EX-99 15 v105220_ex99.htm

BlackRock Diamond Property Fund, Inc.

Consolidated Financial Statements for the years ended

December 31, 2007 and 2006, and for the period March 21, 2005 (inception)

to December 31, 2005

BlackRock Diamond Property Fund, Inc.

Table of Contents

		Page

Report of Independent Auditors		1

Consolidated Financial Statements for the years ended December 31, 2007 and 2006, and for the period March 21, 2005 (inception) to December 31, 2005

Consolidated Statements of Net Assets		2

Consolidated Statements of Operations		3

Consolidated Statements of Changes in Net Assets		4

Consolidated Statements of Cash Flows		5

Schedule of Real Estate Investments		6-7

Notes to Consolidated Financial Statements		8-17

Report of Independent Auditors

To the Board of Directors and Shareholders of

BlackRock Diamond Property Fund, Inc.:

In our opinion, the accompanying consolidated statements of net assets, and the related statements of operations and changes in net assets, of cash flows and the schedule of real estate investments present fairly, in all material respects, the financial position of BlackRock Diamond Property Fund, Inc. and subsidiaries (the "Fund") at December 31, 2007 and 2006, and the results of their operations and changes in net assets and their cash flows for the years ended December 31, 2007 and 2006 and for the period from March 21, 2005 (inception) to December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America. 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 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, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

New York, New York

February 28, 2008

BlackRock Diamond Property Fund, Inc.
Consolidated Statements of Net Assets

	December 31,
	2007		2006
Assets:
Investments in Real Estate at Estimated Fair Value
(Cost - $707,997,807 and $313,697,048)	$	772,994,426	$	336,759,990
Loans Receivable at Estimated Fair Value
(Cost: $105,944,071 and $0)		105,896,691		-
Real Estate Investment Partnerships at Estimated
Fair Value (Cost - $456,510,429 and $303,822,706)		595,343,826		343,374,042
Total Real Estate Investments		1,474,234,943		680,134,032

Cash & Cash Equivalents		5,744,134		37,156,542
Restricted Cash		7,534,599		3,633,888
Prepaid and Other Assets		13,895,057		21,023,329
Deferred Costs, net		10,690,513		2,937,649
Total Assets		1,512,099,246		744,885,440

Liabilities:
Credit Facilities		142,500,000		70,206,317
Mortgage Loans Payable		409,345,936		162,904,737
Accounts Payable and Accrued Expenses		10,042,473		7,148,639
Investment Management and Incentive Fees - related party		11,373,889		5,960,643
Dividends Payable		515,863		1,207,894
Total Liabilities		573,778,161		247,428,230

Net Assets	$	938,321,085	$	497,457,210

Shares Issued and Outstanding:
Preferred Redeemable Stock		184.0000		135.0000
Common Stock		5,818.4114		3,643.7970

Share Value:
Preferred Redeemable Stock	$	1,000.00	$	1,000.00
Common Stock	$	161,235.95	$	136,484.61

See notes to consolidated financial statements

BlackRock Diamond Property Fund, Inc.
Consolidated Statements of Operations

							Period from March 21,
	Years ended December 31,						2005 (Inception) to
	2007			2006			December 31, 2005
Investment Income:
Rental Revenues from Investments in Real Estate	$	26,695,349		$	14,491,497		$	5,561,339
Income from Real Estate Investment Partnerships		1,797,676			4,483,989			1,107,658
Income from Loans Receivable		1,518,264			-			-
Interest Income		2,172,744			686,339			13,179
Total Investment Income		32,184,033			19,661,825			6,682,176

Investment Expenses:
Property Operating		10,711,362			5,275,777			2,013,700
Interest		21,361,838			9,300,846			2,659,865
Other		4,204,969			1,602,091			388,872
Total Investment Expenses		36,278,169			16,178,714			5,062,437

Investment (Loss) / Income Before Investment Management and Incentive Fees		(4,094,136	)		3,483,111			1,619,739
Investment Management and Incentive Fees - related party		10,522,817			6,169,721			4,126,373
Net Investment Loss		(14,616,953	)		(2,686,610	)		(2,506,634	)

Net Realized and Unrealized Gain on Real Estate Investments		142,788,362			51,099,957			17,124,273

Net Increase in Net Assets Resulting from Operations	$	128,171,409		$	48,413,347		$	14,617,639

See notes to consolidated financial statements

BlackRock Diamond Property Fund, Inc.
Consolidated Statements of Changes in Net Assets

							Period from March 21,
	Years ended December 31,						2005 (Inception) to
	2007			2006			December 31, 2005

Net Increase in Net Assets resulting from Operations	$	128,171,409		$	48,413,347		$	14,617,639
Capital Transactions
Issuance of Stock		446,031,068			262,638,081			176,374,182
Redemption of Stock		(128,973,485	)		(26,875	)		-
Dividends		(4,365,117	)		(4,559,164	)		-
Net Increase in Net Assets resulting from Capital Transactions		312,692,466			258,052,042			176,374,182

Total Increase in Net Assets		440,863,875			306,465,389			190,991,821
Net Assets
Beginning of Year		497,457,210			190,991,821			-
End of Year	$	938,321,085		$	497,457,210		$	190,991,821

