3685 SAN FERNANDO

(3/1/08)

1st TD Glendale, CA 1.58 acres infill space for condo development, never happened. Original loan $7,650,000. Discounted payoff offer accepted by 100% of the direct lenders. Sale of property has closed the first week of December from a tax credit buyer. Distributions to Non-LLC members sent out end of January. LLC Member distributions were mailed from Las Vegas the week of 2/25/0

60th STREET VENTURES

(3/1/08)

2nd TD on 61 condo units in San Diego, CA. Same borrower as 5055 Collwood. Original loan amount $3,700,000. Silver Point bought the 1st position from BofA. There are several units remaining to be sold which will complete the obligation to Silver Point which once they are paid will move the USA lenders into 1st position. There is a receiver on the property. Compass working with borrower on resolution moving forward. The condo market in San Diego continues to deteriorate significantly which is making the process more difficult and challenging moving forward for the borrower, Compass and the Direct Lenders.

AMESBURYPORT CORPORATION - HATTERS POINT

(4/28/08)

1st Mortgage 9 buildings Amesbury, Massachusetts for senior condos. William Sullivan borrower has contributed $3 million to the project. First phase was sold out, the $ was not returned to the lenders, the indication is the proceeds were used to pay the interest on the loan. Remaining collateral boarded up buildings and raw land. The borrower was successful in obtaining an increased density 60-65 units instead of 40. Compass is moving forward with receiving the Deed In Lieu of Foreclosure or foreclosing on the remaining collateral. In the event Compass pursues acceptance of a deed in lieu of foreclosure, Compass will certainly obtain a title insurance policy for the purpose of protecting the Direct Lenders. The borrower’s guaranty is worthless and Compass is currently going through the due diligence to substantiate that.  www.hatterspoint.com.

ANCHOR B, LLC

(4/28/08)

Controlled by Tracy Suttles – 1st TD Houston, TX – 9.9 acres of land with $180,000 square ft big-box retail building a part of the Sharpston Mall .Original loan $5,850,000. Request for Consent to a discounted payoff of 57% of principal & interest was NOT approved by 100% of the Direct Lenders. Based on a Global Settlement Agreement reached with the receiver for the Suttles assets, foreclosure has been successfully completed on the Anchor B asset as of 2/5/08. Compass continues to work with potential buyers and interested parties.

BAR/USA

(3/1/08)

Compass and the Direct Lenders have mediated a settlement with William Barkett the borrower to resolve this loan. As of 2/15/08 100% of the Direct Lenders and Compass have consented to a discounted payoff of this loan. The repayment will come in two payments for the Direct Lenders and Compass. The initial payment from the third party lender closed 2/27/08, distribution of these proceeds will go out the end of March 2008. Barkett is committed to repay the balance in June 2008.

BAY POMPANO BEACH

(4/28/08)

BINFORD MEDICAL DEVELOPERS

(4/30/08)

Binford Medical Developers is owned and managed by Ken E. Schmidt – 1st TD on 16.8 acres Indianapolis for Medical office. Original loan amount $8,375,000 was short funded by USA. First building built needs approximately $200K to complete. Contractor owed $800K. Request for Consent for a discounted payoff was submitted to the Direct Lenders which has been rejected by the lenders as of 12/14/07, as we stand today Compass does not have an approval from the Direct Lenders but continues waiting to see if the Lenders will accept the proposal. Foreclosure is slated for April, 2008. Likely the borrower will file Chapter 11 to stay the foreclosure as he has indicated he would do. Under oath at the mediation the borrower confirmed the debt at the time was $10.5 million and the value of the asset as is around $5 million so there is 0 equity. Compass has resolved the investors issues regarding the guarantor’s financial stability and will send a Request for Consent to Direct lenders shortly and hopes that the DL’s will now approve the request regarding the mediated deal, if not it will be officially dead.

