Maxus Realty Trust (MRTI) 10-Q 2006 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter period ended: June 30, 2006

¨ 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: 000-13754

MAXUS REALTY TRUST, INC.

(Exact name of small business issuer as specified in its charter)

Missouri	43-1339136
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

104 Armour, North Kansas City, Missouri 64116

(Address of principal executive offices)

(816) 303-4500

(Issuer's telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 xNo ¨

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

State the number of shares outstanding of the Trust’s sole class of common equity, $1.00 par value common stock, as of June 30, 2006: 1,401,000.

Transitional Small Business Disclosure Format (check one):Yes ¨  No x

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INDEX
		Page
PART I -	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS:
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Cash Flows	5
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION	10
ITEM 3.	CONTROLS AND PROCEDURES	18
PART II -	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	18
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	19
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	19
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	19
ITEM 5.	OTHER INFORMATION	19
ITEM 6.	EXHIBITS	19
SIGNATURES		20
EXHIBIT INDEX		21

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MAXUS REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2006			2005
Assets	(Unaudited)
Investment property:
Land	$	1,420,000			1,420,000
Buildings and improvements		38,255,000			38,200,000
Personal property		3,090,000			2,961,000
		42,765,000			42,581,000
Less accumulated depreciation		(6,463,000	)		(5,527,000	)
Total investment property, net		36,302,000			37,054,000
Cash		2,939,000			2,009,000
Escrows and reserves		1,228,000			936,000
Note receivable		4,068,000			4,091,000
Accounts receivable		5,000			6,000
Prepaid expenses and other assets		333,000			227,000
Intangible assets, net		---			98,000
Deferred expenses, less accumulated amortization		281,000			306,000
Total assets of continuing operations	$	45,156,000			44,727,000
Assets of discontinued operations - property held for sale		6,128,000			9,931,000
Total assets	$	51,284,000			54,658,000
Liabilities and Shareholders’ Equity
Liabilities:
Mortgage notes payable	$	29,131,000			29,373,000
Note payable		4,068,000			4,091,000
Accounts payable, prepaid rent and accrued expenses		912,000			894,000
Real estate taxes payable		425,000			256,000
Refundable tenant deposits		209,000			200,000
Other accrued liabilities		526,000			741,000
Total liabilities of continuing operations	$	35,271,000			35,555,000
Liabilities of discontinued operations - property held for sale		5,132,000			8,163,000
Total liabilities	$	40,403,000			43,718,000
Minority interest	$	627,000			629,000
Shareholders’ equity:
Common stock, $1 par value; Authorized 5,000,000 shares,
issued and outstanding 1,401,000 and 1,401,000 shares
in 2006 and 2005, respectively		1,401,000			1,401,000
Preferred Stock, $0.01 par value; Authorized 5,000,000 shares,
no shares issued and outstanding		---			---
Additional paid-in capital		19,130,000			19,130,000
Distributions in excess of accumulated earnings		(10,277,000	)		(10,220,000	)
Total shareholders’ equity		10,254,000			10,311,000
	$	51,284,000			54,658,000

See accompanying notes to unaudited consolidated financial statements.

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MAXUS REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
Income	2006			2005			2006			2005
Revenues:
Rental	$	1,768,000			1,223,000			3,569,000			2,437,000
Other		214,000			164,000			414,000			334,000
Total revenues		1,982,000			1,387,000			3,983,000			2,771,000
Expenses:
Depreciation and amortization		521,000			346,000			1,066,000			695,000
Repairs and maintenance		296,000			204,000			483,000			377,000
Turn costs and leasing		113,000			99,000			208,000			168,000
Utilities		122,000			90,000			261,000			191,000
Real estate taxes		135,000			98,000			278,000			195,000
Insurance		78,000			59,000			153,000			119,000
Property management fees - related parties		97,000			70,000			196,000			137,000
Other operating expenses		310,000			194,000			531,000			375,000
General and administrative		114,000			121,000			180,000			231,000
Total operating expenses		1,786,000			1,281,000			3,356,000			2,488,000
Net operating income		196,000			106,000			627,000			283,000
Interest income		(160,000	)		(163,000	)		(297,000	)		(308,000	)
Interest expense		581,000			457,000			1,159,000			909,000
Loss before minority interest and
discontinued operations		(225,000	)		(188,000	)		(235,000	)		(318,000	)
Less minority interest in continuing operations		7,000			2,000			8,000			3,000
Loss from continuing operations		(218,000	)		(186,000	)		(227,000	)		(315,000	)
Income (loss) from discontinued operations
before minority interest		130,000			(93,000	)		176,000			4,000
Less minority interest in discontinued operations		(4,000	)		1,000			(6,000	)		---
Income from discontinued operations		126,000			(92,000	)		170,000			4,000
Net loss	$	(92,000	)		(278,000	)		(57,000	)		(311,000	)
Per share data (basic and diluted):
Loss from continuing operations	$	(0.16	)		(0.14	)		(0.16	)		(0.24	)
Income (loss) from discontinued operations		(0.09	)		(0.07	)		0.12			---
Net income (loss) per share	$	(0.07	)		(0.21	)		(0.04	)		(0.24	)
Distributions paid in current year	$	---			0.25			---			0.50
Weighted average shares outstanding		1,401,000			1,297,000			1,401,000			1,296,000

See accompanying notes to unaudited consolidated financial statements.

