Mortgage notes payable as of June 30, 2014 and December 31, 2013 consisted of the following:

Property Securing Mortgage Note	Location	Monthly Payment		Interest Rate			Maturity Date	June 30, 2014		December 31, 2013
Havana/Parker Complex (1)	Aurora, Colorado	$	24,330		6.51	%	July 1, 2016	$	3,098,780	$	3,098,780
Garden Gateway Plaza	Colorado Springs, Colorado		42,383		5.00	%	February 5, 2020		7,042,437		7,119,544
Waterman Plaza	San Bernardino, California		25,995		6.50	%	September 1, 2015		3,413,790		3,457,973
Sparky's Palms Self-Storage	Thousand Palms, California		28,865	Variable rate ranging from 5.5% to 10.5%, currently 5.5%			March 1, 2034		4,157,429		4,215,349
Sparky's Hesperia East Self-Storage	Hesperia, California		5,171	Variable rate, currently 4.75%			December 18, 2022		840,842		890,774
Sparky's Rialto Self-Storage	Rialto, California		19,323		4.75	%	May 15, 2023		2,142,774		2,166,791
Genesis Plaza	San Diego, California		28,219		4.65	%	September 1, 2015		4,555,602		4,618,147
Executive Office Park	Colorado Springs, Colorado		26,962		5.79	%	July 1, 2025		4,413,213		4,447,699
Dakota Center	Fargo, North Dakota		36,031		4.74	%	June 9, 2024		11,014,481		5,417,950
Yucca Valley Retail Center	Yucca Valley, California		23,919		5.62	%	April 11, 2015		3,039,761		3,095,974
Rangewood Medical Office Building	Colorado Springs, Colorado		9,858		4.95	%	January 1, 2019		1,124,197		1,155,305
Regatta Square	Denver, Colorado		7,562		4.95	%	January 1, 2019		1,229,640		1,244,615
Port of San Diego Complex	San Diego, California		61,573		4.75	%	March 5, 2020		10,489,729		10,608,385
Morena Office Center	San Diego, California		13,896		4.50	%	June 1, 2021		2,381,435		2,411,282
Pacific Oaks Plaza	Escondido, California		9,450		4.50	%	June 1, 2021		1,619,357		1,639,658
Shoreline Medical Office Building	Half Moon Bay, California		26,043		5.10	%	June 1, 2022		3,903,203		3,959,914
Sparky's Palm, Joshua and Sunrise Self-Storage	Highland, Hesperia and Thousand Palms, California, respectively		42,788		4.70	%	December 6, 2022		8,050,462		8,116,028
The Presidio	Colorado Springs, Colorado		36,701		5.60	%	January 6, 2015		5,425,751		5,492,375
Sparky's Lancaster Self-Storage	Lancaster, California		13,200		5.00	%	June 1, 2020		1,935,127		1,965,504
Fontana Medical Plaza	Fontana, California		11,479		4.75	%	August 28, 2019		1,966,473		1,990,880
Bismarck Office Building	Bismarck, North Dakota		42,735		6.12	%	October 1, 2016		3,353,357		-
Subtotal, NetREIT, Inc. properties									85,197,840		77,112,927

4 Model Homes	CA		10,333		5.50	%	February 10, 2014		698,650		1,222,266
3 Model Homes	TX		2,799		5.75	%	September 15, 2015		282,579		778,823
7 Model Homes	TX, NC		6,016		5.87	%	December 15, 2015		621,271		639,007
12 Model Homes	AZ, CA, NJ		22,728		5.48	%	April 15, 2017 to June 15, 2017		2,518,553		3,212,444
9 Model Homes	TX		10,346		5.00	%	December 15, 2017		1,216,757		1,777,808
10 Model Homes	PA, TX		14,561		5.00	%	December 15, 2017		1,317,112		1,343,658
4 Model Homes	TX		4,691		5.50	%	January 15, 2018 to December 15, 2018		580,959		593,505
11 Model Homes	AZ, CA, NJ, TX		19,918	5.50% to 5.84%			June 30, 2014 to January 15, 2018		2,142,279		2,871,286
6 Model Homes	PA, TX		7,721	5.07% to 5.13%			December 15, 2017 to July 15, 2018		510,738		-
2 Model Homes			2,449		5.13	%	February 13, 2019		334,447		-
Subtotal, Model Home properties									10,223,345		12,438,797

								$	95,421,185	$	89,551,724

(1)

In the quarter ended September 30, 2013, the Company determined that an additional impairment existed on its Havana Parker property and recorded an asset impairment of $1.5 million. At June 30,2014, the book value of the property was $3.4 million and the property was encumbered with a CMBS loan with a balance of $3.1 million and a maturity date of July 1, 2016. The Company commenced paying the net cash flow from the property in order to get the loan assigned to the proper Servicing Agent qualified to negotiate a modification of the loan. The net cash flow is substantially less than the monthly payment due. The Company has made reduced mortgage payments for the previous eight (8) mortgage payments. In May 2013, months before the decision to pay only the net cash flow generated by the Property, the Company engaged a third party consultant with experience in modification of CMBS loans to have the terms of the loan modified by the lender on the property. Negotiations with the lender are currently ongoing. However, on March 4, 2014, the Company received a notice of foreclosure from the lender stating that the covenants of the deed of trust have been violated for failure to pay principal and interest when due together with all other payments provided for in the evidence of debt secured by the deed of trust and other violations. The notice also included a Notice of Sale of the real property to be held on September 3, 2014. The Company expects that the debt service requirements will be reduced and term of the loan will be extended or the Company will be allowed to pay off the loan at a discounted amount prior to the date of sale. The Company has evaluated the potential loss contingency in accordance with generally accepted accounting principles and concluded that it is not likely at this time that the Company will experience further losses. However, if the negotiations are not successful, the Lender may move forward with the court action and foreclose on the property. The loan on the Havana Parker property is non-recourse. Except as noted above, the Company is in compliance with all conditions and covenants of its mortgage notes payable.

From the time that the Company commenced paying only net cash flow, scheduled payments through June 30, 2014 totalled approximately $301,000 and the Company paid approximately $48,000. The Company has accrued all interest and late charges due under the loan through June 30, 2014.