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<SEC-DOCUMENT>0001362310-08-008694.txt : 20081231
<SEC-HEADER>0001362310-08-008694.hdr.sgml : 20081231
<ACCEPTANCE-DATETIME>20081230173308
ACCESSION NUMBER:		0001362310-08-008694
CONFORMED SUBMISSION TYPE:	10-12B/A
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20081231
DATE AS OF CHANGE:		20081230

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NETREIT
		CENTRAL INDEX KEY:			0001080657
		STANDARD INDUSTRIAL CLASSIFICATION:	REAL ESTATE INVESTMENT TRUSTS [6798]
		IRS NUMBER:				330841255
		STATE OF INCORPORATION:			CA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-12B/A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-34049
		FILM NUMBER:		081276562

	BUSINESS ADDRESS:	
		STREET 1:		1282 PACIFIC OAKS PLACE
		CITY:			ESCONDIDO
		STATE:			CA
		ZIP:			92029-2900
		BUSINESS PHONE:		760-471-8536

	MAIL ADDRESS:	
		STREET 1:		1282 PACIFIC OAKS PLACE
		CITY:			ESCONDIDO
		STATE:			CA
		ZIP:			92029-2900
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-12B/A
<SEQUENCE>1
<FILENAME>c78263e10v12bza.htm
<DESCRIPTION>FORM 10/A
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 10pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

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

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center" style="font-size: 18pt; margin-top: 10pt"><B>FORM 10/A-2</B>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 10pt"><B>GENERAL FORM FOR REGISTRATION OF SECURITIES<BR>
Pursuant to Section&nbsp;12(b) or (g)&nbsp;of The Securities Exchange Act of 1934</B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 10pt"><B>NETREIT</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>California</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>33-0841255</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State of other jurisdiction of incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(IRS Employer Identification Number)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>365 S. Rancho Santa Fe Road</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>92078</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Suite&nbsp;300<BR>
San Marcos, CA</B><BR>
(Address of principal executive offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip code)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>(760)&nbsp;471-8536</B><BR>
(Registrant&#146;s telephone number, including area code)</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Jack K. Heilbron<BR>
Chief Executive Officer<BR>
1282 Pacific Oaks Place<BR>
Escondido, CA 92029-2900<BR>
(760)&nbsp;471-8536</B></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Copies to:<BR>
Bruce J. Rushall, Esq.<BR>
Rushall &#038; McGeever<BR>
6100 Innovation Way<BR>
Carlsbad, California 92009<BR>
760-438-6855</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Securities to be registered pursuant to Section&nbsp;12(b) of the Act: None</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Securities to be registered pursuant to Section&nbsp;12(g) of the Act:<BR>
Common Stock, Series&nbsp;A, no par value</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of &#147;large accelerated
filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148; in Rule&nbsp;12b-2 of the Exchange Act.
(Check one):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top" nowrap>Large accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Non-accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Smaller reporting company <FONT face="Wingdings">&#254;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="white-space: nowrap">(Do not check if a smaller reporting company)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>




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

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</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; margin-left: .25in; width: 7.20in">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>TABLE OF CONTENTS</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>PART I</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">Item&nbsp;1 Business</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">Item&nbsp;1A Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">Item&nbsp;2 Financial Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">Item&nbsp;3 Properties</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">Item&nbsp;4 Security Ownership of Certain Beneficial Owners and Management</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106">Item&nbsp;5 Directors and Executive Officers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">Item&nbsp;6 Executive Compensation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">Item&nbsp;7 Certain Relationships and Related Transactions, and Director Independence</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">Item&nbsp;8 Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">Item&nbsp;9 Market Price of and Dividends on the Registrant&#146;s Common Equity and Related Stockholder Matters</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">Item&nbsp;10 Recent Sales of Unregistered Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">Item&nbsp;11 Description of Registrant&#146;s Securities to be Registered</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">Item&nbsp;12 Indemnification of Directors and Officers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">Item&nbsp;13 Financial Statements and Supplementary Data</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">Item&nbsp;14 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">Item&nbsp;15 Financial Statements and Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c78263exv4w3.htm">Exhibit 4.3</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c78263exv4w4.htm">Exhibit 4.4</A></FONT></TD></TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

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

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS<BR>
AND INDUSTRY DATA</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">This registration statement contains &#147;forward-looking statements&#148; within the meaning of the
Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, many of
which are beyond our control. Our actual results could differ materially and adversely from those
anticipated in such forward-looking statements as a result of certain factors, including those set
forth in this registration statement. Important factors that may cause actual results to differ
from projections include, but are not limited to:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>specific risks that may be referred to in this registration statement, including those set
forth in the &#147;Risk Factors&#148; section of the Registration Statement;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adverse economic conditions in the real estate market;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adverse changes in the real estate financing markets;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our inability to raise sufficient additional capital to continue to expand our real estate
investment portfolio;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unexpected costs, lower than expected rents and revenues from our properties, and/or increases
in our operating costs;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>inability to attract or retain qualified personnel, including real estate management personnel;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adverse results of any legal proceedings; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in laws, rules and regulations affecting our business.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">All statements, other than statements of historical facts, included in this registration statement
regarding our strategy, future operations, financial position, estimated revenue or losses,
projected costs, prospects, current expectations, forecasts, and plans and objectives of management
are forward-looking statements. When used in this registration statement, the words &#147;will,&#148; &#147;may,&#148;
&#147;believe,&#148; &#147;anticipate,&#148; &#147;intend,&#148; &#147;estimate,&#148; &#147;expect,&#148; &#147;should,&#148; &#147;project,&#148; &#147;plan,&#148; and similar
expressions are intended to identify forward-looking statements, although not all forward-looking
statements contain such identifying words. All forward-looking statements speak only as of the date
of this registration statement. We do not undertake any obligation to update any forward-looking
statements or other information contained in this registration statement, except as required by
federal securities laws. You should not place undue reliance on these forward-looking statements.
Although we believe that our plans, intentions and expectations reflected in or suggested by the
forward-looking statements in this registration statement are reasonable, we cannot assure you that
these plans, intentions or expectations will be achieved. We have disclosed important factors that
could cause our actual results to differ materially from our expectations under the &#147;Risk Factors&#148;
section of this registration statement and elsewhere in this registration statement. These
cautionary statements qualify all forward-looking statement attributable to us or persons acting on
our behalf.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Information regarding market and industry statistics contained in this registration statement is
included based on information available to us that we believe is accurate. We have not reviewed or
included data from all sources, and we cannot assure you of the accuracy or completeness of the
data included in this registration statement. Forecasts and other forward-looking information
obtained from these sources are subject to the same qualifications and the additional uncertainties
accompanying any estimates of future market size, revenue and market acceptance of products and
services. We undertake no obligation to update forward-looking information to reflect actual
results or changes in assumptions or other factors that could affect those statements. See the
&#147;Risk Factors&#148; section of this registration statement for a more detailed discussion of
uncertainties and risks that may have an impact on our future results.</B>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>

    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 1.</B></TD>

    <TD><B>&nbsp;BUSINESS</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Our Company, NetREIT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">NetREIT (who we sometimes refer to as &#147;we&#148;, &#147;us&#148; or the &#147;Company&#148;) is a California corporation
formed on January&nbsp;28, 1999 that operates as a real estate investment trust as defined under the
Internal Revenue Code (&#147;REIT&#148;). We are a self-administered REIT, meaning that our operations are
under the control of our board. We have no outside advisor. We do use an affiliated property
manager, CHG Properties, Inc. (&#147;CHG Properties&#148;), to manage the day-to-day operations of our
properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our goal is to create current income and growth for our shareholders by seeking promising financial
opportunities to acquire commercial, retail and multi-unit residential real estate located
primarily in the western United States.
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We invest in retail, commercial and multi-residential real estate. Over the past three years, our
property portfolio has increased from two properties to eight properties at March, 2008, with two
additional properties under purchase contract. Our properties include one apartment complex, two
self-storage facilities, two small retail centers and four office complexes. We also own partial
interests in a single purpose retail property and an apartment complex. No single tenant accounts
for more than 10% of our rental income and the businesses of our respective tenants are generally
diversified. During this period, our equity capitalization has increased from approximately
$660,857 at December&nbsp;31, 2004 to more than $45.3&nbsp;million at
October&nbsp;31, 2008 and total assets increased
during that period from $4.4&nbsp;million to $70.4&nbsp;million.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Our Management</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As we have no outside advisor, our management is responsible for identifying and making
acquisitions on our behalf. Our chief executive officer and president, Jack K. Heilbron, is
responsible for managing our day-to-day affairs. We contract with CHG Properties, Inc. (&#147;CHG
Properties&#148;) for the management of our properties. Our board must approve each real property
acquisition proposed by our executive officers, as well as other matters set forth in our articles
of incorporation. We have five directors comprising our board. Four of our directors are
independent of Mr.&nbsp;Heilbron and CHG Properties. Our directors are elected annually by the
shareholders. We refer to our executive officers and any directors who are affiliated with them as
our management. Currently, we have no such affiliated directors other than Mr.&nbsp;Heilbron
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Our Property Manager</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">CHG Properties, Inc. manages our properties under the Property Management Agreement. The Property
Management Agreement has been approved and is subject to continuing review by our directors,
including a majority of our independent directors. CHG Properties is the wholly owned subsidiary of
CI Holding Group, Inc. (&#147;CI Holding&#148;). Our CEO and president and our CFO, Mr.&nbsp;Heilbron and Mr.
Elsberry, respectively, are minority shareholders of CI Holding. Also, Mr.&nbsp;Heilbron serves as
chairman and president of CHG Properties, and Mr.&nbsp;Elsberry serves as its CFO and secretary and a
director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Under the Property Management Agreement, we will pay CHG Properties management fees in the amount
up to 5 % of the gross revenues of each property managed for management of our properties. We
believe these terms will be no less favorable to NetREIT than those customary for similar services
in the relevant geographic areas of our properties. Depending upon the location of certain of our
properties and other circumstances, we may retain unaffiliated property management companies to
render property management services for some of our properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">CHG Properties&#146; primary business is property management. For the fiscal year ended December&nbsp;31,
2007, CHG Properties reported $135,622 in gross operating revenues and a net profit of $48,998.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Our Contacts with CHG Properties</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The Property Management Agreement. </I></B>CHG Properties provides property management services to us under
the terms of the Property Management Agreement. Without limiting the generality of the following
description, the property manager has agreed to provide services in connection with the rental,
leasing, operation and management of our properties in consideration for a monthly management fee
in the amount of up to 5% of Gross Rental Income, as defined in the Property Management Agreement,
from all properties managed for the month for which the payment is made. In addition, we are
required to compensate the property manager in the event it provides services other than those
specified in the Property Management Agreement and to reimburse the property manager for its costs,
other than its general, administrative and overhead costs, in providing services under the
Agreement. We will maintain a property management agreement for each property, each of which will
have an initial term ending December&nbsp;31, in the year in which the property is acquired. Each
Property Management Agreement will be subject to successive one-year renewals, unless we or the
property manager notifies the other in writing of its intent to terminate the Property Management
Agreement 60
days prior to the expiration of the initial renewal term. Our right to terminate will be limited
so that the Property Management Agreement will be terminable by us only in the event of gross
negligence or malfeasance on the part of the property manager.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Under the Property Management Agreement, the property manager will hire, direct and establish
policies for our employees who will have direct responsibility for each property&#146;s operations,
including resident managers and assistant managers, as well as building and maintenance personnel.
We may employ some persons who are also employed by CHG Properties or its other affiliates. CHG
Properties may, as it deems necessary, engage one or more agents to perform services for us,
including local property managers. In doing so, however, CHG Properties will not be relieved of its
duties and responsibilities to us under the Property Management Agreement, and it must compensate
any such agents without the right to any reimbursement from us or duplication of costs to us. CHG
Properties will also direct the purchase of equipment and supplies and will supervise all
maintenance activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Pursuant to the Property Management Agreement, CHG Properties is responsible for collection and
bank deposit of rents, day-to-day maintenance of the properties, leasing and tenant relations, and
will submit approved vendor invoices to us for payment. CHG Properties will also review and pay
approved vendor invoices, monitor the payment of rents by tenants, and monitor the collection of
reimbursements from tenants, where applicable, for common area maintenance, property taxes and
insurance. Data relating to collections, payments and other operations of the properties will be
entered and maintained on a computer data bank located in CHG Properties&#146; office. CHG Properties
will be responsible for monitoring and supervising any management employees on the properties,
including on-site apartment building managers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Under the Property Management Agreement, we indemnify CHG Properties and pay or reimburse
reasonable expenses in advance of final disposition of any proceeding with respect to its acts or
omissions. Conditions to our indemnification include: that the property manager acted in good faith
and the course of its conduct which caused the loss or liability was in our best interests; that
the liability or loss to be indemnified was not the result of its willful misconduct or gross
negligence; and that, in any event, such indemnification or agreement to hold harmless is
recoverable only out of our assets and not from the assets of our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Right to Acquire Property Manager&#146;s Business. </I></B>During the term of the Property Management Agreement,
we have the option to acquire CHG Properties&#146; property management business, including its assets
used in connection with that business. We have the right to do this without any consent of the
property manager, its board, or its shareholders. We may elect to exercise this right at any time.
Our board&#146;s decision to exercise this right will require the approval of a majority of our
directors not otherwise interested in the transaction (including a majority of our independent
directors). In the event this acquisition is consummated, CHG Properties and/or its shareholders
will receive the number of shares of our common stock determined as described below. We sometimes
refer to our common stock as &#147;Shares&#148;. If the transaction is consummated, we will be obligated to
pay any fees accrued under the contractual arrangements for services rendered through the closing
date of the transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In the event we choose to structure the transaction as a purchase of assets or a share exchange
where we acquire the CHG Properties corporate entity, our articles and bylaws and California
corporation law permit us to do so without obtaining approval of our shareholders. We presently do
not intend to seek our shareholder approval if it is not then required.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The number of Shares we would issue to acquire CHG Properties&#146; business will be determined as
follows. First we would send notice to the property manager of our election to proceed with the
acquisition (the &#147;Acquisition Notice&#148;). Next, an independent auditor will determine the net income
of the property manager for the 6-month period immediately preceding the month in which the
Acquisition Notice is delivered as determined in accordance with generally accepted accounting
principles (&#147;GAAP&#148;). The net income so determined will then be annualized. CHG Properties will bear
the cost of the audit. The annualized net income will then be multiplied by 90% and divided by our
Funds From Operations per Weighted Average Share (&#147;FFO Per Share&#148;) which shall equal the annualized
Funds From Operations for our quarter ended immediately preceding the date the Acquisition Notice
is delivered per our Weighted Average Shares during such quarter, as annualized. The FFO Per Share
will be based on the quarterly report we file and deliver to our shareholders for such quarter. The
resulting quotient will constitute the number of Shares we will issue in the transaction, which
must be consummated within 90&nbsp;days after the Acquisition Notice. FFO means generally net income
(computed in accordance with GAAP), excluding gains or losses from debt restructuring and sales of
properties, plus depreciation of real property and amortization, and extraordinary items.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Under certain circumstances, our acquisition of CHG Properties&#146; business under this agreement can
be entered into and consummated without seeking shareholder approval. Any acquisition of the
property manager will occur, if at all, only if our board obtains a fairness opinion from a
recognized financial advisor or institution providing valuation services to the effect that the
consideration to be paid for the property manager&#146;s business is fair, from a financial point of
view, to the shareholders. In the event the Property Management Agreement is terminated for any
reason other than our acquisition of CHG Properties&#146; business, all of CHG Properties&#146; obligations
and the Property Management Agreement will terminate. We have no intention to exercise our option
to acquire CHG Properties&#146; property management business.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Federal Income Tax REIT Requirements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Starting in our 2000 tax year, we have elected to be taxed as a REIT. As a REIT, we are generally
not subject to federal income tax on income that we distribute to our shareholders. Under the
Internal Revenue Code of 1986, as amended (the &#147;Code&#148;), to maintain our status as a REIT and
receive favorable REIT income tax treatment, we must comply with certain requirements of federal
income tax laws and regulations. These laws and regulations are complex and subject to continuous
change and reinterpretation. We have received an opinion of special tax counsel that our Company
will qualify as a REIT if it achieves certain of its objectives, including diversity of stock
ownership and operating standards. However, there is no assurance that we will be able to achieve
these goals and thus qualify or continue to qualify to be taxed as a REIT.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The principal tax consequences of our being taxed as a REIT are that our shareholders may receive
dividends that are partially sheltered from federal income taxation. In the event we fail to
qualify as a REIT, we will be subject to taxation on two levels in that our income will be taxed at
the corporate level because we will not be able to deduct dividends we pay to our shareholders. In
turn, shareholders will be taxed on dividends they receive from us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">To continue to be taxed as a REIT, we must satisfy numerous organizational and operational
requirements, including a requirement that we distribute at least 90% of our Real Estate Investment
Trust taxable income to our shareholders, as defined in the Code and calculated on an annual basis.
If we fail to qualify for taxation as a REIT in any year, our income will be taxed at regular
corporate rates, and we may be precluded from qualifying for treatment as a REIT for the four-year
period following our failure to qualify. Even though we qualify as a REIT for federal income tax
purposes, we may still be subject to state and local taxes on our income and property and to
federal income and excise taxes on our undistributed income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>1940 Act Considerations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our management will continually review our investment activity in order to prevent us from coming
within the application of the Investment Company Act of 1940 (the &#147;1940 Act&#148;). Among other things,
management will attempt to monitor the proportion of our portfolio that is placed in various
investments so that we do not come within the definition of an &#147;investment company&#148; under the act.
If at any time the character of our investments could cause us to be deemed an investment company
for purposes of the 1940 Act, we will take the necessary action to ensure that we are not deemed to
be an &#147;investment company.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Our Offices and Employees</B>
</DIV>



<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our offices are situated in
approximately 12,134 square feet of space in our Pacific Oaks Plaza
located at 1282 Pacific Oaks Place in Escondido, California.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We currently employ 26 full-time employees and 3 part-time employees.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Certain Investment Limitations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our bylaws place numerous limitations on us with respect to the manner in which we may invest our
funds. These limitations cannot be changed unless our bylaws are amended, which requires the
approval of the shareholders. Under our bylaws, we cannot:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Acquire a property if its purchase price, as defined, exceeds its appraised value and the total acquisition
expenses, as defined, and real estate commissions paid do not exceed six percent (6%) of the purchase price
(or in the case of a mortgage loan, six percent (6%) of the funds advanced), unless our board (including a
majority of the independent directors) approves the transaction as being commercially competitive, fair and
reasonable to us.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Invest in commodities, commodities futures contracts, foreign currency and bullion, with an exception for
interest rate futures.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Invest in installment sales contracts for the sale or purchase of real estate (except in connection with
the disposition of a property and where such contract is in recordable form and is appropriately recorded
in the chain of title).</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

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


</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Invest in mortgage loans, unless such lien, plus the outstanding amount of the senior debt secured by the
same property, if any, does not exceed 85% of the appraised value of the property securing the loan if,
after giving effect thereto, the value of all mortgage loans secured by junior liens on real property would
not exceed 25% of our tangible assets; or if the value of all of our investments in junior mortgage loans
which do not meet the foregoing criteria would not exceed 10% of our tangible assets (which are included in
the aforesaid 25%) and the directors (including a majority of the independent directors) determine
substantial justification exists because of the presence of other underwriting criteria.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Invest in mortgage loans unless:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the mortgagee&#146;s or owner&#146;s title insurance policy
or commitment reflects the priority of the
mortgage or the condition of title is obtained;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the mortgage loan is not subordinate to any
mortgage loan or equity interest by a member of
our management or their affiliate; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the transaction is not with a member of our
management or their affiliate unless an appraisal
of the property securing the mortgage has been
obtained from an independent qualified appraiser
and the transaction is approved by a majority of
the independent directors.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Invest in unimproved real property, as defined, or in mortgage loans secured by liens on unimproved real
property, if the total of such investments exceeds 10% of our invested assets, as defined.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Trade, as compared to investment activities (other than investments made solely for hedging purposes).</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Hold property primarily for sale to customers in the ordinary course of business.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Engage in the trading, underwriting or agency distribution of Securities issued by others.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Invest in the equity securities of any nongovernmental issuer representing less than 100% ownership of such
issuer, including another REIT, for a period in excess of 18&nbsp;months or in the equity securities of any
affiliate of a member of management, except issuers formed by us to develop, own and/or operate specific
properties.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Engage in any short sale, or borrowing on an unsecured basis, if such borrowing will result in an asset
coverage of less than three hundred percent (300%), unless at least eighty percent (80%) of our tangible
assets consist of first mortgage loans. For the purposes hereof, &#147;asset coverage&#148; means the ratio that the
value of the aggregate book value of our assets, less all liabilities and indebtedness, except indebtedness
for unsecured borrowings, bears to the aggregate of our unsecured borrowings.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Also, our aggregate borrowings (secured and unsecured) must be reviewed by our board at least
quarterly as being reasonable in relation to our net assets. The maximum amount of such borrowings
in relation to our net assets shall, in the absence of a satisfactory showing that a higher level
of borrowing is appropriate, not exceed 300%. Any excess in borrowing over such 300% level shall be
approved by a majority of the independent directors and disclosed to shareholders in our next
quarterly report, along with justification for such excess.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Our Policies Regarding Operating Reserves</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We are not required to maintain a specified level of operating reserves nor do we have a policy to
do so. Our directors continually monitor our short term cash needs for capital expenditures and
property operation with a view towards maintaining cash reserves in sufficient amounts to meet our
anticipated short term cash requirements in this regard. In addition, based on the nature,
location, age and condition of our properties, and our requirements under our various leases, we
attempt to maintain sufficient reserves to meet these obligations. However, we cannot assure our
shareholders that we will have sufficient reserves at all times to meet our short term obligations,
especially unforeseen obligations, such as those arising from losses suffered by reason of acts of
God or unsecured casualties. In the event we encounter situations requiring expenditures exceeding
our reserves, we will be forced to seek funds from other sources, including short term borrowing.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Restrictions on Our Transactions with Management and Their Affiliates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our bylaws prohibit the following transactions with our management or their affiliates.
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any loan of funds to or borrowing of funds from such person, unless a
majority of the directors (including a majority of the independent
directors) not otherwise interested in such transaction, approve the
transaction as being fair, competitive, commercially reasonable and no
less favorable to us than loans between unaffiliated lenders and
borrowers under the same circumstances.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any transaction (other than through a joint venture or partnership)
that involves the acquisition of a property from, or the sale of a
property to, such person, except our acquisition of a property where
such person has acquired the property for the sole purpose of
facilitating our acquisition thereof, the total consideration we pay
does not exceed the cost of the property to such person (including
holding costs) and no special benefit results to such person.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any transaction with a business organization with which such a person,
in his individual capacity, is affiliated unless that transaction is
approved by the board and a majority vote of the shareholders.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any investment in a joint venture or partnership with such person
unless a majority of the board (including a majority of the
independent directors), excluding any director who is interested in
the transaction, approve the transaction as being fair and reasonable
to us and substantially on the same terms and conditions as those
received by other joint venturers.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any other transaction between us and such person, unless specifically
prohibited, shall require the approval of the board (including a
majority of the Independent Directors) excluding any director
interested in the transaction, as being fair and reasonable to us and
on terms and conditions not less favorable to us than those available
from unaffiliated third parties.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Restrictions on Our Ability to Issue Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our bylaws prohibit us from issuing the following securities:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Warrants, options or rights, except as part of a public offering or
other financing, a ratable distribution to or purchase by the
shareholder or a stock option plan for our officers, directors and/or
key employees.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Debt securities, unless the historical debt service coverage (in the
most recently completed fiscal year), as adjusted for known changes,
is sufficient to properly service that higher level of debt.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Assessable or non-voting equity securities.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>

