10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-52566

CORNERSTONE CORE PROPERTIES

REIT, INC.

(Exact name of registrant as specified in its charter)

MARYLAND	73-1721791
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1920 MAIN STREET, SUITE 400, IRVINE, CA	92614
(Address of principal executive offices)	(Zip Code)

949-852-1007

(Registrant’s telephone number, including area code)

Not Applicable

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

Indicate by check mark whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act of 1934 during the preceding 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.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the
Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (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 Act).    ¨  Yes    x  No

As of August 13, 2012 we had 23,028,285 shares issued and outstanding.

PART I — FINANCIAL INFORMATION

FORM 10-Q

Cornerstone Core Properties REIT, Inc.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011 (unaudited)	3
	Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2012 (unaudited) and 2011 (unaudited)	4
	Condensed Consolidated Statements of Equity for the Six Months Ended June 30, 2012 (unaudited) and 2011 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2012 (unaudited) and 2011 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6.	Exhibits	42
SIGNATURES		43
EX-31.1
EX-31.2
EX-32.1

2

CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	June 30, 2012			December 31, 2011
ASSETS
Cash and cash equivalents	$	7,967,000		$	17,388,000
Investments in real estate:
Land		11,733,000			11,733,000
Buildings and improvements, net		32,671,000			33,330,000
Intangible lease assets, net		57,000			83,000
Net real estate (Note 4)		44,461,000			45,146,000
Notes receivable, net (Note 7)		908,000			908,000
Receivable from related party (Note 9)		—			—
Deferred costs and deposits		23,000			27,000
Deferred financing costs, net		74,000			91,000
Tenant and other receivables, net		448,000			567,000
Other assets, net		1,228,000			625,000
Assets of variable interest entity held for sale		4,208,000			5,372,000
Total assets	$	59,317,000		$	70,124,000
LIABILITIES AND EQUITY
Notes payable	$	13,235,000		$	21,070,000
Accounts payable and accrued liabilities		1,177,000			785,000
Payable to related parties		—			20,000
Prepaid rent, security deposits and deferred revenue		605,000			460,000
Intangible lease liabilities, net		23,000			44,000
Liabilities of variable interest entity held for sale		2,266,000			2,119,000
Total liabilities		17,306,000			24,498,000
Commitments and contingencies (Note 15)
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding at June 30, 2012 and  December 31, 2011		—			—
Common stock, $0.001 par value; 290,000,000 shares authorized; 23,028,285 shares issued and outstanding at June 30, 2012 and December 31, 2011  respectively		23,000			23,000
Additional paid-in capital		117,226,000			116,238,000
Accumulated deficit		(72,823,000	)		(68,748,000	)
Total stockholders’ equity		44,426,000			47,513,000
Noncontrolling interests		(2,415,000	)		(1,887,000	)
Total equity		42,011,000			45,626,000
Total liabilities and equity	$	59,317,000		$	70,124,000

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

3

CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenues:
Rental revenues	$	854,000		$	916,000		$	1,652,000		$	1,791,000
Tenant reimbursements and other income		216,000			236,000			422,000			466,000
Interest income from notes receivable		14,000			104,000			27,000			263,000
		1,084,000			1,256,000			2,101,000			2,520,000
Expenses:
Property operating and maintenance		440,000			425,000			794,000			818,000
General and administrative		698,000			755,000			1,732,000			1,371,000
Asset management fees		207,000			411,000			422,000			826,000
Depreciation and amortization		389,000			544,000			770,000			1,073,000
Reserve for excess advisor obligation		988,000			—			988,000			—
Impairment of note receivable		—			1,650,000			—			1,650,000
Impairment of real estate		—			23,219,000			—			23,219,000
		2,722,000			27,004,000			4,706,000			28,957,000
Operating loss		(1,638,000	)		(25,748,000	)		(2,605,000	)		(26,437,000	)
Interest expense		(167,000	)		(320,000	)		(433,000	)		(611,000	)
Loss from continuing operations		(1,805,000	)		(26,068,000	)		(3,038,000	)		(27,048,000	)
Discontinued operations:
Loss before impairments		(115,000	)		274,000			(425,000	)		482,000
Impairment of real estate asset held for sale		—			(19,145,000	)		(1,140,000	)		(19,145,000	)
Loss from discontinued operations		(115,000	)		(18,871,000	)		(1,565,000	)		(18,663,000	)
Net loss		(1,920,000	)		(44,939,000	)		(4,603,000	)		(45,711,000	)
Noncontrolling interest’s share in losses		225,000			52,000			528,000			52,000
Net loss applicable to common shares	$	(1,695,000	)	$	(44,887,000	)	$	(4,075,000	)	$	(45,659,000	)
Basic and diluted loss per common share
Continuing operations	$	(0.08	)	$	(1.11	)	$	(0.13	)	$	(1.15	)
Discontinued operations	$	—		$	(0.80	)	$	(0.05	)	$	(0.80	)
Net loss applicable to common shares	$	(0.08	)	$	(1.91	)	$	(0.18	)	$	(1.95	)
Weighted average shares used to calculate basic and diluted net loss per common share		23,028,284			23,521,838			23,028,284			23,473,816
Distributions declared per common share	$	—		$	0.02		$	—		$	0.04

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

4

CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Six Months Ended June, 2012 and 2011

(Unaudited)

	Common Stock
	Number of Shares		Common Stock Par Value		Additional Paid-In Capital		Accumulated Deficit			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance — December 31, 2011		23,028,285	$	23,000	$	116,238,000	$	(68,748,000	)	$	47,513,000		$	(1,887,000	)	$	45,626,000
Issuance of common stock		—		—		—
Redeemed shares		—		—		—		—			—			—			—
Reduction of excess offering costs		—		—		988,000		—			988,000			—			988,000
Dividends declared		—		—		—		—			—			—			—
Net loss		—		—		—		(4,075,000	)		(4,075,000	)		(528,000	)		(4,603,000	)
Balance — June 30, 2012		23,028,285	$	23,000	$	117,226,000	$	(72,823,000	)	$	44,426,000		$	(2,415,000	)	$	42,011,000

	Common Stock
	Number of Shares			Common Stock Par Value		Additional Paid-In Capital			Accumulated Deficit			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance — December 31, 2010		23,074,381		$	23,000	$	117,520,000		$	(16,690,000	)	$	100,853,000		$	117,000		$	100,970,000
Issuance of common stock		—			—		—			—			—			—			—
Redeemed shares		(47,146	)		—		(369,000	)		—			(369,000	)		—			(369,000	)
Dividends declared		—			—		(922,000	)		—			(922,000	)		(6,000	)		(928,000	)
Net loss		—			—		—			(45,659,000	)		(45,659,000	)		(52,000	)		(45,711,000	)
Balance — June 30, 2011		23,027,235		$	23,000	$	116,229,000		$	(62,349,000	)	$	53,903,000		$	59,000		$	53,962,000

5

CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

	Six Months Ended June 30,
	2012			2011
Cash flows from operating activities
Net loss	$	(4,603,000	)	$	(45,711,000	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Amortization of deferred financing costs		72,000			200,000
Depreciation and amortization		770,000			1,549,000
Straight-line rents and amortization of acquired above (below) market leases net		(52,000	)		3,000
Reserve for excess advisor obligation		988,000			—
Impairment of note receivable		—			1,650,000
Impairment  of real estate		1,140,000			42,364,000
Provision for bad debt		(9,000	)		(25,000	)
Change in operating assets and liabilities:
Tenant and other receivables		174,000			190,000
Other assets		(581,000	)		130,000
Accounts payable and accrued liabilities		443,000			(17,000	)
Payable to related parties, net		(11,000	)		97,000
Prepaid rent, security deposit and deferred revenues		(84,000	)		(168,000	)
Net cash (used in) provided by operating activities		(1,753,000	)		262,000
Cash flows from investing activities
Real estate improvements		(26,000	)		(402,000	)
Real estate disposition		—			9,130,000
Notes receivable proceeds		—			150,000
Notes receivable disbursements to affiliated parties (See Note 8)		—			(318,000	)
Net cash (used in) provided by investing activities		(26,000	)		8,560,000
Cash flows from financing activities
Redeemed shares		—			(369,000	)
Security deposit refunded/received, net		231,000			—
Repayment of notes payable		(7,835,000	)		(8,244,000	)
Offering costs		—			(5,000	)
Distributions paid to stockholders		—			(611,000	)
Distributions paid to noncontrolling interest		—			(6,000	)
Deferred financing costs		(55,000	)		(57,000	)
Net cash used in financing activities		(7,659,000	)		(9,292,000	)
Net decrease in cash and cash equivalents		(9,438,000	)		(470,000	)
Cash and cash equivalents - beginning of period		17,483,000			2,014,000
Cash and cash equivalents - end of period (including cash of VIE)		8,045,000			1,544,000
Cash and cash equivalents of VIE – end of period (see Note 16)		78,000			—
Cash and cash equivalents – end of period	$	7,967,000		$	1,544,000
Supplemental disclosure of cash flow information:
Cash paid for interest	$	456,000		$	506,000
Supplemental disclosure of non-cash financing and investing activities:
Accrual for distribution declared	$	—		$	468,000
Accrued leasing commissions	$	100,000		$	6,000
Deferred loan origination fees	$	—		$	20,000
Accrued real estate improvements	$	—		$	102,000
Reduction of excess offering costs	$	988,000		$	—
Elimination of note receivable from related party through consolidation of variable interest entity (See Note 8)
Assets acquired	$	—		$	10,069,000
Liabilities assumed	$	—		$	1,806,000
Elimination of note receivable	$	—		$	8,263,000

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

6

CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2012

(Unaudited)

1. Organization

Cornerstone Core Properties REIT, Inc., a Maryland Corporation, was formed on October 22, 2004 under the General Corporation Law of Maryland for the purpose of engaging in the business of investing in and owning commercial real estate. As used in this report, the “Company”, “we”, “us” and “our” refer to Cornerstone Core Properties REIT, Inc. and its consolidated subsidiaries except where the context otherwise requires. Subject to certain restrictions and limitations, our business is managed pursuant to an advisory agreement (the “Advisory Agreement”) by an affiliate, Cornerstone Realty Advisors, LLC (the “Advisor”), a Delaware limited liability company that was formed on November 30, 2004.

Cornerstone Operating Partnership, L.P. (the “Operating Partnership”), a Delaware limited partnership, was formed on November 30, 2004. At June 30, 2012, we owned a 99.88% general partner interest in the Operating Partnership while the Advisor owned a 0.12% limited partnership interest. We conduct substantially all of our operations through the Operating Partnership. Our financial statements and the financial statements of the Operating Partnership are consolidated in the accompanying condensed consolidated financial statements. These financial statements include consolidation of a variable interest entity (see Note 10). All intercompany accounts and transactions have been eliminated in consolidation.

2. Public Offerings and Strategic Alternatives

On January 6, 2006, we commenced an initial public offering of a minimum of 125,000 shares and a maximum of 55,400,000 shares of our common stock, consisting of 44,400,000 shares for sale to the public (the “Primary Offering”) and 11,000,000 shares for issuance pursuant to our distribution reinvestment plan. We stopped making offers under our initial public offering on June 1, 2009 upon raising gross offering proceeds of approximately $172.7 million from the sale of approximately 21.7 million shares, including shares sold under the distribution reinvestment plan. On June 10, 2009, we commenced a follow-on offering of up to 77,350,000 shares of our common stock, consisting of 56,250,000 shares for sale to the public (the “Follow-On Offering”) and 21,100,000 shares for sale pursuant to our dividend reinvestment plan. The Primary Offering and Follow-On Offering are collectively referred to as the “Offerings.” We retained Pacific Cornerstone Capital, Inc. (“PCC”), an affiliate of our Advisor, to serve as the dealer manager for the Offerings. PCC was responsible for marketing our shares being offered pursuant to the Offerings.

As of June 30, 2012, we had raised $167.1 million of gross proceeds from the sale of 20.9 million shares of our common stock in our Primary and Follow-On Offerings which were used to fund operations, assist in acquiring thirteen properties, four of which were sold during 2011, and pay for distributions. Our revenues, which are comprised largely of rental income, include rents reported on a straight-line basis over the initial term of each lease. Our growth depends, in part, on our ability to increase rental income and other earned income from leases by increasing rental rates and occupancy levels and controlling operating and other expenses. Our operations are impacted by property-specific, market-specific, general economic and other conditions.

Effective November 23, 2010, we stopped soliciting and accepting offers to purchase shares of our stock while our board of directors evaluates strategic alternatives to maximize value. On June 10, 2012, our Follow-on Offering was terminated.

Suspension of Distribution Reinvestment Plan. Our Offerings included a distribution reinvestment plan under which our stockholders could elect to have all or a portion of their distributions reinvested in additional shares of our common stock. We suspended our distribution reinvestment plan effective December 14, 2010. All distributions paid after December 14, 2010 have been and will be made in cash.

Distributions. Effective December 1, 2010, our board of directors resolved to reduce distributions on our common stock to an annualized rate of $0.08 per share (1% based on a share price of $8.00), from the prior annualized rate of $0.48 per share (6% based on a share price of $8.00), in order to preserve capital that may be needed for capital improvements, debt repayment or other corporate purposes. Distributions at this rate were declared for the first and second quarters of 2011. In June 2011, the board decided, based on the financial position of the Company, to suspend the declaration of further distributions and to defer the payment of the second quarter 2011 distribution until the financial position improved. In the fourth quarter of 2011, we used a portion of the proceeds from the sale of properties in Arizona to pay the deferred second quarter distributions. No distributions have been declared for periods after June 30, 2011. The rate and frequency of distributions is subject to the discretion of our board of directors and may change from time to time based on our operating results and cash flow.

7

Stock Repurchase Program. Our board of directors approved an amendment to our stock repurchase program to suspend redemptions under the program effective December 31, 2010. We can make no assurances as to whether and on what terms redemptions will resume. The share redemption program may be amended, resumed, suspended again, or terminated at any time.

Strategic Alternatives. Our board of directors continues to evaluate and implement strategic alternatives to reposition the company and enhance shareholders’ value. Specifically, we sold the Goldenwest property in June 2011 for gross proceeds of $9.4 million and made a principal payment of $7.8 million on the HSH Nordbank credit facility. Additionally, we sold the Mack Deer Valley and Pinnacle Park Business Center properties in November 2011 for gross proceeds of approximately $23.9 million. The net proceeds were used, in part, to pay down the remaining balance of the HSH Nordbank credit facility. In December 2011, we sold the 2111 South Industrial Park property for gross proceeds of $0.9 million. The proceeds were used to pay down the Wells Fargo Bank, National Association (“Wells Fargo”) loan. Furthermore, in February 2012, we amended our loan agreement with Wells Fargo. The amendment, executed upon our making a $7.5 million principal payment, extended the maturity date of the loan from February 13, 2012 to February 13, 2014 and reduced the interest rate from 300 basis points over one-month LIBOR to 200 basis points over one-month LIBOR, with the LIBOR floor remaining fixed at 150 basis points. We are continuing to pursue options for repaying our debt, including asset sales.  

In the first quarter of 2012, we announced an estimated per-share value of our common stock equal to $2.09 per share as of December 31, 2011. Our estimated per-share value was calculated by aggregating the estimated fair value of our investments in real estate and the estimated fair value of our other assets, subtracting the estimated fair value of our liabilities, and dividing the total by the number of our common shares outstanding as of December 31, 2011.

As a strategy to potentially increase the per-share value of our common shares, our board of directors is considering diversifying our investment objectives to add healthcare-related assets to our existing portfolio of industrial properties. In connection with such acquisitions, the board of directors may consider acquiring assets with long-term financing in order to leverage the capital available to us and increase our assets under management to enable better diversification. In August, 2012, we acquired two healthcare-related properties in the Portland, Oregon metropolitan area through a joint venture with an affiliate of our advisor. As part of this acquisition, we also acquired an option to purchase a third healthcare-related property in the Portland area (see Note 18). We may, at some time in the future, reduce our ownership position in the joint venture as a means to diversify our risk by property type, geographic location, operator and debt levels.

3. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared by our management in accordance with generally accepted accounting principles of the United States of America (“GAAP”) and in conjunction with the rules and regulations of the SEC. Certain amounts have been reclassified for prior periods to conform to current period presentation. Assets sold or held for sale and associated liabilities have been reclassified on the condensed consolidated balance sheets and the related operating results reclassified from continuing to discontinued operations on the condensed consolidated income statements. Additionally certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements.

The accompanying financial information reflects all adjustments which are, in the opinion of management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the 2011 Annual Report on Form 10-K as filed with the SEC. Operating results for the six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

Use of Estimates

The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on various assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted. For more information regarding our critical accounting policies and estimates please refer to “Summary of Significant Accounting Policies” contained in our Annual Report on Form 10-K for the year ended December 31, 2011. For the quarter and six months ended June 30, 2012, there have been no material changes to such accounting policies.

8

Fair Value of Financial Instruments and Fair Value Measurements

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 825-10, Financial Instruments, requires the disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practical to estimate that value.

Fair value represents the estimate of the proceeds to be received, or paid in the case of a liability, in a current transaction between willing parties. ASC 820, Fair Value Measurement (“ASC 820”) establishes a fair value hierarchy to categorize the inputs used in valuation techniques to measure fair value. Inputs are either observable or unobservable in the marketplace. Observable inputs are based on market data from independent sources and unobservable inputs reflect the reporting entity’s assumptions about market participant assumptions used to value an asset or liability.

Financial assets and liabilities recorded at fair value on the condensed consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1. Quoted prices in active markets for identical instruments.

Level 2. Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified according to the lowest level input that is significant to their valuation. A financial instrument that has a significant unobservable input along with significant observable inputs may still be classified as a Level 3 instrument.

We generally determine or calculate the fair value of financial instruments using quoted market prices in active markets, when such information is available, or appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow.

Our condensed consolidated balance sheets include the following financial instruments: cash and cash equivalents, notes receivable, tenant and other receivables, certain other assets, deferred costs and deposits, accounts payable and accrued liabilities, payable to related parties, prepaid rent, security deposits and deferred revenue, and notes payable. With the exception of notes receivable and notes payable discussed below, we consider the carrying values to approximate fair value for such financial instruments based on Level 1 inputs because of the short period of time between origination of the instruments and their expected payment.

As of June 30, 2012 and December 31, 2011, the fair value of notes receivable was $1.0 million and $0.9 million, compared to the carrying value of $0.9 million and $0.9 million, respectively. The fair value of notes receivable was estimated by discounting the expected cash flows at current market rates at which management believes similar loans would be made. To estimate fair value at June 30, 2012, we discounted the expected cash flows using a rate of 10.00%. As the inputs to our valuation estimate are neither observable in nor supported by market activity, our notes receivable are classified as Level 3 assets within the fair value hierarchy.

As of June 30, 2012 and December 31, 2011, the fair value of notes payable was $13.6 million and $21.3 million, compared to the carrying value of $13.2 million and $21.1 million, respectively. The fair value of notes payable is estimated by discounting the contractual cash payments using lending rates available to us for financial instruments with similar terms and maturities. To estimate fair value at June 30, 2012, we utilized discount rates ranging from 3.50% to 4.07%. As the inputs to our valuation estimate are neither observable in nor supported by market activity, our notes payable are classified as Level 3 assets within the fair value hierarchy.

As a result of our ongoing analysis for potential impairment of our investments in real estate, including properties classified as held for sale, we were required to adjust the carrying value of certain assets to their estimated fair values during the first quarter of 2012 (see Note 4). No impairments were recorded during the three months ended June 30, 2012.

9

The following table summarizes the assets measured at fair value on a nonrecurring basis during the six months ended June 30, 2012:

	Total Fair Value Measurement		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Net Losses for the Six Months Ended June 30, 2012
Variable interest entity held for sale	$	3,760,000	$	—	$	3,760,000	$	—	$	(1,140,000	)

The variable interest entity held for sale measured at fair value during the first quarter of 2012 was deemed to be a Level 2 asset as we have received a formal offer for the property. We do not believe that this asset was a Level 1 asset as of the valuation date as a purchase and sale agreement had not been signed, giving the potential buyer the right to opt out of the transaction at its discretion.

At June 30, 2012 and December 31, 2011, we do not have any financial assets or financial liabilities that are measured at fair value on a recurring basis in our condensed consolidated financial statements.

Reclassification

Assets sold or held for sale and their associated liabilities have been reclassified on the condensed consolidated balance sheets and operating results have been reclassified from continuing to discontinued operations.

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). The amendments in this update result in additional fair value measurement and disclosure requirements within U.S. GAAP and IFRS. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The Company’s adoption of ASU 2011-04 on January 1, 2012 did not have a significant impact on its consolidated financial condition, results of operations, and/or its disclosures.

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4. Investments in Real Estate

As of June 30, 2012, our portfolio consisted of nine properties which were approximately 80.1% leased. The following table provides summary information regarding our properties.

Property(1)	Location		Date Purchased		Square Footage		Purchase Price		Debt		June 30 2012 %  Leased
Shoemaker Industrial Buildings		Santa Fe Springs, CA		June 30, 2006		18,921	$	2,400,000	$	—		75.7	%
20100 Western Avenue		Torrance, CA		December 1, 2006		116,433		19,650,000		—		100.0	%
Marathon Center		Tampa Bay, FL		April 2, 2007		52,020		4,450,000		—		37.6	%
Orlando Small Bay Portfolio:
Carter Commerce Center		Winter Garden, FL		November 15, 2007		49,125						64.9	%
Goldenrod Commerce Center		Orlando, FL		November 15, 2007		78,646						85.8	%
Hanging Moss Commerce Center		Orlando, FL		November 15, 2007		94,200						80.4	%
Monroe South Commerce Center		Sanford, FL		November 15, 2007		172,500						62.0	%
						394,471		37,128,000		6,679,000		71.5	%
Monroe North Commerce Center		Sanford, FL		April 17, 2008		181,348		14,275,000		6,556,000		97.3	%
1830 Santa Fe		Santa Ana, CA		August 5, 2010		12,200		1,315,000		—		100.0	%
						775,393	$	79,218,000	$	13,235,000		80.1	%

(1) The table excludes Sherburne Commons, a variable interest entity for which we became the primary beneficiary and began consolidating its financial results as of June 30, 2011. As of October 19, 2011, Sherburne Commons was classified as held for sale (see Notes 8 and 10).

As of June 30, 2012, adjusted cost and accumulated depreciation and amortization related to investments in real estate and related intangible lease assets and liabilities were as follows:

	Land		Buildings and Improvements			Acquired Above- Market Leases			In-Place Lease Value			Acquired Below- Market Leases
Investments in real estate and related intangible lease assets (liabilities)	$	11,733,000	$	34,206,000		$	1,401,000		$	1,181,000		$	(620,000	)
Less: accumulated depreciation and amortization		—		(1,535,000	)		(1,373,000	)		(1,152,000	)		597,000
Net investments in real estate and related intangible lease assets (liabilities)	$	11,733,000	$	32,671,000		$	28,000		$	29,000		$	(23,000	)

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As of December 31, 2011, adjusted cost and accumulated depreciation and amortization related to investments in real estate and related intangible lease assets and liabilities were as follows:

	Land		Buildings and Improvements			Acquired Above- Market Leases			In-Place Lease Value			Acquired Below- Market Leases
Investments in real estate and related intangible lease assets (liabilities)	$	11,733,000	$	34,180,000		$	1,401,000		$	1,181,000		$	(620,000	)
Less: accumulated depreciation and amortization		—		(850,000	)		(1,365,000	)		(1,134,000	)		576,000
Net investments in real estate and related intangible lease assets (liabilities)	$	11,733,000	$	33,330,000		$	36,000		$	47,000		$	(44,000	)

Depreciation expense associated with buildings and improvements, including real estate held for sale, for the three months ended June 30, 2012 and 2011 was $0.3 million and $0.7 million, respectively. Depreciation expense for the six months ended June 30, 2012 and 2011 was $0.7 million and $1.4 million, respectively. We are required to make subjective assessments as to the useful lives of our depreciable assets. In making such assessments, we consider each asset’s expected period of future economic benefit to estimate the appropriate useful lives.

Net amortization expense associated with the intangible lease assets and liabilities, including those associated with real estate held for sale, for the three months ended June 30, 2012 and 2011 was $2,000, and $35,000, respectively. Net amortization expense for the six months ended June 30, 2012 and 2011 was $4,000, and $93,000, respectively. Estimated net amortization expense for July 1, 2012 through December 31, 2012 and for each of the five following years ended December 31 is as follows:

	Amortization of Intangible  Lease Assets
July 1, 2012 to December 31, 2012	$	1,000
2013	$	19,000
2014	$	8,000
2015	$	6,000
2016	$	—
2017 and thereafter	$	—

The estimated useful lives of intangible lease assets range from approximately one month to four years. As of June 30, 2012, the weighted-average amortization periods for in-place leases, acquired above-market leases and acquired below-market leases were 1.5 years, 2.3 years and 0.5 years, respectively.

Impairments

In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), we regularly conduct comprehensive reviews of our real estate assets for impairment. ASC 360 requires that asset values be analyzed whenever events or changes in circumstances indicate that the carrying value of a property may not be fully recoverable.

The intended use of an asset, either held for sale or held and used, can significantly impact how impairment is measured. If an asset is intended to be held and used, the impairment analysis is based on a two-step test.

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The first test measures estimated expected future cash flows (undiscounted and without interest charges) over the holding period, including a residual value, against the carrying value of the property. If the asset fails that test, the asset’s carrying value is compared to the estimated fair value from a market-participant standpoint, with the excess of the asset’s carrying value over the estimated fair value recognized as an impairment charge to earnings.

We recorded no impairment charges related to properties held and used for the six months ended June 30, 2012 and 2011.

Real Estate Held for Sale

In the fourth quarter of 2011, we reclassified Nantucket Acquisition LLC, a VIE for which we are the primary beneficiary, to real estate held for sale. The financial results for this property have been reclassified to discontinued operations for all periods presented (see Note 16).

When assets are classified as held for sale, they are recorded at the lower of carrying value or the estimated fair value of the asset, net of estimated selling costs. Accordingly, we assessed Sherburne Commons, the property owned by Nantucket Acquisition LLC, to determine whether its carrying value exceeded its estimated fair value, net of estimated selling costs, as of June 30, 2012. We estimated fair value, net of estimated selling costs, for Sherburne Commons based on a formal offer to acquire the property received from an independent third party. Consequently, we recorded an impairment charge of $1.1 million in the first quarter of 2012. The property was deemed to be a Level 2 asset as our estimate of fair value was based on a non-binding purchase offer. We do not believe that this asset was a Level 1 asset as a purchase and sale agreement had not been signed as of the valuation date, giving the potential buyer the right to opt out of the transaction at its discretion (see Note 3).

Leasing Commissions

Leasing commissions are capitalized at cost and amortized on a straight-line basis over the related lease term. As of June 30, 2012 and December 31, 2011, we recorded $0.7 million and $0.4 million in leasing commissions, respectively. Amortization expense for the three months ended June 30, 2012 and 2011 was $38,000 and $32,000, respectively. Amortization expense for the six months ended June 30, 2012 and 2011 was $68,000 and $64,000 respectively.

5. Allowance for Doubtful Accounts

Our allowance for doubtful accounts was $0.2 million as of June 30, 2012 and December 31, 2011.

6. Concentration of Risk

Financial instruments that potentially subject us to a concentration of credit risk are primarily cash investments, notes receivable and the note receivable from related party. Refer to Notes 7 and 8 with regard to credit risk evaluation of notes receivable and the note receivable from related party, respectively. Cash is generally invested in investment-grade short-term instruments.

On July 21, 2010, President Obama signed into law the “Dodd-Frank Wall Street Reform and Consumer Protection Act” that implements significant changes to the regulation of the financial services industry, including provisions that made permanent the $250,000 limit for federal deposit insurance and increased the cash limit of Securities Investor Protection Corporation protection from $100,000 to $250,000, and provided unlimited federal deposit insurance until January 1, 2013, for non-interest bearing demand transaction accounts at all insured depository institutions. As of June 30, 2012, we had cash accounts in excess of FDIC-insured limits. However, we do not believe this risk is significant.

As of June 30, 2012, we owned three properties in the state of California and six properties in the state of Florida. Accordingly, there is a geographic concentration of risk subject to economic conditions in these states.

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7. Notes Receivable

In May 2008, we agreed to loan up to $10.0 million at a rate of 10% per year to two real estate operating companies, Servant Investments, LLC (“SI”) and Servant Healthcare Investments, LLC (“SHI” and collectively with SI, “Servant”). In May 2010, the loan commitments were reduced to $8.75 million. The loans were scheduled to mature on May 19, 2013. At the time the loans were negotiated, Servant was a sub-advisor in an alliance with the managing member of our Advisor.

On a quarterly basis, we evaluate the collectability of our notes receivable. Our evaluation of collectability involves judgment, estimates, and a review of the underlying collateral and borrower’s business models and future cash flows from operations. During the third quarter of 2009, we concluded that the collectability of the SI note could not be reasonably assured. Therefore, we recorded a reserve of $4.6 million against the note balance. As of June 30, 2012 and December 31, 2011, the SI note receivable had a net balance of $0. It is our policy to recognize interest income on the reserved loan on a cash basis. For the three and six months ended June 30, 2011 and 2010, no interest income related to the SI note receivable was recorded.

In the second quarter of 2011, after evaluating the expected effects of changes in the borrower’s business prospects, including the uncertainty surrounding Servant’s realization of the fees pursuant to a sub-advisory agreement, we concluded that it was probable that the Company would be unable to collect all amounts due according to the terms of the SHI note and consequently, we recorded a note receivable impairment of $1.7 million against the balance of that note.

In December 2011, the notes receivable were restructured to provide for the settlement of the notes in the amount of $2.5 million, $1.5 million of which was received from the borrower in December 2011. The remaining $1.0 million is payable pursuant to a promissory note from SHI which provides for interest at a fixed rate of 5.00% per annum. A principal payment of $0.7 million, plus any accrued and unpaid interest, is due on December 22, 2013 and the remaining balance of $0.3 million, plus any accrued and unpaid interest, is due on December 22, 2014. The note receivable was recorded at its present value of $0.9 million on our consolidated balance sheet as of December 31, 2011.

The following table reconciles notes receivable from January 1, 2012 to June 30, 2012 and from January 1, 2011 to June 30, 2011:

	2012		2011
Balance at January 1,	$	908,000	$	4,000,000
Additions:
Additions to notes receivable		—		—
Deductions:
Notes receivable repayments		—		(150,000	)
Notes receivable impairments		—		(1,650,000	)
Balance at June 30,	$	908,000	$	2,200,000

As of June 30, 2012 and December 31, 2011, the SHI note receivable had a balance of $0.9 million. For the six months ended June 30 2012 and 2011, interest income related to the note receivable was $27,000 and $0.2 million, respectively. We determined that Servant is not a variable interest entity and there is no requirement to include this entity in our condensed consolidated balance sheets and condensed consolidated statements of operations.

8. Note Receivable from Affiliated Party

On December 14, 2009, we made a participating first mortgage loan commitment of $8.0 million to Nantucket Acquisition LLC (“Nantucket Acquisition”), a Delaware limited liability company owned and managed by Cornerstone Ventures Inc., an affiliate of our Advisor. The loan was made in connection with Nantucket Acquisition’s purchase of a 60-unit senior-living community, Sherburne Commons Residences, LLC (“Sherburne Commons”), located on the island of Nantucket, MA. The loan matures on January 1, 2015, with no option to extend and bears interest at a fixed rate of 8.0% for the term of the loan. Interest is payable monthly with the principal balance due at maturity. Under the terms of the loan, we are entitled to receive additional interest in the form of a 40% participation in the appreciation in value of the property, which is calculated based on the net sales proceeds if the property is sold, or the property’s appraised value, less ordinary disposition costs, if the property has not been sold by the time the loan matures. Prepayment of the loan is not permitted without our consent and the loan is not assumable.

Leasing activity at Sherburne Commons has been lower than originally anticipated and to preserve cash flow for operating requirements, the borrower suspended interest payments to us beginning in the first quarter of 2011. Consequently, we began recognizing interest income on a cash basis as of the first quarter of 2011. For the three months ended June 30, 2012 and 2011, interest income recognized on the note was $0. For the six months ended June 30, 2012 and 2011, interest income recognized on the note was $0 and $55,000, respectively.

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During 2011 and in the first half of 2012, the loan balance was increased by $0.5 million and $0.3 million, respectively, to provide funds for Sherburne Commons’ operating shortfalls. It is anticipated that additional disbursements may be required while efforts are made to dispose of the property.

Nantucket Acquisition is considered a variable interest entity for which we are the primary beneficiary due to our enhanced ability to direct the activities of the VIE. Consequently, we have consolidated the operations of the VIE as of June 30, 2011 and, accordingly, eliminated the note receivable from related party in consolidation (see Note 10).

On a quarterly basis, we evaluate the collectability of our note receivable from related party. Our evaluation of collectability involves judgment, estimates, and a review of the underlying collateral and borrower’s business models and future cash flows from operations. For the six months ended June 30, 2012, we recorded an impairment charge of $1.1 million attributed to the variable interest entity held for sale (see Note 10). For the six months ended June 30, 2011, we did not record any impairment on the note receivable from related party.

The following table reconciles the note receivable from related party from January 1, 2012 to June 30, 2012 and from January 1, 2011 to June 30, 2011:

	2012			2011
Balance at January 1,	$	—		$	8,000,000
Additions:
Additions to note receivable from related party		285,000			318,000
Deductions:
Repayments of note receivable from related party		—			—
Elimination of balance in consolidation of VIE		(285,000	)		—
Balance at June 30	$	—		$	8,318,000

9. Receivable from Related Party

The receivable from related party consists of the “excess organization and offering costs” reimbursed to the advisor related to our Follow-on Offering. Our Follow-on Offering was terminated on June 10, 2012. Pursuant to the advisory agreement with our advisor, within 60 days after the end of the month in which our Follow-on Offering terminated, our advisor is obligated to reimburse us to the extent that the organization and offering expenses related to our Follow-on Offering borne by us exceeded 3.5% of the gross proceeds of the Follow-on Offering. As of June 10, 2012, we had reimbursed our advisor a total of $1.1 million in organizational and offering costs related to our Follow-on Offering, of which $1.0 million was in excess of the contractual limit set forth in the advisory agreement. Therefore, we recorded a receivable of approximately $1.0 million for which we then reserved the full amount based on our analysis of collectability (see Note 13).

10. Consolidation of Variable Interest Entity

GAAP requires the consolidation of VIEs in which an enterprise has a controlling financial interest. A controlling financial interest has both of the following characteristics: (i) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

In compliance with ASC 810, Consolidation, we continuously analyze and reconsider our initial determination of VIE status to determine whether we are the primary beneficiary by considering, among other things, whether we have the power to direct the activities of the VIE that most significantly impact its economic performance. Such activities would include, among other things, determining or limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing for the VIE. We also consider whether we have the obligation to absorb losses of the VIE or the right to receive benefits from the VIE.

As of June 30, 2012, we had a variable interest in one VIE in the form of a note receivable from Nantucket Acquisition in the amount of $8.8 million (see Note 8).

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As a result of our issuing a notice of default with respect to the note, we determined that we were the primary beneficiary of the VIE. Therefore, we consolidated the operations of the VIE beginning June 30, 2011. Assets of the VIE may only be used to settle obligations of the VIE and creditors of the VIE have no recourse to the general credit of the Company. As of October 19, 2011, the Sherburne Commons property was reclassified to real estate held for sale. Consequently, the related assets and liabilities of the property are classified as assets of variable interest entity held for sale and liabilities of variable interest entity held for sale on our condensed consolidated balance sheets as of June 30, 2012 and December 31, 2011. Operating results for the property have been reclassified to discontinued operations on our condensed consolidated statement of operations for the six months ended June 30, 2012.

Because the Sherburne Commons property was reclassified to held for sale in the fourth quarter of 2011, the real estate is recorded at the lower of carrying value or the estimated fair value of the asset, net of estimated selling costs. Since June 30, 2011, leasing activity has been lower than originally anticipated and we continue to provide funds to meet Sherburne Commons’ operating shortfalls. As a result, we reduced our cash flow forecasts for purposes of determining whether the property was impaired. As a result of expected reduced leasing activity which reduced our cash flow forecasts for Sherburne Commons, we were required to adjust the property to its estimated fair value, net of estimated selling costs resulting in an impairment charge of $4.8 million, which is classified in discontinued operations as impairment of real estate sold and asset held for sale on our consolidated statement of operations for the year ended December 31, 2011.

Since the fourth quarter of 2011, the Sherburne Commons property has been actively marketed to prospective third-party buyers. In the second quarter of 2012, we received a formal offer from an independent third party to acquire the property. Based upon this evidence and management’s plan to sell the property, we determined that the offer approximates fair value. Consequently, we recorded an impairment charge of $1.1 million in the first quarter of 2012. As of the valuation date, the property was deemed to be a Level 2 asset as our estimate of fair value was based on a non-binding purchase offer. We do not believe that this asset was a Level 1 asset as a purchase and sale agreement had not been signed as of the valuation date, giving the potential buyer the right to opt out of the transaction at its discretion.

11. Payable to Related Parties

Payable to related parties at June 30, 2012 and December 31, 2011 consists of expense reimbursements payable to the Advisor.

12. Equity

Common Stock

Our articles of incorporation authorize 290,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001. As of June 30, 2012 and December 31, 2011, we had cumulatively issued 20.9  million shares of common stock for a total of $167.1 million of gross proceeds, exclusive of shares issued under our distribution reinvestment plan. On November 23, 2010, we stopped making and accepting offers to purchase shares of our stock and on June 10, 2012, our Follow-on Offering expired (see Note 2).

