10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 0-51948

Excelsior LaSalle Property Fund, Inc.

(Exact name of registrant as specified in its charter)

Maryland	20-1432284
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

225 High Ridge Road, Stamford, CT, 06905-3039

(Address of principal executive offices, including Zip Code)

(203) 352-4400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of each class

Class A Common Stock, $.01 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form  10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨ Accelerated filer  x Non-accelerated filer  ¨ Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

As of June 30, 2008, the aggregate market value of the 3,859,792 shares of common stock held by non-affiliates of the Registrant was $481,123,073 based upon the last sale price of $124.65 per share as of June 30, 2008.

As of March 16, 2009, there were 4,120,969 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Specified portions of the registrant’s proxy statement, which will be filed with the Commission pursuant to Regulation 14A in connection with the registrant’s 2009 Annual Meeting of Stockholders are incorporated by reference into Part III of this annual report.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	2
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	21
Item 2.	Properties	22
Item 3.	Legal Proceedings	28
Item 4.	Submission of Matters to a Vote of Security Holders	28
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
Item 6.	Selected Financial Data	35
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 8.	Financial Statements and Supplementary Data	60
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	60
Item 9A.	Controls and Procedures	60
Item 9B.	Other Information	60
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	61
Item 11.	Executive Compensation	61
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	61
Item 13.	Certain Relationships and Related Transactions, and Director Independence	61
Item 14.	Principal Accountant Fees and Services	61
PART IV
Item 15.	Exhibits, Financial Statement Schedule	61

Cautionary Note Regarding Forward-Looking Statements

This Form 10-K may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), regarding, among other things, our plans, strategies and prospects, both business and financial. Forward-looking statements include, but are not limited to, statements that represent our beliefs concerning future operations, strategies, financial results or other developments. Forward-looking statements can be identified by the use of forward-looking terminology such as, but not limited to, “may,” “should,” “expect,” “anticipate,” “estimate,” “would be,” “believe,” or “continue” or the negative or other variations of comparable terminology. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-K is filed with the Securities Exchange Commission (“SEC”). Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this Form 10-K. Important factors that could cause actual results to differ materially from the forward-looking statements are disclosed in “Item 1A. Risk Factors,” “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Presentation of Dollar Amounts

Unless otherwise noted, all dollar amounts, except per share dollar amounts, reported in this Form 10-K are in thousands.

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PART I

Item 1. Business.

GENERAL

Except where the context suggests otherwise, the terms “we,” “us,” “our” and the “Fund” refer to Excelsior LaSalle Property Fund, Inc.

The Fund is a Maryland corporation and was incorporated on May 28, 2004 (“Inception”). The Fund was created to provide accredited investors within the meaning of Regulation D promulgated under the Securities Act of 1933 (the “Securities Act”) with an opportunity to participate in a private real estate investment fund that has elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes. We are authorized to issue up to 5,000,000 of our Class A common stock, $0.01 par value per share (our “Common Stock” or “Shares”). Please note that while we use the term “Fund,” the Fund is not a mutual fund or any other type of “investment company” as that term is defined by the Investment Company Act of 1940, as amended (the “Investment Company Act”), and will not be registered under the Investment Company Act.

From Inception through December 22, 2004, LaSalle US Holdings, Inc. was the sole stockholder of the Fund, and the Fund was managed and advised by LaSalle Investment Management, Inc. (“LaSalle”), a Maryland corporation. On December 23, 2004, we held an initial closing (the “Initial Closing”) and sold Shares for $100 per share to approximately 400 accredited investors. Also on December 23, 2004, our sponsor, U.S. Trust Company, N.A., acting through its investment advisory division, U.S. Trust Company, N.A. Asset Management Division, became the manager of the Fund (“USTAM”). On December 16, 2005, UST Advisers, Inc. (the “Former Manager”), a wholly-owned subsidiary of U.S. Trust Company, N.A., assumed the duties and responsibilities of USTAM and became the manager of the Fund. On March 31, 2006, U.S. Trust Company, N.A. merged with its affiliate, United States Trust Company, National Association (“U.S. Trust”), with U.S. Trust as the surviving entity.

On July 1, 2007, U.S. Trust Corporation and all of its subsidiaries, including the Former Manager and placement agent of the Fund, were acquired by Bank of America Corporation (the “Sale”). As a result of the Sale, the Former Manager and UST Securities Corp., a placement agent of the Fund at that time, became indirect wholly-owned subsidiaries of, and controlled by, Bank of America Corporation (“BAC”). Prior to its acquisition by BAC, U.S. Trust and its subsidiaries, including the Former Manager and UST Securities Corp. (“USTS”), were controlled by The Charles Schwab Corporation. The Former Manager continued to serve as the manager of the Fund and UST Securities Corp. continued to serve as the placement agent to the Fund after the Sale, and the Fund has consented to the change in ownership of the Former Manager and UST Securities Corp. UST Securities Corp. also engaged Bank of America, N.A. (“BANA”) and Banc of America Investment Services, Inc. (“BAI”) as sub-placement agents. The Former Manager was affiliated with Alternative Investment Solutions within the Global Wealth & Investment Management (“GWIM”) division of BAC. On February 22, 2008, U.S. Trust merged into BANA, an indirect wholly-owned subsidiary of BAC.

On March 11, 2008, our board of directors approved a transfer (the “Transfer”) of the Former Manager’s rights and obligations in the following agreements to Bank of America Capital Advisors, LLC, the Fund’s current manager (the “Manager”):

• The management agreement between the Fund and the Former Manager (the “Management Agreement”);

• An expense limitation and reimbursement between the Fund and the Former Manager (the “Expense Limitation Agreement”); and

• An investment advisory agreement, as amended, between the Fund, LaSalle and the Former Manager (the “Advisory Agreement”).

The Transfer became effective on May 29, 2008. The Manager is registered as an investment advisor with the Securities and Exchange Commission (the “SEC”). The Manager has the day-to-day responsibility for our management and administration pursuant to the Management Agreement.

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Effective November 26, 2008, BAI replaced USTS as placement agent of the Fund, and BANA ceased to be sub-placement agent of the Fund.

The Former Manager and the Fund contracted with LaSalle to act as our investment advisor (the “Advisor”), pursuant to the Advisory Agreement. The Advisor is registered as an investment advisor with the SEC. The Advisor has broad discretion with respect to our investment decisions and is responsible for selecting our investments and for managing our investment portfolio pursuant to the terms of the Advisory Agreement. LaSalle is a wholly-owned but operationally independent subsidiary of Jones Lang LaSalle Incorporated (“Jones Lang LaSalle”), a New York Stock Exchange-listed real estate services and money management firm. We have no employees as all operations are overseen and undertaken by the Manager and Advisor. In accordance with Maryland law, the Fund does have certain officers who administer the Fund’s operations. These officers are employees of, and are compensated by, the Manager.

The Manager has retained The Townsend Group, at the expense of the Manager, to assist the Manager in reviewing the investment activities of the Advisor and the investment performance of the Fund’s assets and monitoring compliance with the Fund’s investment guidelines. The Townsend Group is a consulting firm whose exclusive focus is the asset class of real estate. Founded in 1983, and with offices in Cleveland, Denver and San Francisco, The Townsend Group is a provider of real estate consulting services to institutional investors in the United States.

Our primary business is the ownership and management of a diversified portfolio of retail, office, industrial and apartment properties primarily located in the United States. As of December 31, 2008, we wholly or majority owned and controlled 40 consolidated properties totaling approximately 8.4 million square feet. As of December 31, 2008, we owned interests in two unconsolidated properties totaling approximately 0.8 million square feet. For a description of our properties, see “Item 2. Properties.”

INVESTMENT STRATEGY

Our investment objective is to seek to generate attractive long-term risk-adjusted total returns. We intend to pursue our investment objective by investing in real estate and real estate related assets directly or through subsidiaries (as described below), including joint venture arrangements with third parties. We have acquired and managed a portfolio of real estate investments that is diversified by property sector and geographic market. Specifically, we have and will continue to pursue investments in well-located, well-leased assets within the office, retail, industrial and apartment property sectors in the United States (the “Primary Sectors”). We expect to actively manage the mix of properties and markets over time in response to changing operating fundamentals within each property sector and to changing economies and real estate markets in the cities considered for investment. When consistent with our investment objective, we will also seek to maximize the tax efficiency of our investments through tax-free exchanges and other tax planning strategies. Our investment strategy may be changed from time to time by our board of directors.

We expect that a majority of our total return will be generated from cash flow from our properties. We also expect to have the potential for moderate capital appreciation over an extended market cycle. We will seek to minimize risk and maintain stability of income and value through broad diversification across property sectors and geographic markets and by balancing tenant lease expirations and debt maturities across the portfolio.

We expect to employ debt financing to enhance total returns when mortgage interest rates are at attractive levels relative to real estate income yields, when debt is available on terms and conditions which we consider favorable, in keeping with our core investment style. We have relied primarily on fixed-rate financing, locking in what were favorable spreads between real estate income yields and mortgage interest rates and have tried to maintain a balanced schedule of debt maturities. We have attempted to limit overall portfolio leverage to 65% (portfolio leverage is calculated as our share of the current property debt balance divided by the fair value of all

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our real estate investments). Declining commercial property values may, at times, cause our portfolio leverage to increase above our target leverage ratio of 65%. When these conditions occur, and subject to having available capital, we will attempt to acquire properties using lower leverage and retire existing mortgage loans as they mature, which we expect will, in time, reduce overall portfolio leverage.

The uncertainty of the current economic environment and lack of available credit has caused unprecedented volatility in the value of all financial assets, and has now spread to the commercial real estate markets, which are highly dependent upon the availability and terms of credit. After a number of years of above average appreciation in the real estate markets, values began to decrease during 2008 with significantly reduced transaction volume. Real estate values, including properties that we own, may continue to decline over the near term, which should, however, lead to better investment opportunities than have been seen in recent years.

As our portfolio has been static over the last year and in response to the broader financial crisis and economic slow down, we have prioritized the use of available cash to de-leverage the Fund through the repayment of our line of credit, to maintain dividend payments to stockholders, to accumulate cash reserves as may be necessary for the management of our properties and to provide limited liquidity to investors by repurchasing Shares through the tender offer process. The free cash flow generated from our properties in 2008 was used to pay the ongoing dividends to stockholders. During 2008, the capital raised through the sale of Shares to stockholders was used to de-lever the Fund, with the excess devoted largely to offering limited liquidity to our stockholders via the repurchase of Shares.

For the remainder of 2009, we will continue to monitor the broader economic slowdown and, as best we can, mitigate the impacts of weakening property fundamentals on our portfolio. Our challenge will be to balance the sometimes competing objectives of building cash reserves that will reduce risk in our portfolio with our desire to distribute free cash flow generated from our property investments to pay an ongoing dividend to stockholders. Our strategic bias towards longer dated leases, higher credit tenants and fixed rate financing has served us well. However, the duration and magnitude of the current recession has exceeded expectations and historical precedents causing even the most conservative and defensive investment strategies to under perform. While actual and projected property level cash flows have supported consistent dividend payment for sixteen quarters, we are not immune to impacts from a continuation of the current financial crisis and the financial stress it may have on our tenants. We intend to be responsive to changes in market conditions that may require us to adopt a more defensive posture in the management of our balance sheet. Among these defensive tactics may be, establishing cash reserves for future capital needs, altering the timing and amount of what we have historically paid in dividends and amounts and frequency of tender offers. In this regard, our dividend declared for the quarter ended March 31, 2009 has been reduced from $1.75 per Share, our historic practice for quarterly dividends for the past 16 quarters, to $0.875 per Share.

We intend to use our line of credit to fund a portion of our capital expenditures, mortgage principal amortization and other working capital requirements throughout the year. Our line of credit expires in February 2010. While renewing and extending our line of credit beyond its current expiration will be challenging in the current environment, it is critical if our line of credit is to be used as a reliable source of short-term funding needs.

Our longer term strategy provides that we may also seek to enhance overall portfolio returns by selectively investing in higher-risk properties involving more significant leasing and/or capital reinvestment challenges. Since our net asset value, or NAV, as defined under “Item 5. Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchase of Equity Securities,” exceeds $300 million, we may invest up to 25% of our assets in investments in sectors other than the Primary Sectors and/or properties located outside of the United States (“Other Investments”). These Other Investments will be considered when the anticipated incremental return outweighs the inherent incremental risk relative to the Primary Sectors. Pursuant to the terms of the Advisory Agreement, the Manager has retained the right to appoint one or more additional advisors with respect to Other Investments.

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INVESTMENT POLICIES

We may invest directly in real estate or indirectly in real estate through interests in corporations, limited liability companies, partnerships and joint ventures having an equity interest in real property, real estate investment trusts, ground leases, tenant in common interests, mortgages, participating mortgages, convertible mortgages, second mortgages, mezzanine loans or other debt interests convertible into equity interests in real property, options to purchase real estate, real property purchase-and-leaseback transactions and other transactions and investments with respect to real estate. Prior to our NAV reaching $300 million, all real estate investments were required to be located in the United States. Now that our NAV exceeds $300 million, up to 25% of our assets may be located outside the United States. As of the filing of this Form 10-K, all but one of our assets are located within the United States.

We intend, where appropriate, to employ leverage to enhance our returns. Historically, long-term non-recourse financing, on a portfolio-wide basis, was not expected to exceed 65% of portfolio fair value. Initial leverage on any single property was not expected to exceed 75% of the property’s fair value without the approval of our board of directors. There is no set limit as to the number of mortgages that may be secured by a single property, as long as the 75% leverage threshold is not exceeded. Declining real estate values have caused the portfolio’s leverage to increase above our target leverage of 65%. Our board of directors has approved a resolution that allows the Fund to operate with a higher level of portfolio leverage as a result of the decrease in property values. Going forward, subject to having available capital, we expect to acquire properties using lower leverage, which we expect will, in time, reduce overall portfolio leverage thereby reducing portfolio risk. At December 31, 2008, we had an unsecured line of credit of $70 million for short-term operating, property acquisitions and other working capital needs, which is excluded from the portfolio leverage limits described above.

Our Advisor performs hold/sell analyses for each property as part of the annual strategic planning process. A sale decision may also originate at the portfolio or Fund level, where diversification objectives relating to property, geographical mix or scheduled lease expirations may indicate the need to rebalance the portfolio, where our Advisor’s perspectives on risks within a property sector change, or where the Fund’s capital needs have changed. A range of property-specific conditions may also indicate the need to sell, including changing demand fundamentals, potential market oversupply, changing conditions in capital markets, or changes in the asset’s competitive status in its market. Ultimately, the optimal holding period for every property is the period that maximizes return within our risk tolerance objectives. This goal is achieved when:

• the Advisor’s research and analysis conclude that the asset or the market have reached a cyclical peak;

• analysis indicates that a property is likely to under-perform our return objectives going forward;

• analysis indicates that a property’s risk profile exceeds our tolerances; or

• we can achieve improved returns by redeploying capital into new investments.

We have no limitation on the percentage of total assets that may be invested in any asset, nor the concentration of investments in any one geographic location within the United States nor to any individual tenant. The Advisory Agreement includes broad investment guidelines that provide for our diversification goals, which include goals for investment style, property type and geographic diversification.

COMPETITION

We face competition when attempting to make real estate investments, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension funds, partnerships and individual investors. The leasing of real estate is highly competitive. Our properties compete for tenants with similar properties primarily on the basis of location, total occupancy costs (including base rent and operating expenses), services provided, and the design and condition of the improvements.

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SEASONALITY

With the exception of our student-oriented apartment communities, our investments are not materially impacted by seasonality, despite certain of our retail tenants being impacted by seasonality. Percentage rents (rents computed as a percentage of tenant sales) that we earn from investments in retail and office properties may, in the future, be impacted by seasonality.

For our six student-oriented apartment communities, the majority of our leases commence mid-August and terminate the last day of July. These dates generally coincide with the commencement of the universities’ fall academic term and the completion of the subsequent summer school session. In certain cases we enter into leases for less than the full academic year, including nine-month or shorter-term semester leases. As a result, we may experience significantly reduced cash flows during the summer months at properties leased under leases having terms shorter than 12 months. We are required to re-lease each property in its entirety each year, resulting in significant turnover in our tenant population from year to year. We have found certain property revenues and operating expenses to be cyclical in nature, and therefore not incurred ratably over the course of the year. Prior to the commencement of each new lease period, mostly during the first two weeks of August, we prepare the units for new incoming tenants. Other than revenue generated by in-place leases for returning tenants, we do not generally recognize lease revenue during this period referred to as “Turn” as we have no leases in place. In addition, during Turn we incur significant expenses making our units ready for occupancy, which we recognize immediately. This lease Turn period results in seasonality in our operating results during the second and third quarter of each year.

ENVIRONMENTAL STRATEGIES

As an owner and operator of real estate, we are subject to various environmental laws. Compliance with existing laws has not had a material adverse effect on our financial condition and results of operations, and we do not believe it will have such an impact in the future. However, we cannot predict the impact of unforeseen environmental contingencies or new or changed environmental laws or regulations applicable to our current investments in properties or investments in properties we may make in the future. During our due diligence prior to making investments in properties, we retain qualified environmental consultants to assist us in identifying and quantifying environmental risks associated with such investments.

GEOGRAPHIC CONCENTRATION

The following sets forth the percentage of our consolidated revenues derived from properties owned in each state that accounted for more than 10% of our consolidated revenues during 2006, 2007 and 2008:

State	Percentage of Consolidated Revenues
2008
California	17%
Georgia	14%
Florida	11%
Colorado	10%
2007
California	22%
Colorado	13%
Georgia	13%
Arizona	11%
Washington	10%
2006
California	21%
Colorado	17%
Arizona	15%
Virginia	13%
Georgia	13%
Washington	11%

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FOREIGN OPERATIONS

We currently own one property outside the United States, a multi-tenant office building located in Calgary, Canada. We are subject to currency risk and general Canadian economy risks associated with this investment. Canada accounted for 4% of our consolidated revenues from the year ended December 31, 2008.

DEPENDENCE ON SIGNIFICANT TENANTS

For the years ended December 31, 2008, 2007 and 2006, Fannie Mae accounted for 6%, 9% and 13% of our consolidated revenues, respectively. No other tenant accounted for more than 10% of our consolidated revenues during 2008, 2007 or 2006.

REPORTABLE SEGMENTS

Financial Accounting Standards Board (“FASB”) Statement No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”), requires disclosure of certain operating and financial data with respect to separate business activities within an enterprise. Our primary business is the ownership and operation of real estate investments. We evaluate cash flow and allocate resources on a property-by-property basis. We aggregate our properties into one reportable segment since all properties are institutional quality real estate. We do not distinguish or group our consolidated operations by property type or on a geographic basis. Accordingly, we have concluded that we currently have a single reportable segment for SFAS 131 purposes.

AVAILABLE INFORMATION

We are subject to the information requirements of the Securities Exchange Act of 1934, or the Exchange Act. Therefore, we file periodic reports, proxy statements and other information with the SEC. Such reports, proxy statements and other information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE, Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers, like the Fund, that file electronically. We currently do not have an Internet website. However we provide electronic copies of our SEC filings free of charge upon request. If you would like us to send you an electronic or paper copy of our SEC filings, please contact Peggy Lynn, 225 High Ridge Road, Stamford, CT 06905-3039, or call (203) 352-4497.

INSURANCE

Although we believe our investments are currently adequately covered by insurance consistent with the level of coverage that is standard in our industry, we cannot predict at this time if we will be able to obtain adequate coverage at a reasonable cost in the future.

EXECUTIVE OFFICERS OF THE REGISTRANT

James D. Bowden, age 55, has been Chief Executive Officer of the Fund since June 2008. Mr. Bowden has been in the financial industry for 30 years and has specialized in private equity for the last thirteen. He joined the Manager in 1998 to form the private equity group and to manage BAC’s private equity fund of funds business. In that capacity, he has acted as the primary investment strategist for various private placement offerings and client advisory activities associated with the private equity asset class. He has led private placement capital raising activities, directed investment origination and has ongoing management and administration responsibilities for the business. He is a frequent speaker before private equity industry groups and asset management organizations concerning issues associated with investing in private equity, and is a member of the Advisory Board of Private Equity Center of the American Graduate School of International Management. Mr. Bowden’s career covers a variety of private equity, commercial banking and management consulting positions. From 1993 to 1998, he served as the manager of the Chicago office of Corporate Credit Examination Services for Continental Bank,

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where he had responsibility for the independent oversight of the Private Equity Investing and Midwest Commercial Banking Division. He continued in that capacity after Continental Bank merged with BAC, until he joined the Manager. From 1988 to 1993, Mr. Bowden was a Managing Consultant in the Financial Advisory Services practice of Coopers & Lybrand, specializing in corporate turnarounds. His career focused on commercial lending and problem loan workouts prior to joining Coopers & Lybrand, with work at Continental Bank from 1985 to 1988, Citicorp from 1980 to 1985 and American National Bank of Chicago from 1977 to 1980. He received his MBA and BBA degrees from the University of Michigan in 1977 and 1975, respectively. Mr. Bowden is a Certified Public Accountant.

Steven L. Suss, age 48, has been an officer of the Fund since April 2007. Mr. Suss is the Fund’s Chief Financial Officer and the Chief Financial Officer of the Alternative Investment Solutions of GWIM and is responsible for managing the financial reporting and operational affairs of the investment vehicles within the group. Mr. Suss joined BAC in July 2007 via BAC’s acquisition of U.S. Trust, which he joined in April 2007. At U.S. Trust, Mr. Suss was the Chief Financial Officer of the Alternative Investments Division. Prior to joining U.S. Trust, Mr. Suss served as the Chief Financial Officer and Chief Compliance Officer of Heirloom Capital Management, L.P. (“Heirloom”), an SEC-registered investment adviser focused on investing in small to medium capitalized consumer, healthcare and technology companies, from May 2002 until September 2006. Mr. Suss was responsible for, among other things, all accounting and tax functions for all legal entities and managed accounts affiliated with Heirloom and investor communications. From September 1997 until January 2002, Mr. Suss served as the Chief Financial Officer and Vice President of Westway Capital LLC, an organization dedicated to achieving high performance returns by investing in technology and technology-related companies. Mr. Suss received a B.B.A. from the University of Texas at Austin.

INVESTMENT COMMITTEE OF THE ADVISOR

All of the Advisor’s major investment decisions on our behalf require the approval of its North American Private Equity Investment Committee, which is comprised of the following:

Peter H. Schaff, age 50, has been a Director of the Fund since May 2004. Mr. Schaff was designated as a Director by the Advisor. Mr. Schaff is an International Director and is the Chief Executive Officer of LaSalle’s North American Private Equity business. Mr. Schaff serves on LaSalle’s North American Private Equity Investment and Allocation Committees, and also on its Global Management Committee. Since joining LaSalle in 1984, Mr. Schaff has had extensive experience in all aspects of institutional real estate investment management, including acquisitions, joint ventures, financings, redevelopments, and dispositions. Prior to joining LaSalle, Mr. Schaff was a Banking Officer of Continental Illinois National Bank, working on private debt placements, interest rate swaps and related financial products. Mr. Schaff holds an undergraduate degree from Stanford University and an M.B.A. from the University of Chicago Graduate School of Business. Mr. Schaff is a member of the Urban Land Institute and the Pension Real Estate Association.

Wade W. Judge is an International Director and Chief Investment Officer of LaSalle’s North American Private Equity business and is the Chairman of LaSalle’s North American Private Equity Investment Committee. Prior to assuming these responsibilities in 2001, Mr. Judge was responsible for directing LaSalle’s U.S. acquisitions group for approximately 12 years. Prior to joining LaSalle in 1992, Mr. Judge worked for the Chairman of Jones Lang LaSalle and later managed the firm’s development group. Before coming to Jones Lang LaSalle in 1975, Mr. Judge was with Brown Brothers Harriman & Co. in New York City. Mr. Judge graduated with a B.A. from Dartmouth College and an M.B.A. from Stanford University.

James Hutchinson is an International Director of LaSalle and a member of the North American Private Equity Investment Committee. He also serves as the President of the Income & Growth Fund series with primary responsibility for acquisitions, financings and capital decisions. Since joining LaSalle in 1985, Mr. Hutchinson has completed property investments with an aggregate value exceeding $1 billion. Prior to joining LaSalle, Mr. Hutchinson was a senior manager in the audit division of Deloitte & Touche in Chicago. Mr. Hutchinson

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holds a B.A. in mathematics from Brown University and an M.B.A. from Indiana University. He is a C.P.A. and a member of the National Association of Industrial and Office Properties and the Urban Land Institute.

William J. Maher is Director of North American Research & Strategy for LaSalle and has been since he began with the firm in 1995. Mr. Maher is responsible for research relating to real estate investment strategy and direction, as well as market analysis for existing and potential new investments. In addition to leading research efforts throughout North America, he works with clients to develop custom real estate investment and portfolio strategies. Mr. Maher is a member of LaSalle’s U.S. Private Equity Investment Committee, the Global Investment Strategy Committee, and principal author of LaSalle’s Investment Strategy Annual and quarterly Market Watch. Prior to joining LaSalle, Mr. Maher was a partner with Ernst & Young and director of the Real Estate Consulting Group’s Washington, DC office, where he managed the group’s efforts in the fields of strategic planning, market and financial feasibility assessment, portfolio due diligence and corporate real estate. Before that, Mr. Maher was Executive Vice President of Halcyon Ltd., a real estate consulting and services firm. Mr. Maher is a graduate of Harvard University’s Kennedy School of Government, holding a Master’s degree in Urban Planning, with distinction. Mr. Maher also completed an executive management program at Northwestern University’s Kellogg School of Management and received a B.A. in Economics from Williams College in Massachusetts. Mr. Maher is a member of the Research Advisory Task Force of the International Council of Shopping Centers; the Research Committee Vice Chairman of the Real Estate Roundtable; serves as Vice Chairman of the Program Committee for the Urban Land Institute; and is a member of the Real Estate Investment Committee at Williams College. Mr. Maher is also a member of the Association of Foreign Investors in Real Estate and NAREIT.

Non-Voting, Ex Officio Members

The following employees of the Advisor are non-voting, ex officio members of its North American Private Equity Investment Committee:

Jeff Jacobson is the Global Chief Executive Officer of LaSalle. In that role, Mr. Jacobson is responsible for a 740 plus person team managing $41 billion of investments in both private and public real estate across all major markets within Europe, North America and Asia Pacific. Mr. Jacobson is a member of Jones Lang LaSalle’s Global Executive Committee, a member of the Jones Lang LaSalle Co-Investment Capital Allocation Committee and sits on various LaSalle Investment Committees. Mr. Jacobson was appointed Regional CEO of LaSalle’s European operations in 2000, prior to his appointment as Global CEO in January 2007. Mr. Jacobson was responsible for all aspects of the European business, including servicing the firm’s European investment management clients, chairing the European Investment Committee and implementing growth initiatives. Prior to returning to LaSalle in 2000, Mr. Jacobson was a Managing Director of Security Capital Group Incorporated. From 1986 until 1997, Mr. Jacobson was at LaSalle Partners where he worked on a broad range of property acquisitions, sales financing and restructuring assignments and started up the firm’s Commercial Mortgage Backed Securities (“CMBS”) investment activities. Mr. Jacobson holds undergraduate and graduate degrees in Economics from Stanford University.

Jacques Gordon is International Director of Research and Investment Strategy for LaSalle and has served in this role since 1994. Mr. Gordon serves on the Advisor’s Global Management and North American Private Equity Investment Committees. Mr. Gordon is responsible for market forecasting, investment strategy development, and the direction of investment research, which monitors capital markets, regional economies and property markets in 120 metropolitan areas in 20 countries. Mr. Gordon is Managing Editor of Market Watch, a quarterly publication of LaSalle; a primary author of LaSalle’s Investment Strategy Annual; and co-chair of the global research committee of Jones Lang LaSalle. Mr. Gordon is a past President of the Real Estate Research Institute and currently chairs the Pension Real Estate Association’s Research Committee. Mr. Gordon also serves on the boards of the American Real Estate Society and the editorial boards of Real Estate Finance, Journal of Real Estate Portfolio Management and Wharton Real Estate Review. Previously, Mr. Gordon served as Director of Research at Baring Advisors and at Real Estate Research Corporation in Chicago. Mr. Gordon received a bachelor’s degree from the University of Pennsylvania, and M.Sc. from the London School of Economics and a Ph.D. from Massachusetts Institute of Technology.

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Item 1A. Risk Factors.

You should consider carefully the risks described below and the other information in this Form 10-K, including our consolidated financial statements and the related notes included elsewhere in this Form 10-K. If any of the following risks actually occur, they may materially harm our business and our financial condition and results of operations and cause the Fund’s NAV to decline.

Our student-oriented apartment communities are susceptible to certain risks, including: (i) seasonality in rents; (ii) annual re-leasing that is highly dependent on marketing and university admission policies; (iii) competition for tenants from other housing operated by educational institutions or other off-campus properties; and (iv) negative publicity.

For the year ended December 31, 2008, student-oriented apartment communities comprised approximately 22% of our revenues. The results of operations from our student-oriented apartment communities are subject to an annual leasing cycle, short lease-up period, seasonal cash flows, changing university admission and housing policies and other risks inherent in the student housing industry.

Student apartment communities are typically leased by the bed on an individual lease liability basis, unlike multifamily housing where leasing is by the unit. Individual lease liability limits each resident’s liability to his or her own rent without liability for a roommate’s rent. A parent or guardian is required to execute each lease as a guarantor unless the resident provides adequate proof of acceptable credit. The number of lease contracts that we administer is therefore equivalent to the number of beds occupied and not the number of units. We generally lease our owned properties under 12-month leases, and in certain cases, under nine-month or shorter-term semester leases. As a result, we may experience significantly reduced cash flows during the summer months at properties leased under leases having terms shorter than 12 months. Furthermore, all of our properties must be entirely re-leased each year, exposing us to increased leasing risk. Student apartment communities are also typically leased during a limited leasing season that usually begins in January and ends in August of each year. We are therefore highly dependent on the effectiveness of our marketing and leasing efforts and personnel during this season.

Changes in university admission policies could adversely affect us. For example, if a university reduces the number of student admissions or requires that a certain class of students, such as freshman, live in a university owned facility, the demand for beds at our properties may be reduced and our occupancy rates may decline. While we may engage in marketing efforts to compensate for such change in admission policy, we may not be able to effect such marketing efforts prior to the commencement of the annual lease-up period or our additional marketing efforts may not be successful.

Many colleges and universities own and operate their own competing on-campus housing facilities. On-campus student housing has certain inherent advantages over off-campus student housing in terms of physical proximity to the university campus and integration of on-campus facilities into the academic community. Colleges and universities can generally avoid real estate taxes and borrow funds at lower interest rates than us and other private sector operators. We also compete with national and regional owner-operators of off-campus student housing in a number of markets as well as with smaller local owner-operators.

Currently, the industry is fragmented with no participant holding a significant market share. There are a number of student apartment communities that are located near or in the same general vicinity of many of our owned properties and that compete directly with us. Such competing student housing complexes may be newer than our properties, located closer to campus, charge less rent, possess more attractive amenities or offer more services or shorter term or more flexible leases. Rental income at a particular property could also be affected by a number of other factors, including the construction of new on-campus and off-campus residences, increases or decreases in the general levels of rents for housing in competing communities and other general economic conditions. We believe that a number of other large national companies with substantial financial and marketing resources may be potential entrants in the student housing business. The entry of one or more of these companies could increase competition for students.

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Federal and state laws require colleges to publish and distribute reports of on-campus crime statistics, which may result in negative publicity and media coverage associated with crimes occurring on or in the vicinity of our properties. Reports of crime or other negative publicity regarding the safety of the students residing on, or near, our properties may have an adverse effect on our business.

The current global financial crisis may cause us to lose tenants and may impair our ability to borrow money to purchase properties or to refinance existing mortgage loans.