    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 1A.</B></TD>

    <TD><B>&nbsp;RISK FACTORS</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Risks Relating to an Investment in Our Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If we are unable to find suitable investments, we may not be able to achieve our investment
objectives or continue to pay dividends. </I></B>The achievement of our investment objectives and to
continue to pay regular dividends is dependent upon our continued acquisition of suitable property
investments, our selection of tenants and our obtaining satisfactory financing arrangements. We
cannot be sure that our management will be successful in obtaining suitable investments on
financially attractive terms or that, if it makes investments on our behalf, our objectives will be
achieved. If our management is unable to find suitable investments, we will hold the proceeds
available for investment in an interest-bearing account, invest the proceeds in short-term,
investment-grade investments or, ultimately, liquidate. In such an event, our ability to pay
dividends to our shareholders would be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our continued growth depends on external sources of capital. </I></B>We may not be able to acquire or
develop properties when strategic opportunities exist, satisfy our debt service obligations, or
make the cash distributions to our stockholders necessary to maintain our qualification as a REIT
if we do not have the necessary capital. We may not be able to fund our future capital needs as
they arise, including acquisition financing, from our operating cash flow because of our
distribution payment requirements. To
maintain our qualification as a REIT, the Internal Revenue Code requires us to annually distribute
at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction
and excluding income from capital gains. As a result, we must rely on outside sources to fund our
needs. Our access to third-party sources of capital depends, in part, on the following: general
market conditions, the market&#146;s perception of our growth potential, our current debt levels, our
current and expected future earnings, our cash flow and cash distributions, and the market price
per Share of our common stock.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We may be prevented from paying dividends by legal requirements. </I></B>Under California Corporations Law,
our directors may be personally liable for our payment of any distributions, including dividends,
on our equity Shares if at the time payment is made we do not satisfy certain solvency tests,
including current assets and current liabilities ratio tests. In the event our board determines
that we do not satisfy these statutory tests, we will not pay dividends on our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We may change one or more of our investment policies. </I></B>One or more of our investment policies may be
changed, subject to certain investment limitations in our bylaws, or modified from time to time by
our management, subject to review by our independent directors who are charged with the
responsibility and authority to review our investment policies and criteria at least annually to
determine that the policies we are following are in the best interests of our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our shareholders have a very limited right to influence our business or affairs. </I></B>Our executive
officers, under the direction of our board of directors, have the exclusive right to manage our
day-to-day business and affairs. Except for certain major decisions (such as mergers or the sales
of substantially all of our assets) which require the vote of our shareholders, our shareholders
generally do not have the right to participate in our management or investment decisions. Moreover,
shareholders do not have the right to remove directors except for cause.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We depend on key personnel. </I></B>Our ability to achieve our investment objectives and to pay dividends
is dependent to a significant degree upon the continued contributions of certain key personnel in
acquiring our investments, the selection of tenants and the determination of any financing
arrangements. Our key personnel includes Mr.&nbsp;Jack K. Heilbron and Mr.&nbsp;Kenneth W. Elsberry, each of
whom would be difficult to replace. If any of our key employees were to cease employment, our
operating results could suffer. We also believe that our future success depends, in large part,
upon our ability to hire and retain skilled and experienced managerial, operational and marketing
personnel. Competition for skilled and experienced personnel is intense, and we cannot assure our
shareholders that we will be successful in attracting and retaining such skilled personnel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The availability and timing of cash dividends is uncertain. </I></B>We bear all expenses incurred in our
operations, which are deducted from cash funds generated by operations prior to computing the
amount of cash dividends to be distributed to the shareholders. In addition, the board of
directors, in its discretion, may retain any portion of such funds for working capital. We cannot
assure our shareholders that we will have sufficient cash to pay dividends to our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our bylaws may prevent our participation in certain business combinations. </I></B>Provisions of our bylaws
require our shareholders owning at least 67% of the Shares to approve certain business
combinations. For the purposes of these provisions, a &#147;business combination&#148; means (i)&nbsp;a major
consolidation between the Company and an Interested Shareholder and/or its affiliates; (ii)&nbsp;any
sale, lease, exchange, mortgage, pledge or transfer of assets to an Interested Shareholder and/or
its affiliates having an aggregate full value of at least $1,000,000; and (iii)&nbsp;any
reclassification or reorganization, the affect of which would be to increase the proportion of
outstanding shares of any class of our equity securities convertible into a class of equity
securities owned by an Interested Shareholder and/or its affiliates; and (iv)&nbsp;the adoption of any
plan for or liquidation or dissolution, proposed by or on behalf of an Interested Shareholder or
its affiliates. An &#147;Interested Shareholder&#148; is a &#147;shareholder, or corporate shareholder who is
acting in concert, who holds of record, and/or beneficially, 10% or more of our outstanding commons
stock.&#148; Under California Corporate Law, business combinations are required to be approved by a
Majority Vote of our shareholders. The
66<SUP style="font-size: 70%; vertical-align: text-top">2</sup>/<SUB style="font-size: 70%; vertical-align: text-bottom">3</sub><SUP style="font-size: 85%; vertical-align: text-top">rds</SUP> shareholder approval will not apply if, at
the time the business combination is consummated or at any time during the prior twelve months we
are beneficially owned by a majority of the outstanding equity stock of the Interested Shareholder,
the business combination has been unanimously approved by our independent and disinterested
directors. These requirements could have the effect of inhibiting a change in control even if a
change in control were in the best interests of our shareholders. These provisions do not apply,
however, to business combinations that are approved or exempted by our board of directors prior to
the time that someone becomes an interested shareholder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>A limit on the number of Shares a person may own may discourage a takeover. </I></B>Our articles of
incorporation restrict ownership by one person to not more than 9.8% of our outstanding common
Shares. This restriction may discourage a change in control of our voting stock and may deter
individuals or entities from making tender offers for Shares, which offers might be financially
attractive to shareholders or which may cause a change in our management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our common stock is subordinate to our Preferred Stock in rights to distributions. </I></B>Our Series&nbsp;AA
Preferred Stock is entitled to receive dividends of 7% per annum, cumulative before we may pay
distributions to our common stock, and have the rights to receive distributions upon our
liquidation equal to their Liquidation Value of $25.00 per Share before we may pay distributions upon
our liquidation to our common shares. Thus, we may pay smaller distributions on the common stock
than we otherwise could, but for the prior right to distributions of our Preferred Stock.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Possible acquisition of our affiliated property manager&#146;s business. </I></B>We have the option to acquire
the property management business of our property manager, CHG Properties, at any time, in return
for Shares of our common stock, the number of which will be determined by the property manager&#146;s
net income and our Funds From Operations per Share in accordance with a prescribed formula. Under
this right, we can acquire our property manager&#146;s business without a vote or the consent of our
shareholders or the consent of the property manager or its shareholders. Thus, in the event we
acquire the property manager&#146;s business, the owner of the property manager, which is affiliated
with our executive management, would receive payment in the form of Shares of our common stock, the
amount of which could be substantial. This formula is intended to result in our issuance of a
number of our common shares equal to the fair value of the property manager&#146;s business, including
consideration for the cancellation of its contractual relationship with us and the loss of future
fees. However, there is no assurance that the value we would pay for the property manager&#146;s
business and assets would not exceed the value non-related purchasers would pay in an arms-length
transaction. To exercise this right, it must be approved by a majority vote of our directors not
otherwise interested in the transaction and by a majority of our independent directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Possible future transactions with our executive management or their affiliates. </I></B>Under prescribed
circumstances, our bylaws permit us to enter into transactions with our affiliates, including the
borrowing and lending of funds, the purchase and sale of properties, and joint investments.
Currently, our policy is not to enter into any transaction involving sales or purchases of
properties or joint investments with our executive management or their affiliates, or to borrow
from or lend money to such persons. However, our policies in each of these regards may change in
the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our return to our shareholders could be reduced if we are required to register as an investment
company. </I></B>We are not registered as an investment company under the 1940 Act. If we were obligated to
register under the 1940 Act, we would incur additional expenses. Also, because we would have to
comply with a variety of substantive requirements of the 1940 Act, operations could be materially
altered. We plan to continue to rely on an exemption from registration under the 1940 Act.
Compliance with this exemption generally requires that our activities are primarily in the business
of investing in real estate. Under this exemption, we may temporarily invest unused funds in
government securities and other specified short-term investments. Also, in order to comply with
these exemption requirements, we may from time to time acquire indirect assets and real estate, or
invest in sole or participatory ownership of secured loans and certain other qualifying assets.
Inasmuch as our compliance with this exemption will, in large part, depend on the facts and
circumstances of our operations, there is no assurance that we will be able to maintain this
exemption. Moreover, our ability to invest in sufficient qualifying real estate assets and/or real
estate-related assets may be impacted by future changes in the 1940 Act and regulations thereunder
or by future interpretations by the Securities and Exchange Commission or the courts. Any of these
future developments could cause us to lose our exemption and force us to reevaluate our portfolio
and business strategy. Any such changes may materially and negatively impact our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Risks Relating to Private Offering Exemption and Lack of Liquidity</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Private placement offering &#151; compliance with exemption requirements. </I></B>We have in the past and may
continue from time to time to sell our Shares to investors in reliance on the private placement
offering exemption from registration under the 1933 Act and applicable state securities laws. Many
of these requirements are subjective and must ultimately be determined upon the specific facts and
circumstances of the Offering. There is no assurance that the Securities and Exchange Commission,
any state securities law administrator, or a trier of fact in a court or arbitration proceeding
would not determine that we failed to meet one or more of these requirements. In the event we
cannot rely on an exemption from registration under the 1933 Act and/or the securities laws of any
state, we would likely be liable to one or more investors for rescission and possibly damages. If a
number of investors were successful in seeking rescission and/or damages, we could face severe
financial demands that would adversely affect our business as a whole and our shareholders&#146;
investment in our Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Moreover, since 2005, we have conducted multiple private placement offerings, all in reliance upon
the private placement exemptions from registration under the 1933 Act and applicable state
securities laws. Under applicable law and regulations, these multiple offerings could be combined
(or integrated) and treated as a single offering for federal and state securities law purposes. If
so integrated, the offerings would be treated as a single offering and would be required to meet
each of the requirements for the exemption relied upon. While we have structured each of these
offerings individually so that if they are combined they would meet the requirements of the Rule
506 exemption, the area for application of this exemption to integrated offerings remains somewhat
unclear and has not been fully defined by the Securities and Exchange Commission or the courts.
Thus, there is uncertainty as to our burden of proving that we have correctly relied on one or more
of these private placement exemptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>There is no public market for our common stock. </I></B>A public market for our Shares does not exist.
While we plan eventually to have the Shares publicly traded, we do not know and cannot estimate
when or if a regular public market for the Shares will develop. When our common stock is registered
under the 1934 Act by the filing of this Form&nbsp;10, we will be a &#147;publicly held company&#148; and,
in general, our common stock will be eligible for listing on the NASDAQ bulletin board market. We
may also be eligible to file for registration on one or more securities exchanges, including the
American Stock Exchange. We have not yet determined when we will endeavor to list or register our
Shares for trading in any of these markets. Until we do so, there will unlikely be a regular market
for the resale of our common stock. The establishment of and maintaining a registration in these
markets is costly and can be a time-consuming process. When we do so depends on a number of
factors, including the amount of common stock we sell in this Offering and any subsequent
offerings, the number of shareholders we have, the costs and expense of such registration, and the
deemed overall benefits of registration to us and to our shareholders. Until a regular public
market for the Shares exists, our shareholders may not be able to liquidate their investment in the
Shares in the event of emergency or for any other reason, and the Shares may not be readily
accepted as collateral for a loan. The purchase of the Shares, therefore, should be considered only
as a long-term investment.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Risks Relating to Real Estate Investments</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Current unsettled conditions in the financial and equity markets negatively affect the U.S. and
world economies.</I></B> The recent severe uncertainties,
dislocations and disruptions in the U.S. financial markets stemming from the subprime residential
mortgage loan collapse have resulted in a tightening or, in some locations, the unavailability of
secured real estate financing. The collapse of the subprime mortgage market has directly impacted
mortgage securities and asset-backed securities, CDOs and derivative securities associated with
those markets. These uncertainties and devaluations have affected the overall U.S. and world credit
markets and, indirectly, both the residential and commercial real estate markets. We expect these
events will continue to negatively affect other economic sectors such as retail sales manufacturing and labor. As a
result, the U.S. and world economies are experiencing an economic recession of unpredictable severity
and length. Recession effects include decreasing availability of capital and credit
financing, job losses, decreases in wholesale and retail sales, manufacturing and service sectors.
We expect regional or national shortages of products and goods to follow. These shortages could, depending on
governmental responsive actions, among other factors, result in either inflation or deflation of prices. The
effect of recent legislation and governmental action intended to stabilize the U.S. credit markets
is unclear at this time. Accordingly, we are uncertain when stability and reliability will return
to the real estate and real estate financing markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As a result of any of these events, we along with other real estate investors may experience
increasing difficulty in obtaining acceptable real estate financing and experience increases in
costs and/or shortages of goods and materials we need in our operation and the maintenance of our
properties. We also expect to experience an increase in vacancies and tenant defaults. The
rental market may soften and require us to charge lower rents to compete for tenants and fill
vacancies. As a result, our operating or financing costs would increase and our rental revenues
would decrease. Any increase in our costs or decrease in our revenues will directly affect our
profitability, both from operations and from our real estate investments. Our ability to continue
to operate profitably during these uncertain market conditions will depend on our management&#146;s
ability to adjust our acquisition and financing techniques in implementing our investment and
operating strategies, and our management&#146;s ability to make correct decisions on market specific
growth dynamics, operating performance, real estate portfolio management, and to acquire and
maintain long-term quality real estate investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Current commercial mortgage market trends may affect the terms and conditions of our mortgage
financing. </I></B>In response to illiquidity, disruption and uncertainty in the commercial
mortgage markets, lenders with whom we typically deal, such as insurance companies and national
state chartered banks, have instituted more stringent underwriting requirements, increased their
underwriting costs, and increased their credit spreads as the demand for higher risk premiums
continues. Thus, the amount of mortgage financing available has contracted and our future borrowing
costs would increase. Higher costs of mortgage financing and restricted levels of borrowing may
result in lower yields from our real estate investments, which may reduce our cash flow available
for distribution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We expect these trends will make the terms and conditions of our mortgage loans more onerous
and to contain more restrictive terms favorable to the lender, and that these terms and
restrictions would reduce our operating flexibility. These restrictions could include restrictions
on our ability to make distributions to our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Continued illiquidity and disruption of the mortgage market affects our ability to obtain mortgage
financing. </I></B>The commercial real estate mortgage market is currently experiencing volatility and
uncertainty as a result of various market factors which include a significant inventory of unsold
collateralized mortgage-backed securities (&#147;CMBS&#148;) in the market and a tightening of
underwriting standards by lenders and by credit rating agencies. Also, under these volatile and
uncertain circumstances, banks and other financial institutions are reluctant to loan funds to each
other, thus tightening the overall liquidity of the mortgage market. As the amount of available
mortgage financing continues to contract, we will find it more difficult to obtain acceptable
mortgage financing. Unavailability of mortgage financing will directly reduce our ability to
purchase additional properties and thus increase our diversification of real estate ownership.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Dislocations in the real estate mortgage markets have depressed real estate values.</I></B>
We expect actual and expected defaults on loans to continue to increase and exert downward
pressures on real estate prices in both the retail housing and commercial real estate markets. This
and other dislocations in the financing market have generally reduced the amount of capital that is
available to finance real estate. As a result, real estate investors cannot rely on capitalization
rate compression to generate returns and the residential and commercial real estate markets have
slowed, with a downward pressure on both residential and commercial real estate prices. Also, the
higher costs and reductions in the capital available to finance real estate has slowed real estate
transaction activities and depressed real estate prices. The continuation of these trends could
result in a continuing depression of real estate prices for an unpredictable period of time. A
decrease in real estate values would negatively affect the value of our real estate portfolio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>A decrease in real estate values will negatively affect our ability to refinance our properties and
possibly our existing mortgage obligations. </I></B>A decrease in real estate values will decrease the
principal amount of secured loans we can obtain on a specific property and our ability to refinance
our existing mortgage loans. In some circumstances, a decrease in the value of our existing
property which secures a mortgage loan may require us to prepay or post additional security for
that mortgage loan. This would occur where the lender&#146;s initial appraised value of the property
decreases below the value required to maintain a loan-to-value ratio specified in the mortgage loan
agreement. Thus, a decrease in real estate prices would reduce our operating income and ability to
make cash contributions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Continued deterioration of the U.S. mortgage markets would reduce our ability to acquire real
estate and diversify our portfolio. </I></B>We depend on mortgage financing to increase the number of properties we can acquire. Decrease in available
mortgage loan financing will generally result in our acquiring a fewer number of properties, which will slow or prevent our growth and our ability to
diversify our real estate portfolio.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Increase in energy prices. </I></B>Energy prices, especially the price of gasoline and petroleum products,
have disproportionately increased over the past three years to record or near-record prices. The
causes for these increases, including increased world demand, limited supply and conflicts and
uncertainties in the Middle East, Africa, and other oil-producing areas are expected to continue
into the indefinite future. These price increases are expected to continue into the near future.
Also, significant shortages of one or more of these petroleum products could also occur. Such
increased prices and shortages will have a negative impact on the real estate market and exert
upward pressures on rents and operating expenses. Inability to increase our rents to cover
increased costs will negatively impact our business and the returns we can realize from the
operation and disposition of our properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We are not required to set aside and maintain specific levels of cash reserves. </I></B>We do not
anticipate that a permanent reserve for maintenance and repairs, lease commissions or tenant
improvements of real estate properties will be established. However, to the extent that we have
insufficient funds for such purposes, we may establish reserves. To the extent that expenses
increase or unanticipated expenses arise and accumulated reserves are insufficient to meet such
expenses, we would be required to obtain additional funds through borrowing or the sale of
additional equity, if available. Our ability to repay any indebtedness incurred in connection with
the acquisition of a property or any subsequent financing or refinancing will depend in part upon
the sale, refinancing or other disposition of that property prior to the date such amounts become
due. There can be no assurance that any such sale or refinancing can be accomplished at a time or
on such terms and conditions as will permit us to repay the outstanding principal amount of any
indebtedness. Financial market conditions in the future may affect the availability and cost of
real estate loans, making real estate financing difficult or costly to obtain. In the event we are
unable to sell or refinance that property prior to the anticipated repayment date of any
indebtedness, we may be required to obtain the necessary funds through additional borrowings, if
available. If additional funds are not available from any source, we may be subject to the risk of
losing that property through foreclosure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We may be unable to sell a property at any particular time. </I></B>In general, we intend to sell,
exchange or otherwise dispose of the properties when we, in our sole discretion, determine such
action to be in our best interests. Our shareholders should not, however, expect a sale within any
specified period of time, as properties could be sold sooner because they are not performing or
because we believe the maximum value can be obtained with a sale prior to the end of the
anticipated holding period. Likewise, a sale may not be feasible until later than anticipated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Some of our retail properties may depend upon a single tenant for all of their rental income. </I></B>We
expect that a single tenant will occupy some of our retail properties. The success of these
properties will be materially dependent on the financial stability of such tenants. Lease payment
defaults by tenants could cause us to reduce the amount of dividends we pay. A default of a tenant
on its lease payments to us would cause us to lose the revenue from the property and force us to
find an alternative source of revenue to meet any mortgage payment and prevent a foreclosure if the
property is subject to a mortgage. In the event of a default, we may experience delays in enforcing
our rights as landlord and may incur substantial costs in protecting our investment and reletting
the property. If a lease is terminated, there is no assurance that we will be able to lease the
property for the rent previously received or sell the property without incurring a loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Some of our properties may be suitable for only one use. </I></B>We expect that some of our retail
properties will be designed for use by a particular tenant or business. If a lease on such a
property terminates and the tenant does not renew, or if the tenant defaults on its lease, the
property might not be marketable without substantial capital improvements. Improvements could
require the use of cash that we would otherwise distribute to our shareholders. Also, our sale of
the property without improvements would likely result in a lower sales price.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We may obtain only limited warranties when we purchase a property. </I></B>The seller of a property will
often sell such property in its &#147;as is&#148; condition on a &#147;where is&#148; basis and &#147;with all faults,&#148;
without any warranties of merchantability or fitness for a particular use or purpose. In addition,
purchase agreements may contain only limited warranties, representations and indemnifications that
will only survive for a limited period after the closing. The purchase of properties with limited
warranties increases the risk that we may lose some or all of our invested capital in the property
as well as the loss of rental income from that property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our ability to operate a property may be limited by contract. </I></B>Some of our properties will most
likely be contiguous to other parcels of real property, comprising part of the same shopping center
development. In connection therewith, there will likely exist significant covenants, conditions and
restrictions, known as &#147;CC&#038;Rs,&#148; relating to such property and any improvements on that property,
and granting easements relating to that property. The CC&#038;Rs will restrict the operation of that
property. Moreover, the operation and management of the contiguous properties may impact such
property. Compliance with CC&#038;Rs may adversely affect our operating costs and reduce the amount of
funds that we have available to pay dividends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Shorter lease terms tend to increase our maintenance costs. </I></B>Our apartment leases are typically
month-to-month. In our experience, shorter leases lead to more frequent tenant turnover which tends
to increase our leasing and maintenance costs as compared to those we incur with longer leases.
While we attempt to account for these anticipated higher costs in the amount of tenant deposits and
rental rates we require, we are not always able to do so within a given tenant market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>A property that incurs a vacancy could be difficult to sell or re-lease. </I></B>We expect our properties
to periodically incur vacancies by reason of lease expirations, terminations or tenant defaults. If
a tenant vacates a property, we may be unable either to re-lease the property for the rent due
under the prior lease or to re-lease the property without incurring additional expenditures
relating to the property. In addition, we could experience delays in enforcing our rights against
the defaulting tenant and collecting rents and, in some cases, real estate taxes and insurance
costs due from that tenant. If the vacancy continues for a long period of time, we may suffer
reduced revenues resulting in less cash dividends to be distributed to shareholders. In addition,
the resale value of the property could be diminished because the market value of a particular
property will depend principally upon the value of the leases of such property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In order to re-lease a property, substantial renovations or remodeling could be required. The cost
of construction in connection with any renovations or remodeling undertaken at a property and the
time it takes to complete such renovations may be affected by factors beyond our control,
including, but not limited to, the following: labor difficulties resulting in the interruption or
slow-down of construction; energy shortages; material and labor shortages; increases in price due
to inflation; adverse weather conditions; subcontractor defaults and delays; changes in federal,
state or local laws; ordinances or regulations; and acts of God, which may result in uninsured
losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Also, we could incur additional delays and costs if we are required to engage substitute or
additional contractors to complete any renovations in the event of delays or cost overruns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">If we experience cost overruns resulting from delays or other causes in any construction, we may
have to seek additional debt financing. Further, delays in the completion of any construction will
cause a delay in our receipt of revenues from that property and could adversely affect our ability
to attain revenue projections and meet our debt service obligations. Payment of cost overruns could
impair the operational profitability of that property. Our inability to complete any construction
on economically feasible terms could result in termination of construction and could significantly
harm our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We may have to extend credit to buyers of our properties. </I></B>In order to sell a property, we may lend
the buyer all or a portion of the purchase price by allowing the buyer to pay with its promissory
note. Generally, the note would be secured by a junior lien on the property behind the primary
mortgage lender. However, in circumstances we deem appropriate, we may accept an unsecured note,
which may or may not be guaranteed by a principal of the buyer or a third party. Providing
financing of all or a portion of the purchase price to the buyer will increase the risks that we
may not receive full payment for the property sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We may not have funding for future tenant improvements. </I></B>When a tenant at one of our commercial
properties does not renew its lease or otherwise vacates its space in one of our buildings, it is
likely that, in order to attract one or more new tenants, we will be required to expend substantial
funds for tenant improvements and tenant refurbishments to the vacated space. We may depend on
institutional lenders and/or tenants to finance our tenant improvements and tenant refurbishments
in order to attract new tenants.
We do not anticipate that we will maintain significant working capital reserves for these purposes.
We therefore cannot assure our shareholders that we will have any sources of funding available to
us for such purposes in the future.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Uninsured losses may adversely affect returns to our shareholders. </I></B>Management will attempt to
ensure that all of our properties are insured to cover casualty losses. However, in certain areas,
insurance coverage for certain types of losses, generally losses of a catastrophic nature such as
earthquakes, floods, terrorism and wars, is either unavailable or cannot be obtained at a
reasonable cost. In addition, we have no source of funding to repair or reconstruct the damaged
property, and we cannot assure our shareholders that any such sources of funding will be available
to us for such purposes in the future.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our policy is to obtain insurance coverage for each of our properties covering loss from liability,
fire and casualty in the amounts and under the terms we deem sufficient to insure our losses. Under
tenant leases on our commercial and retail properties, we require our tenants to obtain insurance
for our properties to cover casual losses and general liability in amounts and under terms
customarily obtained for similar properties in the area. However, in certain areas, certain types
of losses, generally losses of a catastrophic nature such as earthquakes, floods, terrorism and
wars is either unavailable or cannot be obtained at a reasonable cost. For example, in most
earthquake-prone areas, we do not expect to obtain earthquake insurance because it is either not
available or available at what we decide is too high of a cost. Also, tenants may not be able to obtain terrorism insurance in some urban areas. In the event we are unable or
decide not to obtain such catastrophic coverage for a property and damage or destruction of the
property occurs by reason of an uninsured disastrous event, we could lose a portion of our
investment in the property.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In addition, we could lose a significant portion of our anticipated rental income from a property
if it suffers damage. Our leases generally allow the tenant to terminate the lease if the lease
premises is partially or completely damaged or destroyed by fire or other casualty unless the
premises is restored to the extent of insurance proceeds we receive. These leases will also permit
the tenants to partially or completely abate rental payments during the time needed to rebuild or
restore the damage premises. Loss of rental income under these circumstances would require us to
obtain additional funds to meet our expenses. We generally have insurance for rental loss to cover
at least some losses from ongoing operations in the event of partial or total destruction of a
property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our compliance with various legal requirements of real estate ownership may involve significant
costs. </I></B>Our properties are subject to various local, state and federal regulatory requirements,
including those addressing zoning, environmental, land use, access for the handicapped and air and
water quality. Compliance with these additional legal requirements could adversely affect our
operating income and our ability to pay dividends. Also, the value of a property may be adversely
affected by legislative, regulatory, administrative and enforcement actions at the local, state and
national levels in a variety of areas, including environmental controls.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Environmental laws also may impose restrictions on the manner in which properties may be used or
businesses may be operated, and these restrictions may require expenditures. Such laws may be
amended so as to require compliance with stringent standards which could require us to make
unexpected expenditures, some of which could be substantial. Environmental laws provide for
sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain
circumstances, by private parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our competition for properties could impact our profitability. </I></B>In acquiring properties, we
experience substantial competition from other investors, including other REITs and real estate
investment programs. Many of our competitors have greater resources than we do and, in many cases,
are able to acquire greater resources, including personnel and facilities with acquisition efforts.
Because of this competition, we cannot assure our shareholders that we would be able to always
acquire a property we deem most desirable or that we would be able to acquire properties on
favorable terms. Our inability to acquire our most desirable properties on desired terms could
adversely affect our financial condition, our operations and our ability to pay dividends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The bankruptcy or insolvency of one of our major tenants would adversely impact our operations and
our ability to pay dividends. </I></B>The bankruptcy or insolvency of a significant tenant or a number of
smaller tenants would have an adverse impact on our income and our ability to pay dividends.
Generally, under bankruptcy law, a tenant has the option of continuing or terminating any unexpired
lease. If the tenant continues its current lease, the tenant must cure all defaults under the lease
and provide adequate assurance of its future performance under the lease. If the tenant terminates
the lease, we will lose future rent under the lease and our claim for past due amounts owing under
the lease (absent collateral securing the claim) will be treated as a general unsecured claim and
may be subject to certain limitations. General unsecured claims are the last claims paid in a
bankruptcy and, therefore, funds may not be available to pay such claims.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We could incur uninsured losses which could adversely impact the value of one or more of our
properties. </I></B>We will endeavor to have each of our properties insured against casualty loss. However,
there are types of losses, generally catastrophic in nature, which are uninsurable, are not
economically insurable or are only insurable subject to limitations. Examples of such catastrophic
events include acts of war or terrorism, earthquakes, floods, hurricanes and pollution or
environmental matters.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We may not have adequate insurance coverage in the event we or our buildings suffer casualty
losses. If we do not have the adequate insurance coverage, the value of our assets will be reduced
as the result of, and to the extent of, the uninsured loss. Additionally, we may not have access to
capital resources to repair or reconstruct any uninsured damaged property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Discovery of previously undetected environmentally hazardous conditions may adversely affect our
operating results. </I></B>Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be liable for the cost of
removal or remediation of hazardous or toxic substances on such property. Such laws often impose
liability whether or not the owner or operator knew of, or was responsible for, the presence of
such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner
in which property may be used or businesses may be operated, and these restrictions may require
expenditures. Environmental laws provide for sanctions in the event of noncompliance and may be
enforced by governmental agencies or, in certain circumstances, by private parties. In connection
with the acquisition and ownership of our properties, we may be potentially liable for such costs.
The cost of defending against claims of liability, of compliance with environmental regulatory
requirements, or of remediating any contaminated property could materially adversely affect our
business, our assets and/or our results of operations, and, consequently, amounts available for
distribution to our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We may, as owner of a property, under various local, state and federal laws be required to remedy
environmental contamination of one of our properties. These laws often impose liability without
regard to whether the owner or operator knew of, or was responsible for, the release of any
hazardous substances. We may be liable for the costs of removing or remediating contamination. The
presence of, or the failure to properly remediate, hazardous substances may adversely affect the
ability of tenants to operate, may subject us to liability to third parties, and may adversely
affect our ability to sell or rent such property or borrow money using such property as collateral.
Moreover, persons who arrange for the disposal or treatment of hazardous or toxic substances may
also be liable for the costs of removing or remediating such substances. If we are deemed to have
arranged for the disposal or treatment of hazardous or toxic substances, we may be liable for
removal or remediation costs, as well as other related costs, including governmental fees and
injuries to persons, property and natural resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Also, we could incur costs to comply with comprehensive regulatory programs governing underground
storage tanks used in a convenience store-tenant&#146;s gasoline operations. Compliance with existing
and future environmental laws regulating underground storage tanks may require significant capital
expenditures, and the remediation costs and other costs required to clean up or treat contaminated
sites could be substantial.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We cannot be sure that future laws or regulations will not impose an unanticipated material
environmental liability on any of the properties that we purchase or that the tenants of the
properties will not affect the environmental condition of the properties. The costs of complying
with these environmental laws for our properties may adversely affect our operating costs and the
value of the properties. In order to comply with the various environmental laws, we plan to obtain
satisfactory Phase I environmental site assessments or have a set amount of environmental insurance
in place for all of the properties that we purchase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Recent increase in costs of credit and stagnation of real estate prices could lead to economic
slowdown and possibly a recession. </I></B>Continued stagnation in the real estate market and stagnation or
declines of other economic conditions often lead to overall economic slowdowns and possibly,
recessions. Periods of economic slowdown or recession are typically accompanied by declines in real
estate sales in general. These conditions in turn can result in increases in mortgage loan
delinquencies and foreclosures and declines in real estate prices and values. Any material decline
in real estate values would, among other things, increase the loan-to-value ratio of any properties
on which we have mortgage financing and any real estate loans we own. A significant period of
increased delinquencies, foreclosures or depressions in real estate prices would likely materially
and adversely affect our ability to finance our real estate investments.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The War on Terrorism and any future terrorist attacks may negatively affect our operations and
profitability. </I></B>Terrorist attacks of September&nbsp;11, 2001 on the United States and subsequent events,
including social and economic costs of the wars in Iraq and Afghanistan, have negatively impacted
the U.S. economy and the U.S. financial markets. Any future terrorist attacks, and any military or
other response to anticipated or actual attacks, could further adversely affect the
U.S. economy and the financial markets. In particular, these events would adversely affect our
properties, operations and profitability. For example, direct and collateral damage from such
attacks could damage or compromise the infrastructure upon which our properties depend, such as
water supplies, power, loads and public transportation. Future attacks could also result in
increases in premiums of casualty insurance for our properties and increase the cost of goods and
services which we need to operate and maintain our properties. In addition, attacks or military or
other responses could lead to a general deterioration of business and the economy in the locality
of one or more of our properties, thus reducing our tenants and occupancy levels. Resulting higher
costs of governmental services could result in higher property taxes. The effect on our property
investments and operations from any of these possible events cannot at this time be predicted.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The war in Iraq and other hostilities and uncertainties in the Middle East could have a further
impact on our tenants. The consequences of any armed conflict are unpredictable, and we may not be
able to foresee events that could have an adverse effect on our business or the value of our
Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Any of these events could result in increased volatility in, or damage to, the United States and
worldwide financial markets and economy. They also could result in a continuation of the current
economic uncertainty in the United States or abroad. Our revenues will be dependent upon payment of
rent by tenants, which may be particularly vulnerable to uncertainty in the local economy. Adverse
economic conditions could affect the ability of our tenants to pay rent, which could have a
material adverse effect on our operating results and financial condition, as well as our ability to
pay dividends to our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Methods we use to own our properties. </I></B>We generally hold our investments in real property in the
form of a 100% fee title interest. However, we may also purchase partial interest in property,
either directly with others as co-owners (a co-tenancy interest) or indirectly through an
intermediary entity such as a joint venture, partnership or limited liability company. As
discussed below, we may hold some of our properties indirectly through limited partnerships under a
DOWNREIT structure. Also, we may on occasion purchase an interest in a long-term leasehold estate
(for example, a ground lease). We may also enter sale-leaseback financing transactions whereby we
purchase a property and lease it back to the seller for lease payments to cover our financing costs
and where the seller has the right to repurchase the property at an agreed upon price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If we invest in a DOWNREIT partnership as a general partner we would be responsible for all
liabilities of such partnership. </I></B>In a DOWNREIT structure, as well as some joint ventures or other
investments we may make, we will employ a limited partnership as the holder of our real estate
investment. We will likely acquire all or a portion of our interest in such partnership as a
general partner. As a general partner, we could be liable for all the liabilities of such
partnership. Additionally, we may also be required to take our interests in other investments as a
general partner as in the case of our initial investment. As a general partner, we would be
potentially liable for all such liabilities, even if we don&#146;t have rights of management or control
over the operation of the partnership as another of the general partners may have. Therefore, we
may be held responsible for all of the liabilities of an entity in which we do not have full
management rights or control, and our liability may far exceed the amount or value of investment we
initially made or then had in the partnership. We would like to acquire up to $100&nbsp;million or more
of our properties in DOWNREIT partnerships.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>In a sale-leaseback transaction, we are at risk that our seller/lessee will default if its tenants
default. </I></B>On occasion, we may lease an investment property back to the seller for a certain period
of time or until we obtain stated rental income objectives. When the seller/lessee subleases space
to its tenants, the seller/lessee&#146;s ability to meet any mortgage payments and its rental
obligations to us will be subject to its subtenants&#146; ability to pay their rent to the seller/lessee
on a timely basis. A default by the seller/lessee or other premature termination of its leaseback
agreement with us and our subsequent inability to release the property will likely cause us to
suffer losses and adversely affect our financial condition and ability to pay dividends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Uncertain market conditions and the broad discretion of management relating to the future
disposition of properties could adversely affect the return on our Shares. </I></B>We generally will hold
the various real properties in which we invest until such time as management determines that a sale
or other disposition appears to be advantageous to achieve our investment objectives or until it
appears that such objectives will not be met. Otherwise, our management, subject to approval of our
board, may exercise its discretion as to whether and when to sell a property, and we will have no
obligation to sell properties at any particular time. We cannot predict with any certainty the
various market conditions affecting real estate investments which will exist at any particular time
in the future. Due to the uncertainty of market conditions which may affect the future disposition
of our properties, we cannot assure our shareholders that we will be able to sell our properties at
a profit in the future. Accordingly, the extent to which our shareholders will receive cash
distributions and realize potential appreciation on our real estate investments will be dependent
upon fluctuating market conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Regulatory changes may adversely affect our specific properties and may have adverse results on our
operations and returns on our Shares. </I></B>State and/or local governments may adopt regulatory
provisions regarding land use and zoning changes. Also, regulatory changes may permit requirements
outside the control of governmental authorities at the local level, including, but not limited to
special assessment districts, special zoning codes and restrictions on land development. Also,
special use permits could be required. Any of these changes could affect our costs of operating our
properties, prices at which we can sell or lease or properties, and our ability to finance or
refinance the properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Changes in local conditions may affect one or more of our properties. </I></B>Each of our properties will
be sensitive to local economic conditions such as population growth rates, employment rates and the
local financial markets. The deterioration in any of these local conditions could affect our
ability to profitably operate a property and could adversely affect the price and terms of our sale
or other disposition of the property.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Each of our properties will be subject to local supply and demand for similar or competing
properties. </I></B>Each of our properties will be affected by the number and condition of competing
properties within its general location, which also will affect the supply and demand for such
properties. In general, if the market for a particular type of property is profitable, additional
competing properties will be constructed. As a result, the number of competing properties will at
some point exceed the demand and competition among the similar properties will increase, making
profitable operations of our properties more difficult and depressing the prices at which we would
sell or otherwise dispose of the property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Risks Relating to Debt Financing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The more leverage we use, the higher our operational risks will be. </I></B>The more we borrow, the higher
our fixed debt payment obligations will be and the risk that we will not be able to timely pay
these obligations will be greater in the event we experience a decrease in rental or other revenues
or an increase in our other costs. At October&nbsp;31, 2008, we had a total of $23.7&nbsp;million of secured
financing on our properties. We intend to continue to borrow funds through secured financings to
acquire additional properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If we fail to make our debt payments, we could lose our investment in a property. </I></B>Loans obtained
to fund property acquisitions will generally be secured by mortgages on our properties. If we are
unable to make our debt payments as required, a lender could foreclose on the property or
properties securing its debt. This could cause us to lose part or all of our investment which in
turn could cause the value of the Shares and the dividends payable to shareholders to be reduced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Lenders may require us to enter into restrictive covenants relating to our operations. </I></B>In
connection with obtaining certain financing, a lender could impose restrictions on us which affect
our ability to incur additional debt and our distribution and operating policies. Generally, our
lenders will require us to give them covenants which limit our ability to further mortgage the
property, to discontinue insurance coverage, or impose other limitations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>If we enter into financing arrangements involving balloon payment obligations, it may adversely
affect our ability to pay dividends. </I></B>Some of our financing arrangements may require us to make a
lump-sum or &#147;balloon&#148; payment at maturity. We may finance more properties in this manner. Our
ability to make a balloon payment at maturity is uncertain and will depend upon our ability to
obtain additional financing or our ability to sell the property. At the time the balloon payment is
due, we may or may not be able to refinance the balloon payment on terms as favorable as the
original loan or sell the property at a price sufficient to make the balloon payment. The effect of
a refinancing or sale could affect the rate of return to shareholders and the projected time of
disposition of our assets. In addition, payments of principal and interest made to service our
debts may leave us with insufficient cash to pay the distributions that we are required to pay to
maintain our qualification as a REIT. At October&nbsp;31, 2008, we had loans that require balloon payments of $4.4&nbsp;million due in 2011, $3.1
million due in 2012, $9.4&nbsp;million due in 2014, $3.85&nbsp;million in 2015 and $2.8&nbsp;million due in 2016.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our risks of losing property through a mortgage loan default will be greater where the property is
cross-collateralized. </I></B>In circumstances we deem appropriate, we may cross-collateralize two or more
of our properties to secure a single loan or group of related loans, such as where we purchase a
group of unimproved properties from a single seller or where we obtain a credit facility for
general application from an institutional lender. Cross-collateralizing typically occurs where the
lender requires a single loan to finance the group of properties, rather than allocating the larger
loan to separate loans, each secured by a single property. We thus could default on payment of the
single larger loan, even though we could pay one or more of the single loans secured by individual
properties if each property was subject to a separate loan and mortgage. Our default under a
cross-collateralized obligation could cause the loss of all of the properties securing the loan. In
a typical financing arrangement, each property could secure a separate loan and our default under
one loan generally could result only in our loss of the property securing the loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Due-on-sale clauses in our mortgages may prevent us from taking advantage of interest rate changes.</I></B>
Lenders typically require a due-on-sale clause in their mortgage loan agreements whereby, in the
event of the sale of the property, the lender may call the mortgage due and payable. As a practical
matter, a due-on-sale clause would require the property to be refinanced and the mortgage repaid in
the event we sell the property or require us to pay a premium to the lender to waive the
due-on-sale clause. If prevailing interest rates are higher than those charged on a property&#146;s
mortgage, and its mortgage did not have a due-on-sale clause, we could be able to obtain a higher
sales price to reflect the lower mortgage costs we could pass on to the buyer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Risks Associated with Making or Investing in Mortgage Loans</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We do not have experienced loan underwriting personnel. </I></B>We have made three mortgage loans to a
single borrower totaling $1,935,000. We do not actively seek mortgage loan investments, but our
management is open to these investment opportunities and we anticipate that we will invest in one
or more mortgage loans in the future. We do not maintain any staff of experienced loan underwriting
personnel. Our lack of experienced loan underwriting personnel may put us at a disadvantage in
analyzing and negotiating mortgage loans and could result in our investment in poorer performing
mortgage loans, which investments might have been avoided by a more experienced underwriting staff.
The probability of our successfully investing in mortgage loans would be greatly enhanced by
expertise in and experience with mortgage loan underwriting.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Mortgage loans may be impacted by unfavorable real estate market conditions, which could decrease
the value of our mortgage investments. </I></B>Our mortgage loan investments, if any, will be at risk of
default caused by many conditions beyond our control, including local and other economic conditions
affecting real estate values and interest rate levels. Also, we will not be able to assure that the
values of the property securing our mortgage loan (the &#147;mortgaged property&#148;) will not decrease from
those at the times the mortgage loans were originated. If the values of the mortgaged property
drop, our risk will increase and the values of our mortgage loan investments may decrease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Mortgage loans may be subject to interest rate fluctuations that could reduce our returns as
compared to market interest rates. </I></B>If a mortgage loan investment bears a fixed rate for a long term
and interest rates rise, the mortgage loan could yield a return lower than then-current market
rates. On the other hand, should interest rates fall, we would be adversely affected if our
borrower prepays the mortgage loan because we may not be able to reinvest the proceeds in mortgage
loans bearing the previously higher interest rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Returns on mortgage loans may be limited by regulations. </I></B>Any of our mortgage loan investments will
be subject to regulation by federal, state and/or local authorities and subject to various laws and
judicial and administrative decisions. If we invest in mortgage loans in several jurisdictions, it
could reduce the amount of income we would otherwise receive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Delays in liquidating a defaulted mortgage loan could reduce our investment returns. </I></B>If one of our
mortgage loans goes into default, we may not be able to quickly foreclose and sell the mortgaged
property. Any delay could reduce the value of our investment in the defaulted mortgage loan. An
action to foreclose on a mortgaged property is regulated by state statutes and rules and subject to
many other delays and expenses. In the event of a default by our borrower, these restrictions,
among other things, may impede our ability to foreclose on or sell the mortgage property or to
obtain proceeds sufficient to repay all amounts due to us on the mortgage loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Foreclosures create additional ownership risks that could adversely impact our returns on mortgage
investments. </I></B>If we acquire a mortgaged property by foreclosure following default under a mortgage
loan, we will have the economic and liability risks as the owner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Risks Relating to Our Management&#146;s Conflicts of Interest</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We face certain conflicts of interest with respect to our operations. </I></B>We will rely on our senior
management for our day-to-day operations. Messrs.&nbsp;Heilbron and Elsberry are also officers and
directors of our property manager, CHG Properties, and certain affiliated entities. As such, our
officers and directors may experience conflicts of interest in allocating management time and
resources between us and CHG Properties or its affiliates possibly including other real estate
investment programs. They may also be subject to conflicts of interest in making investment
decisions on properties for us as opposed to other entities that may have similar investment
objectives. For example, they may have different incentives in determining when to sell properties
with respect to which it is entitled to fees and compensation and such determinations may not be in
our best interest. Our shareholders must depend on our independent directors, who presently
constitute four of our five directors, to oversee, monitor and resolve any such conflicts on our
behalf.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>There is competition for the time and services of our senior management, and our property manager
and its affiliates may not dedicate all of the time necessary to manage our business. </I></B>We rely on
Messrs.&nbsp;Heilbron and Elsberry for our daily operations. They and certain of our administrative
personnel are also officers, directors and/or personnel of our property manager and/or its
affiliates. As such, they have conflicts in allocating their management time, services and
functions among us, our property manager and its affiliates, possibly including other real estate
investment programs or other business ventures that they may organize or serve. Those personnel
could take actions that are more favorable to other entities than to us. Our shareholders must
depend on our independent directors to oversee, monitor and resolve any such conflicts on our
behalf.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>The amounts of compensation to be paid to our management, our property manager and possibly their
affiliates cannot be predicted. </I></B>Because our board of directors may vary the amount of fees that we
will pay to our property manager and possibly their affiliates in the future and to a large extent
these fees are based on the level of our business activity, it is not possible to predict the
amounts of compensation that we will be required to pay these entities. In addition, because our
senior management are given broad discretion to determine when to consummate a transaction, we rely
on these key persons to dictate the level of our business activity. Fees paid to our affiliates
will reduce funds available for payment of dividends. Our shareholders must rely on the judgment of
our independent directors whose majority vote is necessary to approve such affiliate compensation.
Because we cannot predict the amount of fees due to these affiliates, we cannot predict how
precisely such fees will impact such payments.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our rights, and the rights of our shareholders, to recover claims against our officers and
directors are limited. </I></B>Our articles of incorporation eliminate the liability of our officers and
directors for monetary damages to the fullest extent permissible under
California law. California law provides that a director has no liability in that capacity if he
performs his duties in good faith, in a manner he reasonably believes to be in our best interest
and with the care that an ordinarily prudent person in a like position would use under similar
circumstances. Also, our articles of incorporation authorize us, and our bylaws require us, to
indemnify our directors, officers, employees and agents to the maximum extent permitted under
California law, and the property management agreement requires us to indemnify our property manager
and its affiliates for actions taken by them in good faith and without negligence or misconduct.
Because of these provisions, we and our shareholders may have more limited rights to monetary
damages against our directors and officers than might otherwise be available under common law. In
addition, we may be obligated to fund the defense costs incurred by our directors, officers,
employees and agents in any legal actions to collect damages or for other claims against our
officers and directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Risks Relating to Federal Income Taxes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Because of recently enacted tax legislation, REIT investments are comparatively less attractive
than investments in other corporations. </I></B>The tax rate applicable to qualifying corporate dividends
received by individuals prior to 2009 has been reduced to a maximum rate of 15.0% by recent income
tax legislation. However, this tax rate is generally not applicable to dividends paid by a REIT,
unless those dividends represent earnings on which the REIT itself has been taxed. Consequently,
dividends (other than capital gain dividends) we pay to individual investors generally will be
subject to the tax rates that are otherwise applicable to ordinary income that currently are as
high as 35.0%. This legislation may make an investment in our Shares comparatively less attractive
relative to an investment in the securities of other corporate entities that pay dividends and that
are not formed as REITs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Failure to qualify as a REIT could adversely affect our operations and our ability to make
distributions. </I></B>If we fail to qualify as a REIT for any taxable year, we will be subject to federal
income tax on our taxable income at corporate rates. In addition, we would generally be
disqualified from treatment as a REIT for the four taxable years following the year of losing our
REIT status. Losing our REIT status would reduce our net earnings available for investment or
distribution to shareholders because of the additional tax liability. In addition, distributions to
shareholders would no longer qualify for the distributions paid deduction and we would no longer be
required to make distributions. We might be required to borrow funds or liquidate some investments
in order to pay the applicable tax. Qualification as a REIT is subject to the satisfaction of tax
requirements and various factual matters and circumstances which are not entirely within our
control. New legislation, regulations, administrative interpretations or court decisions could
change the tax laws with respect to qualification as a REIT or the federal income tax consequences
of being a REIT. Legislative or regulatory action could adversely affect investors. In recent
years, numerous legislative, judicial and administrative changes have been made in the provisions
of the federal income tax laws applicable to investments similar to an investment in Shares. The
Taxpayer Relief Act of 1997 and the Internal Revenue Service Restructuring and Reform Act enacted
in 1998 contain numerous provisions affecting the real estate industry, generally, and the taxation
of REITs, specifically. Changes are likely to continue to occur in the future, and we cannot assure
our shareholders that any such changes will not adversely affect the taxation of a shareholder. Any
such changes could have an adverse effect on an investment in Shares or on the market value or the
resale potential of our properties. Our shareholders are urged to consult with their own tax
advisor with respect to the impact of recent legislation on their investment in our Shares and the
status of legislative, regulatory or administrative developments and proposals and their potential
effect on an investment in our Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>To maintain our REIT status, we may be forced to borrow funds on a short-term basis during
unfavorable market conditions. </I></B>In order to continue to qualify as a REIT, we generally must
distribute to our stockholders at least 90% of our Real Estate Investment Trust Taxable Income
(&#147;REIT Taxable Income&#148;) each year, excluding capital gains, and we will be subject to regular
corporate income taxes to the extent that we distribute less than 100.0% of our net taxable income
each year. In addition, we will be subject to a 4.0% nondeductible excise tax on the amount, if
any, by which distributions paid by us in any calendar year are less than the sum of 85.0% of our
ordinary income, 95.0% of our capital gain net income and 100.0% of our undistributed income from
prior years. In order to maintain our REIT status and avoid the payment of income and excise taxes,
we may need to borrow funds on a short-term basis to meet the REIT distribution requirements even
if the then prevailing market conditions are not favorable for these borrowings. These short-term
borrowing needs could result from differences in timing between the actual receipt of cash and
inclusion of income for federal income tax purposes, or the effect of non-deductible capital
expenditures, the creation of reserves or required debt or amortization payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Qualified plans investing in our Shares will be taxed on our distributions to the extent that they
are unrelated business taxable income. </I></B>Qualified plans, IRAs and certain other tax-exempt entities
will, even though they are generally exempt from federal taxation, nevertheless generally be
subject to tax on our distributions, to the extent the distribution represents unrelated taxable
income (&#147;UBTI&#148;) which exceeds $1,000 during any tax year. In general, an allocation of income from
property that is debt financed property will result in UBTI were &#147;debt financed property&#148; is
defined to mean any property as to which there is &#147;acquisition indebtedness.&#148; Our payment of
distributions to a tax-exempt employee pension benefit trust or other domestic tax-exempt
stockholder generally will not constitute UBTI to such stockholder unless such stockholder has
borrowed to acquire or carry its Shares.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>We still may be required to pay federal or state taxes. </I></B>Even if we qualify and maintain our status
as a REIT, we may be subject to federal income taxes or state taxes. For example, if we have net
income from a &#147;prohibited transaction,&#148; such income will be subject to a 100.0% tax. We may not be
able to make sufficient distributions to avoid the 4.0% excise tax that generally applies to income
retained by a REIT. We may also decide to retain proceeds we realize from the sale or other
disposition of our property and pay income tax on gain recognized on the sale. In that event, we
could elect to treat our stockholders as if they earned that gain and paid the tax on it directly.
However, stockholders that are tax-exempt, such as charities or qualified pension plans, would
derive no benefit from their deemed payment of such tax. We may also be subject to state and local
taxes on our income or property, either directly, at the level of the operating partnership, or at
the level of the other companies through which we indirectly own our assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Foreign shareholders selling their Securities may be subject to FIRPTA tax. </I></B>Generally, a foreign
person disposing of a U.S. real property interest, including securities of a U.S. corporation whose
assets consist principally of U.S. real property interests, is generally subject to a tax, known as
FIRPTA tax, on the gain recognized on the disposition. This FIRPTA tax does not apply, however, to
the disposition of stock in a REIT if the REIT is &#147;domestically controlled.&#148; A REIT is
&#147;domestically controlled&#148; if less than 50.0% of the REIT&#146;s stock, by value, has been owned directly
or indirectly by persons who are not qualifying U.S. persons during a continuous five-year period
ending on the date of disposition or, if shorter, during the entire period of the REIT&#146;s existence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We cannot assure our shareholders that we will qualify as a &#147;domestically controlled&#148; REIT. If we
were to fail to so qualify, gain realized by foreign investors on a sale of our Shares would be
subject to FIRPTA tax, unless our Shares were traded on an established securities market and the
foreign investor did not at any time during a specified testing period directly or indirectly own
more than 5.0% of the value of our outstanding common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Retirement Plan Risks</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>There are special considerations that apply to qualified plans and IRAs investing in our Shares.</I></B>
Investors who are qualified plans, such as a pension, profit sharing, 401(k), Keogh or other
qualified retirement plan, or who are IRAs should satisfy themselves that:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>their investment is consistent with their fiduciary obligations under
ERISA and the Internal Revenue Code;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>their investment is made in accordance with the documents and
instruments governing their Retirement Plan or IRA, including their
plan&#146;s investment policy;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>their investment satisfies the prudence and diversification
requirements of Sections&nbsp;404(a)(1)(B) and 404(a)(1)(C) of ERISA;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>their investment will not impair the liquidity of the plan;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>their investment will not produce UBTI for the plan or IRA;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>they will be able to value the assets of the plan annually in
accordance with ERISA requirements; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>their investment will not constitute a prohibited transaction under
Section&nbsp;406 of ERISA or Section&nbsp;4975 of the Internal Revenue Code.</TD>
</TR>

</TABLE>
</DIV>
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<A name="103"></A>
</DIV>