See notes to consolidated financial statements

BlackRock Diamond Property Fund, Inc.
Consolidated Statements of Cash Flows

							Period from March 21,
	Years ended December 31,						2005 (Inception) to
	2007			2006			December 31, 2005
Cash Flow from Operating Activities:
Net Increase in Net Assets Resulting from Operations	$	128,171,409		$	48,413,347		$	14,617,639
Adjustments to Reconcile Net Increase in Net Asset Resulting from Operations
to Net Cash Used in Operating Activities:
Net Unrealized Gain on Real Estate Investments		(141,071,453	)		(51,099,957	)		(17,124,273	)
Amortization of Deferred Costs		1,975,089			655,528			133,205
Changes in Operating Assets and Liabilities:
Increase in Restricted Cash		(3,900,711	)		(3,133,814	)		(500,074	)
Decrease / (Increase) in Prepaid Expenses and Other Assets		8,433,527			(1,718,839	)		(1,540,490	)
Increase in Accounts Payable and Accrued Expenses		2,893,834			2,968,252			4,180,387
Increase in Investment Management and Incentive Fees		5,413,246			2,054,221			3,906,422
Acquisitions of Investments in Real Estate		(357,197,019	)		(144,667,770	)		(105,408,168	)
Real Estate Improvements		(37,103,738	)		(62,211,355	)		(1,507,191	)
Loans Receivable		(105,944,071	)		-			-
Contributions to Real Estate Investment Partnerships		(152,784,630	)		(166,914,215	)		(149,392,411	)
Distributions from Real Estate Investment Partnerships		-			18,241,309			-
Deposits on Purchase Contracts		(1,305,255	)		(17,234,000	)		(580,000	)

Net Cash Used in Operating Activities		(652,419,772	)		(374,647,293	)		(253,214,954	)

Cash Flow from Financing Activities:
Payment of Deferred Costs		(9,727,954	)		(2,452,636	)		(1,273,746	)
Proceeds from Credit Facilities and Mortgage Loans Payable		413,962,508			187,809,625			90,585,135
Principal Repayments on Credit Facilities and Mortgage Loans Payable		(95,227,625	)		(45,262,825	)		(20,881	)
Issuance of Stock		446,031,068			262,638,081			176,374,182
Dividends Paid		(5,057,148	)		(3,351,271	)		-
Redemptions Paid		(128,973,485	)		(26,875	)		-

Net Cash Provided by Financing Activities		621,007,364			399,354,099			265,664,690

Net (Decrease) / Increase in Cash and Cash Equivalents		(31,412,408	)		24,706,806			12,449,736

Cash and Cash Equivalents, Beginning of Year		37,156,542			12,449,736			-

Cash and Cash Equivalents, End of Year	$	5,744,134		$	37,156,542		$	12,449,736

Supplemental Disclosure of Cash Flow Information:
Interest paid during the year	$	18,447,829		$	8,662,327		$	2,526,660
Accrued Capital Expenditures	$	909,924		$	260,834		$	31,850

See notes to consolidated financial statements

BlackRock Diamond Property Fund, Inc.
Schedule of Real Estate Investments

				December 31, 2007				December 31, 2006
Name	Location			Cost		Fair Value		Cost		Fair Value
Investments in Real Estate:
Retail:
Broomfield Marketplace		Broomfield, CO		$	15,464,644	$	20,700,000	$	15,384,049	$	19,000,000
Troy Corners-WO		Troy, MI			51,663,463		54,000,000		44,662,554		44,759,990
Total Retail					67,128,107		74,700,000		60,046,603		63,759,990
Office:
Shady Grove		Rockville, MD			84,497,467		97,500,000		83,048,902		92,300,000
Landmark		Renton, WA			43,971,120		59,300,000		35,385,280		40,900,000
Canyon Park Heights		Bothell, WA			37,368,350		42,100,000		37,336,821		38,100,000
Potomac Tower		Woodbridge, VA			69,458,118		69,458,118		-		-
520 Broadway		Santa Monica, CA			75,682,687		78,200,000		-		-
530 Park Ave		New York, NY			214,025,831		217,100,000		-		-
121 High Street		Boston, MA			14,236,308		14,236,308		-		-
Total Office					539,239,881		577,894,426		155,771,003		171,300,000
Industrial/Warehouse:
Bensalem		Bensalem, PA			9,165,450		10,800,000		8,656,068		9,400,000
Baypointe		Newark, CA			30,626,963		34,000,000		30,626,963		30,700,000
Total Industrial/Warehouse					39,792,413		44,800,000		39,283,031		40,100,000
Residential:
Canterbury		New York, NY			14,034,090		19,500,000		12,974,998		15,300,000
10 West 74th. Street		New York, NY			47,803,316		56,100,000		45,621,413		46,300,000
Total Residential					61,837,406		75,600,000		58,596,411		61,600,000
Total Investments in Real Estate				$	707,997,807	$	772,994,426	$	313,697,048	$	336,759,990
Investments in Loans Receivable:
429 Delancy				$	29,211,902	$	29,211,902	$	-	$	-
Cal West Mezz					29,161,289		29,161,289		-		-
Cabi Mezz					47,570,880		47,523,500		-		-
Total Investments in Loans Receivable				$	105,944,071	$	105,896,691	$	-	$	-
			Stated
Investment Partnerships:			Ownership
			%
Retail:
International Drive		Orlando, FL	83.33%	$	-	$	76,631	$	-	$	79,547
Bay Street Emeryville		Emeryville, CA	66.67%		47,128,210		53,168,491		46,128,210		46,899,581
Total Retail					47,128,210		53,245,122		46,128,210		46,979,128
Office:
400 South Hope		Los Angeles, CA	66.67%		52,278,149		97,553,336		52,278,149		76,707,089
Central Park at Lisle		Lisle, IL	60.00%		31,051,281		35,671,822		26,823,200		25,939,586
Metropolitan Tower		New York, NY	98.25%		59,415,535		77,582,590		57,450,469		55,261,371
Block 37		Chicago, IL	95.00%		37,642,680		49,161,832		39,482,748		39,540,845
38 Chauncy Street		Boston, MA	85.00%		4,325,668		6,209,883		-		-
635 Madison		New York, NY	91.73%		28,658,482		38,609,370		-		-
Bayview		San Mateo, CA	95.00%		14,124,013		14,435,526		-		-
Total Office					227,495,808		319,224,359		176,034,566		197,448,891
Industrial/Warehouse:
Bethlehem/Southland		Bethlehem, PA	80.00%		1,876,911		2,218,415		1,819,348		2,044,045
Devon & Ellis		Bensenville, IL	85.00%		6,706,676		6,714,398		-		-
South Dulles		Chantilly, VA	85.00%		6,428,585		6,428,585		-		-
Total Industrial/Warehouse					15,012,172		15,361,398		1,819,348		2,044,045

