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<SEC-DOCUMENT>0000950134-05-013647.txt : 20060816
<SEC-HEADER>0000950134-05-013647.hdr.sgml : 20060816
<ACCEPTANCE-DATETIME>20050720151620
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950134-05-013647
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20050720

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			INCOME OPPORTUNITY REALTY INVESTORS INC /TX/
		CENTRAL INDEX KEY:			0000949961
		STANDARD INDUSTRIAL CLASSIFICATION:	REAL ESTATE INVESTMENT TRUSTS [6798]
		IRS NUMBER:				752615944
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
		BUSINESS PHONE:		4685224200

	MAIL ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="center" style="font-size: 12pt">METZGER &#038; McDONALD PLLC

<DIV align="center" style="font-size: 10pt">(formerly Prager, Metzger &#038; Kroemer PLLC)</DIV>


<DIV align="center" style="font-size: 8pt"><FONT style="font-variant: SMALL-CAPS">A PROFESSIONAL LIMITED LIABILITY COMPANY</FONT></DIV>


<DIV align="center" style="font-size: 8pt"><FONT style="font-variant: SMALL-CAPS">ATTORNEYS, MEDIATORS &#038; COUNSELORS</FONT></DIV>


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    <TD width="30%">&nbsp;</TD>
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    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-variant: SMALL-CAPS">Steven C. Metzger</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">2626 Cole Avenue, Suite&nbsp;900</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-variant: SMALL-CAPS">Direct Dial 214-740-5030</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom"><FONT style="font-variant: SMALL-CAPS">Dallas, Texas 75204-1083</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom"><FONT style="font-variant: SMALL-CAPS">Facsimile 214-523-3838</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-variant: SMALL-CAPS">smetzger@pmklaw.com</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">214-969-7600
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">214-969-7635</TD>
</TR>
<TR valign="bottom">
    <TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom"><FONT style="font-variant: SMALL-CAPS">www.pmklaw.com</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
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<P align="center" style="font-size: 10pt">July&nbsp;18, 2005



<P align="left" style="font-size: 10pt"><B><I>Via EDGAR</I></B>


<P align="left" style="font-size: 10pt">The Securities and Exchange Commission<BR>
450 Fifth Street, N.W.<BR>
Judiciary Plaza<BR>
Washington, D.C. 20549-1004

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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Attn:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stephen Jacobs, Accounting Branch Chief</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rachel Zablow, Staff Accountant</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Division of Corporation Finance</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mail Stop 4561</TD>
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</DIV>

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    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Re:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Income Opportunity Realty Investors, Inc. (Commission</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">File No.&nbsp;001-14784; CIK No.&nbsp;0000949961) &#151; Form&nbsp;10-K for the</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">fiscal year ended December&nbsp;31, 2004</TD>
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<P align="left" style="font-size: 10pt">Ladies and Gentlemen:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On behalf of Income Opportunity Realty Investors, Inc., a Nevada corporation
(&#147;IOT&#148;), this letter is being filed as a supplemental letter uploaded on
the EDGAR system on behalf of IOT in response to a letter of comments of the Staff of
the Securities and Exchange Commission dated July&nbsp;1, 2005. Schedule&nbsp;1 annexed to this
letter contains the responses to the comments of the Staff. In each instance on such
Schedule, for convenience, each comment of the Staff is repeated, followed in each
instance by the applicable response to such comment or explanation. Also included in
each response, where appropriate, is a letter/page reference to the text of the
applicable document or instrument referenced in the comment.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For some reason unknown to IOT, the original letter of comments of the Staff
dated July&nbsp;1, 2005 was faxed to a telecopier or facsimile number at another entity and
not ultimately received by a representative of IOT until late in the afternoon on July
6, 2005. For future reference of the Staff, the appropriate facsimile number for IOT
is 214-361-0964.



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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    <TD colspan="3" valign="top" align="left">The Securities and Exchange Commission</TD>
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<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Attn:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stephen Jacobs, Accounting Branch Chief<BR>
Rachel Zablow, Staff Accountant</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">July&nbsp;18, 2005</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">Page 2</TD>
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<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This letter and Schedule&nbsp;1 are being filed under the EDGAR system in direct
response to the comment of the Staff. If you would like to discuss any item
concerning the referenced matter or included in this letter or Schedule&nbsp;1, please do
not hesitate to contact the undersigned at any time at 214-740-5030 direct.



