FORM 10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

S X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2008~~2009

£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number 000-51230

[careic10q033109002.gif]

CASTLE ARCH REAL ESTATE INVESTMENT COMPANY, L.L.C.

(Exact name of registrant as specified in its charter)

California

20-1077312

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer Identification Number)

9595 Wilshire Blvd. Suite 1000, Beverly Hills, CA 90212

(Address of principal executive offices)

(310) 385-5970

(Registrant’s telephone number, including area code)

No change

(Former name, former address and former fiscal year, if changed since last report)

~~Indicate~~Check ~~by check mark~~ whether the ~~registrant~~issuer (1) ~~has~~ filed all reports required to be filed by Section 13 or 15(d) of the ~~Securities~~ Exchange Act ~~of 1934~~ during the ~~preceding~~past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated ~~file~~filer or a smaller reporting company. See ~~definition~~the definitions of “large accelerated filer,” “accelerated filer” and ~~large~~“smaller ~~accelerated~~reporting ~~filer~~company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large ~~accelerated~~Accelerated ~~filer~~Filer £. Accelerated ~~filer~~Filer £. Non-~~accelerated~~Accelerated ~~filer~~Filer ~~£ Smaller reporting company S~~ . (Do not check if a smaller reporting company) Smaller Reporting Company X .

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes S No £ X .

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes £ No £ .

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common ~~stock~~units, as of the latest practicable date: 2728,~~289~~444,~~315~~291 common units and 1112,~~477~~046,~~059~~035 preferred units, outstanding as of May 2015, ~~2008~~2009.

CASTLE ARCH REAL ESTATE INVESTMENT COMPANY, L.L.C.

- INDEX -

		Page
PART I – FINANCIAL INFORMATION:
Item 1.	Financial Statements:	43
	Unaudited Balance Sheet as of March 31, 2008 and December 31, 2007	5
	Unaudited Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008	6
	Unaudited Statements of Operations for the three month period ended March 31, 2008; and for the three month period ended March 31, 2007; and for the period from inception (April 15, 2004) through March 31, 2008	7
	Unaudited Consolidated Statements of Operations for the three month period ended March 31, 2009; and for the three month period ended March 31, 2008	7
	Unaudited Statements of Cash Flows for the three month period ended March 31, 2008; and for the three month period ended March 31, 2007; and for the period from inception (April 15, 2004) through March 31, 2008	8
	Unaudited Consolidated Statements of Cash Flows for the three month period ended March 31, 2009; and for the three month period ended March 31, 2008	8
	Notes to Unaudited Condensed Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1714
Item 4T.	Controls and Procedures	1714
PART II – OTHER INFORMATION:
Item 1.	Legal Proceedings	1715
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	15
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Submission of Matters to a Vote of Security Holders	15
Item 4.	Submission of Matters to a Vote of Security Holders	18
Item 5.	Other Information	15
Item 5.	Other Information	18
Item 6.	Exhibits	16
Item 6.	Exhibits	19
Signatures		17
Signatures		20

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, the financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations, and cash flows of the Company for the interim periods presented.

The results for the period ended March 31, ~~2008~~2009 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the financial statements and footnotes thereto included in the Company’s Form 10-~~KSB~~K filed with the Securities and Exchange Commission for the period ended December 31, ~~2007~~2008.

Castle Arch Real Estate Investment Company, LLC

Financial Statements

For the three month periods

ended March 31, 2009 and 2008

Financial Information

Castle Arch Real Estate Investment Company, LLC

(AIndex ~~Development~~to ~~Stage~~Unaudited ~~Company)~~Financial Statements

~~Consolidated~~For ~~Statements~~the ofthree ~~Financial~~month ~~Condition (Unaudited)~~periods

		March 31,		December 31,
ASSETS		2008		2007
Current assets:
Cash and cash equivalents	$	244,148	$	1,556,730
Interest receivable – current		-		66,435
Notes receivable – current		530,000		383,000
Prepaid expenses and other current assets		-		283,413
Total current assets		774,148		2,289,578
Property, plant and equipment:
Office equipment		62,864		62,864
Less: accumulated depreciation		(22,954)		(19,884)
Net property, plant and equipment		39,910		42,980
Other assets:
Notes receivable – noncurrent		255,000		255,000
Interest receivable – noncurrent		54,493		-
Other properties held for investment		44,809,577		33,805,207
Entitlement costs		6,047		730,000
Other noncurrent assets		3,430		521,233
Total other assets		45,128,547		35,311,440
Total assets	$	45,942,605	$	37,643,998

ended March 31, 2009 and 2008


Unaudited Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008	6

Unaudited Consolidated Statements of Operations for the three month period ended
March 31, 2009; and for the three month period ended March 31,
2008;	7

Unaudited Consolidated Statements of Cash Flows for the three month period ended
March 31, 2009; and for the three month period ended March 31,
2008;	8-9

Notes to the Unaudited Consolidated Financial Statements	10-12

LIABILITIES AND MEMBERS’ CAPITAL
Current liabilities:
Accounts payable	$	527,443	$	259,396
Accounts payable – related party		83,449		41,750
Other accrued expenses		64,915		58,351
Accrued common units		625,000		727,500
Interest payable – related party		67,981		-
Preferred dividends payable		6,053,608		5,251,867
Notes payable – current		7,605,783		9,010,921
Notes payable – related party		1,933,576		-
Total current liabilities		16,961,755		15,349,785
Long term liabilities:
Notes payable – noncurrent		8,254,894		-
Notes payable – related party, noncurrent		-		1,910,423
Other long term liabilities		622,500		665,000
Minority interest in consolidated LLCs		12,741,501		11,163,976
Total long term liabilities		21,618,895		13,739,399
Total liabilities		38,580,650		29,089,184
Members’ capital:
Common units, 27,139,318, issued and outstanding,
ranging from $.001 to $2.50 per unit		7,330,231		6,951,618
Non-managing members’ units, series A preferred,
1,000,000 units issued and outstanding, $1.00 per unit		552,581		567,940
Non-managing members’ units, series B preferred,
2,000,000 units issues and outstanding, $1.00 per unit		1,176,974		1,216,156
Non-managing members’ units, series C preferred,
3,300,000 units issued and outstanding, $1.00 per unit		2,095,945		2,188,316
Non-managing members’ units, series D preferred,
5,029,132 units issued and outstanding, $5.00 per unit		19,669,251		18,795,391
Deficit accumulated during the development phase		(23,463,027)		(21,164,607)
Total members’ capital		7,361,955		8,554,814
Total liabilities and members’ capital	$	45,942,605	$	37,643,998
See accompanying notes.