See notes to consolidated financial statements

BlackRock Diamond Property Fund, Inc.
Schedule of Real Estate Investments

				December 31, 2007				December 31, 2006
Name	Location			Cost		Fair Value		Cost		Fair Value
Residential:
Broadstone Shangri La		Seattle, WA	97.50%		6,056,048		9,247,777		5,436,726		8,293,912
Hidden Harbour		Tamarac, FL	92.50%		16,123,272		28,010,664		14,788,918		27,233,011
Diamond Pointe		Las Vegas, NV	96.70%		-		97,664		-		100,275
Archstone at the Ranch		Westminster, CO	96.00%		7,353,192		9,056,120		6,846,569		7,505,493
Verandah at Meyerland		Houston, TX,	92.50%		17,985,702		19,823,240		17,765,909		17,470,476
Three Palms		Tampa, FL	92.50%		15,723,739		18,490,767		14,318,743		14,480,063
The Maplewood		Los Angeles, CA	90.00%		5,054,482		6,807,307		4,091,196		5,215,251
345 Cloverdale		Los Angeles, CA	90.00%		3,579,181		4,058,779		2,846,882		2,861,855
North Tract Lofts		Arlington, VA	90.00%		20,529,488		19,603,326		10,586,118		10,583,788
Broadstone 14th & LoveJoy		Portland, OR	95.00%		1,118,737		1,118,737		608,000		608,000
5015 Clinton Ave.		Los Angeles, CA	90.00%		4,118,596		4,651,685		-		-
Bronx Portfolio		Bronx, NY	90.00%		35,280,592		54,312,872		-		-
Hollywood Tower		Los Angeles, CA	95.00%		15,756,432		14,071,496		-		-
Detroit & Hauser		Los Angeles, CA	90.00%		5,537,571		4,710,768		-		-
Total Residential					154,217,032		194,061,202		77,289,061		94,352,124
Land:
Melrose		Franklin Park, IL	90.00%		2,565,679		3,360,217		2,551,521		2,549,854
ICIS Glendale		Glendale, CA	95.00%		10,091,528		10,091,528		-		-
Total Land					12,657,207		13,451,745		2,551,521		2,549,854
Total Investment in Partnerships				$	456,510,429	$	595,343,826	$	303,822,706	$	343,374,042
Total Real Estate Investments				$	1,270,452,307	$	1,474,234,943	$	617,519,754	$	680,134,032

See notes to consolidated financial statements

BlackRock Diamond Property Fund, Inc.

Notes to Consolidated Financial Statements

December 31, 2007 and 2006 and for the period March 21, 2005 (inception) to December 31, 2005

1.	Organization and Summary of Significant Accounting Policies

Organization—BlackRock Diamond Property Fund, Inc. (the “Fund”) was incorporated on March 21, 2005, under the laws of the State of Maryland and under its original company name of BlackRock Income and Growth Property Fund, Inc. Pursuant to a certificate of name change filed with the State of Maryland Department of Assessment and Taxation on December 12, 2005, the fund changed its name to BlackRock Diamond Property Fund, Inc. At such time all existing common shares were redeemed in exchange for three classes of common stock, A, B, and C.

The Fund is structured as and intends to meet the qualification requirements of a real estate investment trust (“REIT”) for U.S. Federal income tax purposes. The Fund’s principal business activities are to invest in real estate for current income or capital appreciation or both.

In 2006, the Fund invested in a real estate partnership which required a Taxable REIT Subsidiary (TRS) election. This election was not filed within the required seventy five day period. The REIT filed for 9100 relief with the IRS; which would allow for a retroactive election. The fund successfully received IRS approval on August 9, 2007.

The Fund maintains an operating partnership, BlackRock Diamond Property Fund, LP (the “Operating Partnership”), to serve as the vehicle for the consolidation of ownership and control of the Fund’s assets and operations. BlackRock Diamond Property Fund, LLC. (the “Company”), a wholly-owned subsidiary of, and controlled by, the Fund, is the sole general partner of the Operating Partnership and, at December 31, 2007, owns .1% of its partnership units together with the Fund which owns a 99.9% limited partnership interest.