<P align="left" style="font-size: 10pt; margin-left: 50%">Very truly yours,


<P align="left" style="font-size: 10pt; margin-left: 50%">/s/ Steven C. Metzger


<P align="left" style="font-size: 10pt; margin-left: 50%">Steven C. Metzger


<P align="left" style="font-size: 10pt">SCM:ag<BR>
Enclosures

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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">cc:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">R. Neil Crouch, Executive Vice President<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and Chief Financial Officer<br>
Peter Wang, Controller<BR>
Louis J. Corna, Executive Vice President,<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax and General Counsel and Secretary<br>
Ken L. Joines, Director<BR>
Income Opportunity Realty Investors, Inc.</TD>
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<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P align="center" style="font-size: 12pt"><B>SCHEDULE 1</B>


<P align="center" style="font-size: 12pt"><B>Response to Comments of the Staff of<BR>
The Securities and Exchange Commission<BR>
by letter dated July&nbsp;1, 2005 with respect to<BR>
Form&nbsp;10-K for the year ended December&nbsp;31, 2004 of<BR>
Income Opportunity Realty Investors, Inc.<BR>
Commission File No.&nbsp;001-14784</B>


<P align="center" style="font-size: 10pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following information is intended to provide a further response to
comments of the Staff of the Securities and Exchange Commission rendered by letter
dated July&nbsp;1, 2005, with respect to Form 10-K Annual Report to the Securities and
Exchange Commission for the fiscal year ended December&nbsp;31, 2004 of Income Opportunity
Realty Investors, Inc. For convenience, each comment of the Staff is restated below,
with our response noted immediately following the comment. Also included in such
response is a letter/page reference to the text in the Form 10-K for the fiscal year
ended December&nbsp;31, 2004 (which was filed on March&nbsp;31, 2005), as applicable, and/or a
reference to the date of supplemental information provided to the Staff, including
supplemental information provided by letter dated May&nbsp;6, 2005 (the &#147;First
Supplemental Response&#148;), by letter dated June&nbsp;3, 2005 (the &#147;Second
Supplemental Response&#148;), or by letter dated June&nbsp;24, 2005 by facsimile (the &#147;Third Supplemental Response&#148;).



<P align="left" style="font-size: 10pt"><U><B>CONSOLIDATED FINANCIAL STATEMENTS</B></U>



<P align="left" style="font-size: 10pt"><U><B>Note 5 &#151; Notes and Interest Payable, page 45</B></U>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Comment/Observation No.&nbsp;1. </B>We note that you guaranteed that the acquiring
partnerships controlled by Metra would receive a 15% cumulative compound annual return
on their investments. With respect to your conclusion that you have continuing
involvement with the properties without transfer of risks and rewards, please tell us
the nature of your obligation to fund this return for property operations, and in the
event that the Metra Partnerships are liquidated. In addition, provide us with the
portion(s) of the relevant agreement(s) that discuss these obligations.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Response to Comment/Observation No.&nbsp;1. </B>Income Opportunity Realty Investors, Inc. (the
&#147;Company&#148; or &#147;IOT&#148;) guaranteed that the acquiring
partnerships formed with
 Metra Capital LLC (&#147;Metra&#148;) would receive a 15% cumulative compound annual return on
their investments. The 15% cumulative compound annual return (<I>i.e.</I>, the &#147;Preferential
Return&#148;) was to be paid from the property excess cash flow, and if cash flow was insufficient
to cover the full amount of the Preferential Return, the difference would accrue until the
underlying property was sold to an independent third party; the investors would receive funds first
to make up the Preferential Return at the rate of 15% compounded annually on the property prior to
a return of 25% of the sales cash flow and any required preferred interest redemption. IOT
previously provided in the Second Supplemental Response an exhibit setting forth a schedule of the
Preferential Return on the



