Exhibit 10.7

RECORDING REQUESTED BY:
AND WHEN RECORDED MAIL TO:

La Jolla Bank, FSB
390 W. Valley Parkway
Escondido, CA 92025

Loan No. 1013023934

[Space above this line for Recorder’s use.]

LOAN ASSUMPTION AND SECURITY AGREEMENT,
AND NOTE MODIFICATION AGREEMENT

THIS AGREEMENT is entered into and dated for reference purposes as of, AUGUST 1, 2009, by and among LA JOLLA BANK, FSB, (“ Lender ”), and NETREIT, A CALIFORNIA CORPORATION (“ Purchaser ”), with reference to the following facts:

A.		Lender holds a loan (the “ Loan ”) evidenced by an Adjustable Rate Note dated MARCH 16, 2004, payable by MONTEREY PALMS SELF STORAGE, LLC.(the “ Original Borrower ”), to the order of Lender in the original principal amount of $5,200,000.00 (the “ Note ”) and a Change in Terms Agreement dated December 1, 2005. The Note is secured by, among other things, a Deed of Trust, dated MARCH 16, 2004, executed by the Original Borrower, as trustor, in favor of OLD REPUBLIC TITLE COMPANY, as trustee, for the benefit of Lender, as beneficiary, recorded in the Official Records of RIVERSIDE COUNTY, State Of CALIFORNIA, (the “ Official Records ”) on MARCH 25, 2004, as Document No. 2004-0208211 (the “ Deed of Trust ”) and a Modification of Deed of Trust dated December 1, 2005 and recorded on December 22, 2005 as Document No. 2005-1057223 in the official records of Riverside county, state of California.
B.		The Deed of Trust constitutes a first lien on the Original Borrower’s fee simple estate as more particularly described in Exhibit “A”. The Original Borrower’s right, title and interest in and to the land and the improvements located on the land, are collectively referred to in this Agreement as the “ Property ”.
C.		Concurrently with the recordation of this Agreement in the Official Records, Purchaser has acquired title to the Property from the Original Borrower. In connection therewith, Purchaser has requested that Lender consent to Purchaser’s assumption of the Loan. Lender is willing to permit Purchaser to assume the Loan on the terms and subject to the conditions contained in this Agreement.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Purchaser agree as follows:

1.		Assumption of Loan . Effective as of the date on which Purchaser acquires title to the Properly, which shall conclusively be deemed to have occurred no later than the date on which this Agreement is recorded in the Official Records, Purchaser hereby assumes and agrees to perform fully and when due each and every monetary and non-monetary obligation of the Original Borrower under the Note, the Deed of Trust and every other instrument, certificate, agreement and document that sets forth or secures any obligations of the Original Borrower relating to the Loan (collectively, the “ Loan Documents ”). Lender hereby consents to Purchaser’s assumption of the Loan.
2.		Assumption Fee . Concurrently with the recordation of this Agreement, Purchaser shall pay to Lender an assumption fee in the amount of $0.00. If Purchaser is acquiring the Real Property through an escrow (the “ Escrow ”), this paragraph constitutes Purchaser’s irrevocable instructions to the holder of the Escrow to remit such assumption fee to Lender upon the closing of the Escrow from the funds then held in the Escrow for Purchaser’s account.
3.		Purchaser’s Receipt of Loan Documents . Purchaser acknowledges having received a complete copy of each Loan Document, including all riders and exhibits thereto, each in the form executed and delivered by the Original Borrower.