The Fund consists of three classes of common stock, Class A, Class B, and Class C. Shareholders receive a combination of Class A and B stock based on the aggregate amount invested. Shareholders purchasing up to $10 million of common stock receive 100% Class A. Shareholders purchasing between $10 million and $25 million of common stock receive Class A for the first $10 million; then 92.31% of Class A and 7.69% of Class B for the remainder. Shareholders purchasing between $25 and $50 million of common stock receive Class A for the first $10 million; 92.31% of Class A and 7.69% of Class B for the amounts between $10 and $25 million; and 84.62% of Class A and 15.38% of Class B for amounts above $25 million. Shareholders purchasing $50 million or greater of common stock receive Class A for the first $10 million; 92.31% of Class A and 7.69% of Class B for the amounts between $10 and $25 million; 84.62% of Class A and 15.38% of Class B for amounts between $25 and $50 million; and 76.92% of Class A and 23.08% of Class B for amounts above $50 million. The Class C stock is reserved for purchase by certain individuals or entities associated with, or sponsored by, the Fund, BlackRock, Inc., BlackRock Realty or any of their respective affiliates.

Prior to the payment of regular common dividends, but subsequent to the preferred dividends, a special Class B dividend is payable in an amount equal to 0.1625% of the relative share of the Fund’s net asset value allocable to Class B common stock, plus an amount equal to the reversal of accruals of incentive management fees deemed allocable to Class B. Subsequent to the Class B dividend, a special Class C dividend is payable in an amount equal to 0.1625% of the relative share of the Fund’s net asset value allocable to Class C common stock, plus the pro-rata share of acquisition fees and positive incentive management fee accruals deemed allocable to Class C less any current and previous reversals. In accordance with the Fund’s dividend reinvestment plan, any amounts reinvested by Class A or Class B shareholders provide common stock in the ratio of 76.92% of Class A and 23.08% of Class B; while shareholders of Class C stock receive 100% of Class C.

BlackRock Diamond Property Fund, Inc.

Notes to Consolidated Financial Statements

December 31, 2007 and 2006 and for the period March 21, 2005 (inception) to December 31, 2005

1.	Organization and Summary of Significant Accounting Policies, continued

Investors enter into subscription agreements for specified capital commitments. The Fund will make demands for capital contributions from shareholders proportionately based on their respective unfunded capital commitment. Any portion of a shareholder’s unfunded capital commitment, which remains uncalled after the third anniversary of the date such shareholder’s commitment is accepted by the Fund, shall be released by the Fund and no longer payable by the shareholder. At December 31, 2007 remaining uncalled commitments totaled $232,735,858. In September 2007 the fund began accepting capital commitments in tranches. Capital commitments in each tranche will be fully invested before capital commitments in subsequent tranches can be called. The tranches are drawn in sequence and within each tranche capital will be drawn pro rata based on the percentage of uncalled committed capital each investor represents within that tranche.

Dividends— Upon the approval of the Board separate cumulative special class dividends will be paid in accordance with the Fund’s article of Incorporation. Dividends are accrued at the time of board approval. For the year ended December 31, 2007 the board approved special and preferred dividends in the amount $4,344,523 and $20,594, respectfully, of which $515,863 remain unpaid and is reflected in Dividends Payable in the Consolidated Statements of Net Assets.

Redemptions— Shareholders may request that the Fund redeem all or any portion of their shares on a quarterly basis by giving written notice at least sixty days prior to the end of the quarter for which the request is to be effective. The Fund may redeem, or decline to redeem, all or any portion of the shares held by any investor in the event the Fund deems it necessary. Shares will be redeemed at the per share net asset value of the Fund as of the effective date of each redemption, which is the last business day of the quarter in which the redemption occurred. The Fund will endeavor to honor redemption requests within twenty days after the end of the applicable quarter. For the year ended December 31, 2007, the fund paid $128,973,485 in redemptions, of which $128,606,699 represents the full liquidation of Anthracite Capital, Inc., a related party of BlackRock Realty Advisors, Inc. For the year ended December 31, 2006 and for the period March 21, 2005 (inception) to December 31, 2005 the fund paid $26,875 and $0 in redemptions.

Upon liquidation of the Fund, the net assets attributable to all classes of the common stock shall be distributed pro rata amongst the common shareholders in proportion to the number of shares of common stock, regardless of class, held by each.

Basis of Presentation— The accompanying consolidated financial statements have been presented in conformity with accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of the Fund, the Company, the Operating Partnership and the wholly owned subsidiaries of the Operating Partnership; including those elected to be a TRS. All intercompany balances and transactions have been eliminated in consolidation.

Management’s Use of Estimates in Financial Statements— The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates.

Real Estate Investments—Real estate investments consist of property acquired through direct ownership, real estate investment partnerships, and loans receivable. Wholly owned properties are consolidated. Investments in real estate partnerships are reported on a net basis and initially recorded at the original investment amount, including acquisition fees (see Note 2), and subsequently adjusted for changes in estimated fair value, additional capital contributions, and return of capital distributions received.

The estimated fair value of the Fund's investments in partnerships represents its equity in the net assets of the underlying entities with the value of their real estate holdings and mortgage notes payable at estimated fair value.

BlackRock Diamond Property Fund, Inc.

Notes to Consolidated Financial Statements

December 31, 2007 and 2006 and for the period March 21, 2005 (inception) to December 31, 2005

1.	Organization and Summary of Significant Accounting Policies, continued

Real estate investments are stated at estimated fair values based upon valuations performed internally and upon appraisal reports prepared annually by independent real estate appraisers (Members of the Appraisal Institute).

The purpose of an appraisal is to estimate the fair value of real estate as of a specific date. Fair value has been defined as the most probable price for which the appraised real estate will sell in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest.

In the opinion of the Fund’s management, the stated aggregate value of investments in real estate fairly represents their estimated fair value as of December 31, 2007 and 2006. However, the estimated fair values of real estate investments may differ significantly from that which could be realized if the real estate were actually offered for sale in the marketplace. As the real estate investments are presented at estimated fair value, historical cost depreciation is not recorded in the accompanying consolidated financial statements.