BUNDY CANYON LAND DEVELOPERS - FIVE DIFFERENT LOANS

(5/8/08)

1st TD’s on several parcels in Wildomer, CA, Riverside County. USA Investment Partners, Chris Peterson, Kevin Everett the borrower. $25,500,000 principal balances. NOD’s filed and foreclosures slated for the month of March 2008. Foreclosures on the collateral securing the Bundy $2.5MM and the Bundy $5MM have been completed, 2/29/08. Compass has established separate SPE’s (Special Purpose Entities) to hold the assets. The Bundy $5.725MM and $7.5MM foreclosure sales have been postponed on several occasions. The non-judicial foreclosure sale is on hold because a majority of the direct lenders in the loan provided Compass with written direction not to foreclose. Those direct lenders have indicated a desire to further investigate whether a judicial foreclosure would be preferable in the loan. The borrower in this loan appears to own 10 acres of unencumbered property and a non-judicial foreclosure would prevent Compass from pursuing any deficiency against the borrower, including pursuit of the 10 acre parcel.

Compass believes that the costs of proceeding by way of a judicial foreclosure would far exceed the value of the unencumbered 10 acre parcel. Separately regarding the SPE for the Bundy 7.5 loan Compass is working with certain direct lenders regarding the form of the SPE operating agreement. There is also a title issue that Compass is dealing with. The deed of trust made by the borrower appears to cover more land than the borrower actually owns. Compass has already tendered a claim to the title company which issued the lender’s policy at the time this loan originated. Compass is awaiting a response to that claim.

Link to: MASSA QUESTIONS REGARDING BUNDY CANYON $5.72MM SPE OPERATING AGREEMENT

CABERNET HIGHLANDS

(4/30/08)

2nd TD Sparks, NV, the only performing loan in the portfolio interest being paid monthly by the Borrower. Their approved extension expires January 31, 2008. The borrower has asked for a release of USIP as a guarantor so that the can go ahead and get refinancing which they are having difficulty in doing while USIP is still a co-borrower. Compass has received consent from 100% of the Direct Lenders in the Cabernet loan to release the IP guaranty. The borrower is working to refinance the entire project but to date has been unsuccessful. There is currently an $18MM 1st ahead of USA lenders with US Bank which has matured but they are putting together an extension package. Compass has received an offer from a 3rd party investor to buy the note, a Request for Consent is anticipated soon.

CASTAIC PARTNERS, TAPIA RANCH – CASTAIC ll – CASTAIC lll

(4/18/08)

William Barkett the manager of Castaic Partners is the borrower on all of these loans. Compass has mediated with and continues negotiation with Barkett to resolve these loans. Compass moving forward on all fronts: working with the borrower, while also foreclosing and litigating. Likely additional time will be needed for Barkett to acquire the funds to repay these loans.

6/10/08

Compass has filed suit against Mr. Barkett as the guarantor of the loans, and Compass has taken steps to foreclose on the properties. The parties recently entered into a 9 month forbearance agreement of the litigation and the foreclosure proceedings in consideration for a payment of $1 million. Compass is documenting the deal. Mr. Barkett requested additional time to arrange funding for a settlement. Compass considers the forbearance payment of $1 million to be fair.

CHARLEVOIX HOMES

(3/1/08)

Subordinated TD, 33.42 acres residential land in Chandler, AZ. Original loan $3.4 million. A large 1st in front of lenders approximately $13,000,000. Poor communication from the borrower, property still being developed. Difficult to file NOD because of the subordinated position. Compass attempting to communicate with the borrower and the 1st Mortgage to find a resolution.

COMVEST CAPITAL ADVISORS

(4/4/08)

1st Mortgage on a 36 unit condo complex in Satellite Beach, FL. Original loan $4,500,000. Foreclosure efforts in place and moving forward, no date set at this time. The foreclosure process involves a judicial foreclosure which takes additional time.

COPPER SAGE COMMERCE CENTER

(3/1/08)

1st TD on 8.45 acres to be developed into 124,000 sq ft of warehouse in N. Las Vegas, NV.  Borrower Robert Russell and USA Investment Partners.  A third party has purchased most of the loan through buy out of original lenders.

CORNMAN TOLTEC

(4/30/08)

1st TD on 160 acres in Casa Grande, AZ adjacent to Robson Ranch. Borrowers are USA Investment Partners and Unlimited Holdings. Original loan amount $6,550,000. A Request for Consent to a discounted payoff of $6,750,000 was approved by 100% of the Direct Lenders and Compass as of 1/25/08. The payment by the Borrower was to be paid in 2/08 but did not happen. Compass has foreclosed on the property 3/07/08 and listed it for sale with Nate Nathan & Assoc. and is pursuing the corporate guaranty.

