NEW CHALLENGES AND NEW OPPORTUNITIES

Seven years into opening a real estate fund I help manage, the phenomenon of Covid-19 tested the strength of our diversified portfolio, and we are pleased to report that the fund has continued to provide positive returns to our investors. Along with new challenges, the

current environment has presented multiple new opportunities, and operating in the midst of the pandemic has been a good exercise in flexibility as we respond to the changes in our various markets.

To that end, we are actively transitioning two of our Single Family Residential flip properties in the Atlanta market over to new contractors so that we can get those projects completed and on the market in a more timely and economical manner. Meanwhile, as the impacts of the pandemic set in, we saw inventory drop in several other markets which helped prices hold and fueled demand, and we sold off our two remaining Single Residential flip properties in Ohio and Arkansas, pulling in a nice profit from both.

We have directed most of that capital into first and second trust deeds which are paying returns upwards of 12%. And all but one of the loans in our portfolio are current, with ample equity in the one defaulting loan so that the fund should get a bump in our overall return when and if we take control of that property.

Our residential subdivisions in Soquel and Phoenix remain our two largest investments,

with the 15-lot townhome development in Soquel receiving full approval to start construction next month, and completion slated for late next year. Our 20-townhome development in Phoenix is also shaping up nicely, with modern large floorplans set to come to market just in time to meet the demands of an economic boom there that is seeing some of the strongest growth in the country.

At the beginning of the year, we extended the payout timeline on our investment in a commercial development in Blythe, CA by 6 months in return for an increased yield, and we are actively weighing to what extent we would like to reinvest some of the funds in the development stage of that project when our initial investment is cashed out by a new equity investor.

We are also negotiating a buyout of our Joint Venture partner in Pennsylvania and Texas, to replace our equity share with a simple fixed interest note to allow the partner to take on full responsibility for those projects and pay us a fixed return at a fair interest rate. That will keep our funds productive, while mitigating risk by keeping them tied to sufficient equity to keep our investment secure.

We have achieved these adjustments by taking proactive management steps and responding to various changes, and capitalizing on every round of new opportunities as they take shape, as we continue to build on the foundation that has kept our fund profitable and growing through every market cycle that we navigate.

As the saying goes: Where there is confusion there is opportunity.