Loans Receivable- Included in Loans Receivable are two mezzanine loans and a loan receivable. The Fund performs analysis for loans receivable on a regular basis to estimate fair value. Discounts on the face amount of the loans, origination fees, and other costs are capitalized and amortized over the life of the loan to interest income. On November 20, 2007 the Fund acquired an investment in the asset known as the CalWest mezzanine debt at a discounted price of $29,094,192 with a principal balance of $30,000,000. On December 19, 2007 the Fund acquired an investment in the asset known as Cabi mezzanine debt at a discounted price of $47,517,083 with a principal balance of $50,000,000. On September 19, 2007, Diamond provided a loan of $28,475,004 to 429 Delancy for the acquisition of land.

Cash and Cash Equivalents— For financial statement purposes, cash and cash equivalents include cash and highly liquid short-term investments with original maturities of 90 days or less.

Restricted Cash— The Fund’s restricted cash is comprised of tenant security deposits and property impound accounts.

Fair Value of Financial Instruments—At December 31, 2007 and 2006, the Fund has determined the carrying value of the cash and cash equivalents, restricted cash, credit facilities, accounts payable and accrued expenses approximate the fair value of these instruments.

Deferred Costs— Deferred costs represent finance costs incurred in connection with the credit facility and mortgage loans payable of the Operating Partnership and its wholly owned subsidiaries. For the years ended December 31, 2007 and 2006, such costs amounted to $13,323,912 and $3,596,084 net of accumulated amortization of $2,633,399 and $658,435, respectively.

Reserves for Tenant Receivables—Tenant receivables are reserved for at the time they are deemed uncollectible. The corresponding allowance for uncollectible receivables is included in revenue. At December 31, 2007 and 2006, tenant receivables were $1,329,714 and $886,394, of which $357,257 and $26,613, respectively, was reserved as bad debt allowance.

Revenue Recognition—The Fund recognizes rental revenue when earned pursuant to the terms of tenant leases. Included in rental revenues are $3,361,036, $1,712,129 and $352,302 of expense recoveries for the years ended December 31, 2007 and 2006, and for the period March 21, 2005 (inception) to December 31, 2005, respectively.

BlackRock Diamond Property Fund, Inc.

Notes to Consolidated Financial Statements

December 31, 2007 and 2006 and for the period March 21, 2005 (inception) to December 31, 2005

1.	Organization and Summary of Significant Accounting Policies, continued

Income from Real Estate Partnerships—The Fund’s share of income generated from underlying real estate partnerships is treated as dividend income from real estate partnerships to the extent of operating distributions received. Distributions received in excess of operating earnings are recorded as return of capital.

Unrealized Appreciation of Real Estate Investments— The unrealized appreciation of real estate investments is the amount by which the estimated fair value of the underlying investment exceeds the carrying value or the previous period estimated fair value plus the current period cost of capitalized improvements.

Federal Income Taxes—The Fund has elected to be taxed as a REIT under the Internal Revenue Code (IRC) of 1986, as amended, and intends to operate in a manner enabling it to maintain its tax status as a REIT. As a result, the company intends to distribute taxable income to its shareholders, and therefore no provision has been made for federal or state income taxes in the accompanying consolidated financial statements.

In June 2006, the Financial Accounting Standards Board ("the FASB") issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 (i) clarifies the accounting for uncertainty in income taxes recognized in companies’ financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes , (ii) prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and (iii) provides guidance on derecognition of recognized tax benefits, classification, interest and penalties, accounting in interim periods, disclosure and transition. In January 2008, the effective date of FIN 48 was deferred for non-public companies, and it is now expected to be effective for the Fund in its annual reporting period ending December 31, 2008. Therefore, the Fund will evaluate the impact, if any, of adopting FIN 48.

Interest Rate Caps—The Fund uses interest rate caps in order to reduce the effect of interest rate fluctuation of certain real estate investment interest expense on variable rate debt. The fair value of interest rate caps are the estimated amounts that the Fund would receive or pay to terminate these agreements at the reporting date taking into account current interest rates and credit worthiness of the respective counter-parties. At December 31, 2007, the fair values of the interest rate caps totaled $75,750 and are reflected in the Prepaid and Other Assets on the Statements of Net Assets. Changes in Fair Value of the interest rate caps are reflected in Net Realized and Unrealized Gain on Real Estate Investments.

New Accounting Pronouncements

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 (“SFAS 159”), The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 permits entities to choose to measure eligible financial instruments at fair value. The unrealized gains and losses on items for which the fair value option is elected should be reported in earnings. The decision to elect the fair value option is determined on an instrument-by-instrument basis, it should be applied to an entire instrument, and it is irrevocable. Assets and liabilities measured at fair value pursuant to the fair value option should be reported separately in the balance sheet from those instruments measured using another measurement attribute. SFAS 159 is effective as of the beginning of the first fiscal year that begins after November 15, 2007. The Fund is currently analyzing the potential impact of adopting SFAS 159.

On September 13, 2006, the FASB cleared an AICPA Statement of Position, “Clarification of the Scope of the Audit and Accounting Guide Audits of Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies”. The effective date for required adoption was recently deferred indefinitely by the FASB. The Fund had adopted an earlier interpretation of the Guide and reported as such since inception.

BlackRock Diamond Property Fund, Inc.