<P align="center" style="font-size: 10pt">Schedule 1 - Page 1
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">properties covering from inception of the arrangement through December&nbsp;31, 2004.
Distributions which were in excess of the expensed 15% Preferential Return were accrued by IOT as a
receivable from Metra. IOT also had (and has) a right to approve the price of any sale by Metra of
the properties.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fact, it is the process that has been in effect since the original transaction in April
2002 that has essentially acted as the &#147;guaranty,&#148; pursuant to which IOT agreed to
ensure that IOT would cover any cash shortfalls. The process is that each property distributes its
gross cash to a concentration account controlled by Metra. Metra then pays the property bills from
the account, including the payment of a &#189;% management fee to Innovo, a &#189;% management
fee to Metra, and the 15% Preferential Return to the Metra Partners each month. If the
concentration account cash flow has not been sufficient to cover all of those expenses, then Metra
has requested IOT to fund the shortfalls, requests which IOT satisfied by making funding
contributions of cash to cover the amount of the shortfalls based upon IOT&#146;s understanding of
the original transaction. The net effect is a &#147;procedural guaranty&#148; of the Metra
Partners to ensure payment and distribution of the 15% Preferential Return and all expenses; this
method also procedurally uses cash from the better performing properties to cover any shortfall
from under-performing properties. Further, when cash has been distributed to the Metra Partners
for the 15% Preferential Return (and the &#189;% management fees), it has been delivered in one
lump sum each month and deducted from the property cash. The property credited cash and debited an
account with Metra. Each month when IOT has calculated the 15% Preferential Return (and the
&#189;% management fee to Metra), the full 15% Preferential Return as calculated has been
expensed. In order to expense the two fees, IOT has debited the expense account and credited the
account with Metra. If the cash disbursed and the fees calculated matched, there would be no
balance remaining in the Metra account. However, it appears that IOT has under-calculated the 15%
Preferential Return, and therefore ended up with a receivable from Metra. IOT has recalculated the
15% Preferential Return (on a compounded basis) and determined that at December&nbsp;31, 2004, if IOT
were to apply the correct interest expense, the receivable from Metra would almost be eliminated.
Additionally, on a period-by-period basis looking at the 2002, 2003 and 2004 financial statements
included in the Forms 10-K of IOT, the net income would be reduced by the &#147;increased&#148;
expense from a low of 2% to a high of 4% in these periods. IOT&#146;s management determined that
such &#147;increase&#148; would not be a material change in the financial statements.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Comment/Observation No.&nbsp;2. </B>Further to our previous comment, please confirm to us that you
will enhance your disclosure in the future to address the terms of your obligations to Metra as it
relates to your accounting treatment under SFAS 66. Please include the revised disclosure in your
response.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Response to Comment/Observation No.&nbsp;2. </B>The Company hereby confirms it will enhance its
disclosure in future filings to address the terms of the obligations to Metra as it relates to the
accounting treatment under SFAS 66. However, as a preface to the &#147;revised disclosure,&#148;
please recall that on August&nbsp;10, 2004, certain entities, including IOT, instituted an action in a
Texas State District Court as Cause No.&nbsp;2004-60231-393 against Innovo Realty, Inc., et al.
(including Metra) over the process and other matters. A summary of that litigation is included
under Item&nbsp;3 &#151; Legal Proceedings in IOT&#146;s Form 10-K for the fiscal year ended December
31, 2004. During April&nbsp;2005, a resolution of the litigation occurred settling all liabilities
remaining from the original partnership



<P align="center" style="font-size: 10pt">Schedule 1 - Page 2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">arrangements which included a return of the Metra investor equity, prepayment of prospective
asset management fees and miscellaneous and transaction costs from IOT and the other plaintiffs as
a payment of the 15% Preferential Return, along with the delegation of management to another
entity. Of the payment, IOT will recognize expense of $162,000, and a reduction of $1,476,000 in
liabilities during the second quarter of 2005. See Item&nbsp;1 &#151; Legal Proceedings under Part&nbsp;II,
Other Information, of IOT&#146;s Form 10-Q for the quarter ended March&nbsp;31, 2005. See also Note 5,
&#147;Notes and Interest Payable&#148; to the financial statements for the quarter ended March
31, 2005 included under Part&nbsp;I of IOT&#146;s Form 10-Q for the quarter ended March&nbsp;31, 2005.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IOT would suggest that its enhanced disclosure in future filings to address the terms of the
obligations to Metra as it relates to the accounting treatment under SFAS 66 would be substantially
as follows to be included in an appropriate Note to the financial statements with respect to &#147;Notes
and Interest Payable:&#148;