DEL VALLE – LIVINGSTON

(5/8/08)

1st TD in Livingston, CA on 143.6 acres with 38.2 acres zoned for medium density residential. Original loan amount $19,250,000. Compass most likely will be initiating foreclosure on the property if Scott Meyers the borrower is unable to perform. Compass’s CA counsel has a conflict of interest with respect to this loan. Compass has been provided with names of alternative counsel and intends to pursue foreclosure, file a lawsuit against the guarantors, and handle other legal matters. Currently the property is valued at agriculture, land values, approximately $10K- $30K per acre.

EAGLE MEADOWS

(5/8/08)

1st TD on approximately 479 acres in Merced County, CA. Compass has been attempting a foreclosure on this asset since early 2008. Because of the title defect, the trustee under the deed of trust was unwilling to issue a trustee’s sale guarantee (“TSG”) in connection with a non-judicial foreclosure. Compass made claim to Chicago Title Company under the lender’s policy previously issued to USACM at the time the loan was originated. Chicago Title has recently issued a TSG to Compass. Counsel for Compass is reviewing the TSG and if it is acceptable, Compass will proceed with a non-judicial foreclosure.

FIESTA – MURRIETA

(5/8/08)

FIESTA – STONERIDGE

(4/5/08)

1st TD in Riverside County just east of Perris, CA. Fiesta Development and USA Investment Partners are the borrowers. Original loan amount $10,000,000. NOD filed and foreclosure slated for December 5 was stayed due to a Chapter 11 BK filing by the borrower. Compass completed the foreclosure on the asset 3/11/08 and now holds the asset in an SPE for benefit of the Direct Lenders and is being listed with CBRE & O’Donnel Atkins for marketing of the asset.

6/3/08

A Request for Consent to sell the Fiesta Stoneridge collateral for $18,000,000 to Avanti Properties Group was sent to the Direct Lenders 5/30/08.

FIESTA OAK VALLEY

(5/8/08)

1st TD on 1,540 acres in Calimesa, CA. Original loan amount $20,500,000. Borrower is Fiesta Development and USA Investment Partners. The property is in two counties, Riverside and San Bernardino. Approximately 3 months ago the borrower filed a petition for relief  under the Bankruptcy Code. The filing occurred approximately one week prior to the date scheduled for a foreclosure sale under the deed of trust. Compass retained bankruptcy counsel and obtained stay of relief in the bankruptcy case on April 16, 2008. This was by way of stipulation (as opposed to a trail). Compass is awaiting the results of its Phase l environmental report and working with First American Title Company on the form of owner’s policy of title insurance to be issued in connection with the foreclosure sale. Compass will shortly be seeking consent from the direct lenders to foreclose in the name of a SPE (special purpose entity) in order to facilitate credit bidding at the foreclosure sale, the issuance of a title policy post-foreclosure, and the marketability of title post foreclosure.

FOX HILLS 216

(6/3/08)

1st TD on approximately 987 acres of residential land in Merced County, CA. Kent Hoggan is the principal of the borrowers. Foreclose date for Fox Hills was scheduled for December 28, 2007 Kent Hoggan caused the borrowers to file for Chapter 11 BK protection to stay the foreclosure. Following dismissal of the borrowers’ bankruptcy cases, Compass was successful in completing the foreclosure of Fox Hills the week of 2/25/08 and now holds the asset for benefit of the Direct Lenders.

GRAMERCY CONDOMINIIUMS

(4/30/08)

1st TD Houston, TX – Tracy Suttles is the controlling entity. Two buildings to be sold as condos, 224 units, first building $100% complete second building 90% complete. Original loan balance $34,885,000. Foreclosure has been in place for months, Suttles placed the asset in Chapter 11. Compass has reached a global Settlement Agreement with the receiver for the Suttles assets to which the Borrower consented to lifting the automatic stay and consent to Compass’ foreclosure. Additionally, the Borrower withdrew, with prejudice, its objection to the Lender Claim and release claims against Compass and the Direct Lenders related to the Gramercy Loan, including any claims asserted in the Borrower’s objection to the Lender Claim and any claims for lender liability. Compass has completed the foreclosure 4/1/08 and now holds the asset for benefit of the Lenders. A property manager is in place working to stabilize the property, insurance has been paid and a listing agreement has been signed with CBRE. Compass is analyzing the option of either selling the asset “AS- IS” or after stabilization.