Our operations and performance depend on general economic conditions. The U.S. economy has recently experienced a financial downturn, with consumer spending on the decline, credit tightening and unemployment rising. Many financial and economic analysts are predicting that the world economy has entered into what will be a prolonged economic downturn characterized by high unemployment, limited availability of credit and decreased consumer and business spending. This economic downturn is expected to adversely affect the businesses of many of our tenants. Accordingly, we may experience higher vacancy rates and deterioration in our financial results as a result of the economic downturn.

The current downturn has had, and may continue to have, an unprecedented impact on the global credit markets. Credit has tightened significantly in the last several months. While we recently extended our credit facility so that it now expires on February 21, 2010, there can be no assurance that we will be able to obtain mortgage loans to purchase additional properties if such opportunities arise or to refinance existing mortgage loans, which could hurt our ability to grow our business. The Fund’s failure to obtain leverage at the contemplated levels, or to obtain leverage on attractive terms, could have a material adverse effect on the Fund’s ability to make new investments, its operating costs and its ability to pay dividends over time.

The Fund is subject to the risks of commercial real estate ownership that could reduce the value of its properties.

Real estate historically has experienced significant fluctuations and cycles in value that have resulted in reductions in the value of real estate related investments. Real estate will continue to be subject to such fluctuations and cycles in value in the future that may negatively impact the value of the Fund’s investments. The marketability and value of the Fund’s investments will depend on many factors beyond the control of the Fund. The ultimate performance of the Fund’s investments will be subject to the varying degrees of risk generally incident to the ownership and operation of the underlying real properties. The ultimate value of the Fund’s investment in the underlying real properties depends upon the Fund’s ability to operate the real properties in a manner sufficient to maintain or increase revenues in excess of operating expenses and debt service. Revenues and the values of our properties may be adversely affected by:

• changes in national or international economic conditions;

• cyclicality of real estate;

• changes in local market conditions due to changes in general or local economic conditions and neighborhood characteristics;

• the financial condition of tenants, buyers and sellers of properties;

• competition from other properties offering the same or similar services;

• changes in interest rates and in the availability, cost and terms of mortgage debt;

• access to capital;

• the impact of present or future environmental legislation and compliance with environmental laws;

• the ongoing need for capital improvements (particularly in older structures);

• changes in real estate tax rates and other operating expenses;

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• adverse changes in governmental rules and fiscal policies;

• civil unrest;

• acts of God, including earthquakes, hurricanes and other natural disasters, acts of war, acts of terrorism (any of which may result in uninsured losses);

• adverse changes in zoning laws; and

• other factors that are beyond the control of the real property owners and the Fund.

In the event that any of the real properties underlying the Fund’s investments experience any of the foregoing events or occurrences, the value of and return on such investments would be negatively impacted.

The success of the Fund will be dependent on the availability of, and the degree of competition for, attractive investments. The lack of availability of attractive investments could materially impair the financial performance of the Fund.

The Fund’s operating results will be dependent upon the availability of, and the Advisor’s ability to identify, acquire and manage, appropriate real estate investment opportunities. It may take considerable time for the Fund to identify and acquire appropriate investments. In general, the availability of desirable real estate opportunities and the Fund’s investment returns will be affected by the level and volatility of interest rates, conditions in the financial markets and general, national and local economic conditions. No assurance can be given that the Fund will be successful in identifying, underwriting and then acquiring investments which satisfy the Fund’s return objectives or that such investments, once acquired, will perform as intended. The Fund is engaged in a competitive business and competes for investments with traditional equity sources, both public and private, as well as existing funds, or funds formed in the future, with similar investment objectives. If the Fund cannot effectively compete with these entities for investments, its ability to achieve its investment objective will be adversely affected.

The past performance of the Manager and the Advisor or any fund connected to either is not a predictor of future results of the Fund, and the Fund may not achieve positive financial results.

Neither the track record of senior management of the Manager or the Advisor nor the performance of any fund connected to either shall imply or predict (directly or indirectly) any level of future performance of the Fund, the Manager or the Advisor. The Advisor’s and Manager’s performance and the performance of the Fund is dependent on future events and is, therefore, inherently uncertain. Past performance cannot be relied upon to predict future events due to a variety of factors, including, without limitation, varying business strategies, different local and national economic circumstances, different supply and demand characteristics, varying degrees of competition, varying circumstances pertaining to the real estate capital markets and the cyclical nature of real estate. The Fund has a very short-term performance history, and the Fund may not achieve positive financial results.

If the Fund is unable to obtain leverage on favorable terms, its ability to make new investments, its operating costs and its ability to make dividend payments may be adversely affected.

The Fund’s return on investment is somewhat dependent upon its ability to grow its portfolio of existing and future investments through the use of leverage. The Fund’s ability to obtain the leverage necessary on attractive terms will ultimately depend upon its ability to maintain interest coverage ratios and meet market underwriting standards, which will vary according to lenders’ assessments of the Fund’s creditworthiness and its ability to comply with the terms of the borrowings. The Fund’s failure to obtain leverage at the contemplated levels, or to obtain leverage on attractive terms, could have a material adverse effect on the Fund’s ability to make new investments, its operating costs and its ability to pay dividends over time.

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The Fund’s use of leverage could impair its financial performance and result in the loss of some or all of its assets.

Leverage creates an opportunity for increased return on the Fund’s investments, but at the same time creates risks. For example, leveraging magnifies changes in the net worth of the Fund. This magnification may be realized, for example, in a circumstance where the gross asset value of one of the Fund’s investments declines, the principal amount of the debt secured by that investment stays constant and the net equity or net worth of the Fund absorbs 100% of the decline in the investment’s value. The Fund will leverage assets only when there is an expectation that leverage will enhance returns, although there can be no assurance that the Fund’s use of leverage will prove to be beneficial. Moreover, there can be no assurance that the Fund will be able to meet its debt service obligations and, to the extent that it cannot, the Fund risks the loss of some or all of its assets or a financial loss if the Fund is required to liquidate assets at a commercially inopportune time.

If the Manager or Advisor were to lose key personnel or the Fund were to lose the services of the Manager or the Advisor, the Fund’s ability to run its business could be adversely affected.

The Manager’s ability to successfully manage the Fund’s affairs currently depends on the Manager’s organization and the Advisor’s ability to identify, structure and finance investments. The Fund will also be relying to a substantial extent on the experience, relationships and expertise of the senior management and other key employees of the Manager and the Advisor. There can be no assurance that these individuals will remain in the employ of the Manager and the Advisor. The loss of the services of the Manager’s organization, the Advisor’s investment advice or any of such individuals, could have a material adverse effect on the Fund’s operations. In addition, under certain circumstances, our board of directors has the right to remove the Manager and the Advisor.

The Fund incurs significant costs in connection with Exchange Act compliance and it may become subject to liability or sanctions for any failure to comply, which could materially impact results of operations and financial condition of the Fund.

The Fund is subject to Exchange Act rules and related reporting requirements. Compliance with the reporting requirements of the Exchange Act requires timely filing of Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K, among other actions. Further, recently enacted regulations and standards relating to corporate governance and disclosure requirements applicable to public companies, including the Sarbanes-Oxley Act of 2002 and the SEC regulations relating thereto, have increased the costs of corporate governance, reporting and disclosure practices to which the Fund is subject. The Fund’s efforts to comply with applicable laws and regulations, including requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002, involve significant, and potentially increasing, costs. In addition, these laws, rules and regulations create legal bases for administrative, civil and criminal proceedings against the Fund in cases of non-compliance.

The Fund may not achieve its return objectives, which may adversely affect the value of our Common Stock.

The Fund will make investments based on the Advisor’s estimates or projections of internal rates of return and current returns, which in turn are based on, among other considerations, assumptions regarding the performance of Fund assets, the amount and terms of available financing and the manner and timing of dispositions, all of which are subject to significant uncertainty. In addition, events or conditions that have not been anticipated may occur and could have a significant effect on the ability of the Fund to generate attractive long-term risk-adjusted total returns. The Fund has a limited operating history and therefore may be subject to greater uncertainty than funds with longer track records. Moreover, the Fund’s ability to achieve its objectives may be adversely impacted by any of the factors discussed in this “Risk Factors” section. The Fund’s failure to achieve its return objectives may adversely affect the value of our Common Stock.

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The Fund may suffer declines in rental revenue and/or occupancy at certain of its current and future retail properties related to co-tenancy provisions contained in certain tenant’s leases, which would have a negative impact on the value of our Common Stock.

Tenants of certain retail properties held by the Fund have leases that contain co-tenancy provisions, which require either certain tenants and/or certain amounts of square footage to be occupied and open for business or other tenants of the property gain certain rights. These rights often include the right to pay reduced rents and/or the right to terminate the lease should the co-tenancy provision not be satisfied. As a result of these co-tenancy provisions, and the exercise of rights pursuant to these provisions, the loss of a single tenant may have a negative impact on the Fund beyond the loss of rent from that particular tenant, in that the loss of a tenant due to its exercise of its co-tenancy provision, may trigger the co-tenancy provisions of other tenants, which can result in additional co-tenancy provisions being triggered. In addition, the Fund could still be negatively impacted even if a tenant that vacates the property continues to pay the full rent amount under its lease as the reduced occupancy could permit other tenants to exercise their co-tenancy provision rights. As a result, the Fund would have to recognize reduced rental income and/or reduced occupancy, which would have a negative impact on the value of the Fund’s Common Stock.

If significant tenants were to default on their lease obligations to the Fund, its results of operations and ability to pay dividends to stockholders may be adversely affected.

During the year ended December 31, 2008, Fannie Mae accounted for 6% of consolidated revenues. If this significant tenant were to default on its lease obligation to the Fund, our results of operations and ability to pay dividends to our stockholders would be adversely affected.

The costs of compliance with environmental laws and other governmental laws and regulations may adversely affect the Fund’s results of operations and financial condition and its ability to pay dividends to stockholders.

All real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, and the remediation of contamination associated with disposals. Some of these laws and regulations may impose joint and several liability on tenants, owners or operators for the costs of investigation or remediation of contaminated properties, regardless of fault or the legality of the original disposal. Under various federal, state and local laws, ordinances and regulations, a current or previous owner, developer or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances at, on, under, or in its property. In addition, the presence of these substances, or the failure to properly remediate these substances, may subject the Fund to claims by private plaintiffs and adversely affect its ability to sell or rent a property or to use the property as collateral for future borrowings.

Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations, stricter interpretation of existing laws or the future discovery of environmental contamination may require material expenditures by the Fund. The Fund cannot assure that future laws, ordinances or regulations will not impose any material environmental liability, or that the current environmental condition of its properties will not be affected by the operations of the tenants, by the existing condition of the land, by operations in the vicinity of the properties, such as the presence of underground storage tanks, or by the activities of unrelated third parties.

These laws typically allow liens to be placed on the affected property. In addition, there are various local, state and federal fire, health, life-safety and similar regulations with which the Fund may be required to comply and that may subject it to liability in the form of fines and/or damages for noncompliance.

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The Fund cannot predict what other environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted, or what environmental conditions may be found to exist in the future. The Fund cannot provide assurance that its business, results of operations, liquidity, financial condition and ability to pay dividends will not be adversely affected by these laws.

The Fund’s properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediation of the problem.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Public concern about indoor exposure to mold has been increasing along with awareness that exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of a significant amount of mold at any of the Fund’s properties could require the Fund to undertake a costly remediation program to contain or remove the mold from the affected properties. In addition, the presence of mold could expose the Fund to liability from tenants, employees of tenants and others if property damage or health concerns arise as a result of the presence of mold in the properties of the Fund. If the Fund ever becomes subject to significant mold-related liabilities, its business, financial condition, liquidity, results of operations and ability to pay dividends could be materially and adversely affected.

Stockholders may experience dilution.

The Fund expects to sell additional Shares through private placements to accredited investors. Stockholders that do not participate in future private placements will experience dilution in the percentage of their equity investment in the Fund. In addition, depending on the value of the Fund’s properties at the time of any future sale of Shares, stockholders may experience dilution in Current Share Price (as defined under “Item 5. Markets for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchase of Equity Securities” below) of their Shares.

If the Fund is unable to raise additional capital to support its growth through the sale of Shares, its financial results may suffer.

To support the Fund’s growth and further diversify its portfolio and investments, the Fund expects to raise additional capital by selling Shares to accredited investors in private placement transactions. If the Fund were unable to sell additional Shares due to market forces or other factors, its ability to grow its business may be adversely affected. This may negatively affect the Fund’s ability to achieve greater diversification and economies of scale in its operations and therefore, may adversely affect its financial results.

Future terrorist attacks may result in financial losses for the Fund and limit its ability to obtain terrorism insurance.

The terrorist attacks on September 11, 2001 disrupted the United States financial markets and negatively impacted the U.S. economy in general. Any future terrorist attacks and the anticipation of any such attacks, or the consequences of the military or other response by the United States and its allies, may have a further adverse impact on U.S. financial markets, including real estate capital markets, and the economy. It is not possible to predict the severity of the effect that such future events would have on the financial markets and economy.

It is possible that the economic impact of any future terrorist attacks will adversely affect some of the Fund’s investments. Some of the Fund’s investments, particularly those located in or around major population centers, may be more susceptible to these adverse effects than others. The Fund may suffer losses as a result of the adverse impact of any future attacks and these losses may adversely impact investors’ returns.

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In addition, the events of September 11, 2001 created significant uncertainty regarding the ability of real estate owners of high profile properties to obtain insurance coverage protecting against terrorist attacks at commercially reasonable rates, if at all. With the enactment of the Terrorism Risk Insurance Act, which was extended through 2014 by Terrorism Risk Insurance Program Reauthorization Act of 2007, insurers must make terrorism insurance available under their property and casualty insurance policies, but this legislation does not regulate the pricing of such insurance. The absence of affordable insurance coverage may affect the general real estate lending market, lending volume and the market’s overall loss of liquidity may reduce the number of suitable investment opportunities available to the Fund and the pace at which its investments are made. The Fund currently carries terrorism insurance under its master insurance program on all of its investments.

Insurance on the Fund’s properties may not adequately cover all losses to its properties, which could reduce stockholder returns if a material uninsured loss occurs.

The Fund’s tenants are required to maintain property insurance coverage for the properties under net leases. The Fund maintains a blanket policy on its properties not insured by its tenants. There are various types of losses, generally of a catastrophic nature, such as earthquakes, floods, hurricanes, terrorism or acts of war, that may be uninsurable or not economically insurable. Should an uninsured loss occur, the Fund could lose its capital investment and/or anticipated profits and cash flow from one or more properties. Inflation, changes in building codes and ordinances, environmental considerations, and other factors, including terrorism or acts of war, might make the insurance proceeds insufficient to repair or replace a property if it is damaged or destroyed. In that case, the insurance proceeds received might not be adequate to restore the Fund’s economic position with respect to the affected real property, which could reduce the amounts the Fund has available to pay dividends.

Due to limitations on the ability of the Fund to repurchase stockholders’ Shares and restrictions on their transfer, an investment in the Shares will be illiquid.

An investment in Shares requires a long-term commitment, with no certainty of return. The sale of Shares to investors in the Fund have not been registered under the Securities Act and the Shares may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The Fund does not currently intend to apply for listing of its Common Stock on any securities exchange or arrange for it to be quoted on any automated dealer quotation system. There is no public market for the Shares and none is expected to develop. The Shares are also subject to other transfer restrictions.

Although the Fund intends to provide limited liquidity to its stockholders, subject to board of directors approval, by conducting tender offers pursuant to which the Fund expects to offer to repurchase a specific percentage, number or dollar amount of outstanding Shares, the Fund may not have sufficient available cash to fund the repurchase of Shares. There is no guarantee that cash will be available at any particular time to fund repurchases of Shares, and the Fund will be under no obligation to make such cash available through the sale of assets, borrowings or otherwise. In addition, the Fund’s compliance with the Federal income tax rules applicable to REITs and rules under the Federal securities laws may affect the Fund’s ability to repurchase Shares. If the number of Shares tendered by stockholders exceeds the percentage, number or dollar amount of Shares offered to be repurchased by the Fund, the Fund might only accept Shares properly tendered on a pro rata basis. In this regard, our most recent tender offer that expired on December 19, 2008 was oversubscribed, and we purchased approximately 7.24% of each stockholder’s validly tendered Shares.

In addition, the repurchase of Shares is subject to regulatory requirements imposed by the SEC. The Fund’s repurchase procedures are intended to comply with such requirements. However, in the event that the Board determines that the Fund’s repurchase procedures described above are required to be or appropriately should be amended, the Board will adopt revised repurchase procedures as necessary to ensure the Fund’s compliance with applicable regulations or as the Board in its sole discretion deems appropriate. The Fund may terminate, reduce or otherwise change the above share repurchase program.

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The Fund’s investments may be illiquid, which may limit the Fund’s ability to repurchase Shares.

Real estate investments are relatively illiquid. Such illiquidity may limit the Fund’s ability to vary its portfolio of investments in response to changes in economic and other conditions. Illiquidity may result from the absence of an established market for real estate investments as well as the legal or contractual restrictions on their resale. In addition, illiquidity may result from the decline in value of one of the Fund’s investments. There can be no assurances that the fair market value of any of the Fund’s real property investments will not decrease in the future. The relative illiquidity of the Fund’s investments may limit its ability to repurchase your Shares through tender offers as planned.

If the Fund is not able to appropriately diversify its investments, its financial results would be disproportionately affected by a downturn in the particular geographic region or property sector in which its investments are concentrated.

While the Fund intends to diversify its investments both geographically and by property sector, there is no assurance as to the degree of diversification that will actually be achieved by the Fund. The Fund may not be able to assemble a fully diversified portfolio. Furthermore, the Fund may make investments involving contemplated sales or refinancings that do not actually occur as expected, which could lead to increased risk as a result of it having an unintended long-term investment and reduced diversification. Further diversification consistent with the Fund’s objectives will be dependent on a number of additional factors, including the Fund’s ability to raise additional capital, so there can be no assurance that the Fund’s diversification objectives will be achieved. To the extent the Fund is not able to appropriately diversify its investments, its financial results would be adversely affected if there were a downturn in the particular geographic region or property sector in which the Fund’s investments were concentrated. As of December 31, 2008, 46% of the current fair value of the Fund’s consolidated properties is geographically concentrated in the western United States. Fifty percent of the current fair value of unconsolidated properties are geographically concentrated in the midwestern and western United States. The Fund’s diversification of consolidated properties by property type, based on current fair value as of December 31, 2008, consists of 45% in the office property sector, 20% in the retail property sector, 14% in the industrial property sector and 21% in the residential property sector. The Fund’s diversification of unconsolidated properties by property type at December 31, 2008 consists of 50% in the retail property sector and 50% in the office property sector. Moreover, during the fiscal year ended December 31, 2008, approximately 17%, 14%, 11% and 10% of our consolidated revenues were derived from California, Georgia, Florida and Colorado, respectively. While most states have felt the impact of the current global financial crisis, the economies of California and Florida have been particularly hard hit.

The Fund may not have unilateral control over some of its investments and may be unable to take actions to protect its interests in these investments, which may result in losses with respect to these investments and expose the Fund to liability.

In certain situations, the Fund may (a) acquire only a minority interest in a property or other asset in which it invests, (b) rely on independent third party management or strategic partners with respect to the operations of a property or other asset in which it invests or (c) acquire only a participation in an asset underlying an investment, and therefore may not be able to exercise control over the management of such investment. The Fund may also co-invest with third parties through partnerships, joint ventures or other entities, thereby acquiring non-controlling interests in certain investments. These investments may involve risks not present in investments where a third party is not involved, including the possibility that a third party partner or co-venturer may have financial difficulties resulting in a negative impact on such investment, may have economic or business interests or goals that are inconsistent with or adverse to those of the Fund, or may be in a position to take action contrary to the Fund’s investment objectives. The Fund may in certain circumstances be liable for the actions of its third party partners or co-venturers. In addition, the Fund’s lack of control over the properties in which it invests could result in the Fund being unable to obtain accurate and timely financial information for these properties and could adversely affect the Fund’s internal control over financial reporting.

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A portion of the Advisor’s and Manager’s fees is based on the Fund’s ability to generate cash flow from operations, which may result in the Advisor and the Manager having incentives that conflict with those of the Fund’s stockholders.

A portion of the Advisor’s and Manager’s fees is based on the Fund’s ability to generate cash flow from operations. Therefore, they may have an incentive to maximize the amount of cash generated from Fund operations, rather than to maximize appreciation, and to hold properties rather than to sell properties at an otherwise appropriate time for the stockholders.

Because a portion of the fees paid to the Manager and the Advisor is based on the Fund’s NAV, the Manager and the Advisor may have an incentive to sell Shares at a time when the capital from those sales cannot be effectively employed, which could harm the Fund’s financial performance and decrease the amount of dividends paid to stockholders.

A portion of the fees paid to the Manager and the Advisor is based on the Fund’s NAV. The Manager and the Advisor may have an incentive to sell Shares, as doing so will bring cash into the Fund and increase NAV, which, in turn, will increase the amount of fees paid to the Manager and the Advisor. However, if the Fund is not able to effectively deploy this capital in new real estate investments, the Fund’s financial performance may be harmed and the amount of dividends paid to stockholders could decrease.

Stockholders will have limited recourse against the Board, the Manager and the Advisor.

The Fund’s governing documents, as well as the Management Agreement and Advisory Agreement, limit the circumstances under which the Board, the Manager, the Advisor and their respective affiliates, including their officers, partners, employees, stockholders, members, managers and other agents, can be held liable to the Fund and our stockholders. For example, the Fund’s charter provides that the directors and officers will not be liable to the Fund or our stockholders for money damages to the maximum extent permissible under Maryland law. In addition, the Advisory Agreement and the Management Agreement, respectively, provide for the Fund to indemnify, defend and hold harmless the Advisor and the Manager and their affiliates, partners, members, stockholders, officers, employees, agents, successors, and assigns from and against all liabilities, judgments, costs, losses, and expenses, including attorneys’ fees, charges and expenses and expert witness fees, of any nature, kind or description, arising out of claims by third parties in connection with the Advisory Agreement and the Management Agreement, respectively, and the Advisor’s and the Manager’s respective services thereunder except to the extent caused by or resulting from (i) the Advisor’s or Manager’s breach of the Advisory Agreement or Management Agreement, as applicable, or (ii) the negligent or wrongful acts or omissions of the Advisor or Manager or their affiliates, officers, partners, agents, employees, successors or assigns. As a result, our stockholders may have a more limited right of action in certain cases than they would have in the absence of such limitations.

If the Fund fails to qualify as a “venture capital operating company” under ERISA, stockholders subject to ERISA and the related excise tax provisions of the Internal Revenue Code may be subject to adverse financial and legal consequences if they engage in specified prohibited transactions.

Stockholders subject to ERISA should consult their own advisors as to the effect of ERISA on an investment in the Shares. The Advisor will use reasonable best efforts to conduct the operations of the Fund so that the Fund will qualify as a “venture capital operating company” under applicable ERISA regulations. If in the future the Fund were to fail to qualify as a venture capital operating company under ERISA and the Fund’s investments would be deemed to be “plan assets” of the stockholders that are employee benefit plans subject to ERISA (“Plans”), transactions involving the assets of the Fund with “Parties in Interest” under ERISA or “Disqualified Persons” under the Internal Revenue Code, which we refer to as the Code, with respect to such Plans might be prohibited under Section 406 of ERISA and Section 4975 of the Code.

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The Fund may not be able to qualify for exemption from registration under the Investment Company Act, which could limit the Fund’s ability to use leverage and could materially impair the Fund’s financial performance.

The Fund intends not to become regulated as an investment company under the Investment Company Act based upon certain exemptions thereunder. Accordingly, the Fund does not expect to be subject to the restrictive provisions of the Investment Company Act. If the Fund fails to qualify for exemption from registration as an investment company, its ability to use leverage would be substantially reduced and it may be unable to conduct its business as described in this report. Any failure to qualify for such exemption from the Investment Company Act could have a material adverse effect on the operations and expenses of the Fund. The Fund’s efforts to avoid registration as an investment company in reliance on one of the available exemptions may affect the composition of the Fund’s investment portfolio and the investment and disposition decisions of the Advisor.

Our Charter does not permit ownership of over 9.9% of the Fund’s Common Stock by any individual or entity, and attempts to acquire Shares in excess of the 9.9% limit would be void without the prior approval of our board of directors.

For the purpose of preserving the Fund’s REIT qualification, our Charter prohibits, without the consent of our board of directors, direct or constructive ownership by any individual or entity of more than 9.9% of the lesser of the total number or value of the Shares as a means of preventing ownership of more than 50% of the Shares by five or fewer individuals. Our Charter’s constructive ownership rules are complex and may cause the Shares owned by a group of related individuals or entities to be deemed to be constructively owned by one individual. As a result, the acquisition of less than 9.9% of the Common Stock by an individual or entity could cause an individual to own constructively in excess of 9.9% of the Shares, and thus be subject to our Charter’s ownership limit. Any attempt to own or transfer Shares in excess of the ownership limit without the consent of our board of directors will be void, and will result in those Shares being transferred by operation of law to a charitable trust, and the person who acquired such excess Shares will not be entitled to any distributions thereon or to vote those excess Shares.

There are no assurances of the Fund’s ability to pay dividends in the future.

The Fund intends to pay dividends and to make distributions to stockholders in amounts such that all or substantially all of the Fund’s taxable income in each year, subject to certain adjustments, is distributed to stockholders. This, along with other factors, should enable the Fund to qualify for the tax benefits afforded to a REIT under the Code. All distributions will be made at the discretion of our board of directors and will depend on the Fund’s earnings, financial condition, maintenance of its REIT status and such other factors as our board of directors may deem relevant from time to time. In this regard, we are not immune to impacts from a continuation of the current financial crisis and the financial stress it may have on our tenants. We intend to take a more defensive posture in the management of our balance sheet. These defensive tactics may include, altering the timing and amount of what we have historically paid in dividends. For example, our dividend declared for the quarter ended March 31, 2009 has been reduced from $1.75 per Share, our historic practice for quarterly dividends for the past 16 quarters, to $0.875 per Share. There are no assurances as to the Fund’s ability to pay dividends in the future or the amount of any future dividends. There may be little or no cash flow available to investors. In addition, some of the Fund’s distributions may include a return of capital.

A stockholder who decides to participate in the dividend reinvestment plan will be subject to taxes on those dividends that are reinvested.

Each stockholder has the option of participating in the Fund’s dividend reinvestment plan under which all or a designated portion of such stockholder’s dividends will automatically be reinvested in additional Shares. A stockholder participating in the dividend reinvestment plan will be required to pay taxes with respect to such reinvested dividends in the year that the dividend is paid by the Fund although no cash is actually distributed.

19

If the Fund does not maintain its qualification as a REIT, the Fund will be subject to tax as a regular corporation and face a substantial tax liability.

The Fund expects to operate so as to qualify as a REIT under the Code. However, qualification as a REIT involves the application of highly technical and complex Code provisions for which only a limited number of judicial or administrative interpretations exist. Even a technical or inadvertent mistake could jeopardize the Fund’s REIT status. Furthermore, new tax legislation, administrative guidance or court decisions, in each instance potentially with retroactive effect, could make it more difficult or impossible for the Fund to qualify as a REIT. If the Fund fails to qualify as a REIT in any tax year, then:

• the Fund would be taxed as a regular domestic corporation, which under current laws, among other things, means being unable to deduct distributions to the stockholders in computing taxable income and being subject to Federal income tax on its taxable income at regular corporate rates;

• any resulting tax liability could be substantial, could have a material adverse effect on the Fund’s book value and could reduce the amount of cash available for distribution to the stockholders;

• unless the Fund was entitled to relief under applicable statutory provisions, it would be required to pay taxes, and thus, its cash available for distribution to the stockholders would be reduced for each of the years during which the Fund did not qualify as a REIT; and

• the Fund may also be disqualified from re-electing REIT status for the four taxable years following the year during which it became disqualified.

The tax treatment of dividends may cause investments in non-REIT corporations to be relatively more desirable.

The Code generally provides for reduced tax rates for certain qualified dividends paid to individuals. These reduced rates generally do not apply to dividends paid by REITs. Although this legislation does not adversely affect the tax treatment of REITs, it may cause investments in non-REIT corporations to be relatively more desirable. Such reduced tax rates are currently set to expire at the end of 2010.

Complying with REIT requirements may cause the Fund to forego otherwise attractive opportunities.

To qualify as a REIT for Federal income tax purposes, the Fund must continually satisfy tests concerning, among other things, its sources of income, the nature and diversification of its investments in commercial real estate and related assets, the amounts it distributes to stockholders and the ownership of its Shares. The Fund may also be required to make distributions to stockholders at disadvantageous times or when it does not have capital readily available for distribution. The REIT provisions of the Code may substantially limit the Fund’s ability to hedge its financial assets and related borrowings. Thus, compliance with REIT requirements may hinder the Fund’s ability to operate solely on the basis of maximizing profits.

Complying with REIT requirements may force the Fund to liquidate or restructure otherwise attractive investments.

To qualify as a REIT, the Fund must also ensure that at the end of each calendar quarter, at least 75% of the value of its assets consists of cash, cash items, government securities and qualified REIT real estate assets. The remainder of the Fund’s investments in securities cannot include more than 10% of the outstanding voting securities of any one issuer or 10% of the total value of the outstanding securities of any one issuer. In addition, no more than 5% of the value of the Fund’s assets can consist of the securities of any one issuer. If the Fund fails to comply with these requirements, it must dispose of a portion of its assets within 30 days after the end of the calendar quarter to avoid losing its REIT status and suffering adverse tax consequences.

20

Complying with REIT requirements may force the Fund to borrow to make distributions to stockholders.

From time to time, the Fund’s taxable income may be greater than its cash flow available for distribution to stockholders. If the Fund does not have other capital available in these situations, it may be unable to distribute substantially all of its taxable income as required by the REIT provisions of the Code. Thus, the Fund could be required to borrow capital, sell a portion of its assets at disadvantageous prices, issue consent dividends (which will be taxable to stockholders) or find another alternative. These options could increase the Fund’s costs or reduce its NAV.

Item 1B. Unresolved Staff Comments.

As part of the review by the staff of the Division of Corporation Finance of the SEC (the “Staff”) of our Registration Statement on Form 10 initially filed with the SEC on April 28, 2006, we received and responded to a number of comments. The only comment that remains unresolved pertains to the fact that we were unable to provide financial statements under Rule 3-14 of Regulation S-X relating to our acquisition of our Metropolitan Park North property. We were unable to produce the required financial statements due to lack of access to certain information regarding the property while it was owned by a previous owner. We requested that the Staff grant us a waiver from the requirement to provide the Rule 3-14 financial statements for Metropolitan Park North due to our inability to produce them. The Staff, however, denied our waiver request and indicated that, until we provide the Rule 3-14 financial statements for Metropolitan Park North, it would neither declare effective any registration statement or post-effective amendments, nor consider compliant any proxy or other filing that require our financial statements. The Staff also indicated that our filings are not considered timely for purposes of Form S-3. Finally, the Staff stated that, subject to certain exceptions, we should not make offerings under effective registration statements or under Rule 505 or 506 of Regulation D where any purchasers are not accredited investors under Rule 501(a) of Regulation D. As stated above, we only sell Shares to accredited investors. We do not expect to gain access to the requisite information to provide Rule 3-14 financial statements for Metropolitan Park North. As of the filing of this Form 10-K, we believe we are now compliant with the SEC’s financial statement requirements with respect to Metropolitan Park North.