Notes to Consolidated Financial Statements

December 31, 2007 and 2006 and for the period March 21, 2005 (inception) to December 31, 2005

1.	Organization and Summary of Significant Accounting Policies, continued

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure requirements regarding fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for such fiscal year, including financial statements for an interim period within such fiscal year. The Fund is evaluating the impact of adopting SFAS No. 157 on its financial statements.

2.	Real Estate Investment Partnership

Condensed financial information for the Fund’s investments in real estate partnerships is presented below:

						Period from March 21,
	Years ended December 31,					2005 (Inception) to
	2007			2006		December 31, 2005
Partnership Assets and Liabilities
Real estate at estimated fair value	$	1,795,064,518		$	1,069,455,553
Other Assets		48,521,483			43,881,778
Total assets		1,843,586,001			1,113,337,331
Mortgage loans payable-at estimated fair value		1,037,821,063			610,872,502
Other liabilities		30,764,851			19,567,256
Total liabilities		1,068,585,914			630,439,758
Net assets	$	775,000,087		$	482,897,573
The Fund's Share of Net Assets	$	595,343,826		$	343,374,042

Partnership Operations
Rental revenue		89,528,529			46,053,440		17,152,491
Other revenue		16,455,439			25,183,516		6,469,388
Total revenue		105,983,968			71,236,956		23,621,879
Real estate expenses and taxes		61,295,367			36,842,421		11,476,413
Interest expense		52,809,896			29,958,283		9,316,001
Total expenses		114,105,263			66,800,704		20,792,414
Net Investment (Loss) / Income		(8,121,295	)		4,436,252		2,829,465
Realized and Unrealized Appreciation		166,683,823			65,313,719		25,999,790
Increase in Net Assets Resulting from Operations	$	158,562,528		$	69,749,971	$	28,829,255
The Fund's Income from Real Estate Partnerships	$	1,797,676		$	4,483,989	$	1,107,658
The Fund's share of Realized and Unrealized Appreciation	$	99,282,063		$	31,976,581	$	13,939,633

BlackRock Diamond Property Fund, Inc.

Notes to Consolidated Financial Statements

December 31, 2007 and 2006 and for the period March 21, 2005 (inception) to December 31, 2005

3.	Credit Facilities and Mortgage Loans Payable

Debt includes the credit facilities and mortgage loans payable on wholly owned properties as of December 31, 2007 and 2006. The principal terms of the mortgage loan payables are reflected below:

							Maturity
Portfolio Level Debt	Principal Balance				Interest Rate		Date
	December 31,		December 31,
Credit Facilities:	2007		2006
Bank of America	$	45,500,000	$	70,206,317		LIBOR (30-day)+75bps		2010
Capmark		97,000,000		-		LIBOR (30-day)+165bps		2009
Total Credit Facilities		142,500,000		70,206,317
Mortgage Loans Payable:
Potomac Center		43,960,897		-		LIBOR (30-day)+140bps		2008
Troy Corners		22,473,473		21,422,585		LIBOR (30-day)+220bps		2008
Landmark		24,981,763		18,991,694		LIBOR (30-day)+165bps		2009
Bensalem		5,786,640		5,786,640		5.42%		2009
Canyon Park		15,535,000		15,535,000		5.00%		2009
Broomfield Market Place		9,000,000		9,000,000		LIBOR (30-day)+120bps		2010
Canterbury		5,200,000		5,200,000		5.25%		2010
Canterbury		1,445,963		1,418,818		5.75%		2010
Shady Grove		38,550,000		38,550,000		LIBOR (30-day)+150bps		2010
10 West 74th Street		27,000,000		27,000,000		LIBOR (30-day)+140bps		2010
Baypointe		20,000,000		20,000,000		LIBOR (30-day)+120bps		2010
520 Broadway		51,000,000		-		5.57%		2012
530 Park Ave		135,530,000		-		LIBOR (30-day)+108bps		2012
530 Park Ave		1,621,279		-		LIBOR (30-day)+130bps		2012
121 High Street		7,260,921		-		LIBOR (30-day)+140bps		2012
Total Mortgage Loans Payable		409,345,936		162,904,737
Total Credit Facilities and Mortgage Loans Payable	$	551,845,936	$	233,111,054

The fair value of the mortgage loans payable have been determined by discounting the future payments required under the terms of the note at rates available to the Fund for debt with similar maturities, terms, and underlying collateral. Based upon the borrowing rates determined by the Fund, the fair values for these mortgages are estimated at $563,002,388 as of December 31, 2007.

BlackRock Diamond Property Fund, Inc.

Notes to Consolidated Financial Statements

December 31, 2007 and 2006 and for the period March 21, 2005 (inception) to December 31, 2005

3.	Credit Facilities and Mortgage Loans Payable, continued

As of December 31, 2007, principal amounts of mortgage loans payable on wholly owned properties are payable as follows:

Year Ending December 31,
2008	$	66,434,370
2009		46,303,403
2010		101,195,963
2011		-
2012		195,412,200
Total	$	409,345,936

On May 5, 2005, the Fund entered into a Subscription Collateralized Credit Facility Agreement (the “Credit Agreement”). The Credit Agreement is collateralized by the signed subscription and stock pledge agreement of stockholders. The Fund can draw up to 90% of the unfunded investor commitment. At December 31, 2006, the outstanding balance under the Credit Agreement was $70,206,316. On January 2, 2007, the credit facility expired and was repaid.