Distributions

Distributions paid to stockholders for the three months ended June 30, 2012 and 2011 were $0. Distributions paid to stockholders for the six months ended June 30, 2012 and 2011 were $0 and $0.5 million, respectively, all of which was paid in cash. Total cash distributions paid for the six months ended June 30, 2011 were 100% funded from cash provided by operating activities.

We adopted a distribution reinvestment plan that allows our stockholders to have their distributions invested in additional shares of our common stock. As of June 30, 2012 and December 31, 2011, 2.3  million shares had been issued under the distribution reinvestment plan. On November 23, 2010, our board of directors adopted a resolution to suspend the distribution reinvestment plan indefinitely effective December 14, 2010. As a result, distributions were paid entirely in cash after December 14, 2010. Commencing with the April 2011 distributions, the board elected to pay distributions on a quarterly basis. However, due to cash constraints, the board elected to defer the second quarter 2011 distribution payment until the Company’s cash position improved. The second quarter distribution of $0.5 million was paid in the fourth quarter of 2011. We cannot provide any assurance as to if or when we will resume our distribution reinvestment plan.

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The following table shows the distributions declared during the six months ended June 30, 2012 and 2011:

	Distributions Declared(2)						Cash Flows Provided by (Used in) Operating
Period	Cash		Reinvested		Total		Activities
First quarter 2011(1)	$	454,000	$	—	$	454,000	$	481,000
Second quarter 2011(1)	$	468,000	$	—	$	468,000	$	(219,000	)
First quarter 2012	$	—	$	—	$	—	$	(800,000	)
Second quarter 2012	$	—	$	—	$	—	$	(953,000	)

(1) 100% of the distributions declared during the six months ended June 30, 2011 represented a return of capital for federal income tax purposes.

(2) In order to meet the requirements for being treated as a REIT under the Internal Revenue Code, we must pay distributions to our shareholders each taxable year equal to at least 90% of our net ordinary taxable income. Some of our distributions have been paid from sources other than operating cash flow, such as offering proceeds.

The declaration of distributions is at the discretion of our board of directors and our board will determine the amount of distributions on a regular basis. The amount of distributions will depend on our funds from operations, financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code and other factors our board of directors deems relevant. No distributions have been declared for periods after June 30, 2011. The rate and frequency of distributions is subject to the discretion of our board of directors and may change from time to time based on our operating results and cash flow.

From our inception in October 2004 through June 30, 2012, we declared aggregate distributions of $32.8 million. Our cumulative net loss and cumulative net cash provided by operating activities during the same period were $72.8 million and $2.9 million, respectively.

Stock Repurchase Program

On November 23, 2010, our board of directors concluded that we would not have sufficient funds available to us to continue funding share repurchases. Accordingly, our board of directors suspended repurchases under the program effective December 31, 2010. In January 2011, repurchases due to the death of a shareholder that were requested in 2010, prior to the suspension of the stock repurchase program were funded. We can make no assurance as to when and on what terms redemptions will resume. Our board has the authority to resume, suspend again, or terminate the share redemption program at any time upon 30 days written notice to our stockholders. Our board of directors may modify our stock repurchase program so that we can redeem stock using the proceeds from the sale of our real estate investments or other sources.

During the six months ended June 30, 2012, we did not redeem any shares pursuant to our stock repurchase program. We have received requests to redeem 9,393 shares during the three months ended June 30, 2012. However, due to the current suspension of the stock repurchase program, we were not able to fulfill any of these requests.

During the six months ended June 30, 2011, we redeemed shares pursuant to our stock repurchase program as follows:

Period	Total Number of Shares Redeemed		Average Price Paid per Share
January 2011(1)		46,096	$	7.99
February 2011		—	$	—
March 2011		—	$	—
April 2011		—	$	—
May 2011		—	$	—
June 2011		—	$	—
		46,096

(1) In January 2011, share redemptions due to the death of a shareholder that were requested prior to the suspension of the stock repurchase program were fulfilled under the program.

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Employee and Director Incentive Stock Plan

We have adopted an Employee and Director Incentive Stock Plan (the “Plan”) which provides for the grant of awards to directors, full-time employees, and other eligible participants that provide services to us. We have no employees, and we do not intend to grant awards under the Plan to persons who are not directors. Awards granted under the Plan may consist of nonqualified stock options, incentive stock options, restricted stock, share appreciation rights, and distribution equivalent rights. The term of the Plan is ten years. The total number of shares of common stock reserved for issuance under the Plan is equal to 10% of our outstanding shares of stock at any time.

As of June 30, 2012, we had granted to our independent, non-employee directors nonqualified stock options to purchase an aggregate of 80,000 shares of common stock at an exercise price of $8.00 per share. Of these shares, 15,000 shares lapsed and were canceled on November 8, 2008 due to the resignation of one director from the board of directors on August 6, 2008. On April 6 and July 3, 2012, an additional 20,000 and 5,000 shares, respectively, lapsed and were canceled due to the resignation of Lee Powell Stedman and Jody Fouch, respectively, from the board of directors.

Outstanding stock options became immediately exercisable on the grant date, were issued with a ten-year life, and have no intrinsic value as of June 30, 2012. We recorded compensation expense for non-employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model. No stock options were exercised during the six months ended June 30, 2012 and 2011. We did not incur any non-cash compensation expense for the six months ended June 30, 2012 and 2011.

In connection with the registration of the shares in our Follow-On Offering, we suspended the issuance of options to our independent, non-employee directors under the Plan, and we do not expect to issue additional options to our independent, non-employee directors. As of June 10, 2012, our Follow-on Offering was terminated (see Note 2).

Our equity compensation plan information as of June 30, 2012 and December 31, 2011 is as follows:

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance
Equity compensation plans approved by security holders		45,000	$	8.00	See footnote (1)
Equity compensation plans not approved by security holders		—		—	—
Total		45,000	$	8.00	See footnote (1)

(1) Our Employee and Director Incentive Stock Plan was approved by our security holders and provides that the total number of shares issuable under the plan is a number of shares equal to ten percent (10%) of our outstanding common stock. The maximum number of shares that may be granted under the plan with respect to “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code is 5,000,000. As of June 30, 2012 and December 31, 2011, there were 23,028,285 shares of our common stock issued and outstanding.

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13. Related Party Transactions

Our company has no employees. Our Advisor is primarily responsible for managing our business affairs and carrying out the directives of our board of directors. We have an Advisory Agreement with the Advisor and a dealer manager agreement with PCC which entitle the Advisor and PCC to specified fees upon the provision of certain services with regard to the Offerings and investment of funds in real estate projects, among other services, as well as reimbursement for organizational and offering costs incurred by the Advisor and PCC, on our behalf and reimbursement of certain other reimbursable costs and expenses incurred by the Advisor in providing services to us.

Advisory Agreement

Under the terms of the Advisory Agreement, the Advisor will use commercially reasonable efforts to present to us investment opportunities to provide a continuing and suitable investment program consistent with the investment policies and objectives adopted by our board of directors. The Advisory Agreement calls for the Advisor to provide for our day-to-day management and to retain property managers and leasing agents, subject to the authority of our board of directors, and to perform
other duties.

The fees and expense reimbursements payable to the Advisor under the Advisory Agreement are described below. As discussed below, we amended the Advisory Agreement on August 31, 2011 to reduce the asset management fee payable by us to our Advisor effective October 1, 2011.

Organizational and Offering Costs. Organizational and offering costs of our Offerings have been paid by the Advisor on our behalf and have been reimbursed to the Advisor from the proceeds of our Offerings. Organizational and offering costs consist of all expenses (other than sales commissions and the dealer manager fee) to be paid by us in connection with our Offerings, including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder and other accountable offering expenses, including, but not limited to, (i) amounts to reimburse the Advisor for all marketing related costs and expenses such as salaries and direct expenses of employees of the Advisor and its affiliates in connection with registering and marketing our shares; (ii) technology costs associated with the offering of our shares; (iii) the costs of conducting our training and education meetings; (iv) the costs of attending retail seminars conducted by participating broker-dealers; and (v) payment or reimbursement of bona fide due diligence expenses.

As of June 30, 2012 and December 31, 2011, the Advisor and its affiliates had incurred on our behalf organizational and offering costs totaling $5.6 million, including $0.1 million of organizational costs that were expensed and $5.5 million of offering costs which reduced net proceeds of our Offerings. Of this amount, $4.4 million reduced the net proceeds of our Primary Offering and $1.1 million reduced the net proceeds of our Follow-On Offering.

On June 10, 2012, our Follow-on Offering was terminated. Our advisory agreement provides for reimbursement to the Advisor for organizational and offering costs in excess of 3.5% of the gross proceeds from our Primary Offering and Follow-On Offering. Under the Advisory Agreement, within 60 days after the end of the month in which our Follow-on Offering terminated, the Advisor is obligated to reimburse us to the extent that the organization and offering expenses related to our Follow-on Offering borne by us exceeded 3.5% of the gross proceeds of the Follow-on Offering. As of June 10, 2012, we had reimbursed our advisor a total of $1.1 million in organizational and offering costs related to our Follow-on Offering, of which $1.0 million was in excess of the contractual limit. Consequently, in the second quarter of 2012, we recorded a receivable from the Advisor for $1.0 million reflecting the Excess Reimbursement. The repayment by the Advisor is scheduled to occur in quarterly payments over a 24 month period commencing January 1, 2013. However, as a result of our evaluation of various factors related to collectability of this receivable, we recorded to a reserve for the full amount of the receivable as of June 30, 2012.

Acquisition Fees and Expenses. The Advisory Agreement requires us to pay to the Advisor acquisition fees in an amount equal to 2.0% of the gross proceeds from our Offerings. We have paid the acquisition fees upon receipt of the gross proceeds from our Primary Offering and Follow-On Offering (excluding gross proceeds related to sales pursuant to our distribution reinvestment plan). However, if the Advisory Agreement is terminated or not renewed, the Advisor must return acquisition fees not yet allocated to one of our investments. In addition, we are required to reimburse the Advisor for direct costs the Advisor incurs and amounts the Advisor pays to third parties in connection with the selection and acquisition of a property, whether or not ultimately acquired. For the six months ended June 30, 2012 and 2011, the Advisor earned no acquisition fees. Subsequent to June 30, 2012, we executed an amendment to the terms of the Advisory Agreement to revise the manner in which acquisition fees payable to the Advisor are calculated for new acquisitions (See Note 18).

Management Fees and Expenses. Prior to October 1, 2011, the Advisory Agreement required us to pay the Advisor a monthly asset management fee of one-twelfth of 1.0% of the Average Invested Assets (as defined in the Advisory Agreement). For the three months ended June 30, 2012 and 2011, the Advisor earned $0.2 million and $0.4 million, respectively, of asset management fees which were expensed and included in asset management fees and expenses in our condensed consolidated statements of operations. For the six months ended June 30, 2012 and 2011, the Advisor earned $0.4 million and $0.8 million, respectively, of asset management fees which were expensed and included in asset management fees and expenses in our condensed consolidated statements of operations. On August 31, 2011, we amended the Advisory Agreement to provide that, beginning on October 1, 2011, the asset management fee payable by us to our Advisor shall be reduced to a monthly rate of one-twelfth of 0.75% of our Average Invested Assets, as defined above.

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In addition, we reimburse the Advisor for the direct and indirect costs and expenses incurred by the Advisor in providing asset management services to us, including personnel and related employment costs related to providing asset management services on our behalf. These fees and expenses are in addition to management fees that we pay to third-party property managers. For the three months ended June 30, 2012 and 2011, the Advisor was reimbursed $37,000 and $40,000, respectively, of such direct and indirect costs and expenses incurred on our behalf, which are included in asset management fees and expenses in our condensed consolidated statements of operations. For the six months ended June 30, 2012 and 2011, the Advisor was reimbursed $81,000 and $85,000, respectively, of such direct and indirect costs and expenses incurred on our behalf, which are included in asset management fees and expenses in our condensed consolidated statements of operations.

Operating Expenses. The Advisory Agreement provides for reimbursement of the Advisor’s direct and indirect costs of providing administrative and management services to us. For the three months ended June 30, 2012 and 2011, $0.3 million and $0.2 million of such costs, respectively, were reimbursed and are included in general and administrative expenses in our condensed consolidated statements of operations. For the six months ended June 30, 2012 and 2011, $0.7 million and $0.5 million of such costs, respectively, were reimbursed and are included in general and administrative expenses in our condensed consolidated statements of operations.

Pursuant to provisions contained in our charter and in our Advisory Agreement with our Advisor, our board of directors has the ongoing responsibility of limiting our total operating expenses for the trailing four consecutive quarters to amounts that do not exceed the greater of 2% of our average invested assets or 25% of our net income, calculated in the manner set forth in our charter, unless a majority of the directors (including a majority of the independent directors) has made a finding that, based on unusual and non-recurring factors that they deem sufficient, a higher level of expenses is justified (the “2%/25% Test”). In the event that a majority of the directors (including a majority of the independent directors) does not determine that such excess expenses are justified, our Advisor must reimburse to us the amount of the excess expenses paid or incurred (the “Excess Amount”).

As previously disclosed, for the periods ended March 31, 2011, June 30, 2011, September 30, 2011, December 31, 2011 and March 31, 2012 our board of directors conditioned its findings that Excess Amounts for such periods were justified upon the Advisor agreeing to carry over such Excess Amounts and include them in total operating expenses in subsequent periods for purposes of the 2%/25% Test, with any waiver of such amounts being dependent on our Advisor’s satisfactory progress with respect to executing a strategic alternative to be chosen by the independent directors. Accordingly, for the eight-fiscal-quarter period ended March 31, 2012, our total operating expenses exceeded the greater of 2% of our average invested assets and 25% of our net income. We incurred operating expenses of approximately $8.3 million and incurred an Excess Amount of approximately $5.7 million during the eight quarters ended March 31, 2012, which has been carried over and included in the total operating expenses for the nine-fiscal-quarter period ended June 30, 2012 for purposes of the 2%/25% Test.

For the nine-fiscal-quarter period ended June 30, 2012, our total operating expenses again exceeded the greater of 2% of our average invested assets and 25% of our net income. We incurred operating expenses of approximately $9.3 million and incurred an Excess Amount of approximately $6.7 million during the nine quarters ended June 30, 2012. Our board of directors (including a majority of our independent directors) has determined that this Excess Amount is justified as unusual because of our small size (for a public reporting company), and non-recurring because of (i) the Advisor’s current progress toward developing strategic alternatives for consideration by the independent directors, and (ii) the independent directors committee’s continuing progress towards negotiating reductions in ongoing fees and expenses payable to the Advisor pursuant to the Advisory Agreement. Additionally, the amount by which total operating expenses have exceeded the greater of 2% of our average invested assets and 25% of our net income has been adversely affected by the disposition of four of our industrial properties in the fourth quarter of 2011, as these dispositions have resulted in a reduced average invested assets measure used in the 2%/25% Test. If we sell properties in the future at a faster rate than we can redeploy the proceeds into property acquisitions, there will be a further negative impact on the 2%/25% Test.

Notwithstanding the justification of the Excess Amount discussed above, and as a condition to such justification, the Advisor has again agreed that the Excess Amount for the nine-fiscal-quarter period ended June 30, 2012 shall be carried over and included in total operating expenses in subsequent periods, with any waiver dependent on our Advisor’s satisfactory progress with respect to executing a strategic alternative to be chosen by the independent directors.

Property Management Fees. The Advisory Agreement provides that if we retain our Advisor or an affiliate to manage and lease some of our properties, we will pay a market-based property management fee or property leasing fee, which may include reimbursement of our Advisor’s or affiliate’s personnel costs and other costs of managing the properties. For the three months ended June 30, 2012 and 2011, the Advisor earned approximately $2,000 and $5,000, respectively, of such property management fees. For the six months ended June 30, 2012 and 2011, the Advisor earned $5,000 and $11,000, respectively, of such property management fees. These costs are included in property operating and maintenance expenses in our condensed consolidated statements of operations. Subsequently to June 30, 2012, we executed a Property Management and Leasing Agreement with the Advisor pursuant to which it will perform property management and leasing services with respect to the Portland Portfolio (See Note 18).

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Disposition Fee. Prior to the second amendment to the Advisory Agreement executed on November 11, 2011, the Advisory Agreement provided that if the Advisor or its affiliates provide a substantial amount of the services (as determined by a majority of our directors, including a majority of our independent directors) in connection with the sale of one or more properties, we will pay the Advisor or such affiliate a disposition fee up to 3% of the sales price of such property or properties upon closing. This disposition fee may be paid in addition to real estate commissions paid to non-affiliates, provided that the total real estate commissions (including such disposition fee) paid to all persons by us for each property shall not exceed an amount equal to the lesser of (i) 6% of the aggregate contract sales price of each property or (ii) the competitive real estate commission for each property. We will pay the disposition fees for a property at the time the property is sold. For the three and six months ended June 30, 2012 and 2011, the Advisor did not earn any disposition fees. Subsequent to November 11, 2011, the disposition fee was reduced from an amount up to 3% of the sales price of properties sold to an amount up to 1% of the sales price of properties sold if the Advisor or its affiliates provide a substantial amount of the services (as determined by a majority of our directors, including a majority of our independent directors).

Subordinated Participation Provisions. The Advisor is entitled to receive a subordinated participation upon the sale of our properties, listing of our common stock or termination of the Advisor, as follows:

• After stockholders have received cumulative distributions equal to $8.00 per share (less any returns of capital) plus cumulative, non-compounded annual returns on net invested capital, the Advisor will be paid a subordinated participation in net sale proceeds ranging from a low of 5% of net sales proceeds provided investors have earned annualized returns of 6% to a high of 15% of net sales proceeds if investors have earned annualized returns of 10% or more.

• Upon termination of the Advisory Agreement, the Advisor will receive the subordinated performance fee due upon termination. This fee ranges from a low of 5% of the amount by which the sum of the appraised value of our assets minus our liabilities on the date the Advisory Agreement is terminated plus total distributions (other than stock distributions) paid prior to termination of the Advisory Agreement exceeds the amount of invested capital plus annualized returns of 6%, to a high of 15% of the amount by which the sum of the appraised value of our assets minus our liabilities plus all prior distributions (other than stock distributions) exceeds the amount of invested capital plus annualized returns of 10% or more.

• In the event we list our stock for trading, the Advisor will receive a subordinated incentive listing fee instead of a subordinated participation in net sales proceeds. This fee ranges from a low of 5% of the amount by which the market value of our common stock plus all prior distributions (other than stock distributions) exceeds the amount of invested capital plus annualized returns of 6%, to a high of 15% of the amount by which the sum of the market value of our common stock plus all prior distributions (other than stock distributions) exceeds the amount of invested capital plus annualized returns of 10% or more.

Dealer Manager Agreement

PCC, as dealer manager, was entitled to receive sales commissions of up to 7% of gross proceeds from sales in our Offerings. PCC, as dealer manager, was also entitled to receive a dealer manager fee equal to up to 3% of gross proceeds from sales in the Offerings. The dealer manager was also entitled to receive a reimbursement of bona fide due diligence expenses up to 0.5% of the gross proceeds from sales in the Offerings. For the six months ended June 30, 2012 and 2011, our dealer manager earned no sales commissions or dealer manager fees. Dealer manager fees and sales commissions paid to PCC are a cost of capital raised and, as such, are included as a reduction of additional paid-in capital in the accompanying condensed consolidated balance sheets. Our Follow-on Offering was terminated on June 10, 2012 (see Note 2).

14. Notes Payable

We have total debt obligations of $13.2 million that will mature in February and November of 2014. In connection with our notes payable, we incurred financing costs totaling $0.4 million and $0.9 million, as of June 30, 2012 and December 31, 2011, respectively. These financing costs have been capitalized and are being amortized over the life of their respective financing agreements. For the three months ended June 30, 2012 and 2011, $11,000 and $117,000, respectively, of deferred financing costs were amortized and included in interest expense in our condensed consolidated statements of operations. For the six months ended June 30, 2012 and 2011, $72,000 and $200,000, respectively, of deferred financing costs were amortized and included in interest expense in our condensed consolidated statements of operations.

HSH Nordbank AG

We amended our credit agreement with HSH Nordbank AG, New York Branch (“HSH Nordbank”) in a series of amendments extending the credit facility maturity date from September 20, 2010 to December 16, 2011. As a part of these amendments, we made a principal reduction payment and paid extension fees.

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The July 2011 amendment to this credit agreement extended the maturity date from September 30, 2011 to December 16, 2011 and increased the margin spread over LIBOR from a range of 350 to 375 basis points to a fixed 375 basis points from June 1, 2011 to September 30, 2011 and to 400 basis points from October 1, 2011 to the maturity date. Additionally, this amendment eliminated our requirement to make principal reduction payments of $0.3 million in July, August, and September of 2011, respectively. In connection with this extension and the sale of the Goldenwest property (see Note 16), we made a principal payment of $7.8 million.

On November 28, 2011, this loan was repaid in its entirety with a portion of the proceeds from the sale of the Mack Deer Valley and Pinnacle Park Business Center properties.

Wells Fargo Bank, National Association

On November 13, 2007, we entered into a loan agreement with Wells Fargo, successor-by-merger to Wachovia Bank, N.A., to facilitate the acquisition of properties during our offering period. The terms of the loan agreement provided for a borrowing amount of up to $22.4 million, which was reduced to $15.9 million as of November 30, 2009, at an interest rate of 140 basis points over one-month LIBOR, secured by specified real estate properties. The loan agreement had a maturity date of November 13, 2010, and provided for prepayment without penalty. Through a series of amendments executed through June 30, 2011, we extended the maturity date from November 13, 2010 to August 13, 2011.

On August 12, 2011, the loan agreement was amended to extend the maturity to February 13, 2012. In connection with this amendment, the 2111 South Industrial Park property and Shoemaker Industrial Buildings were added to the loan collateral, and we made a principal payment of $0.5 million. The terms of the amended loan provide for two one-year extensions, subject to meeting certain loan-to-value and debt service coverage ratios and require monthly principal payments. Interest on the amended loan increased to 300 basis points over one-month LIBOR with a 150 basis point LIBOR floor.

On December 22, 2011, in connection with the sale of the 2111 South Industrial Park property (see Note 16), we made a principal payment of approximately $0.9 million.

On February 13, 2012, we amended our loan agreement with Wells Fargo, extending the maturity date from February 13, 2012 to February 13, 2014. In connection with this amendment, we made a principal payment of $7.5 million and paid fees and expenses totaling approximately $65,000. The interest rate on the amended loan decreased from 300 basis points over one-month LIBOR to 200 basis points over one-month LIBOR, with the one-month LIBOR floor remaining fixed at 150 basis points. Any amounts repaid under the loan agreement may not be re-borrowed. All other terms of the loan agreement remain in full force and effect.

As of June 30, 2012 and December 31, 2011, we had net borrowings of approximately $6.7 million and $14.4 million under the loan agreement, respectively. The weighted-average interest rate for the six months ended June 30, 2012 and the year ended December 31, 2011 was 3.80% and 2.54%, respectively. During the three months ended June 30, 2012 and 2011, we incurred $60,000 and $64,000 of interest expense, respectively, related to this loan agreement. During the six months ended June 30, 2012 and 2011, we incurred $0.2 million and $130,000 of interest expense, respectively, related to this loan agreement.

The loan agreement contains various reporting covenants, including providing periodic balance sheets, statements of income and expenses of borrower and each guarantor, statements of income and expenses and changes in financial position of each secured property and cash flow statements of the borrower and each guarantor. As of June 30, 2012, we were in compliance with all financial covenants.

The principal payments due on the Wells Fargo loan for July 1, 2012 to December 31, 2012 and for each of the five following years ended December 31 is as follows:

Year		Principal Amount
July 1, 2012 to December 31, 2012	$	180,000
2013	$	360,000
2014	$	6,139,000
2015	$	—
2016	$	—
2017 and thereafter	$	—

Transamerica Life Insurance Company

In connection with our acquisition of Monroe North Commerce Center, on April 17, 2008, we entered into an assumption and amendment of note, mortgage and other loan documents (the “Loan Assumption Agreement”) with Transamerica Life Insurance Company (“Transamerica”). Pursuant to the Loan Assumption Agreement, we assumed the outstanding principal balance of $7.4 million on the Transamerica secured mortgage loan. The loan matures on November 1, 2014 and bears interest at a fixed rate of 5.89% per annum. As of June 30, 2012 and December 31, 2011, we have an outstanding balance of $6.6 million and $6.7 million, respectively, under this loan agreement. This Loan Assumption Agreement contains various reporting covenants including an annual income statement, rent roll, operating budget and narrative summary of leasing prospects for vacant spaces. As of June 30, 2012, we were in compliance with all reporting covenants. The monthly payment on this loan is $50,370. During the three months ended June 30, 2012 and 2011, we incurred $0.1 million and $0.1 million of interest expense, respectively, related to this loan agreement. During the six months ended June 30, 2012 and 2011, we incurred $0.2 million and $0.2 million of interest expense, respectively, related to this loan agreement. The principal payments due on the Monroe North Commerce Center mortgage loan for July 1, 2012 to December 31, 2012 and for each of the five following years ended December 31 is as follows:

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Year	Principal Amount
July 1, 2012 to December 31, 2012	$	92,000
2013	$	230,000
2014	$	6,234,000
2015	$	—
2016	$	—
2017 and thereafter	$	—

15. Commitments and Contingencies

We monitor our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist, we are not currently aware of any environmental liability with respect to the properties that would have a material effect on our consolidated financial condition, results of operations or cash flows. Further, we are not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

Our commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In the opinion of management, these matters are not expected to have a material impact on our consolidated financial condition, results of operations, and cash flows. We are also subject to contingent losses related to the notes receivable and the note receivable from related party. For further details see Note 7 and 8. We are not presently subject to any material litigation nor, to our knowledge, any material litigation threatened against us which, if determined unfavorably to us, would have a material effect on our consolidated financial statements.

16. Discontinued Operations

Divestitures

In accordance with FASB ASC 360-10, Property, Plant & Equipment, we report results of operations from real estate assets that meet the definition of a component of an entity that have been sold, or meet the criteria to be classified as held for sale, as discontinued operations.

On June 14, 2011, one of our wholly-owned subsidiaries sold the Goldenwest property to Westminster Redevelopment Agency, a non-related party, for a purchase price of $9.4 million. Approximately $7.8 million in proceeds from the sale were used to pay down a portion of the HSH Nordbank credit facility. The operations of Goldenwest are presented in discontinued operations on our condensed consolidated statement of operations for the three and six months ended June 30, 2011.

On November 28, 2011, two of our wholly-owned subsidiaries sold the Mack Deer Valley and Pinnacle Park Business Center properties to a non-related party for a purchase price of $23.9 million. The proceeds were used, in part, to pay down the entire balance of the HSH Nordbank credit facility. The operations of these properties are presented in discontinued operations on our condensed consolidated statement of operations for the three and six months ended June 30, 2011.

On December 22, 2011, our wholly-owned subsidiary sold the 2111 South Industrial Park property for a purchase price of $0.9 million. A loss on sale of $29,000 was recognized in the fourth quarter of 2011. The proceeds were used to pay down the Wells Fargo loan. The operations of this property are presented in discontinued operations on our condensed consolidated statement of operations for the three and six months ended June 30, 2011.

Properties Held for Sale

In the fourth quarter of 2011, our board of directors authorized us to actively market the Sherburne Commons property, a VIE that we began consolidating on June 30, 2011 (see Note 10).

The assets and liabilities of properties for which we have initiated plans to sell, but have not yet sold as of June 30, 2012 and December 31, 2011 have been classified as assets of variable interest entity held for sale and liabilities of variable interest entity held for sale on the accompanying condensed consolidated balance sheets. As of June 30 2012 and December 31, 2011, this represents the assets and liabilities of the Sherburne Commons property. The results of operations for the variable interest entity held for sale are presented in discontinued operations on the accompanying condensed consolidated statement of operations for the three and six months ended June 30, 2012.

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The following is a summary of the components of (loss) income from discontinued operations for the three months and six months ended June 30, 2012 and 2011:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Rental revenues, tenant reimbursements and other income	$	555,000		$	870,000		$	945,000		$	1,749,000
Operating expenses and real estate taxes		670,000			423,000			1,370,000			791,000
Depreciation and amortization		—			173,000			—			476,000
Impairment of real estate		—			19,145,000			1,140,000			19,145,000
Loss from discontinued operation	$	(115,000	)	$	(18,871,000	)	$	(1,565,000	)	$	(18,663,000	)

FASB ASC 360-10 requires that assets classified as held for sale be carried at the lesser of their carrying amount or estimated fair value, less estimated selling costs. Accordingly, we recorded an impairment charge of $1.1 million in the first quarter of 2012 to record the Sherburne Commons property at its estimated fair value, less estimated selling costs (see Notes 4 and 10).

The following table presents balance sheet information for the properties classified as held for sale as of June 30, 2012 and December 31, 2011.

	June 30, 2012		December 31, 2011
Assets of variable interest entity held for sale:
Cash and cash equivalents	$	78,000	$	95,000
Investments in real estate, net		3,905,000		5,045,000
Accounts receivable, inventory and other assets		225,000		232,000
Assets of variable interest entity held for sale	$	4,208,000	$	5,372,000
Liabilities of variable interest entity held for sale:
Note payable	$	1,332,000	$	1,332,000
Loan payable		166,000		127,000
Accounts payable and accrued liabilities		398,000		373,000
Intangible lease liabilities, net		145,000		145,000
Interest payable		225,000		142,000
Liabilities of variable interest entity held for sale	$	2,266,000	$	2,119,000

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17. Segment Reporting

ASC 280-10, “Segment Reporting,” establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. As of and for the six months ended June 30, 2012, we report our operations under one reportable segment: Industrial. Our Industrial segment consists of nine multi-tenant industrial properties offering a combination of warehouse and office space adaptable to a broad range of tenants and uses typically catering to local and regional businesses.

We evaluate performance of the combined properties based on net operating income (“NOI”). NOI is a non-GAAP supplemental measure used to evaluate the operating performance of real estate properties. We define NOI as total rental revenues, tenant reimbursements and other income less property operating and maintenance expenses. NOI excludes interest income from notes receivable, general and administrative expense, asset management fees and expenses, real estate acquisition costs, depreciation and amortization, impairments, interest income, interest expense, and income from discontinued operations. We believe NOI provides investors relevant and useful information because it measures the operating performance of the REIT’s real estate at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess and compare property-level performance. We believe that net income (loss) is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income (loss) as defined by GAAP since it does not reflect the aforementioned excluded items. Additionally, NOI as we define it may not be comparable to NOI as defined by other REITs or companies, as they may use different methodologies for calculating NOI.

The following table reconciles NOI from net loss for the three months and six months ended June 30, 2012 and 2011:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Net loss	$	(1,920,000	)	$	(44,939,000	)	$	(4,603,000	)	$	(45,711,000	)
Interest income from notes receivable		(14,000	)		(104,000	)		(27,000	)		(263,000	)
General and administrative		698,000			755,000			1,732,000			1,371,000
Asset management fees and expenses		207,000			411,000			422,000			825,000
Depreciation and amortization		389,000			544,000			770,000			1,074,000
Reserve for excess advisor obligation		988,000			—			988,000			—
Interest expense		167,000			320,000			433,000			611,000
Impairment of notes receivable		—			1,650,000			—			1,650,000
Impairment of real estate		—			23,219,000			—			23,219,000
Loss from discontinued operations		115,000			18,871,000			1,565,000			18,663,000
Net operating income	$	630,000		$	727,000		$	1,280,000		$	1,439,000

18. Subsequent Events

Acquisition of Health Care Properties

On August 3, 2012, through a wholly-owned subsidiary, we funded an investment in a joint venture, Cornerstone Healthcare Partners, LLC, that concurrently acquired a portfolio of two skilled nursing facilities located in the Portland, Oregon metropolitan area from Sheridan Care Center LLC, Sheridan Properties LLC, Fernhill Estates LLC and Fernhill Properties LLC (collectively, the “Sellers”). The Company contributed approximately $3.5 million to the joint venture, with Cornerstone Healthcare Realty Fund (“CHREF”), an affiliate of our advisor, contributing approximately $0.2 million as our joint venture partner. The purchase price of the portfolio was $8.6 million in addition to acquisition costs of $0.9 million. The portfolio, which includes the property at 411 SE Sheridan Road, Sheridan Oregon and 5737 NE 37^th Avenue, Portland Oregon (collectively, the “Portland Properties”) has a total of 102 beds.

We acquired our interest in the Portland Properties subject to a secured loan.  On August 1, 2012, we entered into a loan agreement with the Sellers for a loan (the “Seller Loan”) in the aggregate amount of approximately $5.8 million secured by security interests in the Portland Properties. The Seller Loan, which bears interest fixed at 5%, matures on March 15, 2013, at which time all outstanding principal, accrued and unpaid interest and any other amounts due under the loan agreement will become due. The Seller Loan is interest-only and may be voluntarily prepaid in its entirety prior to the maturity date without penalty. Interest payments on the Seller Loan are due monthly. Prior to the maturity date of the Seller Loan, the Company intends to refinance the property through a commercial lending institution. No financing fee was incurred in connection with the Seller Loan.

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The Portland Properties will be leased by the joint venture to the current operator of the facilities, pursuant to a long-term triple net lease. The lease term is fifteen years with a lessee option to renew for an additional five-year period.

Additionally, in August, 2012, the joint venture acquired, for a fee of $348,000, the option to purchase an additional property located at 14145 SW 105^th Street, Tigard, Oregon (“Tigard”) for a purchase price of $8.2 million. The option gives the joint venture the right, but not the obligation, to purchase Tigard from Pacific Gardens Estates, LLC. Tigard is a 78 bed facility that is currently 77% occupied.

In connection with the acquisition, we executed an amendment to our existing advisory agreement with Cornerstone Realty Advisors (the “Advisor”) in order to revise certain advisory fees payable in connection with the acquisition of the Portland Properties and other property that we may acquire in the future. The amendment revises the acquisition fee payable to the advisor from an amount equal to 2.0% of the gross proceeds from our public offering to an amount not to exceed 2.0% of our pro rata portion of the contract purchase price of the acquired property.

We also executed a property management and leasing agreement with the Advisor pursuant to which the Advisor will perform property management and leasing services with respect to the Portland Properties and will receive property management fees, payable monthly, of 3.0% of monthly gross revenues from the Portland Properties and a one-time leasing fee with respect to the leasing of the Portland Properties of 2.5% of the rent payable by the tenant during the initial term of the lease, payable upon the execution of the lease.

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

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with our financial statements and notes thereto contained elsewhere in this report. This section contains forward-looking statements, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements should be read in light of the risks identified in Part II, Item 1A herein and Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2011 filed with the U.S. Securities and Exchange Commission (the “SEC”).

Overview

We were incorporated on October 22, 2004 for the purpose of engaging in the business of investing in and owning commercial real estate. As of June 30, 2012, we had raised $167.1 million of gross proceeds from the sale of 20.9 million shares of our common stock in our initial and follow-on public offerings and had acquired thirteen properties, four of which were sold during 2011.

Our revenues, which are comprised largely of rental income, include rents reported on a straight-line basis over the initial term of each lease. Our growth depends, in part, on our ability to increase rental income and other earned income from leases by increasing rental rates and occupancy levels and controlling operating and other expenses. Our operations are impacted by property-specific, market-specific, general economic and other conditions.

On November 23, 2010, we stopped soliciting and accepting offers to purchase shares of our stock while our board of directors evaluates strategic alternatives to maximize value and we informed our investors of several decisions made by the board of directors for the health of our REIT.

Suspension of Distribution Reinvestment Plan. We suspended our distribution reinvestment plan effective December 14, 2010. All distributions paid after December 14, 2010 have been and will be made in cash.

Distributions. Effective December 1, 2010, our board of directors resolved to reduce distributions on our common stock to an annualized rate of $0.08 per share (1% based on a share price of $8.00), from the prior annualized rate of $0.48 per share (6% based on a share price of $8.00), in order to preserve capital that may be needed for capital improvements, debt repayment or other corporate purposes. Distributions at this rate were declared for the first and second quarters of 2011. In June 2011, the board of directors decided, based on the financial position of the Company, to suspend the declaration of further distributions and to defer the payment of the second quarter 2011 distribution until the financial position improved. In the fourth quarter of 2011, we sold the Arizona properties and paid the second quarter distributions. No distributions have been declared for periods after June 30, 2011. The rate and frequency of distributions is subject to the discretion of our board of directors and may change from time to time based on our operating results and cash flow.

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Stock Repurchase Program. After careful consideration of the proceeds that were available from our distribution reinvestment plan in 2010, and an assessment of our expected capital expenditures, tenant improvement costs and other costs and obligations related to our investments, our board of directors concluded that we did not have sufficient funds available to prudently fund any stock redemptions during 2011. Accordingly, our board of directors approved an amendment to our stock repurchase program to suspend redemptions under the program effective December 31, 2010. We can make no assurances as to whether and on what terms redemptions will resume. The share redemption program may be amended, resumed, suspended again, or terminated at any time.

Our board of directors continues to evaluate and implement strategic alternatives to reposition the company and enhance shareholders’ value. Specifically, we sold the Goldenwest property in June 2011 for gross proceeds of $9.4 million and made a principal payment of $7.8 million on the HSH Nordbank credit facility. Additionally, we sold the Mack Deer Valley and Pinnacle Park Business Center properties in November 2011 for gross proceeds of approximately $23.9 million. The net proceeds were used, in part, to pay down the remaining balance of the HSH Nordbank credit facility. In December 2011, we sold the 2111 South Industrial Park property for gross proceeds of $0.9 million. The proceeds were used to pay down the Wells Fargo Bank, National Association (“Wells Fargo”) loan. Furthermore, in February 2012, we amended our loan agreement with Wells Fargo. The amendment, executed upon our making a $7.5 million principal payment, extended the maturity date of the loan from February 13, 2012 to February 13, 2014 and reduced the interest rate from 300 basis points over one-month LIBOR to 200 basis points over one-month LIBOR, with the LIBOR floor remaining fixed at 150 basis points. We are continuing to pursue options for repaying our debt, including asset sales.