On November 21, 2007, the Fund acquired Cabana Beach Gainesville which met the “significant” criteria as described in Rule 3-14 of Regulation S-X. Also on November 21, 2007, the Fund acquired three additional real estate investments from a related selling group (the “Selling Group”), Cabana Beach San Marcos, Campus Lodge Athens and Campus Lodge Columbia. The Fund also acquired a fifth real estate investment from the Selling Group in February 2009. Pursuant to Rule 3-14, we are required to file certain financial statements relating to these acquisitions. However, the Selling Group has refused to participate in the audits, and we are therefore unable to supply the required audited income statement required by Rule 3-14. As a result, we will be subject to limitations specified by the Staff in the preceding paragraph with respect to our failure to provide Rule 3-14 financial statements for our acquisition of the Metropolitan Park North property.

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Item 2. Properties.

DESCRIPTION OF REAL ESTATE:

Our investments in real estate assets as of December 31, 2008 consist of our interests in properties that are consolidated in our consolidated financial statements including interests in nine joint ventures (the “Consolidated Properties”) and interests in two additional joint ventures that own real estate (the “Unconsolidated Properties”). The following table sets forth the information with respect to our real estate assets as of December 31, 2008:

Property Name	Location	Type	% Owned		Year Built	Date Acquired	Net Rentable Square Feet	Percentage Leased
Consolidated Properties:
Monument IV at Worldgate (1)	Herndon, VA	Office	100	%	2001	August 27, 2004	228,000	100	%
Havertys Furniture (1)	Braselton, GA	Industrial	100	%	2002/2005(2)	December 3, 2004	808,000	100	%
Hagemeyer Distribution Center (3)	Auburn, GA	Industrial	100	%	2001	December 3, 2004	300,000	100	%
25850 S. Ridgeland (1)	Monee, IL	Industrial	100	%	2004	December 31, 2004	719,000	100	%
Georgia Door Sales Distribution Center (1)	Austell, GA	Industrial	100	%	1994/1996(4)	February 10, 2005	254,000	76	%
105 Kendall Park Lane (1)	Atlanta, GA	Industrial	100	%	2002	June 30, 2005	409,000	100	%
Waipio Shopping Center (1)	Waipahu, HI	Retail	100	%	1986/2005(5)	August 1, 2005	137,000	97	%
CHW Medical Office Portfolio (3)(6):
300 Old River Road	Bakersfield, CA	Office	100	%	1992	December 21, 2005	37,000	100	%
500 Old River Road	Bakersfield, CA	Office	100	%	1992	December 21, 2005	30,000	90	%
500 West Thomas Road	Phoenix, AZ	Office	100	%	1994	December 21, 2005	169,000	97	%
1500 South Central Ave	Glendale, CA	Office	100	%	1980	December 21, 2005	37,000	100	%
14600 Sherman Way	Van Nuys, CA	Office	100	%	1991	December 21, 2005	50,000	97	%
14624 Sherman Way	Van Nuys, CA	Office	100	%	1981	December 21, 2005	51,000	83	%
18350 Roscoe Blvd	Northridge, CA	Office	100	%	1979	December 21, 2005	68,000	96	%
18460 Roscoe Blvd	Northridge, CA	Office	100	%	1991	December 21, 2005	25,000	100	%
18546 Roscoe Blvd	Northridge, CA	Office	100	%	1991	December 21, 2005	43,000	92	%
4545 East Chandler	Chandler, AZ	Office	100	%	1994	December 21, 2005	48,000	68	%
485 South Dobson	Chandler, AZ	Office	100	%	1984	December 21, 2005	43,000	61	%
1501 North Gilbert	Gilbert, AZ	Office	100	%	1997	December 21, 2005	38,000	75	%
116 South Palisade	Santa Maria, CA	Office	100	%	1995	December 21, 2005	34,000	100	%
525 East Plaza	Santa Maria, CA	Office	100	%	1995	December 21, 2005	44,000	96	%
10440 East Riggs	Chandler, AZ	Office	100	%	1996	December 21, 2005	39,000	66	%
Marketplace at Northglenn (1)	Northglenn, CO	Retail	100	%	1999-2001(7)	December 21, 2005	439,000	96	%
Metropolitan Park North (1)	Seattle, WA	Office	100	%	2001	March 28, 2006	187,000	100	%
Stirling Slidell Shopping Centre (1)	Slidell, LA	Retail	100	%	2003	December 14, 2006	139,000	71	%
9800 South Meridian (8)	Englewood, CO	Office	90	%	1994	December 26, 2006	144,000	65	%
18922 Forge Drive (8)	Cupertino, CA	Office	90	%	1972/1999(9)	February 15, 2007	91,000	100	%
4001 North Norfleet Road (1)	Kansas City, MO	Industrial	100	%	2007	February 27, 2007	702,000	100	%
Station Nine Apartments (1)	Durham, NC	Apartment	100	%	2005	April 16, 2007	312,000	93	%
4 Research Park Drive (1)	St. Charles, MO	Office	100	%	2000/2004	June 13, 2007	60,000	100	%
36 Research Park Drive (1)	St. Charles, MO	Office	100	%	2007	June 13, 2007	81,000	100	%
The District at Howell Mill (8)	Atlanta, GA	Retail	87.85	%	2006	June 15, 2007	306,000	100	%
Canyon Plaza (1)	San Diego, CA	Office	100	%	1986/1993(10)	June 26, 2007	199,000	100	%
Railway Street Corporate Centre (1)	Calgary, Canada	Office	100	%	2007	August 30, 2007	137,000	100	%
Student-oriented Apartment Communities:
Cabana Beach San Marcos (8)	San Marcos, TX	Apartment	78	%	2006	November 21, 2007	278,000	98	%
Cabana Beach Gainesville (8)	Gainesville, FL	Apartment	78	%	2005-2007(11)	November 21, 2007	545,000	51	%
Campus Lodge Athens (8)	Athens, GA	Apartment	78	%	2003	November 21, 2007	229,000	93	%

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Property Name	Location	Type	% Owned		Year Built	Date Acquired	Net Rentable Square Feet	Percentage Leased
Campus Lodge Columbia (8)	Columbia, MO	Apartment	78	%	2005	November 21, 2007	256,000	93	%
Campus Edge Lafayette (8)	Lafayette, LA	Apartment	78	%	2007	January 15, 2008	207,000	98	%
Campus Lodge Tampa (8)	Tampa, FL	Apartment	78	%	2001	February 29, 2008	431,000	81	%
Unconsolidated Properties:
Legacy Village (12)	Lyndhurst, OH	Retail	46.5	%	2003	August 25, 2004	595,000	95	%
111 Sutter Street (8)	San Francisco, CA	Office	80	%	1926/2001(13)	March 29, 2005	286,000	91	%

(1) This property is owned fee.

(2) Built in 2002 and expanded by 297,000 square feet in 2005.

(3) This property is owned leasehold.

(4) Built in 1994 and expanded in 1996.

(5) Built in 1986 and expanded in 2005.

(6) This portfolio was owned 95% as majority interest holder in a joint venture, leasehold until December 31, 2007 at which point the remaining 5% was acquired by the Fund. We previously referred to this portfolio as the Pacific Medical Office Portfolio.

(7) Redeveloped between 1999 and 2001.

(8) This property is owned as majority interest holder in a joint venture.

(9) Built in 1972 and renovated in 1999.

(10) Built in 1986 with addition completed in 1993.

(11) Portions of property built and completed between 2005 and 2007.

(12) This property is owned as an interest holder in a joint venture.

(13) Built in 1926 and renovated in 2001.

ACQUISITIONS

2008 Acquisitions

Consolidated Properties

On January 15, 2008, we acquired a 78% interest in Campus Edge Lafayette, a student-oriented apartment community. Campus Edge Lafayette, located in Lafayette, Louisiana near the University of Louisiana-Lafayette, has 168 units and 524 bedrooms. Leases for this property generally expire within one year. The gross purchase price for the property was approximately $26,870.

On February 29, 2008, we acquired a 78% interest in Campus Lodge Tampa, a student-oriented apartment community. Campus Lodge Tampa, located in Tampa, Florida near the University of South Florida, has 312 units and 1068 bedrooms. Leases for this property generally expire within one year. The gross purchase price for the property was approximately $46,787 and included the assumption of a $33,500, nine-year fixed rate mortgage loan, at 5.95% with interest only due for the first five years.

2007 Acquisitions

Consolidated Properties

On February 15, 2007, we acquired a 90% interest in 18922 Forge Drive, a 91,000 square-foot, multi-tenant office building located in Cupertino, California with lease expirations through 2010. The property’s tenants are IBM and Oracle, which have both sub-leased their space to other technology companies. The gross purchase price was approximately $26,200.

On February 27, 2007, we acquired a 100% ownership interest in 4001 North Norfleet Road, a 702,000 square-foot, single-tenant industrial building located in Kansas City, Missouri. The property’s tenant is Musician’s Friend, a subsidiary of Guitar Center (under a net lease through 2017). The gross purchase price was approximately $37,600.

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On April 16, 2007, we acquired a 100% interest in Station Nine Apartments, a 312,000 square-foot, 323 unit apartment complex located in Durham, North Carolina adjacent to the Duke University campus. The property’s leases generally expire within one year. The gross purchase price was approximately $56,400.

On June 13, 2007, we acquired a 100% interest in two single-tenant office buildings totaling 141,000 square-feet located in St. Charles, Missouri. The buildings are currently leased to a single-tenant (under net leases through 2014 and 2016). The gross purchase price was approximately $28,600.

On June 15, 2007, we acquired an 87.85% interest in The District at Howell Mill, a 306,000 square foot retail property built in 2006, located in Atlanta, Georgia. The property’s largest tenants are Wal-Mart, TJ Maxx, Office Depot, and PetSmart with leases expiring through 2026. Tenants of this center pay their pro rata share of the property’s operating expenses. The gross purchase price was approximately $78,700.

On June 26, 2007, we acquired a 100% interest in Canyon Plaza, a 199,000 square-foot, single-tenant office building located in San Diego, California. The property’s tenant is Conexant Systems, Inc (under a net lease expiring in 2017) which has sub-leased a portion of their space to another technology company. The gross purchase price was approximately $55,000.

On August 30, 2007, we acquired a 100% ownership interest in a 137,000 square-foot, multi-tenant office building located in Calgary, Canada with leases expiring through 2017. The building is currently 100% leased to a number of tenants for between five and ten years. The gross purchase price was approximately $42,600.

On November 21, 2007, we acquired 78% interests in four student-oriented apartment communities. Cabana Beach San Marcos located in San Marcos, Texas near Texas State University has 276 units and 744 bedrooms. Cabana Beach Gainesville located in Gainesville, Florida near the University of Florida has 504 units and 1,488 bedrooms. Campus Lodge Athens located in Athens, Georgia near the University of Georgia has 240 units and 480 bedrooms. Campus Lodge Columbia located in Columbia, Missouri near the University of Missouri has 192 units and 768 bedrooms. Leases for these four properties generally expire within one year. The gross purchase price for the four communities was approximately $149,600.

On December 31, 2007, we acquired the remaining 5% membership interest in a limited liability company that owns the CHW Medical Office Portfolio. The gross purchase price was approximately $4,000.

2006 Acquisitions

Consolidated Properties

On March 28, 2006, we acquired a 100% interest in Metropolitan Park North, a 186,000 square-foot, multi-tenant office building with a five-level parking garage located in Seattle, Washington with lease expirations through 2016. The gross purchase price was approximately $89,200.

On December 14, 2006, we acquired a 100% interest in Stirling Slidell Shopping Centre, a 139,000 square-foot, multi-tenant retail center located approximately 35 miles northeast of New Orleans, Louisiana, built in 1994 with lease expirations through 2020. The gross purchase price was approximately $23,400.

On December 26, 2006, we acquired a 90% interest in 9800 South Meridian, a 129,000 square-foot, multi-tenant office building located in suburban Denver, Colorado, built in 1994 with tenant lease expirations through 2009. The gross purchase price was approximately $14,700. Since we acquired our interest in this building, it has undergone significant upgrades, which involved increasing the rentable space by approximately 10,000 square-feet and leasing the building to new tenants.

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FINANCING

The following is a summary of the mortgage debt for our Consolidated Properties and our Unconsolidated Properties as of December 31, 2008.

Property	Interest Rate	Maturity Date	Principal Balance
Consolidated Properties:
9800 South Meridian	Libor + 1.60%	January 2010	$	13,604
Waipio Shopping Center	5.15%	November 2010		19,950
Monument IV at Worldgate	5.29%	September 2011		36,832
25850 S. Ridgeland	5.05%	April 2012		16,120
105 Kendall Park Lane	4.92%	September 2012		13,000
Metropolitan Park North	5.73%	April 2013		61,000
36 Research Park Drive	5.60%	July 2013		11,050
CHW Medical Office Portfolio	5.75%	November 2013		17,254
CHW Medical Office Portfolio	5.75%	November 2013		15,017
CHW Medical Office Portfolio	5.75%	November 2013		15,551
18922 Forge Drive	6.24%	February 2014		19,050
CHW Medical Office Portfolio	5.79%	March 2014		33,957
Stirling Slidell Shopping Centre	5.15%	April 2014		13,580
Cabana Beach San Marcos	5.57%	December 2014		19,650
Cabana Beach Gainesville	5.57%	December 2014		49,107
Campus Lodge Athens	5.57%	December 2014		13,723
Campus Lodge Columbia	5.57%	December 2014		16,341
Hagemeyer Distribution Center	5.23%	January 2015		6,500
Georgia Door Sales Distribution Center	5.31%	January 2015		5,400
Havertys Furniture	5.23%	January 2015		18,100
Havertys Furniture	6.19%	January 2015		11,025
Campus Edge Lafayette	5.57%	February 2015		17,465
4 Research Park Drive	6.05%	March 2015		7,127
Marketplace at Northglenn	5.50%	January 2016		63,755
Campus Lodge Tampa	5.95%	October 2016		33,500
4001 North Norfleet Road	5.60%	March 2017		24,230
Station Nine Apartments	5.50%	May 2017		36,885
The District at Howell Mill	6.14%	June 2017		10,000
Canyon Plaza	5.90%	June 2017		30,671
Railway Street Corporate Centre	5.16%	September 2017		24,161
The District at Howell Mill	5.30%	March 2027		35,000
Unconsolidated Properties:
Legacy Village	5.63%	January 2014	$	97,047
111 Sutter Street	5.58%	June 2015		56,000

INSURANCE

We believe our properties currently are adequately covered by insurance consistent with the level of coverage that is standard in our industry.

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OPERATING STATISTICS

We generally have investments in properties with high occupancy rates leased to quality tenants under long-term, non-cancelable leases. We believe our leases are beneficial to achieving our investment objectives. The following table shows our operating statistics by property sector for our consolidated properties as of December 31, 2008:

	Number of Properties	Total Area (Sq Ft)	% of Total Area		Occupancy %		Average Minimum Base Rent per Occupied Sq Ft
Consolidated Properties:
Office:
Commercial Office	8	1,127,000	13.5	%	95.5	%	$	21.19
Medical Office	15	756,000	9.0	%	88.2	%		18.71
Retail	4	1,021,000	12.3	%	93.9	%		14.82
Industrial	6	3,192,000	38.2	%	98.1	%		3.27
Apartments	7	2,258,000	27.0	%	81.6	%		15.05
Total	40	8,354,000	100.0	%	91.9	%	$	11.68

The following table shows our operating statistics by property sector for our unconsolidated properties as of December 31, 2008:

	Number of Properties	Total Area (Sq Ft)	% of Total Area		Occupancy %		Average Minimum Base Rent per Occupied Sq Ft
Unconsolidated Properties:
Office:
Commercial Office	1	286,000	32.5	%	91.0	%	$	42.07
Retail	1	595,000	67.5	%	95.0	%		20.97
Total	2	881,000	100.0	%	93.7	%	$	27.62

As of December 31, 2008, the scheduled lease expirations at our consolidated properties are as follows:

Year	Number of Leases Expiring	Annualized Minimum Base Rent		Square Footage	Percentage of Consolidated Annualized Minimum Base Rent
2009 (1)	63	$	4,291	248,000	7.3	%
2010	67		5,842	237,000	9.9	%
2011	66		8,365	415,000	14.2	%
2012	57		8,193	359,000	13.9	%
2013	50		3,940	457,000	6.7	%
2014 and thereafter	74		28,443	4,101,000	48.0	%
Total	377	$	59,074	5,817,000

(1) Does not includes 4,289 leases totaling approximately 1,843,000 square feet and approximately $27,768 in annualized minimum base rent associated with our seven apartment investments.

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As of December 31, 2008, the scheduled lease expirations at our unconsolidated properties are as follows:

Year	Number of Leases Expiring	Annualized Minimum Base Rent		Square Footage	Percentage of Consolidated Annualized Minimum Base Rent
2009	6	$	513	21,000	2.3	%
2010	22		3,947	96,000	17.6	%
2011	8		3,491	67,000	15.5	%
2012	2		227	7,000	1.0	%
2013	18		3,692	101,000	16.4	%
2014 and thereafter	36		10,589	522,000	47.2	%
Total	92	$	22,459	814,000

PRINCIPAL TENANTS

The following table sets forth the top ten tenants, in our consolidated properties, based on their percentage of annualized minimum base rent for the year ended December 31, 2008:

Tenants	Line of Business	Date of Lease Expiration	Lease Renewal Options	% of Total Area		% of Annualized Minimum Base Rent
Fannie Mae	Financial services	December 31, 2011	Two 5-year options	2.7	%	6.6	%
Nordstrom, Inc	Retailer	January 31, 2012	Two 5-year options	1.6	%	5.9	%
Conexant Systems, Inc.	Communications	June 20, 2017	Two 5-year options	2.4	%	5.5	%
Havertys Furniture	Furniture retailer	April 30, 2021	Five 5-year options	9.7	%	4.8	%
Catholic Healthcare West	Healthcare	Varies	Varies	2.0	%	4.3	%
Musician’s Friend, Inc.	Retailer	February 28, 2017	Three 5-year options	8.4	%	3.9	%
International Business Machines Corp.	Information Technology	March 31, 2010	Two 5-year options	0.6	%	3.2	%
Westar Aerospace & Defense Group, Inc.	Technical and Scientific Research Services	Varies	Varies	1.0	%	3.1	%
Michelin North America, Inc	Tire Manufacturer	December 30, 2014	Three 5-year options	8.6	%	2.6	%
Acuity Specialty Products Group, Inc.	Specialty chemical products	April 30, 2017	Two 5-year options	4.9	%	1.9	%
Total				41.9	%	41.8	%

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PRINCIPAL PROPERTIES

The following table sets forth the top ten properties, of our consolidated properties, based on their percentage of minimum base rent for the year ended December 31, 2008:

Properties	% of Total Area		% of Minimum Base Rent
Cabana Beach Gainesville	6.5	%	7.4	%
Metropolitan Park North	2.2	%	6.7	%
Marketplace at Northglenn	5.3	%	6.7	%
Campus Lodge Tampa	5.2	%	5.4	%
Monument IV at Worldgate	2.7	%	5.3	%
The District at Howell Mill	3.7	%	5.1	%
Station Nine Apartments	3.7	%	4.7	%
Canyon Plaza	2.4	%	4.3	%
Cabana Beach San Marcos	3.3	%	3.8	%
Havertys Furniture	9.7	%	3.7	%
Total	44.7	%	53.1	%

GROUND LEASES

We are subject to a number of ground leases at certain properties we own or control. As of December 31, 2008 we have $2 in total payments due over the next 70 years.

Item 3. Legal Proceedings.

We are involved in various matters of litigation arising in the normal course of business. While we are unable to predict with any certainty the amounts involved, management is of the opinion that, when such litigation is resolved, our resulting net liability, if any, will not have a significant effect on our consolidated financial position or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of our stockholders during the fourth quarter of the year ended December 31, 2008.

28

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our Common Stock is not currently traded on any exchange and there is no established public trading market for our Common Stock. As of the filing date of this Form 10-K, there were approximately 1,741 holders of our Common Stock.

The price at which Shares are sold or redeemed at any future dates will be determined based on the current share price (the “Current Share Price” as defined below). We expect to sell additional Shares through private placements to accredited investors on a periodic basis to accommodate investment by existing and additional investors. Subsequent offerings may be made either for our Common Stock or for other share classes that may be subject to sales loads or bear different expense ratios.

Unregistered Sales of Equity Securities

The following table provides information on unregistered sales of our securities that occurred since September 30, 2008 other than unregistered sales that have been previously reported on a Form 8-K:

Date	Total Number of Shares Sold	Price Paid Per Share		Proceeds		Use of Proceeds
November 7, 2008 (1)	18,562	$	123.43	$	2,291	Used to pay down line of credit borrowings

(1) This sale occurred pursuant to our dividend reinvestment plan.

We relied on the exemption from registration provided by Rule 506 under Regulation D and Section 4(2) of the Securities Act in connection with the closing of the unregistered sales listed above. All Shares were sold to accredited investors within the meaning of Regulation D promulgated under the Securities Act. Each investor provided a written representation that it was an accredited investor and the Fund did not engage in general solicitation.

Issuer Purchases of Equity Securities

Pursuant to our share repurchase program (the “Repurchase Program”), we intend to provide limited liquidity to our stockholders by conducting tender offers pursuant to which we expect to offer to repurchase a specific percentage, number or dollar amount of outstanding Shares (“Tender Offer Amount”). The Tender Offer Amount for each tender offer, if any, will depend on a variety of factors, including our available liquidity, available borrowing under our credit facility and the amount of proceeds from our most recent offering of Shares. Such determinations will be made by our board of directors prior to each tender offer and will be communicated to stockholders. During the fourth quarter of 2008, we repurchased Shares through a tender offer which commenced and was publicly announced on November 21, 2008 and expired on December 12, 2008. Pursuant to the tender offer, for which our board of directors approved the purchase of up to $10,000, we repurchased Shares as follows:

Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
December 2008	81,018	$	123.43	81,018	—

29

We will only offer to repurchase Shares through tender offers and then only to the extent that we have sufficient cash available to repurchase Shares consistent with principles of prudent portfolio management and to the extent that such repurchases (i) are consistent with applicable REIT rules and federal securities laws and (ii) would not require the Fund to register as an investment company under the Investment Company Act. We do not guarantee, however, that sufficient cash will be available at any particular time to fund repurchases of our Shares and we will be under no obligation to conduct such tender offers or to make such cash available. In determining the Tender Offer Amount, we will act in the best interest of the stockholders and may take into account our need for cash to pay operating expenses, debt service, distributions to stockholders and other obligations.

CALCULATION OF SHARE PRICE

The Current Share Price of our Common Stock (the “Current Share Price”) is established quarterly based on the following valuation methodology, which may be modified from time to time by our board of directors.

Net Asset Value Calculation

The NAV of the Fund is determined as of the end of each of the first three quarters of a fiscal year, within 45 calendar days following the end of such quarter. The Fund’s year-end NAV is determined after the completion of our year-end audit. NAV is determined as follows: (i) the aggregate fair value of (A) our interests in the real estate investments (“Investments”) plus (B) all other assets of the Fund, minus (ii) the aggregate fair value of our indebtedness and other outstanding obligations as of the determination date.

We have retained independent third-party real estate appraisal firms (the “Appraisal Firms”) that appraise each Investment not less than annually beginning one year after acquisition. During the first three quarters after acquisition, the Investment will be carried at capitalized cost and reviewed quarterly for material events at the property or market level that may require an adjustment of the Investment’s valuation.

For each of the three quarters following the independent appraisal of a particular Investment, we determine the value of such Investment based on our review of the appraisal and material changes at the property or market level. We also determine the value of the indebtedness related to each Investment beginning one year after acquisition of the encumbered property and on a quarterly basis thereafter.

The Current Share Price equals the NAV as of the end of each quarter divided by the number of outstanding shares of all classes of capital stock of the Fund at the end of such quarter.

30

The following table presents the external appraisal and valuation schedule for our investment portfolio for the year ended December 31, 2008:

Period for Appraising the Investment	Notes
For the three months ended March 31, 2009:
Monument IV at Worldgate	(1	)
105 Kendall Park Lane	(1	)
Station Nine Apartments	(1	)
4 Research Park Drive	(1	)
36 Research Park Drive	(1	)
The District at Howell Mill	(1	)
Canyon Plaza	(1	)
For the three months ended June 30, 2009:
Legacy Village	(1	)
Waipio Shopping Center	(1	)
Marketplace at Northglenn	(1	)
Railway Street Corporate Centre	(1	)
Cabana Beach Gainesville	(1	)
Campus Lodge Athens	(1	)
For the three months ended September 30, 2009:
25850 S. Ridgeland	(1	)
Hagemeyer Distribution Center	(1	)
Havertys Furniture	(1	)
CHW Medical Office Portfolio	(1	)
Stirling Slidell Shopping Centre	(1	)
9800 South Meridian	(1	)
Cabana Beach San Marcos	(1	)
Campus Lodge Columbia	(1	)
For the three months ended December 31, 2009:
Metropolitan Park North	(1	)
111 Sutter Street	(1	)
Georgia Door Sales Distribution Center	(1	)
4001 North Norfleet Road	(1	)
18922 Forge Drive	(1	)
Campus Edge Lafayette	(1	)
Campus Lodge Tampa	(1	)

(1) These investments will be externally appraised not less than annually. For quarters where no external appraisal is performed, the investment will be valued by us during the interim quarters, for purposes of calculating NAV. In addition, the Investment’s related indebtedness will be valued every quarter.

Current Share Price Calculation

The Current Share Price equals NAV as of the end of each quarter divided by the number of outstanding Shares at the end of such quarter. During the first three quarters of the calendar year, the Current Share Price is calculated based on the real estate investment value, indebtedness values and value of other assets and liabilities as determined by us and reviewed by our independent auditors. Year-end Current Share Price is calculated based on the real estate investment value, indebtedness values and value of other assets and liabilities as determined by us and audited by our independent auditors. The supplemental consolidated fair value information is presented to the board of directors with our year-end audited financial statements.

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The following table presents the NAV per share for each period indicated below:

Quarter Ended	NAV per Share
December 31, 2008	$	93.80
September 30, 2008		123.43
June 30, 2008		124.65
March 31, 2008		121.58
December 31, 2007		120.03
September 30, 2007		119.95
June 30, 2007		118.40
March 31, 2007		115.95
December 31, 2006		115.02
September 30, 2006		110.93
June 30, 2006		112.66
March 31, 2006		110.73
December 31, 2005		108.08
September 30, 2005		104.16
June 30, 2005		100.07
March 31, 2005		100.03

DIVIDEND POLICY

To comply with current tax laws necessary to qualify as a REIT, we expect to distribute at least 90% of our taxable income to our stockholders. Accordingly, we currently intend, although are not legally obligated, to make distributions to our stockholders in amounts sufficient to maintain our qualification as a REIT. Before payment of any dividend, we must have cash available after payment of both operating requirements and scheduled debt service on mortgages and loans payable. The declaration of dividends is at the discretion of our board of directors, which decision is made from time to time based on then prevailing circumstances.

For the remainder of 2009, we will continue to monitor the broader economic slowdown and, as best we can, mitigate the impacts of weakening property fundamentals on our portfolio. Our challenge will be to balance the sometimes competing objectives of building cash reserves that will reduce risk in our portfolio with our desire to distribute free cash flow generated from our property investments to pay an ongoing dividend to stockholders. Our strategic bias towards longer dated leases, higher credit tenants and fixed rate financing has served us well. However, the duration and magnitude of the current recession has exceeded expectations and historical precedents causing even the most conservative and defensive investment strategies to under perform. While actual and projected property level cash flows have supported a consistent dividend payment for sixteen quarters, we are not immune to impacts from a continuation of the current financial crisis and the financial stress it may have on our tenants. We intend to be responsive to changes in market conditions that may require us to adopt a more defensive posture in the management of our balance sheet. Among these defensive tactics may be, establishing cash reserves for future capital needs, altering the timing and amount of what we have historically paid in dividends and amounts and frequency of tender offers. In this regard, on March 13, 2009, our board of directors declared a dividend of $0.875 per Share to stockholders of record on March 31, 2009, payable on May 1, 2009. This represents a reduction from $1.75 per Share, our historic practice for quarterly dividends for the past 16 quarters. We cannot provide assurance with respect to the amount of dividends, if any, that we will pay in the future.

Our board of directors, the Manager and the Advisor will periodically review the dividend policy to determine the appropriateness of our dividend rate relative to our current and forecasted cash flows.

32

The distributions declared per Share in each quarter since Inception are as follows:

To Stockholders of Record as of	Paid on or to be paid on	Distribution per Share
March 31, 2009	May 1, 2009	$	0.875
December 31, 2008	February 6, 2009		1.75
August 15, 2008	November 7, 2008		1.75
June 25, 2008	August 1, 2008		1.75
February 15, 2008	May 2, 2008		1.75
December 28, 2007	February 1, 2008		1.75
August 15, 2007	November 2, 2007		1.75
May 15, 2007	August 3, 2007		1.75
February 15, 2007	May 4, 2007		1.75
December 29, 2006	February 2, 2007		1.75
September 30, 2006	November 3, 2006		1.75
May 15, 2006	August 4, 2006		1.75
February 24, 2006	May 5, 2006		1.75
December 15, 2005	February 3, 2006		1.75
September 15, 2005	November 4, 2005		1.75
June 30, 2005	August 5, 2005		1.75
March 31, 2005	May 6, 2005		1.75

Any future distributions will be declared at the discretion of the board of our directors and will depend on our actual cash flow, financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code, and such other factors as our board of directors deems necessary. In addition, under the terms of our unsecured credit facility, we may not declare a dividend unless:

• we are in compliance with the terms of our unsecured credit facility; and

• either (i) payment of the dividend is required for the Fund to maintain its status as a REIT or (ii) the amount of the dividend and all other dividends paid by the Fund during the current quarter and the preceding three quarters does not exceed the amount of Funds From Operations (“FFO” as defined in “Item 6. Selected Financial Data”) of the Fund plus $500 during that period.

	Year End December 31, 2008		Year End December 31, 2007
FFO + $500 (dividend limitation amount)	$	26,649	$	22,662
Dividends declared		26,438		22,139
Surplus	$	211	$	523

Performance Graph (1) (Dollars in whole dollars)

The following graph is a comparison of the four-year cumulative return of our Shares (post leverage and fees), the Standard and Poor’s 500 Index (“S&P 500”), the National Real Estate Investment Trusts’ (“NAREIT”) All Equity Index and the National Counsel of Real Estate Investment Fiduciaries (“NCREIF”) Property Index, as peer group indices. The graph assumes that $100 was invested on December 31, 2004 in our Shares, the S&P 500 Index, the NAREIT All Equity Index and the NCREIF Property Index assuming that all dividends were reinvested without the payment of any commissions. There can be no assurance that the performance of our Shares will continue in line with the same or similar trends depicted in the graph below.

(1) The information in this section is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any filing of the Fund under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing.

33

* The NCREIF Property Index is a quarterly time series composite total rate of return measure (before leverage and fees) of investment performance of a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only. Its value is based on the value of the properties in the index and not the market value of securities. All properties in the NCREIF Property Index have been acquired, at least in part, on behalf of tax-exempt institutional investors—the great majority being pension funds. Properties in the NCREIF Property Index are accounted for using market value accounting standards, not historical cost. We measure the performance of our Advisor against the NCREIF Property Index.

34

Item 6. Selected Financial Data.

The following table sets forth our selected financial and operating data on a historical basis. The following data should be read in conjunction with our consolidated financial statements and the accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K.