On April 2, 2007, the Fund entered into a new Subscription Collateralized Revolving Credit Agreement. The Credit Agreement is collateralized by the signed subscription and stock pledge agreement of stockholders. The Fund can draw up to 90% of the unfunded investor commitment. The Credit Agreement has a maturity date of April 2, 2010 and bears interest at LIBOR plus .75%. At December 31, 2007, the outstanding balance under the Credit Agreement was $45,500,000, and the available amount under the credit facility was $54,500,000. On January 2, 2008 the fund paid down $39,574,513 of the outstanding balance.

On May 7, 2007, the Fund entered into an Unsecured Credit Agreement (the “Revolving Credit Agreement”). The Revolving Credit Facility has a maturity date of May 1, 2009 and bears interest at 30 day LIBOR plus 1.65%. At December 31, 2007, the outstanding balance under the Revolving Credit Facility was $97,000,000, and the available amount under the credit facility was $13,000,000. On January 4, 2008 the fund paid down the outstanding balance of $97,000,000.

4.	Leasing Activity

The Operating Partnership leases space to tenants under various operating lease agreements. These agreements, without giving effect to renewal options, have expiration dates ranging from January 2008 through August 2019. At December 31, 2007, the aggregate future minimum base rental payments under non-cancelable operating leases for wholly owned properties are as follows (excluding apartment leases):

Year Ending December 31,
2008	$	20,447,298
2009		14,749,889
2010		13,449,500
2011		12,079,604
2012		9,330,215
Thereafter		18,943,705
Total	$	89,000,211

BlackRock Diamond Property Fund, Inc.

Notes to Consolidated Financial Statements

December 31, 2007 and 2006 and for the period March 21, 2005 (inception) to December 31, 2005

5.	Management and Other Advisory Fees

On March 21, 2005, the Fund entered into an investment management agreement (the “Original Agreement”) with BlackRock Realty Advisors, Inc., a Delaware corporation (the “Investment Manager”), a wholly owned subsidiary of BlackRock Inc. The Original Agreement dated March 21, 2005, between the Investment Manager and the Fund was amended and became effective December 14, 2005 (“Amended Agreement”). The fees are described as follows:

Acquisition Fees— Under the Amended Agreement, at the time a real estate investment is acquired, the Investment Manager is entitled to receive an acquisition fee equal to one half of one percent (0.50%) of the gross acquisition cost deemed allocable to the class A and class B common stockholders. For the years ended December 31, 2007 and 2006, and for the period December 14, 2005 through December 31, 2005, the Fund incurred $4,035,257, $2,053,779, and $741,029 in acquisition fees, respectively.

For the period March 21, 2005 (inception) through December 14, 2005, no acquisition fees were incurred.

Asset Management Fees— Under the Amended Agreement, the Investment Manager will receive a quarterly fee for management services performed equal to 0.1625%, of the Fund’s weighted gross asset value deemed allocable to the class A common stockholders paid in arrears. For the years ended December 31, 2007 and 2006, and for the period December 14, 2005 to December 31, 2005 the Fund incurred $8,749,682, $3,325,039, and $647,032 in asset management fees, respectively.

For the period March 21, 2005 (inception) through December 14, 2005, fees under the Original Agreement were based upon 100% of the weighted gross asset value of the fund and totaled $960,980.

Incentive Management Fees— Under the Amended Agreement, the Fund shall pay to the Investment Manager an incentive management fee once every twelve quarters, with the first such period commencing January 1, 2006. The management fee will be paid in arrears in an amount equal to the sum of 15% of the amount by which the Fund’s total return allocable to the class A and B stockholders exceed a 2.0% inflation-adjusted total return per quarter. The incentive management fee will be determined after deduction of the base management fee and acquisition fees. For the years ended December 31, 2007 and 2006 the Fund accrued fees of $1,773,135 and $2,844,682 respectively, payable to the Investment Manager.

Under the Original Agreement, the Investment Manager earned an incentive management fee quarterly in arrears at the rate of 20% per annum of the amount by which the Fund’s total returns, after deduction of base management fees, including realized and unrealized appreciation and depreciation, exceed a 7% inflation-adjusted return. For the period March 21, 2005 (inception) through December 14, 2005 the fund accrued fees of $2,518,361 which were paid in 2006.

Debt Placement Fees— BlackRock Financial Management Inc (“BFM”), an affiliate of the Investment Manager, provides debt placement services to the Fund. Under both the Original and Amended Agreements BFM receives fees equal to the lesser of market fees or 0.5% of the debt placed by BFM. For the years ended December 31, 2007 and 2006, and for the period March 21, 2005 (inception) to December 31, 2005 the Fund incurred approximately $2,773,483, $1,293,839, and $466,000 for debt placement services, respectively. Such costs are deferred and amortized over the term of the related debt.

BlackRock Diamond Property Fund, Inc.

Notes to Consolidated Financial Statements

December 31, 2007 and 2006 and for the period March 21, 2005 (inception) to December 31, 2005

6.	Common and Preferred Stock

The following represents changes in the Fund’s outstanding common and preferred stock for the years ended December 31, 2007 and 2006.

								Total
	Class A		Class B		Class C			Common			Preferred
Shares Authorized as of December 31, 2007		2,000,000		2,000,000		2,000,000			6,000,000			2,000
Shares Outstanding, at December 31, 2005		1,020.5881		176.4228		435.6495			1,632.6604			5.0000
Issuance of Shares		1,173.1003		479.8450		358.3929			2,011.3383			130.0000
Redemption of Shares		-		-		(0.2017	)		(0.2017	)		-
Shares Outstanding, at December 31, 2006		2,193.6885		656.2679		793.8407			3,643.7970			135.0000
Issuance of Shares		2,602.9567		337.0076		60.5343			3,000.4986			49.0000
Redemption of Shares		-		-		(825.8942	)		(825.8942	)		-
Shares Outstanding, at December 31, 2007		4,796.6452		993.2755		28.4807			5,818.4114			184.0000

7.	Preferred Dividend

Prior to the payment of common dividends, separate cumulative special class dividends shall be paid in accordance with the Fund’s Articles of Incorporation. Holders of preferred stock will receive a 12.5% annual preferential dividend payable in respect of any outstanding preferred shares. For the year ended December 31, 2007, the fund paid out $20,343 in preferred dividend distributions.