Castle Arch Real Estate Investment Co LLC

Consolidated Balance Sheets (Unaudited)


ASSETS			March 31, 2009		December 31, 2008

Current assets:
	Cash and cash equivalents	$	681,168	$	140,393
	Interest receivable		85,093		77,548
	Prepaid expenses and other current assets		127,461		103,018
Total current assets			893,722		320,959

Property and equipment:
	Office equipment		69,834		69,513
	Less: accumulated depreciation		(29,690)		(26,761)
Net property and equipment			40,144		42,752

Other assets:
	Notes receivable – noncurrent		255,000		255,000
	Other properties held for sale		1,405,136		1,219,940
	Other properties held for investment		45,371,761		48,800,297
	Earnest money and other deposits		740,000		148,500
Total other assets			47,771,897		50,423,737
Total assets		$	48,705,763	$	50,787,448

LIABILITIES AND MEMBERS’ CAPITAL
Current liabilities:
	Accounts payable	$	822,948	$	893,144
	Accounts payable – related party		14,975		14,975
	Other accrued expenses		1,867,651		1,261,626
	Notes payable – current		7,306,707		7,300,969
	Notes payable, current – related party		242,204		241,926
Total current liabilities			10,254,485		9,712,640

Noncurrent liabilities:
	Notes payable – noncurrent		15,356,783		13,910,999
	Preferred dividends payable		9,965,562		8,942,229
	Other noncurrent liabilities		660,000		665,000
Total noncurrent liabilities			25,982,345		23,518,228
Total liabilities			36,236,830		33,230,868

Members’ Capital:
Noncontrolling interest in consolidated LLCs			11,748,475		11,429,629
	Common units, 28,249,875 and 27,957,252, respectively,
	issued and outstanding, ranging from $.001 to $2.50
	per unit		6,961,531		6,961,531
	Non-managing members’ units, Series A preferred,
	1,000,000 units issued and outstanding, $1.00 per unit		472,801		492,527
	Non-managing members’ units, Series B preferred,
	2,000,000 units issued and outstanding, $1.00 per unit		1,026,222		1,065,674
	Non-managing members’ units, Series C preferred,
	3,300,000 units issued and outstanding, $1.00 per unit		1,865,309		1,930,405
	Non-managing members’ units, Series D preferred,
	5,042,160 units issued and outstanding, $5,00 per unit		17,933,539		18,375,643
	Non-managing members’ units, Series E preferred,
	567,480 units issued and outstanding, $10.00 per unit		5,251,729		4,357,708
	Retained deficit		(32,790,673)		(27,056,537)
Total members’ capital			12,468,933		17,556,580
Total liabilities and members’ capital		$	48,705,763	$	50,787,448

See accompanying notes to the consolidated financial statements.

Castle Arch Real Estate Investment ~~Company,~~Co LLC

(AConsolidated ~~Development~~Statements ~~Stage~~of ~~Company~~Operation (Unaudited)

Consolidated Statements of Operations (Unaudited)


			For the three month		For the three month
			period ended		period ended
			March 31, 2009		March 31, 2008

Revenues:
	Sales	$	-	$	-
	Cost of sales		-		-
Gross margin					-

Operating expenses:
	Selling, general and administrative		1,374,055		2,301,703
	Depreciation		3,491		3,070
	Cost of terminated projects		15,454		6,970
	Impairment of long lived assets		4,294,316		-

Operating income / (loss)			(5,687,316)		(2,311,743)

Other revenues / (expenses)
	Interest income		7,607		5,017
	Interest expense		(286)		(-)
	Amortization of debt issue costs		(56,832)		(65,538)
	Loss on disposal of fixed assets		(3,635)		-

Income / (loss) from continuing operations
	before noncontrolling interest in losses
	of consolidated LLCs		(5,740,462)		(2,372,264)

Noncontrolling interest in losses of
	consolidated LLCs		6,326		119,324

Net loss		$	(5,734,136)	$	(2,252,940)

Accumulated preferred dividends		$	(716,174)	$	(565,987)

Net loss available to common unitholders		$	(6,450,310)	$	(2,818,927)

Net loss per common unit		$	(0)	$	(0)

Weighted average common units outstanding			28,076,347		27,028,630

						Cumulative From
		Period From		Period From		April 15, 2004
		January 1, 2008 to		January 1, 2007 to		(inception) to
		March 31, 2008		March 31, 2007		March 31, 2008
Revenues:
Proceeds from sale of property, net
of cost of property sold	$	-	$	-	$	48,041
Total revenues		-		-		48,041
Operating Expenses:
Selling, general and administrative		2,469,238		1,065,009		21,156,814
Depreciation		3,070		1,889		22,954
Costs of terminated purchase agreements		6,970		11,750		1,039,531
Start-up and organizational costs		-		-		55,696
Total operating expenses		2,479,278		1,078,648		22,274,995
Operating loss		(2,479,278)		(1,078,648)		(22,226,954)
Other revenue/(expenses)
Interest income		5,017		25,368		236,415
Interest expense		(253,545)		(178,036)		(1,972,426)
Amortization of debt issue costs		(65,538)		(32,635)		(410,139)
Income/(loss) from continuing operations
before minority interest and cumulative
effect on prior years of new minority
interest method		(2,793,344)		(1,263,951)		(24,373,104)
Minority interest in losses of
consolidated subsidiary		119,324		47,671		575,329
Cumulative effect on prior years of
retroactive application of change
in accounting principle (see Note 3)		334,748		-		334,748
Net loss and deficit accumulated during
the development stage	$	(2,339,272)	$	(1,216,280)	$	(23,463,027)
Accumulated preferred dividends	$	(801,741	$	(556,701)	$	(6,053,608)
Net loss available to common unitholders	$	(3,141,013)	$	(1,772,981)	$	(29,516,635)
Net loss per common unit before
cumulative effect on prior years of
retroactive application of change
in accounting principle	$	(.10)	$	(.07)
Cumulative effect on prior years of
retroactive application of change
in accounting principle	$	(.01)	$	-
Net loss per common unit	$	(.11)	$	(.07)
Weighted average units outstanding		27,028,630		24,064,965

See accompanying notes.

Castle Arch Real Estate Investment ~~Company,~~Co LLC

(A Development Stage Company)

Consolidated Statements of Cash Flows (Unaudited)