	Year Ended December 31, 2008			Year Ended December 31, 2007			Year Ended December 31, 2006			Year Ended December 31, 2005			For the Period May 29, 2004 (Inception) Through December 31, 2004
Operating Data:
Total revenues	$	113,434		$	77,287		$	51,105		$	15,003		$	1,518
Operating expenses		113,219			64,603			41,509			10,634			764
Operating income		215			12,684			9,596			4,369			754
Interest income		643			1,788			1,582			898			18
Interest expense		(41,805	)		(28,712	)		(18,522	)		(5,371	)		(840	)
Loss allocated to minority interests		5,651			572			156			11			—
Equity in income of unconsolidated affiliates		1,230			536			425			116			6
Gain (loss) on foreign currency derivative		1,492			(504	)		—			—			—
Net (loss) income		(32,574	)		(13,636	)		(6,763	)		23			(62	)
Foreign currency translation adjustment		(2,848	)		963			—			—			—
Net comprehensive (loss) income	$	(35,422	)	$	(12,673	)	$	(6,763	)	$	23		$	(62	)
Weighted average shares outstanding		3,822,484			3,252,725			2,341,347			1,276,388			39,783
(Loss) income per share—basic and diluted	$	(8.52	)	$	(4.19	)	$	(2.89	)	$	0.02		$	(1.57	)
Cash distributions declared per common share	$	7.00		$	7.00		$	7.00		$	7.00		$	1,289.78
	December 31,
	2008			2007			2006			2005			2004
Balance Sheet Data:
Investments in real estate—net of accumulated depreciation	$	957,974		$	918,604		$	504,133		$	399,182		$	134,925
Total assets		1,084,805			1,070,188			635,694			502,344			169,578
Total debt		717,497			691,316			361,351			280,361			66,850
Minority interests		15,043			15,519			3,036			2,812			—
Stockholders’ equity		308,573			316,076			241,222			186,055			92,258
Cash Flow Information:
Net cash flows provided by operating activities	$	19,983		$	26,464		$	9,941		$	5,254		$	649
Net cash flows used in investing activities		(37,933	)		(391,619	)		(118,800	)		(222,170	)		(96,217	)
Net cash flows provided by financing activities		26,011			344,590			129,667			221,684			98,962
Other Data:
Funds from operations	$	26,149		$	22,162		$	16,821		$	8,810		$	1,133
Funds from operations per share—basic and diluted (1)	$	6.84		$	6.81		$	7.18		$	6.90		$	28.47

35

(1) Funds from operations (“FFO”) does not represent cash flow from operations as defined by accounting principles generally accepted in the United States of America (“GAAP”), should not be considered as an alternative to GAAP net income and is not necessarily indicative of cash available to fund all cash requirements. Please see below for a reconciliation of net income to FFO.

The selected financial data presented above has been dramatically impacted by acquisitions made since the inception of the Fund. These acquisitions drastically impact the comparability of our results from operations, financial position and cash flows. We are uncertain how the results from operations, financial position and cash flows will be impacted by future acquisitions.

FUNDS FROM OPERATIONS

Consistent with real estate industry and investment community preferences, we consider FFO as a supplemental measure of the operating performance for a real estate investment trust and a complement to GAAP measures because it facilitates an understanding of the operating performance of our properties. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains or losses from cumulative effects of accounting changes, extraordinary items and sales of properties, plus real estate related depreciation and amortization and after adjustments for these items related to minority interests and unconsolidated affiliates.

FFO does not give effect to real estate depreciation and amortization because these amounts are computed to allocate the cost of a property over its useful life. Because values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, we believe that FFO provides investors with a clearer view of our operating performance.

In order to provide a better understanding of the relationship between FFO and GAAP net income, the most directly comparable GAAP financial reporting measure, we have provided a reconciliation of GAAP net income (loss) to FFO. FFO does not represent cash flow from operating activities in accordance with GAAP, should not be considered as an alternative to GAAP net income and is not necessarily indicative of cash available to fund cash needs.

	For the year ended December 31, 2008			For the year ended December 31, 2007			For the year ended December 31, 2006			For the year ended December 31, 2005			For the period from May 28, 2004 (Inception) through December 31, 2004
Net income (loss)	$	(32,574	)	$	(13,636	)	$	(6,763	)	$	23		$	(62	)
Plus: Real estate depreciation and amortization		60,244			32,360			19,210			4,794			488
Adjustments for minority interests		(6,462	)		(1,198	)		(445	)		(19	)		—
Real estate depreciation and amortization from unconsolidated real estate affiliates		4,941			4,636			4,819			4,012			707
Funds from operations	$	26,149		$	22,162		$	16,821		$	8,810		$	1,133
Weighted average shares outstanding, basic and diluted		3,822,484			3,252,725			2,341,347			1,276,388			39,783
Funds from operations per share, basic and diluted	$	6.84		$	6.81		$	7.18		$	6.90		$	28.47

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

$ in thousands, except share and per share amounts

Management Overview

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to the consolidated financial statements appearing elsewhere in this Form 10-K. All references to numbered Notes are to specific notes to our Consolidated Financial Statements beginning on page F-1 of this Form 10-K, and which descriptions are incorporated into the applicable response by reference. References to “base rent” in this Form 10-K refer to cash payments made under the relevant lease(s), excluding real estate taxes and certain property operating expenses that are paid by us and are recoverable under the relevant lease(s) and exclude adjustments for straight-line rent revenue and above- and below-market lease amortization (See Note 2).

The discussions surrounding our Consolidated Properties refer to our wholly or majority owned and controlled properties, which as of December 31, 2006 were comprised of:

• Monument IV at Worldgate,

• Havertys Furniture,

• Hagemeyer Distribution Center,

• 25850 S. Ridgeland

• Georgia Door Sales Distribution Center,

• 105 Kendall Park Lane,

• Waipio Shopping Center,

• Marketplace at Northglenn,

• the CHW Medical Office Portfolio,

• Metropolitan Park North,

• Stirling Slidell Shopping Centre and

• 9800 South Meridian.

As of December 31, 2007, our Consolidated Properties also included:

• 18922 Forge Drive,

• 4001 North Norfleet Road,

• Station Nine Apartments,

• 4 Research Park Drive,

• 36 Research Park Drive,

• The District at Howell Mill,

• Canyon Plaza,

• Railway Street Corporate Centre,

• Cabana Beach San Marcos,

• Cabana Beach Gainesville,

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• Campus Lodge Athens and

• Campus Lodge Columbia.

As of December 31, 2008, our Consolidated Properties also included:

• Campus Edge Lafayette and

• Campus Lodge Tampa.

Our Unconsolidated Properties, which are owned through joint venture arrangements, consisted of Legacy Village and 111 Sutter Street as of December 31, 2008, 2007 and 2006. Because management’s operating strategies are generally the same whether the properties are consolidated or unconsolidated, we believe that financial information and operating statistics with respect to all properties, both consolidated and unconsolidated, provide important insights into our operating results, including the relative size and significance of these elements to our overall operations. Collectively, we refer to our Consolidated and Unconsolidated Properties as our “Fund Portfolio.”

Our primary business is the ownership and management of a diversified portfolio of retail, office, industrial and apartment properties primarily located in the United States. We hire property management companies to provide the on-site, day-to-day management services for our properties. When selecting a property management company for one of our properties, we look for service providers that have a strong local market or industry presence, create portfolio efficiencies, have the ability to develop new business for us and will provide a strong internal control environment that will comply with our Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) internal control requirements. We currently use a mix of property management service providers that include large national real estate service firms, including an affiliate of the Advisor, and smaller local firms. Our property management service providers are generally hired to perform both property management and leasing services for our properties.

We seek to minimize risk and maintain stability of income and principal value through broad diversification across property sectors and geographic markets and by balancing tenant lease expirations and debt maturities across the Fund Portfolio. Our diversification goals also take into account investing in sectors or regions we believe will create returns consistent with our investment objective. Under normal conditions, we intend to pursue investments principally in well-located, well-leased assets within the office, retail, industrial and apartment sectors, which we refer to as the “Primary Sectors”. We will also pursue investments in certain sub-sectors of the Primary Sectors, for example the medical office sub-sector of the office sector or the student-oriented housing sub-sector of the apartment sector. We expect to actively manage the mix of properties and markets over time in response to changing operating fundamentals within each property sector and to changing economies and real estate markets in the geographic areas considered for investment. When consistent with our investment objectives, we will also seek to maximize the tax efficiency of our investments through like-kind exchanges and other tax planning strategies.

A key ratio reviewed by management in our investment decision process is the cash flow generated by the proposed investment, from all sources, compared to the amount of cash investment required (the “Cash on Cash Return”). Generally, we look at the Cash on Cash Returns over the one, five and ten-year time horizons and select investments that we believe meet our objectives. We own certain investments that provide us with significant cash flows that do not get treated as revenue under GAAP, but do get factored into our Cash on Cash Return calculations. Examples of such non-revenue generating cash flows include the sales tax sharing agreement at Marketplace at Northglenn (See Note 2 for a description of the Enhanced Sales Tax Incentive Program (“ESTIP”)), the real estate tax reimbursement agreement at 25850 S. Ridgeland (See Note 2 for a description of the 25850 S. Ridgeland Tax Increment Financing Note (“TIF Note”)) and the income guarantees from the seller of five student-oriented apartment communities we acquired in November 2007 and February 2008. For GAAP purposes, cash received from the Marketplace at Northglenn ESTIP and 25850 S. Ridgeland TIF Note is split between repayment of the principal balance on the notes receivable and interest income earned on those notes.

38

For GAAP purposes, cash received from the seller of the student-oriented apartment communities income guarantees are treated as a reduction of purchase price. Additionally, certain GAAP concepts such as straight-line rent and depreciation and amortization, are not factored into our Cash on Cash Returns (See Note 2).

The following tables summarize our diversification by property sector and geographic region based upon the fair value of our Consolidated and Unconsolidated Properties. The ten-year lease expiration table represents the lease expirations by both total square feet and annualized minimum base rents for current tenants of our Consolidated and Unconsolidated Properties. The ten-year debt repayment schedule represents debt principal repayments and maturities and the weighted average interest rate of those repayments and maturities for our Consolidated and Unconsolidated Properties. These tables provide examples of how the Advisor evaluates the Fund Portfolio when making investment decisions.

Property Sector Diversification

Consolidated Properties

	Percent of Fair Value
	2008		2007
Office
Commercial Office	30	%	32	%
Medical Office	15	%	15	%
Retail	20	%	21	%
Industrial	14	%	15	%
Apartment	21	%	17	%

Unconsolidated Properties

	Percent of Fair Value
	2008		2007
Office
Commercial Office	50	%	48	%
Medical Office	—		—
Retail	50	%	52	%
Industrial	—		—
Apartment	—		—

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Geographic Region Diversification

Consolidated Properties

	Percent of Fair Value
	2008		2007
East	11	%	12	%
West	46	%	48	%
Midwest	11	%	11	%
South	28	%	25	%
International	4	%	4	%
Unconsolidated Properties
	Percent of Fair Value
	2008		2007
East	—		—
West	50	%	48	%
Midwest	50	%	52	%
South	—		—
International	—		—

Future Lease Expirations

Consolidated Properties

	Total Square Footage	Annualized Minimum Base Rents		Percent of Annualized Minimum Base Rents
2009 (1)	248,000	$	4,291	7.3	%
2010	237,000		5,842	9.9	%
2011	415,000		8,365	14.2	%
2012	359,000		8,193	13.9	%
2013	457,000		3,940	6.7	%
2014	1,254,000		6,995	11.8	%
2015	122,000		1,732	2.9	%
2016	112,000		2,144	3.6	%
2017	1,506,000		11,695	19.8	%
2018	31,000		498	0.8	%
2019 and thereafter	1,076,000		5,379	9.1	%

(1) Does not includes 4,289 leases totaling approximately 1,843,000 square feet and approximately $27,768 in annualized minimum base rent associated with our seven apartment investments.

40

Unconsolidated Properties

	Total Square Footage	Annualized Minimum Base Rents		Percent of Annualized Minimum Base Rents
2009	21,000	$	513	2.3	%
2010	96,000		3,947	17.6	%
2011	67,000		3,491	15.5	%
2012	7,000		227	1.0	%
2013	101,000		3,692	16.4	%
2014	60,000		2,026	9.0	%
2015	15,000		437	1.9	%
2016	45,000		1,649	7.3	%
2017	1,000		54	0.2	%
2018	79,000		1,532	6.8	%
2019 and thereafter	322,000		4,891	22.0	%

Ten-Year Debt Repayment

Consolidated Properties

	Principal Repayments and Maturities		Percent of Total Outstanding Debt		Weighted Average Interest Rate
2009	$	4,088	0.6	%	5.55	%
2010		40,745	5.8	%	5.24	%
2011		43,157	6.1	%	5.55	%
2012		35,580	5.0	%	5.52	%
2013		120,750	17.0	%	5.64	%
2014		159,273	22.5	%	5.62	%
2015		63,935	9.0	%	5.61	%
2016		90,455	12.8	%	5.63	%
2017		118,875	16.8	%	5.44	%
2018		666	0.1	%	5.30	%
2019 and thereafter		31,081	4.3	%	5.30	%

Unconsolidated Properties

	Principal Repayments and Maturities		Percent of Total Outstanding Debt		Weighted Average Interest Rate
2009	$	2,665	1.7	%	5.63	%
2010		3,123	2.0	%	5.62	%
2011		3,742	2.4	%	5.62	%
2012		3,958	2.6	%	5.62	%
2013		4,186	2.7	%	5.62	%
2014		82,993	54.3	%	5.58	%
2015		52,380	34.3	%	5.58	%
2016		—	—		—
2017		—	—		—
2018		—	—		—
2019 and thereafter		—	—		—

41

We may employ debt financing in an effort to enhance returns when mortgage interest rates are at attractive levels relative to real estate income yields. Historically, Fund Portfolio leverage (long-term non-recourse debt) was expected to be limited to approximately 65%. Declining commercial property values have caused our portfolio leverage to increase above our target leverage ratio of 65%. Going forward, we expect to acquire properties using lower leverage, which we expect will, in time, reduce overall portfolio leverage thereby reducing portfolio risk. We rely primarily on long-term fixed-rate financing to lock in favorable spreads between real estate income yields and mortgage interest rates, and strive to maintain a balanced schedule of debt maturities.

We may also seek to enhance overall portfolio returns by investing selectively in higher risk properties involving more significant leasing and/or capital reinvestment challenges. Now that the Fund has exceeded $300 million in NAV, we may also invest up to 25% of our assets in non-Primary Sectors and/or properties located outside of the United States (“Other Investments”). Other Investments will be considered when the anticipated incremental return properly compensates us for the inherent incremental risk. As of December 31, 2008, we have made one Other Investment, Railway Street Corporate Centre, a 137,000 square-foot, multi-tenant office building located in Calgary, Canada. See Item 2. “Acquisitions—Acquisitions—Consolidated Properties”.

There are several component strategies that we intend to employ to successfully invest our capital, produce incremental cash flow and net income and grow our NAV. These include:

• finding and acquiring quality real estate investments. We intend to focus on acquiring well-located institutional quality real estate investments that provide stability through various real estate cycles.

• the continued successful and timely investment in new properties and financial interests in properties. In order to achieve this goal, we have made and will continue to make effective use of various ownership structures to access investment opportunities that might otherwise be unavailable to us.

• ability to secure financing. We have primarily used long-term, fixed-rate mortgage financing that is accretive to the underlying expected property returns. Our future performance is partially dependent on the direction of interest rates and lenders’ continued willingness to lend at competitive rates. In periods of increasing interest rates Cash on Cash Returns are subject to dilution. Under these market conditions, we may use the following strategies to attempt to improve investment returns:

• invest in properties with favorable in-place debt that we can assume.

• invest in properties using lower leverage.

• invest in structured partnerships and joint ventures that offer us a preferred right to cash flow.

• invest in real estate mortgage debt.

Seasonality

With the exception of our student-oriented apartment communities, our investments are not materially impacted by seasonality, despite certain of our retail tenants being impacted by seasonality. Percentage rents (rents computed as a percentage of tenant sales) that we earn from investments in retail and office properties may, in the future, be impacted by seasonality.

For our six student-oriented apartment communities, the majority of our leases commence mid-August and terminate the last day of July. These dates generally coincide with the commencement of the universities’ fall academic term and the completion of the subsequent summer school session. In certain cases we enter into leases for less than the full academic year, including nine-month or shorter-term semester leases. As a result, we may experience significantly reduced cash flows during the summer months at properties leased under leases having terms shorter than 12 months. We are required to re-lease each property in its entirety each year, resulting in significant turnover in our tenant population from year to year. We have found certain property revenues and operating expenses to be cyclical in nature, and therefore not incurred ratably over the course of the year. Prior to the commencement of each new lease period, mostly during the first two weeks of August, we prepare the units

42

for new incoming tenants. Other than revenue generated by in-place leases for returning tenants, we do not generally recognize lease revenue during this period referred to as “Turn” as we have no leases in place. In addition, during Turn we incur significant expenses making our units ready for occupancy, which we recognize immediately. This lease Turn period results in seasonality in our operating results during the second and third quarter of each year.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. For example, significant estimates and assumptions have been made with respect to the useful lives of assets, recoverable amounts of receivables, and initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. Actual results could differ from those estimates.

Critical Accounting Policies

Critical accounting policies are those that are both significant to the overall presentation of our financial condition and results of operations in our consolidated financial statements and require management to make difficult, complex or subjective judgments. Our critical accounting policies are those applicable to the following:

Initial Valuations and Estimated Useful Lives or Amortization Periods for Real Estate Investments and Intangibles

At acquisition, we make an assessment of the value and composition of the assets acquired and liabilities assumed. These assessments consider fair values of the respective assets and liabilities and are primarily determined based on estimated future cash flows using appropriate discount and capitalization rates, but may also be based on independent appraisals or other market data. The estimated future cash flows that are used for this analysis reflect the historical operations of the property, known trends and changes expected in current market and economic conditions that would impact the property’s operations, and our plans for such property. These estimates are particularly important as they are used for the allocation of purchase price between depreciable and non-depreciable real estate and other identifiable intangibles, including above, below and at-market leases. As a result, the impact of these estimates on our operations could be substantial. Significant differences in annual depreciation or amortization expense may result from the differing useful life or amortization periods related to such purchased assets and liabilities.

Events or changes in circumstances concerning a property may occur, which could indicate that the carrying values or amortization periods of the assets and liabilities may require adjustment. The resulting recovery analysis also depends on an analysis of future cash flows to be generated from a property’s assets and liabilities. Changes in our overall plans and views on current market and economic conditions may have a significant impact on the resulting estimated future cash flows of a property that are analyzed for these purposes.

Impairment of Long-Lived Assets

Real estate investments are individually evaluated for impairment annually or whenever conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis) over the anticipated holding period is less than its depreciated historical cost. Upon determination that a permanent impairment has occurred, rental properties will be reduced to their fair value.

Our estimate of the expected future cash flows used in testing for impairment is highly subjective and based on, among other things, our estimates regarding future market conditions, rental rates, occupancy levels, costs of tenant improvements, leasing commissions and other tenant concessions, assumptions regarding the residual

43

value of our properties at the end of our anticipated holding period, discount rates and the length of our anticipated holding period. These assumptions could differ materially from actual results. If our strategy changes or if market conditions otherwise dictate a reduction in the holding period and an earlier sale date, an impairment loss could be recognized and such loss could be material.

The Fund evaluates the carrying value of its investments in unconsolidated joint ventures in accordance with Accounting Principles Board (“APB”) Opinion 18, “The Equity Method of Accounting for Investments in Common Stock.” We analyze our investments in unconsolidated real estate affiliates when circumstances change and at least annually and determine if an “other-than-temporary” impairment exists and, if so, assess our ability to recover our carrying cost of the investment. The Fund concluded that it did not have an “other-than-temporary” impairment in any of its investments in unconsolidated joint ventures in 2008, 2007 or 2006.

Results of Operations

General

Our revenues are primarily received from tenants in the form of fixed minimum base rents and recoveries of operating expenses. Our expenses primarily relate to the costs of operating and financing the properties. Due to the relatively fixed nature of the revenue and expense streams in the Fund Portfolio, significant future growth in cash flow and net income will need to be generated through the acquisition of additional properties. Our share of the net income or net loss from Unconsolidated Properties is included in the equity in income of unconsolidated affiliates.

Results of Operations for the years ended December 31, 2008 and 2007:

We believe the following analyses of comparable real estate investments provide important information about the operating results of our real estate investments, such as trends in total revenues or operating expenses that may not be as apparent in a period-over-period comparison of the entire Fund. Comparable real estate investments represent properties owned by us at December 31, 2008, which were also owned by us during the entire year ended on December 31, 2007. Comparable real estate investments at December 31, 2008 include Monument IV at Worldgate, Havertys Furniture, Hagemeyer Distribution Center, 25850 S. Ridgeland, Georgia Door Sales Distribution Center, 105 Kendall Park Lane, Waipio Shopping Center, Marketplace at Northglenn, the CHW Medical Office Portfolio, Metropolitan Park North, Stirling Slidell Shopping Center and 9800 South Meridian.

Revenues

	Total Fund
	Year Ended December 31, 2008		Year Ended December 31, 2007		$ Change		% Change
Revenues:
Minimum rents	$	91,481	$	60,945	$	30,536	50.1	%
Tenant recoveries and other rental income		21,953		16,342		5,611	34.3	%
Total revenues	$	113,434	$	77,287	$	36,147	46.8	%

Increases in revenue line items from 2007 to 2008 are primarily attributable to the acquisition of the real estate investments that occurred during 2007 and 2008.

Included in minimum rents, as a net increase, are SFAS 141 and 142 above- and below-market lease amortization (See Note 2) of $1,552 and $1,505 for the years ended December 31, 2008 and 2007, respectively. Also included in minimum rents is straight-line rental income, representing rents recognized prior to being billed and collectible as provided by the terms of the lease, of $1,697 and $1,981 for the years ended December 31, 2008 and 2007, respectively.

44

Tenant recoveries relate mainly to real estate taxes and certain property operating expenses that are paid by us and are recoverable under the various tenants’ leases.

	Comparable Real Estate Investments
	Year Ended December 31, 2008		Year Ended December 31, 2007		$ Change		% Change
Revenues:
Minimum rents	$	45,211	$	44,584	$	627	1.4	%
Tenant recoveries and other rental income		15,145		13,744		1,401	10.2	%
Total revenues	$	60,356	$	58,328	$	2,028	3.5	%

	Total Revenues Reconciliation
	Year Ended December 31, 2008		Year Ended December 31, 2007
Total revenues:
Comparable real estate investments	$	60,356	$	58,328
Non-comparable real estate investments		53,078		18,959
Total revenues	$	113,434	$	77,287

Minimum rents at comparable real estate investments increased by $627 for the year ended December 31, 2008 as compared to the same period in 2007. The increase resulted from an approximate $1,140 increase in minimum rent at 9800 South Meridian due to a new lease of approximately 60,000 square feet that began in the first quarter of 2008 and an increase in minimum rents at Stirling Slidell Shopping Centre of approximately $330 due to the acceleration into minimum base rents of a below market lease intangible liability related to Circuit City, which vacated its lease early. The increases were partially offset by an approximate $465 decrease at the CHW Medical Office Portfolio due to decreased occupancy and conversions from gross leases to net leases. The change in minimum rents was also impacted by a decrease of approximately $370 at Metropolitan Park North due to recapture of above market lease amortization resulting from the property being reclassified to property held and used from held for sale.

Tenant recoveries and other rental income increased by $1,401 for the year ended December 31, 2008 over the same period in 2007 as a result of three items. First, the primary increase was due to an approximate $1,120 increase in recoveries at the CHW Medical Office Portfolio related to conversions from gross leases to net leases and increased operating expenses. Second, an approximate $150 increase at Monument IV at Worldgate mainly related to increases in real estate taxes and operating expenses. Third, an increase in recoveries of approximately $85 at Waipio Shopping Center due to increased operating expenses.

Operating Expenses

	Total Fund
	Year Ended December 31, 2008		Year Ended December 31, 2007		$ Change			% Change
Operating expenses:
Real estate taxes	$	13,730	$	8,014	$	5,716		71.3	%
Property operating		25,726		13,127		12,599		96.0	%
Manager and advisor fees		9,035		7,426		1,609		21.7	%
Fund level expenses		2,454		2,659		(205	)	(7.7	)%
Provision for doubtful accounts		935		379		556		146.7	%
General and administrative		1,095		638		457		71.6	%
Depreciation and amortization		60,244		32,360		27,884		86.2	%
Total operating expenses	$	113,219	$	64,603	$	48,616		75.3	%

45

Increases in operating expense line items from 2007 to 2008 are primarily attributable to the acquisition of the real estate investments that occurred during 2007 and 2008.

Real estate taxes and property operating expenses consist of the costs of ownership and operation of the real estate investments, many of which are recoverable under net leases. Examples of property operating expenses include insurance, utilities and repair and maintenance expenses.

Manager and advisor fees relate to the fixed and variable management and advisory fees earned by the Manager and Advisor. Fixed fees increase or decrease based on changes in our NAV. NAV will be impacted by changes in the value of our properties and the related debt. Variable fees are calculated as a formula of cash flow generated from owning and operating the real estate investments and will fluctuate as future cash flows fluctuate, but are expected to grow as the Fund makes additional acquisitions. The increase in manager and advisor fees from 2007 to 2008 relate mainly to the fixed management and advisory fee.

Our Fund level expenses in 2008 and 2007 were subject to the Expense Limitation Agreement with the Manager (See Note 8), which limits certain expenses to 0.75% of NAV. These expenses relate mainly to our compliance, administration related costs and Share offerings. We record Fund level expenses based on a calculation of 0.75% of NAV annually, calculated quarterly, limited to actual costs incurred by the Fund during the current quarter plus reimbursable expenses carried forward from prior periods. Expenses in excess of the 0.75% of NAV annually, calculated quarterly, will be carried forward for up to three years. As of December 31, 2008 and December 31, 2007, no Fund level expenses were being carried forward by the Manager. The Expense Limitation Agreement is scheduled to expire on December 31, 2009, after which time we will be responsible for all expenses as incurred, unless the agreement is renewed by the Manager and the Fund at their discretion.

Provision for doubtful accounts relate to receivables deemed as potentially uncollectible due to the age of the receivable or the status of the tenant. Increases in provision for doubtful accounts from 2007 to 2008 relate to minimum rents and unit damage charges at some of our student housing properties for tenants whose leases have expired as well as to tenant bankruptcies at some of our multi-tenant retail and office properties.

General and administrative expenses relate mainly to property expenses unrelated to property operations. Increase in general and administrative expenses from 2007 to 2008 relate mainly to bank fees and state taxes.

We expect depreciation and amortization expense to increase as we acquire new real estate investments. Depreciation and amortization expense will be impacted by the values assigned to buildings, personal property and in-place lease assets as part of the initial purchase price allocation.

	Comparable Real Estate Investments
	Year Ended December 31, 2008		Year Ended December 31, 2007		$ Change			% Change
Operating expenses:
Real estate taxes	$	7,413	$	6,333	$	1,080		17.1	%
Property operating		11,805		11,056		749		6.8	%
Provision for doubtful accounts		325		372		(47	)	(12.6	)%
General and administrative		617		607		10		1.6	%
Depreciation and amortization		23,248		21,283		1,965		9.2	%
Total operating expenses	$	43,408	$	39,651	$	3,757		9.5	%

46

	Operating Expenses Reconciliation
	Year Ended December 31, 2008		Year Ended December 31, 2007
Total operating expenses:
Comparable real estate investments	$	43,408	$	39,651
Non-comparable real estate investments		58,322		14,867
Manager and advisor fees		9,035		7,426
Fund level expenses		2,454		2,659
Total operating expenses	$	113,219	$	64,603

The increase in real estate taxes expense at comparable real estate investments is mainly due to an increase of $890 at the CHW Medical Office Portfolio due to an increase in assessed value for the properties located in California and a $160 increase at Monument IV at Worldgate as a result of being reassessed at a higher value.

The increase in property operating expenses at comparable real estate investments is mainly related to an increase of $665 at the CHW Medical Office Portfolio. The increase was a result of utility rate increases, repair and maintenance expenses for general property upkeep and payroll costs as the new property management company utilized more staff than the previous property management company. The increase is also attributable to an increase of $60 at Metropolitan Park North related to miscellaneous repairs and maintenance projects and payroll costs for the property management company as well as an increase of $55 at 9800 South Meridian related to increased utilities due to higher occupancy and miscellaneous repair and maintenance projects.

The decrease in provision for doubtful accounts at comparable properties is mainly related to a decrease in uncollectible accounts at the CHW Medical Office Portfolio of approximately $230 due to tenant bankruptcies in 2007. This decrease was partially offset by an increase in uncollectible accounts at Marketplace at Northglenn of approximately $100 and Stirling Slidell Shopping Centre of approximately $70 related to tenant bankruptcies.

The increase in general and administrative expense at comparable properties is primarily related to certain non-reimbursable state and local taxes and general property level legal costs.

The increase in depreciation and amortization expense at comparable real estate investments is primarily related to the catch up of depreciation and amortization of approximately $2,460 at Metropolitan Park North resulting from the property being reclassified as property held and used from held for sale. Additional increases stemmed from the increase of approximately $675 at Stirling Slidell Shopping Centre due to the acceleration of amortization of an in-place lease intangible asset in the fourth quarter of 2008 related to the Circuit City bankruptcy and of approximately $305 at 9800 South Meridian due to 2008 capital additions. These increases were partially offset by a decrease of approximately $1,330 at the CHW Medical Office Portfolio due to several in-place lease intangible assets becoming fully amortized in the fourth quarter of 2007.

Other Income and Expenses

	Total Fund
	Year Ended December 31, 2008			Year Ended December 31, 2007			$ Change			% Change
Other income and (expenses):
Interest income	$	643		$	1,788		$	(1,145	)	(64.0	)%
Interest expense		(41,805	)		(28,712	)		(13,093	)	(45.6	)%
Loss allocated to minority interests		5,651			572			5,079		887.9	%
Equity in income of unconsolidated affiliates		1,230			536			694		129.5	%
Gain (loss) on foreign currency derivative		1,492			(504	)		1,996		396.0	%
Total other income and (expenses):	$	(32,789	)	$	(26,320	)	$	(6,469	)	(24.6	)%

47

Interest income decreased for the year ended December 31, 2008 over 2007 as a result of investing less average cash balances in 2008 than were invested in 2007 and lower interest rates.

Interest expense increased from 2007 to 2008 primarily due to the acquisition of real estate investments that occurred throughout 2007 and the first quarter of 2008. We expect interest expense to increase in the future as we acquire new real estate investments using leverage. Interest expense includes the amortization of deferred finance fees of $921 and $654 for the years ended December 31, 2008 and 2007, respectively. Also included in interest expense for the years ended December 31, 2008 and 2007, as a net reduction, is amortization of debt premium and discount associated with the assumption of debt of $184 and $121, respectively.

Loss allocated to minority interests represents the other owners’ share of the net loss recognized from operations of our consolidated joint ventures (See Note 3). The amount of future income or loss allocated to the minority interest owners of our consolidated joint ventures will be directly impacted by the net income or net loss recognized by that investment. Increase in loss allocated to minority interests from 2007 to 2008 is mainly attributable to the acquisitions of Campus Edge Lafayette and Campus Lodge Tampa in the first quarter of 2008 and 18922 Forge Drive, The District at Howell Mill, Cabana Beach San Marcos, Cabana Beach Gainesville, Campus Lodge Athens and Campus Lodge Columbia in 2007.

Equity in income of unconsolidated affiliates increased by $694 as equity in the income at 111 Sutter Street decreased by $42 from equity loss of $9 for the year ended December 31, 2007 to equity loss of $51 for the year ended December 31, 2008. Equity income from Legacy Village increased by $736 from equity income of $545 for the year ended December 31, 2007 to equity income of $1,281 for the year ended December 31, 2008. The increase at Legacy resulted mainly from lease termination fees earned in 2008.

Gain (loss) on foreign currency derivative relates to the change in fair value of the foreign currency forward contracts. We settled the foreign currency forward contract on December 31, 2008 and realized a gain on foreign currency derivative of $1,492. The increase in fair value resulted from the strengthening of the United States Dollar against the Canadian Dollar during the year ended December 31, 2008 as compared to the same period of 2007.