Market Outlook — Real Estate and Real Estate Finance Markets

Beginning in 2010, and continuing through 2011 and into 2012, significant and widespread concerns about credit risk and access to capital experienced during 2009 began to subside. However, uncertainties created by a sluggish U.S. economy and global economic problems have depressed real estate demand. Increased trade volume in 2010 spurred some increase in leasing activity in select west coast industrial markets. However, if economic uncertainty persists, we may continue to experience significant vacancies and expect to be required to reduce rental rates on occupied space.

Despite recent positive economic indicators, both the national and most global economies have experienced continued volatility throughout 2011 and during the first half of 2012. These conditions, combined with stagnant business activity and low consumer confidence, have resulted in a challenging operating environment.

As a result of the decline in general economic conditions, the U.S. commercial real estate industry has experienced deteriorating fundamentals across most major property types and most geographic markets. These market conditions have and will likely continue to have a significant impact on our real estate investments. In addition, these market conditions have impacted our tenants’ businesses, which makes it more difficult for them to meet current lease obligations and places pressure on them to negotiate favorable lease terms upon renewal in order for their businesses to remain viable. Increases in rental concessions given to retain tenants and maintain our occupancy level, which are vital to the continued success of our portfolio, have resulted in lower current cash flows from operations. Projected future declines in rental rates, slower or potentially negative net absorption of leased space and expectations of future rental concessions, including free rent to retain tenants who are up for renewal or to sign new tenants, are expected to result in additional decreases in cash flows from operations.

Until market conditions are more stable, we expect to continue to limit capital expenditures, focusing on those capital expenditures that preserve value and/or generate rental revenue. However, if we experience an increase in vacancies, we may incur costs to re-lease properties and pay leasing commissions.

Our board of directors is considering diversifying our investment objectives to include healthcare-related, potential joint-ventures and other asset types as well as industrial properties. In connection with such acquisitions, the board of directors may consider acquiring assets with long-term financing in order to leverage the capital available to us and increase our assets under management to enable better diversification.

Healthcare-related properties include a wide variety of properties, including senior housing facilities, medical office buildings, and skilled nursing facilities. Senior housing facilities include independent living facilities, assisted living facilities and continuing care retirement communities. Each of these caters to different segments of the elderly population. Services provided by operators or tenants in these facilities are primarily paid for by the residents directly or through private insurance and are less reliant on government reimbursement programs such as Medicaid and Medicare. Medical office buildings (“MOBs”) typically contain physicians’ offices and examination rooms, and may also include pharmacies, hospital ancillary service space, and outpatient services such as diagnostic centers, rehabilitation clinics and day-surgery operating rooms. While these facilities are similar to commercial office buildings, they require more systems to accommodate special requirements. MOBs are typically multi-tenant properties leased to multiple healthcare providers (hospitals and physician practices) although there is a trend towards net leases to doctors and hospitals. Skilled Nursing Facilities (“SNFs”) offer nursing care for people not requiring the more extensive and sophisticated treatment available at hospitals. Sub-acute care services are provided to residents beyond room and board. Certain skilled nursing facilities provide some services on an outpatient basis. Skilled nursing services provided in these facilities are primarily paid for either by private sources or through the Medicare and Medicaid programs. SNFs are typically leased to single-tenant operators under net lease structures.

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Healthcare-related properties include a wide variety of lease structures. For example, senior housing facilities are typically leased to an operator on a net lease basis. Medical office buildings are typically leased to multiple tenants although there is a trend towards net leases to doctor groups. Skilled nursing facilities are typically leased to a single operator under a net lease structure.

Critical Accounting Policies

There have been no material changes to our critical accounting policies as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the SEC.

Results of Operations

As of June 30, 2012, we owned nine properties. During 2011, we owned nine properties for a full year, one property for five and one-half months, two properties for eleven months, and one property for eleven and one-half months. In June 2011, we sold the Goldenwest property for gross proceeds of $9.4 million. In November 2011, we sold the Mack Deer Valley and Pinnacle Park Business Center properties for gross proceeds of $23.9 million. In December 2011, we sold the 2111 South Industrial Park property for gross proceeds of $0.9 million.

In October 2011, we reclassified the Sherburne Commons property as held for sale (see Note 10) and the results of its operations have been reported in discontinued operations.

Three months ended June 30, 2012 and 2011

	Three Months Ended June 30,									%
	2012			2011			$ Change			Change
Rental revenues, tenant reimbursements & other income	$	1,070,000		$	1,152,000		$	(82,000	)		(7.1	)%
Property operating and maintenance		(440,000	)		(425,000	)		(15,000	)		3.5	%
Net operating income(1)		630,000			727,000			(97,000	)		(13.3	)%
Interest income from notes receivable		14,000			104,000			(90,000	)		(86.5	)%
General and administrative		(698,000	)		(755,000	)		57,000			(7.5	)%
Asset management fees and expenses		(207,000	)		(411,000	)		204,000			(49.6	)%
Depreciation and amortization		(389,000	)		(544,000	)		155,000			(28.5	)%
Reserve for excess advisor obligation		(988,000	)		—			(988,000	)		(0.0	)%
Interest expense		(167,000	)		(320,000	)		153,000			(47.8	)%
Impairment of notes receivable		—			(1,650,000	)		1,650,000			(100.0	)%
Impairment of real estate		—			(23,219,000	)		23,219,000			(100.0	)%
Loss from continuing operations		(1,805,000	)		(26,068,000	)		24,263,000			(93.1	)%
Loss from discontinued operations		(115,000	)		(18,871,000	)		18,756,000			(99.4	)%
Net loss		(1,920,000	)		(44,939,000	)		43,019,000			(95.7	)%
Noncontrolling interests’ share in losses		225,000			52,000			173,000			332.7	%
Net loss applicable to common shares	$	(1,695,000	)	$	(44,887,000	)	$	43,192,000			(96.2	)%

(1) Net operating income (“NOI”) is a non-GAAP supplemental measure used to evaluate the operating performance of real estate properties. We define NOI as total rental revenues, tenant reimbursements and other income less property operating and maintenance expenses. NOI excludes interest income from notes receivable, general and administrative expense, asset management fees and expenses, real estate acquisition costs, depreciation and amortization, impairments, interest income, interest expense, and income from discontinued operations. We believe NOI provides investors relevant and useful information because it measures the operating performance of the REIT’s real estate at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess and compare property-level performance. We believe that net income (loss) is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income (loss) as defined by GAAP since it does not reflect the aforementioned excluded items. Additionally, NOI as we define it may not be comparable to NOI as defined by other REITs or companies, as they may use different methodologies for calculating NOI. See Note 16 for a summary table reconciling NOI from net loss.

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Rental revenues, tenant reimbursements and other income decreased to $1.1 million for the three months ended June 30, 2012 from $1.2 million for the three months ended June 30, 2011. The decrease is primarily due to lower overall occupancy rates, lower average lease rental rates and longer lease-up periods for vacant space as a result of the current economic environment.

Property operating and maintenance expense was comparable at $0.4 million for the three months ended June 30, 2012 and for the three months ended June 30, 2011.

Interest income from notes receivable decreased to $14,000 for the three months ended June 30, 2012 from $0.1 million for the three months ended June 30, 2011 primarily due to the lower outstanding balance for the Servant Healthcare Investments, LLC note (see Note 7) resulting in less interest income in 2012 compared to approximately $0.1 million in interest income for the three months ended June 30, 2011.

General and administrative expenses decreased to $0.7 million for the three months ended June 30, 2012 from $0.8 million for the three months ended June 30, 2011. The decrease is primarily due lower legal fees offset by increased audit fees, professional fees, allocations and regulatory filing costs.

Asset management fees decreased to $0.2 million for the three months ended June 30, 2012 from $0.4 million for the three months ended June 30, 2011. The lower asset management fees are attributed to the sale of four properties in 2011 combined with a reduction in the annual asset management fee basis from 1.0% to 0.75% of the Average Invested Assets (as defined in the Advisory Agreement).

Depreciation and amortization decreased to $0.4 million for the three months ended June 30, 2012 from $0.5 million for the three months ended June 30, 2011 largely as a result of property impairments recorded in the second quarter of 2011.

Reserve for excess advisor obligation represents the organizational and offering costs incurred in excess of 3.5% of the gross proceeds from our Follow-on Offering. Prior to June 10, 2012, approximately $1.0 million was reimbursed to the Advisor in excess of 3.5% of the gross proceeds of our Follow-on offering. Consistent with the limitations set forth in our charter, the advisory agreement further provides that the Advisor will repay to the Company the excess (the “Excess Reimbursement”). Consequently, in the second quarter of 2012, we recorded a receivable from the Advisor of $1.0 million reflecting the Excess Reimbursement. As a result of our evaluation related to the receivable’s collectability, we reserved for the full amount of the receivable as of June 30, 2012.

Interest expense decreased to $0.2 million for the three months ended June 30, 2012 from $0.3 million for the three months ended June 30, 2011. The decrease is primarily due to lowering our overall outstanding principal balance of our debt obligations as a result of the $13.1 million pay-off of the HSH Nordbank credit facility in 2011 and principal repayments on the Wells Fargo Bank loan of $2.9 million during 2011 and $7.5 million during the first quarter of 2012, partially offset by increasing interest rates during 2011 as a result of the HSH Nordbank and Wells Fargo Bank note extensions and the related amortization of deferred financing costs associated with each extension.

Impairment of note receivable decreased to $0 for three months ended June 30, 2012 compared to $1.65 million for the three months ended June 30, 2011. The decrease relates to the Servant Healthcare note receivable which was determined to be impaired due to events arising in the second quarter of 2011 and settled in a forbearance agreement in December 22, 2011.

Impairment of real estate decreased to $0 for three months ended June 30, 2012 compared to $23.2 million for the three months ended June 30, 2011. The charge during 2011 was a result of our assumption of shorter hold periods for each property used in our impairment testing brought about by our board of directors currently evaluating strategic alternatives to maximize shareholder value. These alternatives include potentially selling additional properties to repay debt as it becomes due.

The loss from discontinued operations represents the results of operations for properties sold and/or classified as held for sale in accordance with ASC 360-10, Property, Plant and Equipment. Additionally, all prior periods presented for these properties were reclassified to discontinued operations for presentation purposes. During 2011, we sold our Goldenwest, Mack Deer Valley, Pinnacle Park Business Center, and 2111 South Industrial Park properties to third parties and classified our VIE as held for sale. The loss from discontinued operations was $0.1 million for the three months ended June 30, 2012 compared to loss from discontinued operations of $18.9 million for the three months ended June 30, 2011. The change is primarily attributed to operating income reported in 2011 from the sold Arizona properties of $0.3 million offset a $19.1 million impairment of real estate compared to net loss reported during the three months ended June 30, 2012.

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Six months ended June 30, 2012 and 2011

	Six Months Ended June 30,									%
	2012			2011			$ Change			Change
Rental revenues, tenant reimbursements & other income	$	2,074,000		$	2,257,000		$	(183,000	)		(8.1	)%
Property operating and maintenance		(794,000	)		(818,000	)		24,000			(2.9	)%
Net operating income(1)		1,280,000			1,439,000			(159,000	)		(11.0	)%
Interest income from notes receivable		27,000			263,000			(236,000	)		(89.7	)%
General and administrative		(1,732,000	)		(1,371,000	)		(361,000	)		26.3	%
Asset management fees and expenses		(422,000	)		(826,000	)		404,000			(48.9	)%
Depreciation and amortization		(770,000	)		(1,073,000	)		303,000			(28.2	)%
Reserve for excess advisor obligation		(988,000	)		—			(988,000	)		(0.0	)%
Interest expense		(433,000	)		(611,000	)		178,000			(29.1	)%
Impairment of notes receivable		—			(1,650,000	)		1,650,000			(100.0	)%
Impairment of real estate		—			(23,219,000	)		23,219,000			(100.0	)%
Loss from continuing operations		(3,038,000	)		(27,048,000	)		24,010,000			(88.8	)%
Loss from discontinued operations		(1,565,000	)		(18,663,000	)		17,098,000			(91.6	)%
Net loss		(4,603,000	)		(45,711,000	)		41,108,000			(89.9	)%
Noncontrolling interests’ share in losses		528,000			52,000			476,000			915.4	%
Net loss applicable to common shares	$	(4,075,000	)	$	(45,659,000	)	$	41,584,000			(91.1	)%

(1) Net operating income (“NOI”) is a non-GAAP supplemental measure used to evaluate the operating performance of real estate properties. We define NOI as total rental revenues, tenant reimbursements and other income less property operating and maintenance expenses. NOI excludes interest income from notes receivable, general and administrative expense, asset management fees and expenses, real estate acquisition costs, depreciation and amortization, impairments, interest income, interest expense, and income from discontinued operations. We believe NOI provides investors relevant and useful information because it measures the operating performance of the REIT’s real estate at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess and compare property-level performance. We believe that net income (loss) is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income (loss) as defined by GAAP since it does not reflect the aforementioned excluded items. Additionally, NOI as we define it may not be comparable to NOI as defined by other REITs or companies, as they may use different methodologies for calculating NOI. See Note 16 for a summary table reconciling NOI from net loss.

Rental revenues, tenant reimbursements and other income decreased to $2.1 million for the six months ended June 30, 2012 from $2.3 million for the six months ended June 30, 2011. The decrease is primarily due to lower overall occupancy rates, lower average lease rental rates and longer lease-up periods for vacant space as a result of the current economic environment.

Property operating and maintenance expense was comparable at $0.8 million for the six months ended June 30, 2012 and for the six months ended June 30, 2011.

Interest income from notes receivable decreased to $27,000 for the six months ended June 30, 2012 from $0.3 million for the six months ended June 30, 2011 primarily due to the lower outstanding balance for the Servant Healthcare Investments, LLC note (see Note 7) resulting in $173,000 less interest income and non-payment of interest on the Nantucket Acquisition LLC loan in 2012 compared to approximately $63,000 in interest income for the six months ended June 30, 2011.

General and administrative expenses increased to $1.7 million for the six months ended June 30, 2012 from $1.4 million for the six months ended June 30, 2011. The increase is primarily due to increased legal fees, audit fees, professional fees, allocations, and regulatory filing costs.

Asset management fees decreased to $0.4 million for the six months ended June 30, 2012 from $0.8 million for the six months ended June 30, 2011. The lower asset management fees are attributed to the sale of four properties in 2011 combined with a reduction in the annual asset management fee basis from 1.0% to 0.75% of the Average Invested Assets (as defined in the Advisory Agreement).

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Depreciation and amortization decreased to $0.8 million for the six months ended June 30, 2012 from $1.1 million for the six months ended June 30, 2011 largely as a result of property impairments recorded in the second quarter of 2011.

Reserve for excess advisor obligation represents the organizational and offering costs incurred in excess of 3.5% of the gross proceeds from our and Follow-on Offering. Prior to June 10, 2012, approximately $1.0 million was reimbursed to the Advisor in excess of 3.5% of the gross proceeds of our Follow-on Offering. Consistent with the limitations set forth in our charter, the advisory agreement further provides that the Advisor will repay to the Company the excess (the “Excess Reimbursement”). Consequently, in the second quarter of 2012, we recorded a receivable from the Advisor of $1.0 million reflecting the “Excess Reimbursement.” As a result of our evaluation related to the receivable’s collectability, we reserved for the full amount of the receivable as of June 30, 2012.

Interest expense experienced a small decrease for the six months ended June 30, 2012 from $0.4 million compared to $0.6 million for the six months ended June 30, 2011. The decrease is primarily due to lowering our overall outstanding principal balance of our debt obligations as a result of the $13.1 million pay-off of the HSH Nordbank credit facility in 2011 and principal repayments on the Wells Fargo Bank loan of $2.9 million during 2011 and $7.5 million during the second quarter of 2012, partially offset by increasing interest rates during 2011 as a result of the HSH Nordbank and Wells Fargo Bank note extensions and related amortization of deferred financing costs associated with each extension.

Impairment of note receivable decreased to $0 for six months ended June 30, 2012 compared to $1.65 million for the six months ended June 30, 2011. The decrease relates to the Servant Healthcare note receivable which was determined to be impaired due to events arising in the second quarter of 2011 and settled in the forbearance agreement in December 22, 2011.

Impairment of real estate decreased to $0 for six months ended June 30, 2012 compared to $23.2 million for the six months ended June 30, 2011. The charge during 2011 was a result of our assumption of shorter hold periods for each property used in our impairment testing brought about by our board of directors currently evaluating strategic alternatives to maximize shareholder value. These alternatives include potentially selling additional properties to repay debt as it becomes due.

The loss from discontinued operations represents the results of operations for properties sold and/or classified as held for sale in accordance with ASC 360-10, Property, Plant and Equipment. Additionally, all prior periods presented for these properties were reclassified to discontinued operations for presentation purposes. During 2011, we sold our Goldenwest, Mack Deer Valley, Pinnacle Park Business Center, and 2111 South Industrial Park properties to third parties and classified our VIE as held for sale. The loss from discontinued operations was $1.6 million for the six months ended June 30, 2012 compared to income from discontinued operations of $18.7 million for the six months ended June 30, 2011. The change is primarily due to 2012 losses incurred by our VIE compared to income reported by our sold Arizona properties in 2011. Additionally 2011 included $19.1 of impairments of real estate impairment compared to 2012 where we recorded $1.1 million of impairments of real estate.

Liquidity and Capital Resources

On November 23, 2010, our board of directors made a decision to stop making or accepting offers to purchase shares of our stock in our Follow-on Offering while evaluating strategic alternatives to maximize value and preserve the capital of our stockholders. On June 10, 2012, our Follow-on Offering was terminated. Going forward, we expect our primary sources of cash to be rental revenues, tenant reimbursements and interest income. In addition, we may receive sources of cash through the sale of additional properties or borrowing against currently-owned properties. We expect our primary uses of cash to be for the repayment of principal on notes payable, funding of future acquisitions, payment of tenant improvements and leasing commissions, operating expenses, interest expense on outstanding indebtedness, advances to our VIE to fund operating shortfalls, and cash distributions. Operating expenses are expected to exceed operating revenues over the next twelve months. We plan to fund this operating shortfall from available cash and the net proceeds from property sales and asset refinancings.

As of June 30 2012, we had $8.0 million in cash and cash equivalents on hand.

Credit Facilities and Loan Agreements

As of June 30, 2012, we had total debt obligations of $13.2 million that mature in February and November of 2014. Of this amount, $6.7 million was outstanding on a loan agreement with Wells Fargo and $6.5 million was outstanding on a loan agreement with Transamerica Life Insurance Company.

On November 28, 2011, the HSH Nordbank credit facility was repaid in its entirety with proceeds from the sale of the Mack Deer Valley and Pinnacle Park Business Center properties (see Notes 14 and 16).

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In February 2012, we amended our loan agreement with Wells Fargo to extend the maturity date to February 13, 2014. In connection with this amendment, we made a principal payment of $7.5 million, reducing the outstanding principal amount of our obligations under the loan agreement from $14.3 million to $6.8 million as of February 13, 2012, and paid fees and expenses totaling approximately $65,000. The interest rate on the amended loan decreased from 300 basis points over one-month LIBOR to 200 basis points over one-month LIBOR, with the one-month LIBOR floor remaining fixed at 150 basis points. Any amounts repaid under the loan agreement may not be re-borrowed. All other terms of the loan agreement remain in full force and effect.

Short-Term Liquidity Requirements

In addition to the capital requirements for recurring capital expenditures, tenant improvements and leasing commissions, we may incur expenditures for future acquisitions and/or renovations of our existing properties, such as increasing the size of the properties by developing additional rentable square feet and/or making the space more appealing to potential industrial tenants.

We sold three properties in the fourth quarter of 2011 and currently have one property listed for sale to monetize our interest in the VIE, and we amended our loan agreement with Wells Fargo Bank in February 2012. We continue to pursue options for repaying our debt obligations, including asset sales. We believe that our cash and cash equivalents totaling $8.0 million as of June 30, 2012 will allow us to meet our obligations during the twelve months ending June 30, 2013. We expect to fund our short-term liquidity requirements primarily from available cash and future net property sales proceeds.

In recent years, financial markets have experienced unusual volatility and uncertainty and liquidity has tightened in all financial markets, including the debt and equity markets. Our ability to repay or refinance debt could be adversely affected by an inability to secure financing at reasonable terms, if at all.

Other than the financial market conditions discussed above and market conditions discussed under the caption “Market Outlook—Real Estate and Real Estate Finance Markets,” we are not aware of any material trends or uncertainties, favorable or unfavorable, affecting real estate generally, which we anticipate may have a material impact on either capital resources or the revenues or income to be derived from the operation of real estate properties.

Distributions

Effective December 1, 2010, our board of directors resolved to reduce distributions on our common stock to an annualized rate of $0.08 per share (1% based on a share price of $8.00), from the prior annualized rate of $0.48 per share (6% based on a share price of $8.00), in order to preserve capital that may be needed for capital improvements, debt repayment or other corporate purposes. Distributions at this rate were declared for the first and second quarters of 2011. In June 2011, the board decided, based on the financial position of the Company, to suspend the declaration of further distributions and to defer the payment of the second quarter 2011 distribution, which was paid in December 2011. No distributions have been declared for periods after June 30, 2011. The rate and frequency of distributions is subject to the discretion of our board of directors and may change from time to time based on our operating results and cash flow.

The following table shows the distributions declared during the six months ended June 30, 2012 and 2011:

	Distributions Declared(2)						Cash Flows Provided by (Used in) Operating
Period	Cash		Reinvested		Total		Activities
First quarter 2011(1)	$	454,000	$	—	$	454,000	$	481,000
Second quarter 2011(1)	$	468,000	$	—	$	468,000	$	(219,000	)
First quarter 2012	$	—	$	—	$	—	$	(800,000	)
Second quarter 2012	$	—	$	—	$	—	$	(953,000	)

(1) 100% of the distributions declared during the six months ended June 30, 2011 represented a return of capital for federal income tax purposes.

(2) In order to meet the requirements for being treated as a REIT under the Internal Revenue Code, we must pay distributions to our shareholders each taxable year equal to at least 90% of our net ordinary taxable income. Some of our distributions have been paid from sources other than operating cash flow, such as offering proceeds.

From our inception in October 2004 through June 30, 2012, we declared aggregate distributions of $32.8 million. Our cumulative net loss and cumulative net cash provided by operating activities during the same period were $72.8 million and $2.9 million, respectively.

Organization and offering costs

As of June 30, 2012, our Advisor and its affiliates had incurred on our behalf organizational and offering costs totaling $5.6 million, including $0.1 million of organizational costs that were expensed and $5.5 million of offering costs which reduced the net proceeds of our combined offerings. Of this amount, $4.4 million reduced the net proceeds of our initial public offering and $1.1 million reduced the net proceeds of our Follow-on Offering.

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On June 10, 2012, our Follow-on Offering was terminated. Under the Advisory Agreement, within 60 days after the end of the month in which our Follow-on Offering terminated, the Advisor is obligated to reimburse us to the extent that the organization and offering expenses related to our Follow-on Offering borne by us exceeded 3.5% of the gross proceeds of the Follow-on Offering. As of June 10, 2012, we had reimbursed our advisor a total of $1.1 million in organizational and offering costs related to our Follow-on Offering, of which $1.0 million was in excess of the contractual limit. Consequently, in the second quarter of 2012, we recorded a receivable from the Advisor for $1.0 million reflecting the Excess Reimbursement. As a result of our evaluation of various factors related to collectability of this receivable, we recorded a reserve for the full amount of the receivable as of June 30, 2012.

Funds from Operations and Modified Funds from Operations

Funds from operations (“FFO”) is a non-GAAP supplemental financial measure that is widely recognized as a measure of REIT operating performance. We compute FFO in accordance with the definition outlined by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as net income (loss), computed in accordance with GAAP, excluding extraordinary items, as defined by the accounting principles generally accepted in the United States of America (“GAAP”), and gains or losses from sales of property, plus depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships, joint ventures, noncontrolling interests and subsidiaries.

NAREIT recently issued updated reporting guidance that directs companies, for their computation of NAREIT FFO, to exclude impairments of depreciable real estate when write-downs are driven by measurable decreases in the fair value of real estate holdings. Previously, the Company’s calculation of FFO (consistent with NAREIT’s previous guidance) did not exclude impairments of, or related to, depreciable real estate. Consistent with this current NAREIT reporting guidance, the Company has restated its 2011 FFO amount.

Our FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. We believe that FFO is helpful to investors and our management as a measure of operating performance because it excludes depreciation and amortization, gains and losses from property dispositions, and extraordinary items, and as a result, when compared year to year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, which is not immediately apparent from net income. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient. As a result, our management believes that the use of FFO, together with the required GAAP presentations, provide a more complete understanding of our performance. Factors that impact FFO include start-up costs, fixed costs, delays in buying assets, lower yields on cash held in accounts pending investment, income from portfolio properties and other portfolio assets, interest rates on acquisition financing and operating expenses. FFO should not be considered as an alternative to net income (loss), as an indication of our performance, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions.

Changes in the accounting and reporting rules under GAAP have prompted a significant increase in the amount of non-cash and non-operating items included in FFO, as defined. Therefore, we use modified funds from operations (“MFFO”), which excludes from FFO real estate acquisition costs, amortization of above- or below-market rents, and non-cash amounts related to straight-line rents and impairment charges to further evaluate our operating performance. We compute MFFO in accordance with the definition suggested by the Investment Program Association (the “IPA”), the trade association for direct investment programs (including non-traded REITs). However, certain adjustments included in the IPA’s definition are not applicable to us and are therefore not included in the foregoing definition.

We believe that MFFO is an important supplemental measure of operating performance because it excludes costs that management considers more reflective of investing activities or non-operating changes. Accordingly, we believe that MFFO can be a useful metric to assist management, investors and analysts in assessing the sustainability of our operating performance. As explained below, management’s evaluation of our operating performance excludes these items in the calculation based on the following considerations:

• Real estate acquisition costs. In evaluating investments in real estate, including both business combinations and investments accounted for under the equity method of accounting, management’s investment models and analyses differentiate costs to acquire the investment from the operations derived from the investment. These acquisition costs have been funded from the proceeds of our initial public offering and other financing sources and not from operations. We believe by excluding expensed acquisition costs, MFFO provides useful supplemental information that is comparable for each type of our real estate investments and is consistent with management’s analysis of the investing and operating performance of our properties. Real estate acquisition costs include those paid to our Advisor and to third parties.

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• Adjustments for amortization of above- or below-market rents. Similar to depreciation and amortization of other real estate-related assets that are excluded from FFO, GAAP implicitly assumes that the value of lease assets diminishes predictably over time and that these charges be recognized currently in revenue. Since real estate values and market lease rates in the aggregate have historically risen or fallen with market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the operating performance of our real estate.

• Adjustments for straight-line rents. Under GAAP, rental income recognition can be significantly different from underlying contract terms. By adjusting for these items, MFFO provides useful supplemental information on the economic impact of our lease terms and presents results in a manner more consistent with management’s analysis of our operating performance.

• Impairment charges. Impairment charges relate to a fair value adjustment, which is based on the impact of current market fluctuations and underlying assessments of general market conditions and the specific performance of the holding, which may not be directly attributable to our current operating performance. As these losses relate to underlying long-term assets and liabilities, excluding real estate, where we are not speculating or trading assets, management believes MFFO provides useful supplemental information by focusing on the changes in our core operating fundamentals rather than changes that may reflect anticipated losses. In particular, because GAAP impairment charges are not allowed to be reversed if the underlying fair values improve or because the timing of impairment charges may lag the onset of certain operating consequences, we believe MFFO provides useful supplemental information related to the sustainability of rental rates, occupancy and other core operating fundamentals.

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FFO and MFFO should not be considered as an alternative to net income (loss) or as an indication of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. Both FFO and MFFO should be reviewed along with other GAAP measurements. Our FFO and MFFO, as presented, may not be comparable to amounts calculated by other REITs. The following is a reconciliation from net loss applicable to common shares, the most direct comparable financial measure calculated and presented with GAAP, to FFO and MFFO for the three and six months ended June 30, 2012 and 2011:

	Three months ended						Six months ended
	June 30,						June 30,
	2012			2011			2012			2011
Net loss applicable to common shares	$	(1,695,000	)	$	(44,887,000	)	$	(4,075,000	)	$	(45,659,000	)
Adjustments:
Depreciation and amortization of real estate assets:
Continuing operations		389,000			544,000			770,000			1,073,000
Discontinued operations		—			173,000			—			476,000
Gain on sales of real estate, net		—			128,000			—			128,000
Impairment of real estate assets:
Continuing operations		—			23,219,000			—			23,219,000
Discontinued operations		—			19,145,000			1,140,000			19,145,000
Noncontrolling interests’ share in losses		(225,000	)		(52,000	)		(528,000	)		(52,000	)
Noncontrolling interests ‘share in FFO		225,000			—			528,000			—
FFO applicable to common shares	$	(1,306,000	)		(1,730,000	)		(2,165,000	)		(1,670,000	)
Adjustments:
Amortization of (below-) above-market rents		(7,000	)		2,000			(13,000	)		6,000
Straight-line rents		(49,000	)		(34,000	)		(39,000	)		(3,000	)
Reserve for excess advisor obligation		988,000			—			988,000			—
Impairment of note receivable		—			1,650,000			—			1,650,000
Amortization of deferred financing costs		11,000			117,000			72,000			200,000
Modified funds from operations (MMFO) applicable to common shares	$	(363,000	)		5,000			(1,157,000	)	$	183,000
Weighted-average number of common shares
Outstanding - basic and diluted		23,028,284			23,521,838			23,028,284			23,473,816
FFO per weighted average common shares	$	(0.06	)	$	(0.07	)	$	(0.09	)	$	(0.07	)
MFFO per weighted average common shares	$	(0.02	)	$	0.00		$	(0.05	)	$	0.01

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Contractual Obligations

The following table reflects our contractual obligations as of June 30, 2012:

	Payment due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Notes payable(1)	$	13,235,000	$	565,000	$	12,670,000	$	—	$	—
Interest expense related to long-term debt(2)	$	1,233,000	$	579,000	$	654,000	$	—	$	—
Below-market ground lease(3)(4)	$	3,609,000	$	—	$	9,000	$	40,000	$	3,560,000

(1) This represents the sum of loan agreements with Wells Fargo Bank, National Association and Transamerica Life Insurance Company.

(2) Interest expense related to the loan agreement with Wells Fargo Bank, National Association is calculated based on the loan balance outstanding at June 30, 2012, one-month LIBOR at June 30, 2012, with a 150 basis point LIBOR floor, plus a margin of 200 basis points. Interest expense related to the loan agreement with Transamerica Life Insurance Company is based on a fixed rate of 5.89% per annum.

(3) The below-market ground lease relates to the Sherburne Commons property, a VIE for which we were deemed to be the primary beneficiary and began consolidating as of June 30, 2011. As of October 19, 2011, the Sherburne Commons property met the requirements for reclassification to real estate held for sale. Consequently, at June 30, 2012, the related assets and liabilities of the VIE are classified as assets of variable interest entity held for sale and liabilities of variable interest entity held for sale, respectively, on our condensed consolidated balance sheets.

(4) The below-market ground lease is a 50-year lease expiring in 2059 relating to land on which the Sherburne Commons senior housing facility is located. The land is leased from the town of Nantucket, Massachusetts with lease payments totaling $1 per year for years one through four, one-half of one percent of operating revenues, as defined in the ground lease, for years five through seven, and one percent of operating revenues, as defined in the ground lease, thereafter.

Subsequent Event

Acquisition of Health Care Properties

On August 3, 2012, through a wholly-owned subsidiary, we funded an investment in a joint venture, Cornerstone Healthcare Partners, LLC, that concurrently acquired a portfolio of two skilled nursing facilities located in the Portland, Oregon metropolitan area from Sheridan Care Center LLC, Sheridan Properties LLC, Fernhill Estates LLC and Fernhill Properties LLC (collectively, the “Sellers”). The Company contributed approximately $3.5 million to the joint venture, with Cornerstone Healthcare Realty Fund (“CHREF”), an affiliate of our advisor, contributing approximately $0.2 million as our joint venture partner. The purchase price of the portfolio was $8.6 million in addition to acquisition costs of $0.9 million. The portfolio, which includes the property at 411 SE Sheridan Road, Sheridan Oregon and 5737 NE 37^th Avenue, Portland Oregon (collectively, the “Portland Properties”) has a total of 102 beds.

We acquired our interest in the Portland Properties subject to a secured loan.  On August 1, 2012, we entered into a loan agreement with the Sellers for a loan (the “Seller Loan”) in the aggregate amount of approximately $5.8 million secured by security interests in the Portland Properties. The Seller Loan, which bears interest fixed at 5%, matures on March 15, 2013, at which time all outstanding principal, accrued and unpaid interest and any other amounts due under the loan agreement will become due. The Seller Loan is interest-only and may be voluntarily prepaid in its entirety prior to the maturity date without penalty. Interest payments on the Seller Loan are due monthly. Prior to the maturity date of the Seller Loan, the Company intends to refinance the property through a commercial lending institution. No financing fee was incurred in connection with the Seller Loan.

The Portland Properties will be leased by the joint venture to the current operator of the facilities, pursuant to a long-term triple net lease. The lease term is fifteen years with a lessee option to renew for an additional five-year period.

Additionally, the joint venture has acquired, for a fee of $348,000, the option to purchase an additional property located at 14145 SW 105^th Street, Tigard, Oregon (“Tigard”) for a purchase price of $8.2 million. The option gives the joint venture the right, but not the obligation, to purchase Tigard from Pacific Gardens Estates, LLC. Tigard is a 78 bed facility that is currently 77% occupied.

In connection with the acquisition, we executed an amendment to our existing advisory agreement with Cornerstone Realty Advisors (the “Advisor”) in order to revise certain advisory fees payable in connection with the acquisition, management and leasing of the Portland Properties and other property that we may acquire in the future. The amendment revises the acquisition fee payable to the advisor from an amount equal to 2.0% of the gross proceeds from our public offering to an amount not to exceed 2.0% of our pro rata portion of the contract purchase price of the acquired property.

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We also executed a property management and leasing agreement with the Advisor pursuant to which the Advisor will perform property management and leasing services with respect to the Portland Properties and will receive property management fees, payable monthly, of 3.0% of monthly gross revenues from the Portland Properties and a one-time leasing fee with respect to the leasing of the Portland Properties of 2.5% of the rent payable by the tenant during the initial term of the lease, payable upon the execution of the lease.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. We are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. We invest our cash and cash equivalents in government-backed securities and FDIC-insured savings accounts which, by their nature, are subject to interest rate fluctuations. However, we believe that the primary market risk to which we will be exposed is interest rate risk related to our variable-rate loan agreement.

We borrow funds and make investments with a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed-rate debt or fixed-rate notes receivable unless such instruments mature or are otherwise terminated and/or need to be refinanced. However, interest rate changes will affect the fair value of our fixed-rate instruments. Conversely, changes in interest rates on variable-rate debt and investments would change our future earnings and cash flows, but not significantly affect the fair value of those instruments.

As of June 30, 2012, we had borrowings outstanding of $6.7 million under our variable-rate loan agreement. An increase in the variable interest rate on the loan agreement constitutes a market risk as a change in rates would increase or decrease interest expense incurred and therefore cash flows available for distribution to shareholders. Based on the debt outstanding as of June 30 2012, a one percent (1%) change in interest rates related to the variable-rate debt would result in a change in interest expense of approximately $67,000 per year, or $0.003 per common share on a basic and diluted basis.

In addition to changes in interest rates, the value of our real estate is subject to fluctuations based on changes in the real estate capital markets, market rental rates for office space, local, regional and national economic conditions and changes in the creditworthiness of tenants. All of these factors may also affect our ability to refinance our debt, if necessary.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our senior management, including our Chief Executive Officer (Principal Executive Officer) and our Interim Chief Financial Officer (Principal Financial Officer), to allow timely decisions regarding required disclosure. Our Chief Executive Officer (Principal Executive Officer) and Interim Chief Financial Officer (Principal Financial Officer) have reviewed the effectiveness of our disclosure controls and procedures and have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1A. Risk Factors

The following risk factors supplement the risks disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2011.

We have paid, and may in the future, pay distributions from sources other than cash provided from operations.

Until our investments in real estate generate operating cash flow sufficient to make distributions to stockholders, we may pay a substantial portion of our distributions from the proceeds of our offerings or from borrowings in anticipation of future cash flow. To the extent that we use offering proceeds to fund distributions to stockholders, the amount of cash available for investment in properties will be reduced. The distributions paid for the four quarters ended June 30, 2012 were approximately $0.5 million. This entire amount was paid in cash to stockholders. For the four quarters ended June 30, 2012 net cash used in operating activities and funds from operations (“FFO”) applicable to common shares were approximately $3.7 million and a loss of $3.4 million, respectively. Accordingly, for the four quarters ended June 30, 2012, total distributions exceeded cash flow from operations and FFO for the same period. We used offering proceeds to pay cash distributions in excess of cash flow from operations during the four quarters ended June 30, 2012.

Any adverse changes in the financial health of our Advisor or its affiliates or our relationship with them could hinder our operating performance and the return on your investment. We may have difficulty finding a qualified successor advisor, and any successor advisor may not be as well suited to manage us. These potential changes could result in a significant disruption of our business and may adversely affect the value of your investment in us.

