Recent Business Highlights

-- Since commencing leasing activities for the recently completed 92-unit Union Lofts residential property in February, to date the company has signed 16 leases with an average term of 13.5 months at rental rates of $2.71 per square foot per month with concessions.

-- Closed seven loans during the first quarter with total loan proceeds of $81.0 million at an average interest rate of 5.54%. Six of these transactions were refinancing of existing loans and one was a new loan. Subsequent to the end of the first quarter, the company has refinanced two additional loans for a total of $24.3 million with an interest rate of 7.76%.

-- Rental income increased to $6.6 million, a 15.1% increase compared to the same period last year.

-- Completed the sale of one non-strategic property for a net gain of $6.9 million.

"The financial performance of our operating portfolio was in line with expectations," said Richard Meruelo, Chairman and Chief Executive Officer of MerueloMaddux. "During the first quarter, annualized cash lease revenue increased by a solid 5.9% compared to annualized lease revenue as of the prior quarter. In addition, I continue to be encouraged by strong early demand for our recently completed Union Lofts residential property, which has resulted in leases signed for a total of 16 units during the first ten weeks of leasing activity."

Mr. Meruelo concluded, "Enhancing our liquidity position remains a top priority. While the ongoing difficulties in the broader credit markets have made it difficult to secure large scale construction and permanent loans, similar to prior periods, we continue to have success in funding our business through the refinancing of current loans and in obtaining new loans on our properties. We will continue to monitor the credit markets and availability of capital and make adjustments to our development strategies as appropriate."

Financial and Operating Results

Results from operations described herein relate to the combined financial statements of the Company's predecessor business as well as those of the Company.

For the three months ended March 31, 2008, total revenue decreased 2.2% to $7.0 million compared to $7.2 million in the same period in 2007. The decrease was primarily due to lower interest income in the period. This was partially offset higher rental income in the most recent quarter, which increased 15% to $6.6 million, compared to rental income of $5.7 million in the same quarter last year. Total expenses in the first quarter of 2008 were $20.3 million, or 89.7% higher than total expenses of $10.7 million in the first quarter of 2007. Included in total expenses in the first quarter of 2008 is a $10.2 million impairment loss on real estate assets. There was no corresponding expense in the comparable period in 2007. Excluding the impairment loss on real estate assets, expenses were $10.1 million, or $0.6 million less than total expenses for the first quarter of 2007. The decrease is primarily due to lower interest expense resulting from the payoff of the CalPERS credit facility and other mortgage debt using proceeds from the Company's January 2007 initial public offering. The Company recorded a $6.9 million gain on sale of real estate in the first quarter of 2008. There was no corresponding gain in the comparable period in 2007. Net loss was $(4.0) million, or $(0.05) per basic and diluted share, for the three months ended March 31, 2008 compared to a net loss of $(3.5) million for the same period in 2007.

Company's Portfolio

As of March 31, 2007, the Company owns, leases with rights to purchase and has rights to acquire interests in 28 development and redevelopment projects and 27 projects that have been developed that are primarily located in or around the downtown area of Los Angeles. All of the projects in the portfolio are in Southern California.

Recent Leasing Activity

The Company completed or renewed a total of thirty five leases during the first quarter for a net total increase of 13,105 square feet of leased space. In addition, the Company leased building signage space to Van Wagner Communications and replaced the lessor of two of its commercial parking lots, significantly increasing those properties' rental income. The largest new lease was to Michael Distributors, Inc., who leased 5,000 square feet in the Barstow Produce Center property. Paola, Inc. leased 4,601 square feet and Super Fine-L LLC leased 3,000 square feet of space at the 2131 Humboldt Street property.

During the first quarter, annualized cash lease revenue increased by $1.3 million to $23.8 million, an increase of 5.9% compared to annualized lease revenue as of the prior quarter. On a GAAP basis, annualized lease revenue increased by $0.2 million to $24.2 million, an increase of 0.7% compared to the prior quarter.

Recent Financing Activity

During the first quarter the company closed seven secured, real property financing transactions with aggregate loan proceeds of $81.0 million at an average interest rate of 5.54%. Six of these transactions were refinancing transactions for existing commercial properties and one was a new loan. Subsequent to the end of the first quarter, the company refinanced one additional loan for a total of $24.3 million for an interest rate of 7.76%. -- Meruelo Maddux Properties, Inc.