 24, 2000, an officer of the Company and St. Charles Community, LLC, a subsidiary of ACPT, were named as defendants in a complaint alleging trespass and restrictions of access to property resulting from the construction of a county road in Charles County. The construction in question was completed by St. Charles Community, LLC. The first and second counts of the complaint seek $10,000,000 in compensatory damages and $10,000,000 in punitive damages. The third and final count seeks an easement and right of way to the county road. The Court granted the defendants' motion to dismiss Counts Two and Three on March 19, 2001, and dismissed all claims against the officer of the Company, leaving only Count One, the trespass count. In the meantime, in an effort to reach a non-monetary resolution to this dispute, the parties and certain Charles County officials have been engaged in settlement negotiations.

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

Wal-Mart Puerto Rico, Inc. vs. Land Development Associates, S.E., et al, No. KAC97-0992, Superior Court of San Juan, Puerto Rico. Wal-Mart Puerto Rico, Inc. ("Wal-Mart") filed suit against the Company regarding a construction contract dispute. Wal-Mart appointed a construction manager responsible for the oversight of construction. Actual construction costs exceeded the contract amount. Both parties claim their maximum share of the total cost was limited and the other party is responsible for costs that exceeded the agreed upon amount. As a good faith gesture, the Company paid the construction contractor $600,000 of the disputed costs. An additional $400,000-$500,000 of costs are unpaid. The case currently is in discovery proceedings.

The sewer and water litigation is St. Charles Associates Limited Partnership, et al. v. County Commissioners of Charles County, et al., No. 89-720, (Circuit Court for Charles County, Maryland). This case originally sought a court ruling that the County was not entitled to impose sewer and water fees at the then-existing level upon residential units in the St. Charles Communities. That aspect of the litigation was settled by a Settlement Agreement dated November 1989, which was confirmed in a Consent Decree entered in March 1990. Subsequent aspects of the litigation have resulted from disputes over the interpretation of the Settlement Agreement and Consent Decree. The principal issues contested between the County, St. Charles Community, LLC, IGC, and SCA were (1) whether a study procured by the County in 1996 justifies the level of sewer and water connection fees which it imposes upon St. Charles Communities and (2) whether SCA and IGC are entitled to recover what they regard as excessive sewer and water connection fees already paid.

On October 6, 1999, the Maryland Court of Special Appeals concluded that the 1996 study procured by County justified the County's imposition of increased water connection fees in the St. Charles Communities, but did not justify a similar increase in sewer connection fees. The Court further held that SCA and IGC may not pursue refund claims for connection fees paid before May 15, 1992 because of an "accord and satisfaction" as to refund claims before that date. The County, St. Charles Community, LLC, IGC and SCA all sought review of this decision in the Maryland Court of Appeals, but that Court declined to review the case, and the decision of the Court of Special Appeals is therefore final. However, this decision does not affect SCA's and IGC's right under the 1989 Agreement to challenge subsequent sewer and water connection fee studies commissioned by the County. On October 19, 2000, the County submitted such a new sewer connection fee study (dated October 12, 2000) to SCA and IGC. SCA and IGC have filed objections to that study and intend to challenge its validity under the 1989 Agreement.

The County has further appealed an injunction issued by the Circuit Court extending the limitation on sewer connection fees to all residential properties located in the St. Charles Communities. On December 5, 2000, the Court of Special Appeals affirmed the Circuit Court and held that the sewer connection fee limitation is a covenant that runs with the land in the St. Charles Communities and, therefore, the right to reduced sewer connection fees extends to all those to whom land in the St. Charles Communities is conveyed. On January 18, 2001, the County filed a petition for writ of certiorari with the Court of Appeals seeking review of this decision.

Also pending are SCA's and IGC's claims for refunds of sewer connection fee overpayments from May 15, 1992 to the present.

None.

The executive officers of the Company as of December 31, 2000 are as follows:

The following is a brief account of the business experience during the past five years through December 31, 2000 of each officer:

J. Michael Wilson was appointed Chairman and Chief Executive Officer of the Company in July 1998. Prior to that date, he served as Vice Chairman, Secretary and Chief Financial Officer of the predecessor company. He has been President and Chief Operating Officer of IBC since 1994. He has been President of Wilson Securities Corporation since March 1996.

Edwin L. Kelly was appointed President and Chief Operating Officer of the Company in July 1998. Prior to that date, he served in various capacities with the predecessor company and its affiliates.