We are dependent on our Advisor to manage our operations and our portfolio of real estate assets. Our Advisor depends upon the fees and other compensation that it receives from us in connection with the purchase, financing, leasing and management and sale of our properties to conduct its operations. To date, the fees we pay to our Advisor have been inadequate to cover its operating expenses. To cover its operational shortfalls, our Advisor has relied on cash raised in private offerings of its sole member. If our Advisor is unable to secure additional capital, it may become unable to meet its obligations and we might be required to find alternative service providers, which could result in a significant disruption of our business and may adversely affect the value of your investment in us.

Our stockholders have limited control over changes in our policies and operations, which increases the uncertainty and risks our stockholders face.

Our board of directors determines our major policies, including our policies regarding investment, financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors is currently engaged in a process of evaluating strategic alternatives to maximize value for our stockholders. As a result of this process, or otherwise, our board of directors may determine that it is in the best interest of the company to amend or revise certain of our major policies. Our board of directors may amend or revise these policies without a vote of the stockholders. Under Maryland General Corporation Law and our charter, our stockholders have a right to vote only on limited matters. Our board’s broad discretion in setting policies and our stockholders’ inability to exert control over those policies increases the uncertainty and risks our stockholders face.

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

(a) We did not sell any equity securities that were not registered under the Securities Act of 1933 during the period covered by this Form 10-Q.

(b) Not applicable.

(c) During the six months ended June 30, 2012, we redeemed no shares pursuant to our stock repurchase program, which has been suspended since December 31, 2010.

On November 23, 2010, our board of directors concluded that we would not have sufficient funds available to us to fund redemptions for the foreseeable future. Accordingly, our board of directors approved an amendment to our stock repurchase program to suspend redemptions under the program effective December 31, 2010. We can make no assurance as to when and on what terms redemptions will resume. The share redemption program may be amended, resumed, suspended again, or terminated at any time based in part on our cash and debt position. Our board has the authority to terminate the program at any time upon 30 days written notice to our stockholders.

During the six months ended June 30, 2012, we received requests to have an aggregate of 16,636 shares redeemed pursuant to our stock repurchase program. However, due to the current suspension of the stock repurchase program, we were not able to fulfill any of these requests.

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Item 6. Exhibits

Ex.	Description
3.1	Amendment and Restatement of Articles of Incorporation (incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2006).
3.2	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.3 to Post-Effective Amendment No. 1 to the Registration Statement on Form S-11 (No. 333-121238) filed on December 23, 2005 (“Post-Effective Amendment No. 1”)).
4.1	Subscription Agreement (incorporated by reference to Appendix A to the prospectus included on Post-Effective Amendment No. 2 to the Registration Statement on Form S-11 (No. 333-155640) filed on April 16, 2010 (“Post-Effective Amendment No. 2”)).
4.2	Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-11 (No. 333-121238) filed on December 14, 2004).
4.3	Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Appendix B to the prospectus dated April 16, 2010 included on Post-Effective Amendment No. 2).
10.1	Lease agreement effective May 1, 2012 between COP-Western Avenue, LLC, a California Limited Liability Company, and Fujitsu Ten Corp. of America, a California Corporation, pertaining to 20100 and 20200 Western Avenue, Los Angeles, California.
31.1	Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.
101.1	The following information from the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Cash Flows.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized this 14^th day of August 2012.

CORNERSTONE CORE PROPERTIES REIT, INC.
By:	/s/ Terry G. Roussel
	Terry G. Roussel
	Chief Executive Officer and Secretary
	(Principal Executive Officer)
By:	/s/ Timothy C. Collins
	Timothy C. Collins
	Interim Chief Financial Officer and Treasurer
	(Principal Financial Officer )

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EX-10.1

AIR COMMERCIAL REAL ESTATE ASSOCIATION

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE – NET

1.     Basic Provisions ("Basic Provisions").

1.1            Parties: This Lease ("Lease"), dated for reference purposes only May 1, 2012, is made by and between COP-Western Avenue, LLC, a California limited liability company ("Lessor") and Fujitsu Ten Corp. of America, a California corporation ("Lessee"), (collectively the "Parties", or individually a "Party").

1.2(a)       Premises: That certain portion of the Project (as defined below), including all improvements therein or to be provided by Lessor under the terms of this Lease, commonly known by the street address of 20100 and 20200 Western Avenue located in the City of Los Angeles , County of Los Angeles , State of California , with zip code 90501 , as outlined on Exhibit A attached hereto ("Premises") and generally described as (describe briefly the nature of the Premises): Two (2) separate warehouse and office spaces totaling approximately 56,520 square feet. In addition to Lessee's rights to use and occupy the Premises as hereinafter specified, Lessee shall have non-exclusive rights to any utility raceways of the building containing the Premises ("Building") and to the common Areas (as defined in Paragraph 2.7 below), but shall not have any rights to the roof or exterior walls of the Building or to any other buildings in the Project. The Premises, the Building, the Common Areas, the land upon which they are located, along with all other buildings and improvements thereon, are herein collectively referred to as the "Project." (See also Paragraph 2 and Addendum Paragraph 64)

1.2(b)       Parking: 105 unallocated and unreserved vehicle parking spaces. (See also Paragraph 2.6 and Addendum Paragraph 54))

1.3           Term: Seven (7) years and No (0) months ("Original Term") commencing June 1, 2012 ("Commencement Date") and ending May 31, 2019 ("Expiration Date"). (See also Paragraph 3)

1.4            Early Possession: If the Premises are available Lessee may have non-exclusive possession of the Premises commencing upon lease execution and delivery of funds set forth in Section 1.7 below ("Early Possession Date").

(See also Paragraphs 3.2 and 3.3)

1.5           Base Rent: $ 43,269.30 per month ("Base Rent"), payable on the first day of each month commencing June 1, 2012 (See also Paragraph 4 and Addendum Paragraph 51).

þ If this box is checked, there are provisions in this Lease for the Base Rent to be adjusted. See Paragraph 50 of Addendum

1.6           Lessee's Share of Common Area Operating Expenses: forty-eight and 54/100ths percent (48.54%) ("Lessee's Share"). Lessee's Share has been calculated by dividing the approximate rentable square footage of the Premises by the approximate square footage of the Project and shall not be subject to revision except in connection with an actual change in the size of the Premises or a change in the space available for lease in the Project.

1.7           Base Rent and Other Monies Paid Upon Execution:

(a) Base Rent: $21,634.60 for the period 2/01/2013-2/28/2013 (See Par. 51 of Addendum)

(b) Common Area Operating Expenses: $11,969.20 for the period 6/1/2012 - 6/30/2012 (see Paragraph 51 of Addendum)

(c) Security Deposit: $170,500.00 ("Security Deposit"). (See also Paragraph 5)

(d) Other: $ N/A for

(e) Total Due Upon Execution of this Lease: $ 196,656.60.

1.8          Agreed Use: Warehouse, repair center, distribution and administrative offices for automotive technology and components. (See also Paragraph 6)

1.9          Insuring Party. Lessor is the "Insuring Party". (See also Paragraph 8)

1.10        Real Estate Brokers: (See also Paragraph 15)

(a) Representation: The following real estate brokers (the "Brokers") and brokerage relationships exist in this transaction

(Check applicable boxes):

þ CBRE, Inc. represents Lessor exclusively ("Lessor's Broker");

þ Collier's International represents Lessee exclusively ("Lessee's Broker"); or

¨ ____________________________________________________________________represents both Lessor and Lessee ("Dual Agency").

(b) Payment to Brokers: Pursuant to a separate written agreement between Lessor and Lessor’s Broker.

PAGE 1 OF 18_________
INITIALS	INITIALS
©1999 - AIR COMMERCIAL REAL ESTATE ASSOCIATION	FORM MTN-11-3/10E

1.11          Guarantor. The obligations of the Lessee under this Lease are to be guaranteed by N/A ("Guarantor"). (See also Paragraph 37)

1.12          Attachments. Attached hereto are the following, all of which constitute a part of this Lease:

þ an Addendum consisting of Paragraphs 50 through 57;

þ a site plan depicting the Premises; (Exhibit A)

£ a site plan depicting the Project;

£ a current set of the Rules and Regulations for the Project;

£ a current set of the Rules and Regulations adopted by the owners' association;

£ a Work Letter;

þ other (specify); Exhibit B - Tenant Improvements/Allowance

                Exhibit C - Designated Reserved Parking.

2. Premises.

2.1          Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. While the approximate square footage of the Premises may have been used in the marketing of the Premises for purposes of comparison, the Base Rent stated herein is NOT tied to square footage and is not subject to adjustment should the actual size be determined to be different. NOTE: Lessee is advised to verify the actual size prior to executing this Lease.

2.2          Condition. Lessor shall deliver that portion of the Premises contained within the Building ('Unit") to Lessee broom clean and free of debris on the Commencement Date or the Early Possession Date, whichever first occurs ("Start Date"), and, so long as the required service contracts described in Paragraph 7.1(b) below are obtained by Lessee and in effect within thirty days following the Start Date, warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems ("HVAC"), loading doors, sump pumps, if any, and all other such elements in the Unit, other than those constructed by Lessee, shall be in good operating condition on said date, that the structural elements of the roof, bearing walls and foundation of the Unit shall be free of material defects, and that the Unit does not contain hazardous levels of any mold or fungi defined as toxic under applicable state or federal law. If a non-compliance with such warranty exists as of the Start Date, or if one of such systems or elements should malfunction or fail within the appropriate warranty period, Lessor shall, as Lessor's sole obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, malfunction or failure, rectify same at Lessor's expense. The warranty periods shall be as follows: (i) 6 months as to the HVAC systems, and (ii) 120 days as to the remaining systems and other elements of the Unit. If Lessee does not give Lessor the required notice within the appropriate warranty period, correction of any such non-compliance, malfunction or failure shall be the obligation of Lessee at Lessee's sole cost and expense (except for the repairs to the fire sprinkler systems, roof, foundations, and/or bearing walls - see Paragraph 7).         

2.3          Compliance. Lessor warrants that to the best of its knowledge the improvements on the Premises and the Common Areas comply with the building codes that were in effect at the time that each such improvement, or portion thereof, was constructed, and also with all applicable laws, covenants or restrictions of record, regulations, and ordinances in effect on the Start Date ("Applicable Requirements"). Said warranty does not apply to the specific and unique use to which Lessee will put the Premises, modifications which may be required by the Americans with Disabilities Act or any similar laws as a result of Lessee's specific and unique use (see Paragraph 49), or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the Applicable Requirements and especially the zoning are appropriate for Lessee's intended use, and acknowledges that past uses of the Premises may no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance rectify the same at Lessor's expense. If Lessee does not give Lessor written notice of a non-compliance with this warranty within 6 months following the Start Date, correction of that non-compliance shall be the obligation of Lessee at Lessee's sole cost and expense, provided, however, if such noncompliance was not readily apparent, then such warranty shall extend for a period of 24 months from the Commencement Date. If the Applicable Requirements are hereafter changed so as to require during the term of this Lease the construction of an addition to or an alteration of the Unit, Premises and/or Building, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the Unit, Premises and/or Building ("Capital Expenditure"), Lessor and Lessee shall allocate the cost of such work as follows:

(a)           Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required as a result of the specific and unique use of the Premises by Lessee as compared with uses by tenants in general, Lessee shall be fully responsible for the cost thereof, provided, however that if such Capital Expenditure is required during the last 2 years of this Lease and the cost thereof exceeds 6 months' Base Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in writing, within 10 days after receipt of Lessee's termination notice that Lessor has elected to pay the difference between the actual cost thereof and the amount equal to 6 months' Base Rent. If Lessee elects termination, Lessee shall immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice specifying a termination date at least 90 days thereafter. Such termination date shall, however, in no event be earlier than the last day that Lessee could legally utilize the Premises without commencing such Capital Expenditure.

(b)           If such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such as, governmentally mandated seismic modifications), then Lessor shall pay for such Capital Expenditure and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease or any extension thereof, on the date that on which the Base Rent is due, an amount equal to the amortized portion of such costs reasonably attributable to the Premises amortized over the useful life of such Capital Expenditure as reasonably determined by Lessor. Lessee shall pay Interest on the balance but may prepay its obligation at any time. If, however, Lessor reasonably determines that it is not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, in writing, within 10 days after receipt of Lessor's termination notice that Lessee will pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any such Capital Expenditure, Lessee may advance such funds and deduct same, with Interest, from Rent until Lessor's share of such costs have been fully paid. If Lessee is unable to finance Lessor's share, or if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the right to terminate this Lease upon 30 days written notice to Lessor.

(c)          Notwithstanding the above, the provisions concerning Capital Expenditures are intended to apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use, change in intensity of use, or modification to the Premises then, and in that event, Lessee shall either: (i) immediately cease such changed use or intensity of use and/or take such other steps as may be necessary to eliminate the requirement for such Capital Expenditure, or (ii) complete such Capital Expenditure at its own expense. Lessee shall not have any right to terminate this Lease.

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2.4          Acknowledgements. Lessee acknowledges that: (a) it has been given an opportunity to inspect and measure the Premises, (b) it has been advised by Lessor and/or Brokers to satisfy itself with respect to the size and condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements and the Americans with Disabilities Act), and their suitability for Lessee's intended use, (c) Lessee has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises, (d) it is not relying on any representation as to the size of the Premises made by Brokers or Lessor, (e) the square footage of the Premises was not material to Lessee's decision to lease the Premises and pay the Rent stated herein, and (f) neither Lessor, Lessor's agents, nor Brokers have made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have made no representations, promises or warranties concerning Lessee's ability to honor the Lease or suitability to occupy the Premises and (ii) it is Lessor's sole responsibility to investigate the financial capability and/or suitability of all proposed tenants.

2.5            Lessee as Prior Owner/Occupant. The warranties made by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises. In such event, Lessee shall be responsible for any necessary corrective work.

2.6            Vehicle Parking. Lessee shall be entitled to use the number of parking spaces specified in Paragraph 1.2(b) on those portions of the Common Areas designated from time to time by Lessor for parking without additional charge. Lessee shall not use more parking spaces than said number. Said parking spaces shall be used for parking by vehicles no larger than full-size passenger automobiles or pick-up trucks, herein called "Permitted Size Vehicles." Lessor may regulate the loading and unloading of vehicles by adopting Rules and Regulations as provided in Paragraph 2.9. No vehicles other than Permitted Size Vehicles may be parked in the Common Area without the prior written permission of Lessor. In addition:

(a) Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee's employees, suppliers, shippers, customers, contractors or invitees to be loaded, unloaded, or parked in areas other than those designated by Lessor for such activities. Lessor acknowledges that Lessee will be driving vehicles into the electronics repair portion of the Premises and consents to such use by Lessee.

(b) Lessee shall not service or store any vehicles in the Common Areas.

(c) If Lessee permits or allows any of the prohibited activities described in this Paragraph 2.6, then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

2.7            Common Areas - Definition. The term "Common Areas" is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Project and interior utility raceways and installations within the Unit that are provided and designated by the Lessor from time to time for the general non-exclusive use of Lessor, Lessee and other tenants of the Project and their respective employees, suppliers, shippers, customers, contractors and invitees, including parking areas, loading and unloading areas, trash areas, roadways, walkways, driveways and landscaped areas.

2.8            Common Areas - Lessee's Rights. Lessor grants to Lessee, for the benefit of Lessee and its employees, suppliers, shippers, contractors, customers and invitees, during the term of this Lease, the non-exclusive right to use, in common with others entitled to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Project. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, temporarily or permanently, in the Common Areas. Any such storage shall be permitted only by the prior written consent of Lessor or Lessor's designated agent, which consent may be revoked at any time. In the event that any unauthorized storage shall occur then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove the property and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

2.9            Common Areas - Rules and Regulations. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify, amend and enforce reasonable rules and regulations ("Rules and Regulations") for the management, safety, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order, as well as for the convenience of other occupants or tenants of the Building and the Project and their invitees. Such Rules and Regulations shall be enforced by Lessor in a non-discriminatory manner. Lessee agrees to abide by and conform to all such Rules and Regulations, and shall use its best efforts to cause its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform. Lessor shall not be responsible to Lessee for the non-compliance with said Rules and Regulations by other tenants of the Project.

2.10          Common Areas - Changes. Lessor shall have the right, in Lessor's sole discretion, from time to time:

(a) To make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways and utility raceways; provided, however, such actions do not materially and adversely affect Lessee's access to or use of the Premises.

(b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available;

(c) To designate other land outside the boundaries of the Project to be a part of the Common Areas;

(d) To add additional buildings and improvements to the Common Areas; provided, however, such actions do not materially and adversely affect Lessee's access to or use of the Premises.

(e) To use the Common Areas while engaged in making additional improvements, repairs or alterations to the Project, or any portion thereof provided Lessor shall use good faith efforts to minimize disruption to Lessee; and

(f) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Project as Lessor may, in the exercise of sound business judgment, deem to be appropriate provided Lessor shall use good faith efforts to minimize disruption to Lessee.

3.             Term.

3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3.

3.2 Early Possession. Any provision herein granting Lessee Early Possession of the Premises is subject to and conditioned upon the Premises being available for such possession prior to the Commencement Date. Any grant of Early Possession only conveys a non-exclusive right to occupy the Premises. If Lessee totally or partially occupies the Premises prior to the Commencement Date, the obligation to pay Base Rent shall be abated for the period of such Early Possession. All other terms of this Lease (including but not limited to the obligations to pay Lessee's Share of Common Area Operating Expenses, Real Property Taxes and insurance premiums and to maintain the Premises) shall be in effect during such period .Any such Early Possession shall not affect the Expiration Date. 

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3.3 Delay In Possession. Lessor agrees to use its best commercially reasonable efforts to deliver possession of the Premises to Lessee by the Commencement Date. If, despite said efforts, Lessor is unable to deliver possession by such date, Lessor shall not be subject to any liability therefore, nor shall such failure affect the validity of this Lease or change the Expiration Date. Lessee shall not, however, be obligated to pay Rent or perform its other obligations until Lessor delivers possession of the Premises and any period of rent abatement that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what Lessee would otherwise have enjoyed under the terms hereof, but minus any days of delay caused by the acts or omissions of Lessee. If possession is not delivered within 60 days after the Commencement Date, as the same may be extended under the terms of any Work Letter executed be Parties, Lessee may, at its option, by notice in writing within 10 days after the end of such 60 day period, cancel this Lease, in which event the Parties shall be discharged from all obligations hereunder. If such written notice is not received by Lessor within said 10 day period, Lessee's right to cancel shall terminate. If possession of the Premises is not delivered within 120 days after the Commencement Date, this Lease shall terminate unless other agreements are reached between Lessor and Lessee,

in writing.

3.4    Lessee Compliance. Lessor shall not be required to tender possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this Lease from and after the Start Date, including the payment of Rent, notwithstanding Lessor's election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied.

4.             Rent.

4.1            Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent ("Rent").

4.2            Common Area Operating Expenses. Lessee shall pay to Lessor during the term hereof, in addition to the Base Rent, Lessee's Share (as specified in Paragraph 1.6) of all Common Area Operating Expenses, as hereinafter defined, during each calendar year of the term of this Lease, in accordance with the following provisions:

(a)           "Common Area Operating Expenses" are defined, for purposes of this Lease, as all commercially reasonable costs incurred by Lessor relating to the ownership and operation of the Project, including, but not limited to, the following:

(i) The operation, repair and maintenance, in neat, clean, good order and condition , and if necessary the replacement, of the following:

(aa)          The Common Areas and Common Area improvements, including parking areas, loading and unloading areas, trash areas, roadways, parkways, walkways, driveways, landscaped areas, bumpers, irrigation systems, Common Area lighting facilities, fences and gates, elevators, roofs, exterior walls of the buildings, building systems and roof drainage systems.

(bb)          Exterior signs and any tenant directories.

(cc)           Any fire sprinkler systems.

(dd)          All other areas and improvements that are within the exterior boundaries of the Project but outside of the Premises and/or any other space occupied by a tenant.

(ii)          The cost of water, gas, electricity and telephone to service the Common Areas and any utilities not separately metered.

(iii)         The cost of trash disposal, pest control services, property management, security services, owners' association dues and fees, the cost to repaint the exterior of any structures and the cost of any environmental inspections.

(iv)          Reasonable reserves set aside for maintenance, repair and/or replacement of Common Area improvements and equipment.

(v)           Real Property Taxes (as defined in Paragraph 10).

(vi)          The cost of the premiums for the insurance maintained by Lessor pursuant to Paragraph 8.

(vii)         Any deductible portion of an insured loss concerning the Building or the Common Areas.

(viii)        Auditors', accountants' and attorneys' fees and costs related to the operation, maintenance, repair and replacement of the Project.

(ix)          The cost of any capital improvement to the Building or the Project not covered under the provisions of Paragraph 2.3 provided; however, that Lessor shall allocate the cost of any such capital improvement over the useful life of such capital improvement as reasonably determined by Lessor and Lessee shall not be required to pay more than Lessee's Share of the amortized cost of such capital improvement in any given month.

(x)           The cost of any other services to be provided by Lessor that are stated elsewhere in this Lease to be a Common Area Operating Expense.

(b)           Any Common Area Operating Expenses and Real Property Taxes that are specifically attributable to the Unit, the Building or to any other building in the Project or to the operation, repair and maintenance thereof, shall be allocated entirely to such Unit, Building, or other building. However, any Common Area Operating Expenses and Real Property Taxes that are not specifically attributable to the Building or to any other building or to the operation, repair and maintenance thereof, shall be equitably allocated by Lessor to all buildings in the Project.

(c)           The inclusion of the improvements, facilities and services set forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to either have said improvements or facilities or to provide those services unless the Project already has the same, Lessor already provides the services, or Lessor has agreed elsewhere in this Lease to provide the same or some of them.

(d)          Lessee's Share of Common Area Operating Expenses is payable monthly on the same day as the Base Rent is due hereunder. The amount of such payments shall be based on Lessor's estimate of the annual Common Area Operating Expenses. Within 120 days after the end of each calendar year Lessor shall deliver to Lessee a reasonably detailed statement showing Lessee's Share of the actual Common Area Operating Expenses for the preceding year. If Lessee's payments during such year exceed Lessee's Share, Lessor shall credit the amount of such over-payment against Lessee's future payments. If Lessee's payments during such year were less than Lessee's Share, Lessee shall pay to Lessor the amount of the deficiency within 30 days after delivery by Lessor to Lessee of the statement.

(e)            Common Area Operating Expenses shall not include any expenses paid by any tenant directly to third parties, or as to which Lessor is otherwise reimbursed by any third party, other tenant, or insurance proceeds.

4.3            Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. All monetary amounts shall be rounded to the nearest whole dollar. In the event that any invoice prepared by Lessor is inaccurate such inaccuracy shall not constitute a waiver and Lessee shall be obligated to pay the amount set forth in this Lease. Rent for any period during the term hereof which is for less than one full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor's rights to the balance of such Rent, regardless of Lessor's endorsement of any check so stating. In the event that any check, draft, or other instrument of payment given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in addition to any Late Charge and Lessor, at its option, may require all future Rent be paid by cashier's check. Payments will be applied first to accrued late charges and attorney's fees, second to accrued interest, then to Base Rent and Common Area Operating Expenses, and any remaining amount to any other outstanding charges or costs.

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5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the Security Deposit as security for Lessee's faithful performance of its obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount already due Lessor, for Rents which will be due in the future, and/ or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of the Security Deposit, Lessee shall within 10 days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to increase the Security Deposit to the extent necessary, in Lessor's reasonable judgment, to account for any increased wear and tear that the Premises may suffer as a result thereof. If a change in control of Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessor's reasonable judgment, significantly reduced, Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on such change in financial condition. Lessor shall not be required to keep the Security Deposit separate from its general accounts. Within 90 days after the expiration or termination of this Lease, Lessor shall return that portion of the Security Deposit not used or applied by Lessor. No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease.

6. Use.

6.1            Use. Lessee shall use and occupy the Premises only for the Agreed Use, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of or causes damage to neighboring premises or properties. Other than guide, signal and seeing eye dogs, Lessee shall not keep or allow in the Premises any pets, animals, birds, fish, or reptiles. Lessor shall not unreasonably withhold or delay its consent to any written request for a modification of the Agreed Use, so long as the same will not impair the structural integrity of the Building or the mechanical or electrical systems therein, and/or is not significantly more burdensome to the Project. If Lessor elects to withhold consent, Lessor shall within 7 days after such request give written notification of same, which notice shall include an explanation of Lessor's objections to the change in the Agreed Use.

6.2            Hazardous Substances.

(a)           Reportable Uses Require Consent. The term "Hazardous Substance" as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or fractions thereof. Lessee shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee's expense) with all Applicable Requirements. "Reportable Use" shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, ordinary office supplies (copier toner, liquid paper, glue, etc.) and common household cleaning materials, so long as such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit.

(b)           Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as previously consented to by Lessor, Lessee shall promptly give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance.

(c)           Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee's expense, comply with all Applicable Requirements and take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Lessee, or any third party under Lessee's direction or control.

(d)           Lessee Indemnification. Lessee shall indemnify, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents and/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys' and consultants' fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party under Lessee's direction or control (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from areas outside of the Project not caused or contributed to by Lessee). Lessee's obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement.

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(e)           Lessor Indemnification. Lessor and its successors and assigns shall indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all damages, liabilities, judgment claims, expenses, penalties and attorneys' and consultant's fees including the cost of remediation, which are suffered as a direct result of Hazardous Substances on the Premises prior to Lessee taking possession or which are caused by the gross negligence or willful misconduct of Lessor, its agents or employees. Lessor's obligations, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease.

(f)           Investigations and Remediations. Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to the Lessee taking possession, unless such remediation measure is required as a result of Lessee's use (including "Alterations", as defined in paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor's agents to have reasonable access to the Premises at reasonable times in order to carry out Lessor's investigative and remedial responsibilities. Lessee shall only be responsible to conduct or reimburse Lessor for any investigations with respect to any existing Hazardous Substances on the Premises caused by Lessee or third parties under Lessee's direction or control.

(g)           Lessor Termination Option. If a Hazardous Substance Condition (see Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by the Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessor's rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's option, either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds, $500,000.00 give written notice to Lessee, within 30 days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of Lessor's desire to terminate this Lease as of the date 60 days following the date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee's commitment to pay the amount by which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal to $500,000.00. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days following such commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessor's notice of termination.

6.3            Lessee's Compliance with Applicable Requirements. Except as otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the reasonable requirements of any applicable fire insurance underwriter or rating bureau, without regard to whether said Requirements are now in effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of Lessor's written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee's compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements. Likewise, Lessee shall promptly give written notice to Lessor of: (i) any water damage to the Premises and any suspected seepage, pooling, dampness or other condition conducive to the production of mold; or (ii) any mustiness or other odors that might indicate the presence of mold in the Premises.

6.4            Inspection; Compliance. Lessor and Lessor's "Lender" (as defined in Paragraph 30) and consultants shall have the right to enter into Premises at any time, in the case of an emergency, and otherwise during normal business hours after reasonable notice, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements by Lessee or any third party under Lessee's direction or control, or a Hazardous Substance Condition (see Paragraph 9.1) is found to exist or be imminent due to any acts or omissions of Lessee or any third party under Lessee's direction or control, or the inspection is requested or ordered by a governmental authority due to any acts or omissions of Lessee or any third party under Lessee's direction or control. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such inspection is reasonably related to the violation or contamination. In addition, Lessee shall provide copies of all relevant material safety data sheets (MSDS) to Lessor within 10 days of the receipt of written request therefor.

7.           Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations.

7.1          Lessee's Obligations.

(a)          In General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole expense, keep the Premises, Utility Installations (intended for Lessee's exclusive use, no matter where located), and Alterations in good order, condition and repair (whether or not the portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the Premises), including, but not limited to, all equipment or facilities, such as plumbing, HVAC equipment, electrical, lighting facilities, boilers, pressure vessels, fixtures, interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and skylights but excluding any items which are the responsibility of Lessor pursuant to Paragraph 7.2. Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Paragraph 7.1(b) below. Lessee's obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair.

(b)          Service Contracts. Lessee shall, at Lessee's sole expense, procure and maintain contracts, with copies to Lessor, in customary form and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements, if any, if and when installed on the Premises: (i) HVAC equipment, However, Lessor reserves the right, upon notice to Lessee, to procure and maintain any or all of such service contracts, and Lessee shall reimburse Lessor, upon demand, for the cost thereof.

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(c)          Failure to Perform. If Lessee fails to perform Lessee's obligations under this Paragraph 7.1, Lessor may enter upon the Premises after 10 days' prior written notice to Lessee (except in the case of an emergency, in which case no notice shall be required), perform such obligations on Lessee's behalf, and put the Premises in good order, condition and repair, and Lessee shall promptly pay to Lessor a sum equal to 115% of the cost thereof.

(d)           Replacement. Subject to Lessee's indemnification of Lessor as set forth in Paragraph 8.7 below, and without relieving Lessee of liability resulting from Lessee's failure to exercise and perform good maintenance practices, if an item described in Paragraph 7.1(a) cannot be repaired other than at a cost which is in excess of 50% of the cost of replacing such item, then such item shall be replaced by Lessor, and the cost thereof shall be prorated between the Parties and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the cost of such replacement by a fraction, the numerator of which is one, and the denominator of which is the number of months in the useful life of such item as reasonably determined by Lessor. Lessee shall pay Interest on the unamortized balance but may prepay its obligation at any time.

7.2           Lessor's Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof (including roof membrane), fire sprinkler system, Common Area fire alarm and/or smoke detection systems, fire hydrants, parking lots, walkways, parkways, driveways, landscaping, fences, signs and utility systems serving the Common Areas and all parts thereof, as well as providing the services for which there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or replace windows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter in effect to the extent it is inconsistent with the terms of this Lease.

7.3          Utility Installations; Trade Fixtures; Alterations.

(a)           Definitions. The term "Utility Installations" refers to all floor and window coverings, air and/or vacuum lines, power panels, electrical distribution, security and fire protection systems, communication cabling, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The term "Trade Fixtures" shall mean Lessee's machinery and equipment that can be removed without doing material damage to the Premises. The term "Alterations" shall mean any modification of the improvements, other than Utility Installations or Trade Fixtures, whether by addition or deletion. "Lessee Owned Alterations and/or Utility Installations" are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).

(b)           Consent. Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor's prior written consent. Lessee may, however, make non-structural Alterations or Utility Installations to the interior of the Premises (excluding the roof) without such consent but upon notice to Lessor, as long as they are not visible from the outside, do not involve puncturing, relocating or removing the roof or any existing walls, will not affect the electrical, plumbing, HVAC, and/or life safety systems, and the cumulative cost thereof during this Lease as extended does not exceed a sum equal to 3 month's Base Rent in the aggregate or a sum equal to one month's Base Rent in any one year. Notwithstanding the foregoing, Lessee shall not make or permit any roof penetrations and/or install anything on the roof without the prior written approval of Lessor. Lessor may, as a precondition to granting such approval, require Lessee to utilize a contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee's: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications.

(c)           Liens; Bonds. Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic's or material man’s lien against the Premises or any interest therein. Lessee shall give Lessor not less than 10 days notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to 150% of the amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. If Lessor elects to participate in any such action, Lessee shall pay Lessor's attorneys' fees and costs.

7.4          Ownership; Removal; Surrender; and Restoration.

(a)           Ownership. Subject to Lessor's right to require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property of Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or termination of this Lease, become the property of Lessor and be surrendered by Lessee with the Premises.

(b)          Removal. By delivery to Lessee of written notice from Lessor at the time Lessor consents to the installation of such Lessee Owned Alterations and Utility Installations pursuant to Paragraph 7.3(b) above. Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this Lease. Lessor may require the removal at any time of all or any part of any Lessee Owned Alterations or Utility Installations made without the required consent.

(c)           Surrender; Restoration. Lessee shall surrender the Premises by the Expiration Date or any earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. "Ordinary wear and tear" shall not include any damage or deterioration that would have been prevented by good maintenance practice. Notwithstanding the foregoing, if this Lease is for 12 months or less, then Lessee shall surrender the Premises in the same condition as delivered to Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any damage occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee. Lessee shall also completely remove from the Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or any third party under Lessee's direction or control (except Hazardous Substances which were deposited via underground migration from areas outside of the Project) even if such removal would require Lessee to perform or pay for work that exceeds statutory requirements. Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. Any personal property of Lessee not removed on or before the Expiration Date or any earlier termination date shall be deemed to have been abandoned by Lessee and may be disposed of or retained by Lessor as Lessor may desire. The failure by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 26 below. 

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8.          Insurance; Indemnity.

8.1          Payment of Premiums. The cost of the premiums for the insurance policies required to be carried by Lessor, pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), shall be a Common Area Operating Expense. Premiums for policy periods commencing prior to, or extending beyond, the term of this Lease shall be prorated to coincide with the corresponding Start Date or Expiration Date.

8.2          Liability Insurance.

(a)           Carried by Lessee. Lessee shall obtain and keep in force a Commercial General Liability policy of insurance protecting Lessee and Lessor as an additional insured against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing single limit coverage in an amount not less than $1,000,000 per occurrence with an annual aggregate of not less than $5,000,000 or an umbrella policy of not less than $5,000,000. Lessee shall add Lessor as an additional insured by means of an endorsement at least as broad as the Insurance Service Organization's "Additional Insured-Managers or Lessors of Premises" Endorsement. The policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an "insured contract" for the performance of Lessee's indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. Lessee shall provide an endorsement on its liability policy(ies) which provides that its insurance shall be primary to and not contributory with any similar insurance carried by Lessor, whose insurance shall be considered excess insurance only.

(b)            Carried by Lessor. Lessor shall maintain liability insurance as described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional insured therein.

8.3           Property Insurance - Building, Improvements and Rental Value.

(a)            Building and Improvements. Lessor shall obtain and keep in force a policy or policies of insurance in the name of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender insuring loss or damage to the Premises. The amount of such insurance shall be equal to the full insurable replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lender, but in no event more than the commercially reasonable and available insurable value thereof. Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's personal property shall be insured by Lessee not by Lessor. If the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender), including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed $5,000 per occurrence.

(b)          Rental Value. Lessor shall also obtain and keep in force a policy or policies in the name of Lessor with loss payable to Lessor and any Lender, insuring the loss of the full Rent for one year with an extended period of indemnity for an additional 180 days ("Rental Value insurance"). Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Lessee, for the next 12 month period.

(c)           Adjacent Premises. Lessee shall pay for any increase in the premiums for the property insurance of the Building and for the Common Areas or other buildings in the Project if said increase is caused by Lessee's acts, omissions, use or occupancy of the Premises.

(d)           Lessee's Improvements. Since Lessor is the Insuring Party, Lessor shall not be required to insure Lessee Owned Alterations and Utility Installations unless the item in question has become the property of Lessor under the terms of this Lease.

8.4           Lessee's Property; Business Interruption Insurance; Worker's Compensation Insurance.

(a)           Property Damage. Lessee shall obtain and maintain insurance coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with written evidence that such insurance is in force.

(b)            Business Interruption. Lessee shall obtain and maintain loss of income and extra expense insurance as would be offered in a standard commercial property policy. The coverage would activate and claim be pursued when loss is caused by a covered peril.

(c)            Worker's Compensation Insurance. Lessee shall obtain and maintain Worker’s Compensation Insurance in such amount as may be required by Applicable Requirements.

(d)           No Representation of Adequate Coverage. Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee's property, business operations or obligations under this Lease.

8.5          Insurance Policies. Insurance required herein shall be by companies maintaining during the policy term a "General Policyholders Rating" of at least A-, VII, as set forth in the most current issue of "Best's Insurance Guide", or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certificates with copies of the required endorsements evidencing the existence and amounts of the required insurance.Lessee shall, at least 10 days prior to the expiration of such policies, furnish Lessor with evidence of renewals or "insurance binders" evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fail to procure and maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same.

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8.6          Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils required to be insured against herein. The effect of such releases and waivers is not limited by the amount of insurance carried or required or by any deductibles applicable hereto. The Parties agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby.

8.7          Indemnity. Except for Lessor's gross negligence or willful misconduct, or that of Lessor's agents or employees, Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor's master or ground lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, liens, judgments, penalties, attorneys' and consultants' fees, expenses and/or liabilities arising out of, involving, or in connection with, the use and/or occupancy of the Premises by Lessee. If any action or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee shall upon notice defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified.

8.8          Exemption of Lessor and its Agents from Liability. Except to the extent caused by the gross negligence or willful misconduct of Lessor, its agents or employees, neither Lessor nor its agents shall be liable under any circumstances for: (i) injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee's employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, indoor air quality, the presence of mold or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building, or from other sources or places, (ii) any damages arising from any act or neglect of any other tenant of Lessor or from the failure of Lessor or its agents to enforce the provisions of any other lease in the Project, or (iii) injury to Lessee's business or for any loss of income or profit therefrom. Instead, it is intended that Lessee's sole recourse in the event of such damages or injury be to file a claim on the insurance policy(ies) that Lessee is required to maintain pursuant to the provisions of paragraph 8.