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MAXUS REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	June 30,			June 30,
Cash flows from operating activities:	2006			2005
Net income (loss)	$	(57,000	)		(311,000	)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities of continuing operations:
Income from discontinued operations		(176,000	)		(4,000	)
Minority interest		(2,000	)		(3,000	)
Depreciation and amortization		1,066,000			696,000
Amortization of loan premium		(63,000	)		---
Changes in accounts affecting operations:
Accounts receivable		1,000			(53,000	)
Prepaid expenses and other assets		(106,000	)		(101,000	)
Escrows and reserves		(292,000	)		(104,000	)
Accounts payable and other liabilities		195,000			120,000
Net cash provided by operating activities of continuing operations		566,000			240,000
Net cash provided by discontinued operations		740,000			181,000
Net cash provided by operating activities		1,306,000			421,000
Cash flows from investing activities:
Purchase of available for sale securities		---			(21,000	)
Capital expenditures		(184,000	)		(148,000	)
Net cash used in investing activities of continuing operations		(184,000	)		(169,000	)
Net cash used by investing activities of discontinued operations		(6,000	)		(21,000	)
Net cash (used in) provided by investing activities		(190,000	)		(190,000	)
Cash flows from financing activities:
Principal payments on mortgage notes payable		(179,000	)		(195,000	)
Proceeds from mortgage notes		---			21,000
Loan fees		(7,000	)		---
Issuance of common stock		---			59,000
Distributions paid to shareholders		---			(653,000	)
Net cash provided by (used in) financing activities of continuing operations		(186,000	)		(768,000	)
Net cash used in activities of discontinued operations		---			(55,000	)
Net cash provided by (used in) financing activities		(186,000	)		(823,000	)
Net increase (decrease) in cash		930,000			(592,000	)
Cash, beginning of period		2,009,000			3,860,000
Cash, end of period	$	2,939,000			3,268,000
Supplemental disclosure of cash flow information:
Cash paid during the six month period for interest	$	1,278,000			1,083,000
Supplemental disclosure of non-cash investing and financing activities:
Arbor Gate renovations financed with accounts payable	$	1,302,000			---
Arbor Gate renovations paid from insurance escrow account	$	863,000			---
Arbor Gate insurance proceeds received in escrow	$	900,000			---
Waverly insurance proceeds received in escrow	$	186,000			---
Waverly mortgage paid from insurance escrow account	$	4,187,000			---

See accompanying notes to unaudited consolidated financial statements.

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MAXUS REALTY TRUST, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005

(UNAUDITED)

(1) Summary of Significant Accounting Policies

Refer to the financial statements of Maxus Realty Trust, Inc. (the “Trust” or “Registrant”) for the year ended December 31, 2005, which are contained in the Trust's Annual Report on Form 10-KSB, for a description of the accounting policies, which have been continued without change. Also, refer to the notes to those statements for additional details of the Trust’s financial condition. The details in those notes have not changed as a result of normal transactions in the interim. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2006 and for all periods presented have been made. The results for the six-month period ended June 30, 2006 are not necessarily indicative of the results which may be expected for the entire year.

Prior period amounts have been reclassified to conform to the current year presentation.

(2) Organization

The Trust is structured as what is commonly referred to as an umbrella partnership REIT, or UPREIT, structure. To effect the UPREIT restructuring, the Trust formed Maxus Operating Limited Partnership, a Delaware limited partnership (“MOLP"), to which the Trust contributed all of its assets, in exchange for a 99.999% partnership interest in MOLP and the assumption by MOLP of all of the Trust's liabilities. The Trust now conducts and intends to continue to conduct all of its activities through MOLP. MOLP is the sole member of limited liability companies that own all of the Trust’s properties. Maxus Realty GP, Inc., a Delaware corporation that is wholly owned by the Trust, is the sole general partner of MOLP and has a 0.001% interest in MOLP. As the sole general partner of MOLP, Maxus Realty GP, Inc. generally has the exclusive power under the partnership agreement to manage and conduct the business of MOLP, subject to certain limited approval and voting rights of the limited partners.

Pursuant to MOLP's limited partnership agreement, MOLP may issue limited partnership operating units (and corresponding limited partnership interests) in return for cash or other property that is contributed to MOLP. Holders of MOLP limited partnership operating units may redeem the units (and corresponding limited partnership interests) in return for the issuance of the Trust's common stock or cash, at the Trust's election, after a one (1) year holding period. At June 30, 2006, the Trust owned approximately 96.73% of the limited partnership interests in MOLP and minority holders of MOLP owned 47,339 limited partnership operating units, or approximately 3.27% of MOLP. The 47,339 limited partnership operating units were issued in connection with the acquisition of the Terrace Apartments in April 2004, and the acquisition of the Bicycle Club Apartments in July 2005.

(3) Segment Reporting

The Trust aggregates the financial information of all its properties into one reportable segment because the properties all have similar economic characteristics and provide similar services to similar types and classes of customers.

(4) Related Party Transactions

The Trust paid Maxus Properties, Inc. property management fees of $196,000 and $137,000 for the six months ended June 30, 2006 and 2005, respectively. At June 30, 2006 and December 31, 2005, $78,000 and $136,000 respectively, was payable to Maxus Properties, Inc. for accrued payroll, and direct expense reimbursement and accrued management fees. The Trust expensed $534,000 and $459,000 for payroll costs for Maxus Properties, Inc.’s employees in the six months ended June 30, 2006 and 2005, respectively.

(5) Contingencies

On August 25, 2004, ACI Financing, L.L.C., a subsidiary of the Trust (“ACI Financing”), sold the ACI Building, an office building located in Omaha, Nebraska (the “ACI Building”), to an unrelated third party, FOR 1031 Omaha

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LLC, an Idaho limited liability company (“FOR 1031”).

As a result of the sale in 2004, the Trust recorded a gain of approximately $2,116,000 after deducting the costs of the sale and the net book value of the assets sold. Accounting rules required the Trust to defer approximately $1,100,000 in sales proceeds. The net book gain was reduced by this amount. This amount represents the Make Whole Premium that would be presently be required if the Lender accelerated the obligation. The difference obtained by subtracting the current amount of the loan from the present value, calculated in accordance with the Trust’s policies, is the current value of the Make Whole Premium. The period-to-period change in the value of the Make Whole Premium is recorded in discontinued operations for the period in which the change occurs. Increases in the calculated amount of the Make Whole Premium are represented as decreases in income from discontinued operations and decreases in the calculated amount of the Make Whole Premium are represented as increases in income from discontinued operations. If the Lender does not accelerate this obligation and it is paid pursuant its regular schedule, the amount deferred will be amortized to income over the remaining term of the obligation in accordance with the Trust’s policies. The decrease of the Make Whole Premium since December 31, 2005 through June 30, 2006 was $214,000 and is presented in the income statement as a credit to income from discontinued operations.

Interest income and interest expense of $135,000 and $267,000 is reflected in the financial statements for the three and six month periods ending June 30, 2006, representing the aggregate interest and default interest on the loan paid by FOR 1031 to ACI Financing.

