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|                                                    |                                                                                    | PAGE   |
|---------------------------------------------------------|-----------------------------------------------------------------------------------------|--------|
|                                                    |                                                                                    |   |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 3                                                                                       |
|                                                    |                                                                                    |   |
| FINANCIAL STATEMENTS:                                   |                                                                                    |
|                                                    |                                                                                    |   |
|                                                    | BALANCE SHEET                                                                           | 4      |
|                                                    |                                                                                    |   |
|                                                    | STATEMENT OF INCOME, EXPENSES AND CHANGES IN PARTNERS' CAPITAL                          | 6      |
|                                                    |                                                                                    |   |
|                                                    | STATEMENT OF CASH FLOWS                                                                 | 7      |
|                                                    |                                                                                    |   |
|                                                    | NOTES TO FINANCIAL STATEMENTS                                                           | 8      |
|                                                    |                                                                                    |   |
| SUPPLEMENTARY INFORMATION:                              |                                                                                    |
|                                                    |                                                                                    |   |
|                                                    | INDEPENDENT AUDITOR'S REPORT ON INFORMATION ACCOMPANYING THE BASIC FINANCIAL STATEMENTS | 12     |
|                                                    |                                                                                    |   |
|                                                    | ANALYSIS OF REPLACEMENT RESERVE ACCOUNT                                                 | 13     |
|                                                    |                                                                                    |   |
|                                                    | CALCULATION OF CASH DISTRIBUTION                                                        | 14     |

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| ASSETS                                                           |   |   |      |
|------------------------------------------------------------------|--------|--------|-----------|
|                                                             |   |   |      |   |
| Current Assets                                                   |   |   |      |   |
|                                                             |   |   |      |   |
| Cash and equivalents                                             |   | $      | 84,263    |   |
| Accounts receivable                                              |   |   | 2,041     |   |
| Prepaid expenses                                                 |   |   | 2,962     |   |
|                                                             |   |   |      |   |
| Total Current Assets                                             |   |   | 89,266    |   |
|                                                             |   |   |      |   |
| Restricted Reserves                                              |   |   |      |   |
| Security Deposits                                                |   |   | 70,404    |   |
|                                                             |   |   |      |   |
| Land, Structures and Equipment, Net of                           |   |   |      |   |
| Accumulated Depreciation of $941,823                             |   |   | 1,223,868 |   |
|                                                             |   |   |      |   |
| Organizational Costs, Net of Accumulated Amortization of $24,000 |   |   | 2,918     |   |

| Total Assets |   | $ | 1,386,456 |   |
|--------------|--------|---|-----------|--------|

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| LIABILITIES AND PARTNERS' CAPITAL       |   |   |      |
|-----------------------------------------|--------|--------|-----------|
|                                    |   |   |      |
| Current Liabilities                     |   |   |      |
|                                    |   |   |      |   |
| Accounts payable - other                |   | $      | 7,217     |   |
| Accounts payable - related party        |   |   | 1,206     |   |
| Security deposits payable               |   |   | 9,246     |   |
| Current portion of long-term debt       |   |   | 47,550    |   |
|                                    |   |   |      |   |
| Total Current Liabilities               |   |   | 65,219    |   |
|                                    |   |   |      |   |
| Long-term Debt                          |   |   | 370,122   |   |
|                                    |   |   |      |   |
| Total Liabilities                       |   |   | 435,341   |   |
|                                    |   |   |      |   |
| Partners' Capital                       |   |   |      |   |
| General Partner                         |   |   | 43,120    |   |
| Limited Partner                         |   |   | 907,995   |   |
|                                    |   |   |      |   |
| Total Partners' Capital                 |   |   | 951,115   |   |
|                                    |   |   |      |   |
| Total Liabilities and Partners' Capital |   | $      | 1,386,456 |   |

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| Operating Income                                                          |   |   |    |
|---------------------------------------------------------------------------|--------|--------|---------|
|     Rental income                                     |   | $      | 237,507 |   |
|     Tenant charges                                    |   |   | 1,183   |   |
|     Other                                             |   |   | 2,368   |   |
|                                                                      |   |   |    |   |
|        Total Operating Income          |   |   | 241,058 |   |
|                                                                      |   |   |    |   |
| Operating Expenses                                                        |   |   |    |   |
|                                                                      |   |   |    |   |
|     Administration                                    |   |   | 23,660  |   |
|     Insurance and taxes                               |   |   | 7,953   |   |
|     Maintenance                                       |   |   | 30,610  |   |
|     Utilities                                         |   |   | 25,694  |   |
|     Depreciation and amortization                     |   |   | 69,618  |   |
|                                                                      |   |   |    |   |
|        Total Operating Expenses        |   |   | 157,535 |   |
|                                                                      |   |   |    |   |
| Net Income from Operations                                                |   |   | 83,523  |   |
|                                                                      |   |   |    |   |
| Other Income and (Expenses)                                               |   |   |    |   |
|     Interest income                                   |   |   | 6,032   |   |
|     Interest expense                                  |   |   | (32,359 | ) |
|                                                                      |   |   |    |   |
|        Net Other Income and (Expenses) |   |   | (26,327 | ) |
|                                                                      |   |   |    |   |
|        Net Income                      |   |   | 57,196  |   |
|                                                                      |   |   |    |   |
| Beginning Partners' Capital                                               |   |   | 969,449 |   |
|                                                                      |   |   |    |   |
| Partner withdrawals                                                       |   |   | (75,530 | ) |
|                                                                      |   |   |    |   |
| Ending Partners' Capital                                                  |   | $      | 951,115 |   |