HARBOR GEORGETOWN

(4/18/08)

1st TD on 6.51 acres of land and 83,000 sq ft of retail and office space in Ann Arbor, MI. Craig Schubiner is the borrower. Original loan amount $8,800,000. Borrower has been cooperative and working towards potential solutions. Compass/Windemere Special Assets has sent a Request for Consent to a Discounted Payoff to Direct Lenders in the loan as of 3/7/08 which was Not consented to by 100% of the Direct Lenders. Request for Consent dated 4/7/08 has been approved by the majority of Direct Lenders as of 4/14/08, now awaiting the borrower to perform by 6/30/08.

HFA CLEARLAKE

(3/1/08)

1st Mortgage on 11 acres of land including 180 unit apartment building in West Palm Beach, FL. Homes for America Holding is the borrower. Original loan amount $16,050,000.  The project was slated for condos which had significant presales that did not come to fruition. Negotiations with borrower have been ongoing, but to date have not produced viable loan resolution. Compass will proceed to foreclose on the asset for benefit of the Direct Lenders. The condo market in FL continues to degrade.

HUNTSVILLE

(3/28/08)

1st TD on 38 acres of land in Huntsville, TX. Original loan amount $13,000,000. Additional collateral was lost in foreclosure. Compass has foreclosed on the property 11/6/07 and is exploring potential buyers and options including a sale to convenience store operators, gas stations, fast food. Compass is receiving formal offers at this time and is looking to maximize the sales price with potential buyers. It is anticipated that a Request for Consent will be going out shortly to the Direct Lenders.

LAKE HELEN PARTNERS

(4/5/08)

1st Mortgage on 6 pieces of property in Lake Helen, FL. The combined acreage is approximately 73 acres plus an additional 36 lots. In addition there WAS a First Mortgage on 5,500 sq. ft of commercial space in St. Augustine, FL called the Lyon Building. Just prior to the USA BK they released the commercial collateral back to the borrower. Compass has filed the NOD and is currently foreclosing on the properties and fighting the borrower, who is contesting the foreclosure. Property taxes were delinquent and Compass has redeemed the taxes, DL’s will receive a Request for $ to pay for the Servicer Advance shortly. Recovery from this asset will come from a judicial foreclosure and sale of the property. Judicial foreclosures require additional time.

(5/20/08)

The following is an update on the status of Compass Financial Partners LLC’s (together with its licensed subservicers and affiliates, “Compass”) efforts to collect amounts due and owing on the Lake Helen loan.

As set forth in prior reports to Direct Lenders in the Lake Helen loan, Compass was compelled to retain counsel on behalf of the Direct Lenders and initiate the foreclosure process in light of the borrower’s and guarantor’s inabilities to meet their contractual obligations under the governing loan documents.  Unlike foreclosures in Texas and California, foreclosure in Florida must proceed on a “judicial” basis (i.e., in the court system).  As expected, the borrower challenged Compass’s efforts to foreclose, and asserted various defenses to its obligation to remit payment to the Direct Lenders.  On April 8, 2008, Compass prevailed on a Motion for Summary Judgment, defeating the borrower’s defenses.  At the same hearing, the Direct Lenders and Compass were awarded a Final Judgment of Foreclosure in the amount was $5,295,520.00.

At the foreclosure sale conducted on May 8, 2008, , Compass submitted a credit bid in accordance with the Preliminary Injunction Order entered by the U.S. District Court for the District of Nevada on behalf of the holders of Bid Interests in the nominal amount of $100.00.  There have been no objections to the sale, and issuance of a Certificate of Title is imminent.