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    <TD width="7%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 2.</B></TD>
    <TD><B>&nbsp;FINANCIAL INFORMATION</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 10pt">
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<TR valign="top">
    <TD nowrap align="left" colspan="2"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B></TD>
</TR>
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following discussion relates to our financial statements and should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this report. Statements
contained in this &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations&#148; that are not historical facts may be forward-looking statements. Such statements are
subject to certain risks and uncertainties, which could cause actual results to materially differ
from those projected. Some of the information presented is forward-looking in nature, including
information concerning projected future occupancy rates, rental rate increases, project development
timing and investment amounts. Although the information is based our current expectations, actual
results could vary from expectations, actual results could vary from expectations stated in this
report. Numerous factors will affect our actual results, some of which are beyond our control.
These include the timing and strength of national and regional economic growth, the strength of
commercial and residential markets, competitive market conditions, fluctuations in availability and
cost of construction materials and labor resulting from the effects of worldwide demand, future
interest rate levels and capital market conditions. You are cautioned not to place undue reliance
on this information, which speaks only as of the date of this report. We assume no obligation to
update publicly any forward-looking information, whether as a result of new information, future
events or otherwise, except to the extent we are required to do so in connection with our ongoing
requirements under federal securities laws to disclose material information. For a discussion of
important risks related to our business, and an investment in our securities, including risks that
could cause actual results and events to differ materially from results and events referred to in
the forward-looking information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>OVERVIEW AND BACKGROUND</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We operate as a self-administered
real estate investment trust (&#147;REIT&#148;) headquartered in San
Diego County, California, formed to own and operate income producing real estate properties.
During the last two years we have been in a fast growth stage, having increased
capital by approximately 1,200% to $29.6&nbsp;million at December&nbsp;31, 2007 from
$2.2&nbsp;million at December&nbsp;31, 2005, and our investment
portfolio by approximately 1,100% to $45.9&nbsp;million at December&nbsp;31, 2007 from
$3.8&nbsp;million at December&nbsp;31, 2005. During
these two years, the primary source of the increase in capital was
the proceeds of approximately $26.7&nbsp;million net proceeds from
the sale of additional equity securities. The increase in our investment portfolio was
also funded from proceeds from mortgage notes payable of
approximately $22.7 million.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">At December&nbsp;31, 2007, we owned 2 office building properties, 2 retail strip centers, 1 single user
retail store, 1 residential apartment building, 2 self storage properties and one mortgage loan.
Our properties are located primarily in Southern California and Colorado. These areas have above
average population growth. We do not develop properties but acquire properties that are stabilized
or that we anticipate will be stabilized within one year of operations. We consider a property to
be stabilized once it has achieved an 80% occupancy rate for a full year as of January&nbsp;1, or has
been operating for three years. Our geographical clustering of assets enables us to reduce our
operating costs through economies of scale by servicing a number of properties with less staff. We
actively seek potential acquisitions through regular communications with real estate brokers and
other third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Most of our office and retail properties we currently own are leased to a variety of tenants
ranging from small businesses to large public companies, many of which do not have publicly rated
debt. We have in the past entered into, and intend in the future to enter into, purchase
agreements for real estate having net leases that require the tenant to pay all of the operating
expense (Net, Net, Net Leases) or pay increases in operating expenses over specific base years.
Most of our leases are for terms of 3 to 5&nbsp;years with annual rental increases built into the
leases. Our residential and self storage properties that we currently own are rented pursuant to a
rental agreement that is for no longer than 6&nbsp;months. Our self storage properties are located in
markets having other self storage properties. Competition with these other properties will impact
our operating results of these properties, which depends materially on our ability to timely lease
vacant self storage units, to actively manage unit rental rates, and our tenants&#146; ability to make
required rental payments. To be successful, we must be able to continue to respond quickly and
effectively to changes in local and regional economic conditions by adjusting rental rates of these
properties within their regional market in Southern California. We depend on advertisements,
flyers, websites, etc. to secure new tenants to fill any vacancies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Current Developments and Trends</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Credit and real estate financing markets have experienced significant deterioration beginning in
the second half of 2007. We expect this trend may continue throughout 2008 and market turbulence
could increase in the commercial real estate arena.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We believe that as a result of these negative trends, mortgage financing will continue to be more
difficult to obtain, which may affect our ability to finance future acquisitions. We have been
able to obtain financing on satisfactory terms for the potential acquisitions we have under
contract. However, we have experienced challenges in obtaining financing in the amounts related to
purchase price or the rates that were available 2 or 3&nbsp;years ago. We believe the negative trends
in the mortgage markets could reduce the competition for properties and reduce the price of those
properties.
</DIV>
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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Although long-term interest rates remain relatively low by historical standards, there has been a
significant increase in the credit spreads across the credit spectrum. Increases in credit spreads
or deterioration in individual tenant credit may lower the appraised values of properties. We
generally seek three to five year leases with our tenants to mitigate the impact that fluctuations
in interest rates have on the values of our portfolio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Also, economic growth rates have slowed in recent periods and inflation rates in the United States
have continued to rise. Increases in inflation are sometimes associated with rising long-term
interest rates, which may have a negative impact on the value of the portfolio we own. To mitigate
this risk, we will continue to try to lease our properties with fixed rent increases and/or with
scheduled rent increases based on formulas indexed to increases in the Consumer Price Index (&#147;CPI&#148;)
or other indices for the jurisdiction in which the property is located. To the extent that the CPI
increases, additional rental income streams may be generated from these leases and thereby mitigate
the impact of inflation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Management Evaluation of Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Management evaluates our results of operations with a primary focus on increasing and enhancing the
value, quality and amount of properties and seeking to increase value in our real estate.
Management focuses its efforts on improving underperforming assets through re-leasing efforts,
including negotiation of lease renewals, or selectively selling assets in order to increase value
in our real estate portfolio. The ability to increase assets under management is affected by our
ability to raise capital and our ability to identify appropriate investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Management&#146;s evaluation of operating results includes our ability to generate necessary cash flow
in order to fund distributions to our shareholders. As a result, management&#146;s assessment of
operating results gives less emphasis to the effects of unrealized gains and losses, which may
cause fluctuations in net income for comparable periods but have no impact on cash flows, and to
other non-cash charges such as depreciation and impairment charges. Management&#146;s evaluation of our
potential for generating cash flow includes an assessment of the long-term sustainability of our
real estate portfolio. Past funding of distributions to our shareholders exceeded our cash flow
from operations. We anticipate that as we acquire additional properties our revenues will increase
at a faster rate than our general and administrative expenses due to efficiencies of scale. We
therefore believe that we will be able to fund our future distributions to our shareholders from
cash flow from operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Management focuses on measures of cash flows from investing activities and cash flows from
financing activities in its evaluation of our capital resources. Investing activities typically
consist of the acquisition or disposition of investments in real property or mortgage receivables
and the funding of capital expenditures with respect to real properties. Financing activities
primarily consist of the proceeds from sale of stock, borrowings and repayments of mortgage debt
and the payment of distributions to our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>CRITICAL ACCOUNTING POLICIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The presentation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses for the
reporting period. Certain accounting policies are considered to be critical accounting policies,
as they require management to make assumptions about matters that are highly uncertain at the time
the estimate is made, and changes in the accounting estimate are reasonably likely to occur from
period to period. Management believes the following critical accounting policies reflect our more
significant judgments and estimates used in the preparation of our financial statements. For a
summary of all of our significant accounting policies, see footnote 2 to our financial statements
included elsewhere in this report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Property Acquisitions. </I></B>The Company accounts for its acquisitions of real estate in accordance with
Statement of Financial Standards (&#147;SFAS&#148;) No.141, &#147;Business Combinations&#148; which requires the
purchase price of acquired properties be allocated to the acquired tangible assets and liabilities,
consisting of land, building, tenant improvements, long-term debt and identified intangible assets
and liabilities, consisting of the value of above-market and below-market leases, the value of
in-place leases, the value of unamortized lease origination costs and the value of tenant
relationships, based in each case on their fair values.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Amounts allocated to land and to buildings and improvements, tenant improvements are derived on
recent tax assessments and building and improvements are allocated to any intangibles determined by management for above-market
and below-market leases, the value of in-place leases, the value of unamortized lease origination
costs and the value of tenant relationships.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The amount allocated to acquire in-place leases is determined based on management&#146;s assessment of
lost revenue and costs incurred for the period required to lease the &#147;assumed vacant&#148; property to
the occupancy level when purchased. The amount
allocated to acquired in-place leases is included in deferred leasing costs and acquisition related
intangible assets in the balance sheet and amortized over the remaining non-cancelable term of the
respective leases.
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The value allocable to the above or below market component of an acquired in-place lease is
determined based upon the present value (using a market discount rate) of the difference between
(i)&nbsp;the contractual rents to be paid pursuant to the lease over its remaining term, and (ii)
management&#146;s estimate of rents that would be paid using fair market rates over the remaining term
of the lease. The amounts allocated to above or below market leases are included in other assets
or acquisition-related liabilities in the balance sheet and are amortized on a straight-line basis
as an increase or reduction of rental income over the remaining non-cancelable term of the
respective leases. As of December&nbsp;31, 2007 and 2006, the Company did not have any deferred rent
for above or below market leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The total amount of remaining intangible assets acquired, which consists of unamortized lease
origination costs, in-place leases and customer relationship intangible values, are allocated based
on managements&#146; evaluation of the of the specific characteristics of each tenant&#146;s lease and the
Company&#146;s overall relationship with that respective tenant. Characteristics considered by
management in allocating these values include the nature and extent of our existing business
relationships with the tenant, growth prospects for developing new business with the tenant, the
tenant&#146;s credit quality and expectations of lease renewals (including those existing under the
terms of the lease agreement), among other factors.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The value of in-place leases and unamortized lease origination costs are amortized to expense over
the remaining term of the respective leases, which range from one to ten years. The value of
customer relationship intangibles, which is the benefit to the Company resulting from the
likelihood of an existing tenant renewing its lease, are amortized over the remaining term and any
renewal periods in the respective leases, but in no event does the amortization period for
intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate
its lease, the unamortized portion of the in-place lease value and customer relationship
intangibles is charged to expense. At December&nbsp;31, 2007, total intangibles for in-place leases and tenant relationship
costs was $170,003 net of accumulated amortization of $31,479.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Revenue Recognition. </I></B>The Company recognizes revenue from rent, tenant reimbursements, and other
revenue once all of the following criteria are met in accordance with SEC Staff Accounting Bulletin
Topic 13, &#147;Revenue Recognition&#148;:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persuasive evidence of an arrangement exists;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delivery has occurred or services have been rendered;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the amount is fixed or determinable; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the collectability of the amount is reasonably assured.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In accordance with SFAS No.&nbsp;13, &#147;Accounting for Leases&#148; (&#147;SFAS 13&#148;), as amended and interpreted,
minimum annual rental revenue is recognized in rental revenues on a straight-line basis over the
term of the related lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Certain of the Company&#146;s leases currently contain rental increases at specified intervals, and
generally accepted accounting principles require the Company to record an asset, and include in
revenues, deferred rent receivable that will be received if the tenant makes all rent payments
required through the expiration of the initial term of the lease. Deferred rent receivable in the
accompanying balance sheets includes the cumulative difference between rental revenue recorded on a
straight-line basis and rents received from the tenants in accordance with the lease terms.
Accordingly, the Company determines, in its judgment, to what extent the deferred rent receivable
applicable to each specific tenant is collectible. The Company reviews material deferred rent
receivable, as it relates to straight-line rents, on a quarterly basis and takes into consideration
the tenant&#146;s payment history, the financial condition of the tenant, business conditions in the
industry in which the tenant operates and economic conditions in the area in which the property is
located. In the event that the collectability of deferred rent with respect to any given tenant is
in doubt, the Company records an increase in the allowance for uncollectible accounts or records a
direct write-off of the specific rent receivable. No such reserves have been recorded as of
December&nbsp;31, 2007 or 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Tenant Receivables. </I></B>The Company periodically evaluates the collectability of amounts due from
tenants and maintains an allowance for doubtful accounts for estimated losses resulting from the
inability of tenants to make required payments under lease agreements. In addition, the Company
maintains an allowance for deferred rent receivable that arises from straight-lining of rents. The
Company exercises judgment in establishing these allowances and considers payment history and
current credit status of its tenants in developing these estimates. There were no allowances at
December&nbsp;31, 2007 or 2006.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Impairment. </I></B>The Company accounts for the impairment of real estate in accordance with SFAS No.
144, Accounting for the Impairment or Disposal of Long Lived Assets, which requires that the
Company review the carrying value of each property to determine if circumstances that indicate
impairment in the carrying value of the investment exist or that depreciation periods should be
modified. If circumstances support the possibility of impairment, the Company prepares a
projection of the undiscounted future cash flows, without interest charges, of the specific
property and determines if the investment in such property is recoverable. If impairment is
indicated, the carrying value of the property would be written down to its estimated fair value
based on the Company&#146;s best estimate of the property&#146;s discounted future cash flows. There have
been no impairments recognized on the Company&#146;s real estate assets at December&nbsp;31, 2007 and 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Provision for Loan Losses. </I></B>The accounting policies require that the Company maintain an allowance
for estimated credit losses with respect to mortgage loans it has made based upon its evaluation
and knowledge of its inherent risks associated with its private lending assets. Management
reflects provisions for loan losses based upon its assessment of general market conditions, its
internal risk management policies and credit risk rating system, industry loss experience, its
assessment of the likelihood of delinquencies or defaults, and the value of the collateral
underlying its investments. Actual losses, if any, could ultimately differ from these estimates.
There have been no provisions for loan losses at December&nbsp;31, 2007 and 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>THE FOLLOWING IS A COMPARISON OF OUR RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2007
AND 2006</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our results of operations for the year ended December&nbsp;31, 2007 are not indicative of those expected
in future periods as we expect that rental income, interest income from real estate loans
receivable, interest expense, rental operating expense, general and administrative expense and
depreciation and amortization will significantly increase in future periods as a result of the
assets acquired during 2007 for an entire period and as a result of anticipated future acquisitions
of real estate investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>RECENT EVENTS HAVING SIGNIFICANT EFFECT ON RESULTS OF OPERATIONS COMPARISONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Acquisitions</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Prior to January&nbsp;1, 2006 we only had two properties; a 39 unit Apartment property in Cheyenne,
Wyoming purchased in 1999 and a 26,912 square foot office building in San Marcos, California
purchased in 2000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">During the year ended December&nbsp;31, 2006, we purchased a 114,000 square foot office building in
Aurora, Colorado (June&nbsp;28, 2006) and a 3000 square foot retail property in Escondido, California
(September&nbsp;8, 2006).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">During the year ended December&nbsp;31, 2007, we purchased a 115,000 square foot office building complex
consisting of three buildings on three separate parcels, in Colorado Springs, Colorado (March&nbsp;21,
2007), a 6,000 square foot strip center in Denver, Colorado (October&nbsp;31, 2007), a 55,000 square
foot strip center in Highland, California (September&nbsp;21, 2007), a 61,000 square foot Self Storage
property in Highland, California (November&nbsp;19, 2007) and a 150,000 square foot self storage in
Hesperia, California (December&nbsp;10, 2007).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As of December&nbsp;31, 2007, the Company portfolio of operating properties was comprised of two office
buildings (&#147;Office Properties&#148;) which encompassed approximately 229 thousand rentable square feet,
three retail centers or stores (&#147;Retail Properties&#148;) which encompassed approximately 64 thousand
rentable square feet, one 39 unit residential apartment (&#147;Residential Properties&#148;) and two self
storage facilities (&#147;Self Storage Properties&#148;) which encompassed approximately 210,000 rentable
square feet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Financing</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On February&nbsp;15, 2005 we commenced a private placement offering of $50&nbsp;million of our unit of common
stock and warrants or Series&nbsp;AA Preferred Stock. The Unit was priced at $20.00 per unit and the
Series&nbsp;AA Preferred Stock was priced at $25.00 per share. The Unit consisted of 2 shares of our
common stock and one warrant to purchase one share of our common stock at $12.00 for a period
ending March&nbsp;31, 2010. A total of 433,204 Units were sold comprised of 433,204 of warrants and
866,208 shares of common stock were sold in this offering. Each share of Series&nbsp;AA Preferred Stock
(i)&nbsp;is non-voting, except under certain circumstances as provided in the Articles of Incorporation;
(ii)&nbsp;is entitled to annual cash dividends of 7% which are cumulative and payable quarterly; (iii)
ranks senior, as to the payment of dividends and distributions of assets upon liquidation, to
common stock or any other series of preferred stock that is not senior to or on parity with the
Series&nbsp;AA Preferred Stock; (iv)&nbsp;is entitled to receive $25.00 plus accrued dividends upon
liquidation; (v)&nbsp;may be redeemed by the Company prior to the mandatory conversion date at a price
of $25.00 plus accrued dividends, (vi)&nbsp;may be converted into two shares of common stock at the
option of the holder prior to the mandatory conversion date, and (vii)&nbsp;shall be converted into two
shares of common stock on the fourth Friday of December
2015. The conversion price is subject to certain anti dilution adjustments. A total of 50,200
shares of the Series&nbsp;AA Preferred Stock were issued in this offering.
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In October 2006 this offering was terminated and we commenced a new offering of $200&nbsp;million of
our common stock at $10.00 per share. Net proceeds from these offerings, after commissions, due
diligence fees, and syndication expenses, were approximately $11.1&nbsp;million in 2006 and $15.6 in
2007. The net proceeds were primarily used to acquire the properties and to expand our
administrative staff and support capabilities to levels commensurate with our increasing assets and
staff requirements. During the year 2007 the net cash used in investing activities net of proceeds
from mortgage notes payable was $15.6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">During 2007 we purchased three properties for $30.7&nbsp;million that we financed $19.1&nbsp;million, 62% of
the purchase price, with various institutions. The remaining two properties that we purchased for
$7.0&nbsp;million were cash purchases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We anticipate that the Company&#146;s capital will increase by $30 to $50&nbsp;million during 2008 from
proceeds from one or more private placement offerings of its securities. The net proceeds of the
offering will be available to acquire more real estate properties. In addition, we anticipate
that we will finance some of the new real estate by borrowing a portion of the purchase price from
financial institutions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Mortgage Loan Receivables</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On March&nbsp;20, 2007, the Company originated its first mortgage loan in the amount of $500,000
collateralized by a second deed of trust on land under development as a retirement home in
Escondido, California. This mortgage loan accrued interest at 15% per year. The mortgage loan
unpaid principal and accrued interest is due and payable on March&nbsp;19, 2008. The loan has been
extended to June&nbsp;19, 2008. At December&nbsp;31, 2007 the principal and accrued interest was $413,368.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On October&nbsp;1, 2007, the Company originated another mortgage loan in the amount of $935,000
collateralized by a first deed of trust on the land under development as a retirement home in
Escondido, California. This mortgage loan accrued interest at 11.5% per year and the unpaid
principal balance and accrued interest is due and payable on September&nbsp;30, 2008. At December&nbsp;31,
2007 the principal and accrued interest was $962,748.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On November&nbsp;19, 2007, the Company originated another mortgage loan in the amount of $500,000
collateralized by a third deed of trust on the land under development as a retirement home in
Escondido, California. This mortgage loan accrues interest at 15% per year. The mortgage loan
unpaid principal and accrued interest is due and payable on September&nbsp;30, 2008 co-terminus with the
loan secured by the second deed of trust. At December&nbsp;31, 2007, the principal and unpaid interest
was $512,709.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Properties Sold</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In June&nbsp;2007, we sold a 48.601% interest in the 7-Eleven property in Escondido, California for
$685,275, for a gain on sale of $4,475.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In October&nbsp;2007, we sold the Rancho Santa Fe Professional office building in San Marcos, California
for $5,650,000 resulting in a gain on the sale of $2,886,130. The net proceeds from this sale were
exchanged, pursuant to Section&nbsp;1031, for the purchase of Regatta Square in Denver, Colorado and
Palm Self Storage in Highland, California, therefore, there was no income tax incurred on the gain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Revenues</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Rental revenue from continuing operations was $2,863,836 for 2007 versus $706,964 for 2006, an
increase of $2,156,872, or 305%. Rental revenue in 2005 was $207,209. The increase in rental
revenue in 2007 compared to 2006 is primarily attributable to:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The five properties acquired by NetREIT in 2007, which generated $1,699,550 of rent revenue in 2007.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The two properties acquired in 2006 which generated $945,742 in 2007 compared to $495,006, an increase of $450,736.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Same property rents generated on one property during the entire year of 2007 and 2006 increased by $6,586.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Rental revenues are expected to continue to increase in future periods, as compared to historical
periods, as a result of owning the assets acquired during 2007 for an entire year and future
acquisitions of real estate assets. Four of the properties acquired in 2007
were purchased in the fourth quarter of 2007. On annualized basis the rental revenues of these
four properties will increase revenues by approximately $800,000, a 27% increase. We currently
have two properties under contract to purchase that would increase annual rental revenues by
approximately $1,700,000. Revenue in 2008 will depend upon the completion of the acquisitions that
we expected to be in June and July&nbsp;2008. Our purchase of this property is contingent upon
obtaining satisfactory financing and our approval of title and the property&#146;s physical condition.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Interest income from mortgage loans was a new activity in 2007. Interest income from real estate
receivables is expected to increase in future periods, as compared to 2007, as a result of owning
assets acquired during 2007 for an entire year. We do not anticipate a significant increase in
this area in 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Rental Operating Expenses</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Rental operating expense from continuing operations was $1,485,490 for 2007 versus $454,476 for
2006 and increase of $1,031,014, an increase of $227%. The increase in operating expense in 2007
compared to 2006 is primarily attributable to the same reasons that rental revenue increased.
However, the operating expense as a percentage rental income was 52% for 2007 versus 64% in 2006,
an improvement of 18%. The increase in number of properties and diversification of type of
properties has resulted in the lower operating expense percentage. Rental operating expenses are
expected to continue to increase in future periods, as compared to historical periods, as a result
of owning the assets acquired during 2007 for an entire year and future acquisitions or real estate
assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Interest Expense</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Interest expense increased by $699,616 during the year 2007 compared to 2006 due to the higher
average outstanding borrowings. At December&nbsp;31, 2007 we had mortgage loans on four of the
properties with total borrowings of $22,420,316 while at December&nbsp;31, 2006 we only had a mortgage
loan on one property for $3,573,443. We paid off the loan of $4,371,460 on the Hesperia,
California property in January&nbsp;2008. We anticipate interest expense to increase as a result of the
increase in loans during 2007 for an entire year and the interest expense on future acquisitions.
We will borrow funds to acquire both of the properties we currently have under contract.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following is a summary of our interest expense on loans, including the interest and
amortization of deferred financing costs reported in the discontinued operations on the statement
of operations:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest on San Marcos, CA property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,962</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest on Cheyenne, WY property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,833</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest on Aurora, CO property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">237,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,911</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest on Colorado Springs, CO property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">520,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest on Highland, CA property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest on Hespira, CA property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of deferred financing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,713</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest Expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">842,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">242,419</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">At April&nbsp;1, 2008, the weighted average interest rate on our mortgage loans of $17,991,624 was 6.01%
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Interest Coverage Ratio</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our interest coverage ratio for 2007 was 1.58 times and for 2006 was 1.09 times. Interest coverage
ratio is calculated as: the interest coverage mount (as calculated in the following table) divided
by interest expense, including interest recorded to discontinued operations. We consider interest
coverage ratio to be an appropriate supplemental measure of a company&#146;s ability to meet its
interest expense obligations. Our calculations of interest coverage ratio may be different from
the calculation use by other companies and, therefore, comparability may be limited. This
information should not be considered as an alternative to any GAAP liquidity measures.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following is a reconciliation of net cash provided by operating activities on our statement of
cash flow to our interest coverage amount:
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash from operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">457,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">131,919</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest and amortized financing expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">842,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense included in discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,945</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Receivable and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,288</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable, accrued expenses and other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(566,335</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(236,718</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest coverage amount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,318,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">212,908</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Divided by interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">835,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">194,706</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest coverage ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.09</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Interest expense includes interest expense recorded to &#147;income from discontinued operations&#148; in our
statement of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Fixed Charge Coverage Ratio</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our fixed charge coverage ratio for 2007 was 1.42 times and for 2006 was .78 times. Fixed charge
coverage ratio is calculated in exactly the same manner as interest coverage ratio, except that
preferred stock dividends are also added to the denominator. We consider fixed charge coverage
ratio to be an appropriate supplemental measure of a company&#146;s ability to make its interest and
preferred stock dividend payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>General and Administrative Expenses</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">General and administrative expenses increased by $285,956 to $794,659 during the year 2007 compared
to $508,703 in 2006. In 2007, general and administrative expenses as a percentage of total revenue
were 27% as compared to 72% in 2006. In comparing our general and administrative expenses with
other REITs you should take into consideration that we are a self administered REIT. Accordingly
all of our expenses related to acquisitions, due diligence performed by our officers and employees
is charged as general and administrative expense as incurred rather than being capitalized as part
of the cost of real acquired. The increase in general and administrative expenses during 2007 and
2006 was a result of the increase in our capital and the size of our real estate portfolio during
those years. The primary increase was in employee and director compensation costs. During the
year 2007 employee and director compensation was $472,722 compared to $227,639 in 2006. The number
of employees at December&nbsp;31, 2007 and 2006 was 14 and 5, respectively. We anticipate an increase
in staff and compensation costs as our capital and portfolio continue to increase, however we
anticipate that these costs as a percentage of total revenue will continue to decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Net Income Available to Common Stockholders</I></B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Net income available to common stockholders was $2,525,277 in 2007, as compared to a net loss of
$(398,121) in 2006. The calculation in determining net income (loss)&nbsp;available to common
stockholders includes gains from sales of properties. The amount of gains varies from period to
period based on the timing of property sales and can significantly impact net income available to
common stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Net loss from continuing operations was $(471,228) for the year ended December&nbsp;31, 2007 compared to
$(455,506) for the year ended December&nbsp;31, 2006. The loss from continuing operations is not
necessarily indicative of future results, since four of the properties included in continuing
operations were purchased during the last four months of 2007 and the general and administrative
expense is not expected to increase significantly due to those acquisitions in the future.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">During 2007, the gain recognized from the sales of investment properties was $2,886,131 as compared
to no gains during 2006.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>LIQUIDITY AND CAPITAL RESOURCES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Cash and Cash Equivalents</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">At December&nbsp;31, 2007, we had approximately $4.9&nbsp;million in cash and cash equivalents compared to
$5.8&nbsp;million at December&nbsp;31, 2006. We expect to obtain additional mortgages collateralized by some
or all of our real property in the future. We anticipate continuing issuing additional equity
securities in order to obtain additional capital. We expect the funds from operations, additional
mortgages and securities offerings will provide us with sufficient capital to make additional
investments and to fund our continuing operations for the foreseeable future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Investing Activities</I></B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Net cash used in investing activities during the year ended December&nbsp;31, 2007 was approximately
$34.6&nbsp;million, which consisted of the purchase of 5 properties and improvements
totaling $38.2&nbsp;million and mortgage receivables of $1.9&nbsp;million offset by the proceeds of sale of real estate of
$6.0&nbsp;million, as compared to net cash used in investing activities during the year ended December
31, 2006 of approximately $7.7&nbsp;million which consisted of the purchase of 2 properties totaling
$7.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Financing Activities</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Net cash provided by financing activities for the year ended December&nbsp;31, 2007 was approximately
$33.3&nbsp;million, which primarily consisted of $19.1&nbsp;million proceeds received from the long-term
financing of three of our properties and $15.6&nbsp;million net proceeds from issuance of common stock
offset by $.2&nbsp;million of principal repayments on mortgages note payables and dividend payments of
$1.1&nbsp;million. Net cash provided by financing activities for the year ended December&nbsp;31, 2006 was
approximately $12.2&nbsp;million, which consisted of the proceeds received from the long-term financing
of 1 property totaling $3.6&nbsp;million, the net proceeds from the offering of our common stock
totaling $11.1&nbsp;million and preferred stock partially offset by the repayment of 2 mortgage notes
payable of $2.4&nbsp;million and dividend payments to our stockholders of $.3&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Operating Activities</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Net cash provided by operating activities during the year ended December&nbsp;31, 2007 was approximately
$457,000 compared to net cash provided by operating activities of approximately $132,000 for the
year December&nbsp;31, 2006. The increase in cash provided by operating activities was due to the
properties acquired in 2007 that resulted in an increase in income before depreciation and
amortization and gain on sale of real estate of approximately $630,000 compared to the year 2006,
however this increase was offset by increases in net working capital (changes in operating assets
and liabilities) of approximately $146,000. Net working capital increase was primarily for prepaid
expenses and lease commissions that increased by approximately $246,000. We anticipate that the
funds from operating activities will increase during 2008 due to a full year of operations of those
properties acquired during 2007 and future property acquisitions.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Future Capital Needs</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">During 2008 and beyond, we expect to complete additional acquisitions of real estate. We intend to
fund our contractual obligations and acquire additional properties in 2008 by borrowing a portion
of purchase price and collateralizing the mortgages with the acquired properties or from the net
proceeds of issuing additional equity securities. We may also use these funds for general
corporate needs. If we are unable to make any required debt payments on any borrowings we make in
the future, our lenders could foreclose on the properties collateralizing their loans, which could
cause us to lose part or all of our investments in such properties. In addition, we need
sufficient capital to fund our dividends in order to meet these obligations.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Contractual Obligations</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table provides information with respect to the maturities and scheduled principal
repayments of our secured debt and interest payments on our fixed-rate debt at December&nbsp;31, 2007
and provides information about the minimum commitments due in connection with our ground lease
obligation and purchase commitment at December&nbsp;31, 2007. Our secured debt agreements contain
covenants and restrictions requiring us to meet certain financial ratios and reporting
requirements. Non-compliance with one or more of the covenants or restrictions could result in the
full or partial principle balance of such debt becoming immediately due and payable. We were in
compliance with all our debt covenants and restrictions at December&nbsp;31, 2007.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="20" style="border-bottom: 1px solid #000000">Payment Due by Period</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Less than 1 Year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">1 - 3 years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">3 - 5 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">More than 5 Years</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(2008)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(2009-2010)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(2011-2012)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(After 2011)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Principal
payments&#151;secured debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">4,767,852</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">867,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">975,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,809,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,420,316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest payments&#151;fixed-rate debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,087,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,080,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,972,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,489,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,628,987</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ground lease obligation (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,159,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,260,428</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase commitments (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,550,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,550,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23,425,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,988,001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,989,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,457,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">47,859,731</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Principal payments include a short term loan of $4,371,460 at an interest rate of 9.5% that
was assumed in connection of the acquisition of our Hesperia self storage property in December
2007. This loan was paid in full in January&nbsp;2008 from funds on hand at December&nbsp;31, 2007.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Lease obligations represent the ground lease payments due on our Highland, California property.
The lease expires in 2062.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Purchase commitments represent two properties that we have contracts to purchase. We
anticipate using funds from proceeds of sale of common stock since December&nbsp;31, 2007 of
approximately $6,200,000 and proceeds from mortgage loans for the remainder of the purchase price.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Capital Commitments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We currently project that we could spend an additional $500,000 to $800,000 in capital
improvements, tenant improvements, and leasing costs for properties within our stabilized portfolio
during 2008, depending on leasing activity. Capital expenditures may fluctuate in any given period
subject to the nature, extent and timing of improvements required to maintain our properties, the
term of the leases, the type of leases, he involvement of external leasing agents and overall
market conditions. We have impounds with lending institutions of $500,000, included in Restricted
Cash, reserved for these tenant improvement, capital expenditures and leasing costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Other Liquidity Needs</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We are required to distribute 90% of our REIT taxable income (excluding capital gains) on an annual
basis in order to qualify as a REIT for federal income tax purposes. Accordingly, we intend to
continue to make, but have not contractually bound ourselves to make, regular quarterly
distributions to common stockholders and preferred stockholders from cash flow from operating
activities. All such distributions are at the discretion of the Board of Directors. We may be
required to use borrowings, if necessary, to meet
REIT distribution requirements and maintain our REIT status. We have historically distributed
amounts in excess of the taxable income resulting in a return of capital to our stockholders, and
currently have the ability to not increase our distributions to meet our REIT requirement for 2008.
If our net cash provided by operating activities and gains on sale of real estate don&#146;t exceed the
distribution and we do not, or cannot, sell property, we would have to borrow funds to pay the
distribution or reduce or eliminate the distribution. We consider market factors and our
historical and anticipated performance in addition to REIT requirements in determining our
distribution levels. During 2007, the dividend distribution paid in cash was paid from net cash
provided by operating activities of $475.190 and the gain portion of the proceeds of the sale of
real state. During 2006 and prior, the dividend distribution paid in cash exceeded the net cash
provided by operating activities and there were no proceeds from the sale of real estate. The
excess of those distributions were paid from sources other than operating cash flow, primarily from
offering proceeds on hand. Until proceeds from our offering are fully invested and generating
operating cash flow sufficient to fully cover distributions to stockholders, we intend to pay a
portion of the distributions from the proceeds of our offering or from borrowings in anticipation
of future cash flows. On January&nbsp;31, 2008, we paid a regular quarterly cash dividend of $0.147 per
common share to stockholders of record on December&nbsp;31, 2007. This dividend is equivalent to an
annual rate of $0.588 per share. In addition, we are required to make quarterly distributions to
our Series&nbsp;AA Preferred stockholders, which totaled $87,850 of preferred dividends for 2007.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We believe that we will have sufficient capital resources to satisfy our liquidity needs over the
next twelve-month period. We expect to meet our short-term liquidity needs, which may include
principal repayments of our debt obligations, capital expenditures, distributions to common and
preferred stockholders, and short-term acquisitions through retained cash flow from operations,
proceeds from the proceeds from disposition of non-strategic assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We expect to meet our long-term liquidity requirements, which will include additional properties
through additional issuance of common stock, long-term secured borrowings. We do not intend to
reserve funds to retire existing debt upon maturity. We presently expect to refinance such debt at
maturity or retire such debt through the issuance of common stock as market conditions permit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Off-Balance Sheet Arrangements</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As of December&nbsp;31, 2007, we do not have any off-balance sheet arrangements or obligations,
including contingent obligations.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Capital Expenditures, Tenant Improvements and Leasing Costs</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Capital expenditures may fluctuate in any given period subject to the nature, extent, and timing of
improvements required to be made to the Properties. We anticipate spending more on gross capital
expenditures during 2008 compared to 2007 due to rising construction costs and the anticipated
increase in acquisitions in 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Tenant improvements and leasing costs may also fluctuate in any given year depending upon factors
such as the property, the term of the lease, the type of lease, the involvement of external leasing
agents and overall market conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Non-GAAP Supplemental Financial Measure: Funds From Operations (&#147;FFO&#148;)</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Management believes that FFO is a useful supplemental measure of our operating performance. We
compute FFO the definition outlined by the National Association of
Real Estate Investment Trusts (&#147;NAREIT&#148;). NAREIT defines
FFO as net income (loss) in accordance with GAAP,
plus depreciation and amortization of real estate assets (excluding amortization of deferred
financing costs and depreciation of non-real estate assets) reduced by gains and losses from sales
of depreciable operating property and extraordinary items, as defined by GAAP. Other REITs may use different methodologies for
calculating FFO, and accordingly, our FFO may not be comparable to other REITs.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Because FFO excludes depreciation and amortization, gains and losses from property dispositions
that are available for distribution to shareholders and extraordinary items, it provides a
performance measure that, when compared year over year, reflects the impact to operations from
trends in occupancy rates, rental rates, operating costs, development activities, general and
administrative expenses and interest costs, providing a perspective not immediately apparent from
net income. In addition, management believes that FFO provides useful information to the
investment community about our financial performance when compared to other REITs since FFO is
generally recognized as the industry standard for reporting the operations of REITs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">However, FFO should not be viewed as an alternative measure of our operating performance since it
does not reflect either depreciation and amortization costs or the level of capital expenditures
and leasing costs necessary to maintain the operating performance of our properties which are
significant economic costs and could materially impact our results from operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table presents our Funds from Operations, for the years ended December&nbsp;31, 2007 and
2006:
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Year ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,613,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(331,515</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87,850</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(66,606</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization of real estate assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">717,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,278</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain from
sale of real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,886,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,713</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Funds From Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,249,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(214,843</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">FFO should not be considered as alternative to net income (loss), as an indication of our
performance, nor is FFO indicative of funds available to fund our cash needs or our ability to make
distributions to our stockholders. In addition, FFO may be used to fund all or a portion of certain
capitalizable items that are excluded from FFO, such as capital expenditures and payments of debt,
each of which may impact the amount of cash available for distribution to our stockholders.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Inflation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Since the majority of our leases require tenants to pay most operating expenses, including real
estate taxes, utilities, insurance, and increases in common area maintenance expenses, we do not
believe our exposure to increases in costs and operating expenses resulting from inflation would be
material.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Recent Issued Accounting Standards. </I></B>In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157, &#147;Fair Value
Measurements&#148; (&#147;SFAS 157&#148;). SFAS 157 defines fair value and establishes a framework for measuring
fair value under U. S. generally accepted accounting principles (&#147;GAAP&#148;). The key changes to
current practice are (1)&nbsp;the definition of fair value, which focuses on an exit price rather than
an entry price; (2)&nbsp;the methods used to measure fair value, such as emphasis that fair value is a
market-based measurement, not an entity-specific measurement, as well as the inclusion of an
adjustment for risk, restrictions, and credit standing and (3)&nbsp;the expanded disclosures about fair
value measurements, SFAS 157 does not require any new fair value measurements. SFAS 157 is
effective for financial statements issued for fiscal years beginning after November&nbsp;15, 2007, and
interim periods within those fiscal years. The Company adopted SFAS 157 on January&nbsp;1, 2008. The
Company does not believe the adoption of SFAS 157 will have a significant impact on the Company&#146;s
financial position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159, &#147;The Fair Value Option for Financial Assets and
Financial Liabilities&#148; (&#147;SFAS 159&#148;). SFAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge accounting
provisions. SFAS 159 also establishes presentation and disclosure requirements designed to
facilitate comparisons between entities that choose different measurements attributes for similar
types of assets and liabilities. SFAS 159 is effective for financial statements issued for fiscal
years beginning after November&nbsp;15, 2007. The Company does not plan to apply the fair value option
to any specific assets or liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In November&nbsp;2007, the FASB issued Emerging Issues Task Force (&#147;EITF&#148;) Issue No.&nbsp;07-06, &#147;Accounting
for Sale of Real Estate Subject to the Requirements of SFAS 66 When the Agreement Includes a
Buy-Sell Clause&#148; (&#147;EITF 07-06&#148;)<I>. </I>A buy-sell clause is a contractual term that gives both investors
of a jointly-owned entity the ability to offer to buy the other investor&#146;s interest. EITF 07-06
applies to sales of real estate to an entity if the entity is both partially owned by the seller of
the real estate and subject to an arrangement between the seller and the other investor containing
a buy-sell clause. The EITF concluded the existence of a buy-sell clause does not represent a
prohibited form of continuing involvement that would preclude partial sale and profit recognition
pursuant to SFAS 66. The EITF cautioned the buy-sell clause could represent such a prohibition if
the terms of the buy-sell clause and other facts and circumstances of the arrangement suggest:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the buyer cannot act independently of the seller or</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the seller is economically compelled or contractually required to reacquire the other
investor&#146;s interest in the jointly owned entity.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">EITF 07-06 is effective for new arrangements in fiscal years beginning after December&nbsp;15, 2007, and
interim periods within those fiscal years. The FASB does permit early adoption of EITF 07-06. The
Company is currently evaluating the impact that EITF 07-6 will have on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In December&nbsp;2007, the FASB issued SFAS No.&nbsp;141 (revised 2007), &#147;Business Combinations&#148; <I>(&#147;</I>SFAS
141R&#148;), which replaces FASB Statement No.&nbsp;141, &#147;Business Combinations&#148; (&#147;SFAS 141&#148;). SFAS 141R
expands the definition of a business combination and requires the fair value of the purchase price
of an acquisition, including the issuance of equity securities, to be determined on the acquisition
date. SFAS 141R also requires that all assets, liabilities, contingent considerations, and
contingencies of an acquired business be recorded at fair value at the acquisition dater. In
addition, SFAS 141R requires that acquisition costs generally be expensed as incurred,
restructuring costs generally be expensed in periods subsequent to the acquisition date and changes
in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties
after the measurement period impact income tax expense. SFAS 141R is effective for business
combinations for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December&nbsp;15, 2008. Early adoption is prohibited. The
Company is currently evaluating the impact that SFAS 141R will have on its future financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In December&nbsp;2007, the FASB issued SFAS No.&nbsp;160, &#147;Noncontrolling Interests in Consolidating
Financial Statements&#151;an amendment of ARB No.&nbsp;51&#148; (&#147;SFAS 160&#148;). SFAS 160 establishes accounting
and reporting standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parent&#146;s ownership interest and the valuation of retained noncontrolling
equity investments when a subsidiary is deconsolidated. In addition, SFAS 160 provides reporting
requirements that clearly identify and distinguish between the interests of the parent and the
interests of the noncontolling owners. SFAS 160 is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December&nbsp;15, 2008. The Company
does not believe the adoption of SFAS 160 will have a significant impact on the Company&#146;s financial
position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>SEGMENTS DISCLOSURE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Company&#146;s reportable segments consist of the four types of commercial real estate properties
for which the Company&#146;s decision-makers internally evaluate operating performance and financial
results: Residential Properties, Office Properties, Retail Properties and Self Storage Properties.
The Company also has certain corporate level activities including accounting, finance, legal
administration and management information systems which are not considered separate operating
segments.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Company evaluates the performance of its segments based upon net operating income. Net
operating income is defined as operating revenues (rental income, tenant reimbursements and other
property income) less property and related expenses (property expenses, real estate taxes, ground
leases and provisions for bad debts) and excludes other non-property income and expenses, interest
expense, depreciation and amortization, and general and administrative expenses. There is no
intersegment activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following tables reconcile the Company&#146;s segment activity to its combined results of operations
for the years ended December&nbsp;31, 2007 and 2006.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Office Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,192,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">478,037</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and related expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,193,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341,592</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating income, as defined</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">998,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,445</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Residential Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211,958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and related expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,321</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating income, as defined</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,637</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Retail Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">349,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,969</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and related expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">563</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating income, as defined</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,406</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Self Storage Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and related expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating income, as defined</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Mortgage loan activity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Reconciliation to Net Income Available to Common Stockholders:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net operating income, as defined, for reportable segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,453,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">252,488</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unallocated other income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unallocated other expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">794,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">508,703</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">842,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">648,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,920</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(471,228</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(455,506</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,084,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,613,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(331,515</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Preferred dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87,850</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(66,606</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available for common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,525,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(398,121</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Office properties activity increase was due to a full year of operations in 2007 of the office
building in Aurora, Colorado compared to a half year of operations in 2006 plus nine months results
of operations of the office buildings in Colorado Springs, Colorado in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Retail properties consisted of the results of the 7-Eleven property in Escondido, California in
2006. The year of 2007 also included the results of the two retail centers that were purchased
during the last quarter of 2007 in Highland, California and Denver, Colorado.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>