On June 14, 2005, the Trust entered into a real estate purchase agreement to purchase Westgate Park Apartments II in Temple, Texas, pursuant to which the Trust made an earnest money deposit of $100,000.  The Trust has filed a lawsuit against the seller in Clay County, Missouri over the failure to disclose the 2005 property tax assessment against the property.  The Trust has requested a reduction in the original $4.75 million purchase price which was comprised of (i) the $100,000 Deposit, (ii) the Trust's assumption of a mortgage loan of Lehman Brothers Bank, FSB (the "Lender") in the amount of $3,800,000 (the "Existing Mortgage") and (iii) the balance of approximately $940,000 payable in cash on the closing date (See Part II, Item 5). The seller has requested the escrow agent to release the deposit to seller, and has asserted a counterclaim against the Trust for the earnest money deposit, costs, and expenses.  The lawsuit is currently in the discovery phase, and no trial date is scheduled. At June 30, 2006 the Trust has recorded the earnest money deposit of $100,000 and included it with other escrow and reserve amounts in the balance sheet. At this date it is not possible to predict the outcome of this litigation.

(6) Discontinued Operations

The Trust has reclassified its Consolidated Balance Sheet as of December 31, 2005 and its Consolidated Statement of Cash Flows for the six months ended June 30, 2005 and has presented its Consolidated Statement of Operations for the three and six months ended June 30, 2006 and Consolidated Statement of Cash Flows for the six months ended June 30, 2006 to reflect discontinued operations of the Arbor Gate Apartments, (“Arbor Gate”) and the Waverly Apartments, (“Waverly”). The Trust follows the provisions of Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. These two properties were classified as held for sale on May 8, 2006 after management, with the approval of the Board of Directors, committed to a plan to sell these properties.

The Board recognized the need to sell the properties due to the devastating effects of Hurricane Katrina both to the properties and to the regional economy. As a result of Hurricane Katrina, the Waverly Apartments were completely destroyed and remain uninhabitable. Management and the Board agreed that due to the delay of “new” construction, the inability to receive raw materials for rebuilding, the suffering job market and the increased costs of insurance, it would be prudent to pull out of this geographical location and reinvest its proceeds from the sale of these two assets in another market.

On May 22, 2006 an unrelated third party, was under contract to purchase the Arbor Gate Apartment project. The transaction is anticipated to close in the third quarter of 2006. As a result of the expected sale, we anticipate recording a realized gain. (See Note 8.)

The Waverly property is actively being marketed for sale in its present condition for its land value and it is expected

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to sell at an amount greater than its net book value. The sale of this asset is expected to be completed within one year.

Condensed financial information for Arbor Gate and Waverly are as follows:

DISCONTINUED OPERATIONS

(ARBOR GATE AND WAVERLY)

BALANCE SHEETS (UNAUDITED)

	June 30,			December 31,
	2006			2005
	(Unaudited)
Assets
Investment property
Land	$	248,000			248,000
Buildings and improvements		4,363,000			2,573,000
Personal property		293,000			164,000
Construction in progress		---			611,000
		4,904,000			3,596,000
Less accumulated depreciation		(255,000	)		(214,000	)
Total investment property, net		4,649,000			3,382,000
Escrows and reserves		1,090,000			5,844,000
Insurance claims receivable		265,000			560,000
Prepaid expenses and other assets		94,000			75,000
Deferred expenses, less accumulated amortization		30,000			70,000
Assets of discontinued operations - property held for sale	$	6,128,000			9,931,000
Liabilities:
Mortgage notes payable	$	3,034,000			7,220,000
Account payable, prepaid rent and accrued expenses		1,222,000			762,000
Deferred Gain		791,000			---
Real estate taxes payable		69,000			172,000
Refundable tenant deposits		16,000			9,000
Liabilities of discontinued operations - property held for sale	$	5,132,000			8,163,000

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DISCONTINUED OPERATIONS

(ARBOR GATE AND WAVERLY)

STATEMENT OF OPERATIONS (UNAUDITED)

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2006			2005			2006			2005
Revenue:
Rental		194,000			365,000			343,000			713,000
Other		10,000			53,000			15,000			97,000
Total revenues		204,000			418,000			358,000			810,000
Expenses:
Depreciation and amortization		11,000			129,000			81,000			283,000
Repairs and maintenance		14,000			46,000			30,000			95,000
Turn costs and leasing		3,000			17,000			4,000			46,000
Utilities		10,000			36,000			20,000			68,000
Real estate taxes		35,000			35,000			37,000			62,000
Insurance		23,000			24,000			47,000			54,000
Property management fees - related parties		10,000			21,000			18,000			41,000
Other operating expenses		24,000			47,000			48,000			95,000
Total operating expenses		130,000			355,000			285,000			744,000
Net operating income (loss)		74,000			63,000			73,000			66,000
Interest income		(5,000	)		---			(26,000	)		---
Interest expenses		48,000			92,000			137,000			174,000
Income (loss) from discontinued operations -ACI		99,000			(64,000	)		214,000			112,000
Income (loss) from discontinued operations	$	130,000			(93,000	)		176,000			4,000

(7) Involuntary Conversions

On August 29, 2005, two of the Trust’s eight properties sustained extensive damage caused by Hurricane Katrina. The properties were Arbor Gate located in Picayune, Mississippi and Waverly located in Bay Saint Louis, Mississippi.

The rehabilitation of Arbor Gate due to the damages is 100% complete at June 30, 2006. Approximately $191,300 of additional costs were incurred for the rehabilitation of Arbor Gate during the three months ended June 30, 2006 resulting in total costs incurred to date of $1,912,000. These costs to replace roof, general demolition, drywall, soffit, fascia and gutter repair, siding and carpentry were accrued or paid at June 30, 2006. As of July 12, 2006 $1,389,000 has been distributed from escrow to pay the necessary reconstructive costs.

Through June 30, 2006, the Trust has received $1,900,000 from its primary insurance carrier due to the damage. The estimated net book value of the assets destroyed approximates $1,109,000 at June 30, 2006. A deferred gain of $791,000 has been recorded by the Trust for the difference between insurance proceeds received and the net book value of destroyed assets. The gain is deferred at this time because of potential allocation issues involving insurance proceeds between Arbor Gate and Waverly. The insurance company has yet to complete their claim of the costs incurred at Arbor Gate and Waverly. Once the insurance claim is approved the Trust will then be able to appropriately record any potential gain. With regard to Waverly, the Trust in 2005 received communication from a

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consultant of the property’s lender, Freddie Mac, that the property is considered a total loss. The property has insurance limits in adequate amounts. Prior to June 30, 2006, the Trust received a partial recovery of $4,785,000 from its carriers. The Trust paid the mortgage on this property of $4,306,811 on February 17, 2006.