Results of Operations for the years ended December 31, 2007 and 2006:

We believe the following analyses of comparable real estate investments provide important information about the operating results of our real estate investments, such as trends in total revenues or operating expenses that may not be as apparent in a period-over-period comparison of the entire Fund. Comparable real estate investments represent properties owned by us at December 31, 2007, which were also owned by us during the entire year ended on December 31, 2006. Comparable real estate investments at December 31, 2007 include Monument IV at Worldgate, Havertys Furniture, Hagemeyer Distribution Center, 25850 S. Ridgeland, Georgia Door Sales Distribution Center, 105 Kendall Park Lane, Waipio Shopping Center, Marketplace at Northglenn and the CHW Medical Office Portfolio.

Revenues

	Total Fund
	Year Ended December 31, 2007		Year Ended December 31, 2006		$ Change		% Change
Revenues:
Minimum rents	$	60,945	$	40,577	$	20,368	50.2	%
Tenant recoveries and other rental income		16,342		10,528		5,814	55.2	%
Total revenues	$	77,287	$	51,105	$	26,182	51.2	%

48

Increases in revenue line items from 2006 to 2007 are primarily attributable to the acquisition of the real estate investments that occurred during 2006 and 2007.

Included in minimum rents, as a net increase, are SFAS 141 and 142 above- and below-market lease amortization (See Note 2) of $1,505 and $1,430 for the years ended December 31, 2007 and 2006, respectively. Also included in minimum rents is straight-line rental income, representing rents recognized prior to being billed and collectible as provided by the terms of the lease, of $1,981 and $1,591 for the years ended December 31, 2007 and 2006, respectively.

Tenant recoveries relate mainly to real estate taxes and certain property operating expenses that are paid by us and are recoverable under the various tenants’ leases.

	Comparable Real Estate Investments
	Year Ended December 31, 2007		Year Ended December 31, 2006		$ Change			% Change
Revenues:
Minimum rents	$	35,646	$	36,328	$	(682	)	(1.9	)%
Tenant recoveries and other rental income		11,119		9,207		1,912		20.8	%
Total revenues	$	46,765	$	45,535	$	1,230		2.7	%

	Total Revenues Reconciliation
	Year Ended December 31, 2007		Year Ended December 31, 2006
Total revenues:
Comparable real estate investments	$	46,765	$	45,535
Non-comparable real estate investments		30,522		5,570
Total revenues	$	77,287	$	51,105

Minimum rents at comparable real estate investments decreased by $682 between the year ended December 31, 2007 and the same period in 2006. The decrease resulted from an approximate $536 decrease at the CHW Medical Office Portfolio due to decreased occupancy during 2007 compared to 2006. The decrease also stemmed from an approximate $379 decrease at the Marketplace at Northglenn due to lower amortization from below-market leases due to lease expirations as well as slightly decreased occupancy. These decreases were partially offset by an approximate $164 increase in minimum rent at Waipio Shopping Center due to lease renewals at higher rental rates and an approximate $35 increase in minimum rent at Havertys Furniture due to the expansion.

Tenant recoveries and other rental income increased by $1,912 for the year ended December 31, 2007 over the same period in 2006 as a result of three items. First, an approximate $1,322 increase in recoveries at the CHW Medical Office Portfolio related to increases in reimbursable insurance expense and general operating expenses, as well as conversions from gross leases to net leases. Second, an approximate $35 increase at Havertys Furniture due to the expansion. Third, an approximate $498 combined increase at Waipio Shopping Center, Marketplace at Northglenn and Monument IV at Worldgate due to increases in various reimbursable operating expenses.

49

Operating Expenses

	Total Fund
	Year Ended December 31, 2007		Year Ended December 31, 2006		$ Change		% Change
Operating expenses:
Real estate taxes	$	8,014	$	5,324	$	2,690	50.5	%
Property operating		13,127		8,889		4,238	47.7	%
Manager and advisor fees		7,426		5,176		2,250	43.5	%
Fund level expenses		2,659		2,035		624	30.7	%
Provision for doubtful accounts		379		359		20	5.6	%
General and administrative		638		516		122	23.6	%
Depreciation and amortization		32,360		19,210		13,150	68.5	%
Total operating expenses	$	64,603	$	41,509	$	23,094	55.6	%

Increases in operating expense line items from 2006 to 2007 are primarily attributable to the acquisition of the real estate investments that occurred during 2006 and 2007.

Real estate taxes and property operating expenses consist of the costs of ownership and operation of the real estate investments, many of which are recoverable under net leases. Examples of property operating expenses include insurance, utilities and repair and maintenance expenses.

Manager and advisor fees relate to the fixed and variable management and advisory fees earned by the Manager and Advisor. Fixed fees increase or decrease based on changes in our NAV. NAV will be impacted by changes in value of our properties and the related debt. Variable fees are calculated as a formula of cash flow generated from owning and operating the real estate investments and will fluctuate as future cash flows fluctuate, but are expected to grow as the Fund makes additional acquisitions. Increase in manager and advisor fees from 2006 to 2007 relate mainly to the fixed management and advisory fee.

Our Fund level expenses in 2007 and 2006 were subject to an expense limitation and reimbursement agreement (the “Expense Limitation Agreement”) with the Manager (See Note 8), which limits certain expenses to 0.75% of NAV. These expenses relate mainly to our offering, compliance and administration related costs. We record Fund level expenses based on a calculation of 0.75% of NAV annually, calculated quarterly, limited to actual costs incurred by the Fund during the current quarter plus reimbursable expenses carried forward from prior periods. Expenses in excess of the 0.75% of NAV annually, calculated quarterly, will be carried forward for up to three years. As of December 31, 2007, no Fund level expenses were being carried forward by the Manager. As of December 31, 2006, Fund level expenses of $51 were carried forward by the Manager, all of which were reimbursed to the Manager by us during 2007. The Expense Limitation Agreement was scheduled to expire on December 31, 2007, but was renewed and extended through December 31, 2009, after which time we will be responsible for all expenses as incurred, unless the agreement is renewed by the Manager and the Fund at their discretion. Significant amounts of Fund level expenses are expected to be incurred during the next few years as we are required to comply with the disclosure rules of the SEC and the heightened internal control requirements of Sarbanes-Oxley.

Provision for doubtful accounts relate to receivables deemed as potentially uncollectible due to the age of the receivable or the status of the tenant. Increases in provision for doubtful accounts from 2006 to 2007 relate mainly to tenant bankruptcies at some of our multi-tenant retail and office properties.

General and administrative expenses relate mainly to property expenses unrelated to property operations. Increase in general and administrative expenses from 2006 to 2007 relate mainly to bank fees and state taxes.

50

We expect depreciation and amortization expense to increase as we acquire new real estate investments. Depreciation and amortization expense will be impacted by the values assigned to buildings, personal property and in-place lease assets as part of the initial purchase price allocation.

	Comparable Real Estate Investments
	Year Ended December 31, 2007		Year Ended December 31, 2006		$ Change		% Change
Operating expenses:
Real estate taxes	$	5,028	$	4,833	$	195	4.0	%
Property operating		9,009		8,208		801	9.8	%
Provision for doubtful accounts		372		359		13	3.6	%
General and administrative		476		332		144	43.4	%
Depreciation and amortization		18,333		16,911		1,422	8.4	%
Total operating expenses	$	33,218	$	30,643	$	2,575	8.4	%

	Operating Expenses Reconciliation
	Year Ended December 31, 2007		Year Ended December 31, 2006
Total operating expenses:
Comparable real estate investments	$	33,218	$	30,643
Non-comparable real estate investments		21,138		3,471
Manager and advisor fees		7,426		5,176
Fund level expenses		2,659		2,035
General and administrative		162		184
Total operating expenses	$	64,603	$	41,509

The increase in real estate taxes expense at comparable real estate investments is mainly due to an increase of $109 at Monument IV at Worldgate as a result of being reassessed at a higher value.

The increase in property operating expenses at comparable real estate investments is primarily related to an increase in snow removal expense at Marketplace at Northglenn of approximately $192 in addition to increased insurance costs at our properties in the amount of $150 and increases in general operating expenses. Denver, Colorado had significant amounts of snow fall during 2007 that had not occurred during the same period in 2006, which caused the increased snow removal costs at Marketplace at Northglenn.

The increase in provision for doubtful accounts at comparable properties is mainly related to an increase in uncollectible accounts at the CHW Medical Office Portfolio of $177 due to tenant bankruptcies, partially offset by a decrease in uncollectible accounts at Marketplace at Northglenn of $163 related to tenant bankruptcies that did not occur in 2007.

The increase in general and administrative expense at comparable properties is primarily related to certain non-reimbursable state and local taxes and general property level legal costs.

The increase in depreciation and amortization expense at comparable properties is primarily related to the depreciation and amortization of capital expenditures incurred during 2006 and 2007 and the write-off of tenant improvements and lease commissions with respect to certain tenants that terminated their leases early at both the CHW Medical Office Portfolio and Marketplace at Northglenn.

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Other Income and Expenses

	Total Fund
	Year Ended December 31, 2007			Year Ended December 31, 2006			$ Change			% Change
Other income and (expenses):
Interest income	$	1,788		$	1,582		$	206		13.0	%
Interest expense		(28,712	)		(18,522	)		(10,190	)	(55.0	)%
Loss allocated to minority interests		572			156			416		266.7	%
Equity in income of unconsolidated affiliates		536			425			111		26.1	%
Loss on foreign currency derivative		(504	)		—			(504	)	—	%
Total other income and (expenses):	$	(26,320	)	$	(16,359	)	$	(9,961	)	(60.9	)%

Interest income increased for the year ended December 31, 2007 over 2006 as a result of investing higher excess cash balances in 2007 than were invested in 2006, prior to closing on real estate investments.

Interest expense increased from 2006 to 2007 primarily due to the acquisition of real estate investments that occurred during the fourth quarter of 2006 and during 2007. We expect interest expense to increase in the future as we acquire new real estate investments using leverage. Interest expense includes the amortization of deferred finance fees, excluding those related to properties held for sale, of $601 and $544 for the years ended December 31, 2007 and 2006, respectively. Also included in interest expense for the years ended December 31, 2007 and 2006, as a net reduction, is amortization of debt premium and discount associated with the assumption of debt of $121 and $282, respectively.

Loss allocated to minority interests represents the other owners’ share of the net loss recognized from operations of our consolidated joint ventures (See Note 3). The amount of future income or loss allocated to the minority interest owners of our consolidated joint ventures will be directly impacted by the net income or net loss recognized by that investment. Increase in loss allocated to minority interests from 2006 to 2007 is mainly attributable to the acquisition of 18922 Forge Drive, The District at Howell Mill, Cabana Beach San Marcos, Cabana Beach Gainesville, Campus Lodge Athens and Campus Lodge Columbia in 2007 and 9800 South Meridian in the fourth quarter of 2006.

Equity in income of unconsolidated affiliates increased by $111 as equity in the income at 111 Sutter Street increased by $313 from equity loss of $322 for the year ended December 31, 2006 to equity loss of $9 for the year ended December 31, 2007. The increase at 111 Sutter stemmed from new leasing at higher rental rates as well as the recovery of supplemental real estate taxes related to prior years. Equity income from Legacy Village decreased by $202 from equity income of $747 for the year ended December 31, 2006 to equity income of $545 for the year ended December 31, 2007. The decrease at Legacy resulted from a lease termination fee earned in 2006 that did not recur in 2007. This decrease was partially offset by the reversal of the co-tenancy reserve in 2007.

Loss on foreign currency derivative relates to the change in fair value of the foreign currency forward contracts. The decrease in fair value resulted from the weakening of the United States Dollar against the Canadian Dollar during the third and fourth quarters of 2007.

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Liquidity and Capital Resources

The Fund’s primary uses and sources of cash are as follows:

Uses	Sources
Short-term liquidity and capital needs such as:
•     Interest payments on debt •     Distributions to shareholders •     Fees payable to the Manager and the Advisor •     Minor improvements made to individual properties that are not recoverable through expense recoveries or common area maintenance charges to tenants •     General and administrative costs •     Other Fund level expenses •     Lender escrow accounts for real estate taxes, insurance and capital expenditures	•        Operating cash flow, including the receipt of distributions of our share of cash flow produced by our unconsolidated real estate affiliates •        Proceeds from secured loans collateralized by individual properties •        Proceeds from our unsecured line of credit •        Proceeds from construction loans •        Periodic sales of our Common Stock •        Receipts from local governments for real estate tax reimbursements and sales tax sharing agreements
Longer-term liquidity and capital needs such as:	•        Sales of real estate investments
•     Acquisitions of new real estate •     Expansion of existing properties •     Tenant improvements and leasing commissions •     Debt repayment requirements, including both principal and interest •     Repurchases of our Common Stock	•        Draws from lender escrow accounts

The sources and uses of cash for the years ended December 31, 2008 and 2007 were as follows:

	Year Ended December 31, 2008			Year Ended December 31, 2007			$ Change
Net cash provided by operating activities	$	19,983		$	26,464		$	(6,481	)
Net cash used in investing activities		(37,933	)		(391,619	)		353,686
Net cash provided by financing activities		26,011			344,590			(318,579	)

Our net cash flows provided by operating activities were impacted by a decrease in net income of $18,938, caused in part by an increase in interest expense of $13,093 in addition to a $12,469 decrease in operating income. The decrease in net income was more than offset by an increase in depreciation and amortization expense of $27,884. Our working capital, which consists of cash, tenant accounts receivable, deferred rent receivable and prepaid and other assets less accounts payable and accrued expenses, accrued interest and accrued real estate taxes, was impacted between December 31, 2007 and December 31, 2008 by the following items:

• a decrease in prepaid expenses and other assets of $3,022 related to collection of payments on long term receivables and income guarantee receivables from our 2007 acquisitions, offset by an increase in deferred rent receivable of $1,679, which was mainly the result of our 2008 and 2007 acquisitions; and

• a decrease in accounts payable and accrued expenses of $1,503 offset by an increase in accrued real estate taxes of $1,304 due to 2008 acquisitions and reassessments of existing properties.

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Cash used in investing activities decreased as a result of a $355,232 decrease in acquisition activity for the year ended December 31, 2008 over December 31, 2007. Cash provided by financing activities decreased for the year ended December 31, 2008 over the same period in 2007 as a result of a decrease in Share issuances of $55,405 and a decrease in net borrowings of $261,936, as a result of less acquisition activity in 2008 than in 2007.

Financing

We expect to employ debt financing to enhance total returns when mortgage interest rates are at attractive levels relative to real estate income yields and when debt is available on terms and conditions that we consider favorable and in keeping with our core investment style. We have relied primarily on fixed-rate financing, locking in what were favorable spreads between real estate income yields and mortgage interest rates and have tried to maintain a balanced schedule of debt maturities. We have attempted to limit overall portfolio leverage to 65% (portfolio leverage is calculated as our share of the current property debt balance divided by the fair value of all our real estate investments). Declining commercial property values have caused our portfolio leverage to increase above our target leverage ratio of 65%. When these conditions occur, and subject to having available capital, we will attempt to acquire properties using lower leverage and retire existing mortgage loans as they mature, which we expect will, in time, reduce overall portfolio leverage.

The following Consolidated Debt table provides information on the outstanding principal balances and the weighted average interest rate at December 31, 2008 and 2007 for such debt. The Unconsolidated Debt table provides information on our pro rata share of debt associated with our unconsolidated joint ventures.

Consolidated Debt

	2008				2007
	Principal Balance		Weighted Average Interest Rate		Principal Balance		Weighted Average Interest Rate
Fixed	$	695,001	5.57	%	$	653,483	5.55	%
Variable		23,604	2.76	%		40,338	6.43	%
Total	$	718,605	5.48	%	$	693,821	5.60	%

Unconsolidated Debt

	2008				2007
	Principal Balance		Weighted Average Interest Rate		Principal Balance		Weighted Average Interest Rate
Fixed	$	89,927	5.60	%	$	91,098	5.60	%
Variable		—	—			—	—
Total	$	89,927	5.60	%	$	91,098	5.60	%

We have placed mostly fixed-rate financing with terms ranging from 2 to 19 years. At December 31, 2008, we had one floating rate loan at LIBOR plus 160 basis points (2.04% at December 31, 2008) and a borrowing on our line of credit at 3.75%. At December 31, 2007, we had one floating rate loan at LIBOR plus 160 basis points (6.20% at December 31, 2007) and a borrowing on our line of credit at 6.52%.

Covenants

At December 31, 2008, we were in compliance with all debt covenants.

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Line of Credit

On February 21, 2007, we entered into a $60,000 line of credit agreement, replacing an existing line of credit, to cover short-term capital needs for acquisitions and operations, which was expanded to $70,000 on July 27, 2007. The additional $10,000 borrowing capacity is supplied by BAC. The line of credit expires on February 21, 2010. The line of credit carries an interest rate that approximates LIBOR plus 1.50% for borrowings expected to be outstanding for at least one month, or a base rate for borrowings expected to be outstanding for less than one month, which is the greater of (i) the interest rate per annum announced from time to time by the lender, as its prime rate or (ii) the Federal Funds effective rate plus 0.75%. Should the Fund fail to maintain a debt service coverage ratio of 1.50 to 1.00 or greater, the interest rate on the outstanding borrowings will increase by 0.50%. At December 31, 2007, our debt service coverage ratio fell below the 1.50 to 1.00 threshold. Since April 29, 2008, we have been paying an additional 0.50% on our line of credit borrowing which has resulted in additional interest expense of approximately $95. We will continue to pay the additional 0.50% until our debt service coverage ratio returns to 1.50 to 1.00 or greater. At December 31, 2008, we had $10,000 borrowed on our line of credit at 3.75% and four letters of credit outstanding for approximately $3,015, which were used as additional collateral for our student-oriented apartment mortgage loans. At December 31, 2007, we had $29,000 borrowed on our line of credit at 6.52%. As of December 31, 2008 we had issued four letters of credit from our line of credit for approximately $3,015, which were used as additional collateral on three of our apartment communities acquired in November 2007. As of December 31, 2008, we were in compliance of the terms of our line of credit. At December 31, 2008, we had approximately $56,985 available to draw on our line of credit.

We anticipate that we will need a line of credit throughout the life of the Fund to accomplish our acquisition and operational objectives. In this respect, monies borrowed on our line of credit will be repaid from three sources:

• placing fixed-rate mortgages on the Fund Portfolio,

• cash flow generated by the Fund Portfolio and

• sales of our Common Stock.

Recent Events and Outlook

For the remainder of 2009, we will continue to monitor the broader economic slowdown and, as best we can, mitigate the impacts of weakening property fundamentals on our portfolio. Our challenge will be to balance the sometimes competing objectives of building cash reserves that will reduce risk in our portfolio with our desire to distribute free cash flow generated from our property investments to pay an ongoing dividend to stockholders. Our strategic bias towards longer dated leases, higher credit tenants and fixed rate financing has served us well. However, the duration and magnitude of the current recession has exceeded expectations and historical precedents causing even the most conservative and defensive investment strategies to under perform. While actual and projected property level cash flows have supported a consistent dividend payment for sixteen quarters, we are not immune to impacts from a continuation of the current financial crisis and the financial stress it may have on our tenants. We intend to be responsive to changes in market conditions that may require us to adopt a more defensive posture in the management of our balance sheet. Among these defensive tactics may be, establishing cash reserves for future capital needs, altering the timing and amount of what we have historically paid in dividends and amounts and frequency of tender offers. In this regard, on March 13, 2009, our board of directors declared a dividend of $0.875 per Share to stockholders of record on March 31, 2009, payable on May 1, 2009. This represents a reduction from $1.75 per Share, our historic practice for quarterly dividends for the past 16 quarters. We cannot provide assurance with respect to the amount of dividends, if any, that we will pay in the future.

We intend to use our line of credit to fund a portion of our capital expenditures, mortgage principal amortization and other working capital requirements throughout the year. Our line of credit expires in February 2010. While renewing and extending our line of credit beyond its current expiration will be challenging in the current environment, it is critical if our line of credit is to be used as a reliable source of short-term funding needs.

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Contractual Cash Obligations and Commitments

The following table below aggregates our contractual obligations and commitments with payments due subsequent to December 31, 2008. The table does not include commitments with respect to the purchase of services from the Manager and the Advisor, as future payments due on such commitments cannot be determined.

Obligations	Total		Payments due by period
			Less than 1 year		1 – 3 years		3 – 5 years		More than 5 years
Long-term debt (1)	$	1,161,787	$	54,871	$	192,642	$	243,248	$	671,026
Loan escrows		11,619		4,675		5,744		751		449
Total	$	1,173,406	$	59,546	$	198,386	$	243,999	$	671,475

(1) Includes interest expense calculated using the effective interest rates of the underlying borrowings for all fixed-rate debt at December 31, 2008, which was 5.57%. Since the interest rates on certain loans are based on a spread over LIBOR, the rates will periodically change; therefore, interest expense for all variable-rate debt was calculated using the effective interest rates of the underlying borrowings at December 31, 2008, which was an average interest rate of 2.76%.

As our portfolio has been static over the last year and in response to the broader financial crisis and economic slow down, we have prioritized the use of available cash to de-leverage the Fund through the repayment of our line of credit, to maintain our current dividend payments to stockholders, to accumulate cash reserves as may be necessary for the management of underlying properties and to provide limited liquidity to investors by repurchasing Shares through the tender process. The free cash flow generated from our properties in 2008 was used to pay the ongoing dividends to stockholders. During 2008, the capital raised through the sale of Shares to stockholders was used to de-lever the Fund, with the excess devoted largely to offering limited liquidity via the repurchase of Shares.

Capital raised through the sale of Shares to stockholders will be used first to pay down any line of credit borrowings; second, to create cash reserves to fund future capital expenditures, debt principal amortization and debt maturities; third to acquire new real estate investments; finally to offer to repurchase Shares through a tender offer process.

To reduce the dilutive impact to stockholders created by maintaining cash reserves, our Manager and Advisor have agreed to waive 1.0% of their combined 1.5% fixed fee expense (See Note 8). The reduced fee will apply to cash reserves generated by capital raised through the sale of Shares to stockholders.

We have two long-term debt maturity balloon payments coming due in 2010 in the aggregate amount of $33,554. We intend to refinance these loans, or a portion of these loans with new long-term loans. In the event we cannot refinance these loans, we expect to pay down these debt maturities from operating cash flow and the line of credit.

Should we be unable to renew our line of credit, we will need to retain our operating cash flow and look into selective dispositions of our properties to build cash reserves sufficient to cover our cash needs.

We intend to actively monitor and manage our available liquidity to ensure the long-term viability of the Fund.

As of the filing date of this Form 10-K, we had entered into the following additional contractual commitments:

• On February 4, 2009, the Fund borrowed $5,000 on its line of credit for use in operations.

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Commitments

From time to time, we have entered into contingent agreements for the acquisition of properties. Such acquisitions are subject to satisfactory completion of due diligence.

As part of the acquisition of the 25850 S. Ridgeland property we were granted an option expiring in 2009 to purchase a portion of adjacent land if the tenant chooses to expand its facility. If the tenant chooses to expand its facility, then we can acquire the additional portion of land subject to the terms and conditions of that certain Expansion Option Agreement dated as of December 31, 2004, which agreement provides among other things the terms and conditions pursuant to which the purchase price for the adjacent land shall be determined.

The CHW Medical Office Portfolio mortgage debt requires that we deposit a maximum of $1,900 into an escrow account to fund future tenant improvements and leasing commissions. At December 31, 2008, we had approximately $1,860 deposited in this escrow, and we expect to fund approximately $40 during 2009. Additionally, we are required to deposit approximately $151 per year into an escrow account to fund capital expenditures. At December 31, 2008, our capital account escrow account balance was $707. These escrow accounts allow us to withdraw funds as we incur costs related to tenant improvements, leasing commissions and capital expenditures. We expect to fund the escrow requirements with operating cash flows generated by the CHW Medical Office Portfolio.

The mortgage loan collateralized by Metropolitan Park North requires that on or before April 1, 2009 we post a $3,900 reserve in escrow to cover costs of certain tenant improvements, leasing commissions, rent concessions, and lost rental income in connection with re-leasing space to a major tenant of the building. If the tenant provides written notice of its intent to exercise its lease renewal option by September 30, 2010, the lender will return the $3,900 deposit to us. If the tenant fails to provide notice of its renewal, we are obligated to post an additional $2,800 deposit into the escrow. The lender will return the reserve to us if the following conditions are met: (1) no default has occurred and remains outstanding; and (2) either the tenant has exercised its renewal options or the space has been re-leased to a new tenant(s). The Fund plans on satisfying these commitments with letters of credit against our line of credit.

The mortgage loan collateralized by Monument IV at Worldgate requires that, should the tenant not renew its lease or the space not be leased to a new tenant(s), the Fund must reserve all rental payments received from the tenant at the earlier of September 1, 2010 or upon the tenant delivering a notice of its intent not to renew the lease. The Fund can avoid reserving the rental payments by delivering a letter of credit to the lender of $4,800 on September 1, 2008 or $3,600 on September 1, 2009 or $2,400 on September 1, 2010, depending on the date at which the reserve payments become required. The Fund expects to fund the reserve, if required to do so, from the rental payments received from the tenant. The lender will return the reserve to the Fund if the following conditions are met: (1) no default has occurred and remains outstanding; and (2) either the tenant has renewed its lease or the space has been re-leased to a new tenant(s).

The debt associated with five of the Fund’s student-oriented apartment communities requires that we deposit a total of $224 per year into a replacement reserve to fund future furniture replacement costs. As of December 31, 2008, we had deposited approximately $266 into this escrow. We expect to fund the loan escrows from property operations.

As part of the lease with our single tenant at the 4001 North Norfleet Road property, we provided the tenant a right to expand the current building by up to 286,000 square feet of space. If the tenant exercises this right, we will be obligated to construct this expansion space. The tenant has the right to notify us of their desire to expand at any time prior to February 28, 2016, (the end of the ninth year of the lease), or if the lease is extended, until any time prior to the end of the fourth year of any extension. As of December 31, 2008, we have not received an expansion notice from the tenant.

On March 13, 2009, our board of directors declared a dividend of $0.875 per Share to stockholders of record on March 31, 2009, payable on May 1, 2009.

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Off Balance Sheet Arrangements

Letters of credit are issued in most cases as collateral for acquisitions of properties. At December 31, 2008, we had approximately $3,015 in outstanding letters of credit, none of which are reflected as liabilities on our balance sheet. We have no other off balance sheet arrangements.

REIT Requirements

To remain qualified as a real estate investment trust for federal income tax purposes, we must distribute or pay tax on 100% of our capital gains and at least 90% of ordinary taxable income to stockholders.

The following factors, among others, will affect operating cash flow and, accordingly, influence the decisions of our board of directors regarding distributions:

• scheduled increases in base rents of existing leases;

• changes in minimum base rents and/or overage rents attributable to replacement of existing leases with new or renewal leases;

• changes in occupancy rates at existing properties and procurement of leases for newly acquired or developed properties;

• necessary capital improvement expenditures or debt repayments at existing properties; and

• our share of distributions of operating cash flow generated by the unconsolidated real estate affiliates, less management costs and debt service on additional loans that have been or will be incurred.

We anticipate that operating cash flow, and potential new debt or equity from our future equity offerings, or refinancings will provide adequate liquidity to conduct our operations, fund general and administrative expenses, fund operating costs and interest payments and allow distributions to our stockholders in accordance with the requirements of the Code.

Recently Issued Accounting Pronouncements And Developments

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“Statement No. 160”). Statement No. 160 requires (i) that noncontrolling (minority) interests be reported as a component of shareholders’ equity, (ii) that net income attributable to the parent and to the noncontrolling interest be separately identified in the consolidated statement of operations, (iii) that changes in a parent’s ownership interest while the parent retains its controlling interest be accounted for as equity transactions, (iv) that any retained noncontrolling equity investment upon the deconsolidation of a subsidiary be initially measured at fair value, and (v) that sufficient disclosures are provided that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. Statement No. 160 is effective for annual periods beginning after December 15, 2008 and should be applied prospectively. However, the presentation and disclosure requirements of the statement shall be applied retrospectively for all periods presented. We believe the adoption of the provisions of Statement No. 160 will not have a material impact on the Fund’s consolidated financial position and results of operations, but will have an impact on the presentation of noncontrolling interest in our financial statements.

In December 2007, the FASB issued SFAS 141 (revised 2007), “Business Combinations”, (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, including goodwill, the liabilities assumed and any non-controlling interest in the acquiree. SFAS 141R also establishes disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. 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 15, 2008. The Fund will adopt this standard on January 1, 2009. The

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impact of adopting SFAS 141R will be dependent on the future business combinations that the Fund may pursue after its effective date, but will require expensing of acquisition related costs, as incurred, which were previously capitalized prior to adopting the standard.

In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”). SFAS No. 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand the effects of the derivative instruments on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Fund believes the potential impact of SFAS No. 161 on its financial statements will not be material.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

We are subject to market risk associated with changes in interest rates both in terms of our variable-rate debt and the price of new fixed-rate debt for acquisitions or refinancing of existing debt. As of December 31, 2008, we had consolidated debt of $718,605, which included $23,604 of variable-rate debt. Including the $1,108 net discount on the assumption of debt, we have consolidated debt of $717,497 at December 31, 2008. None of the variable-rate debt was subject to interest rate cap agreements. A 25 basis point movement in the interest rate on the $23,604 of variable-rate debt would have resulted in an approximately $59 annualized increase or decrease in consolidated interest expense and cash flow from operating activities.

As of December 31, 2007, we had consolidated debt of $693,821, which included $40,338 of variable-rate debt. Including the $2,505 net discount on the assumption of debt, we had consolidated debt of $691,316 at December 31, 2007. A 25 basis point movement in the interest rate on the $40,338 of variable-rate debt would have resulted in an approximately $101 annualized increase or decrease in consolidated interest expense and cash flow from operating activities.

All our Unconsolidated Properties are financed with fixed-rate debt; therefore we are not subject to interest rate exposure at these properties.

We are subject to interest rate risk with respect to our fixed-rate financing in that changes in interest rates will impact the fair value of our fixed-rate financing. To determine fair market value, the fixed-rate debt is discounted at a rate based on an estimate of current lending rates, assuming the debt is outstanding through maturity and considering the collateral. At December 31, 2008, the fair value of our mortgage notes payable and other debt payable was estimated to be approximately $51,047 lower than the carrying value of $717,497. If treasury rates were 25 basis points higher at December 31, 2008, the fair value of our mortgage notes payable and other debt payable would have been approximately $59,018 lower than the carrying value.

At December 31, 2007, the fair value of our mortgage notes payable and other debt payable was estimated to be approximately $1,870 lower than the carrying value of $691,316. If treasury rates were 25 basis points higher at December 31, 2007, the fair value of our mortgage notes payable and other debt payable would have been approximately $11,030 lower than the carrying value.

In August 2007, we purchased Railway Street Corporate Centre located in Calgary, Canada. For this investment, we use the Canadian dollar as the functional currency. When preparing consolidated financial statements, assets and liabilities of foreign entities are translated at the exchange rates at the balance sheet date, while income and expense items are translated at weighted average rates for the period. Foreign currency translation adjustments are recorded in accumulated other comprehensive (loss) income on the Consolidated Balance Sheet and foreign currency translation adjustment on the Consolidated Statement of Operations and Comprehensive Loss.

As a result of our Canadian investment, we are subject to market risk associated with changes in foreign currency exchange rates. These risks include the translation of local currency balances of our Canadian

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investment and transactions denominated in Canadian dollars. Our objective is to control our exposure to these risks through our normal operating activities and, where appropriate, through foreign currency forward contracts. We use foreign currency forward contracts as a hedging instrument to offset the impact of changes in exchange rates. Foreign currency forward contracts are sensitive to changes in foreign currency exchange rates. We do not enter into foreign exchange forward contracts for trading purposes. We record these foreign currency forward contracts at fair value on the Consolidated Balance Sheet with gains and losses reported as a component of net loss in the gain (loss) on foreign currency derivative in the Consolidated Statement of Operations and Comprehensive Loss.