						Cumulative
			For the three month		For the three month
		Period From		Period From		From April 15,
			period ended		period ended
		January 1, 2008 to		January 1, 2007 to		2004 (inception) to
			March 31, 2009		March 31, 2008
		March 31, 2008		March 31, 2007		March 31, 2008
Cash flows from operating activities:
Cash Flows From Operating Activities:
Net loss		$	(5,734,136)	$	(2,252,940)
Net loss	$	(2,339,272)	$	(1,216,280)	$	(23,463,027)
Adjustments to reconcile net loss to net cash
Adjustments to reconcile net loss to
	used in operating activities:
net cash used in operating activities:
	Depreciation		3,491		3,070
Depreciation		3,070		1,889		22,954
	Loss on disposal of fixed assets		3,635		-
~~Amortization of debt issue costs~~	Amortization of debt issue costs	~~65,538~~	56,832	~~32,635~~	65,538	~~410,139~~
Professional outside services paid in the
	Impairment of long lived assets		4,294,316		-
form of assets transferred to broker dealer		300,000		-		300,000
	Noncontrolling interest in losses of LLCs		(6,326)		(119,324)
Minority interest in losses of subsidiary		(119,324)		(47,671)		(575,329)
	Professional outside services paid in the form
Cumulative effect of change on prior years
	of common units		-		2,000
of retroactive application of change
	Professional outside services paid in the form
in accounting principle		(334,748)		-		(334,748)
	of assets transferred to broker dealer		-		300,000
Professional outside services paid in
Changes in operating assets and liabilities:
the form of common units		250,000		-		7,955,231
	Interest receivable		(7,545)		11,942
Changes in operating assets and liabilities:
	Prepaid investment banking fees		-		359,383
Interest receivable		11,942		(24,665)		(54,493)
	Properties held for sale		(185,196)		-
Prepaid investment banking fees		359,383		10,959		200,000
	Properties held for investment		(865,780)		(2,204,894)
Other receivable		-		250,000		(255,000)
	Prepaid expenses and other current assets		(24,443)		3,600
Prepaid expenses and other assets		3,600		6,526		(3,430)
	Accounts payable		(70,196)		268,047
Accounts payable		268,047		228,056		527,443
	Accounts payable – related party		-		41,699
Accounts payable – related party		41,699		-		83,449
	Interest payable – related party		-		67,981
~~Other accrued expenses~~	Other accrued expenses	~~6,564~~	606,025	~~(70,314)~~	6,564	~~689,915~~
Interest payable – related party		67,981		-		67,981
	Other noncurrent liabilities		(5,000)		-
Properties held for investment		(2,031,814)		(885,393)		(25,255,197)
Net cash used in operating activities			(1,934,323)		(3,447,334)
Net cash used in operating activities		(3,447,334)		(1,714,258)		(39,684,112)
Cash flows from investing activities:
Cash Flows From Investing Activities:
	Earnest money and other deposits		(591,500)		-
Option, earnest money,
	Purchase of property, plant and equipment		(4,518)		-
entitlement deposits		-		(48,388)		(536,047)
Net cash used in investing activities			(596,018)		-
Additions to notes receivable		-		(65,000)		(500,000)
Cash flows from financing activities:
Purchase of property, plant and equipment		-		-		(62,864)
	Proceeds from issuance of investment units		2,868,836		1,861,357
Net cash used in investing activities		-		(113,388)		(1,098,911)
	Proceeds from subscriptions receivable		-		1,807,900
Cash Flows From Financing Activities:
	Offering costs		(45,774)		(84,505)
Proceeds from issuance of member units		1,861,357		1,691,100		44,800,656
	Proceeds from notes payable, noncurrent		400,000		-
Offering costs		(84,505)		(16,250)		(1,600,720)
	Repayment of notes payable, noncurrent		(2,605)		-
Proceeds from subscriptions receivable		1,807,900		68,400		-
	Repayment of notes payable, current		(108,596)		(1,450,000)
Repayment of short term debt		(1,450,000)		-		(2,150,000)
	Debt issue costs		(40,745)		-
Debt issue costs		-		-		(22,765)
Net cash provided by financing activities		$	3,071,116	$	2,134,752
Net cash provided by financing activities		2,134,752		1,743,250		41,027,171
Net increase (decrease) in cash			540,775		(1,312,582)
Net increase (decrease) in cash and cash
Cash at beginning of period			140,393		1,556,730
equivalents		(1,312,582)		(84,396)		244,148
Cash at end of period		$	681,168	$	244,148
Cash at beginning of period		1,556,730		1,500,752		-
Cash at end of period	$	244,148	$	1,416,356	$	244,148

See accompanying notes.

Castle Arch Real Estate Investment ~~Company,~~Co LLC

(A Development Stage Company)

Consolidated Statements of Cash Flows (Unaudited) Continued

						Cumulative
			For the three month		For the three month
		Period From		Period From		From April 15,
			period ended		period ended
		January 1, 2008 to		January 1, 2007 to		2004 (inception) to
			March 31, 2009		March 31, 2008
		March 31, 2008		March 31, 2007		March 31, 2008
Non-cash investing and financing activities:
Non-Cash Investing and Financing Activities:
Preferred dividend payable		$	1,023,333	$	801,741
Issuance of members’ units for subscriptions
Issuance of notes payable in exchange for other
receivable	$	1,268,447	$	2,611,782	$	1,268,447
	properties held for investment		-		8,257,371
Preferred dividends payable	$	801,741	$	3,134,795	$	6,053,608
Subscriptions receivable			1,747,720		1,268,447
Referral fees issued as common units	$	76,251	$	12,500	$	1,244,756
Referral fees issued in the form of common
Issuance of notes payable in exchange for
	units		-		76,251
other properties held for investment	$	8,257,371	$	450,000	$	18,021,425
Supplemental disclosures:
Issuance of notes payable – related party for
Cash paid for interest		$	211,776	$	240,780
other properties held for investment	$	-	$	-	$	1,933,576
Supplemental Disclosures
Cash paid for interest	$	240,780	$	178,036	$	1,972,426

Castle Arch Real Estate Investment ~~Company,~~Co LLC

(ANotes ~~Development~~to ~~Stage~~Unaudited ~~Company)~~Consolidated Financial Statements

~~Notes~~1. METHOD toOF ~~Consolidated~~REPORTING ~~Financial~~AND ~~Statements~~USE OF ESTIMATES

~~March~~The 31accompanying unaudited condensed consolidated financial statements have been prepared by Castle Arch Real Estate Investment Company, ~~2008~~LLC (~~Unaudited~~the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim condensed financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed financial statements be read in conjunction with the Company's audited financial statements and notes thereto included in its most recent Form 10-K. Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2009.

1.The accompanying consolidated financial statements include the accounts of the Company, as well as the accounts of the following entities:

METHOD OF REPORTING AND USE OF ESTIMATES


Entity	Date of Organization

Castle Arch Kingman, LLC (“CAK”)	April, 2006
Castle Arch Smyrna, LLC (“CAS”)	June, 2007
Castle Arch Secured Development Fund, LLC (“CASDF”)	January, 2008
Castle Arch Asia, Limited (“CAA”)	September, 2008
Castle Arch Opportunity Managers, LLC (“CAOP Managers”)	March, 2009
Castle Arch Opportunity Partners I, LLC (“CAOPI”)	March, 2009
Castle Arch Lease-to-Own Managers, LLC (“CALTO Managers”)	March, 2009
Castle Arch Lease-to-Own Income Fund, LLC (“CALTO”)	March, 2009

~~The~~In ~~accompanying~~December ~~unaudited~~2003, ~~condensed consolidated financial statements have been prepared by~~ the ~~Castle~~Financial ~~Arch~~Accounting ~~Real~~Standards ~~Estate~~Board ~~Investment Company, LLC~~ (~~the “Company”~~"FASB") ~~pursuant~~issued toInterpretation ~~the~~No. ~~rules~~46(R) ~~and~~("FIN ~~regulations~~46(R)"), ofwhich ~~the~~further ~~Securities~~clarified and ~~Exchange~~amended ~~Commission. Certain~~FIN ~~information~~46, ~~and~~Consolidation ~~footnote~~of ~~disclosures~~Variable ~~normally~~Interest ~~included~~Entities, inwhich ~~financial~~requires ~~statements~~the ~~prepared~~consolidation inof ~~accordance~~entities ~~with U.S. generally accepted accounting principles have been condensed or omitted~~ in ~~accordance~~which ~~with~~an ~~such~~enterprise ~~rules~~absorbs ~~and~~a ~~regulations. The~~majority ~~information~~of ~~furnished in~~ the ~~interim~~entity's ~~condensed~~expected ~~financial~~losses, ~~statements~~receives ~~includes~~a ~~normal~~majority ~~recurring~~of ~~adjustments~~the ~~and~~entity's ~~reflects~~expected ~~all~~residual ~~adjustments~~returns, ~~which,~~or inis the ~~opinion~~primary ~~of management~~beneficiary, ~~are~~as ~~necessary for~~ a ~~fair~~result ~~presentation~~ of ~~such~~ownership, ~~financial~~contractual ~~statements. Although~~or ~~management~~other ~~believes~~financial ~~the~~interests ~~disclosures~~in ~~and information presented are adequate to make~~ the ~~information~~entity. CAK, ~~not~~CAS, ~~misleading~~CASDF, itCAA, isCAOP ~~suggested~~Managers, ~~that~~CAOPI, ~~these~~CALTO ~~interim~~Managers ~~condensed~~and ~~financial~~CALTO ~~statements~~are beconsidered ~~read~~variable ininterest ~~conjunction~~entities ~~with~~of which the Company's ~~audited~~is ~~financial~~the ~~statements~~primary ~~and notes thereto included in its most recent Form 10KSB~~beneficiary. ~~Operating~~All ~~results~~intercompany ~~for~~accounts ~~the~~and ~~three~~transactions ~~months~~have ~~ended~~been ~~March~~eliminated ~~31,~~in ~~2008 are not necessarily indicative of~~ the ~~results~~consolidated tofinancial ~~be expected for the fiscal year ending December 31, 2008~~statements.