The net book value of the Waverly property was reported at $5,050,000. Because the insurance claims are being adjusted at the present time, management is uncertain what the actual amount of insurance proceeds will be. However, as a result of consultations with the insurance companies and legal counsel, the Trust believes it is probable that the insurance proceeds will exceed the net book value of its investment in Waverly. Recoveries in excess of the original cost basis in the property of $5,050,000 including amounts for business interruption will be recorded in the period they are realized. In May 2006, management committed to a plan to sell Waverly in its present condition. (Note 6.)

(8) Subsequent Events

On July 6, 2006, the Trust's wholly-owned subsidiary Northtown Business Center, L.L.C. deposited $125,000 with an escrow agent appointed under a Purchase and Sale Agreement dated June 28, 2006 (the “Purchase Agreement”) with Cherokee North Kansas City, LLC (the “Seller”). Pursuant to the Purchase Agreement, the Trust will purchase approximately 12.44 acres of land and an industrial building containing approximately 240,000 rentable square feet of industrial and related office and mezzanine space located in North Kansas City, Missouri for a purchase price of $5.25 million, adjusted for standard prorations. The Seller is an unrelated third party.

The purchase of Northtown Business Center, (the “Property”) is subject to the Trust's due diligence review and inspection, which must be satisfactory in the Trust's sole discretion determined during a 30 day due diligence period that commenced on June 30, 2006. The closing is scheduled to occur 60 days after June 30, 2006. The closing is also subject to other standard closing conditions, including conveyance of the Property with a title insurance policy insuring title, free and clear of all liens and encumbrances except permitted encumbrances.

One of the current tenants of the Property is Delphi Automotive Systems LLC, which is a debtor-in-possession under Chapter 11 of the United States Bankruptcy Code and has the right to reject its lease of the Property in connection with the bankruptcy proceedings at any time prior to June 7, 2007. Delphi Automotive leases 55% of the total rentable square footage of the Northtown Business Center.

On July 21, 2006, the Trust sold Arbor Gate Apartments to an unrelated third party. This property was sold for approximately $6.1 million. The Trust will record a net book gain of $1,406,000 as a result of the sale and this sale provided approximately $2,721,000 in net sale proceeds, after the payoff of the related debt, commissions and other miscellaneous prorations. The proceeds are with an intermediary and will be used for the acquisition of Northtown Business Center, and we expect to elect to structure the acquisition of Northtown Business Center as a like-kind exchange through an intermediary in accordance with Section 1031 of the Internal Revenue Code. Therefore, the tax gain derived from the sale of Arbor Gate will be deferred indefinitely.

The Trust executed an “Early Note Lock Application” for the refinancing of the mortgage loan on Bicycle Club and The Landings. The Bicycle Club was locked in for $11,250,000 at 6.19% for 10 years and The Landings was locked in for $6,250,000 at 6.19% for 10 years. The expected payoff for The Landings loan with Deutsche Bank is to occur on August 31, 2006 and the amount of the total loan payoff is $3,620,000. The Trust anticipates closing on these two refinancings in the third quarter.

ITEM 2:MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Section includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this section and located elsewhere in this Form 10-QSB regarding the prospects of our industry and our prospects, plans, financial position and business strategy may constitute forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "plan," "foresee," "believe" or "continue" or the negatives of these terms or variations of them or similar terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been

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correct. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from our expectations include, among others: (i) the ability to retain tenants, (ii) general economic, business, market and social conditions, (iii) trends in the real estate investment market, (iv) projected leasing and sales, (v) competition, (vi) inflation and (vii) future prospects for the Trust.  Readers are urged to consider these factors carefully in evaluating the forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included herein are made only as of the date of this Form 10-QSB, and we do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported in the accompanying Consolidated Financial Statements. The most significant assumptions and estimates relate to revenue recognition, depreciable lives of investment property, capital expenditures, properties held for sale, and the valuation of investment property. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.

Revenue Recognition

Lease agreements are accounted for as operating leases, and rentals from such leases are reported as revenues ratably over the terms of the leases.

In connection with the sale of the ACI Building on August 25, 2004, a deferred liability was recorded in the amount of approximately $1,100,000, representing the Make Whole Premium described in Note 7. The MakeWhole Premium is the greater of (i) 1% of the outstanding principal amount of the loan or (ii) a premium calculated by determining the present value of the payments to be made in accordance with the promissory note discounted at the yield on the applicable US Treasury Issue for the number of months remaining from the date of acceleration to the maturity date, which is approximately 65 months. The difference obtained by subtracting the current amount of the loan from the present value, calculated in this manner represents the current value of the make whole premium. The period-to-period change in the value of the Make Whole Premium is recorded in discontinued operations for the period in which the change occurs. Increases in the calculated amount of the Make Whole Premium are represented as decreases in income from discontinued operations and decreases in the calculated amount of the Make Whole Premium are represented as increases in income from discontinued operations. Due to the method of calculation of the value of the Make Whole Premium using the yield on the applicable U.S. Treasury note, the amount of the Make Whole Premium can fluctuate significantly from period to period. The calculation method is dictated by the ACI loan documents and management believes alternate calculations using different assumptions are inappropriate.

Investment Property Useful Lives

The Trust is required to make subjective assessments as to the useful lives of its properties for the purpose of determining the amount of depreciation to reflect on an annual basis with respect to those properties. These assessments have a direct impact on the Trust’s net income.

Buildings and improvements are depreciated over their estimated useful lives of 27.5 to 40 years on a straight-line basis. Land improvements are depreciated over their useful lives of 15 to 20 years on a straight-line basis. Personal property is depreciated over its estimated useful life of 5 to 15 years using the straight-line method.

