SecProbe.io

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                          MONTGOMERY REALTY GROUP, INC.
                        400 Oyster Point Blvd., Suite 415
                          South San Francisco, CA 94080
                             Telephone: 650-266-8080
                             Telecopy: 650-266-8089

                                November 10, 2005

                                                                   VIA EDGAR AND
                                                          FACSIMILE TRANSMISSION
                                                                    202-772-9209

Mr. Steven Jacobs
Accounting Branch Chief
United States Securities and Exchange Commission
Division of Corporation Finance
Mail Stop 4561
100 F Street, N.E.
Washington, D.C. 20549

         Re:      Montgomery Realty Group, Inc.
                  Form 10-KSB for the year ended December 31, 2004
                  Filed August 23, 2005
                  File No. 000-30724

Dear Mr. Jacobs:

         Montgomery Realty Group, Inc. ("Montgomery") is in receipt of your
letter dated September 22, 2005, and thanks you for granting additional time to
respond.

         Montgomery responds to your questions as follows:

Form 10-KSB for the year ended December 31, 2004

Description of Business and Property

Front Street Office Building, page 16

1.       Please explain to us how you considered the guidance in SFAS 34 and
         SFAS 67 in capitalizing interest, property taxes, and insurance related
         to vacant office space when no construction, development or renovation
         appears to be underway. Please address each of the conditions in
         paragraph 17 of SFAS 34 in your response. We also refer you to
         paragraph 10(b) of SFAS 34.

         Response:

         When the Front Street Office Building was acquired in July 2003 it was
         purchased as a "development property." That is, the vacant office space
         in the building was not leasable absent substantial development
         activities at the property, including structural reinforcement and

<PAGE>
MONTGOMERY REALTY GROUP, INC.

Mr. Steven Jacobs
Accounting Branch Chief
U.S. Securities and Exchange Commission
Division of Corporation Finance
November 10, 2005
Page 2
--------------------------------------

         substantial renovation work to bring the building into compliance with
         the San Francisco Building Code. Further, to permit office tenants to
         have full use and enjoyment of their premises, the building requires
         renovation of the lobby and the building elevator, together with
         improvements to the vacant office space areas. The ground floor of the
         building was occupied by a restaurant.

         Prior to making such substantial renovations and improvements,
         Montgomery had to receive approval from the San Francisco Planning
         Department with respect to the proposed construction. Additionally, the
         San Francisco Fire Department had to approve the proposed fire
         sprinkler systems and fire escape design. Consequently, the building
         had to be held during this "planning stage" as a condition precedent to
         the commencement of actual construction. SFAS 34 provides in part:

                  If an asset requires a period of time in which to carry out
                  the activities necessary to bring it to that condition and
                  location, the interest cost incurred during that period as a
                  result of expenditures for asset is a part of the historical
                  cost of acquiring the asset.

         Footnote omitted.  (SFAS 34, P.  6).

         SFAS 34 further provides in part:

                  17.      The capitalization period shall begin when three
                           conditions are present:

                  a.       Expenditures (as defined in paragraph 16) for the
                           asset have been made.

                  b.       Activities that are necessary to get the asset ready
                           for its intended use are in progress.

                  c.       Interest cost is being incurred.

                  . . . The term activities is to be construed broadly. It
                  encompasses more than physical construction; it includes all
                  the steps required to prepare the asset for its intended use.

         (Emphasis added) (SFAS 34, P.  17).

         While the foregoing applies directly to interest cost only, it does
         specifically permit capitalization of costs during the early stages of
         development, which is the situation that faced Montgomery in its
         reporting obligations. Montgomery concluded that to properly present
         its financial position, it was appropriate to capitalize interest,
         property taxes and insurance, on a pro rata basis, as it applied to the
         vacant portions of the building.

<PAGE>
MONTGOMERY REALTY GROUP, INC.

