SEQUOIA REAL ESTATE PARTNERS

2011 Pacific Value Opportunities Fund I Update

The fourth quarter was a busy one for Pacific Value Opportunities Fund I, as we acquired two additional assets: a 24-unit apartment building located in the Koreatown area of Los Angeles, and another singlefamily home in South Los Angeles. The Fund now owns two apartment buildings (85 units total, including one non-conforming unit) and four homes. Of the original Fund equity, we have invested approximately 95% to fund the acquisitions and various capital improvements made to the acquired assets. As discussed in more detail below, we anticipate monetizing one or more Fund assets in the next 12 to 18 months. Details of the Fund assets are as follows: APARTMENT ASSETS 318 S. Commonwealth Avenue, Los Angeles 90020 Three stories, 24 units (18 singles, 6, one bedroom, one bath) Purchase price: $1.329 million ($53K per unit) Acquired November 2011 Year built: 1927 (rent-controlled) Construction: Brick

To fund the building purchase, we secured $1.09 million of 10-year fixed rate financing from Fannie Mae at a rate of 4.74%. The overall strategy is to hire a new on-site manager, renovate the common areas (lobby, hallways, laundry room) and exterior (paint and landscape), renovate unit interiors, and increase rents as tenants vacate. We have budgeted approximately $40-50K for the proposed renovations and unit turns. The building is rent-controlled, so we will actively manage leases and promote renter turn where feasible. We believe we acquired the asset at a very favorable price, and plan to reposition the property for a sale in either 2012 or 2013. 245 N. Alvarado Avenue, Los Angeles 90026 Three stories, 60 units (36, one bedroom, one bathroom; 19, two bed- two bath; five two bed + loft, one bath; and, one non-conforming) Purchase price: $7.525 million ($125K/unit) Renovation costs to date: approximately $400,000 Acquired November 2010 Year built: 1990 (not rent-controlled) Construction: wood-frame stucco

10990 Wilshire Blvd

Suite 420

Los Angeles

CA

90024

310 312 4807

SEQUOIA REAL ESTATE PARTNERS

We have essentially completed all of the common area and exterior renovation work at the 245 property, which was substantial. Many of you visited the property both "before and after" and can testify to the extensive work that was done. We have also completed upgrades on 23 of the units, have nine more unit renovations in progress, and have nearly finished work on a new assistant manager's unit (the nonconforming unit) and added a small gym on the building's ground floor. The building is now 90% occupied, with all rent-ready units rented. We will likely market the building for sale sometime towards the end of the first quarter of 2012. Depending on what interest received, we may decide to sell the building, though we may also decide to continue to own and operate the asset, with an eye towards commencing cash distributions. SINGLE-FAMILY RESIDENCES/OTHER ASSETS 4161 Mandalay Drive, Los Angeles 90063 Single-family home Four bedrooms, three bathrooms Acquired March 2011 Purchase price of $212,000 Renovation costs = approximately $45,000 Currently leased for $2,250 per month Estimated fair market value = $300,000

908 Frigate Avenue, Wilmington 90744 Duplex Six bedrooms, four bathrooms Acquired August 2011 Purchase price of $220,000 Renovation costs = approximately $11,000 Currently leased for $2,600 per month Estimated fair market value = $320,000

3118 Palo Verde Avenue, Long Beach 90808 Single-family home Three bedrooms, two bathrooms Acquired September 2011 Purchase price of $307,000 Renovation costs = approximately $3,000 Currently leased for $2,200 per month Estimated fair market value = $380,000

10990 Wilshire Blvd

Suite 420

Los Angeles

CA

90024

310 312 4807

SEQUOIA REAL ESTATE PARTNERS

3137 W. 108th Street, Los Angeles 90303

Single-family home Two-bedrooms, one bathroom Acquired November 2011 Purchas e price of $155,000 Renovation costs are to be determined, but likely to range from $9,000 - $60,000. We are contemplating adding on another one or two bedrooms and bathroom, and are soliciting bids for such work. Estimated fair market value = $220,000 - $320,000 (pending upgrades)

We are considering several alternatives for the four homes. They are all currently generating positive cash flows and cash returns on equity of between six and 10 percent. It is likely that we will market one or more of the homes for sale in 2012. Overall, we continue to be pleased with the progress that 2011 has brought Fund I both in terms of acquisitions and repositioning of assets. While the global economic picture remains decidedly uncertain and volatile - conditions that will likely continue well into 2012 until there is greater clarity into the situation in Europe, China (and its ability to steer itself to a "soft landing"), the toxic political climate here at home, and the impact all of this (and more) will have on GDP both here and globally - the rental housing market continues to perform very well for all of the reasons we have laid out in past missives. Rising rents, declining home ownership, dropping unemployment levels, and the declining cost of core inputs upon which we rely (e.g., labor, building materials, and capital) have launched significant interest in multifamily assets. Not surprisingly, many are now jumping on the multifamily bandwagon. A recent Wall Street Journal article (December 21st) noted that large commercial developers like Boston Properties, Mack-Cali Realty, SL Green, and Macerich have all either "acquired, completed, or broken ground on apartment buildings in recent months, or plan to do so next year". All have traditionally focused exclusively on office and/or retail projects. Data released by the Commerce Department a day earlier indicated that November multifamily construction starts increased 25.3% from the previous month. For experienced players like Sequoia, we believe that favorable acquisitions will remain available, while the markets provide significant opportunities to harvest our Fund I assets. Meanwhile, we will stick to our knitting, seeking out value-add opportunities (as opposed to higher-risk development and speculation), focusing on acquiring assets in need of significant repositioning and hands-on property management, and concentrating on assets overlooked by the larger institutional players and the Johnny Come Latelys. We look forward to reporting additional progress in upcoming reports and news surrounding the launch of our second fund sometime in early 2012. All of us at Sequoia Real Estate Partners and the Pacific Value Opportunity Fund I would like to wish you and yours a very healthy, happy, and prosperous holiday season and New Year.

10990 Wilshire Blvd

Suite 420

Los Angeles

CA

90024

310 312 4807