Capital Expenditures

For reporting purposes, the Trust capitalizes all carpet, flooring, blinds, appliance and HVAC replacements. The Trust expenses all other expenditures that total less than $10,000. Expenditures and costs related to contracts that are equal to or greater than $10,000 are evaluated individually for capitalization. Repairs and maintenance are charged to expense as incurred. Additions and betterments are capitalized.

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Classification of Properties

The Trust is required to make subjective assessments as to whether a property should be classified as “Held for Sale” under the provisions of SFAS 144. SFAS 144 contains certain criteria that must be met in order for a property to be classified as held for sale, including: management commits to a plan to sell the asset; the asset is available for immediate sale in its present condition; an active program to locate a buyer has been initiated; the sale of the asset is probable and transfer of the asset is expected to qualify for recognition as a sale within one year; the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Impairment of Investment Property Values

The Trust is required to make subjective assessments as to whether there are impairments in the value of its investment properties. Management's estimates of impairment in the value of investment properties have adirectimpact on the Trust’s net income.

The Trust follows the provisions of SFAS No. 144. The Trust assesses the carrying value of its long-lived asset whenever events or changes in circumstances indicate that the carrying amount of the underlying asset may not be recoverable. Certain factors that may occur and indicate that an impairment may exist include, but are not limited to: significant underperformance relative to projected future operating results; significant changes in the manner of the use of the asset; and significant adverse industry or market economic trends. If an indicator of possible impairment exists, a property is evaluated for impairment by a comparison of the carrying amount of a property to the estimated undiscounted future cash flows expected to be generated by the property. If the carrying amount of a property exceeds its estimated future cash flows on an undiscounted basis, an impairment charge is recognized by the amount by which the carrying amount of the property exceeds the fair value of the property. Management estimates fair value of its properties based on projected undiscounted cash flows using a discount rate determined by management to be commensurate with the risk inherent in the Trust.

Real Estate Acquisitions

Upon acquisitions of real estate properties, management makes subjective estimates of the fair value of acquired tangible assets (consisting of land, land improvements, building, improvements, and furniture, fixtures and equipment) and identified intangible assets and liabilities (consisting of above and below market leases, in-place leases, tenant relationships and assumed financing that is determined to be above or below market terms) in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations. Management utilizes methods similar to those used by independent appraisers in making these estimates. Based on these estimates, management allocates purchase price to the applicable assets and liabilities. These estimates have a direct impact on our net income.

DESCRIPTION OF BUSINESS

OVERVIEW

The Trust currently operates eightapartment communities. Cash is primarily generated by renting apartment units to tenants, or securing loans with the Trust’s assets. Cash is used primarily to pay operating expenses (repairs and maintenance, payroll, utilities, taxes, and insurance), make capital expenditures for property improvements, repay principal and interest on outstanding loans or to pay cash distributions to shareholders. The key performance indicators for revenues are occupancy rates and rental rates. Revenues are also impacted by concessions (discounts) offered as rental incentives. The key performance indicator for operating expenses is total operating expense per apartment unit. A significant change in the turnover rate of rental units can also cause a significant change in operating expenses. Management also evaluates total taxes, utilities and insurance rates for each property.

General economic trends that management evaluates include construction of apartment units (supply), unemployment rates, job growth, and interest rates (demand). The apartment industry is sensitive to extremely low interest rates, which tend to increase home ownership and decrease apartment occupancy rates. The apartment industry is also sensitive to increased unemployment rates, which tend to cause possible renters to double up in a

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unit or share a non-rental dwelling with relatives or acquaintances. New construction in an area with low occupancy rates can cause a further decline in occupancy or rental rates.

Economic trends appear to indicate that interest rates are increasing. It also appears that unemployment rates are declining, with job growth rising. If these trends are correct and if the trends continue, the Trust believes it should be able to begin reducing concessions, raising rental rates and increasing occupancy, which should improve revenues. In such case, the Trust also believes variable operating expenses will also tend to increase, but fixed expense coverage would improve.

The Trust primarily invests in income-producing real properties (apartments). As of June 30, 2006 the Trust’s portfolio is comprised of:

PROPERTY	# UNITS	TYPE	LOCATION	PURCHASE DATE
Arbor Gate Apartments (“Arbor Gate”)	120	Apartments	Picayune, MS	September, 2004
Barrington Hills Apartments (“Barrington Hills”)	232	Apartments	Little Rock, AR	November, 2001
Bicycle Club Apartments (“Bicycle Club”)	312	Apartments	North Kansas City, MO	July, 2005
Chalet Apartments - I and II (“Chalet”)	234	Apartments	Topeka, KS	September, 2001
Forest Park Apartments (“Forest Park”) (f.k.a. North Winn)	110	Apartments	Kansas City, MO	August, 2000
King’s Court Apartments (1) (“King’s Court”)	82	Apartments	Olathe, KS	August, 2001
Terrace Apartments (1) (“Terrace”)	84	Apartments	Olathe, KS	April, 2004
The Landings Apartments (the “Landings”)	154	Apartments	Little Rock, AR	September, 2001
Waverly Apartments (“Waverly”)	128	Apartments	Bay Saint Louis, MS	September, 2004

⁽¹⁾ King’s Court and Terrace Apartment (“Kings Court/Terrace”) are operated as one entity.

UPREIT Structure

The Trust is structured as what is commonly referred to as an umbrella partnership REIT, or UPREIT, structure. To effect the UPREIT restructuring, the Trust formed Maxus Operating Limited Partnership, a Delaware limited partnership (“MOLP"), to which the Trust contributed all of its assets, in exchange for a 99.999% partnership interest in MOLP and the assumption by MOLP of all of the Trust's liabilities. The Trust conducts and intends to continue to conduct all of its activities through MOLP. Maxus Realty GP, Inc., a Delaware corporation that is wholly owned by the Trust, is the sole general partner of MOLP and has a 0.001% interest in MOLP. As the sole general partner of MOLP, Maxus Realty GP, Inc. generally has the exclusive power under the partnership agreement to manage and conduct the business of MOLP, subject to certain limited approval and voting rights of the limited partners.