Foreign currency translation gains and losses on our Canadian investment will generally be partially offset by corresponding losses and gains on the related foreign currency forward contracts. Our foreign currency forward contracts reduce, but do not always entirely eliminate the impact of foreign currency exchange rate movements. For the year ended December 31, 2008, we recognized a foreign currency translation loss of $2,848. On December 31, 2008, we settled the foreign currency forward contract and realized a gain on foreign currency derivative of $1,492. We are currently evaluating the need and our ability to enter into an additional foreign currency forward contract.

Item 8. Financial Statements and Supplementary Data.

See “Index to Financial Statements” on page F-1 of this Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as the end of the period covered by this report. Based on management’s evaluation as of December 31, 2008, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting during the fourth quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management’s Report on Internal Control Over Financial Reporting, which appears on page F-2, is incorporated herein by reference.

Item 9B. Other Information.

None.

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PART III

In accordance with the rules of the SEC, certain information required by Part III is omitted and is incorporated by reference into this Form 10-K from our definitive proxy statement relating to our 2009 annual meeting of stockholders (our “2009 Proxy Statement”) that we intend to file with the SEC no later than April 30, 2009.

Item 10. Directors, Executive Officers and Corporate Governance.

The information regarding Directors and Executive Officers appearing under the heading “Proposal 1: Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” of our 2009 Proxy Statement is incorporated by reference. The information under the heading “Executive Officers of the Registrant” in Item 1 of this Form 10-K is also incorporated by reference in this section.

We have adopted the Excelsior LaSalle Property Fund, Inc. Code of Business Conduct and Ethics Policy that applies to all of our officers, directors and employees. We have also adopted Corporate Governance Guidelines. If you would like a copy of our Code of Business Conduct and Ethics Policy and/or our Corporate Governance Guidelines, please contact Peggy Lynn, 225 High Ridge Road, Stamford, CT 06905-3039, or call (203) 352-4497.

Item 11. Executive Compensation.

The information appearing in our 2009 Proxy Statement under the headings “Compensation,” and “Compensation Committee Interlocks and Insider Participation” is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.

We do not have any compensation plans pursuant to which our equity securities are authorized for issuance.

The information appearing in our 2009 Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management” is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information appearing in our 2009 Proxy Statement under the headings “Information Regarding the Board of Directors and its Committees” and “Transactions with Related Persons, and Certain Control Persons” is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services.

The information appearing in our 2009 Proxy Statement under the headings “Fees Paid to Independent Registered Public Accounting Firm” and “Audit Committee Pre-Approval Policies and Procedures” is incorporated herein by reference.

PART IV

Dollars are shown in thousands except Share and per Share amounts.

Item 15. Exhibits, Financial Statement Schedules.

(1) Financial Statements: See “Index to Financial Statements” at page F-1 below.

(2) Financial Statement Schedule: See “Schedule III—Real Estate and Accumulated Depreciation” at page F-34 below.

(3) The Index of Exhibits below is incorporated herein by reference.

61

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant, Excelsior LaSalle Property Fund, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	EXCELSIOR LASALLE PROPERTY FUND, INC.
	By:	/s/    JAMES D. BOWDEN
Date: March 16, 2009		James D. Bowden President, Chief Executive Officer

POWER OF ATTORNEY

Each individual whose signature appears below constitutes and appoints James D. Bowden and Steven Suss, and each of them, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this report on Form 10-K, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his, her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/    JAMES D. BOWDEN	President, Chief Executive Officer (Principal Executive Officer)	March 16, 2009
/s/    STEVEN L. SUSS	Chief Financial Officer (Principal Financial and Accounting Officer)	March 16, 2009
/s/    THOMAS F. MCDEVITT	Chairman of the Board of Directors	March 16, 2009
/s/    DAVID R. BAILIN	Director	March 16, 2009
/s/    VIRGINIA G. BREEN	Director	March 16, 2009
/s/    JONATHAN B. BULKELEY	Director	March 16, 2009
/s/    PETER H. SCHAFF	Director	March 16, 2009

62

Exhibit Number	Description
3.1(1)	Amended and Restated Articles of Incorporation of Excelsior LaSalle Property Fund, Inc.
3.2(2)	Amended and Restated Bylaws of Excelsior LaSalle Property Fund, Inc., Adopted by the Board of Directors on December 18, 2006.
4.1(3)	Form of Subscription Agreement for Excelsior LaSalle Property Fund, Inc.
10.1(3)	Amended and Restated Management Agreement by and between Excelsior LaSalle Property Fund, Inc. and UST Advisors, Inc., dated as of June 19, 2007.
10.2(1)*	Letter Agreement by and between Excelsior LaSalle Property Fund, Inc., U.S. Trust Company, N.A. and LaSalle Investment Management, Inc., dated as of June 16, 2004.
10.3(1)	Letter Agreement by and between Excelsior LaSalle Property Fund, Inc., U.S. Trust Company, N.A. and LaSalle Investment Management, Inc., dated as of September 8, 2004.
10.4(1)*	Investment Advisory Agreement by and between Excelsior LaSalle Property Fund, Inc., U.S. Trust Company, N.A. and LaSalle Investment Management, Inc., dated as of December 23, 2004.
10.5(1)*	Letter Agreement by and between Excelsior LaSalle Property Fund, Inc., U.S. Trust Company, N.A. and LaSalle Investment Management, Inc., dated as of December 23, 2004.
10.6(1)	Investment Advisory Agreement Assumption Agreement by and between Excelsior LaSalle Property Fund, Inc., U.S. Trust Company, N.A., LaSalle Investment Management, Inc. and UST Advisers, Inc. dated as of December 16, 2005.
10.7(4)	Excelsior LaSalle Property Fund, Inc. Expense Limitation and Reimbursement Agreement, by and between Excelsior LaSalle Property Fund, Inc. and Bank of America Capital Advisors LLC, dated as of December 16, 2008.
10.8(1)	Purchase Agreement for Metropolitan Park North.
10.9(5)*	Purchase and Sale Agreement for The District at Howell Mill, dated May 13, 2007, by and among The District at Howell Mill, LLC, ELPF Howell Mill, LLC and Calloway Title and Escrow, L.L.C.
10.10(6)*	Real Estate Purchase and Sale Agreement among Cabana Beach of San Marcos, L.P., Cabana South Beach Apartments LP and Excelsior LaSalle Property Fund, Inc. dated September 14, 2007 (the “Purchase and Sale Agreement”).
10.11(6)	First Amendment to the Purchase and Sale Agreement dated October 1, 2007.
10.12(6)*	Second Amendment to the Purchase and Sale Agreement dated October 9, 2007.
10.13(6)	Third Amendment to the Purchase and Sale Agreement dated October 11, 2007.
10.14(6)	Fourth Amendment to the Purchase and Sale Agreement dated October 12, 2007.
14(3)	Excelsior LaSalle Property Fund, Inc. Code of Business Conduct and Ethics Policy.
21	Subsidiaries of Excelsior LaSalle Property Fund, Inc.
24	Power of Attorney (see signature page to this Form 10-K)
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

63

* Portions of these exhibits have been omitted and filed separately with the Securities and Exchange Commission (the “SEC”) pursuant to confidential treatment requests filed with and approved by the SEC under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

(1) Incorporated by reference to the Fund’s Registration Statement on Form 10 filed with the SEC on April 28, 2006.

(2) Incorporated by reference to the Fund’s Annual Report on Form 10-K filed with the SEC on March 16, 2007.

(3) Incorporated by reference to the Fund’s Annual Report on Form 10-K filed with the SEC on March 7, 2008.

(4) Incorporated by reference to the Fund’s Current Report on Form 8-K filed with the SEC on December 22, 2008.

(5) Incorporated by reference to the Fund’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2007.

(6) Incorporated by reference to the Fund’s Quarterly Report on Form 10-Q filed with the SEC on November 7, 2007.

64

Excelsior LaSalle Property Fund, Inc.

INDEX TO FINANCIAL STATEMENTS

	PAGE NUMBER
FINANCIAL STATEMENTS
Managements’ Report on Internal Control over Financial Reporting	F-2
Report of Independent Registered Public Accounting Firm	F-3
Report of Independent Registered Public Accounting Firm	F-4
Consolidated Balance Sheets as of December 31, 2008 and 2007	F-5
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2008, 2007 and 2006	F-6
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2008, 2007 and 2006	F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006	F-8
Notes to Consolidated Financial Statements	F-9
FINANCIAL STATEMENT SCHEDULE
Schedule III—Real Estate and Accumulated Depreciation	F-30

F-1

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed under the supervision of our chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and preparation of our financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

As of December 31, 2008, our management conducted an assessment of the effectiveness of our internal control over financial reporting based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control—Integrated Framework”.

Based on the assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2008 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

The effectiveness of our internal control over financial reporting has been audited by our independent registered public accounting firm, PricewaterhouseCoopers LLP, as stated in their report, which is included on page F-3 of this Form 10-K.

/S/    JAMES D. BOWDEN

James D. Bowden

President and Chief Executive Officer

/S/    STEVEN SUSS

Steven Suss

Chief Financial Officer

March 16, 2009

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Excelsior LaSalle Property Fund, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive loss, of stockholders’ equity, and of cash flows present fairly, in all material respects, the financial position of Excelsior LaSalle Property Fund, Inc. and its subsidiaries (collectively, the “Company”) at December 31, 2008 and 2007 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion the financial statement schedule as of December 31, 2008 and for the two years then ended listed in the index appearing under Item 15(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and the financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

March 16, 2009

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Excelsior LaSalle Property Fund, Inc.

We have audited the accompanying consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows of Excelsior LaSalle Property Fund, Inc. and subsidiaries (the “Fund”) for the year ended December 31, 2006. Our audit also included the financial statement schedule listed at Item 15. These financial statements and the financial statement schedule are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the financial statements and the financial statement schedule based on our audit.

We conducted our audit 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. 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 audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the results of their operations and their cash flows of Excelsior LaSalle Property Fund, Inc. and subsidiaries for the year ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/S/ DELOITTE & TOUCHE LLP

Chicago, Illinois

March 13, 2007

F-4

EXCELSIOR LASALLE PROPERTY FUND, INC.

CONSOLIDATED BALANCE SHEETS

$ in thousands, except per share amounts

	December 31,
	2008			2007
ASSETS
Investments in real estate:
Land	$	143,595		$	135,751
Buildings and equipment		818,572			761,751
Construction in progress		—			271
Less accumulated depreciation		(45,140	)		(22,652	)
Net property and equipment		917,027			875,121
Investments in unconsolidated real estate affiliates		40,947			43,483
Net investments in real estate		957,974			918,604
Cash and cash equivalents		16,395			8,386
Restricted cash		5,304			6,705
Tenant accounts receivable, net		3,950			2,063
Deferred expenses, net		6,325			6,266
Acquired intangible assets, net		82,557			114,495
Deferred rent receivable, net		6,321			4,668
Prepaid expenses and other assets		5,979			9,001
TOTAL ASSETS	$	1,084,805		$	1,070,188
LIABILITIES AND STOCKHOLDERS’ EQUITY
Mortgage notes and other debt payable, net	$	717,497		$	691,316
Accounts payable and other accrued expenses		10,292			11,795
Distributions payable		7,057			6,092
Accrued interest		3,192			3,248
Accrued real estate taxes		4,687			3,383
Manager and advisor fees payable		2,365			2,807
Acquired intangible liabilities, net		16,099			19,952
TOTAL LIABILITIES		761,189			738,593
Minority interests		15,043			15,519
Commitments and contingencies		—			—
Stockholders’ Equity:
Common stock: $0.01 par value; 5,000,000 shares authorized; 4,032,563 and 3,586,850 shares issued and outstanding at December 31, 2008 and 31, 2007, respectively		40			36
Additional paid-in capital		443,808			386,527
Accumulated other comprehensive (loss) income		(1,885	)		963
Distributions to stockholders		(74,755	)		(48,323	)
Accumulated deficit		(58,635	)		(23,127	)
Total stockholders’ equity		308,573			316,076
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,084,805		$	1,070,188

See notes to consolidated financial statements.

F-5

EXCELSIOR LASALLE PROPERTY FUND, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

$ in thousands, except per share amounts

	Year Ended December 31, 2008			Year Ended December 31, 2007			Year Ended December 31, 2006
Revenues:
Minimum rents	$	91,481		$	60,945		$	40,577
Tenant recoveries and other rental income		21,953			16,342			10,528
Total revenues		113,434			77,287			51,105
Operating expenses:
Real estate taxes		13,730			8,014			5,324
Property operating		25,726			13,127			8,889
Manager and advisor fees		9,035			7,426			5,176
Fund level expenses		2,454			2,659			2,035
Provision for doubtful accounts		935			379			359
General and administrative		1,095			638			516
Depreciation and amortization		60,244			32,360			19,210
Total operating expenses		113,219			64,603			41,509
Operating income		215			12,684			9,596
Other income and (expenses):
Interest income		643			1,788			1,582
Interest expense		(41,805	)		(28,712	)		(18,522	)
Loss allocated to minority interests		5,651			572			156
Equity in income of unconsolidated affiliates		1,230			536			425
Gain (loss) on foreign currency derivative		1,492			(504	)		—
Total other income and (expenses):		(32,789	)		(26,320	)		(16,359	)
Net loss		(32,574	)		(13,636	)		(6,763	)
Other comprehensive (loss) income:
Foreign currency translation adjustment		(2,848	)		963			—
Total other comprehensive (loss) income		(2,848	)		963			—
Net comprehensive loss	$	(35,422	)	$	(12,673	)	$	(6,763	)
Loss per share-basic and diluted	$	(8.52	)	$	(4.19	)	$	(2.89	)
Weighted average common stock outstanding-basic and diluted		3,822,484			3,252,725			2,341,347

See notes to consolidated financial statements.

F-6

EXCELSIOR LASALLE PROPERTY FUND, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

$ in thousands, except per share amounts

	Common Stock					Additional Paid In Capital			Other Comprehensive Income (Loss)			Distributions to Stockholders			Retained Earnings / (Accumulated Deficit)			Total Stockholders’ Equity
	Shares		Amount
Balance, December 31, 2005	1,937,943		$	19		$	196,258			—		$	(10,183	)	$	(39	)	$	186,055
Issuance of common stock	756,300			8			83,183			—			—			—			83,191
Repurchase of common stock	(46,692	)		—			(4,807	)		—			—			(453	)		(5,260	)
Net loss	—			—			—			—			—			(6,763	)		(6,763	)
Distributions declared ($7.00 per share)	—			—			—			—			(16,001	)		—			(16,001	)
Balance, December 31, 2006	2,647,551			27			274,634			—			(26,184	)		(7,255	)		241,222
Issuance of common stock	1,138,920			11			133,140			—			—			—			133,151
Repurchase of common stock	(199,621	)		(2	)		(21,247	)		—			—			(2,236	)		(23,485	)
Net loss	—			—			—			—			—			(13,636	)		(13,636	)
Other comprehensive income	—			—			—		$	963			—			—			963
Distributions declared ($7.00 per share)	—			—			—			—			(22,139	)		—			(22,139	)
Balance, December 31, 2007	3,586,850			36			386,527			963			(48,323	)		(23,127	)		316,076
Issuance of common stock	654,450			6			79,872			—			—			—			79,878
Repurchase of common stock	(208,737	)		(2	)		(22,591	)		—			—			(2,934	)		(25,527	)
Net loss	—			—			—			—			—			(32,574	)		(32,574	)
Other comprehensive loss	—			—			—			(2,848	)		—			—			(2,848	)
Distributions declared ($7.00 per share)	—			—			—			—			(26,432	)		—			(26,432	)
Balance, December 31, 2008	4,032,563		$	40		$	443,808		$	(1,885	)	$	(74,755	)	$	(58,635	)	$	308,573

See notes to consolidated financial statements.

F-7

EXCELSIOR LASALLE PROPERTY FUND, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

$ in thousands, except per share amounts

	Year Ended December 31, 2008			Year Ended December 31, 2007			Year Ended December 31, 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(32,574	)	$	(13,636	)	$	(6,763	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss allocated to minority interests		(5,651	)		(572	)		(156	)
Depreciation		22,619			12,037			7,904
Amortization of in-place lease intangible assets		37,220			20,196			11,242
Amortization of net above-and below-market in-place leases		(1,552	)		(1,505	)		(1,430	)
Amortization of financing fees		921			654			583
Amortization of net debt premium and discount		(184	)		(121	)		(282	)
Amortization of lease commissions		405			127			63
(Gain) loss on foreign currency derivative		(1,492	)		504			—
Receipt on net settlement of foreign currency derivative		985			—			—
Provision for doubtful accounts		935			379			359
Equity in income of unconsolidated affiliates		(1,230	)		(536	)		(425	)
Distributions of income received from unconsolidated affiliates		911			545			747
Net changes in assets and liabilities:
Tenant accounts receivable		(2,809	)		(533	)		(1,937	)
Deferred rent receivable		(1,679	)		(1,981	)		(1,591	)
Prepaid expenses and other assets		3,034			714			1,004
Manager and advisor fees payable		(442	)		1,020			(478	)
Accounts payable and other accrued expenses		566			9,172			1,101
Net cash provided by operating activities		19,983			26,464			9,941
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of real estate investments		(35,262	)		(390,494	)		(117,711	)
Capital improvements and lease commissions		(6,579	)		(3,336	)		(3,839	)
Deposits for investments under contract		—			(1,700	)		(500	)
Deposits refunded for investments under contract		1,700			500			—
Distributions received from unconsolidated affiliates in excess of income		2,856			4,467			3,428
Loan escrows		(648	)		(1,056	)		(178	)
Net cash used in investing activities		(37,933	)		(391,619	)		(118,800	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock		71,430			126,835			79,358
Repurchase of common stock		(25,527	)		(23,485	)		(5,260	)
Distributions to stockholders		(17,019	)		(14,364	)		(10,562	)
Distributions paid to minority interests		(789	)		(654	)		(224	)
Contributions received from minority interests		1,030			—			—
Deposits for loan commitments		—			(349	)		(485	)
Return of loan commitments		349			485			—
Draws on credit facility		48,500			79,500			19,000
Payments on credit facility		(67,500	)		(50,500	)		(19,000	)
Debt issuance costs		(516	)		(2,866	)		(661	)
Proceeds from mortgage notes and other debt payable		19,731			232,179			72,670
Principal payments on mortgage notes and other debt payable		(3,678	)		(2,191	)		(5,169	)
Net cash provided by financing activities		26,011			344,590			129,667
Net increase (decrease) in cash and cash equivalents		8,061			(20,565	)		20,808
Effect of exchange rates		(52	)		(19	)		—
Cash and cash equivalents at the beginning of the period		8,386			28,970			8,162
Cash and cash equivalents at the end of the period	$	16,395		$	8,386		$	28,970
Supplemental disclosure of cash flow information:
Interest paid	$	41,141		$	26,026		$	17,301
Interest capitalized	$	17		$	61		$	20
Non-cash activities:
Assumption of mortgage loan payable		35,081			69,254			13,771
Distributions payable		7,057			6,092			4,633
Stock issued through dividend reinvestment plan		8,448			6,315			3,833
Change in liability for capital expenditures		262			(550	)		732
Minority interests		4,934			13,708			604
Havertys Furniture land purchase		—			3,144			—
25850 S. Ridgeland option payment		—			—			500
Write-offs of receivables		856			145			—

See notes to consolidated financial statements.

F-8

EXCELSIOR LASALLE PROPERTY FUND, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$ in thousands, except per share amounts

NOTE 1—ORGANIZATION

General

Except where the context suggests otherwise, the terms “we,” “us,” “our” and the “Fund” refer to Excelsior LaSalle Property Fund, Inc.

The Fund is a Maryland corporation and was incorporated on May 28, 2004 (“Inception”). The Fund was created to provide accredited investors within the meaning of Regulation D promulgated under the Securities Act of 1933 (the “Securities Act”) with an opportunity to participate in a private real estate investment fund that has elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes. We are authorized to issue up to 5,000,000 of our Class A common stock, $0.01 par value per share (our “Common Stock” or “Shares”). Please note that while we use the term “Fund,” the Fund is not a mutual fund or any other type of “investment company” as that term is defined by the Investment Company Act of 1940, as amended (the “Investment Company Act”), and will not be registered under the Investment Company Act.

From Inception through December 22, 2004, LaSalle US Holdings, Inc. was the sole stockholder of the Fund, and the Fund was managed and advised by LaSalle Investment Management, Inc. (“LaSalle”), a Maryland corporation. On December 23, 2004, we held an initial closing (the “Initial Closing”) and sold Shares for $100 per share to approximately 400 accredited investors. Also on December 23, 2004, our sponsor, U.S. Trust Company, N.A., acting through its investment advisory division, U.S. Trust Company, N.A. Asset Management Division, became the manager of the Fund (“USTAM”). On December 16, 2005, UST Advisers, Inc. (the “Former Manager”), a wholly-owned subsidiary of U.S. Trust Company, N.A., assumed the duties and responsibilities of USTAM and became the manager of the Fund. On March 31, 2006, U.S. Trust Company, N.A. merged with its affiliate, United States Trust Company, National Association (“U.S. Trust”), with U.S. Trust as the surviving entity.

On July 1, 2007, U.S. Trust Corporation and all of its subsidiaries, including the Former Manager and placement agent of the Fund, were acquired by Bank of America Corporation (the “Sale”). As a result of the Sale, the Former Manager and UST Securities Corp. (“USTS”), a placement agent of the Fund, became indirect wholly-owned subsidiaries of, and controlled by, Bank of America Corporation (“BAC”). Prior to its acquisition by BAC, U.S. Trust and its subsidiaries, including the Former Manager and UST Securities Corp., were controlled by The Charles Schwab Corporation. The Former Manager continued to serve as the manager of the Fund and UST Securities Corp. continued to serve as the placement agent to the Fund after the Sale, and the Fund has consented to the change in ownership of the Former Manager and UST Securities Corp. UST Securities Corp. also engaged Bank of America, N.A. (“BANA”) and Banc of America Investment Services, Inc. (“BAI”) as sub-placement agents. The Former Manager was affiliated with Alternative Investment Solutions within the Global Wealth & Investment Management (“GWIM”) division of BAC. On February 22, 2008, U.S. Trust merged into BANA, an indirect wholly-owned subsidiary of BAC.

On March 11, 2008, our board of directors approved a transfer (the “Transfer”) of the Former Manager’s rights and obligations in the following agreements to Bank of America Capital Advisors, LLC, the Fund’s current manager (the “Manager”):

• The management agreement between the Fund and the Former Manager (the “Management Agreement”);

• An expense limitation and reimbursement between the Fund and the Former Manager (the “Expense Limitation Agreement”); and

• An investment advisory agreement, as amended, between the Fund, LaSalle and the Former Manager (the “Advisory Agreement”).

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The Transfer became effective on May 29, 2008. The Manager is registered as an investment advisor with the Securities and Exchange Commission (the “SEC”). The Manager has the day-to-day responsibility for our management and administration pursuant to the Management Agreement.

Effective November 26, 2008, BAI replaced USTS as placement agent of the Fund, and BANA ceased to be sub-placement agent of the Fund.

The Former Manager and the Fund contracted with LaSalle to act as our investment advisor (the “Advisor”), pursuant to the Advisory Agreement. The Advisor is registered as an investment advisor with the SEC. The Advisor has broad discretion with respect to our investment decisions and is responsible for selecting our investments and for managing our investment portfolio pursuant to the terms of the Advisory Agreement. LaSalle is a wholly-owned but operationally independent subsidiary of Jones Lang LaSalle Incorporated, a New York Stock Exchange-listed real estate services and money management firm. We have no employees as all operations are overseen and undertaken by the Manager and Advisor. In accordance with Maryland law, the Fund does have certain officers who administer the Fund’s operations. These officers are employees of, and are compensated by, the Manager.

The Manager has retained The Townsend Group, at the expense of the Manager, to assist the Manager in reviewing the investment activities of the Advisor and the investment performance of the Fund’s assets and monitoring compliance with the Fund’s investment guidelines. The Townsend Group is a consulting firm whose exclusive focus is the asset class of real estate. Founded in 1983, and with offices in Cleveland, Denver and San Francisco, The Townsend Group is a provider of real estate consulting services to institutional investors in the United States.

Our primary business is the ownership and management of a diversified portfolio of retail, office, industrial and apartment properties primarily located in the United States. As of December 31, 2008, we wholly or majority owned and controlled 40 consolidated properties. As of December 31, 2008, we owned interests in two unconsolidated properties.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the instructions to Form 10-K and Regulation S-X and include the accounts of our wholly-owned subsidiaries, consolidated variable interest entities and the unconsolidated investments in real estate affiliates. We consider Accounting Principles Board (“APB”) Opinion 18: “The Equity Method of Accounting for Investments in Common Stock”, Statement of Position (“SOP”) 78-9: “Accounting for Investments in Real Estate Ventures”, Emerging Issues Task Force (“EITF”) 96-16: “Investors Accounting for an Investee When the Investor has the Majority of the Voting Interest but the Minority Partners have Certain Approval or Veto Rights”, EITF 04-5: “Determining Whether a General Partner, or General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” and Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (Revised 2003): “Consolidation of Variable Interest Entities—An Interpretation of ARB No. 51” (“FIN 46(R)”), to determine the method of accounting for each entity in which we own less than a 100% interest. In determining whether we have a controlling interest in a non-wholly owned entity and the requirement to consolidate the accounts of that entity, we consider factors such as ownership interest, board representation, management representation, authority to make decisions, and contractual and substantive participating rights of the members as well as whether the entity is a variable interest entity in which the Fund will absorb the majority of the entity’s expected losses, if they occur, or receive the majority of the expected residual returns, if they occur, or both. With respect to our 80% interest in 111 Sutter Street, we have concluded that we do not control the non wholly-owned entity, despite having an ownership interest of 50% or greater, because the entity is not considered a variable interest entity and the approval of all of the members is contractually required with respect to major decisions, such as operating and capital budgets, the sale, exchange or other disposition of real property, the

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commencement, compromise or settlement of any lawsuit, legal proceeding or arbitration or the placement of new or additional financing collateralized by assets of the venture. All significant intercompany balances and transactions have been eliminated in consolidation.

Minority interests represent the minority members’ proportionate share of the equity in 9800 South Meridian, 18922 Forge Drive, The District at Howell Mill, Cabana Beach San Marcos, Cabana Beach Gainesville, Campus Lodge Athens, Campus Lodge Columbia, Campus Edge Lafayette and Campus Lodge Tampa. At acquisition, we measured and recorded the assets, liabilities and non-controlling interests at the implied fair value, based on the purchase price. Minority interests will increase for the minority members’ share of net income of these entities and decrease for the minority members’ share of net loss and distributions.

Certain of the Fund’s joint venture agreements include provisions whereby, at certain specified times, each party has the right to initiate a purchase or sale of its interest in the joint ventures at an agreed upon fair value. Under these provisions, the Fund is not obligated to purchase the interest of its outside joint venture partners.

Certain reclassifications of prior period amounts have been made to the consolidated statements of cash flows. These reclassifications have been made to conform to the 2008 presentation. These reclassifications have not changed the Fund’s financial position as of December 31, 2007 and 2006 or consolidated results of operations or cash flows for the years ended December 31, 2007 and 2006.

Investments in Real Estate

Real estate assets are stated at cost. Our real estate assets are reviewed for impairment annually, on December 31 of each year, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. A real estate asset is considered to be impaired when the estimated future undiscounted operating cash flow over the expected hold period is less than its carrying value in accordance with FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, (“SFAS 144”). To the extent an impairment has occurred, the excess of carrying value of the asset over its estimated fair value will be charged to operations.

Depreciation expense is computed using the straight-line method based upon the following estimated useful lives:

Asset Category	Estimated Useful Life
Buildings and improvements	40-50 Years
Tenant improvements	Life of related lease
Equipment and fixtures	2-10 Years

Construction in progress represents the cost of construction plus capitalized expenses incurred during the construction period for expansion projects undertaken by us. Interest costs are capitalized during the construction period for construction related expenditures based on the interest rates for in-place debt. An allocable portion of real estate taxes and insurance expense incurred during the construction period are capitalized until construction is substantially completed. Construction costs and capitalized expenses are depreciated over the useful life of the development project once placed in service.

Acquisition related costs are capitalized for successful acquisitions. Beginning in 2009, pre-acquisition costs will be expensed as incurred.

Maintenance and repairs are charged to expense when incurred. Expenditures for significant betterments and improvements are capitalized.

Pursuant to the provisions of SFAS 144, properties held-for-sale are carried at the lower of their carrying values (i.e., cost less accumulated depreciation and any impairment loss recognized, where applicable) or

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estimated fair values less costs to sell. Fair value is based upon the property’s most recent appraisal by a third party or internal valuation prepared by the Advisor and carrying values are reassessed at each balance sheet date. Due to market fluctuation, actual proceeds realized on the ultimate sale of these properties may differ from estimates and such differences could be material. Depreciation and amortization cease once a property is classified as held-for-sale.

Investments in Unconsolidated Real Estate Affiliates

We account for our investments in unconsolidated real estate affiliates using the equity method whereby the costs of the investments are adjusted for our share of equity in net income or loss from the date of acquisition and reduced by distributions received. The limited liability company agreements (“the Agreements”) with respect to the unconsolidated real estate affiliates provide that elements of assets, liabilities and funding obligations are shared in accordance with our ownership percentage. In addition, we share in the profits and losses, cash flows, distributions and other matters relating to our unconsolidated real estate affiliates in accordance with the Agreements.

To the extent that the Fund’s cost basis is different than the basis reflected at the joint venture level, the basis difference is amortized over the life of the related asset and included in the Fund’s share of equity in income of the unconsolidated affiliates.

The Fund evaluates the carrying value of its investments in unconsolidated joint ventures in accordance with APB Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.” We analyze our investments in unconsolidated real estate affiliates when circumstances change and at least annually and determine if an “other-than-temporary” impairment exists and, if so, analysis to assess our ability to recover our carrying cost of the investment. The Fund concluded that it did not have an “other-than-temporary” impairment in any of its investments in unconsolidated joint ventures in 2008, 2007 or 2006.

Revenue Recognition

Minimum rent revenues are recognized on a straight-line basis over the terms of the related leases. For the years ended December 31, 2008, 2007 and 2006, $1,697, $1,981 and $1,591, respectively, have been recognized as net straight-line rent revenue (representing rents recognized prior to being billed and collectible as provided by the terms of the leases). Also included, as an increase to rent revenue, for the years ended December 31, 2008, 2007 and 2006, are $1,552, $1,505 and $1,430, respectively, of net amortization related to above-and below-market in-place leases at properties acquired as provided by FASB Statement No. 141, “Business Combinations” (“SFAS 141”) and No. 142, “Goodwill and Intangible Assets” (“SFAS 142”). Tenant recoveries are recognized as revenues in the period the applicable costs are incurred.

Percentage rents are recognized when earned as certain tenant sales volume targets, as specified by the lease terms, are met. For the years ended December 31, 2008, 2007 and 2006, $574, $421 and $306 in the aggregate, respectively, have been recognized in tenant recoveries and other rental income.

We provide an allowance for doubtful accounts against the portion of accounts receivable and deferred rent receivable that is estimated to be uncollectible. Such allowance is reviewed periodically based upon our recovery experience. At December 31, 2008 and 2007, our allowance for doubtful accounts was $503 and $424, respectively.