<P align="left" style="margin-left:4%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;In April&nbsp;2002, the Company transferred all of its residential
properties to partnerships formed with Metra Capital LLC (&#145;Metra&#146;).
The properties included the 60-unit Brighton Court, the 92-unit Del Mar, the 68-unit
Enclave, the 280-unit Meridian, the 57-unit Signature, and the 114-unit Sinclair,
all located in Midland, Texas, and the 106-unit Treehouse located in San Antonio,
Texas. Innovo Realty, Inc., a subsidiary of Innovo Group, Inc.
(&#145;Innovo&#146;) is a limited partner in the partnerships that purchased the
properties. A former director of ARI, a related party, controlled approximately
11.67% of the outstanding common stock of Innovo. The transfer constituted 23% of
the total assets of the Company as of December&nbsp;31, 2001. The transfer price for the
properties totaled $26.2&nbsp;million, of which the Company received $5.3&nbsp;million in cash
after the payment of $15.9&nbsp;million in debt and various closing costs. Management
determined to account for the transaction as a refinancing transaction (rather than
a sale) in accordance with SFAS 66 &#145;Accounting for Sales of Real
Estate.&#146; At the time of the transaction in April&nbsp;2002, ARI was a related
party to the Company by virtue of ARI&#146;s subsidiaries&#146; ownership of
approximately 28.5% of the then outstanding common stock of the Company, and the
fact that ARI and the Company had the same persons as executive officers. The
compensation price for the properties transferred totaled $26.2&nbsp;million and possible
additional contingent consideration depending upon the sale price of the properties
by the Metra partnerships. The Company also received $5.2&nbsp;million in value of 8%
non-recourse, non-convertible preferred stock of Innovo. Based upon the prospect of
additional consideration, ultimate continued involvement through the preferred stock
and the related-party nature of the former ARI director&#146;s involvement, as well
as the Company retaining a right to approve the price of any ultimate sale by a
Metra partnership of the properties, and a process by which the Company effectively
guaranteed a preferential return to the Metra investors, management determined that
the transaction must be classified as a financing transaction and not a sale. The
Company continued to be able to exert control over the Metra partnerships, and no
sale was recorded. The Treehouse property was subsequently sold to a non-related
party in February&nbsp;2004, and all of its debts have been repaid to the lenders at the
time of the sale. During August&nbsp;2004, certain entities, including the Company,
instituted


<P align="center" style="font-size: 10pt">Schedule 1 - Page 3
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<DIV style="font-family: 'Times New Roman',Times,serif">



<P align="left" style="margin-left:4%; font-size: 10pt">an action in a Texas state court against Innovo and Metra and others over
the process, as well as distribution questions. During April&nbsp;2005, a resolution of
the litigation occurred settling all liabilities remaining from the original
partnership arrangements which included a return of the Metra investor equity,
prepayment of prospective asset management fees and miscellaneous fees and
transaction costs from the Company and the other plaintiffs as a payment of the
Preferential Return along with the delegation of management to another entity. Of
the payment made, the Company will recognize expense of $162,000 and a reduction of
$1,476,000 in liabilities during the second quarter of 2005.&#148;

<P align="left" style="font-size: 10pt">Please note that the $162,000 is composed of an $82,000 revision from 2002 (see Response to
Comment/Observation No.&nbsp;3 below), $24,000 remainder of a receivable from Metra after the 15%
calculation has been revised, and $56,000 from the net settlement/resolution expense.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Comment/Observation No.&nbsp;3. </B>We note that distributions have been accrued as a receivable from
Metra. Considering that your obligation to Metra appears to be a current financing cost, please
provide us with a SAB 99 materiality analysis as it relates to the historical periods and advise us
whether you intend to account for the distribution differently on a going forward basis.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Response to Comment/Observation No.&nbsp;3. </B>Management has determined that the change in the
preferred return calculation is not material to the historic periods 2002, 2003 and 2004. Per the
SAB 99, management has reviewed the prior recordations in both a quantitative and qualitative
process, giving consideration to the items set forth below from SFAS 99:



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the misstatement arises from an item capable of precise measurement or
whether it arises from an estimate and, if so, the degree of imprecision inherent in the
estimate</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:6%; font-size: 10pt">The issue arises from an item capable of precise measurement, so there is no
additional variance to consider due to an estimate.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the misstatement masks a change in earnings or other trends</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:6%; font-size: 10pt">The issue does not mask a change in earning or a change in other trends.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the misstatement hides a failure to meet analysts&#146; consensus
expectations for the enterprise</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:6%; font-size: 10pt">No analysts follow or publish expectations for the registrant to
management&#146;s knowledge.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the misstatement changes a loss into income or vice versa</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:6%; font-size: 10pt">No change of income to a loss (or vice versa) results.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the misstatement concerns a segment or other portion of the
registrant&#146;s business that has been identified as playing a significant role in the
registrant&#146;s operations or profitability</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">Schedule 1 - Page 4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="margin-left:6%; font-size: 10pt">The registrant is in the business of buying and selling real estate to make
gains/income; there is no significant effect on the core business.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the misstatement affects the registrant&#146;s compliance with regulatory
requirements</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:6%; font-size: 10pt">To management&#146;s knowledge, there is no effect upon the registrant&#146;s
compliance with regulatory requirements.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the misstatement affects the registrant&#146;s compliance with loan
covenants or other contractual requirements</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:6%; font-size: 10pt">To management&#146;s knowledge, there is no effect upon registrant&#146;s compliance
with loan covenants or other contractual requirements.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the misstatement has the effect of increasing management&#146;s
compensation &#151; for example, by satisfying requirements for the award of bonuses or other
forms of incentive compensation</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:6%; font-size: 10pt">There is no effect on management&#146;s compensation.


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>whether the misstatement involves concealment of an unlawful transaction.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:6%; font-size: 10pt">To management&#146;s knowledge, no concealment of an unlawful transaction is
involved.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management also does not believe that the issue results in any violation of Registrant&#146;s
obligation to keep books and records that are accurate &#147;in reasonable detail,&#148; and that IOT should
not be required to make a major expenditure to correct a small item. It appears that an error
occurred in the original recordation of certain item in April&nbsp;2002 which, for that year, is not
material as explained below, but the cost to correct the error (and restate any financial
statements for that year) could be great because it would require review by a former auditor which
is no longer the auditor for IOT.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Similarly, at the time of the original transaction in April&nbsp;2002, reasonable minds differed
about the appropriate accounting treatment of certain aspects of the original transaction and its
proper treatment, ultimately concluding that treatment of the transaction as a refinancing (rather
than a sale or partial sale) was the appropriate treatment based upon Management&#146;s discussion in
consultation with its independent accountants, with the business of IOT acting in good faith
complying with the accounting provisions and requirements in effect at that time.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management does believe, however, that human error occurred at the inception of the
recordation of the transaction when an Excel schedule for the 15% Preferred Return to the Metra
Partners was initially established, with the utilization of incorrect principal balances for the
investor equity in the properties (too low) starting with July&nbsp;2002 when the transaction occurred
in April&nbsp;2002. In an over-simplification, this arrangement created an understatement of the 15%
Preferred Return expense. For the year 2002, the expense was recorded as $107,532.32, when the
correct amount should have been $189,909.60, for a difference of $82,377.28. For the year ending
2002, IOT reported net income in its Form 10-K for the fiscal year ended December&nbsp;31, 2002 of
$2,085,000. The correction for 2002 would therefore be approximately 4% of net income for that



<P align="center" style="font-size: 10pt">Schedule 1 - Page 5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">period. Management has concluded that the situation, which is human error (without any intentional
misstatement), is not material with respect to 2002. None of the nine items listed in SAB 99 cause
any suggestion of materiality for 2002. Management of IOT&#146;s intention is to clean-up the item with
the resolution of the litigation in April&nbsp;2005 by recording the 2005 expense. Going forward, IOT
will account for distributions to Metra partners as an expense in the period of the distribution.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, in researching the 15% Preferred Return calculation, Management identified an
additional accounting error in the financial statements related to the total Metra transactions.
With guidance from the registrant&#146;s auditors, Management has determined that this needs to be
corrected as well. The controller at the time of the initial transaction, set up a process where
operating income or expense from the Metra properties was deferred until the sale of the property.
This set up an additional intercompany account with Metra that could have a receivable or payable
balance. Management has undergone another materiality study, also with guidance from the
registrant&#146;s auditors and determined that this operation income or expense deferral is not material
to the historic period 2002, but is material for 2003 (and therefore, subsequent periods 2004 and
the first quarter of 2005). The result is that Management of IOT has concluded that changes should
be made in its financial statements for the year ending December&nbsp;31, 2003, for the year ending
December&nbsp;31, 2004, and for the quarter ended March&nbsp;31, 2005. To summarize the changes which
Management of IOT believes should be made, the following items in summary form are the changes
which Management intends to effectuate through appropriate amendments to the applicable Forms 10-K
and Form 10-Q as soon as reasonably practicable:



<P align="left" style="font-size: 10pt"><B>Changes in Financial Statements for the Year Ended December&nbsp;31, 2003</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in interest expense by $458,000 from a reported $2,105,000 to $2,563,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in advisory fee by $1,000 from a reported $425,000 to $424,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in net income fee by $21,000 from a reported $130,000 to $109,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in total &#147;other expense&#148; by $436,000 from a reported $5,486,000 to $5,922,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in net income by $436,000 from a reported $1,782,000 to $1,346,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in net income per share by $0.30 from a reported $1.24/sh to $0.94/sh.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in receivable from affiliates by $22,000 from a reported $457,000 to $479,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in other assets by $73,000 from a reported $4,126,000 to $4,053,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in total assets by $51,000 from a reported $101,144,000 to $101,093,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in other liabilities by $385,000 from a reported $1,230,000 to $1,615,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in accumulated deficit by $436,000 from a reported $23,699,000 to $24,135,000.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Changes in the Financial Statements for the Fiscal Year Ended December&nbsp;31, 2004</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in interest expense by $79,000 from a reported $3,491,000 to $3,570,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in advisory fee by $2,000 from a reported $743,000 to $741,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in net income fee by $13,000 from a reported $453,000 to $440,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in total &#147;other expense&#148; by $64,000 from a reported $5,990,000 to $6,054,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in net income by $64,000 from a reported $5,492,000 to $5,428,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in net income per share by $0.04 from a reported $3.95/sh to $3.91/sh.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in other assets by $178,000 from a reported $3,658,000 to $3,480,000 (includes
$73,000 decrease in 2003).</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">Schedule 1 - Page 6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in total assets by $178,000 from a reported $91,201,000 to $91,023,000
(includes $73,000 decrease in 2003).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in payable to affiliates by $37,000 from a reported $1,286,000 to $1,249,000
(includes $22,000 decrease in 2003).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in other liabilities by $359,000 from a reported $1,553,000 to $1,912,000
(includes $385,000 increase in 2003).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in accumulated deficit by $500,000 from a reported $18,206,000 to $18,706,000
(includes $436,000 increase in 2003).</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><B>Changes in 2003 Results Due To Discontinued Operations<BR>
(part of changes to 2004)</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in interest expense by $458,000 from a reported $1,354,000 to $1,812,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in total &#147;other expense&#148; by $436,000 from a reported $4,352,000 to $4,788,000.</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 10pt"><B>Changes to Financial Statements in Form&nbsp;10-Q for the Quarter Ended March&nbsp;31, 2005</B>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in interest expense by $65,000 from a reported $936,000 to $871,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in advisory fee by $1,000 from a reported $167,000 to $166,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in net income fee by $12,000 from a reported $12,000 to $24,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in total &#147;other expense&#148; by $54,000 from a reported $1,434,000 to $1,380,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in net income by $54,000 from a reported $239,000 to $293,000.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in net income per share by $0.04 from a reported $0.17/sh to $0.21/sh.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in other assets by $210,000 from a reported $3,244,000 to $3,034,000 (includes
$105,000 decrease in 2004 and $73,000 decrease in 2003).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in total assets by $210,000 from a reported $91,006,000 to $90,796,000
(includes $105,000 decrease in 2004 and $73,000 decrease in 2003).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Decrease in payable to affiliates by $26,000 from a reported $1,523,000 to $1,497,000
(includes $15,000 decrease in 2004 and $22,000 decrease in 2003).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in other liabilities by $262,000 from a reported $1,081,000 to $1,343,000
(includes $26,000 decrease in 2004 and $385,000 increase in 2003).</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increase in accumulated deficit by $446,000 from a reported $17,967,000 to $18,413,000
(includes $64,000 increase in 2004 and $436,000 increase in 2003).</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">Schedule 1 - Page 7
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