Pursuant to MOLP's limited partnership agreement, MOLP may issue limited partnership operating units (and

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corresponding limited partnership interests) in return for cash or other property that is contributed to MOLP. Holders of MOLP limited partnership operating units may redeem the units (and corresponding limited partnership interests) in return for the issuance of the Trust's common stock or cash, at the Trust's election, after a one (1) year holding period. The Trust anticipates that the UPREIT structure will enable it to make additional acquisitions of properties from tax-motivated sellers. As an UPREIT, the Trust believes that MOLP will be able to issue limited partnership operating units to tax-motivated sellers who contribute properties to MOLP, thereby enabling those sellers to realize certain tax benefits that would be unavailable to them if the Trust purchased those properties directly for cash or common stock. As of June 30, 2006, minority holders of MOLP own 47,339 limited partnership operating units, or approximately 3.27% of the partnership interest in MOLP.

Each of the apartment complexes are owned by single member limited liability companies that are directly owned by MOLP. Maxus Properties, Inc. provides property management services for each of the Trust’s real properties.

LIQUIDITY AND CAPITAL RESOURCES

Comparison of Consolidated Results from Continuing Operations

Cash as of June 30, 2006 was $2,939,000, an increase of $930,000 from $2,009,000 at December 31, 2005. The majority of the increase, $618,000, was due to the release of the monies in escrow after the payoff of the Waverly note. An additional increase in cash of $217,878, is attributed to an increase in cash fromoperations. Escrows and reserves held by various lenders were $1,228,000 and $936,000 at June 30, 2006 and December 31, 2005, respectively. The majority of the increase, $292,000, was due to the insurance proceeds received less the payment to the reconstructive firm for the rehabilitation of Arbor Gate.

Net cash provided by operating activities of continuing operations increased $326,000 to $566,000 for the period ended June 30, 2006. The majority of the increase was due to the increase in net income from the properties in continuing operations, higher depreciation expense in 2006, and net changes in working capital balances.

Net cash used in investing activities of continuing operations was $184,000 comprised of capital expenditures. The largest capital expenditure was $64,000 for the combined capital replacements at the Trust’s properties.

Net cash used in financing activities of continuing operations was $186,000 due to the payments on the mortgage notes. There were no distributions in the second quarter ending June 30, 2006.

Comparison of Consolidated Results from Discontinued Operations

Net cash provided by operating activities of discontinued operations was $740,000. The majority of the cash was due to the increase in escrows and reserves from the insurance company.

Net cash used by investing activities of discontinued operations was $6,000. The cash used by investing activities in 2006 relates primarily to Arbor Gate’s capital expenditures.

Management believes that the current cash position and the properties’ ability to generate operating and financing cash flows should enable the Trust to fund anticipated operating and capital expenditures for the remainder of 2006. Specifically, even with the damages caused by Hurricane Katrina, management believes the Trust will have the ability to fund these costs given its current cash position. However, no assurance can be given as to the actual timing of the receipt of the anticipated insurance proceeds with respect to the damages caused by Hurricane Katrina.

Projected capital expenditures of approximately $446,000 are currently planned for the remainder of 2006, primarily for re-roofing, parking/driveway repair, landscaping, concrete repairs, and HVAC projects, with the majority of the expenditures expected to be reimbursed from escrow reserves held by lenders. Capital replacements of approximately $364,000 are currently expected to be reimbursed from reserves held by lenders. Including the items mentioned, management does anticipate material capital expenditures due to the damages caused by Hurricane Katrina. The Trust will also continue to evaluate opportunities for the acquisition of investment properties and may incur material capital expenditures in connection with these acquisition opportunities.

The Board of Trustees of the Registrant decided to continue to suspend the quarterly dividend payment until the

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Hurricane Katrina insurance claims are resolved and the Registrant can better project the recurring cash flows from the Registrant’s operations.

The Board of Trustees will re-evaluate the cash dividend next quarter, including an evaluation of whether the Trust will be required to pay a cash dividend to satisfy the requirement that the Trust pay dividends to its shareholders of at least 90% of its taxable income to continue to qualify as a real estate investment trust under the Internal Revenue Code of 1986, as amended.

Contractual Obligations and Commercial Commitments

	Balance at		Interest		Fixed		Due
	June 30, 2006		Rate		or (variable)		Date
ACI		4,068,000		12.63%				August 1, 2010
Forest Park		2,376,000		5.29%				September 1, 2015
Kings Court/Terrace		2,277,000		5.91%		(variable)		May 1, 2009
Terrace		1,582,000		6.87%				February 1, 2009
Chalet I		3,829,000		6.59%				October 1, 2008
Chalet II		1,444,000		6.54%				October 1, 2008
The Landings		3,572,000		7.66%				September 1, 2007
Barrington Hills		5,481,000		6.04%				July 1, 2029
Arbor Gate		3,034,000		6.25%		(variable)		September 1, 2011
Bicycle Club		8,350,000		6.91%				March 1, 2008
Total	$	36,013,000

Reference is also made to Note 3 of Notes to Consolidated Financial Statements incorporated by reference in the Trust’s Annual Report on Form 10-KSB for a description of mortgage indebtedness secured by the Trust’s real property investments.

OFF-BALANCE SHEET ARRANGEMENTS

The Partnership does not have any “off-balance sheet arrangements” as defined in Item 303 (c) of Regulations S-B promulgated under the Securities Exchange Act of 1934, as amended.

RESULTS OF OPERATIONS

The results of operations for the Trust's properties for the six months ended June 30, 2006 are detailed below.

Funds from Operations

The white paper on Funds from Operations approved by the board of governors of NAREIT defines Funds from Operations as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus property related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect Funds from Operations on the same basis. In 1999, NAREIT clarified the definition of Funds from Operations to include non-recurring events,

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except for those that are defined as “extraordinary items” under GAAP and gains and losses from sales of depreciable operating property. In 2002, NAREIT clarified that Funds from Operations related to assets held for sale, sold or otherwise transferred and included in results of discontinued operations should continue to be included in consolidated Funds from Operations.

The Trust computes Funds from Operations in accordance with the guidelines established by the white paper, which may differ from the methodology for calculating Funds from Operations utilized by other equity REITs, and, accordingly, may not be comparable to such other REITs. Funds from Operations do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations, distributions or other commitments and uncertainties. Funds from Operations should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Trust’s financial performance or to cash flows from operating activities (determined in accordance with GAAP) as a measure of the Trust’s liquidity, nor is it indicative of funds available to fund the Trust’s cash needs including its ability to make distributions. The Trust believes Funds from Operations is helpful to investors as a measure of the performance of the Trust because, along with cash flows from operating activities, financing activities and investing activities, it provides investors with an understanding of the ability of the Trust to incur and service debt and make capital expenditures. In the table below, revenue, expenses, net income and property related depreciation and amortization were determined in accordance with GAAP. The addition of property related depreciation and amortization to net income results in Funds from Operations, which is not determined in accordance with GAAP.