The next step is to seek a deficiency judgment against the borrower, which will also constitute a final monetary judgment against the guarantor.  Under Florida law, the amount of a deficiency judgment is usually be the difference between the final judgment amount and the property’s fair market value.
The guarantor of the Lake Helen loan is Valerie Kahn.  While Kahn lists substantial assets on her financial statement, it has been informally represented to Compass that her guaranty is “uncollectible” because she carries many millions of dollars of tax liabilities.  Collection in general against Florida residents – often referred to as a “debtor’s haven” – can be challenging.  One major characteristic is that residential homes are usually free from exposure to judgment claims.  Compass anticipates that the pursuit of Kahn’s guaranty could be trying.  It is difficult for Compass to predict the costs that will be associated with pursuing Kahn’s guaranty.  While the collection efforts could be simple (perhaps leading to a reasonably quick settlement), the pursuit could evolve into full-blown litigation (which could cost the Direct Lenders in excess of $300,000).  Compass intends to take preliminary steps in order to ascertain the degree of difficultly in collecting upon Kahn’s guaranty, and will keep Direct Lenders’ apprised in this regard.

MARGARITA ANNEX

(5/8/08)

(John & Carol King) – 1st TD on approximately 99.5 acres in San Luis Obispo, CA. Original loan amount $12,000,000. John and Carol King are the borrower. The property was under contract to be sold, sale did not consummate and became VERY litigious.  Compass is conducting a due diligence review of the value of the property which serves as collateral for the loan, and also the value of the borrower’s other assets, in order to make an informed decision as to whether to pursue judicial or non-judicial foreclosure. In this loan, the guarantors are also the borrowers. This prevents Compass from non-judicially foreclosing while pursuing the guarantors for the deficiency. This is so because in CA one cannot guarantee one’s own debt (this is known as a “sham guaranty” when it occurs). If Compass completes a non-judicial foreclosure, it will not be able to seek any deficiency from the borrower/guarantor. To the extent the borrower/guarantor has significant free assets, Compass may decide to proceed by way of judicial foreclosure, in order to obtain a deficiency claim.

6/11/08

The Borrower owns 27 acres of land (the "Property") in San Luis Obispo County.  In February 2003 the Borrower entered into a purchase and sale agreement (the "Agreement") with Midland Pacific Building Corporation ("Midland").  The parties agreed to go forward with their deal only if the City of San Luis Obispo (the "City") approved a plan that substantially conformed with a draft plan that was attached to the Agreement.  The Borrower, in seeking to comply with the City's current land use requirements, submitted an application for plans that contained a number of "affordable" homes in the package.  Midland claimed this plan was at odds with the plan attached to the Agreement and sued the Borrower for breach of contract.  After placing several calls with attorneys for the Borrower over a period of several weeks, Compass's attorneys have recently obtained copies of the most recent relevant papers in the Midland litigation and are reviewing them.

A primary concern with respect to the Agreement is that it appears to have priority over Compass's deed of trust.  A memorandum of the Agreement was recorded prior in time to Compass's deed of trust, and the preliminary title report that is referred to in the loan agreement lists the Agreement as a permitted exception.  As a result, were Compass to institute nonjudicial foreclosure proceedings, it would not be able to wipe out this senior lien.  This would affect the marketability of the Property in many ways.  Perhaps most importantly, most lenders who might be interested in providing take-out financing to the Borrower would want Midland to subordinate its Agreement to the lien of the new lender, which Midland would not likely be willing to do.  Consequently, it is questionable whether foreclosure is beneficial and it will be very difficult to bring new money in to refinance the property until this dispute over the Agreement is resolved.

With a view towards resolving the dispute over the Agreement and working out the loan, Compass's attorneys have placed several calls with the attorneys for the Borrower and have arranged for Compass to participate in a three way call with the Borrower and Midland in hopes of reaching a resolution.

6/10/08

In prior updates Compass reported to you regarding a dispute between the Borrower and Midland Pacific Building Corporation ("Midland"). Compass's attorneys have followed up with counsel for the Borrower and have recently learned that Midland has asked to take some discovery prior to settlement discussions. The Borrower's responses to discovery are due at the end of June 2008. Compass is hopeful that the settlement discussions between the parties will proceed in early July, with Compass involved.