The accompanying consolidated financial statements include the accounts of the Company, as well as the accounts of Castle Arch Kingman, LLC (“CAK”), Castle Arch Smyrna, LLC (“CAS”), and Castle Arch Secured Development Fund (“CASDF”) which entities were created in April, 2006, June, 2007, and January, 2008, respectively2. InMATERIAL December 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46(R) ("FIN 46(R)"), which further clarified and amended FIN 46, Consolidation of Variable Interest Entities, which requires the consolidation of entities in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or is the primary beneficiary, as a result of ownership, contractual or other financial interests in the entity. CAK, CAS and CASDF are considered variable interest entities of which the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated in the consolidated financial statements.TRANSACTIONS

2During the three month period ended March 31, 2009 the Company organized CAOP Managers and CAOPI. CAOP Managers is a wholly owned entity of the Company and was organized to manage and control all affairs of CAOPI. CAOP Managers has the responsibility and final authority in substantially all matters affecting CAOPI.

PREPAID INVESTMENT BANKING FEES

During 2007, the Company transferred securities, which it had obtained in connection with two notes receivable, to a third party registered broker dealer (the “BD”) as a prepayment for fees in connection with the BD’s participation in various Company offerings. At the time of receipt, the readily determinable fair value of the collateral totaled $392,200. The assets transferred represented partial payment of commissions, investment banking fees and consulting, which the Company incurred for these services in 2008. Accordingly, at March 31, 2008, the value of the collateral received was recorded as a reduction in prepaid investment banking fees and expensed on the Company’s statement of operations and included in selling, general and administrative expenses.

In addition, the Company had advanced $267,183 to the BD during 2007, which represented prepaid investment banking fees and which was also recorded as such at December 31, 2007. These payments represented the remaining portion of the consulting and various services to be performed during the period ended March 31, 2008. Accordingly, a total of $659,383 was recorded as services rendered and included in selling, general and administrative expenses.

Castle Arch Real Estate Investment ~~Company,~~Co LLC

(ANotes ~~Development~~to ~~Stage~~Unaudited ~~Company)~~Consolidated Financial Statements

~~Notes~~2. MATERIAL toTRANSACTIONS ~~Consolidated Financial Statements~~(CONTINUED)

The Company organized CAOPI to raise equity capital through a private placement offering (the “CAOPI Fund”), which capital is to be used to acquire, manage, and dispose of distressed residential properties. The CAOPI Fund is designed to issue 100,000 Investment Units, consisting of one common and one preferred A unit, at $100 per unit. Holders of the CAOPI Fund Investment Units are entitled to the greater of a 15 percent annual return or 25 percent of all profits realized. As of March 31, ~~2008~~2009, ~~(Unaudited)~~the Company had raised $584,000 through the CAOPI Fund, resulting in the issuance of 5,840 Investment units, or 5,840 common and preferred A units. These amounts have been recorded in noncontrolling interest in consolidated LLCs, totaling $11,748,475.

3In addition, during the three month period ended March 31, 2009 the Company organized CALTO Managers and CALTO. CALTO Managers is a wholly owned entity of the Company and was organized to manage and control all affairs of CALTO. CALTO Managers has the responsibility and final authority in substantially all matters affecting CALTO.

~~CUMULATIVE~~CALTO ~~EFFECT~~was OForganized ~~CHANGE~~to INraise ~~ACCOUNTING~~equity ~~PRINCIPLE~~capital through a private placement offering (the “CALTO Fund”), which capital is to be used to acquire, manage, and dispose of distressed residential properties. The CALTO Fund is offering 10 percent Series A Preferred Units at $1.00 per unit. As of March 31, 2009, CALTO had raised $50,000, resulting in the issuance of 50,000 Series A Preferred Units. Interest is to be paid to holders of the Series A Preferred Units at the holder’s election, resulting in a monthly interest payout, or accrual of the same.

~~During the three month period ended March 31~~CALTO, ~~2008, the Company changed the method it was using~~ in ~~order~~connection towith ~~determine~~an ~~the~~unrelated ~~minority~~third ~~interest calculation in the Company’s earnings. Specifically~~party, ~~during the three month period Castle Arch Real Estate Investment Company (the “Parent”), LLC~~ has ~~been~~established ~~paying~~a ~~substantial~~lease-purchase ~~operating~~program ~~costs~~that onpurchases ~~behalf~~single-family ofhomes ~~its~~from ~~subsidiaries,~~banks ~~Castle Arch Kingman, LLC (“CAK”)~~ and ~~Castle~~other ~~Arch~~financial ~~Smyrna~~institutions, ~~LLC~~and ~~(“CAS”). The~~at ~~consolidated financial statements of prior periods presented only~~ the ~~net~~time ~~losses~~ of ~~the~~funding ~~minority interests attributable to costs borne by~~ the ~~subsidiaries themselves. As a result~~purchase, ~~the~~leases ~~respective~~these ~~subsidiary’s~~homes ~~minority~~to ~~interests’~~qualified ~~portion~~tenants ofwho ~~losses~~have ~~incurred~~purchased ~~within~~an ~~the~~option ~~subsidiary~~to ~~did~~acquire ~~not properly reflect~~ the ~~economic~~home, ~~substance~~at ofa ~~the~~higher ~~relative~~price, ~~costs~~from ~~they were incurring in relation to the consolidated entities costs~~CALTO.

~~Therefore~~During the three months ended March 31, it2009, ~~was~~the ~~deemed~~Company ~~preferable~~continued it efforts to ~~employ~~finalize aentitlements ~~different~~and ~~method~~begin the development of ~~cost~~a ~~allocation~~certain soproject. Accordingly, asthe Company secured $300,000 in debt financing to ~~accurately~~fund ~~compute~~a portion of the ~~respective~~initial ~~subsidiary~~phase’s ~~minority~~major ~~interest~~on-site improvements. ~~Accordingly,~~ The ~~during~~debt ~~the~~financing ~~three~~bears ~~month~~interest ~~period~~at ~~ended~~18 ~~March~~percent ~~31,~~per ~~2008~~annum, ~~the~~with ~~Company~~interest ~~reallocated~~only ~~certain~~payments ~~costs,~~due ~~previously~~monthly. In ~~borne~~addition, bythe ~~CAREIC~~terms onof the ~~subsidiaries~~debt ~~behalf,~~contemplate ~~based~~repayment onof ~~the~~principal ~~proportion~~upon sale of the ~~entity~~initial phase’s ~~respective~~improved ~~portion~~lots based on a $37,500 per lot release price. Any and all remaining accrued interest and principal is to be repaid upon the date of ~~capital~~maturity, ~~raised~~or September, 2010. This amount has been recorded in notes payable, noncurrent, totaling $15,356,783 at March 31, 2009.