Paul A. Resnik was appointed Senior Vice President and Secretary of the Company in July 1998. He served as Senior Vice President of the predecessor company from 1993-1998.

Carlos R. Rodriguez was appointed Senior Vice President of the Company in June 1999. Prior to that date, he served in various capacities with the predecessor company and its affiliates.

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

Cynthia L. Hedrick was appointed Vice President of the Company in November 1998. Prior to that date, she served as Vice President of the predecessor company.

Nancy M. Shambaugh was appointed Vice President of the Company in November 1998. Prior to that date, she served in various capacities with the predecessor company

Richard E. Barnas was appointed Vice President of the Company in January 1999 after serving as Vice President of the predecessor company since May 1998. He served as Branch Manager of McCrone, Inc., an engineering firm, from May 1997 to April 1998. Prior to that date, he served as President of Barnas Engineering, P.C.

Hector O. Ramos was appointed Vice President and Assistant Secretary of the Company in June 1999. He held the position of Chief Financial Officer of Blue Cross of Puerto Rico, Inc. from October 1987 to May 1999. Prior to that date, he served in various capacities with Blue Cross of Puerto Rico, Inc.

Jorge Garcia was appointed Vice President of IGP in January 1999. He served as Vice President and General Manager of Fountainebleu Plaza, S.E., a real estate development firm, from January 1994 to December 1998.

ACPT's shares are traded on the American and the Pacific Stock Exchanges under the symbol "APO". The following table sets forth, for the periods indicated, the high and low sales prices per ACPT share as reported in the consolidated transaction reporting system, and cash distributions paid to shareholders during these periods. ACPT's shares commenced public trading on October 6, 1998.

Cash available for distribution will be determined at the discretion of the Board of Trustees. The Board of Trustees will review the adequacy of the Company's distribution rate quarterly. Future distributions by the Company will depend on its financial condition, capital requirements, and such other factors as the Board of Trustees deems relevant. The Board of Trustees will make minimum annual distributions to the shareholders equal to at least 45% of the net taxable income allocated to the shareholders reduced by any Puerto Rico income tax paid by ACPT and any U.S. federal income taxes paid by American Rental with respect to undistributed capital gains.

The following table sets forth financial and operating information of ACPT for the five year period ended December 31, 2000 as if it had been a separate company operating for all periods presented. It should be read in conjunction with the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

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

On October 5, 1998 IGC transferred to ACPT the common shares of four subsidiaries that collectively comprised the majority of principal real estate operations and assets of IGC. In exchange, ACPT issued to IGC 5,207,954 common shares of ACPT, all of which were distributed ("the Distribution") to the partners of IGC. The financial information below for periods prior to October 5, 1998, include the accounts of IGC for the operations and assets distributed to ACPT as if the distribution had occurred prior to January 1, 1996.

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

Community development land sales revenue decreased $3,944,000 to $13,576,000 during the twelve months ended December 31, 2000, compared to sales of $17,520,000 during the twelve months ended December 31, 1999. The decrease was attributable to Puerto Rico commercial land sales of $6,558,000 during 1999 with no comparable sale in 2000; U.S. commercial and industrial land sales of $3,770,000 during 1999, as compared to $736,000 during 2000; and the completion of the homebuilding joint venture in 1999 which produced $1,577,000 of deferred land sales in 1999. This was offset by an increase of $7,226,000 residential land sales in 2000 as compared to the same period of 1999. The increase was from $5,067,000 in Puerto Rico and $2,159,000 in the U.S. The Puerto Rico increase is due to the completion of the development of the next residential phase at Parque Escorial and the strong demand for finished lots. The increase in the U.S. is primarily attributable to the grand opening of Fairway Village, the newest village in St. Charles. The overall gross profit margin for the twelve months ended December 31, 2000 decreased by 3% to 35%. The decrease is primarily due to the reduction of sales during 2000 with no corresponding reduction in period costs and the mix of sales in 2000 as compared to 1999. The decrease was offset in part by the increased sales prices of the residential lots in Parque Escorial.

Rental property revenues, net of operating expenses, increased 7% to $5,883,000 for the twelve months ended December 31, 2000, as compared to $5,499,000 in the same period in 1999. The increase is primarily attributable to cable marketing fees earned in 2000 with none in 1999, an increase in 2000 in the rental rates coupled with a reduction in vacancies as compared to those in 1999.