8.9          Failure to Provide Insurance. Lessee acknowledges that any failure on its part to obtain or maintain the insurance required herein will expose Lessor to risks and potentially cause Lessor to incur costs not contemplated by this Lease, the extent of which will be extremely difficult to ascertain. Accordingly, for any month or portion thereof that Lessee does not maintain the required insurance and/or does not provide Lessor with the required binders or certificates evidencing the existence of the required insurance, the Base Rent shall be automatically increased, without any requirement for notice to Lessee, by an amount equal to 10% of the then existing Base Rent or $100, whichever is greater. The parties agree that such increase in Base Rent represents fair and reasonable compensation for the additional risk/costs that Lessor will incur by reason of Lessee's failure to maintain the required insurance. Such increase in Base Rent shall in no event constitute a waiver of Lessee's Default or Breach with respect to the failure to maintain such insurance, prevent the exercise of any of the other rights and remedies granted hereunder, nor relieve Lessee of its obligation to maintain the insurance specified in this Lease.

9.           Damage or Destruction.

9.1          Definitions.

(a)            "Premises Partial Damage" shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations, which can reasonably be repaired in 9 months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total. Notwithstanding the foregoing, Premises Partial Damage shall not include damage to windows, doors, and/or other similar items which Lessee has the responsibility to repair or replace pursuant to the provisions of Paragraph 7.1.

(b)           "Premises Total Destruction" shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be repaired in 9 months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total.

(c)            "Insured Loss" shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits involved.

(d)            "Replacement Cost" shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation.

(e)            "Hazardous Substance Condition" shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance, in, on, or under the Premises which requires restoration.

9.2          Partial Damage - Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor's election, make the repair of any damage or destruction the total cost to repair of which is $10,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds as and when required to complete said repairs. In the event, however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said 10 day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10 days thereafter to: (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect, or (ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party.

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9.3           Partial Damage - Uninsured Loss. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), Lessor may either: (i) repair such damage as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective 60 days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within 30 days after receipt of the termination notice to give written notice to Lessor of Lessee's commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not make the required commitment, this Lease shall terminate as of the date specified in the termination notice.

9.4          Total Destruction. Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, this Lease shall terminate 60 days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.

9.5          Damage Near End of Term. If at any time during the last 9 months of this Lease there is damage for which the cost to repair exceeds three one month's Base Rent, whether or not an Insured Loss, either party may terminate this Lease effective 60 days following the date of occurrence of such damage by giving a written termination notice to the other party within 30 days after the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the date which is 10 days after Lessee's receipt of Lessor's written notice purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee's option shall be extinguished.

9.6           Abatement of Rent; Lessee's Remedies.

(a)            Abatement. In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired, All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein.

(b)            Remedies. If Lessor is obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within 90 days after such obligation shall accrue, or complete the same within 240 days after obtaining permits, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee's election to terminate this Lease on a date not less than 60 days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within 30 days thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or restoration is commenced within such 30 days, this Lease shall continue in full force and effect. "Commence" shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs.

9.7          Termination; Advance Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit as has not been, or is not then required to be, used by Lessor.

10.          Real Property Taxes.

10.1        Definition. As used herein, the term "Real Property Taxes" shall include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal income or estate taxes); improvement bond; and/or license fee imposed upon or levied against any legal or equitable interest of Lessor in the Project, Lessor's right to other income therefrom, and/or Lessor's business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Project address and where the proceeds so generated are to be applied by the city, county or other local taxing authority of a jurisdiction within which the Project is located. The term "Real Property Taxes" shall also include any tax, fee, levy, assessment or charge, or any increase therein: (i) imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Project, (ii) a change in the improvements thereon, and/or (iii) levied or assessed on machinery or equipment provided by Lessor to Lessee pursuant to this Lease. In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any real estate tax year shall be included in the calculation of Real Property Taxes for such calendar year based upon the number of days which such calendar year and tax year have in common.

10.2        Payment of Taxes. Except as otherwise provided in Paragraph 10.3, Lessor shall pay the Real Property Taxes applicable to the Project and said payments shall be included in the calculation of Common Area Operating Expenses in accordance with the provisions of Paragraph 4.2.

10.3        Additional Improvements. Common Area Operating Expenses shall not include Real Property Taxes specified in the tax assessor's records and work sheets as being caused by additional improvements placed upon the Project by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at the time Common Area Operating Expenses are payable under Paragraph 4.2, the entirety of any increase in Real Property Taxes if assessed solely by reason of Alterations, Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee's request or by reason of any alterations or improvements to the Premises made by Lessor subsequent to the execution of this Lease by the Parties.

10.4        Joint Assessment. If the Building is not separately assessed, Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Property Taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. Lessor's reasonable determination thereof, in good faith, shall be conclusive.

10.5        Personal Property Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained in the Premises. When possible, Lessee shall cause its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee's said property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's property within 10 days after receipt of a written statement setting forth the taxes applicable to Lessee's property. 

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11.          Utilities and Services. Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon. Notwithstanding the provisions of Paragraph 4.2, if at any time in Lessor's reasonable judgment, Lessor determines that Lessee is using a disproportionate amount of water, electricity or other commonly metered utilities, or that Lessee is generating such a large volume of trash as to require an increase in the size of the trash receptacle and/or an increase in the number of times per month that it is emptied, then Lessor may increase Lessee's Base Rent by an amount equal to such increased costs. There shall be no abatement of Rent and Lessor shall not be liable in any respect whatsoever for the inadequacy, stoppage, interruption or discontinuance of any utility or service due to riot, strike, labor dispute, breakdown, accident, repair or other cause beyond Lessor's reasonable control or in cooperation with governmental request or directions.

12.          Assignment and Subletting.

12.1        Lessor's Consent Required.

(a)           Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, "assign or assignment") or sublet all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent.

(b)           Unless Lessee is a corporation and its stock is publicly traded on a national stock exchange, a change in the control of Lessee shall constitute an assignment requiring consent. The transfer, on a cumulative basis, of 50% or more of the voting control of Lessee shall constitute a change in control for this purpose.

(c)           The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of the Net Worth of Lessee by an amount greater than 25% of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent. "Net Worth of Lessee" shall mean the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles.

(d)           Other than a Permitted Transfer as set forth in the Addendum, an assignment or subletting without consent shall, at Lessor's option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable Breach, Lessor may either: (i) terminate this Lease, or (ii) upon 30 days written notice, increase the monthly Base Rent to 110% of the Base Rent then in effect. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to 110% of the price previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term shall be increased to 110% of the scheduled adjusted rent.

(e)           Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief.

(f)            Lessor may reasonably withhold consent to a proposed assignment or subletting if Lessee is in Default at the time consent is requested.

(g)          Notwithstanding the foregoing, allowing a de minimis portion of the Premises, ie. 20 square feet or less, to be used by a third party vendor in connection with the installation of a vending machine or payphone shall not constitute a subletting.

12.2        Terms and Conditions Applicable to Assignment and Subletting.

(a)           Regardless of Lessor's consent, no assignment or subletting shall: (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee.

(b)           Lessor may accept Rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for Lessee's Default or Breach.

(c)           Lessor's consent to any assignment or subletting shall not constitute consent to any subsequent assignment or subletting.

(d)          In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee's obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefore to Lessor, or any security held by Lessor.

(e)           Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor's determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together with a fee of $500 as consideration for Lessor's considering and processing said request. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested. (See also Paragraph 36)

(f)           Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment, entering into such sublease, or entering into possession of the Premises or any portion thereof, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing.

(g)           Lessor's consent to any assignment or subletting shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease unless such transfer is specifically consented to by Lessor in writing. (See Paragraph 39.2)

12.3      Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:

(a)           Lessee hereby assigns and transfers to Lessor all of Lessee's interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee's obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee's obligations, Lessee may collect said Rent. In the event that the amount collected by Lessor exceeds Lessee's then outstanding obligations any such excess shall be refunded to Lessee. Lessor shall not, by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee's obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary.

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(b)           In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior Defaults or Breaches of such sublessor.

(c)           Any matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor.

(d)           No sublessee shall further assign or sublet all or any part of the Premises without Lessor's prior written consent.

(e)           Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee.

13.          Default; Breach; Remedies.

13.1        Default; Breach. A "Default" is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or Rules and Regulations under this Lease. A "Breach" is defined as the occurrence of one or more of the following Defaults, and the failure of Lessee to cure such Default within any applicable grace period:

(a)           

(b)           The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to provide reasonable evidence of insurance or surety bond, or to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of 3 business days following written notice to Lessee. THE ACCEPTANCE BY LESSOR OF A PARTIAL PAYMENT OF RENT OR SECURITY DEPOSIT SHALL NOT CONSTITUTE A WAIVER OF ANY OF LESSOR'S RIGHTS, INCLUDING LESSOR'S RIGHT TO RECOVER POSSESSION OF THE PREMISES.

(c)           The failure of Lessee to allow Lessor and/or its agents access to the Premises or the commission of waste, act or acts constituting public or private nuisance, and/or an illegal activity on the Premises by Lessee, where such actions continue for a period of 5 days following written notice to Lessee.

(d)           The failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized assignment or subletting, (iv) an Estoppel Certificate or financial statements, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 41, (viii) material data safety sheets (MSDS), or (ix) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of 10 days following written notice to Lessee.

(e)           A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof, other than those described in subparagraphs 13.1(a), (b), (c) or (d), above, where such Default continues for a period of 30 days after written notice; provided, however, that if the nature of Lessee's Default is such that more than 30 days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said 30 day period and thereafter diligently prosecutes such cure to completion.

(f)           The occurrence of any of the following events: (i) the making of any general arrangement or assignment for the benefit of creditors; (ii) becoming a "debtor" as defined in 11 U.S.C. § 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within 30 days; provided, however, in the event that any provision of this subparagraph is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions.

(g)           The discovery that any financial statement of Lessee or of any Guarantor given to Lessor was knowingly and materially false.

(h)           If the performance of Lessee's obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's liability with respect to this Lease other than in accordance with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a Guarantor's breach of its guaranty obligation on an anticipatory basis, and Lessee's failure, within 60 days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease.

13.2         Remedies. If Lessee fails to perform any of its affirmative duties or obligations, within 10 days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duty or obligation on Lessee's behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. Lessee shall pay to Lessor an amount equal to 115% of the costs and expenses incurred by Lessor in such performance upon receipt of an invoice therefor. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach:

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(a)           Terminate Lessee's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys' fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent. Efforts by Lessor to mitigate damages caused by Lessee's Breach of this Lease shall not waive Lessor's right to recover damages under Paragraph 12. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute.

(b)          Continue the Lease and Lessee's right to possession and recover the Rent as it becomes due, in which event Lessee may sublet or assign, subject only to reasonable limitations. Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor's interests, shall not constitute a termination of the Lessee's right to possession.

(c)           Pursue any other remedy now or hereafter available under the laws or judicial decisions of the state wherein the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee's right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee's occupancy of the Premises.

13.3        Inducement Recapture. Any agreement for free or abated rent or other charges, tenant improvement allowance, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee's entering into this Lease, all of which concessions are hereinafter referred to as "Inducement Provisions", shall be deemed conditioned upon Lessee's full and faithful performance of all of the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any unused or unpaid Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and the unamortized portion as amortized over the term of the Lease of any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this paragraph shall not be deemed a waiver by Lessor of the provisions of this paragraph unless specifically so stated in writing by Lessor at the time of such acceptance.

13.4        Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent shall not be received by Lessor within 5 days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall immediately pay to Lessor a one-time late charge equal to 5% of each such overdue amount or $100, whichever is greater. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for 3 consecutive installments of Base Rent, then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor's option, become due and payable quarterly in advance.

13.5        Interest. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor, when due as to scheduled payments (such as Base Rent) or within 30 days following the date on which it was due for non-scheduled payment, shall bear interest from the date 5 days after the date due, as to scheduled payments, or the 31st day after it was due as to non-scheduled payments. The interest ("Interest") charged shall be computed at the rate of 10% per annum but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charge provided for in Paragraph 13.4.

13.6        Breach by Lessor.

(a)          Notice of Breach. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than 30 days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor's obligation is such that more than 30 days are reasonably required for its performance, then Lessor shall not be in breach if performance is commenced within such 30 day period and thereafter diligently pursued to completion.

(b)          Performance by Lessee on Behalf of Lessor. In the event that neither Lessor nor Lender cures said breach within 30 days after receipt of said notice, or if having commenced said cure they do not diligently pursue it to completion, then Lessee may elect to cure said breach at Lessee's expense and offset from Rent the actual and reasonable cost to perform such cure, provided however, that such offset shall not exceed an amount equal to two month's Base Rent, reserving Lessee's right to reimbursement from Lessor for any such expense in excess of such offset. Lessee shall document the cost of said cure and supply said documentation to Lessor prior to any offset.

14.        Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively "Condemnation"), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the floor area of the Unit, or more than 25% of the parking spaces is taken by Condemnation, Lessee may, at Lessee's option, to be exercised in writing within 10 days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within 10 days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation paid by the condemnor for Lessee's relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnation.

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15.          Brokerage Fees.

15.1

15.2

15.3          Representations and Indemnities of Broker Relationships. Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) in connection with this Lease, and that no one other than said named Brokers is entitled to any commission or finder's fee in connection herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, attorneys' fees reasonably incurred with respect thereto.

16.         Estoppel Certificates.

(a)          Each Party (as "Responding Party") shall within 10 days after written notice from the other Party (the "Requesting Party") execute, acknowledge and deliver to the Requesting Party a statement in writing in form similar to the then most current "Estoppel Certificate" form published by the AIR Commercial Real Estate Association, plus such additional information, confirmation and/or statements as may be reasonably requested by the Requesting Party.

(b)          If the Responding Party shall fail to execute or deliver the Estoppel Certificate within such 10 day period, the Requesting Party may execute an Estoppel Certificate stating that: (i) the Lease is in full force and effect without modification except as may be represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting Party's performance, and (iii) if Lessor is the Requesting Party, not more than one month's rent has been paid in advance. Prospective purchasers and encumbrancers may rely upon the Requesting Party's Estoppel Certificate, and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate.

(c)          If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee shall within 15 days after written notice from Lessor deliver to any potential lender or purchaser designated by Lessor such recent financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee's most recently prepared financial statements. All such financial statements shall be received by Lessor and such lender or purchaser in confidence, shall be used only for the purposes herein set forth and upon the request of Lessee such parties shall sign a commercially reasonable non-disclosure agreement regarding such financials.

17.         Definition of Lessor. The term "Lessor" as used herein shall mean the owner or owners at the time in question of the fee title to the Premises, or, if this is a sublease, of the Lessee's interest in the prior lease. In the event of a transfer of Lessor's title or interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor. Upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined.

18.         Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.

19.         Days. Unless otherwise specifically indicated to the contrary, the word "days" as used in this Lease shall mean and refer to calendar days.

20.         Limitation on Liability. The obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, or its partners, members, directors, officers or shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against Lessor's partners, members, directors, officers or shareholders, or any of their personal assets for such satisfaction.

21.         Time of Essence. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease.

22.         No Prior or Other Agreements; Broker Disclaimer. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the use, nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party.

23.         Notices.

23.1          Notice Requirements. All notices required or permitted by this Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease shall be that Party's address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate in writing.

23.2          Date of Notice. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given 72 hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantees next day delivery shall be deemed given 24 hours after delivery of the same to the Postal Service or courier. Notices transmitted by facsimile transmission or similar means shall be deemed delivered upon telephone confirmation of receipt (confirmation report from fax machine is sufficient), provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.

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24.          Waivers.

(a)          No waiver by either party of the Default or Breach of any term, covenant or condition hereof by the other party, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by the other party of the same or of any other term, covenant or condition hereof. Lessor's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent.

(b)          The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment.

(c)          THE PARTIES AGREE THAT THE TERMS OF THIS LEASE SHALL GOVERN WITH REGARD TO ALL MATTERS RELATED THERETO AND HEREBY WAIVE THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE TO THE EXTENT THAT SUCH STATUTE IS INCONSISTENT WITH THIS LEASE.

25.          Disclosures Regarding The Nature of a Real Estate Agency Relationship.

(a)          

26.          No Right To Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over, then the Base Rent shall be increased to 150% of the Base Rent applicable immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee.

27.          Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.

28.          Covenants and Conditions; Construction of Agreement. All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the Parties only and shall not be considered a part of this Lease. Whenever required by the context, the singular shall include the plural and vice versa. This Lease shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it.

29.         Binding Effect; Choice of Law. This Lease shall be binding upon the parties, their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located.

30.         Subordination; Attornment; Non-Disturbance.

30.1        Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, "Security Device"), now or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together referred to as "Lender") shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, whereupon this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof.

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30.2          Attornment. In the event that Lessor transfers title to the Premises, or the Premises are acquired by another upon the foreclosure or termination of a Security Devise to which this Lease is subordinated (i) Lessee shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and upon request, enter into a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder of the term hereof, or, at the election of the new owner, this Lease will automatically become a new lease between Lessee and such new owner, and (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor's obligations, except that such new owner shall not: (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (b) be subject to any offsets or defenses which Lessee might have against any prior lessor, (c) be bound by prepayment of more than one month's rent, or (d) be liable for the return of any security deposit paid to any prior lessor which was not paid or credited to such new owner.

30.3          Non-Disturbance. With respect to Security Devices entered into by Lessor after the execution of this Lease, Lessee's subordination of this Lease shall be subject to receiving a commercially reasonable non-disturbance agreement (a "Non-Disturbance Agreement") from the Lender which Non-Disturbance Agreement provides that Lessee's possession of the Premises, and this Lease, including any options to extend the term hereof, will not be disturbed so long as Lessee is not in Breach hereof and attorns to the record owner of the Premises. Further, within 60 days after the execution of this Lease, Lessor shall, if requested by Lessee, use its commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security Device which is secured by the Premises. In the event that Lessor is unable to provide the Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee's option, directly contact Lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement.

30.4          Self-Executing. The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attornment and/or Non-Disturbance Agreement provided for herein.

31.         Attorneys' Fees. If any Party brings an action or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term, "Prevailing Party" shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party of its claim or defense. The attorneys' fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be entitled to attorneys' fees, costs and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence for such services and consultation).

32.         Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise during normal business hours after reasonable prior notice for the purpose of showing the same to prospective purchasers, lenders, or during the last 12 months of the term, to tenants, and making such alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary or desirable and the erecting, using and maintaining of utilities, services, pipes and conduits through the Premises and/or other premises as long as there is no material adverse effect on Lessee's use of the Premises. All such activities shall be without abatement of rent or liability to Lessee.

33.         Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor's prior written consent. Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction.

34.         Signs. Lessor may place on the Premises ordinary "For Sale" signs at any time and ordinary "For Lease" signs during the last 6 months of the term hereof. Except for ordinary "For Sublease" signs which may be placed only on the Premises, Lessee shall not place any sign upon the Project without Lessor's prior written consent. All signs must comply with all Applicable Requirements.

35.         Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing subtenancies. Lessor's failure within 10 days following any such event to elect to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor's election to have such event constitute the termination of such interest.

36.         Consents. Except as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including but not limited to architects', attorneys', engineers' and other consultants' fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor. Lessor's consent to any act, assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any than existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor's consent shall not preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and in reasonable detail within 10 business days following such request.

37.         Guarantor.

37.1          Execution. The Guarantors, if any, shall each execute a guaranty in the form most recently published by the AIR Commercial Real Estate Association.

37.2          Default. It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidence of the execution of the guaranty, including the authority of the party signing on Guarantor's behalf to obligate Guarantor, and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect.

38.          Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions on Lessee's part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof.

39.         Options. If Lessee is granted an option, as defined below, then the following provisions shall apply.

39.1          Definition. "Option" shall mean: (a) the right to extend or reduce the term of or renew this Lease or to extend or reduce the term of or renew any lease that Lessee has on other property of Lessor; (b) the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase, the right of first offer to purchase or the right of first refusal to purchase the Premises or other property of Lessor.

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39.2        Options Personal To Original Lessee. Any Option granted to Lessee in this Lease is personal to the original Lessee and any Permitted Transferee (as defined in the Addendum), and cannot be assigned or exercised by anyone other than said original Lessee or a Permitted Transferee and only while the original Lessee or a Permitted Transferee is in full possession of the Premises

39.3        Multiple Options. In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Options have been validly exercised.

39.4        Effect of Default on Options.

(a)          Lessee shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is cured, (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has been given 3 or more notices of separate Default, whether or not the Defaults are cured, during the 12 month period immediately preceding the exercise of the Option.

(b)          The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of Paragraph 39.4(a).

(c)           An Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and prior to the commencement of the extended term or completion of the purchase, (i) Lessee fails to pay Rent for a period of 30 days after such Rent becomes due (without any necessity of Lessor to give notice thereof),or (ii) if Lessee commits a Breach of this Lease.

40.        Security Measures. Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties.

41.        Reservations. Lessor reserves the right: (i) to grant, without the consent or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, (ii) to cause the recordation of parcel maps and restrictions, and (iii) to create and/or install new utility raceways, so long as such easements, rights, dedications, maps, restrictions, and utility raceways do not unreasonably interfere with the access to and use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate such rights.

42.        Performance Under Protest. . If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay. A Party who does not initiate suit for the recovery of sums paid "under protest" within 6 months shall be deemed to have waived its right to protest such payment.

43.         Authority; Multiple Parties; Execution.

(a)          If either Party hereto is a corporation, trust, limited liability company, partnership, or similar entity, each

individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each Party shall, within 30 days after request, deliver to the other Party satisfactory evidence of such authority.

(b)           If this Lease is executed by more than one person or entity as "Lessee", each such person or entity shall be

jointly and severally liable hereunder. It is agreed that any one of the named Lessees shall be empowered to execute any amendment to this Lease, or other document ancillary thereto and bind all of the named Lessees, and Lessor may rely on the same as if all of the named Lessees had executed such document.

(c)           This Lease may be executed by the Parties in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

44.         Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions.

45.         Offer. Preparation of this Lease by either party or their agent and submission of same to the other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto.

46.         Amendments. This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. As long as they do not materially change Lessee's obligations hereunder, Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises.

47.          Waiver of Jury Trial. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR ARISING OUT OF THIS AGREEMENT.

48.          Arbitration of Disputes. An Addendum requiring the Arbitration of all disputes between the Parties and/or Brokers arising out of this Lease £ is þ is not attached to this Lease.

49. Americans with Disabilities Act. Since compliance with the Americans with Disabilities Act (ADA) is dependent upon Lessee's specific use of the Premises, Lessor makes no warranty or representation as to whether or not the Premises comply with ADA or any similar legislation. In the event that Lessee's use of the Premises requires modifications or additions to the Premises in order to be in ADA compliance, Lessee agrees to make any such necessary modifications and/or additions at Lessee's expense. Lessor has not received any written notice from any governmental agency stating that the Premises are not in compliance with ADA.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:

1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID

INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE.

WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED.

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The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures.

Executed at:   Executed at:

On:   Executed at:

By Lessor:	By Lessee:
COP –Western, LLC	Fujitsu Ten Corp of America
a California limited liability company	a California corporation
By: /s/ Jonathon Carley	By: /s/ Lawrence S. Kutsch
Named Printed:   Jonathon Carley	Name Printed    Lawrence S. Kutsch
Title: Director Asset Management of Manager	Title: EVP Administration
By: /s/ Terry Roussel	By:
Name Printed: Terry Roussel	Name Printed:
Title:   Chief Executive Officer of Manager	Title:
Address: c/o Cornerstone Real Estate Funds	Address: 20100 Western Avenue
1920 Main Street, Suite 400	Los Angeles, CA 90501
Irvine, CA 92614
Telephone: (949) 852-1007	Telephone: (   )
Facsimile:   (949) 852-2729	Facsimile:   (  )
Email:	Email:
Email:	Email:
Federal ID No.	Federal ID No.

BROKER:	BROKER:
CBRE Inc.	Colliers International
Attn: John Schumacher	Attn: David Drummond
Title: Exec. Vice President	Title: Exec. Vice President
Address: 2221 Rosecrans Ave., Ste.100	Address: 2050 W. 190th Street, Ste. 101
El Segundo, CA 90245	Torrance, CA  90504
Telephone: (949) 852-1007	Telephone: (   )
Facsimile:   (949) 852-2729	Facsimile:   (  )
Email:	Email:
Email:	Email:
Federal ID No.	Federal ID No.
Broker/Agent DRE License #:	Broker/Agent DRE License #

NOTICE: These forms are often modified to meet changing requirements of law and industry needs. Always write or call to make sure you are utilizing the most current form: AIR Commercial Real Estate Association, 800 W 6th Street, Suite 800, Los Angeles, CA 90017. Telephone No. (213) 687-8777. Fax No.: (213) 687-8616.

©Copyright 1999 By AIR Commercial Real Estate Association.

All rights reserved. No part of these works may be reproduced in any form without permission in writing.

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ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT

LEASE – NET

DATED MAY 1, 2012 BY AND BETWEEN COP – WESTERN AVENUE, LLC, A

CALIFORNIA LIMITED LIABILITY COMPANY (“LESSOR”), AND FUJITSU

TEN CORP. OF AMERICA, A CALIFORNIA CORPORATION (“LESSEE”)

all of which constitute a part of the Lease attached hereto.

50.        Base Rent Adjustments. The Base Rent, set forth in Paragraph 1.5, shall be increased during the Term as follows:

June 1, 2014 through May 31, 2016:          $45,865.46 per month, which consists of $27,034.51 for 20100 Western Avenue and $18,830.95 for 20200 Western Avenue.

June 1, 2016 through May 31, 2018:          $48,617.39 per month, which consists of $28,656.58 for 20100 Western Avenue and $19,960.81 for 20200 Western Avenue.

June 1, 2018 through May 31, 2019:          $51,534.43 per month, which consists of $30,375.97 for 20100 Western Avenue and $21,158.46 for 20200 Western Avenue.

51.          Abated Rent.     Notwithstanding anything to the contrary in the Lease, Lessee shall not be responsible for any Base Rent or Lessee’s Share of Real Property Taxes under the Lease during the first eight months (June 2012 through January 2013) of the Term (the “Full Abated Rent”). Additionally, Lessee shall not be responsible for one-half (1/2) of the Base Rent under the Lease during the months of February 2013 through May 2013 (the “Partial Abated Rent” and together with the Full Abated Rent, the “Abated Rent”). In the event of a Breach by Lessee of this Lease, Lessee’s right to any future Abated Rent shall be immediately terminated and Lessee shall owe and shall

immediately repay to Lessor the unamortized portion of Abated Rent as described in Paragraph 13.3. The remedies in this Paragraph 51 are in addition to and shall not limit Lessor’s other remedies under the Lease or at law or equity for a Breach or Default by Lessee. The estimated Common Area Operating Expenses shown in Paragraph 1.7(b) of

the Lease includes Lessee’s Share of Real Property Taxes, so Lessee shall only pay $4,522.00 for the estimated Common Area Operating Expenses for the months of June 2012 through December 2012, subject to the annual reconciliation of the Common Area Operating Expenses as set forth in Paragraph 4.2 of the Lease. Additionally,

notwithstanding anything to the contrary in this Lease, Lessee shall not be responsible for Lessee’s Share of Common Area Operating Expenses or Real Property Taxes during Early Possession.

52.          Early Lease Termination.           Lessee shall have the one-time option to terminate all or portion of the Lease as expressly set forth below:

a.            Entire Lease.    Notwithstanding anything to the contrary set forth herein and provided that Lessee shall have not previously executed its option to terminate the Lease as to a portion of the Premises as set forth in Paragraph 52(b) below, Lessee shall have the onetime right to terminate this Lease during the Original Term (the “Full Termination Option”) effective any time between July 1, 2017 and November 30, 2017 (the Termination Period”), provided that Lessee shall (i) deliver a written notice to Lessor at least one hundred eighty (180) days prior to the selected effective date of such entire termination of the Lease within the Termination Period (the “Early Full Termination Date”), (ii) on or before the Early Full Termination Date, deliver funds to Lessor in an amount equal to all “Full Unamortized Leasing Costs” (as defined below) which shall be reasonably calculated by Lessor, and (iii) have paid to Lessor all Rent due under the Lease for the period prior to the Early Full Termination Date. “Full Unamortized Leasing Costs” shall mean the unamortized amount of all Abated Rent, any Allowance provided to Lessee by Lessor for tenant improvements, and all leasing commissions paid by Lessor as of the Early Full Termination Date amortized over eighty-four (84) months. Lessee’s failure to pay the Full Unamortized Leasing Costs and Rents due for the period prior to the Early Full Termination Date on or before the Early Full Termination Date will terminate the Full Termination Option and the Partial Termination Option (as defined below) and make each of them null and void.

1

b.            Partial Premises.    Notwithstanding anything to the contrary set forth herein and subject to the Rent adjustment and any other revisions to the terms of the Lease set forth below, Lessee shall have the one-time right to terminate its obligations and rights to lease the Warehouse Portion (as defined below) of the Premises (the “Partial Termination Option”) effective any time during the Termination Period, provided that Lessee shall (i) deliver a written notice to Lessor at least one hundred eighty (180) days prior to the selected effective date of such partial termination of the Lease within the Termination Period (the “Early Partial Termination Date”), (ii) on or before the Early Partial Termination Date, deliver funds to Lessor in an amount equal to all “Partial Unamortized Leasing Costs” (as defined below) which shall be reasonably calculated by Lessor, (iii) have paid to Lessor all Rent due under the Lease for the period prior to the Early Partial Termination Date, and (iv) have fully vacated and removed all its property from the Warehouse Portion (as defined below) prior to the Early Partial Termination Date as set forth in Paragraph 7.4 of the Lease. “Warehouse Portion” shall mean that portion of the Premises commonly known as 20200 Western Avenue being approximately 26,515 square feet. “Partial Unamortized Leasing Costs” shall mean one-half (1/2) of the unamortized amount of all Abated Rent, any Allowance provided to Lessee by Lessor for tenant improvements, and all leasing commissions paid by Lessor as of the Early Partial Termination Date amortized over eighty-four (84) months. Lessee’s failure to pay the Partial Unamortized Leasing Costs and Rents due for the period prior to the Early Partial Termination Date on or before the Early Partial Termination Date will terminate the Partial Termination Option and the Full Termination Option and make each of them null and void. Notwithstanding Section 50 above and provided that Lessee has effectively exercised and performed under its Partial Termination Option (being the “Partial Termination”), upon and after the Early Partial Termination Date: (a) the Warehouse Portion shall be deemed excluded from the Premises for all future purposes under the Lease; (b) Lessee shall have no rights in or to the Warehouse Portion; (c) the monthly Base Rent for the revised Premises shall be $28,656.58 through May 31, 2018 and then increased to $30,375.97 on June 1, 2018 through the rest of the Original Term; and (d) Lessee’s Share shall be reduced to twenty-five and 77/100ths percent (25.77%). Upon and after the Partial Termination, Lessee shall certify to any third party that may be acquiring an interest or right in or to the Warehouse Portion that Lessee no longer has any rights or claims to use the Warehouse Portion.

53.          Option to Renew.           Lessee shall, provided the Lease is in full force and effect and Lessee is not in Breach under any of the other terms and conditions of the Lease at the time of notification or commencement, have one (1) option to renew this Lease for a term of sixty (60) months, for the portion of the Premises being leased by Lessee as of the date the renewal term is to commence, on the same terms and conditions set forth in the Lease, except as modified by the terms, covenants and conditions as set forth below:

               a.           If Lessee elects to exercise said option, then Lessee shall provide Lessor with written notice not later than the date which is nine (9) months prior to the Expiration Date and not earlier then the date which is twelve (12) months prior to the Expiration Date. If Lessee fails to provide such notice in a timely manner, Lessee’s option shall automatically terminate and Lessee shall have no further or additional right to extend or renew the Term of the Lease.

               b.           The monthly Base Rent in effect at the expiration of the Original Term of the Lease shall be adjusted to reflect the current fair market rental and escalations for comparable space in the Building or Project and in other similar office/industrial buildings within the Torrance area as of the date the renewal term is to commence (the “Fair Market Rate”), taking into account the specific provisions of the Lease which will remain constant.

Lessor shall advise Lessee of the new Base Rent for the Premises no later than fifteen (15) days after receipt of Lessee's written request therefore. Said notification of the new Base Rent may include a provision for its escalation to provide for a change in Fair Market Rate between the time of notification and the commencement of the renewal term. If Lessee and Lessor are unable to agree on a mutually acceptable rental rate no later than ninety (90) days prior to the Expiration Date, then Lessor and Lessee shall each appoint a qualified MAI appraiser with at least five (5) years’ of experience appraising comparable properties within the Torrance area on or before the date which is no later than seventy-five (75) days prior to the Expiration Date. Those two appraisers designated by the parties shall appoint a third MAI appraiser doing business in the area on or before the date which is no later than sixty (60) days prior to the Expiration Date. The three appraisers shall decide upon the Fair Market Rate for the Premises as of the Expiration Date by a majority vote (2 of the 3 appraisers). The Fair Market Rate decided by majority vote of the appraisers shall become the Base Rent and escalations for the renewal term. Lessor and Lessee shall equally share in the expense of the appraisers except that in the event the Fair Market Rate determined by the appraisers is found to be within three percent (3%) of the original Fair Market Rate quoted by Lessor, then Lessee shall bear the full cost of all the appraisal process.

                c.           This option is not transferable except to a Permitted Transferee (defined below). The parties hereto acknowledge and agree that they intend that the aforesaid option to renew this Lease shall be "personal" to Lessee as set forth above and that in no event will any assignee or sublessee have any rights to exercise the aforesaid option to renew.

d.            Lessee shall have no Termination Option during any renewal period.

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54.          Reserved Parking; Revised Parking for Termination. Notwithstanding Section 1.2(b) of this Lease, Lessor shall designate or mark those sixty (60) parking spaces set forth of Exhibit “C” attached hereto as “reserved” for the benefit of Lessee (the “Reserved Parking Spaces”). Notwithstanding anything in Paragraph 1.2(b) or elsewhere in the Lease, should Lessee complete the Partial Termination as described above, Lessee shall only be entitled to fifty-five (55) total parking spaces of which thirty (30) of those shall be marked Reserved Parking Spaces.

55.          Conflict/Defined Terms. If the terms of this Addendum conflict with the terms of the Lease, the terms of this Addendum shall prevail. Any terms not defined herein shall have the meanings ascribed to them under the Lease.

56.          Exclusions from Common Area Operating Expenses; Right to Audit; Gross-Up.

a.            Exclusions.          Notwithstanding anything to the contrary contained in the Lease or this Addendum, including Paragraph 4.2 of the Lease, the following are excluded from the definition of Common Area Operating Expenses: (i) the costs of repair, replacement, or restoration work occasioned by any damage or destruction pursuant to Article 9 or Condemnation pursuant to Article 13; (ii) finance and debt service fees, principal and/or interest on debt or amortization payments on any mortgages executed by Lessor covering Lessor’s property, any other indebtedness of Lessor, and rental under any ground lease or leases for the Building, Common Areas and/or the Project; (iii) any depreciation allowance or expense, amortization (except as expressly permitted by the Lease), and expense reserves and other non-cash items; (iv) management fees in excess of five percent (5%) of gross revenue and rents; (v) any costs or expenses representing any amount paid for services and materials to a (personal or business) related person, firm, or entity of Lessor, the property manager, or any of their principals to the extent such amount exceeds the amount that would have been paid for such service or materials at the then existing market rates in the absence of such relationship; (vi) insurance costs for coverage not customarily paid by tenants of similar projects in the vicinity of the Building, and increases in insurance costs caused by special nature or activities of another occupant of the Project; (vii) costs incurred in connection with the presence of any Hazardous Substances, except to the extent caused by the release or emission of the Hazardous Substance in question by Lessee or any third party under its direction or control; (viii) the costs and expenses attributable to the construction of the Building, including correcting defects in the construction of the Building or in the Building equipment; (ix) the costs of repairs or maintenance which are covered by warranties or service contracts in existence on the Commencement Date and to the extent such maintenance and repairs are made at no cost to Lessor; (x) the costs of repairs, alterations, and general maintenance necessitated by the negligence or willful misconduct of Lessor or its agents, employees, or contractors or repairs, alterations, and general maintenance necessitated by the negligence or willful misconduct of any other occupant of the Project or any of their respective agents, employees, contractors, invitees, or licensees; (xi) interest or penalties due to the late payment of taxes, utility bills or other such costs, except to the extent caused by Lessee; (xii) any amount payable by Lessor by way of indemnity or for damages or which constitute a fine or penalty, including interest or penalties for late payment; (xiii) any cost for overtime or other expenses to Lessor in curing defaults; (xiv) the costs including fines, penalties, and legal fees incurred due to violations by Lessor, its employees, agents, or contractors or assigns, or any other occupant of the Project of building codes, any governmental rule or requirement or any other contract pertaining to the Premises; (xv) any of the following tax or assessment expenses: (a) penalties and interest, other than those attributable to Lessee’s failure to comply timely with its obligations pursuant to the Lease, (b) increases in Real Property Taxes (whether increases result from increased rate, valuation, or both) attributable to additional improvements to the Project unless constructed for Lessee’s primary benefit or for the common benefit of Lessee and other tenants in the Project, and (c) any Real Property Taxes in excess of the amount which would be payable if such tax or assessment expense were paid in installments over the longest possible term; (xvi) Lessor’s general overhead; and (xvii) bad debt expenses and charitable contributions and donations of Lessor.

