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NEWTOWN SQUARE, PA-Net income fell while revenues rose for GMH Communities Trust Inc. during the full year and Q4 2006. The full-year loss was $5 million on revenues of $293.1 million, compared with a net income of $6.1 million on revenues of $224.2 million in 2005.

The year’s final quarter followed a similar pattern. The net loss was $1.3 million on total revenues of $81.4 million, versus net income of $3.8 million on revenues of $68.4 million for the same quarter of 2005. Fourth-quarter FFO was $9.8 million, down from $16.4 million in the same quarter a year ago.

Net income and FFO for the year ended Dec. 31 were hit by $7.8 million in costs associated with internal audit and special committee investigations, $1.1 million in charges related to termination of a line of credit with Bank of America, and $1.7 million related to a new short-term line of credit with Wachovia Bank. “We’ve learned some painful lessons in 2006,” said Joseph Macchione, EVP and general counsel, who hosted a conference call in the absence of Gary Holloway Sr., CEO, who was ill.

The special committee and audit began in March 2006, prompted by an allegation of “tone at the top” problems and “material weaknesses” in controls over financial reporting. The audit is complete; the special committee has been disbanded, and Macchione reported there are now “no material weaknesses in internal control over financial reporting.” He said, “2006 was a challenging year we can put behind us.”

Turnaround strategies are in the “early stages,” said John DeRiggi, president of the student housing division. The $73 million obtained from the sale of two student housing properties, as GlobeSt.com reported, was used to pay down debt. Seven additional properties in the portfolio are under agreement to sell and another six are in the process of joint venturing.

DeRiggi said those transactions are expected to be completed in second quarter. Because due diligence is under way, he declined to estimate the proceeds, but said they would “comfortably allow us to repay our current line of credit before the June 1 expiration date.” He also said the company is negotiating with several lenders to obtain a new line of credit of between $50 million and $100 million.

Two exclusive negotiations are under way by the company’s military housing division. The largest, housing for the Navy’s Southeast region, is expected to close in early fourth quarter, “but could slip into first quarter of 2008,” Bruce Robinson, president of that division, said. The other, for Army housing at West Point, is also expected to close in next year’s first quarter.

Shares of GCT stock were trading at $10.13 a share on the NYSE by mid-day March 15. This compares with a 52-week low of $9.14 a share on Jan. 8 this year and a 52-week high of $14.18 a share on Oct. 26, 2006. On March 1, 2006, prior to the launch of the investigation, GMH shares hit a high of $17.10 a share.

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