Equity in earnings increased $1,838,000 to $3,234,000 during the twelve months ended December 31, 2000, as compared to $1,396,000 during the twelve months ended December 31, 1999. The increase is primarily attributable to $1,679,000 of earnings generated during 2000 from the sale of rental units converted into condominiums in Puerto Rico and $454,000 of earnings generated from the unconsolidated commercial property partnerships, with no corresponding earnings in 1999. This increase was offset in part by the recognition during 1999 of $373,000 of income from the Puerto Rico homebuilding joint venture that sold their last home in 1999, as compared to losses and warranty expenses of $100,000 recognized during 2000 for the same joint venture.

Management and other fees increased 16% to $3,738,000 in the twelve months ended December 31, 2000, as compared to $3,213,000 in the same period in 1999. This increase is primarily due to $684,000 of special management fees earned during 2000 from the rental units converted into condominiums in Puerto Rico, as compared to $198,000 in 1999, the recognition of $100,000 of incentive management fees in 2000 with no comparable fees earned in 1999, an increase in the fees from three U.S. properties and additional management fees earned on the cable marketing fee income recognized by the U.S. housing partnerships. The increase was offset in part by the expiration of short term management contracts in five Puerto Rico properties.

Interest expense, exclusive of interest expense related to rental properties, increased 23% to $2,070,000 during the twelve months ended December 31, 2000, as compared to $1,680,000 in the same period in 1999. This increase is primarily attributable to the increase in the prime lending interest rate, and an increase in the outstanding debt during 2000, as compared to the same period in 1999. In addition, during 2000 a decrease of inventory eligible for capitalization left a higher percent of the interest incurred to be expensed as compared to 1999.

General and administrative expenses increased 5% to $6,357,000 during the twelve months ended December 31, 2000, as compared to $6,051,000 during the twelve months ended December 31, 1999. This increase is primarily due to additional personnel related to the growth in the Puerto Rico operations, legal expenses related to litigation and HUD compliance, director and officer insurance, preparation of the annual report and shareholder K-1's, and general inflation, offset in part by a reduction in bad debt expense.

Community development land sales revenue increased $850,000 to $17,520,000 during the twelve months ended December 31, 1999, compared to sales of $16,670,000 during the twelve months ended December 31, 1998. The increase was attributable to residential lot sales in the U.S. in 1999 of $994,000 compared to $193,000 in 1998 as a result of the grand opening in 1999 of Fairway Village. The gross profit margin for 1999 increased to 38%, as compared to 33% in 1998. This increase was due primarily to the increase in the sales price of the residential lots sold in Puerto Rico during 1999 as compared to those sold in 1998.

Rental property revenues, net of operating expenses, increased 2% to $5,499,000 for the twelve months ended December 31, 1999, as compared to $5,401,000 in the same period in 1998. The increase is primarily attributable to a 3% increase in rental revenues offset in part by a 4% increase in operating expenses. The increase in rental revenues is a result of increased rental rates. The increase in operating expenses is a result of increased maintenance costs.

Equity in earnings decreased 15% to $1,396,000 during the twelve months ended December 31, 1999, as compared to $1,638,000 during the twelve months ended December 31, 1998. The decrease is primarily attributable to a decrease of earnings generated from the Puerto Rico homebuilding joint venture during 1999, as compared to the same period in 1998.

Management and other fees decreased 7% to $3,213,000 in the twelve months ended December 31, 1999, as compared to $3,447,000 in the same period in 1998. This decrease is due primarily to the recognition of $200,000 of incentive management fees and $160,000 of fees earned from the refinancing of certain apartment complexes in 1998 with no comparable fees earned in 1999, offset in part by an increase in the contracted fees from three properties and management fees earned from a short term management arrangement on three other properties during 1999.

Interest expense, exclusive of interest expense related to rental properties, increased $471,000 to $1,680,000 during 1999, as compared to $1,209,000 in 1998. This increase is primarily attributable to an increase in interest incurred and a decrease of inventory eligible for interest capitalization leaving a higher percent of the interest incurred to be expensed during the twelve months ended December 31, 1999 as compared to the same period of 1998.

General and administrative expenses increased 4% to $6,051,000 during the twelve months ended December 31, 1999, as compared to $5,793,000 during the same period of 1998. This increase resulted from an increase in bad debt expense of $196,000, primarily attributable to discounts on notes receivable of $165,000, a $110,000 increase in tax consulting fees relating to the Company's initial year and general inflation during 1999 as compared to 1998. These increases were offset in part by a decrease in legal fees and operating expenses during 1999 as compared to 1998.