    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 3.</B></TD>

    <TD><B>&nbsp;PROPERTIES</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>General
Information</B>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We own
eleven (11)&nbsp;separate properties located in three states. The following tables provide certain
additional information about our properties as of November&nbsp;30,
2008.
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Renovation or</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Date</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Type of</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Year Property</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Purchase</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Percent</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Improvement</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B><I>Property/Location</I></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>Acquired</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>Property</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>Constructed</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>Price*</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>Ownership</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>Occupancy</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>Cost</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I>(7)</I></B></SUP></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Casa Grande Apts.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Residential</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,020,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">92.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cheyenne, WY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Escondido 7-Eleven<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Retail</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,404,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">51.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Escondido, CA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Havana/Parker Complex<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6/06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Office</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,828,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">74.9</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">275,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Aurora, CO</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
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<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Joshua Self-Storage<SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>Self-storage</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">2003/2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,007,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">71.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Hesperia, CA</DIV></TD>
    <TD>&nbsp;</TD>
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</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
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</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Plaza<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Office</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1982</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,132,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">94.25</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">85.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Colorado Springs, CO</DIV></TD>
    <TD>&nbsp;</TD>
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</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
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</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Palm Self-Storage<SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Self-storage</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,848,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">51.97</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">91.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Highlands, CA</DIV></TD>
    <TD>&nbsp;</TD>
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</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
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</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regatta Square<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Retail</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,180,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hesperia, CA</DIV></TD>
    <TD>&nbsp;</TD>
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</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
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</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">World Plaza<SUP style="font-size: 85%; vertical-align: text-top">(9)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Retail</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,650,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">98.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">San Bernardino, CA</DIV></TD>
    <TD>&nbsp;</TD>
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</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
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</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive Office Park<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7/08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Office</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2000/2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,031,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">94.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Colorado Springs, CO</DIV></TD>
    <TD>&nbsp;</TD>
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</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
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</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Waterman Plaza<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Retail</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,382,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">74.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">San Bernardino, CA</DIV></TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pacific Oaks Plaza<SUP style="font-size: 85%; vertical-align: text-top"> (10)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Office</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,859,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Escondido, CA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>&#147;Purchase Price&#148; includes our acquisition related costs and expenses for the property.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>An apartment building leased to tenants on a month-to-month basis.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>An office building leased to tenants on a semi-gross basis.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Under single user lease to 7-Eleven, Inc. This property is owned by a DOWNREIT Partnership for which we
serve as general partner and in which we own a 51.4% equity interest.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of 3 separate properties. Information is for all 3 buildings in Complex.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Strip Centers.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Two story built in 1982 renovated &#151; 2002, 2 one stories built 1999.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes costs of or repairs to or replacement of major components, such as roofs, parking lot surfaces,
landscaping, etc. Renovation or improvement costs will be financed from reserves or other cash on hand.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Self-storage property.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>A neighborhood shopping center.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>The Company uses 12,134 square feet of the leasable 16,003 square feet as its principal business offices.</TD>
</TR>

</TABLE>
<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->29<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Physical
Occupancy Table for Last 5 Years (1)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <td colspan="2" align="center">Date</td>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000">Percentage Occupancy for Year Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" style="border-bottom: 1px solid #000000">Acquired</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->

<TR valign="top" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Casa Grande Apts. Cheyenne, WY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6/06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">99.6</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">99.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">97.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">94.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">92.0</TD>
    <TD nowrap>%</TD>
</TR>

<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Havana/Parker</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">79.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">74.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Escondido 7-Eleven</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Bldg. 1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Bldg. 2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">81.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Bldg. 3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">81.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">World Plaza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">98.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regatta Square</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive Office Park</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7/08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">94.8</TD>
    <TD nowrap>%(4)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Waterman Plaza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>&nbsp;&nbsp;&nbsp;&nbsp;(2)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Palm Self-Storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">85.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Joshua Self-Storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">77.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pacific Oaks Plaza<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">21.0</TD>
    <TD nowrap>%(4)</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left"><DIV style="font-size: 10pt; margin-top: 10pt; width: 18%; border-bottom: 1px solid #000000">&nbsp;</DIV></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Information is provided only for the years that we owned the property.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Newly constructed property.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Registrant occupies the remaining approximately 12,134 square feet of this property as its
offices.</TD>
</TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>At the date of purchase.</TD>
</TR>

</TABLE>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Top Ten Tenants Physical Occupancy Table</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table sets forth certain information with respect to our top ten tenants.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Percent of Total</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Annualized Base</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Annualized Base</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Rent as of</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Rent as of</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B><I>Tenant</I></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B><I>Number of Leases</I></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>December 31, 2007</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>December 31, 2007</I></B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">County of San Bernardino</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">483,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Marvell Semiconductor</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">228,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fairchild Semiconductor</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">207,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">St. Paul Fire &#038; Marine Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">154,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.7</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Citizens Business Bank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">128,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kinko&#146;s</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">107,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">USA Triathlon</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">94,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Community Alternatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Smiling Moose Deli</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">61,617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">India&#146;s Express Menu</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">1</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>



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

<P align="center" style="font-size: 10pt"><!-- Folio -->30<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Occupancy and Average Effective Annual Rent Per Square Foot Average Effective Annual Rent Per
Square Foot</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table presents the average effective annual rent per square foot for our properties
as of December&nbsp;31, 2007, or if later, the date we acquired the property.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Annual Rent</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>GLA/</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Annual</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Annual Net</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Per Sq Ft</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Property</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B># of Units</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Gross Rent</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Oper Inc.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>At Full Occupancy</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Casa Grande Apts.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">39 Apts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">213,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">117,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Havana/Parker</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">798,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">169,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Escondido 7-Eleven</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">54,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,037,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">990,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10.61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">World Plaza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">791,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">540,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14.65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regatta Square</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">183,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">165,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30.59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive Office Park</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">770,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18.00</TD>
    <TD>(4)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Waterman Plaza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">602,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">350,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28.48</TD>
    <TD>(4)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">

<TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s
Palm Self-Storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">494 Units</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">521,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">231,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10.13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Joshua Self-Storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">789 Units</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">315,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pacific Oaks Plaza<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">57,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">57,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15.00</TD>
    <TD>(4)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>&#147;GLA&#148; means Gross Leasable Area.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of 3 separate properties. Information is for all 3 buildings in Complex.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Registrant occupies approximately 12,134 square feet of this
property as its offices</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>At the date of purchase.</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Average Effective Annual Rent Per Square Foot for Last 5 Years</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">Average Effective Annual Rent per Square Foot</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000">For the Years Ended December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Casa Grande Apts.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Havana/Parker</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Escondido 7-Eleven</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18.02</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Bldg. 1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12.57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Bldg. 2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11.43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Bldg. 3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10.28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">World Plaza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15.49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regatta Square</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">31.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive Office Park</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17.06</TD>
    <TD>(3)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Waterman Plaza<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Palm Self-Storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9.32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Joshua Self-Storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pacific Office Park<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left"><DIV style="font-size: 10pt; margin-top: 10pt; width: 18%; border-bottom: 1px solid #000000">&nbsp;</DIV></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Newly constructed property.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Previously owner occupied.</TD>
</TR>
<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>At the date of purchase.</TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->31<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Lease Expirations Lease Expiration Table</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table shows lease expirations for our properties, assuming that none of the tenants
exercise renewal options.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Number of Leases</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Annual Rental</I></B></TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Percent</I></B></TD>


    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B><I>Expiration Year</I></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>Expiring</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>Square Footage</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>From Lease</I></B></TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>of Total</I></B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">508,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">458,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">496,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">907,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">29.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">439,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">255,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2014</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2015</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2016</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2017</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Totals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,064,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Concentration of Tenants Concentration of Tenants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As of December&nbsp;31, 2007, the following tenants accounted for 10% or more of our aggregate annual
rental income for the specific property:
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Current Base</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% of Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Property</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Tenant</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Annual Rent</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Rental Income</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->

<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Casa Grande Apts.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Havana/Parker Complex</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Escondido 7-Eleven</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">7-Eleven, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">54,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Plaza Bldg. 1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">FedEx Kinko&#146;s</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">107,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">34</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Fairchild Semiconductor</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">207,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">66</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Plaza Bldg. 2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Marvell Semiconductor</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">228,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Plaza Bldg. 3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>St. Paul Fire and Marine</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">154,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">31</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">USA Triathlon</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">94,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">19</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">World Plaza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>County of San Bernardino</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">483,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">61</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regatta Square</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Smiling Moose Deli</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">61,617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">34</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Fancy, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Inda&#146;s Express Menu</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue Nails</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">33,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive Office Park</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Keller Williams Realty</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">254,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33</TD>
    <TD nowrap>%(3)</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Security Title Guaranty Co</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">124,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16</TD>
    <TD nowrap>%(3)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Waterman Plaza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Goodwill Industries</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">330,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">64</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Palm Self-Storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Joshua Self-Storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pacific Oaks Plaza<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Pierce Target, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">57,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">21</TD>
    <TD nowrap>%(3)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left"><DIV style="font-size: 10pt; margin-top: 10pt; width: 18%; border-bottom: 1px solid #000000">&nbsp;</DIV></DIV>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>This property is comprised of self storage units which are
rented on a short term basis, generally less than 12 months.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Registrant occupies the remaining approximately 12,134 square feet of this property as its
offices.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>At the date of purchase.</TD>
</TR>


</TABLE>

<DIV align="left"><FONT size="1">

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

<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table provides certain information with respect to the leases of those tenants that
occupy 10% or more of the rentable square footage in each of our properties as of December&nbsp;31,
2007.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Percentage of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Rentable</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Property</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Current Base</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Renewal</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Property and Lessee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Square Feet</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Lease Ends</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Leased</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Annual Rent</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Options</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Escondido 7-Eleven<br>
7-Eleven</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/31/2018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">54,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Two 5 yr.</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Havana/Parker</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">None</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Plaza Bldg. 1<br>
FedEx Kinko&#146;s</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/30/2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">26</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">107,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Two 5 yr.</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fairchild Semiconductor</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7/31/2013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">74</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">207,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">One 5 yr.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Plaza Bldg. 2<br>
Marvell Semiconductor</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1/31/2012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">81</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">228,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">One 2 yr.</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Plaza Bldg. 3<br>
St. Paul Fire and Marine</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2/28/2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">154,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">One 5 yr.</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">USA Triathlon</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6/30/2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">15</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">94,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">No</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">World Plaza<br>
County of San Bernardino</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2/28/2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">55</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">483,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Two 1 yr.</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">&#038; One 5 yr.</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regatta Square<br>
Smiling Moose Deli</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4/30/2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">38</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">61,617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Two 5 yr.</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fancy, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5/31/2012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">One 5 yr.</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inda&#146;s Express Menu</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/31/2013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">31</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">60,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">No</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Avenue Nails</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/31/2012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">17</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">33,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">One 5 yr.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Palm Self-Storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">None</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Joshua Self-Storage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">None</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive Office Park</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Keller Williams Realty</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/31/2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">254,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">One 2 yr.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Security Title Guaranty Co</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7/31/2012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">14</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">124,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">No</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Waterman Plaza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Goodwill Industries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/24/2018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">68</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">330,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Two 5 yr.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pacific Oaks Plaza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pierce Target, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9/7/2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">21</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">57,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">None</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">None</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left"><DIV style="font-size: 10pt; margin-top: 10pt; width: 18%; border-bottom: 1px solid #000000">&nbsp;</DIV></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Self-storage units rented on a short term basis.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The Company uses the remaining 12,134 square feet.</TD>
</TR>
</TABLE>



<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Geographic Diversification Table</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%">The following table shows a list of properties we owned as of December&nbsp;31, 2007, grouped
by the state where each of our investments is located.
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Current</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Base</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Approximate %</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>No. of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Aggregate</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Approximate %</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Annual</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>of Aggregate</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>State</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Properties</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Square Feet</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>of Square Feet</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Rent</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Annual Rent</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">California</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">50.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,966,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">46.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Colorado</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">44.1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,018,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">48.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Wyoming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">532,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,199,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Garden Gateway Plaza is comprised of 3 separate properties.</TD>
</TR>

</TABLE>
<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Indebtedness</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Mortgage Debt</I></B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table presents
information as of October&nbsp;31, 2008 on indebtedness encumbering our properties, excluding
advances under any credit facility we may obtain.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Principal</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Current</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Balance at</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Property</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Interest Rate</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Maturity Date</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Maturity</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Havana/Parker Complex</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,469,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.51</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">July 2016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,844,980</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Plaza Bldg. 1 (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">10,705,295</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6.08</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">April 2014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,387,287</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Plaza Bldg. 1 (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">April 2014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Plaza Bldg. 1 (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">April 2014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">World Plaza</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,545,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5.31</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">February 2012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD nowrap>(2)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Executive Office Park</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">2,147,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.25</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">7/9/2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" valign="top">Revolving;<BR>due 6/9/2011</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Waterman Plaza
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">3,844,859</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.50</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" valign="top">9/1/2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">3,304,952</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Mortgage is cross-collateralized by the three properties comprising
the Garden Gateway Plaza. Mortgage has release clause for each
property.</TD>
</TR>
</TABLE>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Description
of Properties</B>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Casa Grande Apartments</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">This is a 39-unit apartment complex, including related improvements, on approximately 1.2 acres.
The property is located in Cheyenne, Wyoming. The complex contains a total of twenty (20)
two-bedroom apartments, and nineteen (19)&nbsp;single-bedroom apartments. The enclosed living areas
aggregate approximately 29,250 square feet. The property was constructed in 1973.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Cheyenne, which is located in the southeast corner of the state, has a population of approximately
55,000. The property is located at 921 E. 17<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Street, which is in the city&#146;s downtown
area in an established residential neighborhood next to Holiday Park, the city&#146;s largest public
park. The neighborhood is comprised of approximately 70% single family residences, 10% multi-family
housing, 15% commercial uses and 5% industrial uses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We lease the property to tenants on a month-to-month basis. The roof of the property was replaced
in 1996. We plan no major renovations to the property within the next 36&nbsp;months. The property is
currently 97% occupied. Current rental rates are $480 for single bedroom units and a range from
$515 to $575 for 2-bedroom units. The property competes for tenants with comparable multi-unit
properties and single family residences in its area. We believe the property is comparable or
superior to other multi-unit properties in the area considering its location and close proximity to
Holiday Park, one of the more desirable areas of the city. We maintain casualty and liability
insurance on the property which we believe provides adequate coverage against losses by reason of
casualty or personal liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The complex is constructed of wood frame with stucco exterior and wood facing and trim. The complex
includes paved parking for approximately sixty cars (1.5 places per apartment unit). The grounds of
the building contain approximately 20,000 square feet of open area, which is fully landscaped with
concrete walks throughout the site. The property was constructed in 1973.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We acquired this property on April&nbsp;1, 1999 from Wyoming Casa Grande, a California limited
partnership (&#147;Wyoming Casa Grande&#148; or the &#147;Partnership&#148;) in exchange for 36,830 of our common
Shares and 39,852 shares of our Series&nbsp;A Preferred Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">For federal income tax purposes, the property has a depreciable basis of $363,247, the cost of
which we will recover on a thirty year, straight line basis. We anticipate 2008 property taxes
will be approximately $10,800.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Company sold 55.381% interest in Casa Grande on March&nbsp;3, 2008 for $1,104,535.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Escondido 7-Eleven</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On September&nbsp;8, 2006, we acquired a stand alone-single use retail property located at 850 West
Mission Road, Escondido, California. This property, which we refer to as the &#147;Escondido 7-Eleven
Property,&#148; consists of a 3,000 sq. ft. retail building situated on an approximately 12,000 sq. ft.
corner lot. It is located at the corner of West Mission Road and Rock Springs Road in a mixed
commercial, light industrial and residential area. The property consists of a one-story, brick and
wood constructed building with a cement stucco exterior and an asphalt-paved parking lot.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The building is currently under lease to 7-Eleven, Inc. and is operated as a convenience store. The
lease provides for minimum monthly rent of $4,505. The lease, which was originally terminable on
December&nbsp;31, 2008, has been extended to December&nbsp;31, 2018 with minimum monthly rent of $9,000
during the first 5&nbsp;years and $10,350 during the second 5&nbsp;years. The lease is not subject to any
renewal options. The lease is a NNN-lease. That is, the tenant is responsible for all major
expenses of maintaining the property, including property taxes, insurance and maintenance costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Effective June&nbsp;28, 2007, we sold a 48.6% undivided interest in the Escondido 7-Eleven property to
the Allen Trust DTD 7-9-1999 (the &#147;Trust&#148;). We sold the 48.6% interest in the property for
$680,425, which equals our pro rata cost for the property, including most of our acquisition costs
and expenses. As a condition to the transaction, the parties, among other things, agreed to engage
CHG Properties, Inc. to manage the property. We structured this transaction to satisfy the
requirements of a tax deferred exchange under Section&nbsp;1031 of the IRC. We do not believe that we
will recognize taxable gain or loss as a result of this transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In April&nbsp;2008, we and the Trust contributed this property to a California limited partnership for
which we serve as general partner and own a 51.4% equity interest. In connection with the formation
of the Partnership, we gave the Trust the right to exchange its interest in the Partnership for
shares of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Havana/Parker Complex</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On June&nbsp;28, 2006, we purchased the Havana/Parker Complex which consists of 7 attached three story
office buildings located in Aurora, Colorado. This property, which is operated under the name
&#147;Havana/Parker Complex&#148;, is located at the intersection of Parker Road and Havana Street which is
one of the busiest intersections in Aurora. The property consists of approximately 114,000 square
feet and is approximately 65% occupied. The property is surrounded by newer Class&nbsp;A buildings. Our
buildings are an alternative to the higher priced buildings in the area. We purchased the building
for $5.829&nbsp;million and invested approximately an additional $324,000 in renovating the property to
attract quality and larger tenants. We borrowed $3.6&nbsp;million at the time of purchase. The appraiser
set a replacement value of $13.4&nbsp;million on the property.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Sparky&#146;s Palm Self-Storage</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On November&nbsp;19, 2007, we purchased the self-storage property located at 1775 N. Palm Avenue in
Highland, California. We refer to this property as &#147;Sparky&#146;s Palm Self-Storage&#148; property. Our
purchase price was $4.85&nbsp;million, all of which we paid in cash.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Sparky&#146;s Palm Self-Storage is comprised of ten single story buildings and one two-story building,
totaling approximately 50,250 square feet, located on approximately 2.81 acres of land. The
buildings comprise 463 self-storage rental units and 29 recreational vehicle (RV)&nbsp;rental spaces.
The buildings are of framed stucco and modular construction completed in 2003. The property is
currently approximately 92% occupied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Garden Gateway Plaza</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On March&nbsp;21, 2007, we acquired Garden Gateway Plaza for $15.1&nbsp;million, including transaction costs.
This property is located in Colorado Springs Colorado and consists of three individual buildings situated on three separate properties within a
multi-property campus. Included is a multi-tenant two-story office/flex building and two
single-story office/flex buildings. The property is comprised of 115,179 sq. ft. on 12.0 acres.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The key attributes to this acquisition are:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Minimal leasing retrofit costs due to high-quality suite designs</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Standard office and bay sizes</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Strong high-quality tenant demand</TD>
</TR>








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

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="margin-top: 10pt"><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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Strong market location and access</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Pricing is well below replacement cost</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Current rental rates below market rates.</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The property has 13 tenants and is approximately 85% leased. The major tenants include
FedEx/Kinko&#146;s, St. Paul Travelers, Waddell and Reed and Stifel, Nicolaus &#038; Co., Fairchild
Semiconductors, Marvell Technology.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Sparky&#146;s Joshua Self-Storage</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On December&nbsp;10, 2007, the Company acquired the Sparky&#146;s Joshua Self-Storage property located in
Hesperia, California. We refer to this property as the &#147;Sparky&#146;s Joshua Self-Storage&#148;. We purchased
this property for $8&nbsp;million, including transaction costs. We purchased the property for cash and
by assuming an existing loan. We repaid the assumed loan of $4,376,174 in full in January&nbsp;2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Sparky&#146;s Joshua Self-Storage was constructed in 2003 and 2005 and is comprised of four single level
storage buildings, a three bedroom residence building, and a six bay self-serve coin operated car
wash facility located on approximately 9.5 acres of land. The property consists of approximately
804 self-storage units and 72 recreational vehicle (RV)&nbsp;rental spaces. The property is currently
approximately 75% occupied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>World Plaza</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On
September&nbsp;20, 2007, we completed our purchase of the World Plaza Retail Center, a multi-tenant
neighborhood retail center located in San Bernardino, California. We refer to this property as the &#147;World
Plaza Property.&#148; The property consists of approximately 49,800 sq. ft. of net rentable area
situated on approximately 4.48 acres used pursuant to a Ground Lease. We purchased the property
from World Plaza, LLC, a
Delaware limited liability company. The purchase price of $7.6&nbsp;million was with cash and by
assumption of an existing loan in the principal amount of $3.7&nbsp;million secured by a first deed of trust on
the Ground Lease. The Ground Lease requires current annual rentals of $20,040 and expires on June
31, 2062. The Ground lease includes an option to purchase the property at the price of $181,710 in
2062. This property is currently 98% occupied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The property was constructed in 1974. The major tenants on the property include the County of San
Bernardino, San Bernardino Police Department, Inland Empire Deliverance Center, and Citizens
Business Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Regatta Square</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On October&nbsp;31, 2007, we completed our purchase of the Regatta Square, a neighborhood retail center
located at 727 Colorado Boulevard, Denver, Colorado. The purchase price was $2.180&nbsp;million
including transaction costs, all payable in cash. This property, which we refer to as the &#147;Regatta
Square Property&#148;, is comprised of approximately 6100 square feet of gross leasable space situated
on 0.4 acres of land. The property is currently 100% occupied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Executive Office Park</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On July&nbsp;9, 2008, we purchased the Executive Office Plaza located at 1271, 1277, 1283 and 1295 Kelly
Johnson Boulevard in Colorado Springs, Colorado, which we refer to as the &#147;Executive Office Park&#148;
property. Our purchase price for the property was $10.15&nbsp;million, of which $6,597,500 was paid from
a fixed rate revolving line of credit loan in the amount of $6,597,500 from Mile High Banks, DTC
Branch, Greenwood Village, Colorado (the &#147;Mile High Banks Credit Facility&#148;). The credit facility
bears a fixed interest rate of 6.25% per annum and is due and payable on June&nbsp;9, 2011. The credit
facility is secured by first deeds of trust on our Executive Office Park and Regatta Square
properties. We paid a total of $43,785 in prepaid finance charges in connection with this credit
facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Executive Office Park is comprised of a condominium development consisting of four (4)&nbsp;separate
buildings situated on four (4)&nbsp;legal parcels. The property is developed as an office condominium
complex. The property consists of a total of 65,084 sq. ft. situated on a total of 4.57 acres. The
property is approximately 6&nbsp;years old. On the acquisition date, 95% was under NNN leases to
tenants. Thus, the Company may sell portions of the property as individual condominium units in the
future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The loan requires regular monthly payments of interest only commencing on August&nbsp;2, 2008. Under the
Loan Agreement, the total of unpaid accrued interest and principal is due and payable on June&nbsp;9,
2011. The Company used $6,597,500 proceeds from the loan to acquire the Executive Office Park
property. The loan is a revolving line of credit, and we intend to regularly pay down the loan and
borrow against the credit line to fund one or more other future property acquisitions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Waterman Plaza</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On August&nbsp;12, 2008, we purchased the Waterman Plaza located at 444-464 S. Waterman Avenue, San
Bernardino, California 92408, which we refer to as the &#147;Waterman Plaza&#148; property. We paid the $7.35
million purchase price for the property with cash and a fixed rate Promissory Note in the amount of
$3.8&nbsp;million from MTL Insurance Company, Oak Brook, Illinois. The Promissory Note bears a fixed
interest rate of 6.5% per annum and is due on September&nbsp;1, 2015. The MTL loan is secured by a first
deed of trust on the property. We paid a total of $38,500 in prepaid finance charges in connection
with the MTL loan. The loan requires regular monthly payments of principal and interest commencing
on September&nbsp;1, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Waterman Plaza is a newly constructed retail/office building of approximately 21,200 rentable
square feet and approvals to construct an additional 2,300 square foot building. The property
consists of a total of 2.7 acres. On the date acquired, 83.6% of the property was under lease. The
seller guaranteed base rent on the vacant space for a period of twelve months up to an aggregate
maximum of $233,200.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Pacific Oaks Plaza</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On September&nbsp;3, 2008, we acquired the office building and related personal property located at 1282
Pacific Oaks Place, Escondido, California, which we refer to as the &#147;Pacific Oaks Plaza&#148; property.
Our purchase price for the property was $4.85&nbsp;million, all of which we paid in cash.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Pacific Oaks Plaza consists of a two story office building of approximately
16,003 square feet situated on 48,793 square feet of land. The building was completed in 2005 and has been owner
occupied since its construction. On the acquisition date, the previous owner entered into a three
year lease to occupy approximately 24% of the building. Our principal offices occupy the remainder of the building.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Pacific Oaks Plaza property is located in the City of Escondido, the fourth largest of the 18
incorporated cities in San Diego County. It lies in the northern part of the County bordering the
City of San Diego to the south, San Marcos to the west and unincorporated areas of San Diego County
to the north and east.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

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

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left"><FONT size="1">

</FONT></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Planned
Acquisitions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Morena
Office Centre</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On
December&nbsp;1, 2008, we entered into a purchase agreement and
escrow instructions to purchase the Morena Office Centre, a 26,784
square foot office building located at 1202 Morena Blvd. in San
Diego, California. The contract Purchase Price is $6.6&nbsp;million,
all of which we plan to pay in cash. The property consists of a
four-story building situated on 0.62 acres of land. The building is
steel frame construction with glass exterior and was constructed in
1985. We anticipated this purchase to close in the first week of
January, 2009.</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Our Real Estate Loan Investments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On March&nbsp;20, 2007, we made a loan of up to $500,000 to Nightingale Escondido Real Estate L.P.
(&#147;Nightingale&#148;). This loan is secured by a junior lien on two (2)&nbsp;parcels of property totaling
approximately 3.47 acres located at 1802 North Centre City Parkway in Escondido, California. The
loan is personally guaranteed by Mr.&nbsp;Cesar G. Tangonan, who is an affiliate of the General Partner
of the Borrower. The loan is junior to a first deed of trust in the amount of $910,000. The loan
bears interest at the rate of fifteen percent (15%) per annum. The loan is due on its first
anniversary date unless exceeded for an additional ninety (90)&nbsp;days at election of the Borrower.
Under the terms of the loan agreement, we will retain a principal amount of the loan equal to
interest payments on the loan. Principal and interest are payable on the maturity date. The
Borrower intends to develop the property into an approximately 75,000 sq. ft. 174-bed assisted
living facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Under the terms of the loan agreement, we will advance the loan amount as requested by the
Borrower. The loan agreement provides that at least 85% of the principal amount of the loan must
be used solely for the acquisition, design and development, and expenses relating to the property,
including payment of fees, property taxes and interest on the first deed of trust and expenses
relating to the property, except as we may consent to in writing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%">On October&nbsp;1, 2007, we loaned Nightingale $935,000 collateralized the a first deed of trust on
the same land under development. This mortgage loan accrues interest at 11.5% per year and the
unpaid principle balance and accrued interest is due and payable on June&nbsp;30, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 0%">On November&nbsp;19, 2007, we loan Nightingale $500,000 colateralized by a third deed of trust on
the same land under development. This mortgage accrues interest at 11.5% per year. This loan is
due on June&nbsp;30, 2008.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Effective March&nbsp;20, 2008, we extended the maturity date on each of the Nightingale loans to and
including December&nbsp;31, 2008.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Dispositions of Properties</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On October&nbsp;5, 2007, we sold our office building located at 365 Rancho Santa Fe Road, San Marcos,
California (the &#147;RSF Building&#148;). The purchaser paid $5,650,000 in cash for the property. We paid
real estate commissions, closing costs and selling costs of $272,000. The building was transferred
pursuant to a Section&nbsp;1031 tax deferred exchange transaction, whereby we have caused the sale
proceeds to be used by an independent facilitator to purchase two properties. We purchased the
Regatta Square Property and the Palm Self-Storage Property as the exchange properties for this
transaction. As a result of this exchange transaction, we do not anticipate any current
recognition of gain from the disposition of the RSF Building.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On
March&nbsp;18, 2008, we sold a 18.55% undivided interest in the Casa Grande Apartments for
$500,000 and a 36.37% percent undivided interest in the Casa Grande Apartments for $700,000, respectively, to two
purchasers. In each transaction, the sales price was paid in cash. Each purchaser entered into an
Agreement Between Tenants-in-Common and a Property Management Agreement with CHG Properties.
Following these transactions, we retained a 45.08% undivided interest in this property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On October&nbsp;16, 2008, we sold a 25.3% undivided interest in the Sparky&#146;s Palm Self-Storage
property. The property was valued at $5.4&nbsp;million for the purposes of this transaction. The
purchaser entered into an Agreement Between Tenants-in-Common and a Property Management Agreement
with CHG Properties. Following this transaction, we retained a 74.7% interest in this property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">October&nbsp;17, 2008, we sold a 5.99% undivided interest in our Garden Gateway property to a single
purchaser for $1,000,000. We financed $603,842 of this purchase price with a 1-year loan at 6.25%
interest. The loan was secured by the purchaser&#146;s undivided interest in the property. The purchaser
entered into an Agreement Between Tenants-in-Common and a Property Management Agreement with CHG
Properties. Following this sale, we retained a 94.01% interest in this property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On December&nbsp;8, 2008, we sold
a 25.00% undivided interest in Casa Grande Apartments for $500,000. The sales price was paid in cash.  Upon completion of the sale, we retained a 20.08% interest in the Casa Grande Apartments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On December&nbsp;8, 2008, we sold
a 9.33% interest in our Sparky&#146;s Palm Self-Storage property for $500,000. Upon completion of
the sale, we retained a 65.37% interest in this property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We have entered escrow to
sell a 13.40% interest in the Sparky&#146;s Palm Self-Storage property for
$718,000. The sales price will be paid in cash. Upon completion of
the sale, we will retain a 51.97% in the Sparky&#146;s Palm
Self-Storage property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As a
condition to each of the foregoing sales of an undivided interest in
of our properties, we required the purchaser to enter into a
Agreement Between Tenants in Common and a Property Management
Agreement with CHG Properties for each property.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>OUR INVESTMENT OBJECTIVES, STRATEGIES AND PRACTICES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>General</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We invest in commercial properties, such as office buildings, and in apartment buildings. Our
investment objectives are:
</DIV>

<DIV style="margin-top: 10pt">
<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="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to maximize cash dividends on our Shares;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to realize growth in the value of our properties upon our ultimate sale of such properties;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to realize growth in the value of our Shares; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to preserve our investors&#146; capital contributions.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We may not change our investment objectives, except upon approval of shareholders holding a
majority of the Shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Decisions relating to the purchase or sale of properties will be made by our management subject to
approval by the board of directors.
</DIV>



<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->37<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>OUR
OBJECTIVES AND POLICIES</B>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Our Contrarian Investment Strategy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We may from time to time use a contrarian investment strategy in choosing our properties. Using
this strategy, we will seek properties that are out of the current investment mainstream or that
have unusual features. For example, we might look for smaller
retail properties at a time when the common wisdom for REITs is to invest in large multi-family
residential properties or anchored shopping centers. We look to employ a contrarian strategy at
times we believe that the herd is often wrong. For this strategy to succeed, we must be tenacious
in negotiating our acquisitions and persistent in avoiding the cookie-cutter attitude all too
commonplace with real estate investors. By acquiring a property that is contrary to common wisdom,
we will have a greater risk that the property will not appreciate in value at a rate commensurate
with that of similar properties or the real estate market in general. For example, this might occur
either because the market&#146;s perceived value of the property does not adjust or correct with future
events and/or we are unable to improve or recondition the property to cure its perceived
deficiencies. We believe that raising cash at this time allows us to carefully select properties
that lose favor in the market during the next real estate industry or segment downturn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Our Acquisition and Investment Policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We will acquire commercial office buildings, retail properties and/or multi-unit residential
properties. We prefer to acquire properties which have operating histories but we may purchase one
or more newly constructed properties, or properties under construction. We also prefer to acquire
commercial and retail properties which are less than ten years old, but have and will continue to
acquire older properties under conditions we determine to be advantageous. We endeavor to acquire
properties that are leased or pre-leased to one or more tenants having acceptable creditworthiness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We seek properties that will satisfy our investment objectives of maximizing cash available for
distribution as dividends, preserving our capital and realizing growth in value upon the ultimate
sale of our properties. However, because a significant factor in the valuation of income-producing
real properties is their potential for future income, many properties we acquire will provide both
current cash flow and potential growth. To the extent feasible, we try to achieve a diversified
portfolio of properties, in terms of location, type of property and industry group of our tenants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Investment in real estate generally will take the form of fee title. We will acquire such interests
either directly or, in circumstances we deem appropriate, we may acquire real estate indirectly
through an intermediary entity, such as a DOWNREIT partnership, or other partnership or joint
venture. We will not enter into any such arrangement where a member of our management or their
affiliate is a participant or where any such person receives compensation from the intermediary. In
addition, we may purchase properties and lease them back to the sellers of such properties. While
we will use our best efforts to structure any such sale-leaseback transaction such that the lease
will be characterized as a &#147;true lease&#148; so that we will be treated as the owner of the property for
federal income tax purposes, we cannot assure our shareholders that the Internal Revenue Service
will not challenge such characterization. In the event that any such sale-leaseback transaction is
recharacterized as a financing transaction for federal income tax purposes, deductions for
depreciation and cost recovery relating to such property would be disallowed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Although we are not limited as to the geographic area where we may conduct our operations, we look
first to acquire properties located in the Rocky Mountain States and states to the west.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In making investment decisions for us, management will consider relevant real estate property and
financial factors, including the location of the property, its suitability for any development
contemplated or in progress, its income-producing capacity, the prospects for long-range
appreciation, its liquidity and income tax considerations. In this regard, management will have
substantial discretion with respect to the selection of specific investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our obligation to close the purchase of any investment will generally be conditioned upon the
delivery and verification of certain documents from the seller or developer, including, where we
deem appropriate:
</DIV>

<DIV style="margin-top: 10pt">
<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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>plans and specifications;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>environmental reports;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>surveys;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>evidence of marketable title subject to such liens and encumbrances as are acceptable to our management;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>financial statements covering recent options of properties having operating histories; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>title and liability insurance policies.</TD>
</TR>


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

<P align="center" style="font-size: 10pt"><!-- Folio -->38<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