4.		Lender’s Costs; Title Endorsement . Purchaser shall pay, immediately upon Lender’s written request, all out-of-pocket expenses incurred by Lender in connection with Purchaser’s assumption of the Loan, including the fees for recording this Agreement in the Official Records, the cost of obtaining a new Loan Policy of Title Insurance, or an ALTA No. 10, Policy Bring Down endorsement to Lender’s policy of title insurance insuring the continued validity and first lien priority of the Deed of Trust. If for any reason Lender’s title insurer is unwilling or unable to issue such ALTA No. 10, Policy Bring Down endorsement, then Lender, at its election, shall have the right, but not the obligation, to revoke Lender’s consent to Purchaser’s assumption of the Loan and to declare the Loan due and payable in full. Purchaser acknowledges that as a condition of issuing the ALTA No. 10 Policy Bring Down Form endorsement. Lender’s title insurer may require that the Original Borrower or Purchaser obtain and deliver to the title insurer for recordation a subordination agreement in form and content satisfactory to the title insurer, executed and acknowledged by each person or entity that holds or proposes to acquire any lien or security interest on or in the Property or any part thereof. Purchaser hereby agrees to obtain any and all such subordination agreements at no expense whatsoever to Lender, and to deliver a complete and correct copy of each subordination agreement to Lender concurrently with the Purchaser’s receipt thereof.
5.		Non-Recourse. Notwithstanding anything contained herein to the contrary, Lender by its acceptance hereof, hereby agrees that none of the partners of Borrower, individually, shall ever have any personal liability for the payment of the indebtedness evidenced hereby or for the performance of any covenant, condition or term of this Note or the Deed of Trust or any other instrument or other agreement existing as security for the payment of this Note. Such non-personal liability shall in no way affect or impair the rights of the holder hereof to realize upon the security thereof in the default, or levy execution of any money, judgement, deficiency, or otherwise against Borrower or any property of Borrower. Lender hereby agrees that at such time as a default shall occur, the sole remedies of the legal holder hereof, or the Lender, or the Trustee, or the Beneficiary under the Deed of Trust, shall be the foreclosure of the properly covered by the Deed of Trust or an action against Borrower or the assets of Borrower and Lender shall not be entitled to a personal or deficiency judgement against any partner.
6.		Original Borrower and Guarantor Released . Upon Purchaser’s satisfaction of all conditions and requirements of Lender to the this assumption, including, without limitation, the payment of all principal reductions, fees and expenses, the closing of this assumption, and the recordation of all agreements required to be recorded, this Agreement shall release the Original Borrower(s) and Guarantors from any of their respective liabilities under the Loan Documents and/or Guaranties.
7.		Costs of Suit . If any legal action, suit, or other proceeding is brought by either party to enforce any provision of this Agreement, to rescind or otherwise set aside or vacate this Agreement, or to remedy any breach or alleged breach of this Agreement, the party who obtains substantially the relief sought by it in such action, suit or proceeding shall be entitled to recover from the other party all costs and expenses of suit, including actual attorneys’ fees.
8.		No Novation . This Agreement shall not be construed as a novation, it being the intent of the parties that the Loan Documents shall remain in full force and effect and that the lien priority of the Deed of Trust relative to any other lien or encumbrance on the Property shall not in any way be affected by this Agreement.
9.		Notices . All notices and other communications required or permitted under this Agreement shall be in writing and shall be personally delivered or sent by first class United States mail, and if mailed, shall be deemed received on the third business day after deposit in the mail in the State of California, postage prepaid, addressed to Lender at 390 W. Valley Parkway, Escondido, California 92025, or to Purchaser at 1282 PACIFIC OAKS PLACE, ESCONDIDO, CA 92029. Notice of any change of either party’s address shall be given by written notice in the manner set forth in this paragraph.
10.		Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document.
11.		Further Actions . The parties shall execute such further documents and take such further actions as may be necessary to carry the provisions of this Agreement into effect.
12.		Construction of Agreement . Paragraph headings in this Agreement are included solely for ease of reference and shall not affect the construction of this Agreement. This Agreement shall be construed as if it had been prepared jointly by Lender and Purchaser. Unless otherwise indicated, all references to paragraphs are to paragraphs in this Agreement. Unless otherwise indicated, each exhibit referred to in this Agreement is an exhibit attached to this Agreement and is incorporated herein by reference. When used in this Agreement, the words “include”, “includes”, and “including” shall be construed as if immediately followed by the words “without limitation”. If any portion of this Agreement shall be declared to be invalid, illegal or unenforceable by any court of competent jurisdiction, such portion shall be deemed severed from this Agreement and the remaining portions shall continue in full force and effect. CALIFORNIA law shall govern the construction and enforcement of this Agreement.

13.		Entire Agreement . This Agreement is intended by the parties to be a final expression of their agreement with respect to the subject matter hereof and a complete and exclusive statement of the terms of such agreement between the parties. This Agreement supersedes any and all prior understandings, written or oral, between the parties.
14.		No Relationship . Purchaser, Original Borrower(s) and each Guarantor represent and warrant to Lender, that neither Original Borrower(s) nor any Guarantor have any interest in or is anyway related to or affiliated with Purchaser or any party holding and interest in Purchaser or the Property.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

CONSENT OF ORIGINAL BORROWER AND GUARANTORS

The undersigned Original Borrower and Guarantors consent to the execution and delivery of this Agreement.