MARLTON SQUARE

(5/8/08)

1st TD on 22 acres of land in Los Angeles, CA for mixed use development. Borrower is Chris Hammond. Original loan amount $31,000,000.  In spite of several alleged pay off indications from the borrower none have come to fruition, the borrower has failed to deliver. Compass filed a notice of default under the Deed of Trust on December 12, 2007. This is the first step in the non-judicial foreclosure process. A notice of sale set May 6, 2008 as the date of the foreclosure sale. On May 1,2008, Compass received notice that an alleged junior lien holder intended to file a complaint and seek a temporary restraining order against the trustee scheduled to conduct the foreclosure sale. Compass investigated the merits of the junior lien holders claims. Following the investigation, Compass’s counsel attended the TRO hearing on May 5, 2008 before the Los Angeles Superior Court. At the hearing the Court denied the junior lien holder’s application for the TRO. A recent title report on the property has raised some issues that merit further investigation. As a result, Compass has decided to temporarily postpone the foreclosure sale. Lawsuits are currently pending against the guarantors on the loan. Click here for LA Times article of 4/28/08

MOUNTAIN HOUSE

(3/1/08)

1st TD on 34 acres of residential property in Tracy, CA. Original loan amount $16,800,000. Michael Clevenger and William Zenklusen are the guarantees on the loan. There is additional collateral for the loan in a subordinated position on 135 acres of mixed use property. The 1st lien holder on the additional property has issued a default and is proceeding to foreclose on the 135 acre piece, which will wipe out the subordinated collateral. Compass is proceeding with the default and foreclosure of the residential piece. The borrower filed Chapter 11 BK late February to stay the foreclosures.

6/10/08

Compass is monitoring the chapter 11 BK case and participating in the Chapter 11 process.

OAK SHORES II

(5/8/08)

(John & Carol King) – 1st TD on 400 acres of land on Lake Nacimiento in San Luis Opispo, CA. Original loan amount $15,150,000. John & Carol King the borrower. There was a $3,000,000 principal pay down paid by the borrower which USA Capital never returned to the lenders, this principal was diverted.   Since the borrower is the same as the guarantor Compass cannot go after the property AND the guaranty. Compass is conducting a due diligence review of the value of the property which serves as collateral for the loan, and also the value of the borrower’s other assets, in order to make an informed decision as to whether to pursue judicial or non-judicial foreclosure. To the extent the borrower/guarantor has significant free assets, Compass may decide to proceed by way of a judicial foreclosure, in order to obtain a deficiency claim.

OCEAN ATLANTIC

(4/30/08)

1st TD on 127.18 acres in Yorkville, IL. Original loan amount $9,425,000. Compass has been working with the borrower on potential resolutions. Recently the borrower had submitted a potential discounted payoff amount of $8.1MM but to date has not been able to substantiate the offer and has become non-responsive. Compass has engaged counsel to pursue the foreclosure on the asset.

PALM HARBOR ONE

(4/18/08)

1st Mortgage on 20 acres and two apartment buildings, 432 units converted to condos for sale. Borrower is Joseph Lily. Original loan amount $29,000,000. The borrower initially was making significant efforts to perform but was stalled by a very aggressive subordinated debt holder. The borrower has filed for Chapter 11 BK, along with significant title issues yet to be resolved. The property still requires significant improvements. There have been small principal pay downs previously to the lenders. Compass has been successful in getting relief from stay and is analyzing whether it makes more sense to foreclose or sell the property through a BK 363 sale.

(6/3/08)

Some Direct Lenders have received a notice issued by the debtor-borrower, Palm Harbor One LLC (the "Debtor") of a claims bar date in the Debtor's bankruptcy case. The claims bar date notice states that (with limited exceptions) every entity that holds a claim against the Debtor that arose prior to August 16, 2007 (the "Petition Date") must file a "proof of claim" so as to be received on or before June 16, 2008 by the Bankruptcy Court for the District of Massachusetts (the "Court"), or else be forever barred from asserting such claim. The notice further states that an entity should not file a proof of claim if it does not have a claim against the Debtor, and that receipt of a notice does not mean that the entity has a claim against the Debtor or that the Debtor believes such entity has a claim. Compass has received inquiries from Direct Lenders as to whether they should file proofs of claim in the Debtor's case in response to this notice. We believe that the answer to that question is no, based on the following analysis.