	Three Months Ended						Six Months Ended
	June 31,			June 31,			June 31,			June 31,
	2006			2005			2006			2005
Net loss		(92,000	)		(278,000	)		(57,000	)		(311,000	)
Property related depreciation and amortization (1)		532,000			475,000			1,147,000			978,000
Funds from operations	$	440,000			197,000			1,090,000			667,000

⁽¹⁾ For the three months ended June 30, 2006, and June 30, 2005, depreciation and amortization of discontinued operations of Arbor Gate and Waverly of $11,000 and $129,000, respectively, is included in this amount. For the six months ended June 30, 2006 and June 30, 2005, depreciation and amortization of discontinued operations of $81,000 and $283,000, respectively is included in this amount.

Occupancy

The occupancy levels at June 30 were as follows:

	OCCUPANCY LEVELS AT JUNE 30,
	2006	2005
Arbor Gate	97%	99%
Barrington Hills	86%	92%
Bicycle Club	91%	n/a
Chalet	95%	98%
Forest Park	94%	88%
King’s Court/Terrace	93%	90%
The Landings	95%	96%
Waverly	0%	95%

Forest Park was 94% occupied at June 30, 2006. The Northern Kansas City rental market conditions began improving at the beginning of June 2006. This is partly due to an increase in interest rates that has led to a decrease in house buying. Competitors are giving fewer concessions in 2006 compared to 2005. Occupancy rates in general have been higher with most competitors’ rates averaging in the high 80% to low 90%. New competitors and construction have not been an issue. King’s Court/Terrace occupancy was 93% at June 30, 2006. King’s Court/Terrace is located in Olathe, Kansas. Overall occupancy in the Olathe, Kansas market has remained stable, with most competitors’ average occupancy in the high 80% to low 90% range. There is some evidence that concessions are declining in this market. New construction is less than it was in 2005. Also, fewer people are purchasing homes in this market due to the increase in interest rates. Chalet, which is located in Topeka, Kansas, ended the quarter at 95% occupancy. The average occupancy for competitors in this market is about 93%. Chalet offers few concessions due to consistently high occupancy rates. There is no new competition in the Topeka area. Competitors in the area continue to offer concessions. The Landings and Barrington Hills are both located in Little Rock, Arkansas. The average occupancy rate for Little Rock is 93% to 95%. The Landings and Barrington Hills had occupancy rates of 95% and 86%, respectively on June 30, 2006. Barrington’s decrease in occupancy is due in part to manager turnover. The property is currently giving a moderate rent concession to all prospective tenants. Concessions in the Little Rock area continue to be minimal. Arbor Gate ended the quarter at 97% occupancy. Arbor Gate is located in Picayune, Mississippi. Since Hurricane Katrina in August 2005, the rental market for housing in Picayune has improved drastically. Average occupancy rates have increased by 20% since September 2005. Because of the damages incurred by Hurricane Katrina, Waverly is uninhabitable. Waverly is located in Bay Saint Louis, Mississippi. Due to the effects of Hurricane Katrina, competitive conditions in this area of Mississippi are difficult to ascertain at this time.

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Comparison of Consolidated Results From Continuing Operations

For the three and six month periods ended June 30, 2006, the Trust’s consolidated revenues from continuing operations were $1,982,000 and $3,983,000, respectively. Revenues increased $595,000 (43%) and $1,212,000 (44%) for the three and six month periods ended June 30, 2006 as compared to the same period ended June 30, 2005. The increase is due primarily to the 2005 acquisition of Bicycle Club. Bicycle Club provided an additional $526,000 and $1,048,000 of revenues for the three and six month periods ended June 30, 2006, offset by the loss of income from Waverly of $225,000 and $437,000 for the three and six month periods ended June 30, 2006.

For the three and six month periods ended June 30, 2006, the Trust’s consolidated operating expenses from continuing operations were $1,786,000 and $3,356,000, respectively. Expenses increased $505,000 (39%) and $868,000 (35%) for the three and six month periods ended June 30, 2006, as compared to the same period ended June 30, 2005. This increase is due primarily to the property acquired in 2005. The acquisition of Bicycle Club increased operating expenses by $418,000 and $874,000 for the three and six month periods ended June 30, 2006. For the six months ended June 30, 2006, depreciation expense increased by $371,000, interest expense increased by $250,000, repairs and maintenance expense increased $106,000, and other operating expenses increased by $156,000. These increases pertain to the additional investment assets associated with the acquisition of Bicycle Club.

The net loss from continuing operations before minority interest for the six month periods ended June 30, 2006 was ($235,000) or ($.17) per share. The net loss from continuing operations before minority interest for the six-month periods ended June 30, 2005 was ($318,000) or ($.25) per share.

Comparison of Results of Discontinued Operations

For the three and six month periods ended June 30, 2006, revenue decreased $214,000 (51%) and $452,000 (56%), respectively as compared to the same periods last year. This decrease is primarily due to the total destruction of Waverly from Hurricane Katrina.

For the three and six month periods ended June 30, 2006, expenses decreased $255,000 (63%) and $459,000 (62%), respectively as compared to the same periods last year. This decrease is primarily due to the total destruction of Waverly from Hurricane Katrina.

MARKET RISK

The debt on the ACI building is at a fixed rated of 8.63% and matures in 2010 (the lender is currently charging, and DBSI is paying, a default interest rate of 12.63% as described in Note 6); the debt on the Landings is at a fixed rate of 7.66% and matures in 2007; the debt on Chalet is at fixed rates of 6.59% and 6.535% and matures in 2008; and the debt on Barrington Hills is at a fixed rate of 6.035%, is repriced in 2009 and matures in 2029. The debt on Terrace is at a fixed rate of 6.87% and matures in 2009. The debt on Bicycle Club is at a fixed rate of 6.91% and matures in 2008 and the debt on Forest Park is at a fixed rate of 5.29% and matures in 2015. The debt on King’s Court/Terrace, and Arbor Gate are at variable rates and mature in 2009 and 2011, respectively. King’s Court/Terrace is 5.91%; Arbor Gate is currently 6.25% and is capped at 6.25%. A 100 basis point increase in the variable rate debt on an annual basis would impact net income by approximately $53,000.