Costs of $56,000 related to the restructuring of IGC, the Predecessor, were recognized as an expense in 1999, as compared to $2,324,000 for the same period of 1998. In addition, during 1999 the Company wrote off $310,000 of expenses related to an equity offering that was not consummated.

Cash and cash equivalents were $5,867,000 and $5,186,000 at December 31, 2000 and December 31, 1999, respectively. This increase was attributable to $13,526,000 provided by operations and $2,488,000 provided by financing activities, offset by $15,333,000 used in investing activities. The cash inflow from operating activities was primarily attributable to $13,576,000 of land sales, net land sales note receivable activity of $1,591,000 and $1,114,000 of distributions from unconsolidated partnerships. The cash outflow for investing activities was primarily attributable to $13,513,000 of land improvements put in place for future land sales and $1,533,000 of additions to the consolidated rental properties. During 2000, $2,405,000 of funds was drawn in excess of loan repayments.

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

The Company's principal demands for liquidity are expected to be the continued funding of its current debt service, development costs in Fairway Village and Parque Escorial and other normal operating costs. The Company does not expect to generate significant cash flows in excess of its existing obligations. Management is pursuing additional capital which can be used by ACPT to fund new community development projects, reduce payables and provide for other working capital needs. Such sources of funding may include, but are not limited to, secured or unsecured financings, private or public offerings of debt or equity securities and proceeds from sales of properties. The Company's anticipated cash provided by operations, new and existing financing facilities, and extension or refinancing of $1,453,000 of loans that are due in the next twelve months are expected to meet the Company's financial requirements for the next year. However, there are no assurances that these funds will be generated.

Substantially all of ACPT's assets are encumbered by $47,000,000 of recourse debt and $38,000,000 of non-recourse debt. The non-recourse debt is attributable to the mortgages of consolidated rental property partnerships. The significant terms of ACPT's recourse debt financing arrangements are shown below (dollars in thousands):

ACPT's loans contain various financial, cross-collateral, cross-default, technical and restrictive provisions; the most significant of which requires the Company to maintain a ratio of combined aggregate liabilities to combined tangible net worth of no greater than seven and a half to one. The material negative covenants require ACPT to obtain prior approval before incurring any liens on its assets or incurring any additional indebtedness. ACPT is prohibited from making distributions in excess of the minimum distributions required by ACPT's Declaration of Trust without prior lender approval. Lender approval is also required prior to LDA making cash distributions in excess of distributions to pay income taxes on LDA generated taxable income unless certain cash flow conditions exist that provide adequate working capital for debt service and operations for the following twelve months. Lender approval is required prior to ACPT making any guarantee or loan out of the normal course of business. ACPT is prohibited from selling or disposing of substantially all of its assets outside the ordinary course of business or entering into any significant new line of business. LDA may not enter into any transaction with any affiliate out of the normal course of business and for terms less favorable than would be obtained in an arm's-length transaction without prior lender approval. Prior approval is also required for any change in the ownership of LDA, any amendments to LDA's partnership agreement, or any merger, reorganization or acquisition of LDA.

In January 2001, the Company modified the $5,000,000 loan with The Columbia Bank to increase the term loan to $1,000,000. The outstanding balance on this loan cannot exceed $4,997,000. The loan's maturity date was extended to February 15, 2006.

Market risks relating to the Company's operations result primarily from changes in the prime interest rate. It is the Company's policy to minimize the impact of variable rate debt to the greatest extent possible by pursuing equity and long term fixed rate financing and refinancings of current fixed rate debt at lower rates when favorable market conditions exist. The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates. The table presents the Company's debt obligations, principal repayments, related weighted average interest rates by expected maturity dates and fair values. The Company has no derivative financial instruments.

To the Shareholders of

American Community Properties Trust:

We have audited the accompanying consolidated balance sheets of American Community Properties Trust (a Maryland real estate investment trust) and subsidiaries (the "Company") as of December 31, 2000 and 1999 and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2000. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Community Properties Trust and its subsidiaries as of December 31, 2000 and 1999 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.

Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The financial statement schedule included on pages 52 through 56 of the Form 10-K is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in our audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

ARTHUR ANDERSEN LLP
Vienna, Virginia
March 27, 2001