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| Cash flows from operating activities:                                                         |   |   |       |
|-----------------------------------------------------------------------------------------------|--------|--------|------------|
|   Net Income                                                                        |   | $      | 57,196     |   |
|   Adjustments to reconcile net income to net cash provided by operating activities: |   |   |       |   |
|     Depreciation and amortization                                         |   |   | 69,618     |   |
|     (Increase) decrease in accounts receivable                            |   |   | (1,947     | ) |
|     (Increase) decrease in prepaid expenses                               |   |   | 54         |   |
|     Increase (decrease) in accounts payable - other                       |   |   | 1,070      |   |
|     Increase (decrease) in accounts payable - related parties             |   |   |  (971 | ) |
|        Total adjustments                                   |   |   | 67,176     |   |
|   Net cash provided (used) by operating activities                                  |   |   | 124,912    |   |
|                                                                                          |   |   |       |   |
| Cash flows from investing activities:                                                         |   |   |       |   |
|     (Deposit) withdrawal reserve                                     |   |   | (4,800     | ) |
|     Purchases of capital assets                                           |   |   | (337       | ) |
|   Net cash provided (used) by investing activities                                  |   |   | (5,137     | ) |
|                                                                                          |   |   |       |   |
| Cash flows from financing activities:                                                         |   |   |       |   |
|     Capital withdrawals                                                   |   |   | (75,530    | ) |
|     Principal payments on long-term debt                                  |   |   | (44,139    | ) |
|   Net cash provided (used) by financing activities                                  |   |   | (119,669   | ) |
|                                                                                          |   |   |       |   |
| Net increase (decrease) in cash and equivalents                                               |   |   | 106        |   |
| Cash and equivalents, beginning of year                                                       |   |   | 84,157     |   |
|                                                                 |   |   |       |   |
| Cash and equivalents, end of year                                                        |   | $      | 84,263     |   |
|                                                                 |   |   |       |   |
| Supplemental disclosures of cash flow information:                                            |   |   |       |   |
| Cash paid during the year for:                                                                |   |   |       |   |
|     Interest Expense                                                      |   | $      | 32,359     |   |

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|      |   | Cost   |      |   | AccumulatedDepreciation |   |
|-----------|--------|--------|-----------|--------|-------------------------|--------|
| Land      |   | $      | 275,000   |   |                    | $      | -  |   |
| Building  |   |   | 1,868,634 |   |                    |   | 920,102 |   |
| Equipment |   |   | 22,057    |   |                    |   | 21,721 |   |
|      |   |   |      |   |                    |   |   |   |
| Total     |   | $      | 2,165,691 |   |                    | $      | 941,823 |   |

|               |   | Cost   |   |   | AccumulatedDepreciation |   |
|--------------------|--------|--------|--------|--------|-------------------------|--------|
|               |   |   |   |   |                    |   |   |   |
| Organization costs |   | $      | 26,918 |   |                    | $      | 24,000 |   |

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| Year ending December 31, |   |   |    |
|--------------------------|--------|--------|---------|
|                     |   |   |    |   |
| 2008                     |   | $      | 47,550  |   |
| 2009                     |   |   | 370,122 |   |
|                     |   |   |    |   |
| Total                    |   | $      | 417.672 |   |

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| Balance of replacement reserve account -  Beginning of Year              |   | $      | 56,358 |   |
|------------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                               |   |   |   |   |
| Contributions to account during the fiscal year  ended December 31, 2007 |   |   | 4,800  |   |
|                                                                               |   |   |   |   |
| Balance of replacement reserve account -  End of Year                    |   | $      | 61,158 |   |

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| Net Income for the year ended December 31, 2007                         |   | $      | 57,196  |   |
|-------------------------------------------------------------------------|--------|--------|---------|--------|
|                                                                    |   |   |    |   |
| Add: Depreciation expense                                               |   |   | 67,950  |   |
|                                                                    |   |   |    |   |
| Add: Amortization expense                                               |   |   | 1,667   |   |
|                                                                    |   |   |    |   |
| Deposits to Replacement Reserve Account                                 |   |   | (4,800  | )      |
|                                                                    |   |   |    |   |
| Debt Service (Mortgage Loan)                                            |   |   | (44,139 | )      |
|                                                                    |   |   |    |   |
| Adjusted cash available from operations through December 31, 2007       |   | $      | 77,874  |   |
|                                                                    |   |   |    |   |
| Net cash available for disbursement                                     |   | $      | 77,874  |   |
|                                                                    |   |   |    |   |
| Limited Partner Distribution = 75%                                      |   | $      | 58,406  |   |
|                                                                    |   |   |    |   |
| General Partner Distribution = 25%                                      |   |   | 19,468  |   |
|                                                                    |   |   |    |   |
| Total Partner Distributions for the fiscal year ended December 31, 2007 |   | $      | 77,874  |   |

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