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b.            Right to Audit.          In the event Lessee disputes the amount of Common Area Operating Expenses payable by Lessee, provided Lessee is not then in Default of the Lease (other than a default for failure to pay Lessee’s Share of Common Area Operating Expenses) and no event shall have occurred which with the passage of time would constitute an event of Default under the Lease (other than a default for failure to pay Lessee’s Share of Common Area Operating Expenses), Lessee shall be entitled to retain an independent, certified public accountancy firm (the "CPA") engaged on a noncontingency fee basis, or an employee of Lessee, to audit and/or review Lessor’s general ledger of expenses with respect to the calculation of Common Area Operating Expenses. Lessee shall give notice ("Inspection Notice") to Lessor of Lessee's intent to audit within ninety (90) days after Lessee's receipt of Lessor's expense statement which sets forth Lessor's actual Common Area Operating Expenses for the previous calendar year, identifying the expense in question and setting out in reasonable detail the reason why such expense should not be binding on Lessee. Such audit shall be conducted at a mutually agreeable time during normal business hours at the office of Lessor or its management agent where such accounts are maintained or at such other location as the parties shall mutually agree. If Lessee does not cause such audit to be accomplished within ninety (90) days after Lessor’s receipt of the Inspection Notice, Lessee’s right to object to any such expense shall terminate. In no event shall Lessee be entitled to so inspect such records more than once per fiscal year. Lessee shall pay all costs of such audit including, without limitation, any and all copying costs, unless the actual Common Area Operating Expenses submitted to Lessee by Lessor for any fiscal year are determined by the CPA to be overstated by five percent (5%) or greater in which event Lessor shall pay for the reasonable out-of-pocket costs incurred by Lessee in connection with the audit. The amount of Additional Rent payable by Lessee to Lessor shall be appropriately adjusted on the basis of such audit and, if the audit shows (a) that Lessor has overcharged Lessee, then Lessor shall credit such overcharge against the next installment of Rent coming due hereunder or (b) that Lessor has undercharged Lessee, then Lessee shall pay to Lessor such amount due as Additional Rent within thirty (30) days following the completion of such audit. All of the information obtained by Lessee and/or its auditor in connection with such audit, as well as any compromise, settlement, or adjustment reached between Lessor and Lessee as a result thereof, shall be held in strict confidence and, except as may be required pursuant to litigation, shall not be disclosed to any third party, directly or indirectly, by Lessee or its auditor or any of their officers, agents or employees. Lessor may require Lessee's auditor to execute a separate confidentiality agreement affirming the foregoing as a condition precedent to any audit. In the event of a violation of this confidentiality covenant in connection with any audit, then in addition to any other legal or equitable remedy available to Lessor, Lessee shall forfeit its right to any reconciliation or cost reimbursement payment from Lessor due to said audit (and any such payment theretofore made by Lessor shall be promptly returned by Lessee), and Lessee shall have no further audit rights under this Lease.

57.         Assignment and Subletting; Permitted Transfers.         Notwithstanding anything to the contrary in the Lease or this Addendum, including Paragraph 12 of the Lease, and provided that Lessee shall not be in Default under the terms of the Lease, Lessee may, without Lessor’s prior written consent and without the right of recapture, sublet the Premises or assign the Lease to: (i) a subsidiary, affiliate, or other entity controlling, controlled by or under common control with Lessee with common ownership, directly or indirectly with Lessee, (ii) a successor corporation or entity related to Lessee by merger, consolidation, acquisition, non-bankruptcy reorganization, or government action; or (iii) a purchaser of substantially all of Lessee’s assets; provided that such transferee or subtenant assumes the Lessee’s obligations of the Lease in writing of which a copy shall be delivered to Lessor. Any of the above are referenced hereafter as a "Permitted Transfer", and the transferee is referenced as "Permitted Transferee". Notwithstanding the above, Lessee shall only be permitted to assign, sublet or transfer to a Permitted Transferee without the consent of Lessor, if, and only if, such Permitted Transferee at the time of such proposed assignment or sublease has a net worth equal to or greater than the net worth of Lessee at the time of such proposed assignment or sublease as determined using generally accepted accounting principles. Prior to any Permitted Transfer, Lessee shall deliver financial statements of the proposed transferee, assignee or sublessee prepared in conformity with generally accepted accounting principles.

58.          Hazardous Substances.          Lessor acknowledges that Lessee’s use of the Premises results in the generation of a small amount of lead waste which requires that a notice be given to persons entering or occupying the Premises. Lessor hereby consents to such Reportable Use by Lessee within the Premises. Pursuant to the provisions of Paragraph 6.2(a) of the Lease, Lessee shall comply (at Lessee’s expense) with all Applicable Requirements in connection with such Reportable Use and shall indemnify, defend and hold Lessor, its owners, members, managers and agents harmless from such use by Lessee or any third party under Lessee’s direction or control.

[SIGNATURES APPEAR ON FOLLOWING PAGE(S)]

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IN WITNESS WHEREOF, the parties have executed this Addendum as of the reference date first set forth in the Lease.

COP – WESTERN AVENUE, LLC, a California		FUJITSU TEN CORP. OF AMERICA, a
limited liability company		California corporation
By:	Cornerstone Operating Partnership,
	LP, a Delaware limited partnership,
	its Sole Member

By:	Cornerstone Core Properties,	By:	/s/ Lawrence S. Kutsch
	REIT, Inc., a Maryland corporation,	Lawrence S. Kutsch
	its General Partner	Executive Vice President, Administration

By:	/s/ Jonathan Carley
	Jonathan Carley
	Director, Asset Management
By:	/s/ Terry Roussel
	Terry Roussel
	Chief Executive Officer

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EXHIBIT B

LESSOR’S TENANT IMPROVEMENT ALLOWANCE

AND LESSEE’S IMPROVEMENT OBLIGATIONS

Lessee hereby acknowledges and agrees that (a) subject to Paragraph 2.2 of the Lease, Lessee accepts the Premises in its “AS IS” condition as of the Commencement Date, and (b) Lessor is not and shall not be obligated to construct or pay for any improvements, additions or refurbishment in, to or of the Premises, except for the “Allowance” as defined below. Lessee desires to make certain improvements to the Premises (all such improvements being hereinafter referred to as the “Lessee Improvements”) which shall be subject to Lessee’s compliance with each and every provision set forth in this Exhibit B and in the Lease, including, without limitation, Paragraphs 7.3 and 7.4 of the Lease. Lessee hereby agrees to indemnify, defend and hold Lessor harmless from and against any and all claims, costs, liens, expenses or liability, arising from Lessee’s design, construction, maintenance and use of any improvements in, on or about the Premises (including, without limitation, Lessee’s disturbance of other tenants or

occupants in or around the Project, Lessee’s failure to obtain any necessary permits, approvals or certificates from the applicable governmental authorities, and/or attorneys’ costs and fees, and court costs). In addition to the requirements of Paragraph 7.3(b), Lessor’s approval of any Lessee Improvements for which Lessee desires to apply the Allowance is subject to the following additional provisions:

1.          Prior to hiring any contractors or subcontractors, or entering into agreements with any of them, Lessee shall deliver to Lessee for Lessor’s reasonable approval the name of the general contractor Lessee proposes to hire to perform the Lessee Improvements. It shall be reasonable for Lessor to withhold approval based on the proposed contractor’s inadequate financial status, reputation for poor quality work, lack of experience, insurance, or union/nonunion status. As a condition to its approval, Lessor may require insurance coverage, regular written progress reports and consultations, and the employment of only union or non-union personnel and subcontractors.

2.          The Lessee Improvements may be commenced any time after the satisfaction of the items listed in this subsection and shall be completed within twelve (12) months following the Commencement Date. The work contemplated by the this section shall not commence until:

(a)          receipt and written approval by Lessor of the floor plan, proposed scope of work, and thereafter the detailed working drawings and specifications depicting the proposed Lessee Improvements (collectively the “Plans and Specifications”) (it is understood and agreed that Lessee may not make any alterations to the electrical distribution system to the Premises, Building or Project if, in Lessor’s sole judgment, such alterations would in any way interfere with other tenants in the Project). Lessor shall notify Lessee of its approval or disapproval of the Plans and Specifications within ten (10) business days after receipt thereof from Lessee. If Lessor reasonably disapproves of any portion of the Plans and Specifications, the parties shall meet, within three (3) days after Lessee’s receipt of Lessor’s disapproval, to agree upon revisions to be made to the Plans and Specifications to meet the reasonable satisfaction of the parties. Lessee shall then cause the Plans and Specifications to be revised to the form agreed upon in such meeting and Lessor shall then approve or reasonably disapprove the revised Plans and Specifications no later than five (5) days after Lessor’s receipt of such revised Plans and Specifications. If Lessor shall again reasonably disapprove the revised Plans and Specifications, the parties will revise and review the Plans and Specifications again in accordance with the procedure set forth above until the parties' reasonable approval is obtained, provided, however, if such Plans and Specifications are not approved by Lessor within forty-five (45) days after Lessee’s original submittal to Lessor, then the twelve (12) month construction deadline described above and in Section 4 below shall be extended on a day-for-day basis for each day thereafter until the Plans and Specifications have been approved.

(b)          a copy of a fully executed construction contract or contracts (collectively, the “Construction Contract”) has been delivered to Lessor including the name of the general contractors and all subcontractors and their California state contractor’s license numbers;

(c)          an insurance certificate has been received by Lessor from the general contractor naming Lessor as an additional insured on the general contractor’s commercial liability insurance policy which complies with Section 4 below;

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(d)          all other requirements regarding insurance imposed on Lessee by this Lease have been satisfied; and

(e)          Lessee has given Lessor at least ten (10) days' prior written notice of Lessee's intention to commence construction.

3.          Lessee shall bear the entire cost of the Lessee Improvements and all the costs of architectural and engineering consultants in connection therewith, except that Lessor shall reimburse Lessee in an amount not to exceed Six Hundred Thousand Dollars $600,000.00 (the “Allowance”) for the design and construction of the Lessee Improvements by properly licensed third parties.

The Allowance shall only be disbursed and shall be used only to reimburse Lessee for the following items directly related to the Lessor approved Lessee Improvements:

(a)          Payment of the cost of unrelated, third parties preparing the working drawings, including mechanical, electrical, plumbing and structural drawings.

(b)          The payment of plan check, permit and license fees relating to construction of the Lessee Improvements.

(c)          Construction of the Lessee Improvements, including, without limitation, the following:

(i)           Installation within the Premises of all partitioning, doors, floor coverings, ceilings, wall coverings and painting, millwork and similar items;

(ii)         All electrical wiring, lighting fixtures, outlets and switches, and other electrical work necessary for the Premises;

(iii)        The furnishing and installation of all duct work, terminal boxes, diffusers and accessories necessary for the heating, ventilation and air conditioning cooling systems within the Premises, including the cost of meter and key control for after-hour air conditioning.

(iv)        All fire and life safety control systems such as fire walls, sprinklers, halon, fire alarms, including piping, wiring and accessories, necessary for the Premises;

(v)         All plumbing, fixtures, pipes and accessories necessary for the Premises;

(vi)        Testing and inspection costs; and

(vii)        Fees for the general contractor(s) as expressly set forth in the Construction Contract.

4.          Provided that Lessee submits a written request or requests, not more frequently than once every thirty (30) day period, for payment of all or a portion of the Allowance prior to the date that is twelve (12) months following the Commencement Date (the “Payment Request Date”), Lessor agrees to reimburse Lessee in multiple disbursements, not more often than every thirty (30) days, an amount not to exceed the lesser of (i) ninety (90%) of any acceptable and paid invoices for the Lessee Improvements delivered by Lessee to Lessor, or (ii) the entire Allowance (on an aggregate basis of all progress payments previously and currently requested by Lessee) upon satisfaction of each of the following:

(a)          all required governmental approvals and permits have been obtained and originals thereof delivered to Lessor, including the building permit application and plan check number;

(b)          the Lessee Improvements as of the request date have been completed or are being completed in accordance with the working drawings;

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(c)          no Breach (as defined in the Lease) then exists under the Lease; and

(d)          the submission to Lessor of paid invoices evidencing the completion of certain Lessee Improvements together with partial and/or conditional lien releases for the work covered by such invoices by each and every applicable contractor performing such work.

Notwithstanding the above, Lessor shall have the right to retain a portion of the Allowance up to ten percent (10%) of the greater of: (y) the entire Allowance; or (z) the entire amount to be paid by Lessee under the Construction Contract (the “Retention”). Lessor agrees to release the Retention, up to the aggregate amount of unpaid portions of invoices requested by Lessee for payment under this Section 4 prior to the Payment Request Date, to Lessee upon satisfaction of each of the following:

i.             the Lessee Improvements shall have been substantially completed in accordance with the working drawings, and the original inspection card, with all appropriate signatures and/or initials thereon, has been delivered to Lessor;

ii.         a notice of completion has been recorded in accordance with applicable California law and a recorded copy thereof has been provided to Lessor;

iii.         delivery to Lessor of all original blue prints, drawings and as-built plans and specifications for the Lessee Improvements;

iv.         a final, unconditional certificate of occupancy for the Premises has been issued by the appropriate governmental agency (or such equivalent governmental issuance, approval or sign-off that permits the occupancy of the Premises); and

v.           the submission to Lessor of all paid invoices evidencing the completion of certain Lessee Improvements together with unconditional lien releases for the work and materials covered by such invoices by each and every applicable contractor performing work on or providing materials to the Premises.

5.          Except for the Allowance, Lessor shall have no liability or responsibility for the Lessee Improvements or any maintenance, repairs to, changes to, or code upgrades required in connection with the Lessee Improvements. During the period of construction, Lessee and its contractors and subcontractors shall procure and maintain property damage and public liability insurance during the period of their performance of labor or the furnishing of materials to the Premises from an insurance company reasonably satisfactory to Lessor. Said insurance shall have a coverage limit of at least Two Million Dollars ($2,000,000) and be in form reasonably satisfactory to Lessor and shall name Lessor and, at Lessor’s request, any mortgagee or property manager of Lessor, as additional insureds, as their respective interests may appear. Lessee shall also require each contractor and subcontractor employed to perform labor or furnish materials to the Premises to procure and maintain, during the performance of the labor or the furnishing of the materials, a policy of workers’ compensation or employer’s liability insurance issued by an insurance company reasonably acceptable to Lessor and Lessor’s mortgagees for the protection of the employees of the contractors and subcontractors, including executive, managerial, and supervisorial employees engaged in any work to be performed in the Premises. Copies of the policies or certificates evidencing the existence and amounts of such insurance, and renewals or binders, shall be delivered to Lessor by Lessee prior to the commencement of the Lessee Improvements.

6.          No unused portion of the Allowance upon completion of the Lessee Improvements shall be provided to Lessee or be available to Lessee as a credit against any obligations of Lessee under the Lease. Lessor shall have no obligation to deliver any unused portion of the Allowance to Lessee for any reimbursement request made by Lessee after the Payment Request Date.

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7.          Except to the extent arising from the gross negligence or willful misconduct of Lessor, Lessee shall be responsible for and shall indemnify, defend and hold Lessor harmless from and against any liability, cost, claim, lawsuit, damage or expense (including court costs and attorneys’ fees) arising out of any activity or omission of Lessee’s contractors, subcontractors, or their agents and employees. Such indemnity and defense obligations by Lessee shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to Lessor’s performance of any ministerial acts reasonably necessary to (i) permit Lessee to complete the Lessee Improvements, and/or (ii) enable Lessee to obtain any building permit or certificate of occupancy for the Premises.

8.          Time is of the essence of this Exhibit B.

9.          The Lessee Improvements constructed by Lessee pursuant to this Exhibit B and shall be deemed “Alterations” in accordance with, and subject to the provisions of Paragraphs 7.3 and 7.4 of the Lease.

10.         Any failure of Lessee to comply with any of the provisions contained in this Exhibit B shall be deemed a Default under the Lease. In addition to the remedies provided to Lessor in this Exhibit B upon the occurrence of such a Default by Lessee, Lessor shall have all remedies available at law or equity to a landlord against a defaulting tenant pursuant to a written lease, including but not limited to those set forth in the Lease.

THIS EXHIBIT IS APPROVED BY LESSOR AND LESSEE:

LESSOR’S INITIALS LESSEE’S INITIALS

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EX-31.1

Exhibit 31.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER

I, Terry G. Roussel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cornerstone Core Properties REIT, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/S/ TERRY G. ROUSSEL
Date:August 14, 2012	Terry G. Roussel
	Chief Executive Officer and Secretary
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER

I, Timothy C. Collins, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cornerstone Core Properties REIT, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ TIMOTHY C. COLLINS
Date:August 14, 2012	Timothy C. Collins
	Interim Chief Financial Officer and Treasurer (Principal Financial Officer )

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Terry G. Roussel and Timothy C. Collins do each hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge, the Quarterly Report of Cornerstone Core Properties REIT, Inc. on Form 10-Q for the three-month period ended June 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Cornerstone Core Properties REIT, Inc.

	/S/ TERRY G. ROUSSEL
Date:August 14, 2012	Terry G. Roussel
	Chief Executive Officer and Secretary (Principal Executive Officer)
	/s/ TIMOTHY C. COLLINS
Date:August 14, 2012	Timothy C. Collins
	Interim Chief Financial Officer and Treasurer (Principal Financial Officer )

XML

Investments in Real Estate (Details 1) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Net investments in real estate and related intangible lease assets (liabilities)	$ 44,461,000	$ 45,146,000
Land [Member]
Investments in real estate and related intangible lease assets (liabilities)	11,733,000	11,733,000
Less: accumulated depreciation and amortization	0	0
Net investments in real estate and related intangible lease assets (liabilities)	11,733,000	11,733,000
Building Improvements [Member]
Investments in real estate and related intangible lease assets (liabilities)	34,206,000	34,180,000
Less: accumulated depreciation and amortization	(1,535,000)	(850,000)
Net investments in real estate and related intangible lease assets (liabilities)	32,671,000	33,330,000
Building Improvements [Member] | Leases, Acquired-In-Place [Member]
Investments in real estate and related intangible lease assets (liabilities)	1,181,000	1,181,000
Less: accumulated depreciation and amortization	(1,152,000)	(1,134,000)
Net investments in real estate and related intangible lease assets (liabilities)	29,000	47,000
Building Improvements [Member] | Below Market Leases [Member]
Investments in real estate and related intangible lease assets (liabilities)	(620,000)	(620,000)
Less: accumulated depreciation and amortization	597,000	576,000
Net investments in real estate and related intangible lease assets (liabilities)	(23,000)	(44,000)
Building Improvements [Member] | Above Market Leases [Member]
Investments in real estate and related intangible lease assets (liabilities)	1,401,000	1,401,000
Less: accumulated depreciation and amortization	(1,373,000)	(1,365,000)
Net investments in real estate and related intangible lease assets (liabilities)	$ 28,000	$ 36,000

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Equity (Details Textual) (USD $)	6 Months Ended		93 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Dec. 31, 2011
Common Stock, Shares Authorized (in shares)	290,000,000		290,000,000	290,000,000
Common stock, par value (in dollars per share)	$ 0.001		$ 0.001	$ 0.001
Preferred Stock, Shares Authorized (in shares)	10,000,000		10,000,000	10,000,000
Preferred stock, par value (in dollars per share)	$ 0.001		$ 0.001	$ 0.001
Cummulative Common Stock Shares Issued (in shares)	20,900,000		20,900,000	20,900,000
Distributions paid to stockholders	$ 0	$ 611,000
Proceeds from Issuance of Common Stock Excluding Shares Issued Under Distribution Plan	167,100,000	167,100,000
Accumulated deficit	(72,823,000)		(72,823,000)	(68,748,000)
Accumulated Net Cash Flow Provided by Operating Activities			3,900,000
Employee and Director Incentive Stock Plan [Member]
Stock Repurchase Program, Number of Shares Authorized to be Repurchased (in shares)	0		0
Number of Common Stock Reserved Description			The total number of shares of common stock reserved for issuance under the Plan is equal to 10% of our outstanding shares of stock at any time.
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)			80,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in dollars per share)			$ 8.00
Share-based Compensation Arrangement by Share-based Payment Award, Description	On April 6 and July 3, 2012, an additional 20,000 and 5,000 shares, respectively, lapsed and were canceled due to the resignation of Lee Powell Stedman and Jody Fouch, respectively, from the board of directors.
Share Based Compensation Arrangement By Share Based Payment Award Options Cancellations In Period Gross			15,000
Share-based Compensation Arrangement by Share-based Payment Award, Terms of Award (in years)			10 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Intrinsic Value (in dollars per share)			$ 0
Stockholders Distributions [Member]
Distributions paid to stockholders			$ 32,800,000
Distribution Reinvestment Plan [Member]
Shares, Issued	23,028,285		23,028,285	23,028,285

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Receivable from Related Party (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Organisational and Offering Costs In Excess Of Contractual Limit	$ 1,000,000
Receivable from related party (Note 9)	0	0
Advisor To Follow On Offering [Member]
Related Party Transaction, Description of Transaction	The receivable from related party consists of the excess organization and offering costs reimbursed to the advisor related to our Follow-on Offering. Our Follow-on Offering was terminated on June 10, 2012. Pursuant to the advisory agreement with our advisor, within 60 days after the end of the month in which our Follow-on Offering terminated, our advisor is obligated to reimburse us to the extent that the organization and offering expenses related to our Follow-on Offering borne by us exceeded 3.5% of the gross proceeds of the Follow-on Offering.
Organisational and Offering Costs Reimbursed	1,100,000
Receivable from related party (Note 9)	$ 1,000,000

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Related Party Transactions (Details Textual) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended			24 Months Ended
	Aug. 31, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Mar. 31, 2012
Advisors and Offering Cost Description				On June 10, 2012, our Follow-on Offering was terminated. Our advisory agreement provides for reimbursement to the Advisor for organizational and offering costs in excess of 3.5% of the gross proceeds from our Primary Offering and Follow-On Offering. Under the Advisory Agreement, within 60 days after the end of the month in which our Follow-on Offering terminated, the Advisor is obligated to reimburse us to the extent that the organization and offering expenses related to our Follow-on Offering borne by us exceeded 3.5% of the gross proceeds of the Follow-on Offering. As of June 10, 2012, we had reimbursed our advisor a total of $1.1 million in organizational and offering costs related to our Follow-on Offering, of which $1.0 million was in excess of the contractual limit. Consequently, in the second quarter of 2012, we recorded a receivable from the Advisor for $1.0 million reflecting the Excess Reimbursement. As a result of our evaluation of various factors related to collectability of this receivable, we recorded a reserve for the full amount of the receivable as of June 30, 2012. The repayment by the Advisor is scheduled to occur in quarterly payments over a 24 month period commencing January 1, 2013.
Advisors and Offering Cost Expenses				$ 5,600,000
Organisationl Cost Expenses					100,000
Offering Cost		5,500,000		5,500,000
Reduction in Proceeds from Issuance Primary Offering		4,400,000		4,400,000
Reduction in Proceeds from Issuance Follow on Offering		1,100,000		1,100,000
Advisory Acquisition Fees Description				Advisor acquisition fees in an amount equal to 2.0% of the gross proceeds from our Offerings.
Advisor Fees Description	The current asset management fee is 0.75% of the Average Invested Assets (as defined in the Advisory Agreement).			Prior to October 1, 2011, the Advisory Agreement required us to pay the Advisor a monthly asset management fee of one-twelfth of 1.0% of the Average Invested Assets (as defined in the Advisory Agreement).
Asset management fees and expenses		207,000	411,000	422,000		826,000
General and administrative		698,000	755,000	1,732,000		1,371,000
Total Operating Expenses Towars Advisory Cost Description		For the nine-fiscal-quarter period ended June 30, 2012, our total operating expenses again exceeded the greater of 2% of our average invested assets and 25% of our net income. We incurred operating expenses of approximately $9.3 million and incurred an Excess Amount of approximately $6.7 million during the nine quarters ended June 30, 2012.		Pursuant to provisions contained in our charter and in our Amended and Restated Advisory Agreement with our Advisor, our board of directors has the ongoing responsibility of limiting our total operating expenses for the trailing four consecutive quarters to amounts that do not exceed the greater of 2% of our average invested assets or 25% of our net income, calculated in the manner set forth in our charter, unless a majority of the directors (including a majority of the independent directors) has made a finding that, based on unusual and non-recurring factors that they deem sufficient, a higher level of expenses is justified (the "2%/25% Test").			We incurred operating expenses of approximately $8.3 million and incurred an Excess Amount of approximately $5.7 million during the eight quarters ended March 31, 2012, which has been carried over and included in the total operating expenses for the nine-fiscal-quarter period ended June 30, 2012 for purposes of the 2%/25% Test.
Property operating and maintenance		440,000	425,000	794,000		818,000
Additional Fees to Advisors for Sale of Property, Description				0
Subordinate Participation Fees to Advisors for Sale of Property, Description				After stockholders have received cumulative distributions equal to $8.00 per share (less any returns of capital) plus cumulative, non-compounded annual returns on net invested capital, the Advisor will be paid a subordinated participation in net sale proceeds ranging from a low of 5% of net sales proceeds provided investors have earned annualized returns of 6% to a high of 15% of net sales proceeds if investors have earned annualized returns of 10% or more.
Subordinate Participation Fees to Advisors for Termination				Upon termination of the Advisory Agreement, the Advisor will receive the subordinated performance fee due upon termination. This fee ranges from a low of 5% of the amount by which the sum of the appraised value of our assets minus our liabilities on the date the Advisory Agreement is terminated plus total distributions (other than stock distributions) paid prior to termination of the Advisory Agreement exceeds the amount of invested capital plus annualized returns of 6%, to a high of 15% of the amount by which the sum of the appraised value of our assets minus our liabilities plus all prior distributions (other than stock distributions) exceeds the amount of invested capital plus annualized returns of 10% or more.
Subordinate Participation Fees to Advisors for Listing of Shares, Description				In the event we list our stock for trading, the Advisor will receive a subordinated incentive listing fee instead of a subordinated participation in net sales proceeds. This fee ranges from a low of 5% of the amount by which the market value of our common stock plus all prior distributions (other than stock distributions) exceeds the amount of invested capital plus annualized returns of 6%, to a high of 15% of the amount by which the sum of the market value of our common stock plus all prior distributions (other than stock distributions) exceeds the amount of invested capital plus annualized returns of 10% or more.
Commission and Fees Payable to Dealer Manager, Description				PCC, as dealer manager, is entitled to receive sales commissions of up to 7% of gross proceeds from sales in our Offerings. PCC, as dealer manager, is also entitled to receive a dealer manager fee equal to up to 3% of gross proceeds from sales in the Offerings.
Reimbursement for Expenses, Description		The Advisory Agreement requires the Advisor to reimburse us to the extent that offering expenses including sales commissions, dealer manager fees and organization and offering expenses (but excluding acquisition fees and acquisition expenses discussed above) are in excess of 13.5% of gross proceeds from the Offerings when combined with the shares sold under the related distribution reinvestment plan.		The dealer manager is also entitled to receive a reimbursement of bona fide due diligence expenses up to 0.5% of the gross proceeds from sales in the Offerings.
Advisory Agreement [Member]
Date of Amendment of Agreement				Aug. 31, 2011
Advisors and Offering Cost Description				Our Advisory Agreement provides for reimbursement to the Advisor for organizational and offering costs in excess of 3.5% of the gross proceeds from our Primary Offering and Follow-on Offering.
Asset management fees and expenses					0
General and administrative		300,000	200,000	700,000		500,000
Property operating and maintenance		2,000	5,000	5,000		11,000
Advisors Fees Reimbursed [Member]
Asset management fees and expenses		200,000	400,000	400,000		800,000
General and administrative		$ 37,000	$ 40,000	$ 81,000		$ 85,000

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Note Receivable from Affiliated Party (Details) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Mar. 31, 2011
Balance at January 1,	$ 0	$ 8,000,000	$ 8,318,000
Additions to note receivable from related party	285,000	318,000
Repayments of note receivable from related party	0	0
Elimination of balance in consolidation of VIE	(285,000)	0
Balance at June 30	$ 0	$ 8,318,000	$ 8,318,000

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Segment Reporting (Table)

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Reconciliation of Net Operating Income from Net Loss [Table Text Block]

The following table reconciles NOI from net loss for the three months and six months ended June 30, 2012 and 2011:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Net loss	$	(1,920,000	)	$	(44,939,000	)	$	(4,603,000	)	$	(45,711,000	)
Interest income from notes receivable		(14,000	)		(104,000	)		(27,000	)		(263,000	)
General and administrative		698,000			755,000			1,732,000			1,371,000
Asset management fees and expenses		207,000			411,000			422,000			825,000
Depreciation and amortization		389,000			544,000			770,000			1,074,000
Reserve for advisor obligation		988,000			—			988,000			—
Interest expense		167,000			320,000			433,000			611,000
Impairment of notes receivable		—			1,650,000			—			1,650,000
Impairment of real estate		—			23,219,000			—			23,219,000
Loss from discontinued operations		115,000			18,871,000			1,565,000			18,663,000
Net operating income	$	630,000		$	727,000		$	1,280,000		$	1,439,000

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Notes Payable (Details 1) (Monroe North Commerce Center Mortgage Loan [Member], USD $)	Jun. 30, 2012
Monroe North Commerce Center Mortgage Loan [Member]
Principal payments due, July 1, 2012 to December 31, 2012	$ 92,000
Principal payments due, 2013	230,000
Principal payments due, 2014	6,234,000
Principal payments due, 2015	0
Principal payments due, 2016	0
Principal payments due, 2017 and thereafter	$ 0

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared by our management in accordance with generally accepted accounting principles of the United States of America (“GAAP”) and in conjunction with the rules and regulations of the SEC. Certain amounts have been reclassified for prior periods to conform to current period presentation. Assets sold or held for sale and associated liabilities have been reclassified on the condensed consolidated balance sheets and the related operating results reclassified from continuing to discontinued operations on the condensed consolidated income statements. Additionally certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements.

The accompanying financial information reflects all adjustments which are, in the opinion of management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the 2011 Annual Report on Form 10-K as filed with the SEC. Operating results for the six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on various assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted. For more information regarding our critical accounting policies and estimates please refer to “Summary of Significant Accounting Policies” contained in our Annual Report on Form 10-K for the year ended December 31, 2011. For the quarter and six months ended June 30, 2012, there have been no material changes to such accounting policies.

Fair Value of Financial Instruments Fair Value Measurements [Policy Text Block]

Fair Value of Financial Instruments and Fair Value Measurements

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 825-10, Financial Instruments, requires the disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practical to estimate that value.

Fair value represents the estimate of the proceeds to be received, or paid in the case of a liability, in a current transaction between willing parties. ASC 820, Fair Value Measurement (“ASC 820”) establishes a fair value hierarchy to categorize the inputs used in valuation techniques to measure fair value. Inputs are either observable or unobservable in the marketplace. Observable inputs are based on market data from independent sources and unobservable inputs reflect the reporting entity’s assumptions about market participant assumptions used to value an asset or liability.

Financial assets and liabilities recorded at fair value on the condensed consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1. Quoted prices in active markets for identical instruments.

Level 2. Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified according to the lowest level input that is significant to their valuation. A financial instrument that has a significant unobservable input along with significant observable inputs may still be classified as a Level 3 instrument.

We generally determine or calculate the fair value of financial instruments using quoted market prices in active markets, when such information is available, or appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow.

Our condensed consolidated balance sheets include the following financial instruments: cash and cash equivalents, notes receivable, tenant and other receivables, certain other assets, deferred costs and deposits, accounts payable and accrued liabilities, payable to related parties, prepaid rent, security deposits and deferred revenue, and notes payable. With the exception of notes receivable and notes payable discussed below, we consider the carrying values to approximate fair value for such financial instruments based on Level 1 inputs because of the short period of time between origination of the instruments and their expected payment.

As of June 30, 2012 and December 31, 2011, the fair value of notes receivable was $1.0 million and $0.9 million, compared to the carrying value of $0.9 million and $0.9 million, respectively. The fair value of notes receivable was estimated by discounting the expected cash flows at current market rates at which management believes similar loans would be made. To estimate fair value at June 30, 2012, we discounted the expected cash flows using a rate of 10.00%. As the inputs to our valuation estimate are neither observable in nor supported by market activity, our notes receivable are classified as Level 3 assets within the fair value hierarchy.

As of June 30, 2012 and December 31, 2011, the fair value of notes payable was $13.6 million and $21.3 million, compared to the carrying value of $13.2 million and $21.1 million, respectively. The fair value of notes payable is estimated by discounting the contractual cash payments using lending rates available to us for financial instruments with similar terms and maturities. To estimate fair value at June 30, 2012, we utilized discount rates ranging from 3.50% to 4.07%. As the inputs to our valuation estimate are neither observable in nor supported by market activity, our notes payable are classified as Level 3 assets within the fair value hierarchy.

As a result of our ongoing analysis for potential impairment of our investments in real estate, including properties classified as held for sale, we were required to adjust the carrying value of certain assets to their estimated fair values during the first quarter of 2012 (see Note 4). No impairments were recorded during the three months ended June 30, 2012.

The following table summarizes the assets measured at fair value on a nonrecurring basis during the six months ended June 30, 2012:

	Total Fair Value Measurement		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Net Losses for the Six Months Ended June 30, 2012
Variable interest entity held for sale	$	3,760,000	$	—	$	3,760,000	$	—	$	(1,140,000	)

The variable interest entity held for sale measured at fair value during the first quarter of 2012 was deemed to be a Level 2 asset as we have received a formal offer for the property. We do not believe that this asset was a Level 1 asset as of the valuation date as a purchase and sale agreement had not been signed, giving the potential buyer the right to opt out of the transaction at its discretion.

At June 30, 2012 and December 31, 2011, we do not have any financial assets or financial liabilities that are measured at fair value on a recurring basis in our condensed consolidated financial statements.

Reclassification, Policy [Policy Text Block]

Reclassification

Assets sold or held for sale and their associated liabilities have been reclassified on the condensed consolidated balance sheets and operating results have been reclassified from continuing to discontinued operations.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). The amendments in this update result in additional fair value measurement and disclosure requirements within U.S. GAAP and IFRS. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The Company’s adoption of ASU 2011-04 on January 1, 2012 did not have a significant impact on its consolidated financial condition, results of operations, and/or its disclosures.

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Payable to Related Parties (Details Textual)	6 Months Ended
	Jun. 30, 2012
Due To Related Parties Description	Payable to related parties at June 30, 2012 and December 31, 2011 consists of expense reimbursements payable to the Advisor.

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Allowance for Doubtful Accounts (Details Textual) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Allowance for Doubtful Accounts Receivable	$ 0.2	$ 0.2

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Basis of Presentation and Summary of Significant Accounting Policies (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Notes Receivable, Fair Value Disclosure	$ 1,000,000	$ 900,000
Notes receivable, net (Note 7)	908,000	908,000
Fair Value Measurements Valuation Techniques Notes Receivable	The fair value of notes receivable was estimated by discounting the expected cash flows at current market rates at which management believes similar loans would be made.
Fair Value Inputs Discount Rate Notes Receivable	10.00%
Notes payable	13,235,000	21,070,000
Fair Value Measurements Valuation Techniques Notes Payable	The fair value of notes payable is estimated by discounting the contractual cash payments using lending rates available to us for financial instruments with similar terms and maturities.
Notes Payable, Fair Value Disclosure	$ 13,600,000	$ 21,300,000
Maximum [Member]
Fair Value Inputs Discount Rate Notes Receivable	4.07%
Minimum [Member]
Fair Value Inputs Discount Rate Notes Receivable	3.50%

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Equity (Details 1) (USD $)	1 Months Ended							6 Months Ended
	Jun. 30, 2011	May 31, 2011	Apr. 30, 2011	Mar. 31, 2011	Feb. 28, 2011	Jan. 31, 2011		Jun. 30, 2011
Total Number of Shares Redeemed	0	0	0	0	0	46,096	[1]	46,096
Stock Redeemed Average Price Per Share	$ 0	$ 0	$ 0	$ 0	$ 0	$ 7.99	[1]	$ 0

[1] In January 2011, share redemptions due to the death of a shareholder that were requested prior to the suspension of the stock repurchase program were fulfilled under the program.

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Discontinued Operations (Details Textual) (USD $)	3 Months Ended		6 Months Ended		3 Months Ended			1 Months Ended	3 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2011 Hsh Nordbank Ag [Member]	Jun. 30, 2011 Goldenwest Property [Member]	Dec. 31, 2011 Mack Deer Valley and Pinnacle Park Business Center Properties [Member]	Dec. 22, 2011 South Industrial Park Property 2111 [Member]	Jun. 30, 2012 Sherburne Commons Property [Member]
Proceeds from Sale of Property Held-for-sale						$ 9,400,000	$ 23,900,000	$ 900,000
Line of Credit Facility Repayment		7,800,000			7,800,000
Gain (Loss) on Sale of Properties								29,000
Impairment of real estate	$ 0	$ 23,219,000	$ 0	$ 23,219,000					$ 1,100,000

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Note Receivable from Affiliated Party (Details Textual) (USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2009	Jun. 30, 2012	Jun. 30, 2011	Dec. 14, 2009
Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entity, Methodology for Determining Whether Entity is Primary Beneficiary					Nantucket Acquisition is considered a variable interest entity because the equity owners of Nantucket Acquisition do not have sufficient equity at risk. Due to the suspension of interest payments by the borrower, we issued a notice of default to the borrower on June 30, 2011 and determined that we were the primary beneficiary of the VIE due to our enhanced ability to direct the activities of the VIE. The primary beneficiary of a VIE is required to consolidate the operations of the VIE. Consequently, we have consolidated the operations of the VIE as of June 30, 2011 and, accordingly, eliminated the note receivable from related party balance in consolidation (see Note 9).
Impairment of Real Estate Asset Held for Sale				$ 1,100,000	$ 0
Nantucket Acquisition Llc [Member]
Mortgage Loans on Real Estate, Face Amount of Mortgages						8,000,000
Participating Mortgage Loan Receivable Description			Under the terms of the loan, we are entitled to receive additional interest in the form of a 40% participation in the appreciation in value of the property, which is calculated based on the net sales proceeds if the property is sold, or the property''s appraised value, less ordinary disposition costs, if the property has not been sold by the time the loan matures. Prepayment of the loan is not permitted without our consent and the loan is not assumable.
Mortgage Loans on Real Estate, Interest Rate			8.00%
Mortgage Loans on Real Estate, Final Maturity Date			Jan. 01, 2015
Interest and Fee Income, Loans, Commercial, Real Estate	0	0		0	0
Mortgage Loans on Real Estate, Period Increase (Decrease)				$ 300,000	$ 500,000

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Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

3. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared by our management in accordance with generally accepted accounting principles of the United States of America (“GAAP”) and in conjunction with the rules and regulations of the SEC. Certain amounts have been reclassified for prior periods to conform to current period presentation. Assets sold or held for sale and associated liabilities have been reclassified on the condensed consolidated balance sheets and the related operating results reclassified from continuing to discontinued operations on the condensed consolidated income statements. Additionally certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the interim condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements.