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


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We will not close the purchase of a property unless we obtain a Phase I environmental report from
the seller, acceptable to our mortgage lender or we are otherwise satisfied with the environmental
status of the property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We may also enter into arrangements with the seller or developer of a property whereby the seller
or developer agrees that if during a stated period the property does not generate a specified cash
flow, the seller or developer will pay us cash in an amount necessary to reach the specified cash
flow level, subject in some cases to negotiated dollar limitations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In determining whether to purchase a particular property, we may, in accordance with customary
practices, obtain an option on such property. The amount paid for an option, if any, is normally
surrendered if the property is not purchased and is normally credited against the purchase price if
the property is purchased.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In purchasing, leasing and developing real estate properties, we will be subject to risks generally
incident to the ownership of real estate, including:
</DIV>

<DIV style="margin-top: 10pt">
<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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in general economic or local conditions;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in supply of or demand for similar or competing properties in an area;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in interest rates and availability of permanent mortgage funds which may render the sale of a
property difficult or unattractive;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in tax, real estate, environmental and zoning laws;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>periods of high interest rates and tight money supply which may make the sale of properties more difficult;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>tenant turnover; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general overbuilding or excess supply in the market area.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Our Leasing Strategy and Tenant Requirements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The terms and conditions of any lease we enter into with our tenants may vary substantially,
depending on the prevailing local rental market in which the property is located. However, we
expect that a majority of our leases will be what is generally referred to as &#147;gross&#148; or
&#147;semi-gross&#148; leases. A &#147;gross&#148; lease provides that the tenant will not be required to pay or
reimburse us for any real estate taxes, sales and use taxes, special assessments, utilities,
insurance and building repairs, or any other building operation and management costs, in addition
to making its lease payments. A &#147;semi-gross&#148; lease provides that the tenant will be required to pay
or reimburse us for some of these expenses, generally certain utilities, operation and maintenance
expenses. We rent apartments on a month-to-month basis. We generally require that the tenant pay a
security deposit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We do not employ rigid standards for determining the creditworthiness of potential tenants of our
properties. Instead, our management considers a number of objective and subjective factors such as
credit history, how long the tenant has been in business, the nature of the tenant&#146;s business and
the tenant&#146;s relationships with the community. While authorized to enter into leases with any type
of tenant, we anticipate that a majority of our tenants will be individuals and closely held or
smaller publicly held U.S. corporations or other entities. We have not set net worth or other
standards for our tenants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our management generally attempts to limit or avoid speculative purchases by purchasing buildings
which are at least 80% leased.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We anticipate that tenant improvements required to be funded by the landlord in connection with our
properties will be funded from our working capital reserves. However, at such time a tenant at one
of our commercial properties does not renew its lease or otherwise vacates its space in one of our
buildings, it is likely that, in order to attract new tenants, we will be required to expend
substantial funds for tenant improvements and tenant refurbishments to the vacated space.
Maintenance of our apartment buildings is our responsibility and we plan to pay these costs from
tenant securities deposits, as appropriate, and from working capital reserves. Since we may not
always maintain sufficient working capital reserves, we may not have access to funds required in
the future for tenant improvements and tenant refurbishments in order to attract new tenants to
lease vacated space.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->39<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Insurance on Our Properties Insurance on Our Properties</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We maintain damage and liability insurance on each of our properties. In addition, we require our
tenants to maintain renter/lessee insurance on the portion of our properties they rent/lease. We
believe each of these properties is adequately covered by insurance and is suitable for its
intended purpose. However, we are typically not able to obtain earthquake insurance at a reasonable
cost. Also, we may not be able either to obtain certain desirable types of insurance coverage, such
as terrorism insurance, or to obtain such coverage at a reasonable cost in the future. Our
inability or decision not to acquire insurance may inhibit our ability to finance or refinance debt
secured by our properties. Additionally, we could default under debt or other agreements if the
cost and/or
availability of certain types of insurance makes it impractical or impossible to comply with
covenants relating to the insurance we are required to maintain under such agreements. In such
instances, we may be required to self-insure against certain losses or seek other forms of
financial assurance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Depreciation of Properties Depreciation of Properties</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The cost of each of the properties will be depreciated on a straight-line basis over the estimated
useful lives of the buildings and improvements ranging up to 40 and 15&nbsp;years, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Co-Ownership of Properties</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We may acquire properties as sole owner or in direct or indirect co-ownership with others.
Co-ownership of properties allows us to acquire interests in a greater number of properties with
the same resources than if we acquired properties only in sole ownership. We may jointly own
properties directly, as tenants-in-common with others, or indirectly through co-ventures (joint
ventures or partnerships) with others. Where we own properties as co-tenants with others, we will
enter into an agreement with the co-tenants for the operation and maintenance of the property, and
we will also endeavor to have the co-owners engage CHG Properties to manage the property. At March
31, 2008, we co-owned two of our properties under this structure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We may acquire one or more properties in joint ownership with others, including affiliates of
management. We will invest in co-ventures with others only if:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our interest in the co-venture profits and losses is proportionate to our investment;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our share of the co-venture operating costs, including administrative costs, is
proportionate to our investment;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>such investment is not as a limited partner and our voice in co-venture management
is proportionate to our investment;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the investment is not subject to a promotional compensatory interest (subordinate or
otherwise) of a promoter or sponsor; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the investment in the co-venture otherwise meets our investment objectives and the
restrictions contained in the bylaws.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">To date we own undivided interests in our Casa Grande, Sparky&#146;s Palm Self-Storage and Garden
Gateway properties as tenants-in-common with one or more unrelated investors.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Also, we may use a DOWNREIT structure, as defined below, to acquire up to an additional $100
million of our properties. A DOWNREIT structure will allow us to offer sellers the ability to sell
their properties to us on a full or partial tax deferred basis. Our management believes that using
the DOWNREIT structure will also give us advantages similar to those currently offered by other
REITs and allow us to better compete with competitors for property acquisitions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">To use a DOWNREIT structure, we form a limited partnership or other income tax pass-through entity
(a &#147;DOWNREIT Partnership&#148;) with a property owner with us serving as sole general partner or manager
and the owner serving as limited partner. The owner contributes the property to the partnership in
exchange for limited partner interests. As general partner, we will contribute property and/or cash
which may be used to pay the debt and/or operating expenses of the property. Each DOWNREIT
Partnership has terms and conditions as agreed to by us and the owner. These include the exchange
value, priority of distributions, and voting rights. The limited partner interests are valued
according to the contributions of cash and/or real property equity that the owner contributes. In
connection with the formation of the DOWNREIT Partnership, we and the owner generally agree to give
the other the right to exchange the limited partner interests for shares of our common stock. The
limited partner may be required to hold its units for a minimum period before having the option to
exchange its limited partner interests for our equity securities.
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We own
our interest in the Escondido 7-Eleven property in a DOWNREIT
Partnership.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Our Borrowing Policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">While we strive for diversification, the number of different properties we can acquire will be
affected by the amount of funds available to us.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->40<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our ability to increase our diversification through borrowing could be adversely impacted by banks
and other lending institutions reducing the amount of funds available for loans secured by real
estate. When interest rates on mortgage loans are high or
financing is otherwise unavailable on a timely basis, we may purchase certain properties for cash
with the intention of obtaining a mortgage loan for a portion of the purchase price at a later
time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">There is no limitation on the amount we may invest in any single improved property or on the amount
we can borrow for the purchase of any property except under our articles of incorporation, we have
a self-imposed limitation on borrowing which precludes us from borrowing in the aggregate in excess
of 80% of the value of all of our properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">By operating on a leveraged basis, we will have more funds available for investment in properties.
This will allow us to make more investments than would otherwise be possible, resulting in a more
diversified portfolio. Although our liability for the repayment of indebtedness is expected to be
limited to the value of the property securing the liability and the rents or profits derived
therefrom, our use of leveraging increases the risk of default on the mortgage payments and a
resulting foreclosure of a particular property. To the extent that we do not obtain mortgage loans
on our properties, our ability to acquire additional properties will be restricted. Management
will use its best efforts to obtain financing on the most favorable terms available to us. Lenders
may have recourse to assets not securing the repayment of the indebtedness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We may not borrow money from any of our directors or from CHG Properties and its affiliates for the
purpose of acquiring real properties. Any loans by such parties for other purposes must be approved
by a majority of the directors, including a majority of the independent directors, not otherwise
interested in the transaction as fair, competitive and commercially reasonable and no less
favorable to us than comparable loans between unaffiliated parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Our Property Disposition Policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We intend to hold each property we acquire for an extended period. However, circumstances might
arise which could result in the early sale of some properties. A property may be sold before the
end of the expected holding period if:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the tenant has involuntarily liquidated;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in management&#146;s judgment, the value of a property might decline substantially;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an opportunity has arisen to improve other properties;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we can increase cash flow through the disposition of the property;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the tenant is in default under the lease; or</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in our judgment, the sale of the property is in our best interests.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The determination of whether a particular property should be sold or otherwise disposed of will be
made after consideration of relevant factors, including prevailing economic conditions, with a view
to achieving maximum capital appreciation. We cannot assure our shareholders that this objective
will be realized. The selling price of a property which is net leased will be determined in large
part by the amount of rent payable under the lease. If a tenant has a repurchase option at a
formula price, we may be limited in realizing any appreciation. In connection with our sales of
properties, we may lend the purchaser all or a portion of the purchase price. In these instances,
our taxable income may exceed the cash received in the sale. The terms of payment will be affected
by the then prevailing economic conditions in the area in which the property being sold is located.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Changes in Our Investment Objectives and Limitations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our bylaws require that the independent directors review our investment policies at least annually
to determine that the policies we are following are in the best interest of the shareholders. Each
determination and the basis therefor shall be set forth in our minutes. The methods of implementing
our investment policies also may vary as new investment techniques are developed. The methods of
implementing our investment objectives and policies, except as otherwise provided in the
organizational documents, may be altered by a majority of the directors, including a majority of
the independent directors, without the approval of the shareholders.

</DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->41<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 4.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Principal Shareholders</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table sets forth certain information as of October&nbsp;31, 2008 by each person who is
known to us to be the beneficial owner of more than 5% of our common stock, the beneficial
ownership by each director and the beneficial ownership of all directors and officers as a group.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Maximum</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Percentage Owned</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Beneficial</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>At</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Ownership</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>October 31, 2008(1)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jack K. Heilbron</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">37,933</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.61</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1282 Pacific Oaks Place<BR>
Escondido, CA 92029-2900</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kenneth W. Elsberry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">31,669</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.51</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1282 Pacific Oaks Place<BR>
Escondido, CA 92029-2900</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">David Bruen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">None</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1282 Pacific Oaks Place<BR>
Escondido, CA 92029-2900</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Larry G. Dubose</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11,973</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.19</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1282 Pacific Oaks Place<BR>
Escondido, CA 92029-2900</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sumner Rollings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24,502</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.40</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1282 Pacific Oaks Place<BR>
Escondido, CA 92029-2900</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thomas Schwartz</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18,366</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.30</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1282 Pacific Oaks Place<BR>
Escondido, CA 92029-2900</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bruce A. Staller</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">17,637</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.29</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1282 Pacific Oaks Place<BR>
Escondido, CA 92029-2900</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All Officers and directors as a Group (six)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">142,080</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.28</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other five percent beneficial owners</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">No shareholder beneficially owns 5% or more</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">None</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt">See notes to the table below.
</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Based on 6,203,013 common Shares outstanding as of October&nbsp;31, 2008.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Includes 830 Shares held of record by CI Holding Group, Inc. (&#147;CI Holding&#148;), 23,799 Shares, and 4,050
non-vested shares owned by Mr.&nbsp;Heilbron, 3,684 Shares owned by Ms.&nbsp;Limoges, wife of Mr.&nbsp;Heilbron, and stock
options expiring on June&nbsp;30, 2009 and June&nbsp;30, 2010 held by Mr.&nbsp;Heilbron to purchase 5,570 Shares at prices
ranging from $7.20 to $8.638 per Share.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Includes 24,146 Shares held of record, 4,050 non-vested shares and stock options which expire on June&nbsp;30, 2009
and June&nbsp;30, 2010 for the purchase of 3,473 Shares at price of $8.638 per Share.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Includes 7,723 Shares owned of record by Mr.&nbsp;Dubose and 4,250 non-vested shares that will vest in 2008 and 2009.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Includes 14,201 Shares held, 4,050 non-vested restricted shares that will vest in 2008 and 2009 and stock
options which expire on June&nbsp;30, 2009 and June&nbsp;30, 2010 to purchase 6,251 Shares at prices ranging from $7.20
to $8.638 per Share.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Includes 8,065 Shares held, 4,050 non-vested restricted shares that will vest in 2008 and 2009 and stock
options for 6,251 Shares which expire on June&nbsp;30, 2009 and June&nbsp;30, 2010 at prices ranging from $7.20 to
$8.638.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Includes 9,614 Shares beneficially owned, 4,550 non-vested restricted shares that will vest in 2008 and 2009
and stock options which expire on June&nbsp;30, 2009 and June&nbsp;30, 2010 for the purchase of 3,473 Shares at price of
$8.638 per Share.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Includes 92,063 Shares beneficially held of record by the directors and officers, 25,000 non-vested restricted
shares and stock options which expire on June&nbsp;30, 2009 and June&nbsp;30, 2010 for the purchase of 29,634 Shares at
prices ranging from $7.20 to $8,638 per Share.</TD>
</TR>

</TABLE>
<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->42<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">




<DIV align="left">
<A name="106"></A>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="98%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px"><B>ITEM 5.</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>DIRECTORS AND EXECUTIVE OFFICERS</B></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table sets forth information about our directors and executive officers.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="27%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Address</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jack K. Heilbron</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the board</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1282 Pacific Oaks Place</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief executive officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Escondido, CA 92029<br></TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kenneth W. Elsberry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief financial officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1282 Pacific Oaks Place</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Secretary, director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Escondido, CA 92029<br></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">David Bruen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1282 Pacific Oaks Place</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Escondido, CA 92029<br></TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em;">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Larry G. Dubose</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1282 Pacific Oaks Place</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Escondido, CA 92029<br></TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sumner J. Rollings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1282 Pacific Oaks Place</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Escondido, CA 92029<br></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em;">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thomas Schwartz</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1282 Pacific Oaks Place</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Escondido, CA 92029<br></TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bruce A. Staller</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1282 Pacific Oaks Place</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Escondido, CA 92029<br></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt">None of our directors serves as a director of any company reporting under the 1934 Act. &#147;Reporting
Companies&#148; include companies with a class of securities registered pursuant to Section&nbsp;12 of the
1934 Act, or subject to the requirements of Section 15(d) of the 1934 Act, or any company
registered as an investment company under the 1940 Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Each of our directors serves for a concurrent term of one year or until his or her successor is
duly elected and qualified. Set forth below is a description of the business and employment
background of each director and executive officer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Jack K. Heilbron </I></B>has served as our chief executive officer and a director since our inception. Mr.
Heilbron is a founding officer, director and shareholder of CI Holding Group, Inc. and of its
subsidiary corporations. Mr.&nbsp;Heilbron also serves as chairman of Centurion Counsel Inc., a licensed
investment advisor. He also currently serves as chairman of the board of directors of CI Holding
Group, Inc. and certain of its subsidiaries. From 1994 until its dissolution in 1999, Mr.&nbsp;Heilbron
served as the chairman of Clover Income and Growth REIT (&#147;Clover REIT&#148;). Mr.&nbsp;Heilbron presently
holds a license as a registered securities principal with Centurion Institutional Investor
Services, Inc., an NASD member broker-dealer. Mr.&nbsp;Heilbron graduated with a B.S. degree in Business
Administration from California Polytechnic College, San Luis Obispo, California.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Mr.&nbsp;Heilbron&#146;s prior experience includes acting as chief executive officer and founding director of
The Investors Realty Trust, Inc. (&#147;TIRT&#148;), a San Diego, California based real estate investment
trust he co-founded in 1987. Mr.&nbsp;Heilbron&#146;s affiliated advisor, Income Realty Advisors, Inc.
(&#147;IRA&#148;), served as sponsor and advisor to TIRT. &#062;From its organization in 1987, TIRT grew to
more than $3.5&nbsp;million in total assets by the end of 1988, when IRA was acquired by Excel Realty
Advisors, Inc. TIRT changed its name in 1989 to Excel Realty Trust, Inc. (&#147;ERT&#148;). Mr.&nbsp;Heilbron
remained active in ERT&#146;s management until 1991, when he resigned from Excel Realty Advisors, Inc.
and its related companies to devote his full time to CI Holding and its related businesses. At the
time he left, ERT had total assets exceeding $24.0&nbsp;million. By March&nbsp;1998, ERT had become a New
York stock exchange traded REIT with total assets in excess of $1.0&nbsp;billion and by the end of 1998,
had merged with New Plan Realty Trust and became New Plan Excel Realty Trust, one of the nation&#146;s
largest community and neighborhood shopping center REITs.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->43<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Kenneth
W. Elsberry </I></B>has served as our chief financial officer since
our inception and as a director since July&nbsp;2008. Mr.&nbsp;Elsberry has
served as chief financial officer and a director of CI Holding Group, Inc. and certain of its
affiliates. Since 2004, Mr.&nbsp;Elsberry has also served as chief financial officer of Trusonic, Inc.,
a startup technology company based in San Diego, California. Until August&nbsp;31, 1999, he served as
president and chief financial officer of Centurion Counsel Funds, Inc., a registered investment
company. From 1994 until 1998, Mr.&nbsp;Elsberry served as chief financial officer of Clover REIT. Since
1990, Mr.&nbsp;Elsberry has operated his own consulting firm, which provides financial and
administrative consultation services to small and medium-sized companies. Prior to 1990, Mr.
Elsberry served as president and chief executive officer of Bekhor Securities Corp. dba First
Affiliated Securities, a firm he joined in 1989. From 1975 to May&nbsp;1989, Mr.&nbsp;Elsberry had served as
an executive financial officer for First Affiliated Securities, Inc. Mr.&nbsp;Elsberry received his
Bachelor of Science degree in accounting from Colorado State University and is a registered
securities
principal. He is a member of the California Society of Certified Public Accountants, American
Institute of Certified Public Accountants and National Association of Accountants.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>David Bruen </I></B>has been in the banking industry for over thirty years in both commercial lending and
administration. He began his career at Bank of America where he assumed additional
responsibilities and ultimately became a Credit Administrator. He later held executive management
positions at two independent banks in Northern California, as Chief Credit Officer and President,
respectively. Most recently, during the past seventeen years, Mr.&nbsp;Bruen has been in commercial
lending to mid-size businesses in San Diego County for First Interstate Bank, Wells Fargo Bank,
Mellon 1<SUP style="font-size: 85%; vertical-align: text-top">st</SUP> Business Bank and San Diego National Bank. He has recently retired from San
Diego National Bank after 6&nbsp;years as a senior commercial lending officer. Mr.&nbsp;Bruen is a graduate
of San Diego State University and has an M.B.A. from the University of Southern California. He is
a Life Member of the Pacific Life Holiday Bowl Committee and he has been a member of the Presidents
Association for Palomar College, Financial Executive International, San Diego MIT Enterprise Forum,
and the Association for Corporate Growth.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Larry G. Dubose </I></B>has served as a director since June&nbsp;2005. Mr.&nbsp;Dubose currently serves as consultant
to Dubose Model Home Company, a residential real estate construction company headquartered in
Dallas, Texas. Prior to selling that company in 2004, Mr.&nbsp;Dubose served as chief executive officer
since he founded it in 1985. Prior to forming that company, Mr.&nbsp;Dubose served as vice president and
chief financial officer of a full service real estate brokerage company in Houston for six years.
From June&nbsp;1973 to February&nbsp;1976, he served as a staff accountant with Price Waterhouse. Mr.&nbsp;Dubose
graduated with a B.A. degree in Accounting from Lamar University in 1973. Although not active at
present, Mr.&nbsp;Dubose was a certified public accountant in the state of Texas. He also holds a real
estate brokerage license.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Sumner J. Rollings </I></B>has served as a director since April&nbsp;2001. Mr.&nbsp;Rollings is chief executive
officer and sole shareholder of the Wagon Wheel Restaurant. From May&nbsp;1999 to May&nbsp;2001 he served as
sales executive for Joseph Webb Foods; from 1985 to 1999 he was sales executive for Alliant Food
Service Sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Thomas E. Schwartz </I></B>has been a Certified Financial Planner since 1990 and an Independent Certified
Financial Planner since 2001. Mr.&nbsp;Schwartz has served as a director of Gold Terra, Inc. since March
1999 and is currently vice president of development for that company. Gold Terra, Inc. is a
closely-held Nevada corporation which participates in mining operations for gold, silver and other
valuable mineral deposits. It owns 80 square miles of mineral and state mining leases in Carbon
County and Emery County in Utah. Mr.&nbsp;Schwartz served as an officer in the U.S. Marine Corps from
1964 to 1968 and saw extensive service in Vietnam. Mr.&nbsp;Schwartz holds a Bachelor of Science degree
from the University of Wisconsin, Madison. He has served on the board of directors of the Boys and
Girls Club of Greater San Diego since 1996.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Bruce A. Staller </I></B>has served as one of our directors since June, 2004. Until December&nbsp;31, 2005, Mr.
Staller was an investment counselor registered as an Investment Advisor under California Law. From
1988 through May&nbsp;2003, Mr.&nbsp;Staller served as a director of New Plan Excel Realty Trust, Inc., and
its predecessor Excel Realty Trust, a New York Stock Exchange traded REIT. From 1988 until 1994,
Mr.&nbsp;Staller served as president and compliance officer of First Wilshire Securities Management,
Inc., a Pasadena based investment advisory firm. Since 2000, he has served as a trustee and
president of Monrovia Schools Foundations, Inc., a non-profit education corporation based in
Monrovia, California.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Committees of Directors</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Audit Committee</I></B>. Our board established an Audit Committee which consists of Mr.&nbsp;Dubose, who serves
as chairman, Mr.&nbsp;Staller and Mr.&nbsp;David Bruen. Our Audit Committee reports and assists our board by providing
oversight of our financial officers, our independent auditors and our financial purporting
procedures and other matters which our board may from time to time direct.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Nominating and Corporate Governance Committee. </I></B>Our board established a Nominating and Corporate
Governance Committee composed of Mr.&nbsp;Rollings, who serves as chairman, and Mr.&nbsp;Schwartz. Our
Nominating and Corporate Governance Committee identifies qualified individuals for service on our
board, recommends director nominees to our board for our next annual meeting of our shareholders,
develops and recommends to our board a set of corporate governance guidelines and provides
oversight of our corporate governance affairs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Compensation and Benefits Committee</I></B><I>. </I>Our board established a Compensation and Benefits Committee
composed of Mr.&nbsp;Staller, who serves as chairman, and Mr.&nbsp;Rollings. The Compensation and Benefits
Committee oversees the compensation and benefit packages paid to our management and advises our
board as to appropriate compensation, including various pension, savings, health and welfare plans,
for our management and employees.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->44<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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<DIV align="left">
<A name="107"></A>
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<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="98%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 6.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>EXECUTIVE COMPENSATION</B></TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table acts forth information concerning the compensation earned by our chief
executive officer and our chief financial officer (collectively, the &#147;Named Executive Officers&#148;)
for the fiscal years ended December&nbsp;31, 2007 and 2006. There was no non-equity incentive plan
compensation or change in pension value and non-qualified deferred compensation earnings paid to
the executive officers in 2007 and 2006.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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    <TD width="23%">&nbsp;</TD>
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    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">All other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left">Name and Principal</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Position</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Salary</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Bonus (1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">awards (2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Awarded</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jack K. Heilbron</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">88,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">154,418</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">

    <TD><DIV style="margin-left:15px; text-indent:-15px">President/CEO</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">76,492</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,583</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kenneth Elsberry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">88,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">147,375</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Secretary/CFO</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66,281</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,583</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The bonuses shown for 2007 were paid in January&nbsp;2008 and the bonuses shown for 2006 were paid
in 2007.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>For 2007, the amounts shown represent the compensation cost recognized by us related to the
grants of restricted stock during 2007 in accordance with SFAS 123R. For a discussion of valuation
assumptions used to determine the compensation cost in 2007, see Note 2 to the Notes to Financial
Statements included in our Annual Report on Form&nbsp;10 for the year ended December&nbsp;21, 2007.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>The following table sets forth distributions paid on restricted stock and the cost of term life
premiums paid by us:</TD>
</TR>

</TABLE>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Distributions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Paid on</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Group Term</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total of All</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Restricted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Life Insurance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Auto</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Country</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Other</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Payments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Allowance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Club</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Compensation</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jack K. Heilbron,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,503</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">President/CEO</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,425</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kenneth W. Elsberry,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,460</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Secretary/CFO</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,214</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 7pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Stock Option Awards (1)(2)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>Restricted Stock Awards (3)(4)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Equity</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Incentive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Equity</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Plan</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Incentive</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Awards:</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Plan</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Awards:</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Market or</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Equity</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unearned</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Payout</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Incentive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Market</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Value of</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Plan wards:</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Value of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Restricted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unearned</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Stock or</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares of</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Restricted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Restricted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Restricted</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Rights</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unexercised</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unexercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unexercised</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Option</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Option</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>That</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>That</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>That</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>That</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Options (#)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Options (#)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unearned</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Have Not</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Have Not</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Have Not</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Have Not</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Unexercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Options (#)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Price ($)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Vested (3)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Vested (4)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Vested</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Vested</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jack K. Heilbron</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>6/30/2009 and 2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kenneth W. Elsberry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">6/30/2009 and 2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Options were granted in 2004 and 2005. The option price represents the weighted average price
of the outstanding options. The options for each named executive officer expire as follows: 2,778
on June&nbsp;30, 2009 and 3,473 on June&nbsp;30, 2010. No options have been granted since 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The amounts in these columns represent the stock awards that were granted on January&nbsp;1, 2007
and held at December&nbsp;31, 2007.</TD>
</TR>
</TABLE>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->45<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>The restricted stock awards vest according to the following schedule: 525 shares vest on
12/31/08 and 525 vest on 12/31/09.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Market value has been calculated by multiplying the offering price of $10 in our ongoing
private placement offering by the outstanding restricted stock awards for each named executive
officer.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Stock Vested Table</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table sets forth summary information concerning option exercises and vesting of stock
awards for each named executive officer during the year ended December&nbsp;31, 2007.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Option Awards</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Stock Awards</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Acquired on</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Value Realized on</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Acquired on</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Value Realized on</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Exercise (1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Vesting</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Vesting (2)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jack K. Heilbron</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kenneth W. Elsberry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,500</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>This column represents the difference between the exercise price and the market value of the
common stock based on the offering price of $10 in our ongoing private placement offering.<BR></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>This column represents the value realized on vesting as calculated by multiplying the offering
price of our common stock on December&nbsp;31, 2007 of $10 by the number of shares vested.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Employment Agreements. </I></B>We have employment agreements with Messrs.&nbsp;Heilbron and Elsberry. In
addition to their base compensation, each is entitled life insurance and medical insurance coverage
and to an annual bonus and/or award of restricted stock and/or stock options in an amount
determined by the Compensation and Benefits Committee of our board. Annual bonuses are determined
based on the executive&#146;s performance against the annual objectives and goals set by the Committee
as well as other factors. The Committee has approved increases in each of Mr.&nbsp;Heilbron&#146;s and Mr.
Elsberry&#146;s annual base compensation of $2,000 annually for each $1.0&nbsp;million of additional capital
we raise until such time as Mr.&nbsp;Heilbron&#146;s salary is $200,000 and Mr.&nbsp;Elsberry&#146;s salary is
$150,000. Awards of any bonus compensation are dependent on our attaining certain minimum
performance levels as determined by the Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Committee will annually review the performance of each of our other employees to consider
awarding bonus compensation in at least the amount necessary to raise the employee&#146;s annual salary
to the median level of salaries paid to comparable executives for comparable-sized REITs as
reported by the National Association of Real Estate Investment Trusts (&#147;NAREIT&#148;) or, if NAREIT or a
comparable organization fails to publish such information, such bonus compensation will be awarded
as reasonably determined by the Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>2008 Executive Compensation Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Below we discuss the material elements of compensation that we will pay, on a go-forward basis, to
our only executive officers, Mr.&nbsp;Heilbron and Mr.&nbsp;Elsberry, who are referred to as our &#147;Named
Executive Officers.&#148;
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->46<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Compensation of the Company&#146;s Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">None of our officers receive or will receive any compensation for serving as a member of our board
of directors or any of its committees. Our directors received the following aggregate amounts of
compensation for the year ended December&nbsp;31, 2007.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Change in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">pension value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">and</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fees earned</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">nonqualified</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">or paid in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Non-equity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">deferred</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">All other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">cash</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Awards</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">incentive plan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Name</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(2)(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Awards</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">compensation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">earnings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bruce Staller</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sumner Rollings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thomas Schwartz</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Larry Dubose</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,845</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The Company pays no cash fees to any of its nonaffiliated directors to attend directors&#146;
meetings but does reimburse such directors for their travel expenses.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The amounts shown represent the compensation cost recognized by us related to the grants of
restricted stock during 2007 in accordance with Statement of Financial Accounting Standard No.
123R, <I>Share Based Payments </I>(&#147;SFAS 123R&#148;). For a discussion of the valuation assumptions used to
determine the compensation cost in 2007, see Note 2 to the Financial Statements included in our
annual report on Form&nbsp;10 for the year ended December&nbsp;31, 2007.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>On January&nbsp;1, 2007, each non-employee director was awarded 1,500 shares of restricted stock
with a fair value of $15,000 on date of grant which is calculated by multiplying the 1,500 shares
by the price of our private placement offering of common stock of $10. All of these restricted
stock awarded vest on the anniversary of the grant date over three years and all shares, including
shares of restricted stock, are eligible to receive distributions from the date of grant. During
2007, 1/3 of the grant vested and was recorded as director compensation.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>For all directors the amount represents distributions paid on shares of restricted stock during
the year ended December&nbsp;31, 2007.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Compensation Decision-Making</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Our Compensation Committee. </I></B>Our Compensation Committee exercises our Board of Directors&#146; authority
concerning compensation of the executive officers, non-employee directors and the administration of
our 1999 Flexible Incentive Plan. The Compensation Committee meets in separate sessions
independently of board meetings. The Compensation Committee will typically schedule telephone
meetings as necessary to fulfill its duties. The Chairman will typically establish meeting agendas
after consultation with other committee members and our CEO.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Role of Contracts Establishing Compensation. </I></B>We endeavor to negotiate formal employment agreements
without executive officers that have a term of at least three years and provide for annual salary,
bonus, equity incentives and other non-cash compensation. Our Compensation Committee will bear
primary responsibility for negotiating the terms of such agreements and passing on the
reasonableness thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Role of Executives in Establishing Compensation. </I></B>Our CEO regularly discusses our compensation
issues with Compensation Committee members. In general, the Compensation Committee will have the
sole authority to establish salary, bonus and equity incentives for our CEO in consultation with
other members of the management team. Subject to Compensation Committee review, modification and
approval, our CEO will typically make recommendations respecting bonuses and equity incentive
awards for the other executive officers and employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Other Compensation Policies. </I></B>With the assistance of the Compensation Committee and our management
team, we developed a number of policies and practices that we plan to implement during 2008.
Consistent with our compensation philosophies described below, our goal will be to provide our
executive officers and our employees with a compensation program that is competitive with other
opportunities that were available to them.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->47<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We do not have a pre-established policy or target for the allocation of incentive compensation
between cash bonuses and equity incentive compensation. The Compensation Committee reviews
information considered relevant to determine the appropriate level and mix of incentive
compensation for each executive officer and make a final decision in consultation with the
executive officer. The portion of an executive&#146;s total compensation that is contingent upon the
Company&#146;s performance will generally tend to increase commensurate with the executive&#146;s position
within the Company. This approach is designed to provide more upside potential and downside risk
for those senior positions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">For 2008, we will endeavor to ensure that a significant, but not substantial, amount of each Named
Executive Officer&#146;s total compensation will be performance-based, linked to the Company&#146;s operating
performance, and over the executive&#146;s tenure, derived its value from the market price of the
Company&#146;s common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our benefit programs are generally egalitarian. Our Named Executive Officers do not receive
perquisites other than a monthly car allowance and participation without cost in our standard
employee benefit programs, including medical and hospitalization insurance and group life
insurance. We will attempt to ensure that both cash and equity components of total compensation are
tax deductible, to the maximum extent possible.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Compensation Program</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Compensation Program Objectives and Philosophy. </I></B>Our philosophy is to establish and maintain
competitive pay practices in order to attract, retain and reward the highest performers who are
capable of leading us in achieving our objectives. We employ base salaries, performance-based
bonuses and equity-based incentive awards, as appropriate, to reward and reinforce the value added
contributions and attainment of performance objectives that enable us to meet our goals and create
stockholder value. We use an equity-based compensation component to emphasize the link between
executive officer compensation and the creation of stockholder value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We do not use external benchmarking data or comparable peer groups to establish competitive total
compensation pay practices. We evaluate employees&#146; compensation on an annual basis and make changes
accordingly. We target the overall pay structures to provide a reasonable level of assurance that
we will be able to retain the services of our principal executive officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Compensation Program Design. </I></B>Our compensation program is designed to achieve our objectives of
attracting, retaining and motivating employees and rewarding them for achievement that we believe
will bring us success and create stockholder value. These programs are designed to be competitive
with other employment opportunities that are available to our executive officers. A significant
portion of the compensation of our Named Executive Officers includes equity awards that have
extended vesting periods. These awards are to serve as both a retention and incentive mechanism
that will encourage recipients to remain with our Company and create value for both the award
recipient and our stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Elements of Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Compensation arrangements for the Named Executive Officers under our fiscal 2008 compensation
program will typically include four components: (1)&nbsp;a base salary; (b)&nbsp;a cash bonus program; (c)
the grant of equity incentives in the form of restricted stock; and (d)&nbsp;other compensation and
employee benefits generally available to all of our employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>COMPENSATION DISCUSSION AND ANALYSIS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Compensation Committee of the Board of Directors is comprised of independent directors. The
Compensation Committee operates pursuant to a written charter which was adopted by in 2005. The
Compensation Committee met three times during 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our executive compensation benefits program aims to encourage our management team to continually
pursue our strategic opportunities while effectively managing the risks and challenges inherent to
the real estate investment industry. We gear different compensation elements to shorter and
longer-term performance, with the overall objective of creating long-term value for our
stockholders. We utilize short term compensation, including base salary, adjustments to base
salary and cash bonuses to motivate and reward our key executives for individual performance. The
Committee&#146;s fundamental policy is to offer the executive officers competitive compensation
opportunities based upon overall Company growth and performance, their individual contribution to
the financial success of the Company and their personal performance. It is the Committee&#146;s
objective to have a substantial portion of each officer&#146;s compensation contingent upon the
Company&#146;s performance, as well as upon his own level of performance.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->48<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Base Salary</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Base salary provides our executive officers with a degree of financial certainty and stability, and
will be used to attract and retain highly qualified individuals. The Compensation Committee will
normally review and determine the base salaries of our executive officers. Base salaries are also
evaluated at the time of a promotion or other significant changes in responsibilities. In
establishing the 2006 base salaries of the named executive officers, our Compensation Committee and
management took into account a number of factors, including the comparable salaries of comparable
positions with other REITs and the significant changes in responsibilities and time required due to
the significant growth in capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Employment and Severance Agreements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Company employed Jack K. Heilbron as President and Chief Executive Officer and Kenneth W.
Elsberry as Chief Financial Officer pursuant to the terms of Employment Agreements dated January
28, 1999. Under the agreement, Messrs.&nbsp;Heilbron and Elsberry are entitled to (a)&nbsp;a base annual
salary of $10,000, (b)&nbsp;an annual bonus compensation in at least the amount necessary to raise the
employee&#146;s annual salary to the median level of salaries paid to comparable executives of
comparable sized REITs. Such bonus compensation will be awarded as reasonably determined by the
Compensation Committee. The award of any bonus compensation, however, is dependent on our
attaining certain minimum performance levels as determined by the Compensation committee, (c)&nbsp;group
medical plan, and (d)&nbsp;an automobile allowance of $500 per month.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">During 2006 the Compensation Committee recommended and the Board of Directors approved increases in
Mr.&nbsp;Elsberry and Mr.&nbsp;Heilbron&#146;s annual compensation from $10,000 to $20,000 at the first close of
escrow of the 2006 Private Placement Offering and increases of $4,000 annually for each additional
million of capital raised up to ten million. After ten million in new capital raised salaries
would raised by $2,000 annually for each additional million of capital raised until Mr.&nbsp;Heilbron&#146;s
salary is $200,000 and Mr.&nbsp;Elsberry&#146;s salary is $150,000. The first close of escrow occurred on
July&nbsp;29, 2005. At December&nbsp;31, 2007, Mr.&nbsp;Heilbron and Mr.&nbsp;Elsberry annual salary rate was
$108,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Annual Cash Bonus</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The annual cash incentive is designed to supplement the pay of our executive officers (and other
key management personnel) so that overall total cash compensation (salary and bonus) is competitive
in our industry and properly rewards the executive officers for their efforts in achieving their
objectives. The cash bonuses paid to the executive officers for 2007 also reflected the
Compensation Committee&#146;s determination of each executive officer&#146;s individual performance and the
level of pay of each executive officer compared to other similarly situated officers in the
industry. Bonuses were approved by the Compensation Committee in December&nbsp;2007 and paid in January
2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Long-Term Incentive Compensation Awards</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We believe that an important component of our total compensation program is an effective equity
incentive plan that provides alignment of the interests of our executive officers and those of our
stockholders. The equity compensation program consisted of stock options in prior years and
restricted stock commencing in 2007. The initial restricted stock grant made to each executive
officer is based on competitive conditions applicable to the executive&#146;s specific
position. Subsequent stock grants may be made at varying times and in varying amounts at the
discretion of the Committee. Equity awards are not granted automatically to our executives and
employees. Generally, the size of each grant is set at a level that the Committee deems
appropriate to create a meaningful opportunity for stock ownership based upon the individual&#146;s
position with the Company, the individual&#146;s potential for future responsibility and promotion, the
individual&#146;s performance in the recent period and the number and value of unvested options and
restricted stock held by the individual at the time of the new grant. The relative weight given to
each of these factors will vary from individual to individual at the Committee&#146;s discretion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Compensation Committee grants nonvested stock awards to our executive officers under our 2007
Incentive Award Plan. These stock awards are designed to increase the performance, encourage
officers&#146; ownership in us, motivate our executive officers to improve long-term dividend
performance, encourage long-term dedication to us and to operate as an executive officer retention
mechanism for key members of our management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our nonvested stock awards generally vest evenly, on each anniversary of the grant date, over three
years. When an Executive Officer reaches age of 55, his vesting on the grant of any new shares of
nonvested stock awards vesting would be accelerated to 3&nbsp;years. Distributions are paid on the
entirety of the grant from the grant date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In 2007, no stock options were granted to the Executive Officers. In 2005, we discontinued our
practice of granting stock options in favor of only granting nonvested stock. We believe that
nonvested stock is a more appropriate incentive to our executive officers and employees given the
focus of our business on monthly dividends.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->49<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>1999 Flexible Incentive Plan. </I></B>We have established the NetREIT 1999 Flexible Incentive Plan for the
purposes of attracting and retaining directors, officers and other employees and consultants. Under
this incentive plan, we can award incentive compensation to directors, officers, employees and
consultants. Such incentive compensation may include grants of stock options, stock, restricted
stock (Shares subject to restrictions or a substantial risk of foreclosure), cash, stock
appreciation rights. The number of Shares that may be issued under the incentive plan is limited to
no more than 10% of our outstanding Shares of Common Stock at any time. As of February&nbsp;29, 2008, we
have 29,635 stock options outstanding and 38,075 restricted and non-vested shares outstanding under
the incentive plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Compensation of Directors. </I></B>We compensate our directors with awards of restricted stock and/or stock
options. We may compensate them with cash or other payments in the future. Our directors receive
reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at
meetings of the board of directors. Where a director is also one of our officers, we do not pay
separate compensation for services rendered as a director.
</DIV>
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>