INFLATION

The effects of inflation did not have a material impact upon the Trust's operations during the current period.

ITEM 3: CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

The Trust's Chief Executive Officer and Chief Financial Officer, after evaluating the design and effectiveness of the Trust’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”), have concluded that as of the Evaluation Date, the Trust’s disclosure

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     controls and procedures were effective.

(b) Changes in internal controls

There has been no change in the Trust’s internal control over financial reporting during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS:

On April 3, 2006 (the "Effective Date"), Maxus Realty Trust, Inc., a Missouri corporation (the “Registrant”), entered into a Purchase and Sale Agreement and Joint Escrow Instructions (the “Purchase Agreement”) with FDC Lewisville Seniors, Ltd., a Texas limited partnership (“Seller”) pursuant to which the Registrant agreed to purchase a 180 multi-family unit apartment complex that is located at 901 N. Garden Ridge, Lewisville, Texas, known as Franklin Park Apartments (the “Property”), subject to the terms and conditions provided in the Purchase Agreement, for a purchase price of $15.35 million (the “Purchase Price”), subject to standard prorations. Seller is an unrelated third party.

The Registrant paid $50,000 of the Purchase Price to an escrow agent as a deposit (the "Initial Deposit").

On May 3, 2006, the Registrant sent a letter to the seller and officially terminated the Purchase Agreement. The Initial Deposit has been refunded to the Registrant and the transaction has been abandoned.

Maxus Realty Trust, Inc. v. FF Park Lane Associates, L.P., et al.

On June 14, 2005, the Trust entered into a Purchase and Sale Agreement and Joint Escrow Instructions (the "Purchase Agreement") with FF Park Lane Associates, L.P., a Texas limited partnership ("Seller") pursuant to which the Trust agreed to purchase a 168 multi-family unit apartment complex that is located at 3007 Antelope Trail, Temple, Texas, known as Westgate Park Apartments II (the "Property"), subject to the terms and conditions provided in the Purchase Agreement, for a purchase price of approximately $4.75 million (the "Purchase Price"), subject to standard prorations (the "Transaction"). On July 1, 2005, the Trust's Board of Trustees approved the Transaction. In accordance with the terms of the Purchase Agreement, the Trust paid $100,000 of the Purchase Price to an escrow agent as a deposit (the "Deposit").

The Purchase Price is comprised of (i) the $100,000 Deposit, (ii) the Trust's assumption of a mortgage loan of Lehman Brothers Bank, FSB (the "Lender") in the amount of $3,800,000 (the "Existing Mortgage") and (iii) the balance of approximately $940,000 payable in cash on the closing date.

However, the Transaction has not closed as a result of a dispute between the Trust and Seller. Shortly prior to the anticipated closing of the Transaction, the Trust discovered that the 2005 property taxes for the Property increased by more than $50,000 from the 2004 property taxes for the Property. In providing certain due diligence information to the Trust on May 26, 2005, Seller included 2003 and 2004 tax statements, but failed to include the 2005 tax assessment for the Property, which the Trust learned Seller apparently received on May 2, 2005.

As a result, the Trust requested a reduced purchase price. On November 2, 2005 Seller notified the Trust in writing that the Trust had defaulted under the Purchase Agreement claiming Seller had satisfied all of its closing conditions under the Purchase Agreement. Seller also requested the escrow agent deliver the Deposit to Seller if the Trust had not remedied the default prior to 5:00 pm, November 4, 2005. On November 2, 2005, the Trust notified Seller in writing that Seller had not satisfied certain conditions to closing. On November 4, 2005, the Trust sent Seller a letter requesting a

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 $570,000 purchase price reduction to offset the economic impact of the increased property tax assessment on the Property.

On November 4, 2005, the Trust filed a lawsuit in the Circuit Court of Clay County, Missouri, Case No. CV105-010030 against Seller and its general partner GAF Park Lane, Inc. (the "Defendants") for breach of contract and fraud. The Trust requested that the court (i) order the Defendants to specifically perform the Purchase Agreement by conveying the Property to the Trust and (ii) award the Trust its damages, primarily $570,000 in actual damages, as well as punitive damages, attorneys' fees and expenses.

Seller filed a motion to dismiss based on a lack of personal jurisdiction, which was briefed and argued on April 26, 2006. On May 15, 2006, the court denied Seller's motion to dismiss. On June 9, 2006, Seller filed its answer and counterclaim, alleging that the Trust breached the Purchase Agreement by not closing the transaction. Seller has requested as damages the earnest money deposit made by the Trust and attorneys' fees and costs. The Trust is pursuing discovery on its claims and the counterclaim filed by Seller. The court has not set a date for the trial in this case.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURTIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

See Notes 5 and 6 of the Notes to Unaudited Consolidated Financial Statements with respect to the sale of the ACI Building

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

None

ITEM 5. OTHER INFORMATION

The Trust recently announced in the second quarter of 2006 that it plans to continue to suspend the quarterly dividend until the Hurricane Katrina insurance claims are resolved and the Trust can better project the recurring cash flows from the Trust’s properties.

ITEM 6. EXHIBITS

See Exhibits Index on Page 20.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

			MAXUS REALTY TRUST, INC.
Date:	August 11, 2006	By:	/s/ David L. Johnson
			David L. Johnson
			Chairman of the Board,
			President and Chief Executive Officer
			Trustee
Date:	August 11, 2006	By:	/s/ John W. Alvey
			John W. Alvey
			Vice President
			Chief Financial and Accounting Officer

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EXHIBIT INDEX

Exhibit
Number	Description
3.1	Articles of Incorporation of the Registrant, as amended, are incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005, as filed pursuant to Rule 13a-13 under the Securities Exchange Act of 1934 (File No. 000-13754).
3.2	Bylaws of the Registrant, as amended, are incorporated by reference to Exhibit 3.2, to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended March 31, 2005, as filed pursuant to Rule 13a-13 under the Securities Exchange Act of 1934 (File No. 0000-13754).
31.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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