ORIGINAL BORROWER

MONTEREY PALMS SELF STORAGE, LLC

BY: SOVREN VENTURES II, LLC, MANAGING MEMBER OF
MONTEREY PALMS SELF STORAGE, LLC

BY: GRANITE SOVREN PARTNERS, LLC, MANAGING MEMBER OF
SOVREN VENTURES II, LLC

BY: GRANITE INVESTMENT GROUP, MANAGING MEMBER OF
GRANITE SOVREN PARTNERS. LLC

Principal Amount: $5,200,000.00		Initial Rate: 7.000%		Date of Note: March 16, 2004

PROMISE TO PAY. MONTEREY PALMS SELF STORAGE, LLC (“Borrower”) promises to pay to LA JOLLA BANK, FSB (“Lender”), or order, in lawful money of the United States of America, the principal amount of Five Million Two Hundred Thousand & 00/100 Dollars ($5,200,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance. The interest rate will not increase above 10.500%.

PAYMENT. Subject to any payment changes resulting from changes in the Index, Borrower will pay this loan in accordance with the following payment schedule: 24 monthly consecutive interest payments, beginning April 1, 2004, with interest calculated on the unpaid principal balances at an interest rate of 7.000% per annum; 335 monthly consecutive principal and interest payments in the initial amount of $30,366.22 each, beginning April 1, 2006, with interest calculated on the unpaid principal balances at an interest rate based on the THE LOWEST NEW YORK PRIME RATE IN EFFECT ON THE FIRST BUSINESS DAY OF THE MONTH (CYCLE) AS PUBLISHED IN THE MONEY RATE SECTION OF THE WEST COAST EDITION OF THE WALL STREET JOURNAL, (currently 4.000%), plus a margin of 0.500 percentage points, adjusted if necessary for the minimum and maximum rate limitations for this loan, resulting in an initial interest rate of 5.500%; and one principal and interest payment of $30,368.30 on March 1, 2034, with Interest calculated on the unpaid principal balances at an interest rate based on the THE LOWEST NEW YORK PRIME RATE IN EFFECT ON THE FIRST BUSINESS DAY OF THE MONTH (CYCLE) AS PUBLISHED IN THE MONEY RATE SECTION OF THE WEST COAST EDITION OF THE WALL STREET JOURNAL, (currently 4.000%), plus a margin of 0.500 percentage points, adjusted if necessary for the minimum and maximum rate limitations for this loan, resulting in an initial interest rate of 5.500%. This estimated final payment is based on the assumption that all payments will be made exactly as scheduled and that the Index does not change; the actual final payment will be for all principal and accrued interest not yet paid, together with any other unpaid amounts under this Note. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any unpaid collection costs; and then to any late charges. Interest on this Note during the initial interest only payment period is computed on a 3651365 simple interest basis; that is, by applying the ratio of the annual interest rate over the number of days in a year, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Interest on this Note during the permanent loan phase is computed on a 301360 simple interest basis; that is, with the exception of odd days in the first payment period, monthly interest is calculated by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by a month of 30 days. Interest for the odd days is calculated on the basis of the actual days to the next full month and a 360-day year. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the THE LOWEST NEW YORK PRIME RATE IN EFFECT ON THE FIRST BUSINESS DAY OF THE MONTH (CYCLE) AS PUBLISHED IN THE MONEY RATE SECTION OF THE WEST COAST EDITION OF THE WALL STREET JOURNAL, (the “Index”). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notice to Borrower. Lender will tell Borrower the current Index rate upon Borrower’s request. The interest rate change will not occur more often than each 6 MONTHS. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 4.000% per annum. The interest rate or rates to be applied to the unpaid principal balance of this Note will be the rate or rates set forth herein in the “Payment” section. Notwithstanding any other provision of this Note, after the first payment stream, the interest rate for each subsequent payment stream will be effective as of the last payment date of the just-ending payment stream. Notwithstanding the foregoing, the variable interest rate or rates provided for in this Note will be subject to the following minimum and maximum rates. NOTICE: Under no circumstances will the interest rate on this Note be less than 5.500% per annum or more than (except for any higher default rate shown below) the lesser of 10.500% per annum or the maximum rate allowed by applicable law. Notwithstanding the above provisions, the maximum increase or decrease in the interest rate at any one time on this loan will not exceed 2.000 percentage points. Whenever increases occur in the interest rate, Lender, at its option, may do one or more of the following: (A) increase Borrower’s payments to ensure Borrower’s loan will pay off by its original final maturity date, (B) increase Borrower’s payments to cover accruing interest, (C) increase the number of Borrower’s payments, and (D) continue Borrower’s payments at the same amount and increase Borrower’s final payment.

PREPAYMENT FEE. Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law. Upon prepayment of this Note, Lender is entitled to the following prepayment fee: If the aggregate amount of principal prepaid during months 25 through 36, from the date of funding, exceeds twenty percent (20%) of the original principal amount of this Note, the Borrower shall pay Lender a penalty equal to three percent (3%) of the original principal amount of this Note.