    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 7.&nbsp;</B></TD>

    <TD><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Other than the following and as disclosed, there have been no material transactions between us and
our officers or directors, or any of their respective affiliates, during the last two (2)&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Certain services and facilities are provided to the Company by CI Holding, a minority shareholder
in the Company which is approximately 35% owned by our executive management. We reimburse CI
Holding for a portion of our general and administrative costs. We paid CI Holding $56,539 in 2007
and $76,650 in 2006 for general and administrative expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We paid our property manager, CHG Properties, a wholly owned subsidiary of CI Holding, management
fees during the years ended December&nbsp;31, 2007 and 2006 of $134,316 and $37,575, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Prior to the sale of the RSF office building in October&nbsp;2007, the Company leased office space to CI
Holding under a lease that provided for future monthly lease payments of $8,787. This lease
terminates on December&nbsp;31, 2008. CI Holding is currently in arrears in its rents by approximately
$106,500. The bulk of these arrearages represent rents due during part of 2006. We have delayed
action to recover these amounts based on CI Holdings&#146; agreement to pay current rents as due and to
repay past rents owed within the next 12&nbsp;months. At April&nbsp;23, 2008, the amount owed to the Company
had been reduced to $70,373.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">All of our directors are independent except for Mr.&nbsp;Heilbron and Mr.&nbsp;Elsberry.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We have an agreement with CI Holding where by it and certain of its subsidiary companies, including
CHG Properties use approximately 1200 square feet of our offices and certain of our employees and equipment on a cost reimbursement basis. The total value to us
of this arrangement is less than $50,000 per annum.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Board Independence</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our board has determined that each of our current directors and nominees, except for Mr.&nbsp;Heilbron
and Mr.&nbsp;Elsberry, have no material relationship with us (either directly or as a partner,
stockholder or officer of an organization that has a relationship with us) and is &#147;independent&#148;
within the meaning of our director independence standards. Our board established and employed the
following categorical standards in determining whether a relationship is material and thus would
disqualify such director from being independent.
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director is, or has been within the last three years, our employee or an employee of any of our subsidiaries;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An immediate family member of the director is, or has been within the last three years, our executive officer or
an executive officer of any of our subsidiaries;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director (or an immediate family member of the director) received during any twelve-month period within the
last three years, more than $60,000 in direct compensation from us and/or any of our subsidiaries, other than
director and committee fees and pension or other forms of deferred compensation for prior service (provided such
compensation is not contingent in any way on continued service;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director was affiliated with or employed within the last three years by our present or former (internal or
external) auditor or an immediate family member of the director was affiliated with or employed in a
professional capacity by our present or former (internal or external) auditor;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director (or an immediate family member of the director) is, or has been within the last three years,
employed as an executive officer of another company where any of our executives served on that company&#146;s
compensation committee;</TD>
</TR>

</TABLE>
</DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->50<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director is a current employee, or an immediate family member of the director is a current executive officer
of another company that made payments to, or received payments from us or any of our subsidiaries for property
or services in an amount which, in any of the last three fiscal years, exceeds the greater of $200,000, or two
percent (2%) of such other company&#146;s consolidated gross revenue;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director (or an immediate family member of the director) was, within the last three years, an affiliate or
executive officer of another company which was indebted to us, or to which we were indebted, where the total
amount of either company&#146;s indebtedness to the other was five percent (5%) or more of our total consolidated
assets or the total consolidated assets of the company for which he or she served as an affiliate or execute
officer;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director (or an immediate family member of the director) was, within the last three years, an officer,
director or trustee of a charitable organization where our (or an affiliated charitable foundation&#146;s) annual
discretionary charitable contributions to the charitable organization exceeded the greater of $1&nbsp;million or five
percent (5%) of that organization&#146;s revenues;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Within the last three (3)&nbsp;fiscal years been an officer, director or trustee of a charitable organization where
NetREIT&#146;s contributions (or an affiliated charitable foundation&#146;s annual discretionary charitable contributions
to the charitable organization) exceeded the greater of One Hundred Thousand Dollars ($100,000) or five percent
(5%) of that organization&#146;s consolidated gross revenue.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">An &#147;Affiliate&#148; includes any person beneficially owning in excess of 10% of the voting power
of, or a general partner or managing member of, a company.
</DIV>

<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>

    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 8.</B></TD>

    <TD><B>&nbsp;LEGAL PROCEEDINGS</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">None
</DIV>

<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 9.&nbsp;&nbsp;</B></TD>
    <TD><B>MARKET PRICE AND DIVIDENDS ON RGESTRANT&#146;S COMMON EQUITY AND
RELATED STOCKHOLDER
 MATTERS</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">To date,
there was no public market for any of the Registrant&#146;s securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">To date, there is no public market for any of the securities of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We pay quarterly cash distributions compute on a monthly basis to our common stockholders. The
following is a summary of monthly distributions paid per share common shares for the years:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Month</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Cash Dividend</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Stock Dividend</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Cash Dividend</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Stock Dividend</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Cash Dividend</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">April</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.04925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.04925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.04925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">July</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">August</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">September</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">October</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">November</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.050</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid black">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid black">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.597</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 3px double black">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 3px double black">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">At December&nbsp;31, 2007, a distribution of $0.144 per common share was payable and was paid in January
2008. At December&nbsp;31, 2006, a distribution of $0.15 per common share was payable and was paid in
January&nbsp;2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In addition we made distributions on the Series&nbsp;AA Preferred Stock outstanding in 2007 and 2006 at
a monthly rate of $0.1458333 per share.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->51<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Number of Holders of Each Class of Stock</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As of
October&nbsp;31, 2008, there were 1,411 holders of our Series&nbsp;A common stock and 31 holders of our
Series&nbsp;AA Preferred Stock.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Market Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our common stock is not currently traded on any stock exchange or electronic quotation system. We
do not expect that our common stock will be traded on any stock exchange or electronic quotation
system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Securities Eligible for Resale</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Rule&nbsp;144. </I></B>Under Rule&nbsp;144, as recently amended by the SEC, all shares held by non-affiliates that
have been issued and outstanding for more than one year are presently eligible for resale and
commencing 90&nbsp;days after the effective date of this registration statement, all shares held by
non-affiliates that have been issued and outstanding for more than six months will be eligible for
resale. Future sales of large numbers of shares into a limited trading market or the concerns that
those sales may occur could cause the trading price of our common stock to decrease or to be lower
than it might otherwise be. If an active, stable and sustained trading market does not develop, the
market price for our shares will decline and such declines are likely to be permanent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Rule&nbsp;701. </I></B>Under Rule&nbsp;701, as currently in effect, shares of common stock acquired in compensatory
transactions by employees of privately held companies may be resold by persons, other than
affiliates, beginning 90&nbsp;days after the date of the effectiveness of this registration statement,
subject to manner of sale provisions of Rule&nbsp;144, and by affiliates in accordance with Rule&nbsp;144
without compliance with its one-year minimum holding period.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Share
Ownership. </I></B>At October&nbsp;31, 2008, we had 6,203,013 shares outstanding, including
6,085,950 shares held by persons who are not directors, officers and
their affiliates. Of this
total:
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>3,588,360 shares held by non-affiliates have been outstanding since
February&nbsp;29, 2008 and are presently eligible for resale pursuant to
Rule&nbsp;144;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR>

<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>no shares were issued to non-affiliates pursuant to Rule&nbsp;701 in
December&nbsp;31, 2007; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>391,032 shares were issued to non-affiliates between February&nbsp;29, 2008
and April&nbsp;23, 2008, and became eligible for resale pursuant to
Rule&nbsp;144 commencing 90&nbsp;days after the effectiveness of this
registration statement.</TD>
</TR>

<TR><TD><DIV align="left"><FONT size="1">

</FONT></DIV></TD></TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>1999
Flexible Incentive Plan.</I></B> We have established the NetREIT 1999 Flexible Incentive Plan for the purposes
of attracting and retaining directors, officers and other employees and consultants. This plan was approved
by our Shareholders and implemented in 1999. Under this plan, we can award incentive compensation to directors,
officers, employees and consultants. Such incentive compensation may include grants of stock options, stock,
restricted stock (Shares subject to restrictions or a substantial risk of foreclosure), cash, stock appreciation rights.
The number of Shares that may be issued under the incentive plan is limited to no more than 10% of our outstanding
Shares of Common Stock at the time an award is made.</DIV>



<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Securities Authorized for Issuance under Equity Compensation Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table provides information as of the end of the most recently completed fiscal year
with respect to compensation plans.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of securities</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of securities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">remaining available for</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">to be issued upon</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted-average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">future issuance under</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">exercise of outstanding</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">exercise price of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">equity compensation plans</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">options, warrants</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">outstanding options,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(excluding securities</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">and rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">warrants and rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">reflected in column (a))</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Plan Category</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(a)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(b)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(c)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans approved by
security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans not approved
by security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">None</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">None</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Totals</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The stock option compensation plan was issued under the 1999 Flexible Incentive Plan that
provides that no more than 10% of the outstanding shares can be issued under the Plan. At December
31, 2007 the maximum number of shares that could be issued under the Plan was 383,595 shares.
Excluding the exercisable stock options and the non-vested restricted stock described in note (2),
the number of securities remaining available for future issuance under equity compensation plans is
330,765 shares at December&nbsp;31, 2007.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>In addition to the stock options awarded under the 1999 Flexible Incentive Plan, the
Compensation Committee of the Board of Directors adopted a Restricted Stock Plan under the 1999
Flexible Incentive Plan in December&nbsp;2006 and granted non-vested shares of restricted common stock
during the year 2007 of 14,237 shares. During the year 2007, 3,907 shares vested leaving a balance
of 10,329 non-vested shares outstanding at December&nbsp;31, 2007.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">See footnote 7 of the Notes to Financial Statements for further description of the employee
retirement and share-based Incentive plans.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Options</B>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We have options outstanding on the date of this registration statement. When we are eligible to do
so, we may file a registration statement under the Securities Act on Form S-8 to register the
securities included in and authorized by our 1999 Flexible Incentive Plan. This registration
statement is expected to become effective upon filing. Shares covered by the registration statement
will thereupon be eligible for sale in the public market, if any, subject in certain cases to
vesting and other plan requirements.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

 <DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>

    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>ITEM 10.&nbsp;</B></TD>

    <TD><B>RECENT SALES OF UNREGISTERED SECURITIES</B></TD>
</TR>
</TABLE>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>OVERVIEW</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Since January&nbsp;1, 2005, we have sold our securities pursuant to four private offerings as follows:
</DIV>

<DIV style="margin-top: 10pt">
<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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Stock options and restricted stock under our 1999 Flexible Incentive Plan (the &#147;Incentive
PPO&#148;);</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Common Stock under our Dividend Reinvestment Plan (the &#147;Reinvestment PPO&#148;);</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Common Stock, Series&nbsp;AA Preferred Stock and common stock purchase options under our private
placement offering which commenced on February&nbsp;15, 2005 and terminated in October, 2007 (the &#147;2005
PPO&#148;); and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Common Stock under our private placement offering which commenced immediately upon
termination of the 2005 PPO in October&nbsp;2007 and is continuing (the &#147;2007 PPO&#148;).</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Securities Issued in Private Placement Offerings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Set forth below is information regarding securities we have issued within the past three (3)&nbsp;years.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Since
February&nbsp;15, 2005, Registrant  has sold its securities in
two private placement offerings. The Company sold shares of its common stock and Series&nbsp;AA Preferred
Stock, and its $12 common stock purchase warrants. Registrant&#146;s sales of these securities have
been made on a continuous basis through two private placement offerings, the Offering commenced in
February&nbsp;2005 (the &#147;2005 PPO&#148;) and the Offering
commenced in October&nbsp;2007 (the &#147;2007 PPO&#148;). Upon
termination of the 2005 PPO in October&nbsp;2007, Registrant had sold a total of 50,200 shares of its Series&nbsp;AA Preferred Stock,
866,408 shares of its common stock, and Warrants for the purchase of a total of 433,204 shares of
its common stock in the 2005 PPO, for a total of $9,350,000. These
securities were sold to a total of 316 investors all except eighteen
of whom were accredited investors under Rule&nbsp;501(a)
Regulation&nbsp;D.</DiV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">
Registrant sold its
Series&nbsp;AA Preferred Stock at $25 per share, and a unit containing two shares of its common stock
and one $12 Purchase Warrant for a price of $20 per unit, and shares of its common stock at $10 per
share.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

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


<P align="center" style="font-size: 10pt"><!-- Folio -->52<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Each $12 Warrant entitles the holder to purchase one share of common stock at a price of $12.00.
Any Warrant unexercised by its expiration date is automatically converted into one-tenth share of
common stock. The offering price of the common stock was not adjusted during these offerings to
reflect dividends in kind on Registrant&#146;s common stock during the offering period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">At
October&nbsp;31, 2008, Registrant had sold 4,252,817 shares of its common stock in the 2007 PPO for
total proceeds of $42,528,170 to a total of 1,021 investors, all
except one (1) of whom were accredited investors under
Rule&nbsp;501(a) of Regulation D.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">These two offerings were made through a small number of selected broker-dealers who were members of
the National Association of Securities Dealers, Inc., and currently members of the financial
Industry Regulatory Authority (&#147;FINRA&#148;), and are duly registered as broker-dealers under the 1934
Act and/or applicable state securities laws. The Company paid commissions of up to 7% in connection
with the sales of these securities and up to an additional 6.0% in other fees and expense
reimbursements. All of these securities were sold for cash consideration.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The securities were offered and sold without means of general solicitation, including but not
limited to any publicly disseminated written or oral advertisement, mailings directed to potential
investors not reasonably believed to be suitable investors under Rule&nbsp;506(b), seminars or meetings,
the attendance at which was solicited by general solicitations, including any of the foregoing. The
offering was made through selected broker-dealers who directed offers only to persons known or
reasonably believed to be accredited investors or knowledgeable investors under Rule&nbsp;501(b)(ii).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Registrant made sales to each investor who is not an accredited investor based on its knowledge or
reasonable belief that the investor met the requirements of Rule&nbsp;506(b)(ii) by reason of the
selling broker-dealer&#146;s representations and the investor&#146;s completed subscription agreement which
set forth information regarding investor&#146;s financial capabilities and investment experience.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">All investors, including accredited investors, were provided prior to their purchase of the
securities a private placement memorandum meeting the requirements of Rule&nbsp;502(b).
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In making
these offerings, Registrant relied upon the exemptions from
registration under the 1933 Act contained in Section&nbsp;4(2)
thereof and Rule&nbsp;506 of Regulation&nbsp;D promulgated
thereunder.</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Issuances
of Common Stock under Registrant&#146;s Dividend Reinvestment Plan
(&#147;DRIP&#148;)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">From
January&nbsp;1, 2005 through October&nbsp;31, 2008, Registrant sold a
total of 231,904 shares to participants in its DRIP. The shares were
issued directly by Registrant at a price of $9.50 per share. The
shares were sold to a total of 422&nbsp;participants, all but 24 of
whom are accredited investors under Rule&nbsp;501(a) of
Regulation&nbsp;D.</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Issuances of Securities in Compensatory Transactions</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Since
January&nbsp;1, 2005, Registrant has issued 13,607 shares of restricted common stock which will
vest during 2007 to 2012 and stock options to purchase 18,000 (20,837 shares after effect of stock
dividends) shares of its common stock at an exercise price of $10 as compensation to its directors,
its two executive officers, 13 of its employees and consultants
pursuant to the NetREIT 1999 Flexible Incentive Plan. All of these securities were issued for non-cash consideration under this Plan.
These securities were sold pursuant to the exemption under Rule&nbsp;701 because the sales were made pursuant
to a compensatory benefit plan, where the aggregate sales price or amount of securities sold in
reliance on this exemption during any consecutive 12-month period did not exceed the greatest of:
$1,000,000, 15% of the total assets of Registrant or 15% of Registrant&#146;s outstanding common stock,
all as determined under Rule&nbsp;701. Registrant may also claim an exemption under Section&nbsp;4(2) of the
1933 Securities Act for these sales.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="6%">&nbsp;</TD>

    <TD width="77%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top" NOWRAP><DIV style="margin-left:0px; text-indent:-0px"><B>ITEM 11.</B>
</DIV></TD>

    <TD align="left" valign="top"><B>&nbsp;DESCRIPTION OF REGISTRANT&#146;S
SECURITIES TO BE REGISTERED</B></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Common
Stock.</I></B> Registrant is authorized to issue up to 100,000,000 shares of Series&nbsp;A Common Stock, of
which 6,203,013 were outstanding at October&nbsp;31, 2008. We are authorized to issue 1,000 shares of Series
B Common Stock, none of which are outstanding.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The holders of the Shares are entitled to such distributions as may be authorized from time to time
by our board of directors out of legally available funds and declared by us and, upon our
liquidation, are entitled to receive all assets available for distribution to our stockholders,
subject to the preferential rights of the Series&nbsp;AA Preferred Stock and any other authorized and
outstanding class or series of stock and to the provisions of our Articles of Incorporation
regarding the restriction on the transfer of the Shares. The Shares have equal distribution,
liquidation and other rights. All of our outstanding Shares are fully paid and non-assessable.
Holders of the Shares do not have preemptive rights, which means that they do not have an automatic
option to purchase any new shares that we issue, or preference, conversion, exchange, cumulative,
sinking fund, redemption or appraisal rights. See &#147;Risk
Factors &#151; Risks Relating to an Investment in Our Securities &#151; We may be prevented from paying
dividends by legal requirements.&#148;
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->53<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Series&nbsp;A Common Stock and the Series&nbsp;B Common Stock have identical rights, preferences, terms
and conditions except that the Series&nbsp;B Common Stock is not entitled to receive any portion of our
assets in the event of our liquidation. Except as described below, the Series&nbsp;A Common Stock is not
subject to redemption, nor does the Series&nbsp;A Common Stock have any preference, conversion, exchange
or preemptive rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Limitation on Share Ownership. </I></B>Our articles of incorporation contain a restriction on ownership of
the Shares that prevents one person from owning more than 9.8% of the outstanding Shares of our
common stock. These restrictions are designed to enable us to comply with stock accumulation
restrictions imposed on REITs by the Internal Revenue Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Dividend Policy. </I></B>To maintain our status as a REIT, we must distribute to our shareholders at least
90% of our REIT taxable income each year. In order to accomplish this, our directors may authorize
dividends in excess of this percentage, subject to our meeting applicable statutory requirements,
as they may from time to time deem appropriate. The differences in timing between our receipt of
cash and the payment of our expenses, the timing of required debt payments, and other factors,
could require us to borrow funds upon a short term basis, issue additional securities or sell
assets in order to satisfy these distribution requirements necessary to maintain our REIT status.
The terms and methods we use to finance these distributions could affect future distributions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our policy is to pay cash dividends quarterly. We may also, from time to time, pay dividends in
kind on our common stock. Our ability to pay regular cash dividends, even when adequate funds are
available, is subject to our satisfaction of certain state law solvency requirements. There may be
circumstances when we cannot satisfy these requirements.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Piggyback
Registration Rights. </I></B>Approximately 5,119,225 of Registrant&#146;s outstanding shares of common
stock, not including shares of common stock underlying approximately 434,000 warrants, and the
Series&nbsp;AA Preferred Stock are entitled to piggyback registration rights on any Securities Act
registrations of the Company filed with the U.S. Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (except for registrations relating to employee benefit plans on
Form S-8 and corporate reorganizations on Form S-4), provided that shareholders whose securities
are included on any such registration statements agree to the terms of any lock-up agreement that
may be reasonably required by the Company&#146;s underwriters.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="6%">&nbsp;</TD>

    <TD width="77%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="top" NOWRAP><DIV style="margin-left:0px; text-indent:-0px"><B>ITEM 12.</B>
</DIV></TD>

    <TD align="left" valign="top"><B>&nbsp;INDEMNIFICATION OF OFFICERS AND
DIRECTORS</B></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents Limited
Liability and Indemnification of Directors, Officers, Employees and other Agents</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our organizational documents limit the personal liability of our directors and officers for
monetary damages to the fullest extent permitted under current California Corporation Law. We also
maintain a directors and officers liability insurance policy. California Corporation Law allows
directors and officers to be indemnified against judgments, penalties, fines, settlements and
expenses actually incurred in a proceeding unless the following can be established:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an act or omission of the director or officer was material to the
cause of action adjudicated in the proceeding, and was committed in
bad faith or was the result of active and deliberate dishonesty;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the director or officer actually received an improper personal benefit in money, property or services; or</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>with respect to any criminal proceeding, the director or officer had
reasonable cause to believe his act or omission was unlawful.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Any indemnification or any agreement to hold harmless is recoverable only out of our assets and not
from the shareholder. Indemnification could reduce the legal remedies available to us and the
shareholders against the indemnified individuals, however.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">This provision does not reduce the exposure of directors and officers to liability under federal or
state securities laws, nor does it limit the shareholder&#146;s ability to obtain injunctive relief or
other equitable remedies for a violation of a director&#146;s or an officer&#146;s duties to us or our
shareholders, although the equitable remedies may not be an effective remedy in some circumstances.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->54<!-- /Folio -->
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In spite of the above provisions of California Corporation Law, our articles of incorporation
provide that the directors and CHG Properties and its affiliates will be indemnified by us for
losses arising from our operation only if all of the following conditions are met:
</DIV>


<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our directors and CHG Properties or its affiliates have determined, in
good faith, that the course of conduct which caused the loss or
liability was in our best interests;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our directors and CHG Properties or its affiliates were acting on our behalf or performing services for us;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the case of our affiliated directors and CHG Properties or its
affiliates, the liability or loss was not the result of negligence or
misconduct by the party seeking indemnification; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the indemnification or agreement to hold harmless is recoverable only
out of our net assets and not from the shareholders.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We have agreed to indemnify and hold harmless CHG Properties and its affiliates performing services
for us from specific claims and liabilities arising out of the performance of its obligations under
the property management agreement. As a result, we and our shareholders may be entitled to a more
limited right of action than they would otherwise have if these indemnification rights were not
included in the property management agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The general effect to investors of any arrangement under which any of our controlling persons,
directors or officers are insured or indemnified against liability is a potential reduction in
distributions resulting from our payment of premiums associated with insurance. In addition,
indemnification could reduce our available legal remedies and those of our shareholders against the
officers and directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Securities and Exchange Commission takes the position that indemnification against liabilities
arising under the 1933 Act is against public policy and unenforceable. Indemnification of the
directors, officers, CHG Properties, or its affiliates will not be allowed for liabilities arising
from or out of a violation of state or federal securities law, unless one or more of the following
conditions are met:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>there has been a successful adjudication on the merits of each count involving alleged securities law violations;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction; or</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a court of competent jurisdiction approves a settlement of the claims
against the indemnitee and finds that indemnification of the
settlement and the related costs should be made, and the court
considering the request for indemnification has been advised of the
position of the Securities and Exchange Commission and of the
published position of any state securities regulatory authority in
which the securities were offered as to indemnification for violations
of securities laws.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Indemnification will be allowed for settlements and related expenses of lawsuits alleging
securities laws violations and for expenses incurred in successfully defending any lawsuits,
provided that a court either:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approves the settlement and finds that indemnification of the settlement and related costs should be made; or</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>dismisses with prejudice or there is a successful adjudication on the
merits of each count involving alleged securities law violations as to
the particular indemnitee and a court approves the indemnification.</TD>
</TR>

</TABLE>
</DIV>


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

<P align="center" style="font-size: 10pt"><!-- Folio -->55<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTING DATA</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>INDEX TO FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="92%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#301"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>FINANCIAL STATEMENTS:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#302">Balance Sheets</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#303">Statements of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#304">Statements of Stockholders&#146; Equity</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#305">Statements of Cash Flows</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#306">Notes to Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">62-77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->56<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="301"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><U>Report of Independent Registered Public Accounting Firm</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">To the Board of Directors and<BR>
Stockholders of NetREIT

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We have audited the accompanying balance sheets of NetREIT as of December&nbsp;31, 2007 and 2006, and
the related statements of operations, stockholders&#146; equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of NetREIT as of December&nbsp;31, 2007 and 2006, and its results of
operations and cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As discussed in Note 9 to the financial statements, the 2006 financial statements have been
restated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">/s/ J.H.Cohn LLP<BR>
San Diego, California<BR>
April&nbsp;30, 2008

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

<P align="center" style="font-size: 10pt"><!-- Folio -->57<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>NetREIT</B>
</DIV>

<DIV align="left">
<A name="302"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Balance Sheets</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>December&nbsp;31, 2007 and 2006</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>December 31,</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>December 31,</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>2007</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>2006</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>(as restated)</I></B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Real estate assets, at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45,910,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,317,433</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(902,569</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(864,164</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Real estate assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,008,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,453,269</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mortgages receivable and interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,888,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,880,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,783,283</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">697,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,488</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,862</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tenant receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due from related party</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,863</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred rent receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred stock issuance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,022</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">455,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,796</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>TOTAL ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">53,416,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,807,583</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Mortgage notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,420,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,573,443</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">844,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">376,834</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296,790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,217</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tenant security deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,834,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,249,354</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments and contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Undesignated preferred stock, no par value, shares authorized: 8,995,000,
no shares issued and outstanding at December&nbsp;31, 2007 and 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Series&nbsp;A preferred stock, no par value, shares authorized: 5,000, no shares
issued and outstanding at December&nbsp;31, 2007 and 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Convertible series AA preferred stock, no par value, $25 liquidating
preference, shares authorized: 1,000,000; 50,200 shares issued
and outstanding at December&nbsp;31, 2007 and 2006,
liquidating value of $1,255,000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,028,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,028,916</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock series A, no par value, shares authorized: 100,000,000;
3,835,958 and 1,738,315 shares issued and outstanding at December&nbsp;31, 2007 and 2006 respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,299,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,227,294</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock series B, no par value, shares authorized: 1,000, no shares
issued and outstanding at December&nbsp;31, 2007 and 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433,204</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends paid in excess of accumulated earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,179,409</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,131,185</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,582,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,558,229</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>TOTAL LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">53,416,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,807,583</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><I>See notes to financial statements.</I>
</DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->58<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>NetREIT</B>
</DIV>

<DIV align="left">
<A name="303"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Statements of Operations</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>Years ended December&nbsp;31, 2007 and 2006</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Year Ended</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Year Ended</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>December 31, 2007</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>December 31, 2006</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>(as restated)</I></B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,863,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">706,964</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">842,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rental operating costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,485,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">454,476</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">794,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">508,703</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">648,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,920</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total costs and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,771,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,251,573</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">434,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,776</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,327</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">436,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(471,228</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(455,506</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discontinued operations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain from sale of real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,886,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,084,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,613,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(331,515</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87,850</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(66,606</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;available to common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,525,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(398,121</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;per common share &#151; basic:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.23</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.77</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income (loss)&nbsp;per common share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.59</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of common shares outstanding &#151; Basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,426,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673,974</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><I>See notes to financial statements.</I>
</DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->59<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>NetREIT</B>
</DIV>

<DIV align="left">
<A name="304"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Statements of Stockholders&#146; Equity</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>Years ended December&nbsp;31, 2007 and 2006</B></DIV>

<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Dividends</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Paid</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Series AA</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>in Excess of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Preferred Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, December
31, 2005 as
previously reported</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">166,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,619,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(543,771</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,241,856</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Prior Period
Adjustments:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Correct shares for
2006 stock
dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41,226</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants issued in
2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(117,131</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">117,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock dividend at
$10 per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(206,493</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends declared
in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(53,547</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(46,373</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance December
31, 2005 as
restated</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,716,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(803,811</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,195,483</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sale of common stock and
warrants at $10 per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,248,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,173,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">316,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,489,510</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock issuance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(192,084</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,208,646</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,400,730</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sale of preferred
stock at $25 per
share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,055,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,055,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of stock
options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,662</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock dividend at
$10 per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(390,429</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reinvestment of
cash dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,408</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(331,515</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(331,515</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(365,372</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(365,372</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(240,058</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(163,217</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, December
31, 2006 as
restated</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,028,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,738,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,227,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,131,185</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,558,229</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sale of common stock and
warrants at $10 per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,837,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,381,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,381,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock issuance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,828,611</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,828,611</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repurchase of
common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,309</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,724</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,724</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reinvestment of
cash dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">670,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">670,068</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of stock
options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,757</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of
restricted stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,214</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock dividend at
$10 per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,528,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,528,210</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,613,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,613,127</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,584,913</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,584,913</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(548,228</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(296,790</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, December
31, 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,028,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,835,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">31,299,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">433,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,179,409</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,582,042</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><I>See notes to financial statements.</I>
</DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->60<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>NetREIT</B>
</DIV>

<DIV align="left">
<A name="305"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Statements of Cash Flows</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>Years ended December&nbsp;31, 2007 and 2006</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Year Ended</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>Year Ended</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>December 31, 2007</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>December 31, 2006</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>(as restated)</I></B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,613,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(331,515</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments
to reconcile net income (loss)&nbsp;to net Cash provided by operating activities (including discontinued operations):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">717,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,278</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on sale of real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,886,131</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Changes in operating assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Deferred rent receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(89,668</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,399</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Tenant receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(38,236</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,400</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(462,524</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49,489</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">404,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">329,313</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Due from related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(66,524</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Tenant security deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,655</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">457,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,919</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from investing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Real estate investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(38,199,822</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,546,030</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds received from sale of real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,012,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of mortgages receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,888,555</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restricted cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(589,406</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(108,488</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"> received on (purchases of) short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(66,455</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34,615,291</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,720,973</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from mortgage notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,064,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,600,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repayment of mortgage notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(218,103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,380,560</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net proceeds from issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,553,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,280,864</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net proceeds from issuance of preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">862,916</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repurchase of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,724</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,662</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred stock issuance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(98,440</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,857</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,078,063</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(344,338</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,255,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,194,401</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(902,624</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,605,347</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,783,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,177,936</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,880,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,783,283</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental disclosure of cash flow information:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Interest paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">748,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">193,518</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-cash financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reinvestment of cash dividend</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">670,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">67,408</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of stock dividend</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,528,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">390,429</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrual of dividends payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">548,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">240,058</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><I>See notes to financial statements.</I>
</DIV>


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

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>NetREIT</B>
</DIV>

<DIV align="left">
<A name="306"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Notes to Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>1. ORGANIZATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">NetREIT (the &#147;Company&#148;) was formed and incorporated in the State of California on January&nbsp;28, 1999
for the purpose of engaging in the business of investing in income-producing real estate
properties. The Company, which qualifies and operates as a self-administered real estate
investment trust (&#147;REIT&#148;) under the Internal Revenue Code of 1986, as amended, (the &#147;Code&#148;)
commenced operations upon the completion of its private placement offering in 1999.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Company invests in a diverse portfolio of real estate assets. The primary types of properties
the Company invests in include office, retail, residential and self storage properties located in
western United States. The Company also invests in mortgage loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Prior to January&nbsp;1, 2006, the Company had two properties; a 39 unit apartment building in Cheyenne,
Wyoming purchased in 1999 and a 27,127 square foot office building in San Marcos, California
purchased in 2000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">During the year ended December&nbsp;31, 2006, the Company purchased an 114,000 square foot office
building in Aurora, Colorado and a 7-Eleven property in Escondido, California.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">During the year ended December&nbsp;31, 2007, the Company purchased a 115,052 square foot office
building complex consisting of three buildings in Colorado Springs, Colorado; a 5,983 square foot
strip center in Denver, Colorado; a 55,096 square foot strip center in San Bernardino, California;
a 60,508 square foot self storage property in Highland, California; and a 149,650 square foot self
storage property in Hesperia, California. In June&nbsp;2007, the Company sold a 48.6% undivided
interest in its 7-Eleven property in Escondido, California. In October&nbsp;2007, the Company sold the
27,127 square foot office building in San Marcos, California.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As of December&nbsp;31, 2007, the Company&#146;s portfolio of operating properties was comprised of two
office buildings (&#147;Office Properties&#148;) which encompassed approximately 229,000 rentable square
feet, two retail shopping centers and a 7-Eleven property (&#147;Retail Properties&#148;) which encompassed
approximately 64,000 rentable square feet, one 39 unit apartment building (&#147;Residential
Properties&#148;), and two self storage facilities (&#147;Self Storage Properties&#148;) which encompassed
approximately 210,000 rentable square feet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>2. SIGNIFICANT ACCOUNTING POLICIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Property Acquisitions. </I></B>The Company accounts for its acquisitions of real estate in accordance with
Statement of Financial Standards (&#147;SFAS&#148;) No.&nbsp;141,
&#147;Business Combinations&#148;(&#147;SFAS 141&#148;) which
requires the purchase price of acquired properties be allocated to the acquired tangible assets and
liabilities, consisting of land, building, tenant improvements, long-term debt and identified
intangible assets and liabilities, consisting of the value of above-market and below-market leases,
the value of in-place leases, unamortized lease origination costs and tenant relationships, based
in each case on their fair values.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Amounts allocated to land, buildings and improvements are derived from recent tax assessments after
deduction of any intangibles determined by management for the value of in-place leases,
above-market and below-market leases, the value of unamortized lease origination costs and the
value of tenant relationships.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The amount allocated to acquire in-place leases is determined based on management&#146;s assessment of
lost revenue and costs incurred for the period required to lease the &#147;assumed vacant&#148; property to
the occupancy level when purchased. The amount allocated to acquired in-place leases is included
in deferred leasing costs and acquisition related intangible assets in the balance sheets and
amortized over the remaining non-cancelable term of the respective leases. As of December&nbsp;31, 2007
and 2006, the Company did not have any amount allocated to acquired in-place leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The value allocable to above or below market component of an acquired in-place lease is determined
based upon the present value (using a market discount rate) of the difference between (i)&nbsp;the
contractual rents to be paid pursuant to the lease over its remaining term, and (ii)&nbsp;management&#146;s
estimate of rents that would be paid using fair market rates over the remaining term of the
lease. The amounts allocated to above or below market leases are included in other assets in the
accompanying balance sheets and are amortized on a straight-line basis as an increase or reduction
of rental income over the remaining non-cancelable term of the respective leases. As of December
31, 2007 and 2006, the Company did not have any deferred rent for above or below market leases.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->62<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The total amount of remaining intangible assets acquired, which consists of unamortized lease
origination costs, in-place leases and customer relationship intangible values, are allocated based
on management&#146;s evaluation of the specific characteristics of each tenant&#146;s lease and the Company&#146;s
overall relationship with that respective tenant. Characteristics considered by management in
allocating these values include the nature and extent of the existing business relationships with
the tenant, growth prospects for developing new business with the tenant, the tenant&#146;s credit
quality and expectations of lease renewals (including those existing under the terms of the lease
agreement), among other factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The land lease acquired has a fixed option cost of $181,710 at termination of the lease in
2062. Management valued the land option at $1,370,000 based on comparable land sales adjusted for
the present value of the payments. The land option value is included in the accompanying 2007
balance sheet as real estate assets, at cost.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The value of in-place leases and unamortized lease origination costs are amortized to expense over
the remaining term of the respective leases, which range from four to seven years. The value of
customer relationship intangibles, which is the benefit to the Company resulting from the
likelihood of an existing tenant renewing its lease, are amortized over the remaining term and any
renewal periods in the respective leases, but in no event does the amortization period for
intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate
its lease, the unamortized portion of the in-place lease value and customer relationship
intangibles is charged to expense. Total amortization expense related to these assets was $31,479
and $0 for the years ended December&nbsp;31, 2007 and 2006, respectively. Included in other assets, net
in the accompanying balance sheet at December&nbsp;31, 2007, are acquired origination costs of $170,003
net of accumulated amortization of $31,479.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Depreciation and Amortization of Buildings and Improvements. </I></B>Land, buildings and improvements are
recorded at cost. Major replacements and betterments, which improve or extend the life of the
asset, are capitalized and depreciated over their estimated useful lives, while ordinary repairs
and maintenance are expensed as incurred. The cost of buildings and improvements are depreciated
using the straight-line method over estimated useful lives of 39&nbsp;years for buildings, improvements
are amortized over the shorter of the estimated life of the asset or term of the tenant lease which
range from 1 to 10&nbsp;years, and 4 to 5&nbsp;years for furniture, fixtures and equipment. Depreciation
expense, including discontinued operations, for buildings and improvements for the years ended
December&nbsp;31, 2007 and 2006, was $635,630 and $177,840, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Provision for Loan Losses. </I></B>The accounting policies require the Company to maintain an allowance
for estimated credit losses with respect to mortgage loans it has made based upon its evaluation of
known and inherent risks associated with its lending activities. Management reflects provisions
for loan losses based upon its assessment of general market conditions, its internal risk
management policies and credit risk rating system, industry loss experience, its assessment of the
likelihood of delinquencies or defaults, and the value of the collateral underlying its
investments. Actual losses, if any, could ultimately differ from these estimates. There have been
no provisions for loan losses at December&nbsp;31, 2007 and 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Cash and Cash Equivalents. </I></B>The Company considers all short-term, highly liquid investments that are
both readily convertible to cash and have an original maturity of three months or less at the date
of purchase to be cash equivalents. Items classified as cash equivalents include commercial paper
and money market funds. At December&nbsp;31, 2007, $540,000 was held in the custody of one financial
institution in excess of the federally insurable limits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Restricted Cash. </I></B>Restricted cash consists of funds held in escrow for a Company lender for
properties held as collateral by the lender. The funds are for certain lender holdbacks, tenant
improvements, and other replacement reserves. The funds will be released upon the completion of
agreed-upon tasks as specified in the agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Short-Term Investments. </I></B>In accordance with the standards set forth in SFAS No.&nbsp;115, &#147;Accounting
for Certain Investments in Debt and Equity Securities&#148; (&#147;SFAS 115&#148;), the Company classifies its
investments in marketable securities as available-for-sale since the Company may sell them prior to
their maturity but does not hold them principally for the purpose of making frequent investments
and sales with the objective of generating profits on a short-term difference in price. These
investments are carried at fair value, with unrealized gains and losses reported in accumulated
other comprehensive income (loss). Estimated fair values are based on quoted market prices, when
available, or on estimates provided by independent pricing sources or dealers who make markets in
such securities. Upon the sale of a security, the realized net gain or loss is computed on a
average price basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Company monitors its available-for-sale securities for impairments. A loss is recognized when
the Company determines that a decline in the estimated fair value of a security below its amortized
cost is other-than-temporary. The Company considers many factors in determining whether the
impairment of a security is deemed to be other-than-temporary, including, but not limited to, the
length of time the security has had a decline in estimated fair value below its amortized cost, the
amount of the unrealized loss, the intent and ability of the Company to hold the security for a
period of time sufficient for a recovery in value, recent events specific to the issuer or
industry, external credit ratings and recent changes in such ratings. The Company does not invest
in commercial mortgage-backed securities.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->63<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">All short-term investments are recorded at market using the specific identification method. Cost
approximates market for all classifications of short-term investments; realized and unrealized
gains and losses were not material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Deferred Common Stock Issuance Costs. </I></B>Common stock issuance costs including distribution fees, due
diligence fees, syndication and wholesaling costs, legal and accounting fees, and printing are
capitalized before sale of the related stock and then netted against gross proceeds when the stock
is sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Tenant Receivables. </I></B>The Company periodically evaluates the collectability of amounts due from
tenants and maintains an allowance for doubtful accounts for estimated losses resulting from the
inability of tenants to make required payments under lease agreements. In addition, the Company
maintains an allowance for deferred rent receivable that arises from straight-lining of rents. The
Company exercises judgment in establishing these allowances and considers payment history and
current credit status of its tenants in developing these estimates. There were no allowances at
December&nbsp;31, 2007 or 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Deferred Leasing Costs. </I></B>Costs incurred in connection with successful property leases are
capitalized as deferred leasing costs and amortized to leasing commission expense on a
straight-line basis over the terms of the related leases which generally range from one to five
years. Deferred leasing costs consist of third party leasing commissions. Management re-evaluates
the remaining useful lives of leasing costs as the creditworthiness of the tenants and economic and
market conditions change. If management determines the estimated remaining life of the respective
lease has changed, the amortization period is adjusted. At December&nbsp;31, 2007 and 2006, the Company
had net deferred leasing costs of approximately $209,000 and $36,000, respectively, which are
included in other assets, net in the accompanying balance sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Deferred Financing Costs. </I></B>Costs incurred, including legal fees, origination fees, and
administrative fees, in connection with debt financing are capitalized as deferred financing
costs. Deferred financing costs consist primarily of loan fees which are amortized using the
straight-line method, which approximates the effective interest method, over the contractual term
of the respective loans. At December&nbsp;31, 2007 and 2006, deferred financing costs were approximately
$125,000 and $48,000, respectively, which are included in other assets, net in the accompanying
balance sheets. Amortization of deferred financing costs is included in interest expense in the
statements of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Revenue Recognition. </I></B>The Company recognizes revenue from rent, tenant reimbursements, and other
revenue once all of the following criteria are met in accordance with SEC Staff Accounting Bulletin
Topic 13, &#147;Revenue Recognition&#148;:
</DIV>