ByDuring ~~employing this method of cost allocation~~ the ~~Company~~three ~~will~~month ~~better~~period ~~allocate~~ended ~~costs~~March ~~amongst the Parent~~31, ~~CAK and CAS~~2009, as the ~~nature~~Company ~~of the costs being reallocated are those costs~~ incurred to$91,500 ~~raise~~in ~~capital~~nonrefundable ~~through the Company’s respective offerings. Thus~~deposits, ~~the~~to ~~approach~~be isapplied ~~deemed~~toward ~~preferable~~purchases ~~by the Company. The retroactive application~~ of ~~the~~raw ~~new~~land ~~method resulting~~ in a2010. In ~~cumulative effect of $334~~addition,~~748~~ isduring ~~included in~~ the ~~losses for the~~ three month period ended March 31, ~~2008~~2009 CAOPI made $500,000 ~~has~~in ~~been~~nonrefundable ~~treated~~deposits, asto abe ~~cumulative~~applied ~~effect~~towards the purchase of a ~~change~~pool inof ~~accounting~~distressed ~~principle~~assets ~~with~~in ~~application~~May, ~~retroactive~~2009. Accordingly, to$500,000 ~~inception~~has been recorded asin ofproperties ~~the~~held ~~beginning~~for ofsale, ~~the~~totaling ~~period~~$1,905,136 inat ~~which~~March ~~the~~31, ~~change was adopted~~2009.

Below are pro forma results of the retroactive application of this change in accounting principle implemented by the Company for the three month period ended March 31, 2008, and from April 15, 2004 (Inception) through March 31, 2008:

For the three months ended March 31, 2008:

		New Method		Prior Method		Effect of Change
Minority interest in losses of
consolidated subsidiaries	$	119,324	$	31,996	$	87,328

The effect of the change on the first quarter of 2008 was to decrease the loss before the cumulative effect of a change in accounting principle by $87,328 and net loss by $422,076 (the sum of the first quarter effect totaling $87,328 and the cumulative effect of $334,748), or $.02 per common unit.

For the period from April 15, 2004 (Inception) through March 31, 2008:

		New Method		Prior Method		Effect of Change
Minority interest in losses of
consolidated subsidiaries	$	910,077	$	565,840	$	344,237

Castle Arch Real Estate Investment ~~Company,~~Co LLC

(ANotes ~~Development~~to ~~Stage~~Unaudited ~~Company)~~Consolidated Financial Statements

~~Notes~~3. IMPAIRMENT toOF ~~Consolidated~~LONG ~~Financial~~LIVED ~~Statements~~ASSET

During the three months period ended March 31, ~~2008~~2009 ~~(Unaudited)~~the Company engaged a third party to perform an appraisal to determine the market value of approximately 348 acres, or of a long lived asset, purchased by the Company during 2005 and 2006. As a result of the appraisal’s determined market value, the Company’s management deemed it necessary to record an impairment of the long lived asset, totaling $4,294,316 for the three month period ended March 31, 2009, which amount has been separately recorded on the Company’s Statements of Operations.

3Although the local economic circumstances in which the long lived asset is located has been relatively resilient to and less impacted by the national slowdown in economic growth, other market considerations resulted in the reduced market value of the long lived asset, as well as the Company management’s election to impair the long lived asset. These considerations include accelerating job losses, substantial slowing of residential home building activity and turmoil within the national financial markets, resulting in reduced availability of credit, or other debt financing.

~~CUMULATIVE~~The ~~EFFECT~~third OFparty ~~CHANGE~~employed INa ~~ACCOUNTING~~sales ~~PRINCIPLE~~comparison ~~(CONTINUED)~~approach in determining market value of the long lived asset, including examining current offerings and analyzing prices buyers have recently paid for comparable property. The sales comparison approach included the comparison of property rights conveyed, the financial terms incorporated into the transaction, the conditions or motivations surrounding the sale, the location of the property, its utility and the physical characteristics of the property.

The effect of the change on the period from April 15, 2004 (Inception) through March 31, 2008 was to decrease the loss before the cumulative effect of a change in accounting principle by $344,237 and net loss by $678,985 (the sum of the effect from inception totaling $344,237 and the cumulative effect of $334,748)4. ~~The~~SUBSEQUENT ~~proforma amounts reflect the effect of retroactive application on minority interest had the new method been in effect.~~EVENTS

4Subsequent to the three month period ended March 31, 2009, the Company had successfully raised $619,492 through its Series E Investment Unit private placement offering, resulting in the issuance of 61,949 common and preferred E units. In addition, the Company had successfully raised $1,317,411 through CAOPI Fund, resulting in the issuance of 1,317,411 common and preferred A units.

~~MATERIAL~~Subsequent ~~TRANSACTIONS~~to the three month period ended March 31, 2009, the Company created the Castle Arch Opportunity Partners III, LLC (“CAOPIII”). Similar to CAOPI, CAOPIII is to be managed and administered by CAOP Managers, and has been organized to raise equity capital through a private placement offering (the “CAOPIII Fund”), which capital is to be used to acquire, manage, and dispose of distressed residential properties. The CAOPIII Fund is designed to issue 100,000 Investment Units, comprised of one common and one preferred A unit, at $100 per unit. Holders of the CAOPIII Fund Investment Units are entitled to the greater of a 15 percent annual return or 25 percent of all profits realized. Subsequent to the three month period ended March 31, 2009, the Company had raised $585,000 through the CAOPIII Fund, resulting in the issuance of 5,850 Investment units, or 5,850 common and preferred A units.

In March, 2008, the Company acquired approximately 450 acres located outside Kingman Arizona, for the purchase price of $9,859,789. Of this amount, $8,257,371 is reflected by a promissory “note” payable to the seller with the balance having been paid in cash. Pursuant to the terms of the note, $1,257,371 is due and payable in full on or before April 15, 2008 (see Note 5). The remaining $7,000,000 will bear interest at 7 percent per annum, payable monthly, with principal and any accrued but unpaid interest due and payable on or before March 21, 2010.

In January, 2008, the Company organized Castle Arch Secured Development Fund, LLC (“CASDF”). CASDF intends to raise capital through a private placement offering Neither CASDF nor CAREIC has established any maximum amount of subscriptions that may be accepted pursuant to the offering. CASDF will loan funds to certain Company projects and other third-party projects in exchange for origination fees, monthly interest, and principal repayment over a given term.

During the three months ended March 31, 2008, the Company’s subsidiary, Castle Arch Kingman, LLC (“CAK”) executed a promissory note with CASDF, another consolidated subsidiary, totaling $1,280,000. The note is secured by 40 acres in Kingman, AZ. The note bears interest of 12 percent per annum with all principal and accrued interest due on or before March 25, 2009.