8.	Financial Highlights

							Period from March
							21, 2005 (Inception)
	Years ended December 31,						to
Per Common Share Operating Performance:	2007			2006			December 31, 2005

Net Asset Value per share, Beginning of Period	$	136,484.61		$	116,978.90		$	100,000.00
Income From Investment Operations:
Investment (Loss) / Income Before Investment Management and Incentive Fees		(764.49	)		1,599.82			1,880.77
Net Realized and Unrealized Gain on Real Estate Investments		28,505.58			22,516.94			19,398.28
Total Investment Income, Before Fees		27,741.10			24,116.75			21,279.05
Investment Management and Incentive Fees		(2,110.10	)		(2,632.81	)		(4,300.15	)
Net Increase in Net Assets Resulting from Operations		25,630.99			21,483.95			16,978.90
Dividends		(879.65	)		(1,978.24	)		-
Net Asset Value per Share, End of Period	$	161,235.95		$	136,484.61		$	16,978.90
Total Return, before investment management and incentive fees		20.50	%		20.83	%		20.37	%
Total Return, after investment management and incentive fees		18.84	%		18.44	%		16.17	%
Note: Total fund returns are based on quarterly linked returns for the current year. The quarterly returns
are determined by dividing the income for the quarter by the weighted net assets for the quarter.
Ratios as a Percentage of Average Net Assets:
Expenses		6.21	%		6.68	%		5.04	%
Net Investment Loss		(1.94	%)		(0.80	%)		(1.37	%)

BlackRock Diamond Property Fund, Inc.

Notes to Consolidated Financial Statements

December 31, 2007 and 2006 and for the period March 21, 2005 (inception) to December 31, 2005

9.	Commitments and Contingencies

In accordance with FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" the Fund has disclosed obligations under certain guarantees.

The Fund issues loan guarantees to obtain financing agreements and/or preferred terms related to its investments. These guarantees include mortgage, construction loans, and letters of credits and may cover payments of principal and/or interest. These guarantees have fixed termination dates and become liabilities of the Fund in the event the borrower is unable to meet the obligations specified in the guarantee agreement. The Fund may also be liable under certain of these guarantees in the event of fraud, misappropriation, environmental liabilities and certain other matters involving the borrower. The fair value of guarantees is not material.

			Termination		Guaranteed
Borrower	Guarantor		Date		Amount
Diamond River Edge, LLC		Blackrock Diamond Property Fund, LP		05/01/2008	$	13,642,000
Diamond Canyon Trails LLC		Blackrock Diamond Property Fund, LP		11/19/2008		12,044,000
Madison Bay Street, LLC		Blackrock Diamond Property Fund, LP		01/18/2009		4,000,000
RWDI Maplewood, LP		Blackrock Diamond Property Fund, LP		12/15/2009		1,530,000
RWDI Cloverdale, LP		Blackrock Diamond Property Fund, LP		12/15/2009		1,970,000
					$	33,186,000

On May 5, 2006, Diamond Rivers Edge, LLC, a wholly owned subsidiary of the Fund, entered into a forward commitment to acquire the property known as Broadstone River’s Edge. On May 8, 2006, the Fund issued a letter of credit in the amount of $13,642,000, representing 40% of the property’s construction costs.

On May 10, 2007, Diamond Canyon Trails LLC, entered into a forward commitment to acquire the property known as Canyon Trails. On November 18, 2007, the Fund issued a letter of credit in the amount of $12,044,000, representing 40% of the property’s construction costs.

On January 18, 2008, a letter of credit in the amount of $4,000,000 was issued for the benefit of Madison Bay Street, LLC. The letter of credit is secured by the remaining commitments of the facility and reduces the available commitment.

On December 15, 2006, RWDI Maplewood, LP, a real estate investment partnership of the Fund, entered into a loan agreement with La Salle Bank National Association, a national banking association. Pursuant to the loan agreement, the Fund guaranteed a principal repayment in the amount of $1,530,000. The guaranty will be reduced to $765,000 if the debt service coverage ratio (“DSCR”) is 1.10 or greater for two consecutive quarters and will be released if the DSCR is 1.20 or greater for two consecutive quarters.

On December 15, 2006, RWDI Cloverdale, LP, a real estate investment partnership of the Fund, entered into a loan agreement with La Salle Bank National Association, a national banking association. Pursuant to the loan agreement, the Fund guaranteed a principal repayment in the amount of $1,970,000. The guaranty will be reduced to $735,000 if the DSCR is 1.10 or greater for two consecutive quarters and will be released if the DSCR is 1.20 or greater for two consecutive quarters.

On May 3, 2007, Diamond Vintner’s Grove LLC, entered into a purchase agreement to acquire the property known as Vintner’s Grove for a purchase price of $26,105,100. On March 7, 2007, a wholly owned subsidiary made a deposit of $1,305,255 per the purchase and sale agreement.

The Fund is party to a legal proceeding relating to pursuit costs associated with a transaction not consummated and included $485,000 as an estimated settlement amount in accounts payable and accrued expenses.