We are very excited about this property. We feel there is tremendous upside potential in its residual value, and it generates handsome cash on cash returns, currently at 9.90%. We have already extended two of our largest tenants' leases at Cherry Point Mall and our Leasing and Management Team has begun working with two others in hopes of early lease extensions.

For the­ majority of Americans, your home is your greatest financial investment.

In turn, your mortgage lender is potentially one of your greatest financial partners. Choose wisely and understand the shared responsibility of this partnership.

These simple, yet powerful statements are truly the lessons learned with regard to the recent subprime lending situation. You’ll notice the word “partner” plays prominently in the lesson. When any upheaval strikes it’s easy to point fingers when, in reality, all members of the partnership play a role.

In simple terms, Alt-A and Sub-Prime mortgages, for several years, looked like a sure thing to investors and borrowers alike. These higher risk mortgages lost their luster when, in certain parts of the country, home values fell dramatically and money owed was greater than the “value” of the property. Add that to rising interest rates and borrowers with adjustable interest rate mortgages no longer could afford their minimum monthly payments. (According to the Wall Street Journal, these creative subprime loans accounted for 47% of all mortgage loans last year. At the start of the decade they were less than 2%.) With borrowers’ cash flow strapped, foreclosures followed. The foreclosure rate so far in 2007 is 1/557 households compared to 1/1100 in 2006.

The metro area of Merced, CA has been hit the hardest as 1/68 homes have seen foreclosure. Right behind the home foreclosures are the mortgage companies. As reported in the press, many fell on hard financial times. Since December 2006, over 170 major US lending operations have closed their doors. Challenges to the borrower do impact the mortgage lending institution. That’s why a strong “partnership”, mentioned earlier, is critical for borrower and lender. Caution remains as the five-year ARMs, nicknamed “exploding ARMs” signed during the refinance and first home mortgage frenzy of 2003 will reset in 2008/2009.

About 80% of subprime mortgages are adjustable rate mortgages. The foreclosure trend is predicted to increase, not slow.

As a community bank, McFarland State Bank has always looked out for our customers — regardless of the competition’s lending offerings. We provide our customers with the best products and customer focused service as well. That is the foundation of a strong partnership. We’re proud that through the years, even during unstable economic conditions, this strategy has successfully served McFarland State Bank and its customers. We are that trusted partner many seek and our customers have enjoyed.

For investors, the first and last concern in a1031 exchange transaction should be security and integrity. "Are my funds secure?" is the most important question any investor can pose to a Qualified Intermediary (QI) handling a 1031 exchange. Recent events by a handful of disreputable QIs have led investors and real estate professionals to speculate about what is the true litmus test for ‘security of funds' when it comes to a 1031exchange. In turn, a few QIs and pundits have generated a rash of propaganda and half-truths in response.

Why Use A QI?
At the heart of the matter is the reason QIs were created in the first place. Safe-harbor rules broadcast by Congress with respect to 1031 exchanges prohibit an investor from owning or having access to funds generated from the first leg of the exchange (the sale of the Relinquished Property). Instead, the investor must rely on a "Qualified Intermediary" to safeguard the funds generated by the sale of the property. Additionally, IRS Tax Code Section 1031 restricts the investor from using his or her attorney, CPA, agent, realtor or any "related party" to act as QI and hold the investor's funds in trust. Consequently, an investor must go to an independent third party QI. The investor, then, must entrust the proceeds from the sale of an investment property to a QI, relying that those funds will remain intact throughout the 1031 exchange (up to 180 days) until the new investment property is purchased.

Because the Qualified Intermediary industry is virtually unregulated in 48 of the 50 states, anyone can hang a shingle and call themselves a Qualified Intermediary, no questions asked. As a result, in the past five to 10 years, some less-than-reputable parties entered the QI industry. Mismanagement and/or malfeasance resulted in a handful of high-profile bankruptcies and restructurings by such QIs. Adding insult to injury, investors whose QI failed were faced with a double whammy--in addition to losing the exchange funds, each investor was still liable for taxes on the gain from the sale of the Relinquished Property because the second leg of the transaction (the purchase of the Replacement Property) was never completed.

How To Know If Funds Are Secure.
How is an investor to know that their funds are truly secure during a 1031 exchange? Currently, there are a few popular methods used by QIs to assure clients that funds are secure. Each has its advantages and drawbacks. The methods discussed below range from "segregated accounts" at the lowest end of the protection spectrum to "bonding and insurance", which provide the greatest protection to the investor.