The accompanying financial information reflects all adjustments which are, in the opinion of management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the 2011 Annual Report on Form 10-K as filed with the SEC. Operating results for the six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

Use of Estimates

The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on various assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted. For more information regarding our critical accounting policies and estimates please refer to “Summary of Significant Accounting Policies” contained in our Annual Report on Form 10-K for the year ended December 31, 2011. For the quarter and six months ended June 30, 2012, there have been no material changes to such accounting policies.

Fair Value of Financial Instruments and Fair Value Measurements

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 825-10, Financial Instruments, requires the disclosure of fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practical to estimate that value.

Fair value represents the estimate of the proceeds to be received, or paid in the case of a liability, in a current transaction between willing parties. ASC 820, Fair Value Measurement (“ASC 820”) establishes a fair value hierarchy to categorize the inputs used in valuation techniques to measure fair value. Inputs are either observable or unobservable in the marketplace. Observable inputs are based on market data from independent sources and unobservable inputs reflect the reporting entity’s assumptions about market participant assumptions used to value an asset or liability.

Financial assets and liabilities recorded at fair value on the condensed consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1. Quoted prices in active markets for identical instruments.

Level 2. Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified according to the lowest level input that is significant to their valuation. A financial instrument that has a significant unobservable input along with significant observable inputs may still be classified as a Level 3 instrument.

We generally determine or calculate the fair value of financial instruments using quoted market prices in active markets, when such information is available, or appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow.

Our condensed consolidated balance sheets include the following financial instruments: cash and cash equivalents, notes receivable, tenant and other receivables, certain other assets, deferred costs and deposits, accounts payable and accrued liabilities, payable to related parties, prepaid rent, security deposits and deferred revenue, and notes payable. With the exception of notes receivable and notes payable discussed below, we consider the carrying values to approximate fair value for such financial instruments based on Level 1 inputs because of the short period of time between origination of the instruments and their expected payment.

As of June 30, 2012 and December 31, 2011, the fair value of notes receivable was $1.0 million and $0.9 million, compared to the carrying value of $0.9 million and $0.9 million, respectively. The fair value of notes receivable was estimated by discounting the expected cash flows at current market rates at which management believes similar loans would be made. To estimate fair value at June 30, 2012, we discounted the expected cash flows using a rate of 10.00%. As the inputs to our valuation estimate are neither observable in nor supported by market activity, our notes receivable are classified as Level 3 assets within the fair value hierarchy.

As of June 30, 2012 and December 31, 2011, the fair value of notes payable was $13.6 million and $21.3 million, compared to the carrying value of $13.2 million and $21.1 million, respectively. The fair value of notes payable is estimated by discounting the contractual cash payments using lending rates available to us for financial instruments with similar terms and maturities. To estimate fair value at June 30, 2012, we utilized discount rates ranging from 3.50% to 4.07%. As the inputs to our valuation estimate are neither observable in nor supported by market activity, our notes payable are classified as Level 3 assets within the fair value hierarchy.

As a result of our ongoing analysis for potential impairment of our investments in real estate, including properties classified as held for sale, we were required to adjust the carrying value of certain assets to their estimated fair values during the first quarter of 2012 (see Note 4). No impairments were recorded during the three months ended June 30, 2012.

The following table summarizes the assets measured at fair value on a nonrecurring basis during the six months ended June 30, 2012:

	Total Fair Value Measurement		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Net Losses for the Six Months Ended June 30, 2012
Variable interest entity held for sale	$	3,760,000	$	—	$	3,760,000	$	—	$	(1,140,000	)

The variable interest entity held for sale measured at fair value during the first quarter of 2012 was deemed to be a Level 2 asset as we have received a formal offer for the property. We do not believe that this asset was a Level 1 asset as of the valuation date as a purchase and sale agreement had not been signed, giving the potential buyer the right to opt out of the transaction at its discretion.

At June 30, 2012 and December 31, 2011, we do not have any financial assets or financial liabilities that are measured at fair value on a recurring basis in our condensed consolidated financial statements.

Reclassification

Assets sold or held for sale and their associated liabilities have been reclassified on the condensed consolidated balance sheets and operating results have been reclassified from continuing to discontinued operations.

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). The amendments in this update result in additional fair value measurement and disclosure requirements within U.S. GAAP and IFRS. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The Company’s adoption of ASU 2011-04 on January 1, 2012 did not have a significant impact on its consolidated financial condition, results of operations, and/or its disclosures.

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Segment Reporting (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Net loss	$ (1,920,000)	$ (44,939,000)	$ (4,603,000)	$ (45,711,000)
Interest income from notes receivable	(14,000)	(104,000)	(27,000)	(263,000)
General and administrative	698,000	755,000	1,732,000	1,371,000
Asset management fees and expenses	207,000	411,000	422,000	826,000
Depreciation and amortization	389,000	544,000	770,000	1,073,000
Reserve for excess advisor obligation	988,000	0	988,000	0
Interest expense	167,000	320,000	433,000	611,000
Impairment of notes receivable	0	1,650,000	0	1,650,000
Impairment of real estate	0	23,219,000	0	23,219,000
Loss from discontinued operations	115,000	18,871,000	1,565,000	18,663,000
Net operating income	$ 630,000	$ 727,000	$ 1,280,000	$ 1,439,000

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Concentration of Risk (Details Textual)	1 Months Ended	6 Months Ended
	Jul. 21, 2010	Jun. 30, 2012
Concentration Risk, Credit Risk, Financial Instruments	Financial instruments that potentially subject us to a concentration of credit risk are primarily cash investments, notes receivable and the note receivable from related party. Refer to Notes 7 and 8 with regard to credit risk evaluation of notes receivable and the note receivable from related party, respectively. Cash is generally invested in investment-grade short-term instruments.On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act that implements significant changes to the regulation of the financial services industry, including provisions that made permanent the $250,000 limit for federal deposit insurance and increased the cash limit of Securities Investor Protection Corporation protection from $100,000 to $250,000, and provided unlimited federal deposit insurance until January 1, 2013, for non-interest bearing demand transaction accounts at all insured depository institutions. As of June 30, 2012, we had cash accounts in excess of FDIC-insured limits. However, we do not believe this risk is significant.
Concentration Risk, Geographic		As of June 30, 2012, we owned three properties in the state of California and six properties in the state of Florida. Accordingly, there is a geographic concentration of risk subject to economic conditions in these states.

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Note Receivable from Affiliated Party (Table)

6 Months Ended

Jun. 30, 2012

Note Receivable From Related Party [Abstract]

Reconciliation of Notes Receivable Related Party [Table Text Block]

The following table reconciles the note receivable from related party from January 1, 2012 to June 30, 2012 and from January 1, 2011 to June 30, 2011:

	2012			2011
Balance at January 1,	$	—		$	8,000,000
Additions:
Additions to note receivable from related party		285,000			318,000
Deductions:
Repayments of note receivable from related party		—			—
Elimination of balance in consolidation of VIE		(285,000	)		—
Balance at June 30	$	—		$	8,318,000

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Notes Receivable (Table)

6 Months Ended

Jun. 30, 2012

Reconciliation of Notes Receivable [Table Text Block]

The following table reconciles notes receivable from January 1, 2012 to June 30, 2012 and from January 1, 2011 to June 30, 2011:

	2012		2011
Balance at January 1,	$	908,000	$	4,000,000
Additions:
Additions to notes receivable		—		—
Deductions:
Notes receivable repayments		—		(150,000	)
Notes receivable impairments		—		(1,650,000	)
Balance at June 30,	$	908,000	$	2,200,000

Notes Receivable Si and Shi [Member]

Reconciliation of Notes Receivable [Table Text Block]

The following table reconciles notes receivable from January 1, 2012 to June 30, 2012 and from January 1, 2011 to June 30, 2011:

	2012		2011
Balance at January 1,	$	908,000	$	4,000,000
Additions:
Additions to notes receivable		—		—
Deductions:
Notes receivable repayments		—		(150,000	)
Notes receivable impairments		—		(1,650,000	)
Balance at June 30,	$	908,000	$	2,200,000

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Notes Payable (Details) (Wells Fargo Bank Loan [Member], USD $)	Jun. 30, 2012
Wells Fargo Bank Loan [Member]
Principal payments due, July 1, 2012 to December 31, 2012	$ 180,000
Principal payments due, 2013	360,000
Principal payments due, 2014	6,139,000
Principal payments due, 2015	0
Principal payments due, 2016	0
Principal payments due, 2017 and thereafter	$ 0

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Notes Receivable (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Impairment of note receivable	$ 0	$ 1,650,000	$ 0	$ 1,650,000
Balance at June 30,	908,000		908,000		908,000
Notes Receivable SI and SHI [Member]
Balance at January 1,	908,000	4,000,000	908,000	4,000,000
Additions to notes receivable			0	0
Notes receivable repayments			0	(150,000)
Impairment of note receivable			0	(1,650,000)
Balance at June 30,	$ 908,000	$ 2,200,000	$ 908,000	$ 2,200,000

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Equity (Tables)

6 Months Ended

Jun. 30, 2012

Equity [Abstract]

Schedule of Distributions Declared [Table Text Block]

The following table shows the distributions declared during the six months ended June 30, 2012 and 2011:

	Distributions Declared(2)						Cash Flows Provided by (Used in) Operating
Period	Cash		Reinvested		Total		Activities
First quarter 2011(1)	$	454,000	$	—	$	454,000	$	481,000
Second quarter 2011(1)	$	468,000	$	—	$	468,000	$	(219,000	)
First quarter 2012	$	—	$	—	$	—	$	(800,000	)
Second quarter 2012	$	—	$	—	$	—	$	(953,000	)

Schedule of Redeemed Shares [Table Text Block]

During the six months ended June 30, 2011, we redeemed shares pursuant to our stock repurchase program as follows:

Period	Total Number of Shares Redeemed		Average Price Paid per Share
January 2011(1)		46,096	$	7.99
February 2011		—	$	—
March 2011		—	$	—
April 2011		—	$	—
May 2011		—	$	—
June 2011		—	$	—
		46,096

Schedule of Equity Compensation Plan Information [Table Text Block]

Our equity compensation plan information as of June 30, 2012 and December 31, 2011 is as follows:

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance
Equity compensation plans approved by security holders		45,000	$	8.00	See footnote (1)
Equity compensation plans not approved by security holders		—		—	—
Total		45,000	$	8.00	See footnote (1)

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Notes Payable (Tables)

6 Months Ended

Jun. 30, 2012

Schedule of Maturities of Long-term Debt [Table Text Block]

The principal payments due on the Wells Fargo loan for July 1, 2012 to December 31, 2012 and for each of the five following years ended December 31 is as follows:

Year		Principal Amount
July 1, 2012 to December 31, 2012	$	180,000
2013	$	360,000
2014	$	6,139,000
2015	$	—
2016	$	—
2017 and thereafter	$	—

Schedule of Maturities of Long-term Debt Mortage Loan [Table Text Block]

The principal payments due on the Monroe North Commerce Center mortgage loan for July 1, 2012 to December 31, 2012 and for each of the five following years ended December 31 is as follows:

Year	Principal Amount
July 1, 2012 to December 31, 2012	$	92,000
2013	$	230,000
2014	$	6,234,000
2015	$	—
2016	$	—
2017 and thereafter	$	—

Wells Fargo Bank National Association [Member]

Schedule of Maturities of Long-term Debt [Table Text Block]

The principal payments due on the Wells Fargo loan for July 1, 2012 to December 31, 2012 and for each of the five following years ended December 31 is as follows:

Year	Principal Amount
July 1, 2012 to December 31, 2012	$	,000
2013	$	360,000
2014	$	6,139,000
2015	$	—
2016	$	—
2017 and thereafter	$	—

Transamerica Life Insurance Company [Member]

Schedule of Maturities of Long-term Debt Mortage Loan [Table Text Block]

The principal payments due on the Monroe North Commerce Center mortgage loan for July 1, 2012 to December 31, 2012 and for each of the five following years ended December 31 is as follows:

Year	Principal Amount
July 1, 2012 to December 31, 2012	$	,000
2013	$	230,000
2014	$	6,234,000
2015	$	—
2016	$	—
2017 and thereafter	$	—

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Public Offerings and Strategic Alternatives

6 Months Ended

Jun. 30, 2012

Public Offerings [Abstract]

Public Offerings [Text Block]

2. Public Offerings and Strategic Alternatives

On January 6, 2006, we commenced an initial public offering of a minimum of 125,000 shares and a maximum of 55,400,000 shares of our common stock, consisting of 44,400,000 shares for sale to the public (the “Primary Offering”) and 11,000,000 shares for issuance pursuant to our distribution reinvestment plan. We stopped making offers under our initial public offering on June 1, 2009 upon raising gross offering proceeds of approximately $172.7 million from the sale of approximately 21.7 million shares, including shares sold under the distribution reinvestment plan. On June 10, 2009, we commenced a follow-on offering of up to 77,350,000 shares of our common stock, consisting of 56,250,000 shares for sale to the public (the “Follow-On Offering”) and 21,100,000 shares for sale pursuant to our dividend reinvestment plan. The Primary Offering and Follow-On Offering are collectively referred to as the “Offerings.” We retained Pacific Cornerstone Capital, Inc. (“PCC”), an affiliate of our Advisor, to serve as the dealer manager for the Offerings. PCC was responsible for marketing our shares being offered pursuant to the Offerings.

As of June 30, 2012, we had raised $167.1 million of gross proceeds from the sale of 20.9 million shares of our common stock in our Primary and Follow-On Offerings which were used to fund operations, assist in acquiring thirteen properties, four of which were sold during 2011, and pay for distributions. Our revenues, which are comprised largely of rental income, include rents reported on a straight-line basis over the initial term of each lease. Our growth depends, in part, on our ability to increase rental income and other earned income from leases by increasing rental rates and occupancy levels and controlling operating and other expenses. Our operations are impacted by property-specific, market-specific, general economic and other conditions.

Effective November 23, 2010, we stopped soliciting and accepting offers to purchase shares of our stock while our board of directors evaluates strategic alternatives to maximize value. On June 10, 2012, our Follow-on Offering was terminated.

Suspension of Distribution Reinvestment Plan. Our Offerings included a distribution reinvestment plan under which our stockholders could elect to have all or a portion of their distributions reinvested in additional shares of our common stock. We suspended our distribution reinvestment plan effective December 14, 2010. All distributions paid after December 14, 2010 have been and will be made in cash.

Distributions. Effective December 1, 2010, our board of directors resolved to reduce distributions on our common stock to an annualized rate of $0.08 per share (1% based on a share price of $8.00), from the prior annualized rate of $0.48 per share (6% based on a share price of $8.00), in order to preserve capital that may be needed for capital improvements, debt repayment or other corporate purposes. Distributions at this rate were declared for the first and second quarters of 2011. In June 2011, the board decided, based on the financial position of the Company, to suspend the declaration of further distributions and to defer the payment of the second quarter 2011 distribution until the financial position improved. In the fourth quarter of 2011, we used a portion of the proceeds from the sale of properties in Arizona to pay the deferred second quarter distributions. No distributions have been declared for periods after June 30, 2011. The rate and frequency of distributions is subject to the discretion of our board of directors and may change from time to time based on our operating results and cash flow.

Stock Repurchase Program. Our board of directors approved an amendment to our stock repurchase program to suspend redemptions under the program effective December 31, 2010. We can make no assurances as to whether and on what terms redemptions will resume. The share redemption program may be amended, resumed, suspended again, or terminated at any time.

Strategic Alternatives. Our board of directors continues to evaluate and implement strategic alternatives to reposition the company and enhance shareholders’ value. Specifically, we sold the Goldenwest property in June 2011 for gross proceeds of $9.4 million and made a principal payment of $7.8 million on the HSH Nordbank credit facility. Additionally, we sold the Mack Deer Valley and Pinnacle Park Business Center properties in November 2011 for gross proceeds of approximately $23.9 million. The net proceeds were used, in part, to pay down the remaining balance of the HSH Nordbank credit facility. In December 2011, we sold the 2111 South Industrial Park property for gross proceeds of $0.9 million. The proceeds were used to pay down the Wells Fargo Bank, National Association (“Wells Fargo”) loan. Furthermore, in February 2012, we amended our loan agreement with Wells Fargo. The amendment, executed upon our making a $7.5 million principal payment, extended the maturity date of the loan from February 13, 2012 to February 13, 2014 and reduced the interest rate from 300 basis points over one-month LIBOR to 200 basis points over one-month LIBOR, with the LIBOR floor remaining fixed at 150 basis points. We are continuing to pursue options for repaying our debt, including asset sales.  

In the first quarter of 2012, we announced an estimated per-share value of our common stock equal to $2.09 per share as of December 31, 2011. Our estimated per-share value was calculated by aggregating the estimated fair value of our investments in real estate and the estimated fair value of our other assets, subtracting the estimated fair value of our liabilities, and dividing the total by the number of our common shares outstanding as of December 31, 2011.

As a strategy to potentially increase the per-share value of our common shares, our board of directors is considering diversifying our investment objectives to add healthcare-related assets to our existing portfolio of industrial properties. In connection with such acquisitions, the board of directors may consider acquiring assets with long-term financing in order to leverage the capital available to us and increase our assets under management to enable better diversification. In August, 2012, we acquired two healthcare-related properties in the Portland, Oregon metropolitan area through a joint venture with an affiliate of our advisor. As part of this acquisition, we also acquired an option to purchase a third healthcare-related property in the Portland area (see Note 18). We may, at some time in the future, reduce our ownership position in the joint venture as a means to diversify our risk by property type, geographic location, operator and debt levels.

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Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2012

Discontinued Operations and Disposal Groups [Abstract]

Schedule of Component of Income (Loss) from Discontinued Operation [Table Text Block]

The following is a summary of the components of (loss) income from discontinued operations for the three months and six months ended June 30, 2012 and 2011:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Rental revenues, tenant reimbursements and other income	$	555,000		$	870,000		$	945,000		$	1,749,000
Operating expenses and real estate taxes		670,000			423,000			1,370,000			791,000
Depreciation and amortization		—			173,000			—			476,000
Impairment of real estate		—			19,145,000			1,140,000			19,145,000
Loss from discontinued operation	$	(115,000	)	$	(18,871,000	)	$	(1,565,000	)	$	(18,663,000	)

Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures [Table Text Block]

The following table presents balance sheet information for the properties classified as held for sale as of June 30, 2012 and December 31, 2011.

	June 30, 2012		December 31, 2011
Assets of variable interest entity held for sale:
Cash and cash equivalents	$	78,000	$	95,000
Investments in real estate, net		3,905,000		5,045,000
Accounts receivable, inventory and other assets		225,000		232,000
Assets of variable interest entity held for sale	$	4,208,000	$	5,372,000
Liabilities of variable interest entity held for sale:
Note payable	$	1,332,000	$	1,332,000
Loan payable		166,000		127,000
Accounts payable and accrued liabilities		398,000		373,000
Intangible lease liabilities, net		145,000		145,000
Interest payable		225,000		142,000
Liabilities of variable interest entity held for sale	$	2,266,000	$	2,119,000

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Investments in Real Estate (Details 2) (USD $)	Jun. 30, 2012
Amortization ofIntangible Lease Assets, July 1, 2012 to December 31, 2012	$ 1,000
Amortization of Intangible Lease Assets, 2013	19,000
Amortization of Intangible Lease Assets, 2014	8,000
Amortization of Intangible Lease Assets, 2015	6,000
Amortization of Intangible Lease Assets, 2016	0
Amortization of Intangible Lease Assets, 2017 and thereafter	$ 0

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Equity (Details 2) (USD $)	6 Months Ended
	Jun. 30, 2012
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	45,000
Weighted Average Exercise Price of Outstanding Options, Warrants and Rights	$ 8.00
Number of Securities Remaining Available for Future Issuance	0	[1]
Equity Compensation Plans Approved By Security Holders [Member]
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	45,000
Weighted Average Exercise Price of Outstanding Options, Warrants and Rights	$ 8.00
Number of Securities Remaining Available for Future Issuance	0	[1]
Equity Compensation Plans Not Approved By Security Holders [Member]
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	0
Weighted Average Exercise Price of Outstanding Options, Warrants and Rights	$ 0
Number of Securities Remaining Available for Future Issuance	0	[1]

[1] Our Employee and Director Incentive Stock Plan was approved by our security holders and provides that the total number of shares issuable under the plan is a number of shares equal to ten percent (10%) of our outstanding common stock. The maximum number of shares that may be granted under the plan with respect to "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code is 5,000,000. As of June 30, 2012 and December 31, 2011, there were 23,028,285 shares of our common stock issued and outstanding.

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2012	Dec. 31, 2011
ASSETS
Cash and cash equivalents	$ 7,967,000	$ 17,483,000
Investments in real estate:
Land	11,733,000	11,733,000
Buildings and improvements, net	32,671,000	33,330,000
Intangible lease assets, net	57,000	83,000
Net real estate (Note 4)	44,461,000	45,146,000
Notes receivable, net (Note 7)	908,000	908,000
Receivable from related party (Note 9)	0	0
Deferred costs and deposits	23,000	27,000
Deferred financing costs, net	74,000	91,000
Tenant and other receivables, net	448,000	567,000
Other assets, net	1,228,000	625,000
Assets of variable interest entity held for sale	4,208,000	5,372,000
Total assets	59,317,000	70,124,000
LIABILITIES AND EQUITY
Notes payable	13,235,000	21,070,000
Accounts payable and accrued liabilities	1,177,000	785,000
Payable to related parties	0	20,000
Prepaid rent, security deposits and deferred revenue	605,000	460,000
Intangible lease liabilities, net	23,000	44,000
Liabilities of variable interest entity held for sale	2,266,000	2,119,000
Total liabilities	17,306,000	24,498,000
Commitments and contingencies (Note 15)
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding at June 30, 2012 and December 31, 2011	0	0
Common stock, $0.001 par value; 290,000,000 shares authorized; 23,028,285 shares issued and outstanding at June 30, 2012 and December 31, 2011 respectively	23,000	23,000
Additional paid-in capital	117,226,000	116,238,000
Accumulated deficit	(72,823,000)	(68,748,000)
Total stockholders' equity	44,426,000	47,513,000
Noncontrolling interests	(2,415,000)	(1,887,000)
Total equity	42,011,000	45,626,000
Total liabilities and equity	$ 59,317,000	$ 70,124,000

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Notes Receivable (Details Textual) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended		1 Months Ended		3 Months Ended			6 Months Ended				1 Months Ended	3 Months Ended		6 Months Ended
	Dec. 31, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011 Si Note Receivable [Member]	May 31, 2008 Si Note Receivable [Member]	Jun. 30, 2012 Si Note Receivable [Member]	Jun. 30, 2011 Si Note Receivable [Member]	Jun. 30, 2010 Si Note Receivable [Member]	Jun. 30, 2011 Si Note Receivable [Member]	Jun. 30, 2010 Si Note Receivable [Member]	May 31, 2010 Si Note Receivable [Member]	Sep. 01, 2009 Si Note Receivable [Member]	May 31, 2008 Shi Note Receivable [Member]	Jun. 30, 2012 Shi Note Receivable [Member]	Jun. 30, 2011 Shi Note Receivable [Member]	Jun. 30, 2012 Shi Note Receivable [Member]	Jun. 30, 2011 Shi Note Receivable [Member]	Dec. 31, 2011 Shi Note Receivable [Member]	May 31, 2010 Shi Note Receivable [Member]
Notes receivable, net (Note 7)	$ 908,000	$ 908,000		$ 908,000		$ 0	$ 10,000,000	$ 0					$ 8,750,000		$ 10,000,000	$ 900,000		$ 900,000		$ 1,000,000	$ 8,750,000
Receivable with Imputed Interest, Effective Yield (Interest Rate)	5.00%						10.00%								10.00%
Receivable with Imputed Interest, Due Date								May 19, 2013								May 19, 2013
Financing Receivable, Allowance for Credit Losses														4,600,000
Interest Income Note Receivable									0	0	0	0						27,000	200,000
Impairment of note receivable		0	1,650,000	0	1,650,000												1,700,000
Financing Receivable, Modifications, Recorded Investment						2,500,000														2,500,000
Proceeds from Collection of Notes Receivable						1,500,000
Amount Due On Twenty Second December 2013																700,000		700,000
Amount Due on Twenty Second December 2014																300,000		300,000
Notes Receivable Net Present Value																				$ 900,000

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities
Net loss	$ (4,603,000)	$ (45,711,000)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Amortization of deferred financing costs	72,000	200,000
Depreciation and amortization	770,000	1,549,000
Straight-line rents and amortization of acquired above (below) market leases net	(52,000)	3,000
Reserve for excess advisor obligation	988,000	0
Impairment of note receivable	0	1,650,000
Impairment of real estate	1,140,000	42,364,000
Provision for bad debt	(9,000)	(25,000)
Change in operating assets and liabilities:
Tenant and other receivables	174,000	190,000
Other assets	(581,000)	130,000
Accounts payable and accrued liabilities	443,000	(17,000)
Payable to related parties, net	(11,000)	97,000
Prepaid rent, security deposit and deferred revenues	(84,000)	(168,000)
Net cash (used in) provided by operating activities	(1,753,000)	262,000
Cash flows from investing activities
Real estate improvements	(26,000)	(402,000)
Real estate disposition	0	9,130,000
Notes receivable proceeds	0	150,000
Notes receivable disbursements to affiliated parties (See Note 8)	0	(318,000)
Net cash (used in) provided by investing activities	(26,000)	8,560,000
Cash flows from financing activities
Redeemed shares	0	(369,000)
Security deposit refunded/received, net	231,000	0
Repayment of notes payable	(7,835,000)	(8,244,000)
Offering costs	0	(5,000)
Distributions paid to stockholders	0	(611,000)
Distributions paid to noncontrolling interest	0	(6,000)
Deferred financing costs	(55,000)	(57,000)
Net cash used in financing activities	(7,659,000)	(9,292,000)
Net decrease in cash and cash equivalents	(9,438,000)	(470,000)
Cash and cash equivalents - beginning of period	17,483,000	2,014,000
Cash and cash equivalents - end of period (including cash of VIE)	8,045,000	1,544,000
Cash and cash equivalents of VIE - end of period (see Note 16)	78,000	0
Cash and cash equivalents - end of period	7,967,000	1,544,000
Supplemental disclosure of cash flow information:
Cash paid for interest	456,000	506,000
Supplemental disclosure of non-cash financing and investing activities:
Accrual for distribution declared	0	468,000
Accrued leasing commissions	100,000	6,000
Deferred loan origination fees	0	20,000
Accrued real estate improvements	0	102,000
Reduction of excess offering costs	988,000	0
Elimination of note receivable from related party through consolidation of variable interest entity (See Note 8)
Assets acquired	0	10,069,000
Liabilities assumed	0	1,806,000
Elimination of note receivable	$ 0	$ 8,263,000

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Discontinued Operations (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Rental revenues, tenant reimbursements and other income	$ 1,084,000	$ 1,256,000	$ 2,101,000	$ 2,520,000
Operating expenses and real estate taxes	2,722,000	27,004,000	4,706,000	28,957,000
Depreciation and amortization	389,000	544,000	770,000	1,073,000
Impairment of Real Estate Sold and Asset Held for Sale	0	(19,145,000)	(1,140,000)	(19,145,000)
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	(115,000)	(18,871,000)	(1,565,000)	(18,663,000)
Discontinued Operations [Member]
Rental revenues, tenant reimbursements and other income	555,000	870,000	945,000	1,749,000
Operating expenses and real estate taxes	670,000	423,000	1,370,000	791,000
Depreciation and amortization	0	173,000	0	476,000
Impairment of Real Estate Sold and Asset Held for Sale	0	19,145,000	1,140,000	19,145,000
Income (Loss) from Discontinued Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	$ (115,000)	$ (18,871,000)	$ (1,565,000)	$ (18,663,000)

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Public Offerings and Strategic Alternatives (Details Textual) (USD $) In Millions, except Share data, unless otherwise specified	1 Months Ended	3 Months Ended		6 Months Ended		1 Months Ended				3 Months Ended	12 Months Ended		1 Months Ended	0 Months Ended			12 Months Ended
	Dec. 01, 2010	Mar. 31, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Feb. 29, 2012 Wells Fargo Bank National Association [Member]	Dec. 31, 2011 Wells Fargo Bank National Association [Member]	Aug. 31, 2011 Wells Fargo Bank National Association [Member]	Nov. 30, 2009 Wells Fargo Bank National Association [Member]	Jun. 30, 2012 Wells Fargo Bank National Association [Member]	Dec. 31, 2011 Goldenwest Property [Member]	Dec. 31, 2011 Mack Deer Valley and Pinnacle Park Business Center Properties [Member]	Jun. 01, 2009 Ipo [Member]	Jan. 06, 2006 Ipo [Member]	Jan. 06, 2006 Ipo [Member] Maximum [Member]	Jan. 06, 2006 Ipo [Member] Minimum [Member]	Dec. 31, 2009 Follow On Offering [Member]
Issuance of common stock (in shares)				0	0								21,700,000	44,400,000	55,400,000	125,000	77,350,000
Stock Issued During Period, Shares, Dividend Reinvestment Plan														11,000,000			21,100,000
Proceeds from Issuance Initial Public Offering													$ 172.7
Stock Issued During Period, Shares, New Issues to Public																	56,250,000
Distribution Policy, Members or Limited Partners, Description	Effective December 1, 2010, our board of directors resolved to reduce distributions on our common stock to an annualized rate of $0.08 per share (1% based on a share price of $8.00), from the prior annualized rate of $0.48 per share (6% based on a share price of $8.00), in order to preserve capital that may be needed for capital improvements, debt repayment or other corporate purposes.
Sale of Stock, Description of Transaction				We had raised $167.1 million of gross proceeds from the sale of 20.9 million shares of our common stock in our Primary Offering and Follow-On Offering and had acquired thirteen properties, four of which were sold during 2011.
Proceeds from Sale of Property, Plant, and Equipment											9.4	23.9
Line of Credit Facility Repayment			7.8
Debt Instrument Principal Repayment						$ 7.5	$ 0.9	$ 0.5		$ 7.5
Debt Instrument, Maturity Date, Description										February 13, 2012 to February 13, 2014
Line of Credit Facility, Interest Rate Description						The interest rate on amended loan decreased from 300 basis points over one-month LIBOR to 200 basis points over one-month LIBOR, with the one-month LIBOR floor remaining fixed at 150 basis points.		Interest on the amended loan increased to 300 basis points over one-month LIBOR with a 150 basis point LIBOR floor.	At an interest rate of 140 basis points over one-month LIBOR	Reduced the interest rate from 300 basis points over one-month LIBOR to 200 basis points over one-month LIBOR, with the LIBOR floor remaining fixed at 150 basis points.
Business Acquisition Description				In August, 2012, we acquired two healthcare-related properties in the Portland, Oregon metropolitan area through a joint venture with an affiliate of our advisor. As part of this acquisition, we also acquired an option to purchase a third healthcare-related property in the Portland area (see Note 18).
Equity Issuance, Per Share Amount		$ 2.09

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Discontinued Operations

6 Months Ended

Jun. 30, 2012

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

16. Discontinued Operations

Divestitures

In accordance with FASB ASC 360-10, Property, Plant & Equipment, we report results of operations from real estate assets that meet the definition of a component of an entity that have been sold, or meet the criteria to be classified as held for sale, as discontinued operations.

On June 14, 2011, one of our wholly-owned subsidiaries sold the Goldenwest property to Westminster Redevelopment Agency, a non-related party, for a purchase price of $9.4 million. Approximately $7.8 million in proceeds from the sale were used to pay down a portion of the HSH Nordbank credit facility. The operations of Goldenwest are presented in discontinued operations on our condensed consolidated statement of operations for the three and six months ended June 30, 2011.

On November 28, 2011, two of our wholly-owned subsidiaries sold the Mack Deer Valley and Pinnacle Park Business Center properties to a non-related party for a purchase price of $23.9 million. The proceeds were used, in part, to pay down the entire balance of the HSH Nordbank credit facility. The operations of these properties are presented in discontinued operations on our condensed consolidated statement of operations for the three and six months ended June 30, 2011.

On December 22, 2011, our wholly-owned subsidiary sold the 2111 South Industrial Park property for a purchase price of $0.9 million. A loss on sale of $29,000 was recognized in the fourth quarter of 2011. The proceeds were used to pay down the Wells Fargo loan. The operations of this property are presented in discontinued operations on our condensed consolidated statement of operations for the three and six months ended June 30, 2011.

Properties Held for Sale

In the fourth quarter of 2011, our board of directors authorized us to actively market the Sherburne Commons property, a VIE that we began consolidating on June 30, 2011 (see Note 10).

The assets and liabilities of properties for which we have initiated plans to sell, but have not yet sold as of June 30, 2012 and December 31, 2011 have been classified as assets of variable interest entity held for sale and liabilities of variable interest entity held for sale on the accompanying condensed consolidated balance sheets. As of June 30 2012 and December 31, 2011, this represents the assets and liabilities of the Sherburne Commons property. The results of operations for the variable interest entity held for sale are presented in discontinued operations on the accompanying condensed consolidated statement of operations for the three and six months ended June 30, 2012.

The following is a summary of the components of (loss) income from discontinued operations for the three months and six months ended June 30, 2012 and 2011:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Rental revenues, tenant reimbursements and other income	$	555,000		$	870,000		$	945,000		$	1,749,000
Operating expenses and real estate taxes		670,000			423,000			1,370,000			791,000
Depreciation and amortization		—			173,000			—			476,000
Impairment of real estate		—			19,145,000			1,140,000			19,145,000
Loss from discontinued operation	$	(115,000	)	$	(18,871,000	)	$	(1,565,000	)	$	(18,663,000	)

FASB ASC 360-10 requires that assets classified as held for sale be carried at the lesser of their carrying amount or estimated fair value, less estimated selling costs. Accordingly, we recorded an impairment charge of $1.1 million in the first quarter of 2012 to record the Sherburne Commons property at its estimated fair value, less estimated selling costs (see Notes 4 and 10).

The following table presents balance sheet information for the properties classified as held for sale as of June 30, 2012 and December 31, 2011.

	June 30, 2012		December 31, 2011
Assets of variable interest entity held for sale:
Cash and cash equivalents	$	78,000	$	95,000
Investments in real estate, net		3,905,000		5,045,000
Accounts receivable, inventory and other assets		225,000		232,000
Assets of variable interest entity held for sale	$	4,208,000	$	5,372,000
Liabilities of variable interest entity held for sale:
Note payable	$	1,332,000	$	1,332,000
Loan payable		166,000		127,000
Accounts payable and accrued liabilities		398,000		373,000
Intangible lease liabilities, net		145,000		145,000
Interest payable		225,000		142,000
Liabilities of variable interest entity held for sale	$	2,266,000	$	2,119,000

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Basis of Presentation and Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Fair value on a nonrecurring basis, Variable interest entity held for sale	$ 3,760,000		$ 3,760,000
Net loss	(1,920,000)	(44,939,000)	(4,603,000)	(45,711,000)
Variable Interest Entity, Primary Beneficiary [Member]
Net loss			(1,140,000)
Fair Value, Inputs, Level 1 [Member]
Fair value on a nonrecurring basis, Variable interest entity held for sale	0		0
Fair Value, Inputs, Level 2 [Member]
Fair value on a nonrecurring basis, Variable interest entity held for sale	3,760,000		3,760,000
Fair Value, Inputs, Level 3 [Member]
Fair value on a nonrecurring basis, Variable interest entity held for sale	$ 0		$ 0

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Subsequent Events

6 Months Ended

Jun. 30, 2012

Subsequent Events [Abstract]

Subsequent Events [Text Block]

18. Subsequent Events

Acquisition of Health Care Properties

On August 3, 2012, through a wholly-owned subsidiary, we funded an investment in a joint venture, Cornerstone Healthcare Partners, LLC, that concurrently acquired a portfolio of two skilled nursing facilities located in the Portland, Oregon metropolitan area from Sheridan Care Center LLC, Sheridan Properties LLC, Fernhill Estates LLC and Fernhill Properties LLC (collectively, the “Sellers”). The Company contributed approximately $3.5 million to the joint venture, with Cornerstone Healthcare Realty Fund (“CHREF”), an affiliate of our advisor, contributing approximately $0.2 million as our joint venture partner. The purchase price of the portfolio was $8.6 million in addition to acquisition costs of $0.9 million. The portfolio, which includes the property at 411 SE Sheridan Road, Sheridan Oregon and 5737 NE 37^th Avenue, Portland Oregon (collectively, the “Portland Properties”) has a total of 102 beds.