<DIV style="margin-top: 10pt">
<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="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persuasive evidence of an arrangement exists;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delivery has occurred or services have been rendered;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the amount is fixed or determinable; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the collectability of the amount is reasonably assured.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In accordance with SFAS No.&nbsp;13, &#147;Accounting for Leases&#148; (&#147;SFAS 13&#148;), as amended and interpreted,
minimum annual rental revenue is recognized in rental revenues on a straight-line basis over the
term of the related lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Certain of the Company&#146;s leases currently contain rental increases at specified intervals, and
generally accepted accounting principles require the Company to record an asset, and include in
revenues, deferred rent receivable that will be received if the tenant makes all rent payments
required through the expiration of the initial term of the lease. Deferred rent receivable in the
accompanying balance sheets includes the cumulative difference between rental revenue recorded on a
straight-line basis and rents received from the tenants in accordance with the lease
terms. Accordingly, the Company determines, in its judgment, to what extent the deferred rent
receivable applicable to each specific tenant is collectible. The Company reviews material
deferred rent receivable, as it relates to straight-line rents, on a quarterly basis and takes into
consideration the tenant&#146;s payment history, the financial condition of the tenant, business
conditions in the industry in which the tenant operates and economic conditions in the area in
which the property is located. In the event that the collectability of deferred rent with respect
to any given tenant is in doubt, the Company records an increase in the allowance for uncollectible
accounts or records a direct write-off of the specific rent receivable. No such reserves have been
recorded as of December&nbsp;31, 2007 or 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Discontinued Operations and Properties. </I></B>In accordance with SFAS No.&nbsp;144, &#147;Accounting for the
Impairment or Disposal of Long Lived Assets&#148; (&#147;SFAS 144&#148;), the income or loss and net gain or loss
on dispositions of operating properties and the income or loss on all properties classified as held
for sale are reflected in the statements of operations as discontinued operations for all periods
presented. A property is classified as held for sale when certain criteria, set forth under SFAS
144, are met. At such time, the Company presents the respective assets and liabilities separately
on the balance sheets and ceases to record depreciation and amortization expense. As of December
31, 2007 and 2006, the Company did not have any properties classified as held for sale.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->64<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">During the year ended December&nbsp;31, 2007, the Company sold the following property:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Rentable</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Property</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Month of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Square</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Sales Price</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Location</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Type</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Disposition</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Feet</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in millions)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">365 S. Rancho Santa Fe Rd
San Marcos, CA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Office</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">October</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5.65</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following is a summary of discontinued operations for the years ended December&nbsp;31, 2007 and
2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Discontinued operations:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale of real estate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,886,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">394,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">389,765</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rental operating expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160,283</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,491</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,084,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">123,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The statement of operations for the year ended December&nbsp;31, 2006 has been reclassified to reflect
this discontinued operation. The net cash proceeds from this disposition of $5,327,482 were held
by a qualified intermediary, at the Company&#146;s direction, until the Company identified a qualified
investment property pursuant to Section&nbsp;1031 of the Code (&#147;Section&nbsp;1031&#148;). Section&nbsp;1031 allows for
the deferral of income taxes related to the gain attributable to the sale of property if qualified
replacement properties are identified within 45&nbsp;days and such qualified replacement properties are
acquired within 180&nbsp;days from the initial sale. The Company recognized the gain on sale of the
property in accordance with SFAS No.&nbsp;66, &#147;Accounting for Sales of Real Estate&#148;, for financial
reporting purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As of December&nbsp;31, 2007 and 2006, the Company did not classify any properties as held for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Impairment. </I></B>The Company accounts for the impairment of real estate in accordance with SFAS 144
which requires that the Company review the carrying value of each property to determine if
circumstances that indicate impairment in the carrying value of the investment exist or that
depreciation periods should be modified. If circumstances support the possibility of impairment,
the Company prepares a projection of the undiscounted future cash flows, without interest charges,
of the specific property and determines if the investment in such property is recoverable. If
impairment is indicated, the carrying value of the property would be written down to its estimated
fair value based on the Company&#146;s best estimate of the property&#146;s discounted future cash
flows. There have been no impairments recognized on the Company&#146;s real estate assets at December
31, 2007 and 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Federal Income Taxes. </I></B>The Company has elected to be taxed as a Real Estate Investment Trust
(&#147;REIT&#148;) under Sections&nbsp;856 through 860 of the Code, for federal income tax purposes. To qualify
as a REIT, the Company must distribute annually at least 90% of adjusted taxable income, as defined
in the Code, to its stockholders and satisfy certain other organizational and operating
requirements. As a REIT, no provision will be made for federal income taxes on income resulting
from those sales of real estate investments which have or will be distributed to stockholders
within the prescribed limits. However, taxes will be provided for those gains which are not
anticipated to be distributed to stockholders unless such gains are deferred pursuant to Section
1031. In addition, the Company will be subject to a federal excise tax which equals 4% of the
excess, if any, of 85% of the Company&#146;s ordinary income plus 95% of the Company&#146;s capital gain net
income over cash distributions, as defined.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Earnings and profits that determine the taxability of distributions to stockholders differ from net
income reported for financial reporting purposes due to differences in estimated useful lives and
methods used to compute depreciation and the carrying value (basis)&nbsp;on the investments in
properties for tax purposes, among other things. During the years ended December&nbsp;31, 2007 and 2006,
all distributions were non-taxable as they were considered return of capital to the shareholders.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Company believes that it has met all of the REIT distribution and technical requirements for
the years ended December&nbsp;31, 2007 and 2006. During the years
ended December&nbsp;31, 2007 and 2006 all distributions were
non-taxable as they were considered return of capital to the
shareholders.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->65<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In July&nbsp;2006, the Financial Accounting Standards Board (&#147;FASB&#148;) issued Interpretation No.&nbsp;48
&#147;Accounting for Uncertainty in Income Taxes &#151; an interpretation of FASB Statement of No.&nbsp;109&#148; (&#147;FIN
48&#148;). FIN 48 provides guidance for the financial
statement recognition and measurement of a tax position taken or expected to be taken on a tax
return, and provides guidance on recognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition of tax positions. FIN 48 was effective for fiscal
years beginning after December&nbsp;15, 2006. The Company adopted FIN 48 effective for the fiscal year
beginning January&nbsp;1, 2007, and the adoption had no impact on the Company&#146;s results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Stock Options. </I></B>In December&nbsp;2004, the FASB approved the revision of SFAS No.&nbsp;123 &#147;Accounting for
Stock-Based Compensation&#148; (&#147;SFAS 123&#148;), and issued the revised SFAS No.&nbsp;123(R), &#147;Share-Based
Payment&#148; (&#147;SFAS 123(R)&#148;). In April&nbsp;2005, the effective date of adoption was changed from interim
periods ending after June&nbsp;15, 2005 to annual periods beginning after June&nbsp;15, 2005. SFAS 123(R)
effectively replaces SFAS 123, and supersedes Accounting Principle Board Opinion No.&nbsp;25. SFAS
123(R) was effective for awards that are granted, modified, or settled in cash for annual periods
beginning after June&nbsp;15, 2005. The Company adopted SFAS 123(R) on January&nbsp;1, 2006 using the
modified prospective approach. Under the modified prospective approach, stock-based compensation
expense is recorded for the unvested portion of previously issued awards that remained outstanding
at January&nbsp;1, 2006 using the same estimate of the grant date fair value and the same attribution
method used to determine the pro forma disclosure under SFAS 123. SFAS 123(R) also requires that
all share-based payments to employees after January&nbsp;1, 2006, including employee stock options, be
recognized in the financial statements as stock-based compensation expense based on the fair value
on the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Earnings (Loss) Per Common Share. </I></B>Basic earnings (loss)&nbsp;per common share (&#147;Basic EPS&#148;) is computed
by dividing net income (loss)&nbsp;available to common stockholders (the &#147;numerator&#148;) by the weighted
average number of common shares outstanding (the &#147;denominator&#148;) during the period. Diluted
earnings (loss)&nbsp;per common share (&#147;Diluted EPS&#148;) is similar to the computation of Basic EPS except
that the denominator is increased to include the number of additional common shares that would have
been outstanding if the dilutive potential common shares had been issued. In addition, in
computing the dilutive effect of convertible securities, the numerator is adjusted to add back the
after-tax amount of interest recognized in the period associated with any convertible debt. The
computation of Diluted EPS does not assume exercise or conversion of securities that would have an
anti-dilutive effect on net earnings per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following is a reconciliation of the denominator of the basic earnings per common share
computation to the denominator of the diluted earnings per common share computations, for the years
ended December&nbsp;31:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average shares used for Basic EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,426,887</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673,974</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Incremental shares from share-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Incremental shares from convertible preferred and warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjusted weighted average shares used for diluted EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,539,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">788,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Fair Value of Financial Instruments. </I></B>The Company calculates the fair value of financial
instruments using available market information and appropriate present value or other valuation
techniques such as discounted cash flow analyses. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash flows. The derived
fair value estimates cannot always be substantiated by comparison to independent markets and in
many cases, could not be realized in immediate settlement of the instruments. Management believes
that the carrying values reflected in the accompanying balance sheets reasonably approximate the
fair values for financial instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Use of Estimates</I></B>. The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates that
affect the reported amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Segments. </I></B>SFAS No.&nbsp;131, &#147;Disclosure about Segments of an Enterprise and Related Information&#148;
(&#147;SFAS 131&#148;), establishes standards for the way that public entities report information about
operating segments in their financial statements. The Company acquires and operates income
producing properties including office properties, residential properties, retail properties and
self storage properties and invests in real estate assets, including real estate loans, and as a
result, the Company operates in five business segments. See Note 10 &#147;Segment Information&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Recent Issued Accounting Standards. </I></B>In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157, &#147;Fair Value
Measurements&#148; (&#147;SFAS 157&#148;). SFAS 157 defines fair value and establishes a framework for measuring
fair value under U. S. generally accepted accounting principles (&#147;GAAP&#148;). The key changes to
current practice are (1)&nbsp;the definition of fair value, which focuses on an exit price rather than
an entry price; (2)&nbsp;the methods used to measure fair value, such as emphasis that fair value is a
market-based measurement, not an entity-specific measurement, as well as the inclusion of an
adjustment for risk, restrictions, and credit standing and (3)&nbsp;the expanded disclosures about fair
value measurements, SFAS 157 does not require any new fair value
measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning
after November&nbsp;15, 2007, and interim periods within those fiscal years. The Company adopted SFAS
157 on January&nbsp;1, 2008. The Company does not believe the adoption of SFAS 157 will have a
significant impact on the Company&#146;s financial position or results of operations.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->66<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159, &#147;The Fair Value Option for Financial Assets and
Financial Liabilities&#148; (&#147;SFAS 159&#148;). SFAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge accounting
provisions. SFAS 159 also establishes presentation and disclosure requirements designed to
facilitate comparisons between entities that choose different measurements attributes for similar
types of assets and liabilities. SFAS 159 is effective for financial statements issued for fiscal
years beginning after November&nbsp;15, 2007. The Company does not plan to apply the fair value option
to any specific assets or liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In November&nbsp;2007, the FASB issued Emerging Issues Task Force (&#147;EITF&#148;) Issue No.&nbsp;07-06, &#147;Accounting
for Sale of Real Estate Subject to the Requirements of SFAS 66 When the Agreement Includes a
Buy-Sell Clause&#148; (&#147;EITF 07-06&#148;)<I>. </I>A buy-sell clause is a contractual term that gives both investors
of a jointly-owned entity the ability to offer to buy the other investor&#146;s interest. EITF 07-06
applies to sales of real estate to an entity if the entity is both partially owned by the seller of
the real estate and subject to an arrangement between the seller and the other investor containing
a buy-sell clause. The EITF concluded the existence of a buy-sell clause does not represent a
prohibited form of continuing involvement that would preclude partial sale and profit recognition
pursuant to SFAS 66. The EITF cautioned the buy-sell clause could represent such a prohibition if
the terms of the buy-sell clause and other facts and circumstances of the arrangement suggest:
</DIV>

<DIV style="margin-top: 10pt">
<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="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the buyer cannot act independently of the seller or</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the seller is economically compelled or
contractually required to reacquire the other
investor&#146;s interest in the jointly owned entity.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">EITF 07-06 is effective for new arrangements in fiscal years beginning after December&nbsp;15, 2007, and
interim periods within those fiscal years. The FASB does permit early adoption of EITF 07-06. The
Company is currently evaluating the impact that EITF 07-6 will have on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In December&nbsp;2007, the FASB issued SFAS No.&nbsp;141 (revised 2007), &#147;Business Combinations&#148; <I>(&#147;</I>SFAS
141R&#148;), which replaces FASB Statement No.&nbsp;141, &#147;Business Combinations&#148; (&#147;SFAS 141&#148;). SFAS 141R
expands the definition of a business combination and requires the fair value of the purchase price
of an acquisition, including the issuance of equity securities, to be determined on the acquisition
date. SFAS 141R also requires that all assets, liabilities, contingent considerations, and
contingencies of an acquired business be recorded at fair value at the acquisition dater. In
addition, SFAS 141R requires that acquisition costs generally be expensed as incurred,
restructuring costs generally be expensed in periods subsequent to the acquisition date and changes
in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties
after the measurement period impact income tax expense. SFAS 141R is effective for business
combinations for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December&nbsp;15, 2008. Early adoption is prohibited. The
Company is currently evaluating the impact that SFAS 141R will have on its future financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In December&nbsp;2007, the FASB issued SFAS No.&nbsp;160, &#147;Noncontrolling Interests in Consolidating
Financial Statements&#151;an amendment of ARB No.&nbsp;51&#148; (&#147;SFAS 160&#148;). SFAS 160 establishes accounting and
reporting standards for ownership interests in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parent&#146;s ownership interest and the valuation of retained noncontrolling
equity investments when a subsidiary is deconsolidated. In addition, SFAS 160 provides reporting
requirements that clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. SFAS 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December&nbsp;15, 2008. The Company does not
believe the adoption of SFAS 160 will have a significant impact on the Company&#146;s financial position
or results of operations.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->67<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>3. REAL ESTATE ASSETS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">A summary of the eight properties held by the Company as of December&nbsp;31, 2007 is a follows:
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">

    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>


    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>

    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

    <TD width="3%">&nbsp;</TD>

    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Property</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Real estate assets, net</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Property</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Date Acquired</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Location</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Square Footage</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Description</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(in thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Casa Grande Apts.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">November&nbsp;1999</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cheyenne, Wyoming</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">39 units</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Residential</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">777.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Havana Parker Complex</DIV></TD>
    <TD>&nbsp;</TD>

    <TD><DIV style="margin-left:15px; text-indent:-15px">June&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Aurora, Colorado</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Office</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,131.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Escondido 7-Eleven</DIV></TD>
    <TD>&nbsp;</TD>

    <TD><DIV style="margin-left:15px; text-indent:-15px">September&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Escondido, California</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retail</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">703.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Garden Gateway Plaza</DIV></TD>
    <TD>&nbsp;</TD>

    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Colorado Springs, Colorado</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Office</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,766.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">World Plaza</DIV></TD>
    <TD>&nbsp;</TD>

    <TD><DIV style="margin-left:15px; text-indent:-15px">September&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">San Bernardino, California</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retail</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,615.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regatta Square</DIV></TD>
    <TD>&nbsp;</TD>

    <TD><DIV style="margin-left:15px; text-indent:-15px">October&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Denver, Colorado</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retail</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,174.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Palm Self-Storage</DIV></TD>
    <TD>&nbsp;</TD>

    <TD><DIV style="margin-left:15px; text-indent:-15px">November&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Highland, California</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Self Storage</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,837.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Sparky&#146;s Joshua Self-Storage</DIV></TD>
    <TD>&nbsp;</TD>

    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Hesperia, California</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Self Storage</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,002.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>

    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>

    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Total real estate assets, net</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45,008.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property</DIV></TD>
    <TD>&nbsp;</TD>

    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body --></TABLE>
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table sets forth the components of the Company&#146; investments in real estate:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>December 31,</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B><I>December 31,</I></B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>2007</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B><I>2006</I></B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,599,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,409,266</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,965,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,556,252</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tenant improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">345,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">351,915</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,910,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,317,433</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(902,569</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(864,164</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Real estate assets net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">45,008,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,453,269</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left"><FONT size="1">

</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On June&nbsp;28, 2006, the Company
acquired Havana/Parker Complex, a 114,000 square foot office facility in Aurora, Colorado
for $5,828,963 including transaction costs, and the purchase was funded by borrowings of $3,600,000
and the remainder was funded with the Company&#146;s funds on hand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On September&nbsp;8, 2006, the Company
acquired Escondido 7-Eleven, a 3,000 square foot retail store in Escondido,
California for $1,404,864 including transaction costs, and the purchase was funded with the
Company&#146;s funds on hand. In 2007, 48.6% of the interest was sold for approximately $685,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On March&nbsp;21, 2007, the Company
acquired Garden Gateway Plaza, a 115,052 square foot office complex consisting of three
buildings in Colorado Springs, Colorado for $15,132,624 including transaction costs, and the
purchase was funded by borrowings of $11,000,000 and the remainder was funded with the Company&#146;s
funds on hand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On September&nbsp;21, 2007, the
Company acquired World Plaza, a 55,096 square foot retail center in San Bernardino,
California for $7,650,679 including transaction costs, and the purchase was funded by assumption of
an existing borrowing of $3,688,802 and the remainder was funded with the Company&#146;s funds on
hand. The acquisition included a land lease with a fixed option cost of $181,710 at termination of
the lease in 2062.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On October&nbsp;31, 2007, the Company
acquired Regatta Square, a 5,983 square foot retail center in Denver, Colorado for
$2,180,166 including transaction costs, and the purchase was funded with the Company&#146;s funds on
hand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On November&nbsp;19, 2007, the Company
acquired Sparky&#146;s Palm Self-Storage, a 495 unit/60,508 square foot self storage property in
Highland, California for $4,848,919 including transaction costs, and the purchase was funded
with the Company&#146;s funds on hand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On December&nbsp;10, 2007, the Company
acquired Sparky&#146;s Joshua Self-Storage, a 789 unit/149,650 square foot self storage property in
Hesperia, California for $8,007,127 including transaction costs, and the purchase was funded by
assumption of an existing borrowing of $4,376,174 and the remainder was funded with the Company&#146;s
funds on hand.
</DIV>
<DIV align="left"><FONT size="1">

</FONT></DIV>


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

<P align="center" style="font-size: 10pt"><!-- Folio -->68<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In accordance with SFAS 141, the Company allocated the purchase price of the properties acquired
during the years ended December&nbsp;31, 2007 and 2006 as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total Purchase</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Land</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Building</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Leasing Costs</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Aurora, Colorado</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,022,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,806,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,828,963</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Escondido, California</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">562,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">842,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,404,864</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Colorado Springs, Colorado</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,002,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,960,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">170,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,132,624</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">San Bernardino, California</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,370,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,280,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,650,679</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denver, Colorado</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">811,022</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,369,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,180,166</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Highland, California</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">727,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,121,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,848,919</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hesperia, California</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,281,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,725,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,007,127</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>4.&nbsp;MORTGAGES RECEIVABLE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On March&nbsp;20, 2007, the Company originated a mortgage loan in the amount of $500,000 collateralized
by a second deed of trust on land under development as a retirement home in Escondido,
California. This mortgage loan accrues interest at 15% per year. The mortgage loan unpaid
principal and accrued interest was due and payable on March&nbsp;19, 2008 and has been extended to June
30, 2008. At December&nbsp;31, 2007, the principal and accrued interest was $413,368.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On October&nbsp;1, 2007, the Company originated a mortgage loan in the amount of $935,000 collateralized
by a first deed of trust on the same land under development above. This mortgage loan accrues
interest at 11.5% per year and the unpaid principal balance and accrued interest is due and payable
on June&nbsp;30, 2008. At December&nbsp;31, 2007, the principal and accrued interest was $962,478.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On November&nbsp;19, 2007, the Company originated a mortgage loan in the amount of $500,000
collateralized by a third deed of trust on the same land above. This mortgage loan accrues
interest at 15% per year. The mortgage loan unpaid principal and accrued interest was due and
payable on March&nbsp;30, 2008 and was extended to September&nbsp;30, 2008 co-terminus with the loan secured
by the second deed of trust. At December&nbsp;31, 2007, the principal and accrued interest was
$512,709.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>5. MORTGAGE NOTES PAYABLE</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><I>December 31, 2007</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><I>December 31, 2006</I></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mortgage note
payable in monthly
installments of
$24,330 through
July&nbsp;1, 2016,
including interest
at a fixed rate of
6.51%,
collateralized by
the office building
in Aurora, Colorado</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,520,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,573,443</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mortgage note
payable in monthly
installments of
$71,412 through
April&nbsp;5, 2014,
including interest
at a fixed rate of
6.08%; collaterized
by the leases and
office buildings in
Colorado Springs,
Colorado. Certain
obligations under
the note are
guaranteed by the
executive officers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,872,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mortgage note
payable in monthly
installments of
$27,088 through
February&nbsp;1, 2012,
including interest
at a fixed rate of
5.31%;
collateralized by a
retail strip center
in San Bernardino,
California</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,656,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assumed mortgage
note payable in
monthly
installments of
$39,302 through
March&nbsp;10, 2008,
including interest
at a fixed rate of
9.506%;
collateralized be a
self storage
facility in
Hesperia,
California. The
Company paid off
the total loan
balance in January
2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,371,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,420,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,573,443</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


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

<P align="center" style="font-size: 10pt"><!-- Folio -->69<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Scheduled principal payments of mortgage notes payable are as follows as of December&nbsp;31, 2007:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Scheduled</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Principal</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Years Ending:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Payments</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,767,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">421,090</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">446,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473,733</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">501,875</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,809,134</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,420,316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>6. RELATED PARTY TRANSACTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Certain services and facilities are provided to the Company by C.I. Holding Group, Inc. and
Subsidiaries (&#147;CI&#148;), a small shareholder in the Company and is approximately 35% owned by the
Company&#146;s executive management. A portion of the Company&#146;s general and administrative costs are
paid by CI and then reimbursed by the Company. The Company paid CI $56,539 in 2007 and $76,650 in
2006 for general and administrative expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Company has entered into a property management agreement with CHG Properties, Inc. (&#147;CHG&#148;), a
wholly owned subsidiary of CI, to manage all of its properties at rates up to 5% of gross
income. During the years ended December&nbsp;31, 2007 and 2006, the Company paid CHG total management
fees of $134,316 and $37,575, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">During the term of the property management agreement, the Company has an option to acquire the
business conducted by CHG. The option is exercisable, without any consent of the property manager,
its board or its shareholders, with the approval of a majority of the Company&#146;s directors not
otherwise interested in the transaction. The option price is shares of the Company to be
determined by a predefined formula based on the net income of CHG during the 6-month period
immediately preceding the month in which the acquisition notice is delivered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Prior to the sale of the San Marcos office property in October&nbsp;2007, the Company leased office
space to CI under a lease that provided for future monthly lease payments of $8,787 per month. The
Company received cash for rental income from CI totaling $143,547 in 2007 and $38,194 in 2006. At
December&nbsp;31, 2007 and 2006, CI owed the Company $118,447 and $142,134, respectively, relating to
the above lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>7. STOCKHOLDERS&#146; EQUITY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In September&nbsp;2005, the Company commenced a private placement offering of Units and Convertible
Series&nbsp;AA Preferred Stock. The Units consisted of 2 shares of common stock and a warrant to
purchase 1 share of common stock at $12. In October&nbsp;2006, the Company closed that offering and
commenced a private placement offering of only its common stock. During the years ended December
31, 2007 and 2006, the Company had gross proceeds from the sale of common shares, warrants and
convertible Series&nbsp;AA preferred shares of $18,381,685 and $13,544,510, respectively. The Company is
currently self-underwriting a private placement offering and sale of 20,000,000 shares of its
common stock at a price of $10 per share. This offering is being made only to accredited investors
and up to five non-accredited investors pursuant to an exemption from registration provided by
Section&nbsp;4(2) and Rule&nbsp;506 of Regulation&nbsp;D under the Securities Act of 1933, as amended. No public
or private market exists for the securities and no public market is expected to develop for the
securities after the completion of the offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Common Stock. </I></B>The Company is authorized to issue up to 100,000,000 shares of Series&nbsp;A Common
Stock (&#147;Common Stock&#148;) and 1,000 shares of Series&nbsp;B Common Stock. The Common Stock and the Series
B Common Stock have identical rights, preferences, terms and conditions except that the Series&nbsp;B
Common Stockholders are not entitled to receive any portion of Company assets in the event of
Company liquidation. There have been no Series&nbsp;B Common Stock shares issued. Each share of Common
Stock entitles the holder to one vote. The Common Stock is not subject to redemption and it does
not have any preference, conversion, exchange or preemptive rights. The articles of incorporation
contain a restriction on ownership of the Common Stock that prevents one person from owning more
than 9.8% of the outstanding shares of our common stock. At December&nbsp;31, 2007 and 2006, there were
3,835,958 and 1,738,315 shares, respectively, of the Common Stock outstanding.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->70<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Undesignated Preferred Stock. </I></B>The Company is authorized to issue up to 8,995,000 shares of
preferred stock. The preferred stock may be issued from time to time in one or more series. The
Board of Directors is authorized to fix the number of shares of any series of preferred stock, to
determine the designation of any such series, and to determine or alter the rights granted to or
imposed upon any wholly unissued series of preferred stock including the dividend rights, dividend
rate, conversion rights, voting rights, redemption rights (including sinking fund provisions),
redemption price, and liquidation preference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Series&nbsp;A Preferred Stock. </I></B>The Board of Directors authorized 5,000 shares of the preferred stock as
Series&nbsp;A (&#147;Series&nbsp;A&#148;). Each share of Series&nbsp;A (i)&nbsp;shall be entitled to receive, in event of any
liquidation, dissolution or winding up of the affairs of the Company, an amount equal to nine
dollars and 10/100 plus an amount equal to all accrued and unpaid dividends and no more before any
distribution shall be made to the holders of Common Stock or any other class of shares or series
ranking junior and subordinated to the Series&nbsp;A; (ii)&nbsp;is entitled to, when and if declared by the
board of directors, annual dividends at the rate of $0.65 which are cumulative and payable
quarterly; (iii)&nbsp;ranks senior, to the payment of dividends and distributions of assets upon
liquidation, to common stock or any other series of preferred stock that is not senior to or on
parity with the Series&nbsp;A Preferred Stock; (iv)&nbsp;is entitled to receive $9.10 plus accrued dividends
upon liquidation; (v)&nbsp;shall have no voting rights except under certain circumstances as provided by
the Articles of Incorporation; (vi)&nbsp;so long as any Series&nbsp;A is outstanding, the corporation shall
not; (a)&nbsp;without the affirmative vote of the holders of at least two-thirds of the shares of Series
A Preferred Stock amend, alter or repeal the Articles of Incorporation; (b)&nbsp;authorize or issue or
increase any additional class or series of stock ranking senior to or on a parity with the Series
A; and (c)&nbsp;affect any reclassification of the Series&nbsp;A. There were no Series&nbsp;A shares issued and
outstanding at December&nbsp;31, 2007 or 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Series&nbsp;AA Preferred Stock. </I></B>The Board of Directors authorized the original issuance 1,000,000
shares of the Preferred Stock as Series&nbsp;AA (&#147;Series&nbsp;AA&#148;). Each share of Series&nbsp;AA (i)&nbsp;is
non-voting, except under certain circumstances as provided in the Articles of Incorporation; (ii)
is entitled to annual cash dividends of 7% which are cumulative and payable quarterly; (iii)&nbsp;ranks
senior, as to the payment of dividends and distributions of assets upon liquidation, to common
stock or any other series of preferred stock that is not senior to or on parity with the Series&nbsp;AA;
(iv)&nbsp;is entitled to receive $25.00 plus accrued dividends upon liquidation; (v)&nbsp;may be redeemed by
the Company prior to the mandatory conversion date at a price of $25.00 plus accrued dividends,
(vi)&nbsp;may be converted into two shares of common stock at the option of the holder prior to the
mandatory conversion date, and (vii)&nbsp;shall be converted into two shares of common stock on the
fourth Friday of December&nbsp;2015. The conversion price is subject to certain anti-dilution
adjustments. At December&nbsp;31, 2007 and 2006 there were 50,200 shares of Series&nbsp;AA outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Common Stock Units. </I></B>During 2005 and 2006, the Company offered common stock units. Each common
stock unit (the &#147;Units&#148;) consisted of two shares of the Company&#146;s common stock and one warrant (the
&#147;Warrant&#148;) to acquire for $12 one share of common stock. The common stock and the Warrant
comprising the Units may be separated immediately upon issuance. Each may be transferred
separately from the other, subject to compliance with applicable federal and state securities law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Shareholder Warrants. </I></B>Warrants were issued in connection with private placements of common stock
Units during 2005 and 2006 pursuant to the terms of the respective subscription agreements. Each
warrant entitles the registered holder to purchase one share of our Series&nbsp;A common stock at the
exercise price of $12 per share during the period commencing upon issuance and continuing through
the close of business on March&nbsp;31, 2010. In the event a warrant is not exercised by its expiration
date, it will be automatically converted into a one-tenth share of common stock. The warrants are
redeemable at the Company&#146;s election at any time upon prior written notice of at least 30&nbsp;days of
the date so noticed for redemption. In payment of such redemption, the Company must issue to each
holder of a Warrant so redeemed one-tenth common share on the redemption date. The exercise price,
the number and kind of securities issuable on exercise of any Warrant, and the number of Warrants
are subject to adjustment in the event the Company pays stock dividends or makes stock
distributions with respect to its common shares. Adjustments will also be made upon any
reclassification of the Company&#146;s common shares or in the event the Company makes certain pro rata
distributions of options or warrants to its common shareholders. The warrant agreements also
provide for adjustments in the event the Company consummates certain consolidation or merger
transactions, and in the event the Company sells all, or substantially all, of its assets. Warrant
holders do not have any voting or other rights of the Company&#146;s shareholders and are not entitled
to receive dividends or other distributions. During 2006, warrants were issued for the right to
purchase 316,073 shares of common stock in connection with the private offering of common stock
units. There were no warrants issued during 2007. The fair value of these warrants were determined
to be the value of the common share of $10 at the time the warrants were issued times the 1/10th of
a share that is expected be paid on March&nbsp;2010. During the year ended December&nbsp;31, 2006, the
Company recorded $316,073 to additional paid-in capital for the value of the warrants issued. At
December&nbsp;31, 2007 and 2006 there were 433,204 shareholder warrants outstanding.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->71<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Broker Dealer Warrants. </I></B>Warrants are issued pursuant to the terms of the respective warrant
agreements and the Participating Broker Dealer Agreement in connection with the on going private
placement offering. Each Warrant entitles the registered holder to purchase one share of our
common stock at the exercise price of $10.50 per share for a period of three years from the date of
issued. The exercise price, the number and kind of securities issuable on exercise of any
Warrant, and the number of Warrants are
subject to adjustment in the event the Company pays stock dividends or makes stock distributions
with respect to its common stock. Adjustments will also be made upon any reclassification of the
Company&#146;s common shares or in the event the Company makes certain pro rata distributions of options
or warrants to its common shareholders. The warrant agreements also provide for adjustments in the
event the Company consummates certain consolidation or merger transactions, and in the event the
Company sells all, or substantially all, of its assets. Warrant holders do not have any voting or
other rights of the Company&#146;s shareholders and are not entitled to receive dividends or other
distributions. During the years ended December&nbsp;31, 2007 and 2006, warrants for the purchase of
86,542 and 58,486 shares of common stock, respectively, were issued in connection with the private
placement offering. Management has determined that such warrants had no value at issuance. At
December&nbsp;31, 2007 and 2006 there were warrants outstanding for 153,734 and 67,192 shares of common
stock at exercise prices ranging from $9.07 to $10.50 due to the adjustments for stock dividends
issued.<BR>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B><I>Employee Retirement and Share-Based Incentive Plans</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B><I>Stock Options.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table summarizes the stock option activity. The exercise price and number of shares
under option have been adjusted to give effect to stock dividends declared by the Company.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Exercise Price</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.07</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,620</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,182</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6.36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options outstanding and exercisable, December&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">At December&nbsp;31, 2007, the options outstanding and exercisable had exercise prices ranging from
$5.54 to $8.64, with a weighted average price of $7.28, and expiration dates ranging from February
2008 to June&nbsp;2010 with a weighted average remaining term of 1.5&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The intrinsic value of a stock option is the amount by which the market value of the underlying
stock at December&nbsp;31 of each year exceeds the exercise price of the option. The aggregate intrinsic
value of options outstanding, all of which are exercisable, was $115,437 and $137,002 at December
31, 2007 and 2006, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Share-Based Incentive Plan</I></B><I>. </I>An incentive award plan has been established for the purpose of
attracting and retaining officers, key employees and non-employee board members. The Compensation
Committee of the Board of Directors adopted a Restricted Stock plan (&#147;the Restricted Stock&#148;) in
December&nbsp;2006 and granted nonvested shares of restricted common stock on January&nbsp;1, 2007. The
nonvested shares have voting rights and are eligible for and dividends paid to common shares. The
share awards vest in equal annual installments over the three or five year period from date of
issuance. The Company recognized compensation cost for these fixed awards over the service vesting
period, which represents the requisite serve period, using the straight-line attribution expense
method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The value of the nonvested shares was calculated based on the offering price of the shares in the
most recent private placement offering of $10 adjusted for a 5% stock dividend since granted. The
value of granted nonvested restricted stock issued during 2007 totaled $136,070. During the year
ended December&nbsp;31, 2007, 3,907 shares vested and $37,214 was recorded as compensation
expense. During the year ended December&nbsp;31, 2007, dividends of $7,204 were paid on the total
restricted shares issued. The remaining 11,390 nonvested restricted shares will vest in equal
installments over the next two to four years.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->72<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Stock Dividends. </I></B>The Company&#146;s Board of Directors declared stock dividends on common shares to all
stockholders of record and at rates shown in the table below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Stock Dividend</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Common Stock</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Date of Declaration</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Record Date</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Rate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;20, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap>January 3, 2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">206,493</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">May&nbsp;17, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">June 15, 2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">390,429</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">May&nbsp;18, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">August 1, 2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,528,210</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Cash Dividends. </I></B>Cash dividends paid per common share for the years ended
December&nbsp;31, 2007 and 2006 were $0.69 and $0.596, respectively. Dividends paid
per share of Series&nbsp;AA Preferred Stock for both of the years ended December&nbsp;31,
2007 and 2006 were $1.75. The cumulative dividend paid to stockholders of the
Series&nbsp;AA Preferred is $158,248 or 7% of the liquidation preference of $25 per
share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>8. COMMITMENTS AND CONTINGENCIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Operating Leases</I>.</B> The Company has a noncancelable ground lease obligation on the San Bernardino
retail center expiring in June&nbsp;1, 2062. The current annual rent of $20,040 is subject to
adjustments every ten years based on the Cost of Living Index for the Los Angeles area compared to
the base month of June&nbsp;1963 which was 107.4. At the termination of the lease the Company has an
option to purchase the property for a total purchase price of $181,710. The option was determined
to have a fair value of $1,370,000 (Note 2).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Schedule payments on the lease obligation are as follows as of December&nbsp;31, 2007:<BR>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Schedule</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Years Ending:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Payments</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,040</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,040</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,040</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,040</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,154</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,159,114</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,260,428</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Litigation. </I></B>Neither the Company nor any of the Company&#146;s properties are presently subject to any
material litigation nor, to the Company&#146;s knowledge, is there any material threatened litigation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Environmental Matters. </I></B>The Company follows the policy of monitoring its properties for the
presence of hazardous or toxic substances. While there can be no assurance that a material
environmental liability does not exist, the Company is not currently aware of any environmental
liability with respect to the properties that would have a material effect on the Company&#146;s
financial condition, results of operations and cash flow. Further, the Company is not aware of any
environmental liability or any unasserted claim or assessment with respect to an environmental
liability that the Company believes would require additional disclosure or recording of a loss
contingency.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->73<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>9. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">During 2007, the Company determined that certain adjustments and reclassifications of previously
issued financial statements were required to correct errors involving certain equity transactions
that took place during the years ended December&nbsp;31, 2006 and 2005 as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000">Common Stock</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Dividends</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Paid in</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Additional</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">excess of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Dividends</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Paid-In</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Payable</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Earnings</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2005 as previously
reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,619,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(543,771</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Corrections:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrual of dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">46,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(53,547</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrual of stock dividend declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(206,493</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Correction for 2006 stock dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41,226</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Warrants issued in 2005 with common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(117,131</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">117,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2005 restated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">46,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,716,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">117,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(803,811</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2006 as previously
reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,730,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,986,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,294,205</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Corrections:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Effect of 2005 corrections</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,577</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">117,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(206,493</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Warrants issued in 2006 with common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(316,073</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">316,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(390,429</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Correction to common stock shares issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,466</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">163,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(240,058</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2006 as restated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">163,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,738,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,227,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">433,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,131,185</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The effect on the previously reported Statement of Cash Flow was to increase the net cash provided
by operating activities by $163,217 and $46,373, and the net cash increase (decrease)&nbsp;provided by
financing activities changed by the same amounts, during the years ended December&nbsp;31, 2006 and
2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Additionally, as of December&nbsp;31, 2006, $3,004,277 of investments with initial maturities of less
than 90&nbsp;days has been reclassified from short-term investments to cash and cash
equivalents. Certain amounts from the 2006 financial statements have been reclassified to conform
to the 2007 presentation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">There were no changes to net income (loss)&nbsp;or income taxes as a result of the above corrections and
reclassifications. Loss per share increased by $0.09 for the years ended December&nbsp;31, 2006 and
2005, as a result of the above changes in shares outstanding.<BR>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>10. SEGMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Company&#146;s reportable segments consist of the four types of commercial real estate properties
for which the Company&#146;s decision-makers internally evaluate operating performance and financial
results: Residential Properties, Office Properties, Retail Properties and Self Storage
Properties. The Company also has certain corporate level activities including accounting, finance,
legal administration and management information systems which are not considered separate operating
segments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Company evaluates the performance of its segments based upon net operating income. Net
operating income is defined as operating revenues (rental income, tenant reimbursements and other
property income) less property and related expenses (property expenses, real estate taxes, ground
leases and provisions for bad debts) and excludes other non-property income and expenses, interest
expense, depreciation and amortization, and general and administrative expenses. The accounting
policies of the reportable segments are the same as those described in the Company&#146;s summary of
significant accounting policies (see Note 1). There is no intersegment activity.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->74<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following tables reconcile the Company&#146;s segment activity to its combined results of operations
and financial position as of and for the years ended December&nbsp;31, 2007 and 2006.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Office Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,192,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">478,037</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and related expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,193,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341,592</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating income, as defined</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">998,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,445</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Residential Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211,958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and related expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,321</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating income, as defined</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,637</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Retail Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">349,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,969</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and related expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">563</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating income, as defined</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,406</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Self Storage Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and related expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating income, as defined</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Mortgage loan activity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Reconciliation to Net Income Available to Common Stockholders:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net operating income, as defined, for reportable segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,453,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">252,488</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unallocated other income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,103</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unallocated other expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">794,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">508,703</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">842,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">648,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,920</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(471,228</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(455,506</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,084,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,613,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(331,515</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Preferred dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87,850</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(66,606</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available for common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,525,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(398,121</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