NOTES PAYABLE

During February and March, 2008, the Company amended two promissory notes in the amount of $1,800,000 and $550,000, respectively. At the end of the three month period ended March 31, 2008, the Company had repaid $1,700,000 of these amounts. The notes continue to be in good standing and are being repaid pursuant to their terms.

SUBSEQUENT EVENTS

In April, 2008, the Company sold 60 acres in Kingman, AZ to a third party for $1,680,000.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statement Notice

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Castle Arch Real Estate Investment Company, L.L.C. (“we”, “us”, “our” or the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

Description of Business

WeOur ~~were~~principal ~~organized~~activities ~~under~~of securing acquisition rights to properties, obtaining zoning and other entitlements for the ~~laws~~properties, ofsecuring financing for the ~~State~~purchase of ~~California~~the asproperties, aimproving ~~limited~~the ~~liability~~properties’ ~~company~~infrastructure onand ~~April~~amenities, 12and selling the properties have been greatly affected by the current real estate market and financial crisis. Our business model is to secure purchase rights to, ~~2004~~and if conditions warrant, to purchase outright raw land. We ~~are~~target aland ~~residential~~acquisitions in areas where we believe there will be relatively high increased population and ~~commercial~~economic growth. After purchase rights to the land ~~development~~are ~~company~~secured, ~~with~~we ~~projects~~conduct ~~located~~engineering inanalysis ~~Arizona~~of the raw land, ~~Utah~~including hydraulic, ~~Tennessee~~seismic and ~~Wyoming~~other analysis. ~~Our~~We ~~principal~~then ~~activities~~conduct ~~are~~feasibility ~~securing~~studies ~~acquisition~~to ~~rights~~determine tothe ~~properties,~~optimal ~~obtaining~~residential ~~zoning~~density and ~~other~~commercial ~~entitlements~~configuration. Many of the density and configuration decisions are contingent upon local governments’ growth targets. We then create master plans for the ~~properties~~entire project. During this process there are a significant number of variables that result from governmental approvals, ~~securing~~infrastructural ~~financing~~developments, ~~for~~economic conditions, availability of credit and demographic shifts. The process of taking hundreds or in some cases thousands of acres of raw land to the ~~purchase~~point where home and commercial construction can begin takes years as opposed to months. For instance, the size of our projects typically require the ~~properties~~construction of new sewage plants, ~~improving~~roads, bridges, water ways and other significant infrastructural improvements to accommodate the ~~properties’~~number ~~infrastructure~~of buildings and ~~amenities~~new inhabitants. Projects of this magnitude require agreements with local governments as to who will bear what percentage of the costs of infrastructural improvements necessary to sustain the population influx. In addition, environmental approvals, construction plans and ~~selling~~financing ~~the~~arrangements ~~properties~~take significant time.

~~The~~We ~~sub-prime~~believe ~~fall~~that ~~out~~the ~~and~~significant ~~other~~declines ~~financial~~in ~~market~~the ~~downturns~~demand for new homes, the significant oversupply of homes on the market and ~~corrections~~the ~~have~~significant ~~affected~~reductions ~~our~~in ~~business~~the availability of financing for homebuyers indicate that the downturn is continuing and will continue. ~~Our~~Most ~~management~~significant ~~anticipates~~to aour ~~continued~~business, ~~correction~~is the unprecedented downturn in the ~~housing~~availability ~~market~~of credit financing. ~~While~~Our ~~many~~business ~~parts~~model ofrelies on the ~~country,~~ability ~~including~~to ~~major~~apply ~~areas~~cash derived from the sale of ~~California,~~equity ~~Arizona~~toward ~~and~~the ~~Florida,~~purchase ~~are~~of ~~experiencing~~properties ~~severe~~and ~~real~~toward ~~estate~~many ~~setbacks,~~of wethe ~~expect~~entitlement ~~other~~improvement ~~areas~~costs and then to ~~stay~~finance ~~stable~~the orremaining ~~even~~purchase ~~continue~~price toand ~~grow~~excavation costs through debt financing.

WeThe ~~have~~unprecedented ~~put~~downturn ain ~~hold~~credit onavailability ~~our~~has ~~Coalinga~~caused us to delay commencement of excavation of certain infrastructural portions of both the Kingman, Arizona and ~~Firebaugh~~the Smyrna, ~~California~~Tennessee ~~properties~~area ~~due~~projects. In addition, even if we did have adequate financing to ~~market~~commence ~~issues~~excavation, ~~and~~the ~~are~~timing ~~currently~~of ~~assessing~~demand ~~next~~for ~~steps~~lots onwhich ~~our~~we ~~Imperial~~intend ~~City~~to ~~project.~~sell Weto ~~do,~~builders ~~however~~must be considered. Presently, ~~believe~~the ~~that~~growing ~~these~~number ~~areas~~of ~~hold~~home ~~promise~~mortgage ~~for~~foreclosures ~~value~~has ~~creation~~increased ~~once~~housing supply and driven down prices, making the ~~market~~purchase ~~conditions~~of ~~improve~~a foreclosed home an attractive alternative to purchasing a new home. ~~However~~Homebuilders have responded to declining sales with significant concessions, wefurther ~~believe~~adding ~~that~~to the ~~properties~~price declines. The decline in ~~Kingman,~~home ~~Smyrna~~values, ~~Tooele~~the ~~and~~economic ~~Star~~downturn, ~~Valley~~the ~~should~~loss beof ~~developed~~jobs, ~~fully~~and asthe ~~intended.~~loss Weof ~~believe~~consumer ~~that~~confidence ~~these~~have ~~markets~~reached ~~will~~historical ~~remain~~levels. ~~sufficiently~~As ~~steady~~a ~~and~~result, ~~will~~the ~~get~~demand anfor ~~additional~~new ~~boost~~homes, ~~when~~and therefore, the ~~nation’s~~demand ~~credit~~for ~~woes~~lots ~~begin~~by tohome ~~lift~~builders, has declined significantly.

~~Overview~~In the three month period ended March 31, 2009, we commenced targeting acquisition of large tapes of foreclosed properties directly from banks. During the period, we took an equity position and management in several joint ventures to capitalize on the abundance of vacant, foreclosed residential properties. Until the inventory of vacant and foreclosed properties is depleted and some normalcy to the credit markets return, our primary business model of raw land acquisition, entitlement and lot sales to builders has substantially slowed.

The following management discussion and analysis relates to our business of residential and commercial land development with target properties located primarily in the Western United States. Our principal activities include securing acquisition rights to the property, obtaining zoning and other entitlements for the property, securing financing for the purchase of the property, improving the property’s infrastructure and amenities, and selling the property.

ARIZONA: Mohave County

Through Castle Arch Kingman, L.L.C., we own or otherwise have preferential purchase rights for approximately 2,200 acres of raw land just outside the City of Kingman, Arizona. To date we have invested over $15 million to purchase the property parcels, working with our architectural, marketing and engineering teams currently under development. We will take down the remaining property as needed for the project over the course of the next seven years. As of March 31, 2008, the highlights of the project schedule are as follows:

•

Numerous design approvals completed for the Nicklaus™ Design 18-hole Golf Course, Facilities and Club House.

•

Grading permits approved for the Golf Course (May 2008).

•

Scheduled start date for construction of Golf Course and Facilities, July 1, 2008.

•

Golf Course completion now scheduled for October 2009.