If the aggregate amount of principal prepaid during months 37 through 48, from the date of funding, exceeds twenty percent (20%) of the original principal amount of this Note, the Borrower shall pay Lender a penalty equal to two percent (2%) of the original principal amount of this Note.

If the aggregate amount of principal prepaid during months 49 through 60, from the date of funding, exceeds twenty percent (20%) of the original principal amount of this Note, the Borrower shall pay Lender a penalty equal to one percent (1%) of the original principal amount of this Note.

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Except for the foregoing, Borrower may pay all or a portion of the amount owed earlier than it Is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower’s making fewer payments. Borrower agrees not to send Lender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: LA JOLLA BANK, FSB; 389 N. ESCONDIDO BLVD.; ESCONDIDO, CA 92025.

INTEREST RESERVES. Borrower authorizes Lender to place $436,800.00 of the Principal Amount as an interest reserve, which is an estimate of the interest due on the Note for the draw phase (“Interest Reserve”). All interest payments shall be paid from the Interest Reserve. Lender may automatically deduct accrued unpaid interest from the Interest Reserve. Interest will accrue, as described in this Note, on amounts deducted from the Interest Reserve. In the event the interest due under this Note for the draw phase exceeds the Interest Reserve, Borrower will pay accrued unpaid interest when due according to the terms of this Note. At the end of the draw phase. Lender will advance or disburse the remaining Interest Reserve, if any, to Borrower.

LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the regularly scheduled payment or $5.00, whichever is greater.

INTEREST AFTER DEFAULT. Upon default, the variable interest rate on this Note shall immediately increase by 3.000 percentage points, if permitted under applicable law.

DEFAULT. Each of the following shall constitute an event of default (“Event of Default”) under this Note:

Payment Default. Borrower fails to make any payment when due under this Note.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

Environmental Default. Failure of any party to comply with or perform when due any term, obligation, convenant or condition contained in any environmental agreement executed in connection with any loan.

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

Death or Insolvency. The dissolution of Borrower (regardless of whether election to continue is made), any member withdraws from Borrower, or any other termination of Borrower’s existence as a going business or the death of any member, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any

PROMISSORY NOTE

Loan No: 01-33-20070		(Continued)		Page

proceeding under any bankruptcy or insolvency laws by or against Borrower.

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note. In the event of a death, Lender, at its option, may, but shall not be required to, permit the Guarantor’s estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default.

Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.

Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured (and no event of default will have occurred) if Borrower, after receiving written notice from Lender demanding cure of such default: (1) cures the default within ten (10) days; or (2) if the cure requires more than ten (10) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.

ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. Borrower also will pay any court costs, in addition to all other sums provided by law.

GOVERNING LAW. This Note will be governed by, construed and enforced in accordance with federal law and the laws of the State of California. This Note has been accepted by Lender in the State of California.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of SAN DIEGO County, State of California.

DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $10.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorized charge with which Borrower pays is later dishonored.

COLLATERAL. Borrower acknowledges this Note is secured by the following collateral described in the security instruments listed herein:

(A) a Construction Deed of Trust dated March 16, 2004, to a trustee in favor of Lender on real property located in RIVERSIDE County, State of California. That agreement contains the following due on sale provision: Lender may, at Lender’s option, declare immediately due and payable all sums secured by the Construction Deed of Trust upon the sale or transfer, without Lender’s prior written consent, of all or any part of the Real Property, or any interest in the Real Property. A “sale or transfer” means the conveyance of Real Property or any right, title or interest in the Real Property; whether legal, beneficial or equitable; whether voluntary or involuntary; whether by outright sale, deed, installment sale contract, land contract, contract for deed, leasehold interest with a term greater than three (3) years, lease-option contract, or by sale, assignment, or transfer of any beneficial interest in or to any land trust holding title to the Real Property, or by any other method of conveyance of an interest in the Real Property. If any Borrower is a corporation, partnership or limited liability company, transfer also includes any change in ownership of more than twenty-five percent (25%) of the voting stock, partnership interests or limited liability company interests, as the case may be, of such Borrower. However, this option shall not be exercised by Lender if such exercise is prohibited by applicable law.

(B) an Assignment of All Rents to Lender on real property located in RIVERSIDE County, State of California.

(C) collateral described in a Commercial Security Agreement dated March 16, 2004.

LINE OF CREDIT. This Note evidences a straight line of credit. Once the total amount of principal has been advanced, Borrower is not entitled to further loan advances. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower’s accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender’s internal records, including daily computer print-outs.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower’s heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.

NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report any inaccurate information about your account(s) to a consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us at the following address: LA JOLLA BANK, FSB, 389 N. ESCONDIDO BLVD., ESCONDIDO, CA 92025

GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive any applicable statute of limitations, presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.