Cash and Cash Equivalents

We consider all highly-liquid investments purchased with original maturities of three months or less to be cash equivalents. We maintain a portion of our cash in bank deposit accounts, which, at times, may exceed the federally insured limits. No losses have been experienced related to such accounts. We believe we place our cash with quality financial institutions.

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Restricted Cash

Restricted cash includes amounts established pursuant to various agreements for real estate purchase and sale contracts, loan escrow accounts and loan commitments.

Deferred Expenses

Deferred expenses consist of debt issuance costs and lease commissions. Debt issuance costs are capitalized and amortized over the terms of the respective agreements as a component of interest expense. Lease commissions are capitalized and are amortized over the term of the related lease. Deferred expenses accumulated amortization at December 31, 2008 and 2007 was $2,673 and $1,356, respectively.

Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist principally of long-term notes receivable from local governments related to real estate tax rebates and sales tax sharing agreements. The acquisition of Marketplace at Northglenn included an Enhanced Sales Tax Incentive Program (“ESTIP”) note receivable from the local government that allows us to share in sales tax revenue generated by the retail center until a specified amount has been paid to us. At December 31, 2008 and 2007, $114 and $1,107, respectively, were the remaining balances owed to the Fund. The acquisition of 25850 S. Ridgeland included a Tax Increment Financing Note (a “TIF Note”) issued by the Village of Monee, which will reimburse to us approximately 90% of the real estate tax payments made on the property through 2016 or until the TIF note receivable is repaid. The TIF Note bears interest at 7%. At December 31, 2008 and 2007, respectively, $4,547 and $4,648 were the remaining balance owed to the Fund. Cash received from the Marketplace at Northglenn ESTIP and 25850 S. Ridgeland TIF Note is split between repayment of the principal balance on the notes receivable and interest income earned on those notes.

Foreign Exchange

We utilize the U.S. dollar as our functional currency, except for our Canadian operations, which use the Canadian dollar as the functional currency. When preparing consolidated financial statements, assets and liabilities of foreign entities are translated at the exchange rates at the balance sheet date, while income and expense items are translated at weighted average rates for the period. Foreign currency translation adjustments are recorded in accumulated other comprehensive income.

Derivative Instruments

In August 2007, we entered into foreign currency forward contracts, to economically hedge our foreign exchange exposure, for exchanges between United States Dollars and Canadian Dollars. We contracted to buy United States Dollars with Canadian Dollars at each quarter end through and ending on December 31, 2008. We did not designate these forward contracts as accounting hedges. In accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), as amended, these derivatives were recorded at fair value within accounts payable and other accrued expenses on the Consolidated Balance Sheet with gains and losses reported in gain (loss) on foreign currency derivative in the Consolidated Statement of Operations and Comprehensive Loss. We do not enter into foreign exchange forward contracts for trading purposes. We settled the foreign currency forward contract on December 31, 2008 and realized a gain on foreign currency derivative of $1,492. We did not enter into any additional foreign currency forward contracts as of December 31, 2008.

Acquisitions

Acquisitions of properties are accounted for by utilizing the purchase method in accordance with SFAS 141 and SFAS 142. We use estimates of future cash flows and other valuation techniques to allocate the purchase price of acquired property among land, building and other identifiable asset and liability intangibles. We record

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land and building values using an as-if-vacant methodology. We record above- and below-market in-place lease values for acquired properties based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) our estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. We amortize the capitalized above-market lease values as a reduction of minimum rents over the remaining non-cancelable terms of the respective leases. We amortize the capitalized below-market lease values as an increase to minimum rents over the term of the respective leases. Should a tenant terminate its lease prior to the contractual expiration, the unamortized portion of the above-market and below-market in-place lease value is immediately charged to minimum rents.

We measure the aggregate value of other intangible assets acquired based on the difference between (i) the property valued with existing in-place leases and (ii) the property valued as-if-vacant. Our estimates of value are made using methods similar to those used by independent appraisers, primarily discounted cash flow analyses. Factors considered by us in our analysis include an estimate of carrying costs during the hypothetical expected lease-up periods considering current market conditions at the date of acquisition, and costs to execute similar leases. We also consider information obtained about each property as a result of the pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, we will include estimates of lost rentals during the expected lease-up periods, which is expected to primarily range from one to two years, depending on specific local market conditions, and costs to execute similar leases, including leasing commissions, legal and other related expenses to the extent that such costs are not already incurred in connection with a new lease origination as part of the transaction.

The total amount of other intangible assets acquired is further allocated to in-place lease values and customer relationship intangible values based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics considered by us 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’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors. As of December 31, 2008, we have allocated no value to customer relationship value. We amortize the value of in-place leases to expense over the remaining initial terms of the respective leases, which generally range from 1 to 29 years.

We have allocated purchase price to acquired intangible assets, which include acquired in-place lease intangibles, acquired above-market in-place lease intangibles, acquired ground lease intangibles, acquired non-amortizing land purchase options and tenant improvements and lease commissions funding commitment, which are reported net of accumulated amortization of $77,094 and $37,675 at December 31, 2008 and December 31, 2007, respectively, on the accompanying Consolidated Balance Sheets. The acquired intangible liabilities represent acquired below-market in-place leases, which are reported net of accumulated amortization of $11,633 and $7,780 at December 31, 2008 and December 31, 2007, respectively, on the accompanying Consolidated Balance Sheets. Our amortizing intangible assets are reviewed for impairment annually, on December 31 of each year, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An amortizing intangible asset is considered to be impaired when the estimated future undiscounted operating cash flow is less than its carrying value in accordance with SFAS 144. To the extent an impairment has occurred, the excess of the carrying value of the amortizing intangible asset over its estimated fair value will be charged to operations. Our non-amortizing intangible assets are reviewed for impairment annually, on December 31 of each year, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. A non-amortizing intangible asset is considered to be impaired when the carrying amount of the non-amortizing intangible asset is greater than its fair value in accordance with SFAS 142. To the extent an impairment has occurred, the excess of the carrying value of the non-amortizing intangible asset over its estimated fair value will be charged to operations.

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Future amortization related to amortizing acquired intangible assets and liabilities as of December 31, 2008 is as follows:

	Acquired in-place leases		Acquired above- market leases		Below- market ground leases		Acquired below- market leases
2009	$	10,045	$	1,989	$	179	$	(3,124	)
2010		8,906		1,408		179		(2,845	)
2011		8,292		1,172		179		(2,635	)
2012		6,057		803		179		(1,365	)
2013		4,926		667		179		(1,134	)
Thereafter		21,254		1,767		11,437		(4,996	)
	$	59,480	$	7,806	$	12,332	$	(16,099	)

Stock Redemptions

The Fund retires common stock repurchased through the Share Repurchase Program (See Note 6). The excess of redemption price over the stockholders’ cost basis in the underlying stock is charged to retained earnings.

Income Taxes

We made the election to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986 (the “Code”) as of December 23, 2004. To qualify as a REIT, we must meet a number of organizational and operational requirements, including requirements to distribute at least 90% of our ordinary taxable income and to distribute to stockholders or pay tax on 100% of capital gains and to meet certain quarterly and annual asset and income tests. It is our current intention to adhere to these requirements. As a REIT, we will generally not be subject to corporate-level federal income tax to the extent we distribute 100% of our taxable income to our stockholders. Accordingly, the consolidated statements of operations do not reflect a provision for income taxes. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income or property, and to federal income and excise taxes on our undistributed taxable income.

Earnings and profits, which determine the taxability of dividends to stockholders, differ from net income reported for financial reporting purposes due to differences for federal income tax reporting purposes in computing, among other things, estimated useful lives, depreciable basis of properties and permanent and timing differences on the inclusion or deductibility of elements of income and expense for such purposes.

Business Segments

FASB Statement No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”), requires disclosure of certain operating and financial data with respect to separate business activities within an enterprise. Our primary business is the ownership and operation of real estate investments. We evaluate cash flow and allocate resources on a property-by-property basis. We aggregate our properties into one reportable segment since all properties are institutional quality real estate. We do not distinguish or group our consolidated operations by property type or on a geographic basis. Accordingly, we have concluded that we currently have a single reportable segment for SFAS 131 purposes.

At December 31, 2008 and 2007, we held one investment outside the United States. For the years ended December 31, 2008 and 2007, total revenues of this foreign investment were $4,226 and $1,436, respectively. For the years ended December 31, 2008 and 2007, total revenues of U.S. domiciled investments were $109,208

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and $67,990, respectively. At December 31, 2008 and 2007, total assets of our foreign investment were $35,870 and $45,984, respectively. The change in total assets from December 31, 2007 to December 31, 2008 at our foreign investment was mainly a result of the change in foreign currency rate on those dates. At December 31, 2008 and 2007, total assets of U.S domiciled investments were $1,048,935 and $1,024,204, respectively. Prior to 2007, we did not hold any investments outside of the United States.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. For example, significant estimates and assumptions have been made with respect to useful lives of assets, recoverable amounts of receivables, initial valuations and related amortization periods of deferred costs and intangibles, particularly with respect to property acquisitions. Actual results could differ from those estimates.

NOTE 3—PROPERTY

The primary reason we make acquisitions of real estate investments in the retail, office, industrial, and apartment property sectors is to invest capital contributed by accredited investors in a diversified portfolio of real estate. The consolidated properties held within the Fund as of December 31, 2008 were as follows:

Property	Sector	Square Feet (Unaudited)	Location	Ownership %		Acquisition Date	Acquisition Price
Monument IV at Worldgate	Office	228,000	Herndon, VA	100	%	8/27/2004	$	59,608
Havertys Furniture (1)	Industrial	808,000	Braselton, GA	100	%	12/3/2004	$	28,468
Hagemeyer Distribution Center	Industrial	300,000	Auburn, GA	100	%	12/3/2004	$	10,170
25850 S. Ridgeland	Industrial	719,000	Monee, IL	100	%	12/31/2004	$	25,166
Georgia Door Sales Distribution Center	Industrial	254,000	Austell, GA	100	%	2/10/2005	$	8,500
105 Kendall Park Lane	Industrial	409,000	Atlanta, GA	100	%	6/30/2005	$	18,781
Waipio Shopping Center	Retail	137,000	Waipahu, HI	100	%	8/1/2005	$	30,485
Marketplace at Northglenn	Retail	439,000	Northglenn, CO	100	%	12/21/2005	$	91,476
CHW Medical Office Portfolio (2)	Office	755,000	CA and AZ	100	%	12/21/2005	$	136,761
Metropolitan Park North	Office	187,000	Seattle, WA	100	%	3/28/2006	$	89,179
Stirling Slidell Shopping Centre (3)	Retail	139,000	Slidell, LA	100	%	12/14/2006	$	23,367
9800 South Meridian (4)	Office	144,000	Englewood, CO	90	%	12/26/2006	$	14,662
18922 Forge Drive (5)	Office	91,000	Cupertino, CA	90	%	2/15/2007	$	26,233
4001 North Norfleet Road	Industrial	702,000	Kansas City, MO	100	%	2/27/2007	$	37,579
Station Nine Apartments	Apartment	312,000	Durham, NC	100	%	4/16/2007	$	56,417
4 Research Park Drive (6)	Office	60,000	St. Charles, MO	100	%	6/13/2007	$	11,330
36 Research Park Drive	Office	81,000	St. Charles, MO	100	%	6/13/2007	$	17,232
The District at Howell Mill (7)	Retail	306,000	Atlanta, GA	87.85	%	6/15/2007	$	78,661
Canyon Plaza (8)	Office	199,000	San Diego, CA	100	%	6/26/2007	$	54,973
Railway Street Corporate Centre	Office	137,000	Calgary, Canada	100	%	8/30/2007	$	42,614
Cabana Beach San Marcos (9)	Apartment	278,000	San Marcos, TX	78	%	11/21/2007	$	29,375
Cabana Beach Gainesville (9)	Apartment	545,000	Gainesville, FL	78	%	11/21/2007	$	74,277
Campus Lodge Athens (9)	Apartment	229,000	Athens, GA	78	%	11/21/2007	$	20,980
Campus Lodge Columbia (9)	Apartment	256,000	Columbia, MO	78	%	11/21/2007	$	24,852
Campus Edge Lafayette (9)	Apartment	207,000	Lafayette, LA	78	%	1/15/2008	$	26,870
Campus Lodge Tampa (9)	Apartment	431,000	Tampa, FL	78	%	2/29/2008	$	46,787

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(1) Includes 297,000 square feet (unaudited) of development constructed subsequent to the acquisition date. Acquisition price does not include approximately $11,000 of construction costs related to this development. During 2007, we executed a bargain purchase option to acquire a fee simple interest in the land on which the building resides. The land was valued at approximately $3,100 as part of the initial acquisition and recorded as a non-amortizing intangible asset until the bargain purchase option was executed. Upon execution, the land was reclassed from acquired intangible assets to land.

(2) Consists of a portfolio of leasehold interests in fifteen medical office buildings located throughout Southern California and the greater Phoenix metropolitan area. The buildings are all subject to ground leases expiring in 2078. Acquisition price includes the assumption of four fixed-rate mortgage loans for approximately $84,300 at a weighted average interest rate of 5.77%, maturing in 2013 and 2014. From the acquisition date until December 31, 2007, we owned a 95% membership interest in the portfolio at which time we acquired the remaining 5% interest from an unrelated third party. CHW Medical Office Portfolio was consolidated into the Fund. This portfolio was previously referred to as “Pacific Medical Office Portfolio”.

(3) Acquisition price includes the assumption of an approximate $14,000, 5.15% fixed-rate mortgage loan maturing in 2014.

(4) The building has undergone significant upgrades, which involved increasing the rentable space by approximately 10,000 square-feet (unaudited) and leasing the building to new tenants. The other member, owning a 10% interest, is an unrelated third party. The other member has the opportunity to earn a promoted return for meeting certain performance goals.

(5) The other member, owning a 10% interest, is an unrelated third party. The other member has the opportunity to earn a promoted return for meeting certain performance goals.

(6) Acquisition price includes the assumption of an approximate $7,400, 6.05% fixed-rate mortgage loan maturing in 2015.

(7) The other owner, owning a 12.15% interest, is an unrelated third party. Acquisition price includes the assumption of an approximate $35,000, 5.30% fixed-rate mortgage loan maturing in 2027.

(8) Acquisition price includes the assumption of an approximate $31,000, 5.90% fixed-rate mortgage loan maturing in 2017.

(9) The other owner, owning a 22% interest, is an investment fund advised by our Advisor and in which the parent company of our Advisor owns a minority interest.

We allocated the purchase price of our 2008 acquisitions in accordance with SFAS 141 as follows:

	2008 Acquisitions
Land	$	8,986
Building and equipment		54,185
In-place lease intangible		8,161
Personal property		3,822
Debt assumption fee		84
Debt premium		(1,581	)
Assumption of mortgage note payable		(33,500	)
	$	40,157
Amortization period for intangible assets and liabilities		6 - 7 months
Amortization period for debt assumption fee and premium		9 years

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We allocated the purchase price of our 2007 acquisitions in accordance with SFAS 141 as follows:

	2007 Acquisitions
Land	$	68,499
Building and equipment		342,357
In-place lease intangible		55,243
Debt assumption fee		306
Above-market lease intangible		2,883
Below-market ground lease intangible		196
Debt discount		4,097
Personal property		11,202
Below-market lease intangible		(7,860	)
Assumption of mortgage note payable		(73,350	)
	$	403,573
Amortization period for intangible assets and liabilities		6 months - 14 years
Amortization period for debt assumption fee and discount		8 - 20 years

Held for sale

During the first quarter of 2008, the Advisor determined that the conditions in the capital markets were not opportune to dispose of Metropolitan Park North, which as of December 31, 2007 was classified as held for sale. The property was returned to continuing operations for all periods presented. During the quarter ended March 31, 2008, the Fund recorded catch up of depreciation and amortization of building and intangible assets and liabilities in the net amount of $1,414. The catch up related to the period that Metropolitan Park North was classified as held for sale during 2007.

NOTE 4—UNCONSOLIDATED REAL ESTATE AFFILIATES

Legacy Village

On August 25, 2004, we acquired a 46.5% membership interest in Legacy Village Investors, LLC which owns Legacy Village (“Legacy Village”), a 595,000 square-foot lifestyle center in Lyndhurst, Ohio, built in 2003. The aggregate consideration for our 46.5% ownership interest was approximately $35,000.

111 Sutter Street

On March 29, 2005, we acquired an 80% membership interest in CEP Investors XII LLC, which owns 111 Sutter Street (“111 Sutter Street”) in San Francisco, California, a 286,000 square-foot, multi-tenant office building built in 1926 and renovated in 2001. The aggregate consideration paid for the 80% membership interest was approximately $24,646.

SUMMARIZED FINANCIAL INFORMATION OF INVESTMENTS IN UNCONSOLIDATED REAL ESTATE AFFILIATES

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The following is summarized financial information for our unconsolidated real estate affiliates:

SUMMARIZED COMBINED BALANCE SHEETS—UNCONSOLIDATED REAL ESTATE AFFILIATES

	December 31, 2008		December 31, 2007
ASSETS
Investments in real estate (net)	$	165,548	$	169,401
Cash and cash equivalents		1,045		1,848
Other assets		22,364		23,263
TOTAL ASSETS	$	188,957	$	194,512
LIABILITIES AND MEMBERS’ EQUITY
Mortgage notes and other debt payable	$	153,047	$	155,566
Due to affiliate		—		44
Other liabilities		8,720		7,821
TOTAL LIABILITIES		161,767		163,431
Members’ Equity		27,190		31,081
TOTAL LIABILITIES AND MEMBERS’ EQUITY	$	188,957	$	194,512

FUND INVESTMENTS IN UNCONSOLIDATED REAL ESTATE AFFILIATES

	December 31, 2008			December 31, 2007
Members’ equity	$	27,190		$	31,081
Less: other members’ equity		(9,367	)		(11,254	)
Accrued distributions to members		241			281
Purchase price in excess of ownership interest in unconsolidated real estate affiliates (a)		22,883			23,375
Investments in unconsolidated real estate affiliates	$	40,947		$	43,483

(a) The purchase price in excess of our ownership interest in the equity of the unconsolidated real estate affiliates is attributable to a difference in the fair value of Legacy Village over its historical cost at acquisition plus the Fund’s own acquisition costs for Legacy Village and 111 Sutter Street. The excess is being amortized over the lives of the related assets and liabilities that make up the fair value difference, primarily buildings and improvements. The excess allocated to land is not subject to amortization.

SUMMARIZED COMBINED STATEMENTS OF OPERATIONS—UNCONSOLIDATED REAL ESTATE AFFILIATES

	Year Ended December 31, 2008		Year Ended December 31, 2007		Year Ended December 31, 2006
Total revenues	$	32,990	$	29,543	$	28,984
Total operating expenses		22,301		19,452		19,540
Operating income		10,689		10,091		9,444
Total other expenses		8,775		8,830		8,862
Net income	$	1,914	$	1,261	$	582

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FUND EQUITY IN INCOME OF UNCONSOLIDATED REAL ESTATE AFFILIATES

	Year Ended December 31, 2008			Year Ended December 31, 2007			Year Ended December 31, 2006
Net income of unconsolidated real estate affiliates	$	1,914		$	1,261		$	582
Other members’ share of net (income) loss		(317	)		(562	)		78
Depreciation of purchase price in excess of ownership interest in unconsolidated real estate affiliates		(367	)		(152	)		(215	)
Other income (expense) from unconsolidated real estate affiliates		—			(11	)		(20	)
Equity in income of unconsolidated real estate affiliates	$	1,230		$	536		$	425

NOTE 5—MORTGAGE NOTES AND OTHER DEBT PAYABLE

Mortgage notes payable have various maturities through 2027 and consist of the following:

Property	Maturity Date	Fixed / Floating	Rate	Amount payable as of
				December 31, 2008			December 31, 2007
9800 South Meridian	January 1, 2010	Floating	LIBOR + 1.60%	$	13,604		$	11,338
Waipio Shopping Center	November 1, 2010	Fixed	5.15%		19,950			19,950
Monument IV at Worldgate	September 1, 2011	Fixed	5.29%		36,832			37,365
25850 S. Ridgeland	April 1, 2012	Fixed	5.05%		16,120			16,474
105 Kendall Park Lane	September 1, 2012	Fixed	4.92%		13,000			13,000
Metropolitan Park North	April 1, 2013	Fixed	5.73%		61,000			61,000
36 Research Park Drive	July 1, 2013	Fixed	5.60%		11,050			11,050
CHW Medical Office Portfolio	November 1, 2013	Fixed	5.75%		17,254			17,538
CHW Medical Office Portfolio	November 1, 2013	Fixed	5.75%		15,017			15,264
CHW Medical Office Portfolio	November 1, 2013	Fixed	5.75%		15,551			15,807
18922 Forge Drive	February 14, 2014	Fixed	6.24%		19,050			19,050
CHW Medical Office Portfolio	March 1, 2014	Fixed	5.79%		33,957			34,498
Stirling Slidell Shopping Centre	April 1, 2014	Fixed	5.15%		13,580			13,818
Cabana Beach San Marcos	December 1, 2014	Fixed	5.57%		19,650			19,650
Cabana Beach Gainesville	December 1, 2014	Fixed	5.57%		49,107			49,108
Campus Lodge Athens	December 1, 2014	Fixed	5.57%		13,723			13,723
Campus Lodge Columbia	December 1, 2014	Fixed	5.57%		16,341			16,341
Havertys Furniture	January 1, 2015	Fixed	5.23%		18,100			18,100
Havertys Furniture	January 1, 2015	Fixed	6.19%		11,025			11,025
Hagemeyer Distribution Center	January 1, 2015	Fixed	5.23%		6,500			6,500
Georgia Door Sales Distribution Center	January 1, 2015	Fixed	5.31%		5,400			5,400
Campus Edge Lafayette	February 1, 2015	Fixed	5.57%		17,465			—
4 Research Park Drive	March 1, 2015	Fixed	6.05%		7,127			7,278
Marketplace at Northglenn	January 1, 2016	Fixed	5.50%		63,755			64,500
Campus Lodge Tampa	October 1, 2016	Fixed	5.95%		33,500			—
4001 North Norfleet Road	March 1, 2017	Fixed	5.60%		24,230			24,230
Station Nine Apartments	May 1, 2017	Fixed	5.50%		36,885			36,885
The District at Howell Mill	June 1, 2017	Fixed	6.14%		10,000			10,000
Canyon Plaza	June 1, 2017	Fixed	5.90%		30,671			31,000
Railway Street Corporate Centre (1)	September 1, 2017	Fixed	5.16%		24,161			29,929
The District at Howell Mill	March 1, 2027	Fixed	5.30%		35,000			35,000
					708,605			664,821
Line of Credit	February 21, 2010	Floating	3.75%		10,000			29,000
Net debt (discount) premium on assumed debt					(1,108	)		(2,505	)
				$	717,497		$	691,316

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(1) This loan is denominated in Canadian dollars, but is reported in US dollars at the exchange rate in effect on the balance sheet date.

We have recognized a premium or discount on debt we assumed with the following property acquisitions:

Property	Debt Premium / (Discount)			Effective Interest Rate
CHW Medical Office Portfolio	$	1,411		5.41	%
Stirling Slidell Shopping Centre		(197	)	5.57	%
4 Research Park Drive		(13	)	6.17	%
The District at Howell Mill		(3,519	)	6.34	%
Canyon Plaza		(217	)	6.10	%
Campus Lodge Tampa		1,427		5.95	%
Net debt (discount) premium on assumed debt		(1,108	)

Included in mortgage notes and other debt payable is $1,025 and $584 of debt premium accumulated amortization at December 31, 2008 and December 31, 2007, respectively. Also included in mortgage notes and other debt payable is $426 and $169 of debt discount accumulated amortization at December 31, 2008 and December 31, 2007, respectively. Aggregate principal payments of mortgage notes payable as of December 31, 2008 are as follows:

Year	Amount
2009	$	4,088
2010		40,745
2011		43,157
2012		35,580
2013		120,750
Thereafter		464,285
Total	$	708,605

Land, buildings, equipment, and acquired intangible assets related to the mortgage notes payable, with an aggregate cost of approximately $1,122,000 and $1,050,000 at December 31, 2008 and 2007, respectively, have been pledged as collateral.

Covenants

At December 31, 2008, we were in compliance with all debt covenants.

Line of Credit

On February 21, 2007, we entered into a $60,000 line of credit agreement, replacing an existing line of credit, to cover short-term capital needs for acquisitions and operations, which was expanded to $70,000 on July 27, 2007. The additional $10,000 borrowing capacity is supplied by BAC. The line of credit expires on February 21, 2010. The line of credit carries an interest rate that approximates LIBOR plus 1.50% for borrowings expected to be outstanding for at least one month, or a base rate for borrowings expected to be outstanding for less than one month, which is the greater of (i) the interest rate per annum announced from time to time by the lender, as its prime rate or (ii) the Federal Funds effective rate plus 0.75%. Should the Fund fail to maintain a debt service coverage ratio of 1.50 to 1.00 or greater, the interest rate on the outstanding borrowings will increase by 0.50%. At December 31, 2007, our debt service coverage ratio fell below the 1.50 to 1.00 threshold. Since April 29, 2008, we have been paying an additional 0.50% on our line of credit borrowing which has resulted in additional interest expense of approximately $95. We will continue to pay the additional 0.50% until our debt service coverage ratio returns to 1.50 to 1.00 or greater. At December 31, 2008, we had $10,000 borrowed on our

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line of credit at 3.75% and four letters of credit outstanding for approximately $3,015, which were used as additional collateral for our student-oriented apartment mortgage loans. At December 31, 2007, we had $29,000 borrowed on our line of credit at 6.52%. As of December 31, 2007 we had issued four letters of credit from our line of credit for approximately $3,015, which were used as additional collateral on three of our apartment communities acquired in November 2007. As of December 31, 2008, we were in compliance of the terms of our line of credit. At December 31, 2008, we had approximately $56,985 available to draw on our line of credit.

NOTE 6—COMMON STOCK

Share Price Calculation

The Current Share Price of the Common Stock (the “Current Share Price”) is established quarterly based on the following valuation methodology, which may be modified from time to time by our board of directors.

Net Asset Value Calculation. The NAV of the Fund is determined as of the end of each of the first three quarters of a fiscal year, within 45 calendar days following the end of such quarter. The Fund’s year-end NAV is determined after the completion of our year-end audit. NAV is determined as follows: (i) the aggregate fair value of (A) our interests in real estate investments (“Investments”) plus (B) all other assets of the Fund, minus (ii) the aggregate fair value of our indebtedness and other outstanding obligations as of the determination date.

We identify and retain independent third-party real estate appraisal firms (the “Appraisal Firms”) that appraise each Investment not less than annually beginning one year after acquisition. During the first three quarters after acquisition, the Investment will be carried at capitalized cost and reviewed quarterly for material events at the property or market level that may require an adjustment of the Investment’s valuation.

For each of the three quarters following the independent appraisal of a particular Investment, we are responsible for determining the value of such Investment based on our review of the appraisal and material changes at the property or market level. We are also responsible for determining the value of the indebtedness related to each Investment beginning one year after acquisition of the encumbered property and on a quarterly basis thereafter.

Current Share Price Calculation. The Current Share Price equals the NAV as of the end of each quarter divided by the number of outstanding shares of all classes of common stock of the Fund at the end of such quarter.

Stock Subscriptions

We expect to sell additional Shares through private placements to accredited investors. All subscriptions are subject to the receipt of cleared funds from the investor prior to the applicable subscription date in the full amount of the subscription. The subscription amount paid by each prospective investor for Shares in the Fund will initially be held in an escrow account at an independent financial institution outside the Fund, for the benefit of the investors until such time as the funds are drawn into the Fund to purchase Shares at the Current Share Price. Subscription funds will be held in the escrow account for no more than 100 days before we are required to issue the subscribed Shares. At December 31, 2008, approximately $5,990 of subscription commitments were held in escrow, which were brought into the Fund in January 2009. At December 31, 2007, no subscription commitments were held in escrow. For the years ended December 31, 2008 and 2007, we sold 585,465 Shares for $71,430 and 1,085,201 Shares for $126,835, respectively, to subscribers whose funds were held in the escrow account. Subscription commitments for the issuance of new Shares held in escrow are not included in our balance sheets.

Share Repurchase Program

Tender Offers

Pursuant to our Share Repurchase Program (the “Repurchase Program”), we intend to provide limited liquidity to our stockholders by conducting tender offers pursuant to which we expect to offer to repurchase a

F-22

specific percentage, number or dollar amount of outstanding Shares (“Tender Offer Amount”). The Tender Offer Amount for each tender offer, if any, will depend on a variety of factors, including our available liquidity, available borrowing under our credit facility and the amount of proceeds from our most recent offering of Shares. Such determinations will be made by our board of directors prior to each tender offer and will be communicated to stockholders. We have made the following tender offers in 2007 and 2008:

Period	Tender Offer Amount		Number of Shares Tendered	Dollar Amount of Shares Tendered		Number of Shares Repurchased	Dollar Amount of Shares Repurchased			Date Shares Repurchased and Retired
May 2007	$	10,000	114,922	$	13,300	114,922	$	13,300	(1)	June 14, 2007
November 2007		10,000	398,387		47,800	84,699		10,200	(1)	December 26, 2007
June 2008		15,000	483,541		58,800	126,446		15,400	(1)	June 24, 2008
December 2008		10,000	1,119,033		138,100	81,018		10,000		December 22, 2008

(1) We availed ourselves of an SEC rule that allowed us to exceed our Tender Offer Amount by up to 2% of the outstanding Shares to honor redemption requests.

No Obligation to Repurchase Shares

We will only offer to repurchase Shares through tender offers and then only to the extent that we have sufficient cash available to repurchase Shares consistent with principles of prudent portfolio management and to the extent that such repurchases (i) are consistent with applicable REIT rules and federal securities laws and (ii) would not require the Fund to register as an investment company under the Investment Company Act. We do not guarantee, however, that sufficient cash will be available at any particular time to fund repurchases of our Shares, and we will be under no obligation to conduct such tender offers or to make such cash available. In determining the Tender Offer Amount, we will act in the best interest of the stockholders and may take into account our need for cash to pay operating expenses, debt service, distributions to stockholders and other obligations.

Dividend Reinvestment Plan

Stockholders may participate in a dividend reinvestment plan under which all dividends will automatically be reinvested in additional Shares. The number of Shares issued under the dividend reinvestment plan will be determined based on the Current Share Price as of the reinvestment date. For the years ended December 31, 2008 and 2007, we issued 68,985 Shares for approximately $8,448 and 53,719 Shares for approximately $6,315, respectively, under the plan.

Earnings Per Share (“EPS”)

Basic per share amounts are based on the weighted average of shares outstanding of 3,822,484, 3,252,725 and 2,341,347 for the years ended December 31, 2008, 2007 and 2006, respectively. We have no dilutive or potentially dilutive securities.

Distributions Payable

On December 5, 2008, our Board of Directors declared a $1.75 per share distribution to Stockholders of record as of December 31, 2008, payable on February 6, 2009.

Dividends

Earnings and profits, which determine the taxability of dividends to stockholders, will differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of revenue and expense recognition, the estimated useful lives used to compute depreciation, and gains on the sale of real property.

F-23

The tax treatment of common dividends per share for federal income tax purposes is as follows:

	For the year ended December 31,
	2008				2007				2006
	Per Share		%		Per Share		%		Per Share		%
Ordinary income		—	—			—	—			—	—
Capital gains		—	—			—	—			—	—
Return of capital	$	7.00	100	%	$	7.00	100	%	$	7.00	100	%
Total	$	7.00	100	%	$	7.00	100	%	$	7.00	100	%

NOTE 7—RENTALS UNDER OPERATING LEASES

We receive rental income from operating leases. The minimum future rentals from consolidated properties based on operating leases in place at December 31, 2008 are as follows:

Year	Amount (1)
2009	$	63,596
2010		53,163
2011		48,907
2012		36,490
2013		32,403
Thereafter		108,024
Total	$	342,583

(1) Amounts included related to Railway Street Corporate Centre have been converted from Canadian dollars to U.S. dollars using the appropriate exchange rate as of December 31, 2008.