•

Scheduled lot sales expected to begin in October 2009.

•

Local project manager selected, with initial contract signed; ready to begin deploying construction crew and equipment

•

Troon™ Golf contracted to manage the Golf Course

•

Approvals and design completed for the first residential community (440 acres), enabling Phase 1 to begin upon approval from Castle Arch management team.

•

Design completed for the entire Kingman development project.

We believe that Mohave County, just 95 miles southeast of downtown Las Vegas, will continue to be one of the fastest growing in Arizona. Our feasibility studies indicate significant potential for new job creation in manufacturing, distribution, recreation and tourism, as well as from services to meet the needs of an influx of retirees and first-time homeowners.

We anticipate that the development may ultimately provide between 5,000 and 7,000 residential home sites, with over 90 acres of commercial retail servicing the Master Community. We anticipate that the development will contain up to eight different planned communities, ranging from senior living residences to active young adult villages, with recreational amenities including swimming and exercise facilities and over 21 miles of walking trails throughout the planned environmental development.

We are continuing to negotiate our Development Agreement with Mohave County, which will provide for the Master Plan of the community and confirm entitlements for the next 20 years. Overall, we have taken the necessary extra steps to provide the City of Kingman with their first Planned Master Community.

WYOMING: Star Valley/Thayne

As of March 31, 2008, we have continued to make progress in our Sunset Meadows project in Star Valley, Wyoming. We anticipate that lot sales will commence in 2008. Plans for the project comprise approximately 200 residential units, including fourplexes, duplexes and single-family homes.

Despite the nationwide credit crunch and real estate downturns, the Star Valley project has been progressing as expected. Notably, we have incurred no additional material expenses outside of the project budget, and the County has been very accommodating with approvals. While we are in the process of obtaining some necessary and planned for financing for the project, and the credit crunch has in fact impacted the terms we can anticipate now as compared to a year ago, we are progressing according to plan.

TENNESSEE: Smyrna/Rutherford County

During the three month period ended March 31, 2008, we continued to make progress on development of the 640 acres of land near the town of Smyrna, Tennessee, located in rapidly growing Rutherford County. The area has seen significant annual growth of 5% to 7% over the last several years, and in fact has experienced stable and controllable population and economic increases over the past 25 years. These trends and other favorable aspects drawn from comprehensive risk analysis performed on this and all Castle Arch projects has led us to move forward with the Smyrna property. Some project updates include:

•

Beginning on or shortly after August 1, 2008, we will design and build the sewer lines to the property (approximately nine months to complete).

•

Infrastructure for lot development will begin concurrently sewer lines.

•

We have approval to hire the local project management team.

•

City planners are requiring an additional 15 acres to be purchased for retail development.

We intend to develop the property into a residential community with a mixture of product types including some neighborhood commercial retail stores and other businesses, and we are on schedule as planned for sales that should coincide with the national real estate market’s return to health. We have three Letters of Intent from major production builders in the area to move forward in purchasing the estimated 754 finished lots from us.

UTAH: Tooele County

We have continued to move forward during the three month period ended March 31, 2008 with working the 347 acres of raw land in Tooele County, Utah through the entitlement process. The development is currently anticipated to contain approximately 725 lots and leave over 40% of the total acreage as open space, thereby qualifying it as a Conservation Development. We have experienced a number of delays in connection with the Tooele project. Nevertheless, barring unforeseen delays, we currently expect to have our completed entitlements by October of this year.

We targeted the Tooele area because of its sustained growth. According to the most recent US Census, Tooele’s population and economy is growing rapidly, and was rated one of the top job creation cities in the United States by CNN Money (July 2007), which reported 2000-2006 job growth in the Tooele area at 112.5%.

Since its inception in 1850, Tooele has always been a mining area, but today scientific and technical fields are blossoming, too. The county (one of the first in Utah) is near full employment and wages are growing at an above average rate. A key driver to this is a plan by Pittsburgh based Allegheny Technologies Inc. to build a $325 million metals plant that will employ 150 people at an average salary of $45,000.

Our project lies at the northern end of the Tooele municipality, along the major highway to and from Salt Lake City. As part of our project we will have an elementary school and church. In close proximity to our development are community amenities and shopping, including a Wal-Mart Supercenter, two supermarkets and a Home Depot. We believe this project is yet another example of Castle Arch’s focus on high-growth areas that are only minimally affected by market downturns.

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplate our continuation as a going concern. We have sustained significant operating losses since our inception, including the years 2007 and 2006. In the coming twelve months, our liquidity and cash requirements will depend on several factors. If our resources are not sufficient to fund our needs through 2008 there are no assurances that we will be successful in raising sufficient capital.

CASDF

In response to the contraction in money lending by many national institutions, in January, 2008, we organized Castle Arch Secured Development Fund, LLC (“CASDF”). CASDF intends to raise capital through a private placement offering, consisting of 12 percent Series A preferred units at $1.00 per preferred unit. CASDF intends to loan funds to certain of our projects and other third-party projects in exchange for origination fees, monthly interest, and principal repayment over a given term. The finances of CASDF are consolidated into our financials as a subsidiary.

During the three months ended March 31, 2008, CASDF lent $1,280,000 to another of our subsidiaries, Castle Arch Kingman, LLC (“CAK”). The note is secured by 40 acres in Kingman, AZ. The note bears interest of 12 percent per annum, and principal together with all accrued interest is due on or before March 25, 2009.

Revenues

We had no revenues in the three-month period ended March 31, ~~2008~~2009. Currently, we are continuing to work several properties through the entitlement process and expect to generate revenues from those activities in ~~2008~~2009. However, we also expected revenues in the past that have yet to materialize, in part due to disruptions in the real estate and finance markets. Due to our limited revenues, our operations are currently funded by capital funding.

Selling, General and Administrative Expenses

Our operating selling, general and administrative expenses totaled $21,~~469~~374,~~238~~055 during the three-month period ended March 31, ~~2008~~2009, compared to $1 2,~~065~~301,~~009~~703 during the comparable three-month period ended March 31, ~~2007~~2008. The ~~increase~~decrease in operating expenses is primarily attributable to ~~increased~~decreased ~~salaries~~salary ~~of our executive officers~~ and ~~additional employees,~~ office ~~costs,~~expense ~~professional~~allowance ~~services~~obligations. We anticipate that our general and administrative expenses towill ~~level~~continue ~~off~~to decrease in the coming three-months due to ~~some~~additional internal austerity measures and suspension of certain property development activities. ~~However~~Nevertheless, we expect a continuation of entitlement activities on a number of property projects ~~discussed above~~. We do not anticipate significant revenues during the next three months,; however, we do expect limited revenues from the sale of an undeveloped land ~~parcel~~parcels. We also expect revenues in the ~~next~~coming ~~twelve~~ months derived from the sale of entitled residential building lots out of the Wyoming property.

