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Thesecondquarterwitnessedcon1nuedandsignificantprogressinthePacificOpportuni1esValueFund

I,aswehavecompletedthesaleofoneassetandnearthesaleofasecond,bothsingle-familyhomeswe

acquiredandrenovated.Moreover,residen1alrentalmarketfundamentalscon1nuetoimprove,justaswepredicted.Infact,accordingtoREIS,awellregardedrealestatedatacollec1onfirm,secondquarter

averagerentsincreasedinall82marketstheytrack,whilethena1on'sapartmentvacancyratefellto

4.7%(thelowestlevelseensince200).

Thegoodnewsisthatweexpectthesefavorablemarketfundamentalstopersistduetocon1nued1ght

credit,marketuncertainty(Europe,elec1ons,taxes,employment,etc.),andapersistenceinthetrends

wehavediscussedinpriorupdates(e.g.,hightransporta1oncosts,needforlabormobility,excessive

studentdebt).

Wecon1nuetoseesignificantopportuni1esinboththesinglefamilyandapartmentmarkets.Sincethe

vastmajorityofthisfundscapitalhasbeendeployed,nonewassetswereacquiredduringthequarter,butwecon1nuetoevaluateandaggressivelypursueselectopportuni1esforotherlargeinvestors.We

willsoonannouncetheopeningofPVOFIIandinviteyoutopar1cipate.

WeareverypleasedwiththeFund'sperformancetodate,andareexcitedbythepossibili1esthatlie

ahead.Ourtwocoreassets-theapartmentbuildings-con1nuetoachieveincreasingrents,net

opera1ngincome,andvalue.Con1nuedunitturnsandrenova1onsshoulddriveresultshighers1ll.With

thesaleoftwoFundassets,wehavedemonstratedtheprudenceofourstrategy,andwilllikelymakea

modestcashdistribu1onthisquarter.Wewillkeepyoupostedinthatregard.

DetailsoftheFundassetsareasfollows:

APARTMENTASSETS

318S.CommonwealthAvenue,LosAngeles90020

Threestories,24units(8singles,6,onebedroom,

onebath)

Purchaseprice:$.329million($53Kperunit)

AcquiredNovember20

Equitydeployed$400,000

Yearbuilt:927(rent-controlled)

Construc1on:Brick

Es1matedValueincreasetodateapproximately

$650,000

Sequoia Real Estate Partners

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Duringthefirstquarter,werenovatedandre-leasedoneunit,whilewearecurrentlyrenova1ngtwoaddi1onalunits.Althoughweareabletodrivesubstan1allyhigherrentswitheachunitthatisvacated,

renovated,andre-leased(thirtypercentincreaseinrents,on

average),becausethepropertyissubjecttorentcontrol,wecannot

turnall24unitsimmediately,butmustwaitforunitstobecome

vacant.However,wewillhavereposi1onedover20percentofthe

buildingwithinninemonths.Asaresultofourefforts,wehave

increasedthenetopera1ngincomeofthepropertysignificantlyto

anannualized$40,000orso(basedonrecentresults),whichwould

likelyplacethevalueofthepropertyinexcessof$2million.Atsome

point,ifweareunabletogenerateenoughunitturnnaturally,wemayoffer"cashforkeys",essen1allyamonetaryincen1veforthose

tenantswithleasessignificantlybelowmarkettovoluntarilyvacate.

Atthispoint,wewilllikelymarkettheprojectforsalesome1mein

203,onceweturnandincreaserentsonaddi1onalunits.

245N.AlvaradoAvenue,LosAngeles90026

Threestories,60units(36,onebedroom,

onebathroom;9,twobedroom,two

bathroom;fivetwobedroom+lo,one

bathroom;and,onenon-conforming)

Purchaseprice:$7.525million($25K/unit)

Equitydeployed$2.7million

Renova1oncoststodate:approximately

$500,000

AcquiredNovember200

Yearbuilt:990(notrent-controlled)

Construc1on:wood-framestucco

Es1matedValueincreasetodateapproximately$2.0million

Wehavenowrenovatedwelloverhalfofthebuildingunits(38),includingeightinthefirstquarter,while

oneaddi1onalunitiscurrentlyundergoingrenova1ons.Projected202netopera1ngincomeforthe

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buildingapproximates$560,000(annualizingrecentresults),likely

transla1ngtoapropertyvalueabove$9.0million,andperhapsas

highas$0million(dependingoncaprateapplied).Althoughwe

originallythoughtwemightmarketthepropertyforthesaleinthe

firsthalfofthisyear,Ibelievethemarke1ngandsalewillbea

secondhalf202orfirsthalf203event.Thereareacoupleofminorcommonareaimprovementsthatares1llneeded,andwe

wouldliketodrivenetopera1ngincomeevenhigherbeforesale.

SINGLE-FAMILYRESIDENCES/OTHERASSETS

4161MandalayDrive,LosAngeles90063-nochange

Single-Familyhome

Fourbedrooms,threebathrooms

AcquiredMarch20

Purchasepriceof$22,000

Renova1oncosts=approximately$45,000

Currentlyleasedfor$2,250permonth

Es1matedfairmarketvalue=$325,000

908FrigateAvenue,Wilmington90744-nochange

Single-FamilyHome

Sixbedrooms,threebathrooms

AcquiredAugust20

Purchasepriceof$220,000

Renova1oncosts=approximately$,000

Currentlyleasedfor$2,600permonth

Es1matedfairmarketvalue=$356,000

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3118PaloVerdeAvenue,LongBeach90808

Single-familyhome

Threebedrooms,twobathrooms(,86sq.feet)

AcquiredSeptember20

Purchasepriceof$37,000

Renova1oncosts=approximately$35,000

Wewillbelis1ngthispropertyforsaleshortly,and

an1cipatethatthegrosssalesproceedswill

approximate$440,000,resul1nginanetprofitof

$72,000,anROIof2%,andanIRRof

approximately23%.

3137W.108thStreet,LosAngeles,CA90303

Single-familyhome

Two-bedrooms,onebathroom(969sq.feet)

AcquiredNovember20

CostofAcquisi1on$62,000

Renova1oncosts=$36,000

Otherholdingcosts:$5,000

NetSellingPrice=$44,000

NetProfit=$32,000

ROIof5.8%

Pre-taxIRRexceeding2%.