Mr. Steven Jacobs
Accounting Branch Chief
U.S. Securities and Exchange Commission
Division of Corporation Finance
November 10, 2005
Page 3
--------------------------------------

         SFAS 34 requires, in essence, that costs incurred to bring a discrete
         asset (SFAS 34, P. 9b) into condition that will produce revenue; the
         costs associated with the generation of that revenue should be
         capitalized and amortized over the income-producing period of the
         asset, so as to match costs incurred with their revenues. (APB 10,
         passim.) Thus, that portion of the Front Street Office Building for
         which interest, property tax and insurance are allocable, together with
         the direct expenses of pre-construction activities associated with the
         Front Street Office Building, should properly be capitalized during the
         periods ended December 31, 2003 and 2004, and then amortized once the
         asset produces revenues. It is customary in the real estate industry to
         treat separate floors or other large areas of a building as a "discrete
         asset" for purposes of financial reporting and this method was used in
         capitalizing the pro-rata share of expenses that related solely to the
         vacant upper floors of the building.

         The capitalization of a pro rata share of interest expense, property
         taxes and insurance was reported on Montgomery's annual reports on Form
         10-KSB for the periods ended December 31, 2003 and 2004. The
         explanation of the pro rata method used to calculate the amount of
         expense capitalized is described below.

         a.       Expenditures (as defined in paragraph 16) for the asset have
         been made. (SFAS 34, P. 17a).

         After its acquisition, Montgomery has continuously worked to develop
         the property. However, these activities were constrained by
         Montgomery's working capital limitations, which limitations resulted in
         Montgomery ultimately selling the Front Street Office Building in July
         2005 for $4,850,000, or 8.1% more than Montgomery's initial acquisition
         cost.

         Commencing in 2003, Montgomery made direct capital expenditures
         aggregating approximately $139,000 for that fiscal year. These included
         fees paid to a development company and expenditures related to certain
         San Francisco Planning Department permit application fees. In the
         fiscal year ended December 31, 2004, Montgomery expended an additional
         $65,000 to finalize San Francisco Planning Department permits. Planning
         permits are generally obtained prior to proceeding with architectural
         plans and specifications.

         Once the San Francisco Planning Department permits were in place, in
         fiscal 2005, Montgomery engaged the services of Robinson, Mills &
         Williams (RMW), a San Francisco architectural firm, to prepare detailed
         building plans and specifications. As set forth in Montgomery's annual
         report on Form 10-KSB, fees incurred for this activity aggregated
         approximately $200,000 in fiscal year 2005.

         RMW prepared detailed plans and specifications for the renovation and
         expansion, which have been submitted to the San Francisco Building
         Department for a "plan check." The plans and specifications were
         prepared for (a) structural improvements to the building in order to
         seismically retrofit the building; (b) renovating the existing building
         in not only the three upper floors for office space, but also in

<PAGE>
MONTGOMERY REALTY GROUP, INC.

Mr. Steven Jacobs
Accounting Branch Chief
U.S. Securities and Exchange Commission
Division of Corporation Finance
November 10, 2005
Page 4
--------------------------------------

         connection with the first floor restaurant and the "basement" area for
         build-out as a wine tasting room; (c) obtaining the necessary building
         permits; and (d) bidding the work to general contractors.

         Montgomery's progress was normal. In San Francisco, it typically takes
         12 to 18 months for a prospective renovation project of this scope to
         obtain all necessary planning department, building department and
         related agencies permits and approvals. Due to the fact that the
         building has not undergone a major renovation since its original
         construction in 1927, it took approximately two years to obtain the
         building permits.

         As such, based on the above facts, Montgomery believes that the
         criteria described in paragraph 10b and paragraph 17a have been met.

         b.       Activities that are necessary to get the asset ready for its
         intended use are in progress. (SFAS 34, P. 17b)

         As described above, the three upper floors of the Front Street Office
         Building were all vacant and in poor condition, such that they were
         unleasable. Further, given the general age of the building, its poor
         condition, and lack of current code compliance, substantial renovation
         and repair were necessary to get the building ready for new tenants
         (i.e., intended use).

         All the above-described necessary activities to get the Front Street
         Office Building ready for its intended use commenced in 2003, when the
         building was purchased by Montgomery, and have continued to date.