Pursuant to the Stipulation of Settlement entered into by and between Compass, the Debtor and various other parties by order of the Court dated March 25, 2008 (the "Stipulation"), at §§ 4.2-4.3, Compass and the Direct Lenders waived and released all claims, counterclaims, demands and causes of action against the Debtor excluding only the following: (i) claims against Joseph D. Lilly, (ii) a subordinated general unsecured non-priority claim against the Debtor (the "Junior Claim"), and (iii) claims for breach of the Stipulation (if any). The Stipulation, at § 4.4, gives Compass the right to file the Junior Claim on the Direct Lenders' behalf, but the time for Compass to file the Junior Claim is tolled until and unless Compass is notified by the Official Committee of Unsecured Creditors of Palm Harbor One LLC that all allowed unsecured nonpriority claims are paid in full or contemplated to be paid in full. A subsequent order of the Court, entered on May 1, 2008 (after the issuance of the bar date notice) in response to a joint request by Compass and the Debtor, clarifies and reaffirms that the time for Compass to file the Junior Claim on behalf of the Direct Lenders is tolled as set forth in the Stipulation.

Notably, claims against Joseph D. Lilly need not and should not be filed pursuant to the bar date notice, which pertains only to claims against the bankrupt Debtor. Likewise, claims (if any) for breach of the Stipulation need not and should not be filed pursuant to the notice, which by its terms pertains only to claims arising prior to the Petition Date. By definition, claims for breach of the Stipulation could arise only on or after March 25, 2008.

6/20/08

Request for Consent was sent to Direct Lenders the week of 6/16/08 to sell the asset through a 363 BK sale and auction. The stalking horse bid is $15,975,000, the auction will take place July 9, 2008 as scheduled by the Bankruptcy Court. The Request deadline for response is 6/27/08.

SHAMROCK TOWER LP

(4/28/08)

1st TD Houston, TX – The borrower was an entity controlled by Tracy Suttles. 55,195 ft of land downtown Houston. Original loan $10,500,000. Property has been foreclosed and Compass holds the asset for benefit of the Direct Lenders. Suttles had filed claims against Compass on the foreclosure. After approval of the global Settlement Agreement with the Suttles receiver in regards to Shamrock, Compass consummated the sale of the asset for $15,319,235.00 on 3/12/08. The net amount due Direct Lenders/Compass is $14,139,557.81 after Taxes and Purchase Price Deductions. The distribution of proceeds to non LLC members was sent the week of 3/21/08. LLC member distributions sent 4/23/08.

TEN-NINTY

(3/28/08)

1st TD on 200 acres in Fontana, CA, Richard Ashby and Larry Redman are the borrowers. This collateral is primarily designated as open space. Original loan amount $4,150,000. Borrower alleges the loan proceeds went to USA Capital for participation in an unrelated project, no documentation produced on this to date. Compass foreclosed on the asset the week of 2/14/08 and now holds the asset for benefit of the Direct Lenders and is aggressively marketing the sale of the asset through O’Donnell Atkins.

THE GARDENS, LLC & THE GARDENS TIMESHARE

(3/18/08)

3 separate loans on acreage in Orlando, FL that are 1st mortgages along with subordinated debt on the Parliament House Resort a successful alternative life style resort. Original loan amounts of $5,800,000 and $2,425,000. The loans are complicated, cross collateralized and difficult.  Mediation with the borrower, Compass, judge and several DL’s were conducted 12/19/07. The mediation was successful, subject to investor approval. $4MM up front, $5K/unit from remaining 300 units from phase l, $1500/unit from new 2496 units, and $1K from 750 units in the 3rd bldg- all totaling $10MM to be paid w/in 3 years. In return, The Parliament House and guaranty release and all the remaining collateral will be subordinated. Request for Consent to a proposed payoff went out 2/11/08. As of 2/22/08 The Request for Consent for the Gardens loans has been REJECTED by the Direct Lenders. Compass will most likely move with foreclosure on the asset as they have no other option.