Minimum future rentals do not include amounts payable by certain tenants based upon a percentage of their gross sales or as reimbursement of property operating expenses.

During the year ended December 31, 2008 and 2007, no individual tenant accounted for greater than 10% of minimum base rents. During the year ended December 31, 2006, Fannie Mae accounted for 12% of minimum base rents.

NOTE 8—RELATED PARTY TRANSACTIONS

Under the terms of the Management and Advisory Agreements, we pay each the Manager and Advisor an annual fixed fee equal to 0.75% of NAV, calculated quarterly. The fixed portion of the management and advisory fees for the years ended December 31, 2008, 2007 and 2006 were $7,122, $5,732 and $3,888, respectively. Included in manager and advisor fees payable at December 31, 2008 and 2007 was $1,897 and $1,599, respectively, of fixed fee expense.

To the extent that the Fund builds a cash reserve generated by capital raised through the sale of Shares to stockholders, the Manager and Advisor have agreed to waive 1.0% of their combined 1.5% fixed fee expense to reduce the dilutive impact to stockholders created by maintaining cash reserves.

Under the terms of the Management and Advisory Agreements, we pay the Manager and Advisor an aggregate annual variable fee equal to 7.50% of the Variable Fee Base Amount, as defined in the Advisory Agreement, calculated quarterly. Before the Fund’s NAV exceeded $100,000, the variable fee was allocated entirely to the Advisor. The Fund’s NAV exceeded $100,000 on April 1, 2005 and a portion of variable fee was then allocated to the Manager, with the remainder allocated to the Advisor. The Manager will be allocated an increasing proportion of the variable fee as the Fund’s NAV increases, up to a maximum of 1.87% of the 7.50%

F-24

fee paid to the Manager and the Advisor if the Fund’s NAV is $850,000 or more. The total variable fee for the years ended December 31, 2008, 2007 and 2006 was $1,913, $1,694 and $1,288, respectively. Included in manager and advisor fees payable at December 31, 2008 and 2007 was $468 and $433 of variable fee expense.

The Advisor receives an acquisition fee of 0.50% of the acquisition cost of each property acquired for us. Total acquisition fees for the years ended December 31, 2008, 2007 and 2006 were $357, $2,337 and $697, respectively, of which $0 and $775 was included in manager and advisory fees payable at December 31, 2008 and 2007, respectively. The Advisor may pay certain third-party due diligence costs related to acquisitions or unsuccessful acquisitions, which are reimbursable by us. Total reimbursed due diligence costs related to successful investments made by us and unsuccessful acquisitions for the years ended December 31, 2008, 2007 and 2006 were $243, $578 and $130, respectively, $0 and $186 of which is included in accounts payable and other accrued expenses at December 31, 2008 and 2007, respectively. Beginning January 1, 2009, acquisition fees and due diligence costs for acquisitions will be expensed as incurred as required by FAS 141(R).

On December 23, 2004, we entered into an expense limitation and reimbursement agreement (the “Expense Limitation Agreement”) with the Manager, which limits certain Fund expenses to 0.75% of NAV annually. The expenses subject to the limitation include fees paid to the various professional service providers, auditors, stockholder administrator, legal counsel related to the organization of the Fund or share offering, printing costs, mailing costs, fees associated with the board of directors, cost of maintaining directors and officers insurance, blue sky fees and all Fund-level organizational costs. Expenses in excess of the limitation will be carried forward for up to three years and may be reimbursed to the Manager in a year that Fund expenses are less than 0.75% of NAV, but only to the extent Fund expenses do not exceed the expense limitation. Fund expenses for the years ended December 31, 2008, 2007 and 2006 were limited to $3,511, $2,866 and $1,944, respectively. Actual Fund level expenses for the year ended December 31, 2008 were $1,289 less than the amount allowed under the Expense Limitation Agreement. Therefore, no Fund level expenses are being carried forward to future periods. To the extent expenses can not be allocated to the Fund in future years due to the expense limitation, these expenses will be borne by the Manager. The Expense Limitation Agreement was scheduled to expire on December 31, 2008, but was renewed and extended through December 31, 2009. Expenses subject to the Expense Limitation Agreement are included in the Fund level expenses line on the consolidated statements of operations along with certain other Fund level expenses not subject to the expense limitation agreement, such as expenses related to unsuccessful acquisitions and state franchise taxes and filing fees.

Jones Lang LaSalle Americas, Inc. (“JLL”), an affiliate of LaSalle, is paid for property management services performed at Monument IV at Worldgate, The District at Howell Mill, 4 Research Park Drive and 36 Research Park Drive. For the years ended December 31, 2008, 2007 and 2006, JLL was paid $147, $84 and $18, respectively, for property management services performed. In 2008, JLL was paid $61 of loan placement fees related to the mortgage debt on Campus Edge Lafayette. In 2007, JLL was paid $741 of loan placement fees related to the mortgage debt on the Station Nine Apartments, Railway Street Corporate Centre, and four student-oriented apartment communities. JLL has been hired to perform leasing services for Canyon Plaza and 111 Sutter on a contingent fee basis.

The placement agent for the Fund is UST Securities Corp.; the sub-placement agents are BANA and Banc of America Investment Services Inc., all affiliates of the Manager. The placement and sub-placement agents receive no compensation from us for their services, but may receive compensation in the form of a placement fee from the purchasing shareholder.

The Fund has mortgage notes payable to BAC collateralized by Monument IV at Worldgate and Station Nine Apartments. BANA is the lender on up to $10,000 of the Fund’s line of credit. Interest and fees paid to BAC and BANA related to the loans for the year ended December 31, 2008 were $4,255. Interest and fees paid to BAC and BANA related to the loans for the period from July 1, 2007 (the date BAC acquired the Manager) through December 31, 2007 were $2,060. Included in mortgage notes and other debt payable at December 31, 2008 and 2007 was approximately $75,145 and $78,393 of debt payable to BAC and BANA, respectively.

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NOTE 9—COMMITMENTS AND CONTINGENCIES

From time to time, we have entered into contingent agreements for the acquisition of properties. Such acquisitions are subject to satisfactory completion of due diligence.

As part of the acquisition of the 25850 S. Ridgeland property we were granted an option expiring in 2009 to purchase a portion of adjacent land if the tenant chooses to expand its facility. If the tenant chooses to expand its facility, then we can acquire the additional portion of land subject to the terms and conditions of that certain Expansion Option Agreement dated as of December 31, 2004, which agreement provides among other things the terms and conditions pursuant to which the purchase price for the adjacent land shall be determined.

The CHW Medical Office Portfolio mortgage debt requires that we deposit a maximum of $1,900 into an escrow account to fund future tenant improvements and leasing commissions. At December 31, 2008, we had approximately $1,860 deposited in this escrow, and we expect to fund approximately $40 during 2009. Additionally, we are required to deposit approximately $151 per year into an escrow account to fund capital expenditures. At December 31, 2008, our capital account escrow account balance was $707. These escrow accounts allow us to withdraw funds as we incur costs related to tenant improvements, leasing commissions and capital expenditures. We expect to fund the escrow requirements with operating cash flows generated by the CHW Medical Office Portfolio.

The mortgage loan collateralized by Metropolitan Park North requires that on or before April 1, 2009 we post a $3,900 reserve in escrow to cover costs of certain tenant improvements, leasing commissions, rent concessions, and lost rental income in connection with re-leasing space to a major tenant of the building. If the tenant provides written notice of its intent to exercise its lease renewal option by September 30, 2010, the lender will return the $3,900 deposit to us. If the tenant fails to provide notice of its renewal, we are obligated to post an additional $2,800 deposit into the escrow. The lender will return the reserve to us if the following conditions are met: (1) no default has occurred and remains outstanding; and (2) either the tenant has exercised its renewal options or the space has been re-leased to a new tenant(s). The Fund plans on satisfying these commitments with letters of credit against our line of credit.

The mortgage loan collateralized by Monument IV at Worldgate requires that, should the tenant not renew its lease or the space not be leased to a new tenant(s), the Fund must reserve all rental payments received from the tenant at the earlier of September 1, 2010 or upon the tenant delivering a notice of its intent not to renew the lease. The Fund can avoid reserving the rental payments by delivering a letter of credit to the lender of $4,800 on September 1, 2008 or $3,600 on September 1, 2009 or $2,400 on September 1, 2010, depending on the date at which the reserve payments become required. The Fund expects to fund the reserve, if required to do so, from the rental payments received from the tenant. The lender will return the reserve to the Fund if the following conditions are met: (1) no default has occurred and remains outstanding; and (2) either the tenant has renewed its lease or the space has been re-leased to a new tenant(s).

The debt associated with five of the Fund’s student-oriented apartment communities requires that we deposit a total of $224 per year into a replacement reserve to fund future furniture replacement costs. As of December 31, 2008, we had deposited approximately $266 into this escrow. We expect to fund the loan escrows from property operations.

As part of the lease with our single tenant at the 4001 North Norfleet Road property, we provided the tenant a right to expand the current building by up to 286,000 square feet of space. If the tenant exercises this right, we will be obligated to construct this expansion space. The tenant has the right to notify us of their desire to expand at any time prior to February 28, 2016, (the end of the ninth year of the lease), or if the lease is extended, until any time prior to the end of the fourth year of any extension. As of December 31, 2008, we have not received an expansion notice from the tenant.

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NOTE 10—RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“Statement No. 160”). Statement No. 160 requires (i) that noncontrolling (minority) interests be reported as a component of shareholders’ equity, (ii) that net income attributable to the parent and to the noncontrolling interest be separately identified in the consolidated statement of operations, (iii) that changes in a parent’s ownership interest while the parent retains its controlling interest be accounted for as equity transactions, (iv) that any retained noncontrolling equity investment upon the deconsolidation of a subsidiary be initially measured at fair value, and (v) that sufficient disclosures are provided that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. Statement No. 160 is effective for annual periods beginning after December 15, 2008 and should be applied prospectively. However, the presentation and disclosure requirements of the statement shall be applied retrospectively for all periods presented. We believe the adoption of the provisions of Statement No. 160 will not have a material impact on the Fund’s consolidated financial position and results of operations, but will have an impact on the presentation of noncontrolling interest in our financial statements.

In December 2007, the FASB issued SFAS 141 (revised 2007), “Business Combinations”, (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, including goodwill, the liabilities assumed and any non-controlling interest in the acquiree. SFAS 141R also establishes disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. 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 15, 2008. The Fund will adopt this standard on January 1, 2009. The impact of adopting SFAS 141R will be dependent on the future business combinations that the Fund may pursue after its effective date, but will require expensing of acquisition related costs as incurred which were previously capitalized prior to adopting the standard. The adoption of this standard by the Fund on January 1, 2009 is expected to result in a write-off of approximately $225 in acquisition related transaction costs associated with transactions not yet consummated.

In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”). SFAS No. 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand the effects of the derivative instruments on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Fund believes the potential impact of SFAS No. 161 on its financial statements will not be material.

NOTE 11—ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

We adopted the provisions of Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“Statement No. 157”) as of January 1, 2008, for financial instruments recorded at fair value. Although the adoption of Statement No. 157 did not materially impact our financial condition, results of operations, or cash flow, we are now required to provide additional disclosures as part of our financial statements.

Statement No.157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering assumptions, Statement No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• Level 1—Quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement.

F-27

• Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.

• Level 3—Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

As of December 31, 2008 we do not have any financial instruments that are being stated at fair value in the Consolidated Balance Sheet.

FASB Statement No. 107, “Disclosure about the Fair Value of Financial Instruments” (“SFAS 107”), requires the disclosure of the fair value of our financial instruments for which it is practicable to estimate that value. SFAS 107 does not apply to all balance sheet items. We have utilized market information as available or present value techniques to estimate the amounts required to be disclosed. Since such amounts are estimates, there can be no assurance that the disclosed value of any financial instrument could be realized by immediate settlement of the instrument. We consider the carrying value of our cash and cash equivalents to approximate their fair value due to the short maturity of these investments. The fair value of our notes receivable was approximately $1,013 higher and $400 lower, respectively, than the aggregate carrying amounts at December 31, 2008 and 2007. We have estimated the fair value of our mortgage notes and other debt payable reflected in the accompanying Consolidated Balance Sheets at amounts that are based upon an interpretation of available market information and valuation methodologies (including discounted cash flow analyses with regard to fixed rate debt) for similar loans made to borrowers with similar credit ratings and for the same maturities. The fair value of our mortgage notes and other debt payable was approximately $51,047 and $1,870 lower than the aggregate carrying amounts at December 31, 2008 and 2007, respectively. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition of our mortgage notes and other debt payable.

NOTE 12—PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The following unaudited pro forma financial information has been presented as a result of the acquisitions made by the Fund during 2008 and 2007 and 2007 and 2006, which includes the historical results of all acquisitions made during these years. In our opinion, all significant adjustments necessary for a fair presentation of the pro forma financial information for the periods have been included. The pro forma financial information is based upon historical financial information and does not purport to present what actual results would have been had the acquisitions, and related transactions, in fact, occurred at the beginning of each period presented, or to project results for any future period.

	2008			2007
Total revenue	$	114,564		$	102,793
Net loss	$	(33,701	)	$	(35,854	)
Loss per share-basic and diluted	$	(8.36	)	$	(8.89	)

	2007			2006
Total revenue	$	95,271		$	73,008
Net loss	$	(31,823	)	$	(31,184	)
Loss per share-basic and diluted	$	(8.87	)	$	(8.69	)

F-28

NOTE 13—QUARTERLY FINANCIAL INFORMATION

EXCELSIOR LASALLE PROPERTY FUND, INC.

QUARTERLY FINANCIAL INFORMATION

(UNAUDITED)

	Three Months Ended March 31, 2008			Three Months Ended June 30, 2008			Three Months Ended September 30, 2008			Three Months Ended December 31, 2008
Total revenues	$	27,457		$	27,832		$	28,355		$	29,790
Operating income		(496	)		(3,189	)		(249	)		4,149
Net loss		(8,830	)		(11,039	)		(8,209	)		(4,496	)
Loss per share-basic and diluted	$	(2.45	)	$	(2.97	)	$	(2.12	)	$	(1.10	)
Weighted average common stock outstanding-basic and diluted		3,601,239			3,717,703			3,868,852			4,097,311

	Three Months Ended March 31, 2007			Three Months Ended June 30, 2007			Three Months Ended September 30, 2007			Three Months Ended December 31, 2007
Total revenues	$	15,227		$	17,302		$	20,906		$	23,852
Operating income		2,586			2,173			3,796			4,129
Net loss		(1,898	)		(3,273	)		(3,822	)		(4,643	)
Loss per share-basic and diluted	$	(0.67	)	$	(1.04	)	$	(1.11	)	$	(1.31	)
Weighted average common stock outstanding-basic and diluted		2,834,022			3,159,225			3,453,704			3,553,833

All significant fluctuations between the quarters are attributable to acquisitions made by us during 2007 and 2008.

NOTE 14—SUBSEQUENT EVENTS

On January 2, 2009, the Fund issued 63,859 shares for a total of $5,990, proceeds of which were used to paydown the line of credit.

On January 5, 2009, the Fund paid down the line of credit by $9,000.

On February 4, 2009, the Fund made a $5,000 draw on our line of credit, which was used for operations.

On March 13, 2009, the board of directors declared a dividend of $0.875 per Share to stockholders of record on March 31, 2009, payable on May 1, 2009.

*  *  *  *  *  *

F-29

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2008

Col. A	Col. B		Col. C				Col. D						Col. E
Description	Encumbrances		Initial Cost				Costs Capitalized Subsequent to Acquisition						Gross Amounts at which Carried at the Close of Period				Total
			Land		Building and Equipment		Land		Building and Equipment			Carrying Costs	Land		Building and     Equipment
Consolidated Properties:
Monument IV at Worldgate—Herndon, VA, Office	$	36,832	$	5,186	$	57,013	—		$	(1,640	)	—	$	5,186	$	55,373	$	60,559
Havertys Furniture—Braselton, GA, Industrial		29,125		—		17,474	3,153			10,985		—		3,153		28,459		31,612
Hagemeyer Distribution Center—Auburn, GA, Industrial		6,500		—		6,203	—			—		—		—		6,203		6,203
25850 S Ridgeland—Monee, IL, Industrial		16,120		4,300		14,003	—			600		—		4,300		14,603		18,903
Georgia Door Sales Distribution Center—Austell, GA, Industrial		5,400		1,651		5,570	—			36		—		1,651		5,606		7,257
105 Kendall Park Lane—Atlanta, GA, Industrial		13,000		2,656		12,836	—			1		—		2,656		12,837		15,493
Waipio Shopping Center—Waipahu, HI, Retail		19,950		13,425		14,756	—			110		—		13,425		14,866		28,291
Marketplace at Northglenn—Northglenn, CO, Retail		63,755		15,658		66,217	—			368		—		15,658		66,585		82,243
CHW Medical Office Portfolio:
300 Old River Road—Bakersfield, CA, Office		3,947		—		5,943	—			177		—		—		6,120		6,120
500 West Thomas Road—Phoenix, AZ, Office		19,572		—		25,789	—			1,582		—		—		27,371		27,371
500 Old River Road—Bakersfield, CA, Office		3,120		—		4,396	—			344		—		—		4,740		4,740
1500 S. Central Ave—Glendale, CA, Office		4,513		—		5,253	—			298		—		—		5,551		5,551
14600 Sherman Way—Van Nuys, CA, Office		5,631		—		6,348	—			781		—		—		7,129		7,129
14624 Sherman Way—Van Nuys, CA, Office		4,873		—		7,685	—			589		—		—		8,274		8,274
18350 Roscoe Blvd—Northridge, CA, Office		8,576		—		10,584	—			705		—		—		11,289		11,289
18460 Roscoe Blvd—Northridge, CA, Office		1,451		—		2,940	—			5		—		—		2,945		2,945
18546 Roscoe Blvd—Northridge, CA, Office		3,456		—		5,580	—			306		—		—		5,886		5,886
4545 East Chandler—Chandler, AZ, Office		5,410		—		5,345	—			261		—		—		5,606		5,606
485 South Dobson—Chandler, AZ, Office		5,234		—		6,785	—			179		—		—		6,964		6,964
1501 North Gilbert—Gilbert, AZ, Office		4,722		—		4,750	—			301		—		—		5,051		5,051
116 South Palisade—Santa Maria, CA, Office		2,489		—		3,190	—			121		—		—		3,311		3,311
525 East Plaza—Santa Maria, CA, Office		4,829		—		7,511	—			1,015		—		—		8,526		8,526
10440 East Riggs—Chandler, AZ, Office		3,956		—		3,017	—			222		—		—		3,239		3,239
Metropolitan Park North—Seattle, WA, Office		61,000		10,900		64,006	—			16		—		10,900		64,022		74,922
Stirling Slidell Shopping Centre—Slidell, LA, Retail		13,580		5,442		16,843	—			3		—		5,442		16,846		22,288
9800 South Meridian—Englewood, CO, Office		13,604		4,517		9,640	—			3,412		—		4,517		13,052		17,569
18922 Forge Drive—Cupertino, CA, Office		19,050		7,975		12,758	—			247		—		7,975		13,005		20,980
4001 North Norfleet Road—Kansas City, MO, Industrial		24,230		2,134		31,397	9			8		—		2,143		31,405		33,548
Station Nine Apartments—Durham, NC, Apartment		36,885		9,690		43,400	—			390		—		9,690		43,790		53,480
4 Research Park Drive—St. Charles, MO, Office		7,127		1,830		6,743	—			(2	)	—		1,830		6,741		8,571
36 Research Park Drive—St. Charles, MO, Office		11,050		2,655		11,089	—			(2	)	—		2,655		11,087		13,742
The District at Howell Mill—Atlanta, GA, Retail		45,000		10,000		56,040	—			668		—		10,000		56,708		66,708
Canyon Plaza—San Diego, CA, Office		30,671		14,959		32,909	—			1,123		—		14,959		34,032		48,991
Railway Street Corporate Centre—Calgary, Canada, Office		24,161		6,022		35,441	(1,161	)		(6,397	)	—		4,861		29,044		33,905

F-30

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2008—(Continued)

Col. A	Col. B		Col. C				Col. D						Col. E
Description	Encumbrances		Initial Cost				Costs Capitalized Subsequent to Acquisition						Gross Amounts at which Carried at the Close of Period				Total
			Land		Building and Equipment		Land		Building and Equipment		Carrying Costs		Land		Building and     Equipment
Cabana Beach San Marcos—San Marcos, TX, Apartment		19,650		2,530		24,421		—		89		—		2,530		24,510		27,040
Cabana Beach Gainesville—Gainesville, FL, Apartment		49,107		7,244		60,548		—		108		—		7,244		60,656		67,900
Campus Lodge Columbia—Columbia, MO, Apartment		16,341		2,079		20,838		—		254		—		2,079		21,092		23,171
Campus Lodge Athens—Athens, GA, Apartment		13,723		1,754		17,311				189		—		1,754		17,500		19,254
Campus Edge Lafayette—Lafayette, LA, Apartment		17,465		1,782		23,266		—		58		—		1,782		23,324		25,106
Campus Lodge Tampa—Tampa, FL, Apartment		33,500		7,205		33,310				1,914		—		7,205		35,224		42,429
Total Consolidated Properties	$	708,605	$	141,594	$	799,148	$	2,001	$	19,424	$	—	$	143,595	$	818,572	$	962,167

F-31

Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2008—(Continued)

Col. A	Col. F		Col. G	Col. H	Col. I
Description	Accumulated Depreciation		Date of Construction	Date of Acquisition	Life on which depreciation in latest income statement is computed
Consolidated Properties:
Monument IV at Worldgate—Herndon, VA, Office	$	4,659	2001	8/27/2004	50 years
Havertys Furniture—Braselton, GA, Industrial		2,080	2002/2005	12/3/2004	50 years
Hagemeyer Distribution Center—Auburn, GA, Industrial		506	2001	12/3/2004	50 years
25850 S Ridgeland—Monee, IL, Industrial		1,153	2004	12/31/2004	50 years
Georgia Door Sales Distribution Center—Austell, GA, Industrial		438	1994/1996	2/10/2005	50 years
105 Kendall Park Lane—Atlanta, GA, Industrial		898	2002	6/30/2005	50 years
Waipio Shopping Center—Waipahu, HI, Shopping Center		1,279	1986/2005	8/1/2005	40 years
Marketplace at Northglenn—Northglenn, CO, Shopping Center		4,052	1999-2001	12/21/2005	50 years
CHW Medical Office Portfolio:
300 Old River Road—Bakersfield, CA, Office		446	1992	12/21/2005	40 years
500 West Thomas Road— Phoenix, AZ, Office		955	1994	12/21/2005	40 years
500 Old River Road—Bakersfield, CA, Office		491	1992	12/21/2005	40 years
1500 S. Central Ave—Glendale, CA, Office		222	1980	12/21/2005	40 years
14600 Sherman Way—Van Nuys, CA, Office		623	1991	12/21/2005	40 years
14624 Sherman Way—Van Nuys, CA, Office		640	1981	12/21/2005	40 years
18350 Roscoe Blvd—Northridge, CA, Office		464	1979	12/21/2005	40 years
18460 Roscoe Blvd—Northridge, CA, Office		391	1991	12/21/2005	40 years
18546 Roscoe Blvd—Northridge, CA, Office		257	1991	12/21/2005	40 years
4545 East Chandler —Chandler, AZ, Office		811	1994	12/21/2005	40 years
485 South Dobson —Chandler, AZ, Office		542	1984	12/21/2005	40 years
1501 North Gilbert—Gilbert, AZ, Office		379	1997	12/21/2005	40 years
116 South Palisade —Santa Maria, CA, Office		439	1995	12/21/2005	40 years
525 East Plaza —Santa Maria, CA, Office		244	1995	12/21/2005	40 years
10440 East Riggs—Chandler, AZ, Office		2,508	1996	12/21/2005	40 years
Metropolitan Park North—Seattle, WA, Office		3,530	2001	3/28/2006	50 years
Stirling Slidell Shopping Centre—Slidell, LA, Shopping Center		702	2003	12/14/2006	50 years
9800 South Meridian—Englewood, CO, Office		761	1994	12/26/2006	40 years
18922 Forge Drive—Cupertino, CA, Office		597	1972/1999	2/15/2007	40 years
4001 North Norfleet Road—Kansas City, MO, Industrial		1,152	2007	2/27/2007	50 years
Station Nine Apartments—Durham, NC, Apartment		1,463	2005	4/16/2007	50 years
4 Research Park Drive—St. Charles, MO, Office		213	2000/2004	6/13/2007	50 years
36 Research Park Drive—St. Charles, MO, Office		351	2007	6/13/2007	50 years
The District at Howell Mill—Atlanta, GA, Retail		1,796	2006	6/15/2007	50 years
Canyon Plaza—San Diego, CA, Office		1,309	1986/1993	6/26/2007	40 years
Railway Street Corporate Centre—Calgary, Canada, Office		774	2007	8/30/2007	50 years
Cabana Beach San Marcos—San Marcos, TX, Apartment		1,276	2006	11/21/2007	50 years
Cabana Beach Gainesville—Gainesville, FL, Apartment		2,743	2005/2007	11/21/2007	50 years
Campus Lodge Athens—Athens, GA, Apartment		1,081	2003	11/21/2007	50 years
Campus Lodge Columbia—Columbia, MO, Apartment		848	2005	11/21/2007	50 years
Campus Edge Lafayette—Lafayette, LA, Apartment		759	2007	1/15/2008	50 years
Campus Lodge Tampa—Tampa, FL, Apartment		1,308	2001	2/29/2008	40 years
Total Consolidated Properties	$	45,140

F-32

Reconciliation of Real Estate

Consolidated Properties	2008		2007		2006
Balance at beginning of year	$	897,502	$	466,789	$	342,069
Additions		64,665		430,713		124,720
Reductions		—		—		—
Balance at close of year	$	962,167	$	897,502	$	466,789

Reconciliation of Accumulated Depreciation

Consolidated Properties	2008		2007		2006
Balance at beginning of year	$	22,652	$	10,614	$	2,710
Additions		22,488		12,038		7,904
Reductions		—		—		—
Balance at close of year	$	45,140	$	22,652	$	10,614

F-33

EX-21

Exhibit 21

ELPF Subsidiaries as of March 16, 2009	State or Jurisdiction or Incorporation	Percent Owned by the Fund
Excelsior LaSalle Property Fund Inc.	Maryland	100.00	%
Legacy Village Holdings III LLC	Delaware	100.00	%
Legacy Village Holdings II LLC	Delaware	100.00	%
Legacy Village Holdings LLC	Delaware	100.00	%
Legacy Village Investors LLC	Delaware	46.50	%
Village Valet, LLC	Delaware	46.50	%
MIVPO Member LLC	Delaware	100.00	%
MIVPO LLC	Delaware	100.00	%
ELPF Atlanta Member LLC	Delaware	100.00	%
ELPF Jackson LLC	Delaware	100.00	%
ELPF Barrow LLC	Delaware	100.00	%
ELPF Cobb LLC	Delaware	100.00	%
LaSalle Monee Purchaser LLC	Delaware	100.00	%
LaSalle Monee Lender LLC	Delaware	100.00	%
ELPF / Sutter Holdings, LLC	Delaware	100.00	%
CEP XII Investors LLC	Delaware	80.00	%
ELPF Kendall LLC	Delaware	100.00	%
ELPF Waipio LLC	Delaware	100.00	%
ELPF Northglenn Member LLC	Delaware	100.00	%
ELPF Northglenn LLC	Delaware	100.00	%
ELPF Medical Holdings LLC	Delaware	100.00	%
ELPF Acquisitions #1 partners LLC	Delaware	100.00	%
ELPF Chandler 485 South Dobson LLC	Delaware	100.00	%
ELPF Northridge 18350 Roscoe LLC	Delaware	100.00	%
ELPF Phoenix 4545 East Chandler LLC	Delaware	100.00	%
ELPF Van Nuys 14624 Sherman LLC	Delaware	100.00	%
ELPF Bakersfield 500 Old River LLC	Delaware	100.00	%
ELPF Gilbert 1501 North Gilbert LLC	Delaware	100.00	%
ELPF Northridge 18546 Roscoe LLC	Delaware	100.00	%
ELPF Sun Lakes 10440 East Riggs LLC	Delaware	100.00	%
ELPF Phoenix 500 West Thomas LLC	Delaware	100.00	%
ELPF Santa Maria 116 South Palisade LLC	Delaware	100.00	%
ELPF Glendale 1500 South Central LLC	Delaware	100.00	%
ELPF Northridge 18460 Roscoe LLC	Delaware	100.00	%
ELPF Van Nuys 14600 Sherman LLC	Delaware	100.00	%
ELPF Bakersfield 300 Old River LLC	Delaware	100.00	%
ELPF Santa Maria 525 East Plaza LLC	Delaware	100.00	%
ELPF Met Park North LLC	Delaware	100.00	%
ELPF Slidell Member, Inc.	Delaware	100.00	%
ELPF Slidell LLC	Delaware	100.00	%
ELPF Slidell Manager Inc.	Delaware	100.00	%
ELPF Meridian LLC	Delaware	90.00	%
9800 South Meridian LLC	Delaware	90.00	%
ELPF Forge Drive LLC	Delaware	90.00	%
Forge Cupertino LLC	Delaware	90.00	%
ELPF Norfleet LLC	Delaware	100.00	%
ELPF Station Nine LLC.	Delaware	100.00	%
ELPF Missouri Research Park I LLC	Delaware	100.00	%
ELPF Missouri Research Park II LLC	Delaware	100.00	%

ELPF Howell Mill LLC	Delaware	100.00	%
ELPF Scranton Road LP	Delaware	100.00	%
ELPF Railway GP Inc.	Alberta	100.00	%
ELPF Railway LP	Delaware	100.00	%
ELPF Canada Investors GP Inc.	Delaware	100.00	%
ELPF Canada Investors LP	Delaware	100.00	%
ELPF Canada Trust	Delaware	100.00	%
ELPF 6807 Railway Street Inc	Alberta	100.00	%
ELPF 6807 Railway Street Leasehold ULC	Alberta	100.00	%
ELPF Gainesville LLC	Delaware	100.00	%
ELPF Athens LLC	Delaware	100.00	%
ELPF Columbia LLC	Delaware	100.00	%
ELPF San Marcos LLC	Delaware	100.00	%
ELPF Tampa LLC	Delaware	100.00	%
ELPF Lafayette LLC	Delaware	100.00	%
ELPF Lafayette Manager, Inc.	Delaware	100.00	%
ELPF Lafayette Member Inc.	Delaware	100.00	%

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, James D. Bowden, certify that:

1. I have reviewed this annual report on Form 10-K of Excelsior LaSalle Property Fund, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2009	/s/    JAMES D. BOWDEN
	James D. Bowden President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Steven Suss, certify that:

1. I have reviewed this annual report on Form 10-K of Excelsior LaSalle Property Fund, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2009	/s/    STEVEN SUSS
	Steven Suss Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Excelsior LaSalle Property Fund, Inc. (the “Fund”) on Form 10-K for the period ending December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Henry I. Feuerstein, in my capacity as Chief Executive Officer of the Fund, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund.

/s/    JAMES D. BOWDEN        

James D. Bowden

President and Chief Executive Officer

March 16, 2009

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Excelsior LaSalle Property Fund, Inc. (the “Fund”) on Form 10-K for the period ending December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven Suss, in my capacity as Chief Financial Officer of the Fund, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund.

/s/    STEVEN SUSS        

Steven Suss

Chief Financial Officer

March 16, 2009