         Based on the above, Montgomery believes that the criteria in paragraph
         17 of SFAS 34 have been met.

         c.       Interest cost is being incurred. (SFAS 34, P. 17c)

         The Front Street Office Building is encumbered by a first mortgage loan
         with a commercial bank, in the principal amount of $2,800,000, maturing
         February 26, 2006. The Front Street Office Building is further
         encumbered by a second mortgage loan with a commercial lender, in the
         principal amount of $900,000, maturing December 2005.

         After Montgomery's acquisition of the Front Street Office Building in
         July 2003, Montgomery made interest payments to its lenders in the
         annual amount of approximately $312,000, of which approximately 53.66%
         has been capitalized. Additionally, approximately 53.66% of property
         taxes and insurance have been capitalized.

         The 53.66% figure is derived by a fraction, the numerator of which is
         the vacant square footage (three upper floors) of the Front Street
         Office Building and the denominator of which is the total square
         footage of the Front Street Office Building. The restaurant and

<PAGE>
MONTGOMERY REALTY GROUP, INC.

Mr. Steven Jacobs
Accounting Branch Chief
U.S. Securities and Exchange Commission
Division of Corporation Finance
November 10, 2005
Page 5
--------------------------------------

         basement encompass 46.34% of the total square footage. No interest,
         property taxes or insurance of the income-producing portion of the
         Front Street Office Building were capitalized by Montgomery..

         Based on the above facts, Montgomery believes the criteria in paragraph
         17c of SFAS 34 have been met.

         Thus, Montgomery has concluded that all of the criteria of paragraphs
         17a, 17b and 17c of SFAS 34 are met and that pursuant to SFAS
         paragraphs 6, 9 and 10 the capitalization of pre-construction costs
         relating to the portion of the building that is to be renovated, were
         proper and correctly presented. The capitalization of these
         pre-construction costs and expenses was appropriate as the matching of
         costs with revenues is the cornerstone of SFAS 34. The fact that the
         asset was sold at a profit in July 2005, based upon these expenditures
         having been made, supports Montgomery's financial statement
         presentation and disclosures.

Financial Statements

Note 6-Income Taxes, page F-12

2.       Please describe the evidence you evaluated in concluding that a
         valuation allowance is not needed in light of your cumulative losses
         and uncertainties related to some of your investments (e.g., Keker &
         Van Nest Office Building dispute). Refer to paragraph 23 of SFAS 109.

         Response:

         Montgomery understands this question to be directed to the use of the
         deferred tax asset and the cumulative losses that have been
         historically experienced viewed in light of additional potential lost
         revenue because of an unfavorable resolution to the existing Keker &
         Van Nest lease dispute. With regard to the evaluation of whether or not
         an impairment of value loss should be reported at December 31, 2004,
         with respect to the deferred tax asset carried on Montgomery's balance
         sheet, Montgomery carefully considered the negative evidence as
         required by paragraph 23 of SFAS 109, Accounting for Income Taxes, as
         well as the positive evidence as described in paragraph 24 of SFAS 109.
         While Montgomery acknowledges that a history of operating losses does
         exist as reported on Montgomery's income statements, Montgomery
         believes sufficient positive evidence outweighs the negative evidence.
         That is, Montgomery reviewed the evidence that the losses from its
         operations had generated a deferred tax asset and that should such
         losses continue (in the absence of other factors) the benefit of the
         deferred tax asset would be impaired. However, Montgomery weighed this
         evidence against two other factors.

         First, Montgomery considered that it was a real estate asset-based
         company, such that its assets were of greater fair market value than
         that reflected by historical cost (see Footnote 2 to Financial
         Statements) and Montgomery evaluated the general trend of real estate
         assets in the San Francisco Bay Area to appreciate in value (such that
         the benefit of the deferred tax asset could likely be realized upon the

<PAGE>
MONTGOMERY REALTY GROUP, INC.

Mr. Steven Jacobs
Accounting Branch Chief
U.S. Securities and Exchange Commission
Division of Corporation Finance
November 10, 2005
Page 6
--------------------------------------

         disposition of a real estate asset). These factors combine with the
         fact that Montgomery has substantially appreciated asset values for
         many of its real estate assets (based upon independent, third-party
         appraisals) in amounts significantly in excess of their tax basis, such
         that Montgomery's deferred tax asset could be realized through tax
         pla