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

<P align="center" style="font-size: 10pt"><!-- Folio -->75<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Office Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land, buildings and improvements, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,898,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,273,321</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,010,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,599,594</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Residential Property:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land, buildings and improvements, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">777,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">781,385</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">777,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">782,298</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Retail Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land, buildings and improvements, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,492,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,398,562</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,557,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,398,562</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Self Storage Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land, buildings and improvements, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,839,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,854,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Mortgage loan activity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mortgage receivable and accrued interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,888,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,888,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Reconciliation to Total Assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets for reportable segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,089,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,780,454</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other unallocated assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,880,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,783,283</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses and other assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">446,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243,846</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">53,416,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16,807,583</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes land, buildings and improvements, current receivables, deferred rent receivables and
deferred leasing costs and other related intangible assets, all shown on a net basis.</TD>
</TR>

</TABLE>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->76<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">




<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Capital Expenditures:(1)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Office Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of operating properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,962,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,843,463</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures and tenant improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">486,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">289,820</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Residential Property:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures and tenant improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,883</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Retail Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of operating properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,830,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,404,864</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures and tenant improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Self Storage Properties:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of operating properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,856,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures and tenant improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Mortgage loan activity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loans originated</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,888,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total Reportable Segments:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of operating properties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,649,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,248,327</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures and tenant improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">297,703</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 0pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Real
Estate Acquisitions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,199,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,546,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loan origination</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,888,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Total consolidated capital expenditures are equal to the same amounts disclosed for total
reportable segments.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>11. SUBSEQUENT EVENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Purchase Commitment. </I></B>On February&nbsp;22, 2008, the Company entered into a contract to purchase a
building in San Bernardino, California encompassing approximately 21,800 rentable square feet along
with approvals for building an additional 2,300 square foot building for $7,350,000. The
transaction is expected to close by June&nbsp;15, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On April&nbsp;15, 2008, the Company entered into a contract to purchase an office complex consisting of
four buildings in Colorado Springs, Colorado encompassing approximately 65,000 rentable square feet
for $10,200,000. The transaction is expected to close by July&nbsp;15, 2008.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B><I>Property Sale. </I></B>The Company sold a 55.381% interest in its Cheyenne, Wyoming
apartment building on March&nbsp;3, 2008 for $1,104,535 including transaction costs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B><I>Distributions Paid. </I></B>On January&nbsp;10, 2008 and January&nbsp;31, 2008 the Company paid
distributions to common and Series&nbsp;AA preferred stockholders of $548,228, which
related to distributions declared for each month in the period from October&nbsp;1,
2007 through December&nbsp;31, 2007.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B><I>Distribution Declared. </I></B>On April&nbsp;10, 2008, the Company&#146;s board of directors
declared a monthly distribution for the period from January&nbsp;1, 2008 through
March&nbsp;31, 2008, which distribution the Company expects to pay in April
2008. Investors may choose to receive cash distributions or purchase
additional shares through the Company&#146;s dividend reinvestment plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Sale of Common Stock. </I></B>Subsequent to December&nbsp;31, 2007 and through April&nbsp;23, 2008, the Company has
sold 693,497 shares of common stock at a price of $10 per share.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->77<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING DISCLOSURE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Not applicable.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">An index to and description of the financial statements are filed with this Form&nbsp;10 in Item&nbsp;13
hereof. An Index to the Exhibits as filed as part of this Form&nbsp;10 is set forth below.
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Articles of Incorporation filed January&nbsp;28, 1999*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certificate of Determination of Series&nbsp;AA Preferred Stock filed April&nbsp;4, 2005*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bylaws of NetREIT*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Audit Committee Charter*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Compensation and Benefits Committee Charter*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nominating and Corporate Governance Committee Charter*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Principles of Corporate Governance of NetREIT*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Common Stock Certificate*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Series&nbsp;AA Preferred Stock Certificate*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Registration Rights Agreement 2005</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Registration Rights Agreement 2007</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1999 Flexible Incentive Plan*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NetREIT Dividend Reinvestment Plan*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Property Management Agreement*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Option Agreement to acquire CHG Properties*</DIV></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<P align="left" style="font-size: 10pt">*&nbsp;Previously filed on
5-6-2008 (Acc. No. 0001019687-08-002036)



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

<P align="center" style="font-size: 10pt"><!-- Folio -->78<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">


<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Pursuant to the requirements of Section&nbsp;12 of the Securities Exchange Act of 1934, the registrant
has duly caused this amendment on Form&nbsp;10/A to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>NetREIT</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Date:
December&nbsp;30, 2008

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/S/ JACK K. HEILBRON
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="1" valign="top" align="left">Jack K. Heilbron</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="1" valign="top" align="left">Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


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

<P align="center" style="font-size: 10pt"><!-- Folio -->79<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>EXHIBIT
INDEX</B>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Articles of Incorporation filed January&nbsp;28, 1999*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certificate of Determination of Series&nbsp;AA Preferred Stock filed April&nbsp;4, 2005*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bylaws of NetREIT*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Audit Committee Charter*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Compensation and Benefits Committee Charter*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nominating and Corporate Governance Committee Charter*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Principles of Corporate Governance of NetREIT*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Common Stock Certificate*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Series&nbsp;AA Preferred Stock Certificate*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Registration Rights Agreement 2005</DIV></TD>
</TR>
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    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Registration Rights Agreement 2007</DIV></TD>
</TR>
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    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1999 Flexible Incentive Plan*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NetREIT Dividend Reinvestment Plan*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Form of Property Management Agreement*</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Option Agreement to acquire CHG Properties*</DIV></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>





<P align="left" style="font-size: 10pt">*&nbsp;Previously filed on
5-6-2008 (Acc. No. 0001019687-08-002036)






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<TYPE>EX-4.3
<SEQUENCE>2
<FILENAME>c78263exv4w3.htm
<DESCRIPTION>EXHIBIT 4.3
<TEXT>
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<TITLE>Filed by Bowne Pure Compliance</TITLE>
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<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>EXHIBIT 4.3</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>NetREIT</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>REGISTRATION RIGHTS AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">THIS REGISTRATION RIGHTS AGREEMENT (this &#147;Agreement&#148;) is made on the 15<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> day of
February, 2005, by NetREIT, a California corporation (the &#147;Company&#148;), for the benefit of the
Holders in connection with the Registrable Securities. Unless expressly defined in this Agreement,
capitalized terms used in this Agreement shall have the meaning set forth in the Memorandum.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><U><B>RECITALS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">WHEREAS, the Company is offering for sale its Series&nbsp;AA Preferred Stock (the &#147;Series&nbsp;AA
Preferred Stock&#148;) and units (the &#147;Units&#148;), each unit consisting of two shares of common stock (the
&#147;Common Stock&#148;) and one $12.00 Common Stock Purchase Warrant (the &#147;$12.00 Warrants&#148;), pursuant to
the Private Placement Memorandum, to which the Agreement is attached as Exhibit&nbsp;E;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">WHEREAS, the Company hereby agrees that this Agreement shall govern the rights of the Holders
to cause the Company to register shares of Common Stock issuable to the Investors and certain other
matters as set forth herein;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">1.&nbsp;Registration Rights. The Company covenants and agrees as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.1 <U>Definitions</U>. For purposes of this Agreement, the following capitalized terms have
the meanings stated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(a)&nbsp;&#147;Act&#148; means the Securities Act of 1933, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(b)&nbsp;&#147;Common Stock&#148; means any of the Company&#146;s Class&nbsp;A Common Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(c)&nbsp;&#147;Demand for Ownership Confirmation&#148; means a demand in the form the Company determines for
written statement as to the active ownership of the Company&#146;s Securities held of record by the
Holder as may then be required under the Regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(d)&nbsp;&#147;Holder&#148; means, on the date determined, any person then holding as owner of record on the
Company&#146;s stock register one or more of the Registrable Securities, provided such Holder has timely
returned in writing each Demand for Ownership Confirmation theretofore sent to Holder by the
Company and, if such Holder is a transferee of the Registrable Securities, or right to receive
them, by reason of purchase, gift or other transfer (all of which is referred to as an
&#147;Assignment&#148;), the Assignment of the Registrable Securities to the Holder was in compliance with
Section&nbsp;4.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(e)&nbsp;&#147;Memorandum&#148; means the Company&#146;s Private Placement Memorandum dated February&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(f)&nbsp;&#147;1934 Act&#148; means the Securities Exchange Act of 1934, as amended.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(g)&nbsp;The term &#147;register&#148;, &#147;registered,&#148; and &#147;registration&#148; refer to a registration effected by
preparing and filing a registration statement or similar document in compliance with the Act, and
the declaration or ordering of effectiveness of such registration statement or document.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(h)&nbsp;&#147;Registrable Securities&#148; means (i)&nbsp;the Common Stock issuable or issued upon conversion of
the Series&nbsp;AA Preferred Stock, (ii)&nbsp;any Common Stock of the Company issued as or issuable upon the
exercise or conversion of the $12.00 Warrants included in the Units, (iii)&nbsp;the Common Stock
included in the Units and (iv)&nbsp;the Common Stock issuable upon the exercise or conversion of any
warrant, right or other security which is issued as a dividend or other distribution with respect
to, or in exchange for or in replacement of the securities referenced in (i),(ii) and (iii).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(i)&nbsp;&#147;Registrable Securities Then Outstanding&#148; shall be the number of shares of Common Stock
which have been issued and the number of shares of Common Stock which are issuable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(j)&nbsp;&#147;Regulations&#148; means the Regulations promulgated by the Service under the Internal Revenue
Code of 1986, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(k)&nbsp;&#147;SEC&#148; means the Securities and Exchange Commission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(l)&nbsp;&#147;Service&#148; means the United States Internal Revenue Service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.2 <U>Company Registration</U>. If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its stock or other securities under the Act in
connection with the public offering of such securities solely for cash (other than a registration
on Forms S-8 or S-4 or any similar or successor form thereto or, a registration on any form which
is inappropriate for or which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written confirmation of each Holder given within thirty (30)&nbsp;days after
mailing of such notice by the Company in accordance with <U>Section&nbsp;7.5</U>, the Company shall,
subject to the provisions of <U>Section&nbsp;1.6</U>, cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.3 <U>Obligations of the Company</U>. Whenever required under this <U>Section&nbsp;1</U> to
effect the registration of any Registrable Securities, the Company shall, as expeditiously as
reasonably possible:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(a)&nbsp;Prepare and file with the SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to become effective, and
keep such registration statement effective for a period of up to sixty (60)&nbsp;days following the last
expiration date of any market stand-off agreements under <U>Section&nbsp;5</U> to which twenty percent
(20%) or more of the Holders are parties..
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(b)&nbsp;Prepare and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(c)&nbsp;Furnish to the Holders such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Act, and, such other documents as they may
reasonably request in order to facilitate the disposition of Registrable Securities owned by them.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(d)&nbsp;Use its best efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business in any such states or
jurisdictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(e)&nbsp;In the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with the managing
underwriter of such offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(f)&nbsp;Notify each Holder covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light of the
circumstances then existing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(g)&nbsp;Provide a transfer agent and registrar for all Registrable Securities registered
pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later
than the effective date of such registration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(h)&nbsp;Cause all such Registrable Securities registered pursuant hereunder to be listed on each
securities exchange on which similar securities issued by the Company are then listed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.4 <U>Holders Obligated to Furnish Information</U>. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this <U>Section&nbsp;1</U> with respect
to the Registrable Securities of any selling Holder that such Holder shall promptly upon request
furnish to the Company such information regarding the Holder, the Registrable Securities the Holder
owns, and the intended method of disposition of such securities as shall be required to effect the
registration of such Holder&#146;s Registrable Securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.5 <U>Expenses of Company Registration</U>. The Company shall bear and pay all expenses
incurred in connection with any registration, filing or qualification of Registrable Securities
with respect to the registrations pursuant to this <U>Section&nbsp;1.2</U> for each Holder, including
(without limitation) all registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of one counsel for the
selling Holders, but excluding any underwriting discounts, brokerage commissions and stock transfer
taxes relating to Registrable Securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.6 <U>Underwriting Requirements</U>. If the registration is for a registered public
offering involving an underwriting, the right of any Holder to registration pursuant to this
Agreement shall be conditioned upon such Holder&#146;s participation in such underwriting and the
inclusion of such Holder&#146;s Shares in the underwriting to the extent provided herein. All Holders
proposing to distribute their Registrable Securities through such underwriting shall (together with
the Company and other holders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or underwriters selected for such
underwriting by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.7 <U>No Delay of Registration</U>. No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to the interpretation
or implementation of this <U>Section&nbsp;1</U>.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">2.&nbsp;<U>Indemnification</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">2.1 <U>Regarding Registration Statement</U>. In the event any Registrable Securities are
included in a registration statement under this <U>Section&nbsp;2</U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(a)&nbsp;To the extent permitted by law, the Company will indemnify and hold harmless each Holder,
any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject under the Act or the
1934 Act insofar as such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or violations
(collectively a &#147;Violation&#148;): (i)&nbsp;any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii)&nbsp;the omission or alleged
omission to state therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (iii)&nbsp;any violation or alleged violation by the Company of
the Act, the 1934 Act, or any rule or regulation promulgated under the Act or the 1934 Act; and the
Company will reimburse each such Holder, underwriter or controlling person any legal or other
expenses reasonably incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity agreement contained in
this section 2.1(a) shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for
any such loss, claim, damage, liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written information famished
expressly for use in connection with such registration by any such Holder, underwriter or
controlling person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(b)&nbsp;To the extent permitted by law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the registration statement,
each person, if any, who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any controlling person of any
such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only
to the extent) that such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such registration; and
each such Holder will reimburse any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this Section&nbsp;2.1(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section&nbsp;2.1(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected without the consent of
the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any
indemnity under this Section&nbsp;2.1(b) exceed the gross proceeds from the offering received by such
Holder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(c)&nbsp;Promptly after receipt by an indemnified party under this Section&nbsp;2.1 of notice of the
commencement of any action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this Section&nbsp;2.1,
deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying
party
shall have the right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such counsel in such proceeding.
The failure to deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this Section&nbsp;2.1, but the
omission so to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this Section&nbsp;2.1.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 12%">&nbsp;

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(d)&nbsp;If the indemnification provided for in this Section&nbsp;2.1 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim,
damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the indemnifying party
or by the indemnified party and the parties&#146; relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(e)&nbsp;Notwithstanding the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(f)&nbsp;The obligations of the Company and Holders under this Section&nbsp;2.1 shall survive the
completion of any offering of Registrable Securities in a registration statement under this Section
1, and otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">3.&nbsp;<U>Reports Under Securities Exchange Act of 1934</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">3.1 <U>Company&#146;s Obligations</U>. With a view to making available to the Holders the
benefits of Rule&nbsp;144 promulgated under the Act and any other rule or regulation of the SEC that may
at any time permit a Holder to sell securities of the Company to the public without registration,
the Company agrees to:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(a)&nbsp;make and keep public information available, as those terms are understood and defined in
SEC Rule&nbsp;144, at all times after ninety (90)&nbsp;days after the effective date of the first
registration statement filed by the Company for the offering of its securities to the general
public;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(b)&nbsp;file with the SEC in a timely manner all reports and other documents required of the
Company under the Act and the 1934 Act; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(c)&nbsp;furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i)&nbsp;a written statement by the Company that it has complied with the
reporting requirements of SEC Rule&nbsp;144 (at any time after ninety (90)&nbsp;days after the effective date
of the first registration statement filed by the Company), the Act and the 1934 Act (at any time
after it has become subject to such reporting requirements), (ii)&nbsp;a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed by the Company,
and (iii)&nbsp;such other information as may be reasonably requested in availing any Holder of any rule
or regulation of the SEC which permits the selling of any such securities without registration or
pursuant to such form.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 12%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">4.&nbsp;<U>Assignment of Registration Rights</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">4.1 <U>Conditions to Company&#146;s Recognition of Assignment</U>. The rights to cause the
Company to register Registrable Securities pursuant to this <U>Section&nbsp;4</U> shall be assigned
(but only with all related obligations) by a Holder to a transferee or assignee or affiliated group
of transferees or assignees of such securities, provided: (a)&nbsp;the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights are being assigned;
(b)&nbsp;such transferee or assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, including without limitation the provisions of <U>Section&nbsp;5</U>
below; and (c)&nbsp;such assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is restricted under the Act.
The minimum shareholding requirements described above shall not apply to the transfer of
registration rights to a partner or affiliate or immediate family member of the transferring
Holder. For the purposes of determining the number of shares of Registrable Securities held by a
transferee or assignee, the holdings of transferees and assignees of a partnership who are partners
or retired partners of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership; provided that all assignees and
transferees who would not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any
action under this <U>Section&nbsp;1</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">5.&nbsp;&#147;<U>Market Stand-Off&#148;Agreement</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">5.1 <U>Holder&#146;s Obligations to Delay Sales</U>. In consideration of the Company&#146;s
registration of Holders&#146; Registrable Securities under Section&nbsp;1, the Holder agrees that the Holder
shall, upon the Company&#146; request, promptly execute confirmation of such agreement, during the
period of duration specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the date of the first sale to the public pursuant to a registration
statement of the Company filed under the Act pursuant to <U>Section&nbsp;1</U>, the Holder shall not,
to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound)
any securities of the Company held by it at any time during such period except common stock
included in such registration; provided, however, that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(a)&nbsp;all executive officers and directors of the Company enter into similar agreements; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(b)&nbsp;such agreement shall not exceed (180)&nbsp;days after the effective date of the registration
statement filed with respect to the Company&#146;s public offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions
with respect to the Registrable Securities of each Holder (and the shares or securities of every
other person subject to the foregoing restriction) until the end of such period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">6.&nbsp;<U>Termination of Registration Rights</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">6.1 <U>Termination</U>. No Holder shall be entitled to exercise any right provided for in
this Section&nbsp;6 after such time as Rule&nbsp;144 or another similar exemption under the Act is available
for the sale of all of such Holder&#146;s shares during a three (3)&nbsp;month period without registration.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">7.&nbsp;<U>Miscellaneous</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.1 <U>Successors and Assigns</U>. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any shares of Registrable
Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as expressly provided in
this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.2 <U>Governing Law</U>. This Agreement shall be governed by and construed under the laws
of the State of California as applied to agreements among California residents entered into and to
be performed entirely within California.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.3 <U>Counterparts</U>. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.4 <U>References, Titles and Subtitles</U>. Unless otherwise stated, any reference to an
Article, Section or paragraph in this Agreement shall refer to the corresponding Article, Section
or paragraph of this Agreement. The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.5 <U>Notices</U>. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to
the party to be notified or upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="24%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">If to the Company:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NetREIT<br>
<FONT style="white-space: nowrap">Attention: Kenneth Elsberry, Secretary</FONT><br>
365 S. Rancho Santa Fe Road, Suite&nbsp;300<br>
San Marcos, CA 92078<br>
<U>KElsberry@CIHolding.com</U></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">If to a Holder:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Holder&#146;s last address as shown on the records of
the Company or such different address as the Holder may
designate by ten (10)&nbsp;days&#146; advance written notice to
the Company.</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


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

<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.6 <U>Expenses</U>. If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys&#146; fees,
costs and necessary disbursements in addition to any other relief to which such party may be
entitled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.7 <U>Amendments and Waivers</U>. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company
and the holders of a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this Section&nbsp;3.7 shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such Registrable Securities, and
the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.8 <U>Severability</U>. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.9 <U>Aggregation of Agreements and Stock</U>. All Agreements identical to this Agreement
shall be treated as a single Agreement. All shares of Registrable Securities held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of determining the
availability of, any rights under this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.10 <U>Entire Agreement; Amendment; Waiver</U>. This Agreement (including the Exhibits
hereto, if any) constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.11 <U>Effective Date</U>. With respect to each Holder, this Agreement shall become
effective on the first date the Units and/or Series&nbsp;AA Preferred Stock to which give rise to
Holder&#146;s Registrable Securities are first issued.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">NetREIT</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Jack K. Heilbron
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Jack K. Heilbron, President
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Address:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">365 S. Rancho Santa Fe Road, Suite&nbsp;300</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">San Marcos, California 92078</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

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

<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

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</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.4
<SEQUENCE>3
<FILENAME>c78263exv4w4.htm
<DESCRIPTION>EXHIBIT 4.4
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>EXHIBIT 4.4</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>NetREIT</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>REGISTRATION RIGHTS AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">THIS REGISTRATION RIGHTS AGREEMENT (this &#147;Agreement&#148;) is made effective on and as of the
1<SUP style="font-size: 85%; vertical-align: text-top">st</SUP> day of October, 2007, by NetREIT, a California corporation (the &#147;Company&#148;), for the
benefit of the holders of record (the &#147;Holders&#148;) of Registrable Securities. Unless expressly
defined in this Agreement, capitalized terms used in this Agreement shall have the meaning set
forth in the Memorandum.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><U><B>RECITALS</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">WHEREAS, by the Memorandum, as defined below, the Company is offering for sale up to
20,000,000 shares of its common stock;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">WHEREAS, the Company hereby agrees that this Agreement shall govern the rights of the Holders
to cause the Company to register the Registrable Securities owned by the Holders and certain other
matters as set forth herein;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">1.&nbsp;Registration Rights. The Company covenants and agrees as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.1 <U>Definitions</U>. For purposes of this Agreement, the following capitalized terms have
the meanings stated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(a)&nbsp;&#147;1933 Act&#148; means the Securities Act of 1933, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(b)&nbsp;&#147;1934 Act&#148; means the Securities and Exchange Act of 1934, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(c)&nbsp;&#147;Common Stock&#148; means any of the Company&#146;s Series&nbsp;A Common Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(d)&nbsp;&#147;Demand for Ownership Confirmation&#148; means a demand in the form the Company determines for
written statement as to the active ownership of the Registrable Securities held of record by a
Holder as the Company may require.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(e)&nbsp;&#147;Holder&#148; means, on the date determined, any person then holding as owner of record on the
Company&#146;s stock register one or more of the Registrable Securities, provided such Holder has timely
returned in writing each Demand for Ownership Confirmation theretofore sent to Holder by the
Company and, if such Holder is a transferee of the Registrable Securities, or right to receive
them, by reason of purchase, gift or other transfer (all of which is referred to as an
&#147;Assignment&#148;), the Assignment of the Registrable Securities to the Holder was in compliance with
<U>Section&nbsp;4</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(f)&nbsp;&#147;IRC&#148; means the Internal Revenue Code of 1986, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(g)&nbsp;&#147;Memorandum&#148; means the Company&#146;s Private Placement Memorandum dated October&nbsp;1, 2007, as it
may be revised or supplemented.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(h)&nbsp;The term &#147;register,&#148; &#147;registered,&#148; and &#147;registration&#148; refer to a registration effected by
preparing and filing a registration statement or similar document in compliance with the 1933 Act,
and the declaration or ordering of effectiveness of such registration statement or document.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(i)&nbsp;&#147;Registrable Securities&#148; means (i)&nbsp;the Common Stock issuable or issued upon conversion of
the Series&nbsp;AA Preferred Stock, (ii)&nbsp;any Common Stock of the Company issued as or issuable upon the
exercise or conversion of the $12.00 Warrants included in the Units, (iii)&nbsp;the Common Stock
included in the Units, and (iv)&nbsp;the Common Stock issuable upon the exercise or conversion of any
warrant, right or other security which is issued as a dividend or other distribution with respect
to, or in exchange for or in replacement of the securities referenced in (i),(ii) and (iii).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(j)&nbsp;&#147;Registrable Securities Then Outstanding&#148; shall be the number of shares of Common Stock
which have been issued and the number of shares of Common Stock which are issuable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(k)&nbsp;&#147;Regulations&#148; means the Regulations promulgated by the Service under the IRC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(k)&nbsp;&#147;SEC&#148; means the Securities and Exchange Commission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(l)&nbsp;&#147;Service&#148; means the United States Internal Revenue Service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.2 <U>Company Registration</U>. If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the Company for
shareholders other than the Holders) any of its stock or other securities under the 1933 Act in
connection with the public offering of such securities solely for cash (other than a registration
on Forms S-8 or S-4 or any similar or successor form thereto, or a registration on any form which
is inappropriate for or which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written confirmation of each Holder given within thirty (30)&nbsp;days after
mailing of such notice by the Company in accordance with <U>Section&nbsp;7.5</U>, the Company shall,
subject to the provisions of <U>Section&nbsp;1.6</U>, cause to be registered under the 1933 Act all of
the Registrable Securities that each such Holder has requested to be registered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.3 <U>Obligations of the Company</U>. Whenever required under this <U>Section&nbsp;1</U> to
effect the registration of any Registrable Securities, the Company shall, as expeditiously as
reasonably possible:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(a)&nbsp;Prepare and file with the SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to become effective, and
keep such registration statement effective for a period of up to sixty (60)&nbsp;days following the last
expiration date of any market stand-off agreements under <U>Section&nbsp;5</U> to which twenty percent
(20%) or more of the Holders are parties..
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(b)&nbsp;Prepare and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(c)&nbsp;Furnish to the Holders such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable Securities owned by them.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(d)&nbsp;Use its best efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business in any such states or
jurisdictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(e)&nbsp;In the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with the managing
underwriter of such offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(f)&nbsp;Notify each Holder covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the 1933 Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light of the
circumstances then existing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(g)&nbsp;Provide a transfer agent and registrar for all Registrable Securities registered
pursuant hereunder and, if applicable, a CUSIP number, for all such Registrable Securities, in each
case not later than the effective date of such registration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(h)&nbsp;Cause all such Registrable Securities registered pursuant hereunder to be listed on each
securities exchange on which similar securities issued by the Company are then listed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.4 <U>Holders Obligated to Furnish Information</U>. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this <U>Section&nbsp;1</U> with respect
to the Registrable Securities of any selling Holder that such Holder shall promptly upon request
furnish to the Company such information regarding the Holder, the Registrable Securities the Holder
owns, and the intended method of disposition of such securities as shall be required to effect the
registration of such Holder&#146;s Registrable Securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.5 <U>Expenses of Company Registration</U>. The Company shall bear and pay all expenses
incurred in connection with any registration, filing or qualification of Registrable Securities
with respect to the registrations pursuant to this <U>Section&nbsp;1.2</U> for each Holder, including
(without limitation) all registration, filing, and qualification fees, printing and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of one counsel for the
selling Holders, but excluding any underwriting discounts, brokerage commissions and stock transfer
taxes relating to Registrable Securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.6 <U>Underwriting Requirements</U>. If the registration is for a registered public
offering involving an underwriting, the right of any Holder to registration pursuant to this
Agreement shall be conditioned upon such Holder&#146;s participation in such underwriting and the
inclusion of such Holder&#146;s Shares in the underwriting to the extent provided herein. All Holders
proposing to distribute their Registrable Securities through such underwriting shall (together with
the Company and other holders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or underwriters selected for such
underwriting by the Company.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">1.7 <U>No Delay of Registration</U>. No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result of any controversy
that might arise with respect to the interpretation or implementation of this <U>Section&nbsp;1</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">2.&nbsp;<U>Indemnification</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">2.1 <U>Regarding Registration Statement</U>. In the event any Registrable Securities are
included in a registration statement under this <U>Section&nbsp;2</U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(a)&nbsp;To the extent permitted by law, the Company will indemnify and hold harmless each Holder,
any underwriter (as defined in the 1933 Act) for such Holder and each person, if any, who controls
such Holder or underwriter within the meaning of the 1933 Act or the 1934 Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become subject under the 1933
Act or the 1934 Act insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements, omissions or violations
(collectively a &#147;Violation&#148;): (i)&nbsp;any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii)&nbsp;the omission or alleged
omission to state therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (iii)&nbsp;any violation or alleged violation by the Company of
the 1933 Act, the 1934 Act, or any rule or regulation promulgated under the 1933 Act or the 1934
Act; and the Company will reimburse each such Holder, underwriter or controlling person any legal
or other expenses reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement
contained in this <U>Section&nbsp;2.1(a)</U> shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(b)&nbsp;To the extent permitted by law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the registration statement,
each person, if any, who controls the Company within the meaning of the 1933 Act, any underwriter,
any other Holder selling securities in such registration statement and any controlling person of
any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the 1933 Act, the 1934 Act
or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such registration; and
each such Holder will reimburse any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this <U>Section&nbsp;2.1(b)</U>, in connection with
investigating or defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this <U>Section&nbsp;2.1(b)</U> shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this <U>Section&nbsp;2.1(b)</U> exceed the gross
proceeds from the offering received by such Holder.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 12%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(c)&nbsp;Promptly after receipt by an indemnified party under this <U>Section&nbsp;2.1</U> of notice of
the commencement of any action (including any governmental action), such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying party under this <U>Section
2.1</U>, deliver to the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified
parties which may be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this <U>Section&nbsp;2.1</U>, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this <U>Section&nbsp;2.1</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(d)&nbsp;If the indemnification provided for in this <U>Section&nbsp;2.1</U> is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect to any loss,
liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements or omissions that
resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties&#146; relative intent, knowledge, access
to information, and opportunity to correct or prevent such statement or omission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(e)&nbsp;Notwithstanding the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(f)&nbsp;The obligations of the Company and Holders under this <U>Section&nbsp;2.1</U> shall survive
the completion of any offering of Registrable Securities in a registration statement or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">3.&nbsp;<U>Reports Under Securities and Exchange Act of 1934</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">3.1 <U>Company&#146;s Obligations</U>. With a view to making available to the Holders the
benefits of Rule&nbsp;144 promulgated under the 1933 Act and any other rule or regulation of the SEC
that may at any time permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(a)&nbsp;make and keep public information available, as those terms are understood and defined in
SEC Rule&nbsp;144, at all times after ninety (90)&nbsp;days after the effective date of the first
registration statement filed by the Company for the offering of its securities to the general
public;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(b)&nbsp;file with the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act; and
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 12%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(c)&nbsp;furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i)&nbsp;a written statement by the Company that it has complied with the reporting
requirements of SEC Rule&nbsp;144 (at any time after ninety (90)&nbsp;days after the effective date of the
first registration statement filed by the Company), the 1933 Act and the 1934 Act (at any time
after it has become subject to such reporting requirements), (ii)&nbsp;a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed by the Company,
and (iii)&nbsp;such other
information as may be reasonably requested in availing any Holder of any rule or regulation of the
SEC which permits the selling of any such securities without registration or pursuant to such form.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">4.&nbsp;<U>Assignment of Registration Rights</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">4.1 <U>Conditions to Company&#146;s Recognition of Assignment</U>. The rights to cause the
Company to register Registrable Securities pursuant to this <U>Section&nbsp;4</U> shall be assigned
(but only with all related obligations) by a Holder to a transferee or assignee or affiliated group
of transferees or assignees of such securities, provided: (a)&nbsp;the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights are being assigned;
(b)&nbsp;such transferee or assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, including without limitation the provisions of <U>Section&nbsp;5</U>
below; and (c)&nbsp;such assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is restricted under the 1933
Act. The minimum shareholding requirements described above shall not apply to the transfer of
registration rights to a partner or affiliate or immediate family member of the transferring
Holder. For the purposes of determining the number of shares of Registrable Securities held by a
transferee or assignee, the holdings of transferees and assignees of a partnership who are partners
or retired partners of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership; provided that all assignees and
transferees who would not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any
action under this <U>Section&nbsp;4</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">5.&nbsp;&#147;<U>Market Stand-Off&#148;Agreement</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">5.1 <U>Holder&#146;s Obligations to Delay Sales</U>. In consideration of the Company&#146;s
registration of Holders&#146; Registrable Securities under <U>Section&nbsp;1</U>, the Holder agrees that the
Holder shall, upon the Company&#146;s request, promptly execute confirmation of such agreement, during
the period of duration specified by the Company and an underwriter of Common Stock or other
securities of the Company, following the date of the first sale to the public pursuant to a
registration statement of the Company filed under the 1933 Act pursuant to <U>Section&nbsp;1</U>, the
Holder shall not, to the extent requested by the Company and such underwriter, directly or
indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to
be similarly bound) any securities of the Company held by it at any time during such period except
common stock included in such registration; provided, however, that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(a)&nbsp;all executive officers and directors of the Company enter into similar agreements; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 12%">(b)&nbsp;such agreement shall not exceed one hundred eighty (180)&nbsp;days after the effective date of
the registration statement filed with respect to the Company&#146;s public offering.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 12%">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions
with respect to the Registrable Securities of each Holder (and the shares or securities of every
other person subject to the foregoing restriction) until the end of such period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">6.&nbsp;<U>Termination of Registration Rights</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">6.1 <U>Termination</U>. No Holder shall be entitled to exercise any right provided for in
this <U>Section&nbsp;6</U> after such time as Rule&nbsp;144 or another similar exemption under the 1933 Act
is available for the sale of all of such Holder&#146;s shares during a three (3)&nbsp;month period without
registration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">7.&nbsp;<U>Miscellaneous</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.1 <U>Successors and Assigns</U>. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any shares of Registrable
Securities). Nothing in this Agreement, expressed or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as expressly provided in
this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.2 <U>Governing Law</U>. This Agreement shall be governed by and construed under the laws
of the State of California as applied to agreements among California residents entered into and to
be performed entirely within California.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.3 <U>Counterparts</U>. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.4 <U>References, Titles and Subtitles</U>. Unless otherwise stated, any reference to an
Article, Section or paragraph in this Agreement shall refer to the corresponding Article, Section
or paragraph of this Agreement. The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.5 <U>Notices</U>. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to
the party to be notified or upon deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be notified as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="24%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">If to the Company:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">NetREIT<br>
<FONT style="white-space: nowrap">Attention: Kenneth Elsberry, Secretary</FONT><br>
365 S. Rancho Santa Fe Road, Suite&nbsp;300<br>
San Marcos, CA 92078</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">If to a Holder:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Holder&#146;s last address as shown on the records of
the Company or such different address as the Holder may
designate by ten (10)&nbsp;days&#146; advance written notice to
the Company.</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.6 <U>Expenses</U>. If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys&#146; fees,
costs and necessary disbursements in addition to any other relief to which such party may be
entitled.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 8%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.7 <U>Amendments and Waivers</U>. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the Company
and the Holders of a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this <U>Section&nbsp;7.7</U> shall be binding upon each Holder of
any Registrable Securities then outstanding, each future Holder of all such Registrable Securities,
and the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.8 <U>Severability</U>. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.9 <U>Aggregation of Agreements and Stock</U>. All Agreements identical to this Agreement
shall be treated as a single Agreement. All shares of Registrable Securities held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">7.10 <U>Entire Agreement; Amendment; Waiver</U>. This Agreement (including the Exhibits
hereto, if any) constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">NetREIT</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Jack K. Heilbron
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Jack K. Heilbron, President
</TD>
    <TD>&nbsp;</TD>
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    <TD colspan="3" valign="top" align="left">Address:</TD>
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    <TD colspan="3" valign="top" align="left">365 S. Rancho Santa Fe Road, Suite&nbsp;300</TD>
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    <TD colspan="3" valign="top" align="left">San Marcos, California 92078</TD>
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