Liquidity and Capital Resources

At March 31, ~~2008~~2009, we had cash and cash equivalents of $~~244~~681,~~148~~168, compared to $1244,~~556,730~~148 at March 31, ~~2007~~2008. Our ~~decreased~~management ~~cash~~believes ~~balance~~that asproceeds offrom ~~March~~private 31offerings, ~~2008~~loans isand ~~largely~~expected ~~attributable~~revenues towill ~~deployment~~be ofsufficient ~~capital~~for us to ~~meet~~survive ~~selling~~as a going concern for the next 12 months. However, ~~general~~due ~~and~~to ~~administrative~~the ~~expenses~~severe downturn in the real estate and financial markets, we believe that we will need to ~~secure~~greatly ~~rights~~reduce our operational costs during this period. Moreover, additional funding will be necessary to ~~real~~make ~~property~~adjustments to our business model. Management is actively pursuing additional sources of funding. In addition, management is expecting an increase in cash flows through anticipated revenue from the purchase and resale of foreclosed residential properties acquired from third parties.

~~Our~~However, ~~management~~if ~~believes~~we ~~that~~do ~~proceeds~~not ~~from~~raise ~~private~~sufficient ~~offerings,~~funds ~~loans~~in ~~and~~the ~~expected~~future, ~~revenues~~we ~~will~~may not be ~~sufficient~~able ~~for~~to usimplement toour ~~survive~~business asplan, ameet ~~going~~our ~~concern~~existing ~~for~~debt ~~the~~obligations, ~~next~~take 12advantage ~~months.~~of ~~However,~~opportunities ~~additional~~created ~~funding~~by ~~will~~the bedramatic ~~necessary~~shifts toin ~~finance~~the ~~growth~~real estate and financial markets or respond to ~~achieve~~competitive ~~our~~pressures ~~strategic~~or ~~objectives~~unanticipated requirements. ~~Management~~Financing istransactions ~~actively~~in ~~pursuing~~the ~~additional~~future ~~sources~~may ofinclude ~~funding.~~the Inissuance ~~addition,~~of ~~management~~additional isequity ~~expecting~~or andebt ~~increase~~securities, inobtaining ~~cash~~credit ~~flows~~facilities, ~~through~~or ~~anticipated~~other ~~increases~~financing ~~in revenue~~mechanisms.

However, if we do not raise sufficient funds in the future, we may not be able to fund expansion, take advantage of future opportunities, meet our existing debt obligations or respond to competitive pressures or unanticipated requirements. Financing transactions in the future may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Contractual Obligations

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

Item 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations and related forms, and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of March 31, 2008, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. 14

As of March 31, 2009, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective. The primary reason for this conclusion was the need for restatements of several of our financial disclosures in the past 12 months. Since determining that our disclosure controls and procedures were not effective during 2008, we have implemented corrective policies and procedures. As of March 31, 2009, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Controls

There have been no changes in our internal controls over financial reporting during the quarter ended March 31, ~~2008~~2009 that have materially affected or are reasonably likely to materially affect our internal controls.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

To the best knowledge of the officers and directors, the Company is not a party to any legal proceeding or litigation.

Item 1A. Risk Factors.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the three month period ended March 31, ~~2008~~2009, we ~~received~~sold ~~$354~~1,~~365~~268,545 ~~from the sale of our~~ common and preferred Dlimited ~~member~~liability company units toof ~~22 persons. In addition,~~ our consolidated ~~subsidiary~~subsidiaries ~~Castle Arch Smyrna, LLC received $566,000 from the sale of its common and preferred A member units~~ to 956 persons. ~~Finally,~~for ~~our~~a ~~consolidated~~total ~~subsidiary~~of ~~Castle Arch Secured Development Fund, LLC received~~ $12,~~036~~868,~~091 from the sale of its preferred A member units to 30 persons~~836. We believe the transactions to be exempt under Section 4(2) of the Securities Act of 1933, as amended, because they do not involve a public offering. We believe that this sale of securities did not involve a public offering on the basis that each investor is an accredited investor as defined in Rule 501 of Regulation D and because we provided each of our investors with a private placement memorandum disclosing items set out in Rule 501 and 506 of Regulation D. The shares sold were restricted securities as defined in Rule 144(a)(3). Further, each common and preferred unit certificate issued in connection with this private offering bears a legend providing, in substance, that the securities have been acquired for investment only and may not be sold, transferred or assigned in the absence of an effective registration statement or opinion of legal counsel that registration is not required under the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities.

~~None~~In 2008, ANB Financial, one of our lenders (“Lender”) was closed by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (“FDIC”) was named receiver. At the time of the closure, we had two Promissory Notes outstanding with the Lender, totaling $5,380,193 and $1,466,361, respectively. In June, 2008, both Promissory Notes became due and payable. Prior to such closure, we were engaged in discussions with the Lender regarding extension of the Notes. In 2008, the FDIC sold the two Promissory Notes to a third party lender, and we continue to communicate with this third party regarding possible modification of the terms of the loans. Subsequent to the two Promissory Notes’ original maturity dates in June, 2008, we have continued to accrue corresponding interest on these loans at the default rate. The total interest arrearage as of March 31, 2009 is $824,459 on the $5,380,193 note and $230,490 in interest accrued on the $1,466,361 note.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

During the three month period ended March 31, 2008, Jad Howell, Age 29, our controller, was appointed to serve as our principal financial officer charged with the duty of reviewing and attesting to our SEC filings and making certifications required by lawNone. Mr. Howell has served as our controller since 2005. Prior to joining Castle Arch, Mr. Howell was worked in the Richmond Virginia office of Deloitte & Touche, an audit, tax, consulting, and financial advisory services firm. Prior to Deloitte & Touche, Mr. Howell was a financial analyst at CB Richard Ellis, the world's largest commercial real estate services company during 2003 and 2004. Mr. Howell has a B.S. in accounting from the University of Utah and a Master is accounting from The College of William and Mary in Williamsburg, Virginia. Mr. Howell is a CPA and a member of the AICPA.

Douglas Child, our CFO, who has historically signed the certification of principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and the certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 entered into a stipulation with the SEC in November 2007 wherein Mr. Child agreed to a prohibition from practicing before the SEC as an accountant as a result of an alleged SEC Rule 102(e) violation in connection with Mr. Child's audit work with an entity unrelated to Castle Arch. A final order from the SEC is pending. As a result of the stipulation, we take the position that it may not be appropriate for Mr. Child to review or sign our SEC reports, and therefore may not appropriate for him to sign the Sarbanes Oxley certifications. As a result, Mr. Howell was appointed and charged with the responsibility of acting as our principal financial officer.15

Item 6. Exhibits required by Item 601 of Regulation S-K.

(a)

Exhibits (filed with this report unless indicated below)

Exhibit 3.1*

Articles of Organization Dated April 12, 2004

Exhibit 3.2*

Amended Operating Agreement Dated 7/21/04

Exhibit 31.1

Certification of principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2

Certification of principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1

Certification of principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2

Certification of principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


*	Filed as an exhibit to the Company's Registration Statement on Form 10-SB, as filed with the SEC on March 30, 2005, and incorporated herein by this reference.

(b)

Reports on Form 8-K.

No reports on Form 8-K were filed by the Company during the three months ended March 31, ~~2008~~2009.

1916

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CASTLE ARCH REAL ESTATE INVESTMENT COMPANY, L.L.C.

Dated: May 2015, ~~2008~~2009

By: /s/ Kirby D. Cochran

Kirby D. Cochran, Chief Executive Officer

Chief Executive Officer

(Principal Executive Officer)

By: /s/ ~~Jad~~Douglas ~~Howell~~ W. Child

~~Jad~~Douglas ~~Howell~~W. Child, Chief Financial Officer

(Principal Financial Officer)

2017

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