We acquired our interest in the Portland Properties subject to a secured loan.  On August 1, 2012, we entered into a loan agreement with the Sellers for a loan (the “Seller Loan”) in the aggregate amount of approximately $5.8 million secured by security interests in the Portland Properties. The Seller Loan, which bears interest fixed at 5%, matures on March 15, 2013, at which time all outstanding principal, accrued and unpaid interest and any other amounts due under the loan agreement will become due. The Seller Loan is interest-only and may be voluntarily prepaid in its entirety prior to the maturity date without penalty. Interest payments on the Seller Loan are due monthly. Prior to the maturity date of the Seller Loan, the Company intends to refinance the property through a commercial lending institution. No financing fee was incurred in connection with the Seller Loan.

The Portland Properties will be leased by the joint venture to the current operator of the facilities, pursuant to a long-term triple net lease. The lease term is fifteen years with a lessee option to renew for an additional five-year period.

Additionally, in August, 2012, the joint venture acquired, for a fee of $348,000, the option to purchase an additional property located at 14145 SW 105^th Street, Tigard, Oregon (“Tigard”) for a purchase price of $8.2 million. The option gives the joint venture the right, but not the obligation, to purchase Tigard from Pacific Gardens Estates, LLC. Tigard is a 78 bed facility that is currently 77% occupied.

In connection with the acquisition, we executed an amendment to our existing advisory agreement with Cornerstone Realty Advisors (the “Advisor”) in order to revise certain advisory fees payable in connection with the acquisition of the Portland Properties and other property that we may acquire in the future. The amendment revises the acquisition fee payable to the advisor from an amount equal to 2.0% of the gross proceeds from our public offering to an amount not to exceed 2.0% of our pro rata portion of the contract purchase price of the acquired property.

We also executed a property management and leasing agreement with the Advisor pursuant to which the Advisor will perform property management and leasing services with respect to the Portland Properties and will receive property management fees, payable monthly, of 3.0% of monthly gross revenues from the Portland Properties and a one-time leasing fee with respect to the leasing of the Portland Properties of 2.5% of the rent payable by the tenant during the initial term of the lease, payable upon the execution of the lease.

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Organization

6 Months Ended

Jun. 30, 2012

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. Organization

Cornerstone Core Properties REIT, Inc., a Maryland Corporation, was formed on October 22, 2004 under the General Corporation Law of Maryland for the purpose of engaging in the business of investing in and owning commercial real estate. As used in this report, the “Company”, “we”, “us” and “our” refer to Cornerstone Core Properties REIT, Inc. and its consolidated subsidiaries except where the context otherwise requires. Subject to certain restrictions and limitations, our business is managed pursuant to an advisory agreement (the “Advisory Agreement”) by an affiliate, Cornerstone Realty Advisors, LLC (the “Advisor”), a Delaware limited liability company that was formed on November 30, 2004.

Cornerstone Operating Partnership, L.P. (the “Operating Partnership”), a Delaware limited partnership, was formed on November 30, 2004. At June 30, 2012, we owned a 99.88% general partner interest in the Operating Partnership while the Advisor owned a 0.12% limited partnership interest. We conduct substantially all of our operations through the Operating Partnership. Our financial statements and the financial statements of the Operating Partnership are consolidated in the accompanying condensed consolidated financial statements. These financial statements include consolidation of a variable interest entity (see Note 10). All intercompany accounts and transactions have been eliminated in consolidation.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	290,000,000	290,000,000
Common stock, shares issued	23,028,285	23,028,285
Common stock, shares outstanding	23,028,285	23,028,285

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Payable to Related Parties

6 Months Ended

Jun. 30, 2012

Related Party Transaction, Due From (To) Related Party [Abstract]

Schedule of Payable to Related Party [Text Block]

11. Payable to Related Parties

Payable to related parties at June 30, 2012 and December 31, 2011 consists of expense reimbursements payable to the Advisor.

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DOCUMENT AND ENTITY INFORMATION	6 Months Ended
	Jun. 30, 2012	Aug. 13, 2012
Entity Registrant Name	Cornerstone Core Properties REIT, Inc.
Entity Central Index Key	0001310383
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		23,028,285
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2012
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012

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Equity

6 Months Ended

Jun. 30, 2012

Equity [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

12. Equity

Common Stock

Our articles of incorporation authorize 290,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001. As of June 30, 2012 and December 31, 2011, we had cumulatively issued 20.9  million shares of common stock for a total of $167.1 million of gross proceeds, exclusive of shares issued under our distribution reinvestment plan. On November 23, 2010, we stopped making and accepting offers to purchase shares of our stock and on June 10, 2012, our Follow-on Offering expired (see Note 2).

Distributions

Distributions paid to stockholders for the three months ended June 30, 2012 and 2011 were $0. Distributions paid to stockholders for the six months ended June 30, 2012 and 2011 were $0 and $0.5 million, respectively, all of which was paid in cash. Total cash distributions paid for the six months ended June 30, 2011 were 100% funded from cash provided by operating activities.

We adopted a distribution reinvestment plan that allows our stockholders to have their distributions invested in additional shares of our common stock. As of June 30, 2012 and December 31, 2011, 2.3  million shares had been issued under the distribution reinvestment plan. On November 23, 2010, our board of directors adopted a resolution to suspend the distribution reinvestment plan indefinitely effective December 14, 2010. As a result, distributions were paid entirely in cash after December 14, 2010. Commencing with the April 2011 distributions, the board elected to pay distributions on a quarterly basis. However, due to cash constraints, the board elected to defer the second quarter 2011 distribution payment until the Company’s cash position improved. The second quarter distribution of $0.5 million was paid in the fourth quarter of 2011. We cannot provide any assurance as to if or when we will resume our distribution reinvestment plan.

The following table shows the distributions declared during the six months ended June 30, 2012 and 2011:

	Distributions Declared(2)						Cash Flows Provided by (Used in) Operating
Period	Cash		Reinvested		Total		Activities
First quarter 2011(1)	$	454,000	$	—	$	454,000	$	481,000
Second quarter 2011(1)	$	468,000	$	—	$	468,000	$	(219,000	)
First quarter 2012	$	—	$	—	$	—	$	(800,000	)
Second quarter 2012	$	—	$	—	$	—	$	(953,000	)

(1) 100% of the distributions declared during the six months ended June 30, 2011 represented a return of capital for federal income tax purposes.

(2) In order to meet the requirements for being treated as a REIT under the Internal Revenue Code, we must pay distributions to our shareholders each taxable year equal to at least 90% of our net ordinary taxable income. Some of our distributions have been paid from sources other than operating cash flow, such as offering proceeds.

The declaration of distributions is at the discretion of our board of directors and our board will determine the amount of distributions on a regular basis. The amount of distributions will depend on our funds from operations, financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code and other factors our board of directors deems relevant. No distributions have been declared for periods after June 30, 2011. The rate and frequency of distributions is subject to the discretion of our board of directors and may change from time to time based on our operating results and cash flow.

From our inception in October 2004 through June 30, 2012, we declared aggregate distributions of $32.8 million. Our cumulative net loss and cumulative net cash provided by operating activities during the same period were $72.8 million and $2.9 million, respectively.

Stock Repurchase Program

On November 23, 2010, our board of directors concluded that we would not have sufficient funds available to us to continue funding share repurchases. Accordingly, our board of directors suspended repurchases under the program effective December 31, 2010. In January 2011, repurchases due to the death of a shareholder that were requested in 2010, prior to the suspension of the stock repurchase program were funded. We can make no assurance as to when and on what terms redemptions will resume. Our board has the authority to resume, suspend again, or terminate the share redemption program at any time upon 30 days written notice to our stockholders. Our board of directors may modify our stock repurchase program so that we can redeem stock using the proceeds from the sale of our real estate investments or other sources.

During the six months ended June 30, 2012, we did not redeem any shares pursuant to our stock repurchase program. We have received requests to redeem 9,393 shares during the three months ended June 30, 2012. However, due to the current suspension of the stock repurchase program, we were not able to fulfill any of these requests.

During the six months ended June 30, 2011, we redeemed shares pursuant to our stock repurchase program as follows:

Period	Total Number of Shares Redeemed		Average Price Paid per Share
January 2011(1)		46,096	$	7.99
February 2011		—	$	—
March 2011		—	$	—
April 2011		—	$	—
May 2011		—	$	—
June 2011		—	$	—
		46,096

(1) In January 2011, share redemptions due to the death of a shareholder that were requested prior to the suspension of the stock repurchase program were fulfilled under the program.

 Employee and Director Incentive Stock Plan

We have adopted an Employee and Director Incentive Stock Plan (the “Plan”) which provides for the grant of awards to directors, full-time employees, and other eligible participants that provide services to us. We have no employees, and we do not intend to grant awards under the Plan to persons who are not directors. Awards granted under the Plan may consist of nonqualified stock options, incentive stock options, restricted stock, share appreciation rights, and distribution equivalent rights. The term of the Plan is ten years. The total number of shares of common stock reserved for issuance under the Plan is equal to 10% of our outstanding shares of stock at any time.

As of June 30, 2012, we had granted to our independent, non-employee directors nonqualified stock options to purchase an aggregate of 80,000 shares of common stock at an exercise price of $8.00 per share. Of these shares, 15,000 shares lapsed and were canceled on November 8, 2008 due to the resignation of one director from the board of directors on August 6, 2008. On April 6 and July 3, 2012, an additional 20,000 and 5,000 shares, respectively, lapsed and were canceled due to the resignation of Lee Powell Stedman and Jody Fouch, respectively, from the board of directors.

Outstanding stock options became immediately exercisable on the grant date, were issued with a ten-year life, and have no intrinsic value as of June 30, 2012. We recorded compensation expense for non-employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model. No stock options were exercised during the six months ended June 30, 2012 and 2011. We did not incur any non-cash compensation expense for the six months ended June 30, 2012 and 2011.

In connection with the registration of the shares in our Follow-On Offering, we suspended the issuance of options to our independent, non-employee directors under the Plan, and we do not expect to issue additional options to our independent, non-employee directors. As of June 10, 2012, our Follow-on Offering was terminated (see Note 2).

Our equity compensation plan information as of June 30, 2012 and December 31, 2011 is as follows:

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance
Equity compensation plans approved by security holders		45,000	$	8.00	See footnote (1)
Equity compensation plans not approved by security holders		—		—	—
Total		45,000	$	8.00	See footnote (1)

(1) Our Employee and Director Incentive Stock Plan was approved by our security holders and provides that the total number of shares issuable under the plan is a number of shares equal to ten percent (10%) of our outstanding common stock. The maximum number of shares that may be granted under the plan with respect to “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code is 5,000,000. As of June 30, 2012 and December 31, 2011, there were 23,028,285 shares of our common stock issued and outstanding.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Revenues:
Rental revenues	$ 854,000	$ 916,000	$ 1,652,000	$ 1,791,000
Tenant reimbursements and other income	216,000	236,000	422,000	466,000
Interest income from notes receivable	14,000	104,000	27,000	263,000
Revenues	1,084,000	1,256,000	2,101,000	2,520,000
Expenses:
Property operating and maintenance	440,000	425,000	794,000	818,000
General and administrative	698,000	755,000	1,732,000	1,371,000
Asset management fees	207,000	411,000	422,000	826,000
Depreciation and amortization	389,000	544,000	770,000	1,073,000
Reserve for excess advisor obligation	988,000	0	988,000	0
Impairment of note receivable	0	1,650,000	0	1,650,000
Impairment of real estate	0	23,219,000	0	23,219,000
Costs and Expenses	2,722,000	27,004,000	4,706,000	28,957,000
Operating loss	(1,638,000)	(25,748,000)	(2,605,000)	(26,437,000)
Interest expense	(167,000)	(320,000)	(433,000)	(611,000)
Loss from continuing operations	(1,805,000)	(26,068,000)	(3,038,000)	(27,048,000)
Discontinued operations:
Loss before impairments	(115,000)	274,000	(425,000)	482,000
Impairment of real estate asset held for sale	0	(19,145,000)	(1,140,000)	(19,145,000)
Loss from discontinued operations	(115,000)	(18,871,000)	(1,565,000)	(18,663,000)
Net loss	(1,920,000)	(44,939,000)	(4,603,000)	(45,711,000)
Noncontrolling interest's share in losses	225,000	52,000	528,000	52,000
Net loss applicable to common shares	$ (1,695,000)	$ (44,887,000)	$ (4,075,000)	$ (45,659,000)
Basic and diluted loss per common share
Continuing operations (in dollars per share)	$ (0.08)	$ (1.11)	$ (0.13)	$ (1.15)
Discontinued operations (in dollars per share)	$ 0	$ (0.80)	$ (0.05)	$ (0.80)
Net loss applicable to common shares	$ (0.08)	$ (1.91)	$ (0.18)	$ (1.95)
Weighted average shares used to calculate basic and diluted net loss per common share (in shares)	23,028,284	23,521,838	23,028,284	23,473,816
Distributions declared per common share (in dollars per share)	$ 0	$ 0.02	$ 0	$ 0.04

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Concentration of Risk

6 Months Ended

Jun. 30, 2012

Risks and Uncertainties [Abstract]

Concentration Risk Disclosure [Text Block]

6. Concentration of Risk

Financial instruments that potentially subject us to a concentration of credit risk are primarily cash investments, notes receivable and the note receivable from related party. Refer to Notes 7 and 8 with regard to credit risk evaluation of notes receivable and the note receivable from related party, respectively. Cash is generally invested in investment-grade short-term instruments.

On July 21, 2010, President Obama signed into law the “Dodd-Frank Wall Street Reform and Consumer Protection Act” that implements significant changes to the regulation of the financial services industry, including provisions that made permanent the $250,000 limit for federal deposit insurance and increased the cash limit of Securities Investor Protection Corporation protection from $100,000 to $250,000, and provided unlimited federal deposit insurance until January 1, 2013, for non-interest bearing demand transaction accounts at all insured depository institutions. As of June 30, 2012, we had cash accounts in excess of FDIC-insured limits. However, we do not believe this risk is significant.

As of June 30, 2012, we owned three properties in the state of California and six properties in the state of Florida. Accordingly, there is a geographic concentration of risk subject to economic conditions in these states.

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Allowance for Doubtful Accounts

6 Months Ended

Jun. 30, 2012

Allowance For Doubtful Accounts [Abstract]

Allowance for Doubtful Accounts [Text Block]

5. Allowance for Doubtful Accounts

Our allowance for doubtful accounts was $0.2 million as of June 30, 2012 and December 31, 2011.

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Segment Reporting

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

17. Segment Reporting

ASC 280-10, “Segment Reporting,” establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. As of and for the six months ended June 30, 2012, we report our operations under one reportable segment: Industrial. Our Industrial segment consists of nine multi-tenant industrial properties offering a combination of warehouse and office space adaptable to a broad range of tenants and uses typically catering to local and regional businesses.

We evaluate performance of the combined properties based on net operating income (“NOI”). NOI is a non-GAAP supplemental measure used to evaluate the operating performance of real estate properties. We define NOI as total rental revenues, tenant reimbursements and other income less property operating and maintenance expenses. NOI excludes interest income from notes receivable, general and administrative expense, asset management fees and expenses, real estate acquisition costs, depreciation and amortization, impairments, interest income, interest expense, and income from discontinued operations. We believe NOI provides investors relevant and useful information because it measures the operating performance of the REIT’s real estate at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess and compare property-level performance. We believe that net income (loss) is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income (loss) as defined by GAAP since it does not reflect the aforementioned excluded items. Additionally, NOI as we define it may not be comparable to NOI as defined by other REITs or companies, as they may use different methodologies for calculating NOI.

The following table reconciles NOI from net loss for the three months and six months ended June 30, 2012 and 2011:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Net loss	$	(1,920,000	)	$	(44,939,000	)	$	(4,603,000	)	$	(45,711,000	)
Interest income from notes receivable		(14,000	)		(104,000	)		(27,000	)		(263,000	)
General and administrative		698,000			755,000			1,732,000			1,371,000
Asset management fees and expenses		207,000			411,000			422,000			825,000
Depreciation and amortization		389,000			544,000			770,000			1,074,000
Reserve for advisor obligation		988,000			—			988,000			—
Interest expense		167,000			320,000			433,000			611,000
Impairment of notes receivable		—			1,650,000			—			1,650,000
Impairment of real estate		—			23,219,000			—			23,219,000
Loss from discontinued operations		115,000			18,871,000			1,565,000			18,663,000
Net operating income	$	630,000		$	727,000		$	1,280,000		$	1,439,000

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Related Party Transactions

6 Months Ended

Jun. 30, 2012

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

13. Related Party Transactions

Our company has no employees. Our Advisor is primarily responsible for managing our business affairs and carrying out the directives of our board of directors. We have an Advisory Agreement with the Advisor and a dealer manager agreement with PCC which entitle the Advisor and PCC to specified fees upon the provision of certain services with regard to the Offerings and investment of funds in real estate projects, among other services, as well as reimbursement for organizational and offering costs incurred by the Advisor and PCC, on our behalf and reimbursement of certain other reimbursable costs and expenses incurred by the Advisor in providing services to us.

Advisory Agreement

Under the terms of the Advisory Agreement, the Advisor will use commercially reasonable efforts to present to us investment opportunities to provide a continuing and suitable investment program consistent with the investment policies and objectives adopted by our board of directors. The Advisory Agreement calls for the Advisor to provide for our day-to-day management and to retain property managers and leasing agents, subject to the authority of our board of directors, and to perform
other duties.

The fees and expense reimbursements payable to the Advisor under the Advisory Agreement are described below. As discussed below, we amended the Advisory Agreement on August 31, 2011 to reduce the asset management fee payable by us to our Advisor effective October 1, 2011.

Organizational and Offering Costs. Organizational and offering costs of our Offerings have been paid by the Advisor on our behalf and have been reimbursed to the Advisor from the proceeds of our Offerings. Organizational and offering costs consist of all expenses (other than sales commissions and the dealer manager fee) to be paid by us in connection with our Offerings, including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder and other accountable offering expenses, including, but not limited to, (i) amounts to reimburse the Advisor for all marketing related costs and expenses such as salaries and direct expenses of employees of the Advisor and its affiliates in connection with registering and marketing our shares; (ii) technology costs associated with the offering of our shares; (iii) the costs of conducting our training and education meetings; (iv) the costs of attending retail seminars conducted by participating broker-dealers; and (v) payment or reimbursement of bona fide due diligence expenses.

As of June 30, 2012 and December 31, 2011, the Advisor and its affiliates had incurred on our behalf organizational and offering costs totaling $5.6 million, including $0.1 million of organizational costs that were expensed and $5.5 million of offering costs which reduced net proceeds of our Offerings. Of this amount, $4.4 million reduced the net proceeds of our Primary Offering and $1.1 million reduced the net proceeds of our Follow-On Offering.

On June 10, 2012, our Follow-on Offering was terminated. Our advisory agreement provides for reimbursement to the Advisor for organizational and offering costs in excess of 3.5% of the gross proceeds from our Primary Offering and Follow-On Offering. Under the Advisory Agreement, within 60 days after the end of the month in which our Follow-on Offering terminated, the Advisor is obligated to reimburse us to the extent that the organization and offering expenses related to our Follow-on Offering borne by us exceeded 3.5% of the gross proceeds of the Follow-on Offering. As of June 10, 2012, we had reimbursed our advisor a total of $1.1 million in organizational and offering costs related to our Follow-on Offering, of which $1.0 million was in excess of the contractual limit. Consequently, in the second quarter of 2012, we recorded a receivable from the Advisor for $1.0 million reflecting the Excess Reimbursement. As a result of our evaluation of various factors related to collectability of this receivable, we recorded a reserve for the full amount of the receivable as of June 30, 2012. The repayment by the Advisor is scheduled to occur in quarterly payments over a 24 month period commencing January 1, 2013.

Acquisition Fees and Expenses. The Advisory Agreement requires us to pay to the Advisor acquisition fees in an amount equal to 2.0% of the gross proceeds from our Offerings. We have paid the acquisition fees upon receipt of the gross proceeds from our Primary Offering and Follow-On Offering (excluding gross proceeds related to sales pursuant to our distribution reinvestment plan). However, if the Advisory Agreement is terminated or not renewed, the Advisor must return acquisition fees not yet allocated to one of our investments. In addition, we are required to reimburse the Advisor for direct costs the Advisor incurs and amounts the Advisor pays to third parties in connection with the selection and acquisition of a property, whether or not ultimately acquired. For the six months ended June 30, 2012 and 2011, the Advisor earned no acquisition fees. Subsequently to June 30, 2012, we executed an amendment to the terms of the Advisory Agreement to revise the manner in which acquisition fees payable to the Advisor are calculated for new acquisitions (See Note 18).

Management Fees and Expenses. Prior to October 1, 2011, the Advisory Agreement required us to pay the Advisor a monthly asset management fee of one-twelfth of 1.0% of the Average Invested Assets (as defined in the Advisory Agreement). For the three months ended June 30, 2012 and 2011, the Advisor earned $0.2 million and $0.4 million, respectively, of asset management fees which were expensed and included in asset management fees and expenses in our condensed consolidated statements of operations. For the six months ended June 30, 2012 and 2011, the Advisor earned $0.4 million and $0.8 million, respectively, of asset management fees which were expensed and included in asset management fees and expenses in our condensed consolidated statements of operations. On August 31, 2011, we amended the Advisory Agreement to provide that, beginning on October 1, 2011, the asset management fee payable by us to our Advisor shall be reduced to a monthly rate of one-twelfth of 0.75% of our Average Invested Assets, as defined above.

 In addition, we reimburse the Advisor for the direct and indirect costs and expenses incurred by the Advisor in providing asset management services to us, including personnel and related employment costs related to providing asset management services on our behalf. These fees and expenses are in addition to management fees that we pay to third-party property managers. For the three months ended June 30, 2012 and 2011, the Advisor was reimbursed $37,000 and $40,000, respectively, of such direct and indirect costs and expenses incurred on our behalf, which are included in asset management fees and expenses in our condensed consolidated statements of operations. For the six months ended June 30, 2012 and 2011, the Advisor was reimbursed $81,000 and $85,000, respectively, of such direct and indirect costs and expenses incurred on our behalf, which are included in asset management fees and expenses in our condensed consolidated statements of operations.

Operating Expenses. The Advisory Agreement provides for reimbursement of the Advisor’s direct and indirect costs of providing administrative and management services to us. For the three months ended June 30, 2012 and 2011, $0.3 million and $0.2 million of such costs, respectively, were reimbursed and are included in general and administrative expenses in our condensed consolidated statements of operations. For the six months ended June 30, 2012 and 2011, $0.7 million and $0.5 million of such costs, respectively, were reimbursed and are included in general and administrative expenses in our condensed consolidated statements of operations.

Pursuant to provisions contained in our charter and in our Advisory Agreement with our Advisor, our board of directors has the ongoing responsibility of limiting our total operating expenses for the trailing four consecutive quarters to amounts that do not exceed the greater of 2% of our average invested assets or 25% of our net income, calculated in the manner set forth in our charter, unless a majority of the directors (including a majority of the independent directors) has made a finding that, based on unusual and non-recurring factors that they deem sufficient, a higher level of expenses is justified (the “2%/25% Test”). In the event that a majority of the directors (including a majority of the independent directors) does not determine that such excess expenses are justified, our Advisor must reimburse to us the amount of the excess expenses paid or incurred (the “Excess Amount”).

As previously disclosed, for the periods ended March 31, 2011, June 30, 2011, September 30, 2011, December 31, 2011 and March 31, 2012 our board of directors conditioned its findings that Excess Amounts for such periods were justified upon the Advisor agreeing to carry over such Excess Amounts and include them in total operating expenses in subsequent periods for purposes of the 2%/25% Test, with any waiver of such amounts being dependent on our Advisor’s satisfactory progress with respect to executing a strategic alternative to be chosen by the independent directors. Accordingly, for the eight-fiscal-quarter period ended March 31, 2012, our total operating expenses exceeded the greater of 2% of our average invested assets and 25% of our net income. We incurred operating expenses of approximately $8.3 million and incurred an Excess Amount of approximately $5.7 million during the eight quarters ended March 31, 2012, which has been carried over and included in the total operating expenses for the nine-fiscal-quarter period ended June 30, 2012 for purposes of the 2%/25% Test.

For the nine-fiscal-quarter period ended June 30, 2012, our total operating expenses again exceeded the greater of 2% of our average invested assets and 25% of our net income. We incurred operating expenses of approximately $9.3 million and incurred an Excess Amount of approximately $6.7 million during the nine quarters ended June 30, 2012. Our board of directors (including a majority of our independent directors) has determined that this Excess Amount is justified as unusual because of our small size (for a public reporting company), and non-recurring because of (i) the Advisor’s current progress toward developing strategic alternatives for consideration by the independent directors, and (ii) the independent directors committee’s continuing progress towards negotiating reductions in ongoing fees and expenses payable to the Advisor pursuant to the Advisory Agreement. Additionally, the amount by which total operating expenses have exceeded the greater of 2% of our average invested assets and 25% of our net income has been adversely affected by the disposition of four of our industrial properties in the fourth quarter of 2011, as these dispositions have resulted in a reduced average invested assets measure used in the 2%/25% Test. If we sell properties in the future at a faster rate than we can redeploy the proceeds into property acquisitions, there will be a further negative impact on the 2%/25% Test.

Notwithstanding the justification of the Excess Amount discussed above, and as a condition to such justification, the Advisor has again agreed that the Excess Amount for the nine-fiscal-quarter period ended June 30, 2012 shall be carried over and included in total operating expenses in subsequent periods, with any waiver dependent on our Advisor’s satisfactory progress with respect to executing a strategic alternative to be chosen by the independent directors.

Property Management Fees. The Advisory Agreement provides that if we retain our Advisor or an affiliate to manage and lease some of our properties, we will pay a market-based property management fee or property leasing fee, which may include reimbursement of our Advisor’s or affiliate’s personnel costs and other costs of managing the properties. For the three months ended June 30, 2012 and 2011, the Advisor earned approximately $2,000 and $5,000, respectively, of such property management fees. For the six months ended June 30, 2012 and 2011, the Advisor earned $5,000 and $11,000, respectively, of such property management fees. These costs are included in property operating and maintenance expenses in our condensed consolidated statements of operations. Subsequently to June 30, 2012, we executed a Property Management and Leasing Agreement with the Advisor pursuant to which it will perform property management and leasing services with respect to the Portland Portfolio (See Note 18).

Disposition Fee. Prior to the second amendment to the Advisory Agreement executed on November 11, 2011, the Advisory Agreement provided that if the Advisor or its affiliates provide a substantial amount of the services (as determined by a majority of our directors, including a majority of our independent directors) in connection with the sale of one or more properties, we will pay the Advisor or such affiliate a disposition fee up to 3% of the sales price of such property or properties upon closing. This disposition fee may be paid in addition to real estate commissions paid to non-affiliates, provided that the total real estate commissions (including such disposition fee) paid to all persons by us for each property shall not exceed an amount equal to the lesser of (i) 6% of the aggregate contract sales price of each property or (ii) the competitive real estate commission for each property. We will pay the disposition fees for a property at the time the property is sold. For the three and six months ended June 30, 2012 and 2011, the Advisor did not earn any disposition fees. Subsequent to November 11, 2011, the disposition fee was reduced from an amount up to 3% of the sales price of properties sold to an amount up to 1% of the sales price of properties sold if the Advisor or its affiliates provide a substantial amount of the services (as determined by a majority of our directors, including a majority of our independent directors).

Subordinated Participation Provisions. The Advisor is entitled to receive a subordinated participation upon the sale of our properties, listing of our common stock or termination of the Advisor, as follows:

• After stockholders have received cumulative distributions equal to $8.00 per share (less any returns of capital) plus cumulative, non-compounded annual returns on net invested capital, the Advisor will be paid a subordinated participation in net sale proceeds ranging from a low of 5% of net sales proceeds provided investors have earned annualized returns of 6% to a high of 15% of net sales proceeds if investors have earned annualized returns of 10% or more.

• Upon termination of the Advisory Agreement, the Advisor will receive the subordinated performance fee due upon termination. This fee ranges from a low of 5% of the amount by which the sum of the appraised value of our assets minus our liabilities on the date the Advisory Agreement is terminated plus total distributions (other than stock distributions) paid prior to termination of the Advisory Agreement exceeds the amount of invested capital plus annualized returns of 6%, to a high of 15% of the amount by which the sum of the appraised value of our assets minus our liabilities plus all prior distributions (other than stock distributions) exceeds the amount of invested capital plus annualized returns of 10% or more.

• In the event we list our stock for trading, the Advisor will receive a subordinated incentive listing fee instead of a subordinated participation in net sales proceeds. This fee ranges from a low of 5% of the amount by which the market value of our common stock plus all prior distributions (other than stock distributions) exceeds the amount of invested capital plus annualized returns of 6%, to a high of 15% of the amount by which the sum of the market value of our common stock plus all prior distributions (other than stock distributions) exceeds the amount of invested capital plus annualized returns of 10% or more.

Dealer Manager Agreement

PCC, as dealer manager, was entitled to receive sales commissions of up to 7% of gross proceeds from sales in our Offerings. PCC, as dealer manager, was also entitled to receive a dealer manager fee equal to up to 3% of gross proceeds from sales in the Offerings. The dealer manager was also entitled to receive a reimbursement of bona fide due diligence expenses up to 0.5% of the gross proceeds from sales in the Offerings. For the six months ended June 30, 2012 and 2011, our dealer manager earned no sales commissions or dealer manager fees. Dealer manager fees and sales commissions paid to PCC are a cost of capital raised and, as such, are included as a reduction of additional paid-in capital in the accompanying condensed consolidated balance sheets. Our Follow-on Offering was terminated on June 10, 2012 (see Note 2).

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Receivable From Related Party

6 Months Ended

Jun. 30, 2012

Receivable From Related Party [Abstract]

Receivable From Related Party [Text Block]

9. Receivable from Related Party

The receivable from related party consists of the “excess organization and offering costs” reimbursed to the advisor related to our Follow-on Offering. Our Follow-on Offering was terminated on June 10, 2012. Pursuant to the advisory agreement with our advisor, within 60 days after the end of the month in which our Follow-on Offering terminated, our advisor is obligated to reimburse us to the extent that the organization and offering expenses related to our Follow-on Offering borne by us exceeded 3.5% of the gross proceeds of the Follow-on Offering. As of June 10, 2012, we had reimbursed our advisor a total of $1.1 million in organizational and offering costs related to our Follow-on Offering, of which $1.0 million was in excess of the contractual limit set forth in the advisory agreement. Therefore, we recorded a receivable of approximately $1.0 million for which we then reserved the full amount based on our analysis of collectability (see Note 13).

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Discontinued Operations (Details 1) (USD $)	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
Cash and cash equivalents	$ 7,967,000	$ 17,483,000	$ 1,544,000	$ 2,014,000
Investments in real estate, net	3,905,000	5,045,000
Accounts receivable, inventory and other assets	225,000	232,000
Assets of variable interest entity held for sale	4,208,000	5,372,000
Notes payable	13,235,000	21,070,000
Loan payable	166,000	127,000
Accounts payable and accrued liabilities	1,177,000	785,000
Intangible lease liabilities, net	23,000	44,000
Interest payable	225,000	142,000
Liabilities of variable interest entity held for sale	2,266,000	2,119,000
Discontinued Operations [Member]
Cash and cash equivalents	78,000	95,000
Investments in real estate, net	3,905,000	5,045,000
Accounts receivable, inventory and other assets	225,000	232,000
Assets of variable interest entity held for sale	4,208,000	5,372,000
Notes payable	1,332,000	1,332,000
Loan payable	166,000	127,000
Accounts payable and accrued liabilities	398,000	373,000
Intangible lease liabilities, net	145,000	145,000
Interest payable	225,000	142,000
Liabilities of variable interest entity held for sale	$ 2,266,000	$ 2,119,000

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Notes Receivable

6 Months Ended

Jun. 30, 2012

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

7. Notes Receivable

In May 2008, we agreed to loan up to $10.0 million at a rate of 10% per year to two real estate operating companies, Servant Investments, LLC (“SI”) and Servant Healthcare Investments, LLC (“SHI” and collectively with SI, “Servant”). In May 2010, the loan commitments were reduced to $8.75 million. The loans were scheduled to mature on May 19, 2013. At the time the loans were negotiated, Servant was a sub-advisor in an alliance with the managing member of our Advisor.

On a quarterly basis, we evaluate the collectability of our notes receivable. Our evaluation of collectability involves judgment, estimates, and a review of the underlying collateral and borrower’s business models and future cash flows from operations. During the third quarter of 2009, we concluded that the collectability of the SI note could not be reasonably assured. Therefore, we recorded a reserve of $4.6 million against the note balance. As of June 30, 2012 and December 31, 2011, the SI note receivable had a net balance of $0. It is our policy to recognize interest income on the reserved loan on a cash basis. For the three and six months ended June 30, 2011 and 2010, no interest income related to the SI note receivable was recorded.

In the second quarter of 2011, after evaluating the expected effects of changes in the borrower’s business prospects, including the uncertainty surrounding Servant’s realization of the fees pursuant to a sub-advisory agreement, we concluded that it was probable that the Company would be unable to collect all amounts due according to the terms of the SHI note and consequently, we recorded a note receivable impairment of $1.7 million against the balance of that note.

In December 2011, the notes receivable were restructured to provide for the settlement of the notes in the amount of $2.5 million, $1.5 million of which was received from the borrower in December 2011. The remaining $1.0 million is payable pursuant to a promissory note from SHI which provides for interest at a fixed rate of 5.00% per annum. A principal payment of $0.7 million, plus any accrued and unpaid interest, is due on December 22, 2013 and the remaining balance of $0.3 million, plus any accrued and unpaid interest, is due on December 22, 2014. The note receivable was recorded at its present value of $0.9 million on our consolidated balance sheet as of December 31, 2011.

The following table reconciles notes receivable from January 1, 2012 to June 30, 2012 and from January 1, 2011 to June 30, 2011:

	2012		2011
Balance at January 1,	$	908,000	$	4,000,000
Additions:
Additions to notes receivable		—		—
Deductions:
Notes receivable repayments		—		(150,000	)
Notes receivable impairments		—		(1,650,000	)
Balance at June 30,	$	908,000	$	2,200,000

As of June 30, 2012 and December 31, 2011, the SHI note receivable had a balance of $0.9 million. For the six months ended June 30 2012 and 2011, interest income related to the note receivable was $27,000 and $0.2 million, respectively. We determined that Servant is not a variable interest entity and there is no requirement to include this entity in our condensed consolidated balance sheets and condensed consolidated statements of operations.

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Note Receivable from Affiliated Party

6 Months Ended

Jun. 30, 2012

Note Receivable From Related Party [Abstract]

Note Receivable from Related Party [Text Block]

8. Note Receivable from Affiliated Party

On December 14, 2009, we made a participating first mortgage loan commitment of $8.0 million to Nantucket Acquisition LLC (“Nantucket Acquisition”), a Delaware limited liability company owned and managed by Cornerstone Ventures Inc., an affiliate of our Advisor. The loan was made in connection with Nantucket Acquisition’s purchase of a 60-unit senior-living community, Sherburne Commons Residences, LLC (“Sherburne Commons”), located on the island of Nantucket, MA. The loan matures on January 1, 2015, with no option to extend and bears interest at a fixed rate of 8.0% for the term of the loan. Interest is payable monthly with the principal balance due at maturity. Under the terms of the loan, we are entitled to receive additional interest in the form of a 40% participation in the appreciation in value of the property, which is calculated based on the net sales proceeds if the property is sold, or the property’s appraised value, less ordinary disposition costs, if the property has not been sold by the time the loan matures. Prepayment of the loan is not permitted without our consent and the loan is not assumable.

Leasing activity at Sherburne Commons has been lower than originally anticipated and to preserve cash flow for operating requirements, the borrower suspended interest payments to us beginning in the first quarter of 2011. Consequently, we began recognizing interest income on a cash basis as of the first quarter of 2011. For the three months ended June 30, 2012 and 2011, interest income recognized on the note was $0. For the six months ended June 30, 2012 and 2011, interest income recognized on the note was $0 and $55,000, respectively.

During 2011 and in the first half of 2012, the loan balance was increased by $0.5 million and $0.3 million, respectively, to provide funds for Sherburne Commons’ operating shortfalls. It is anticipated that additional disbursements may be required while efforts are made to dispose of the property.

Nantucket Acquisition is considered a variable interest entity for which we are the primary beneficiary due to our enhanced ability to direct the activities of the VIE. Consequently, we have consolidated the operations of the VIE as of June 30, 2011 and, accordingly, eliminated the note receivable from related party in consolidation (see Note 10).

On a quarterly basis, we evaluate the collectability of our note receivable from related party. Our evaluation of collectability involves judgment, estimates, and a review of the underlying collateral and borrower’s business models and future cash flows from operations. For the six months ended June 30, 2012, we recorded an impairment charge of $1.1 million attributed to the variable interest entity held for sale (see Note 10). For the six months ended June 30, 2011, we did not record any impairment on the note receivable from related party.

The following table reconciles the note receivable from related party from January 1, 2012 to June 30, 2012 and from January 1, 2011 to June 30, 2011:

	2012			2011
Balance at January 1,	$	—		$	8,000,000
Additions:
Additions to note receivable from related party		285,000			318,000
Deductions:
Repayments of note receivable from related party		—			—
Elimination of balance in consolidation of VIE		(285,000	)		—
Balance at June 30	$	—		$	8,318,000

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Consolidation of Variable Interest Entity

6 Months Ended

Jun. 30, 2012

Consolidation Of Variable Interest Entity [Abstract]

Consolidation of Variable Interest Entity [Text Block]

10. Consolidation of Variable Interest Entity

GAAP requires the consolidation of VIEs in which an enterprise has a controlling financial interest. A controlling financial interest has both of the following characteristics: (i) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

In compliance with ASC 810, Consolidation, we continuously analyze and reconsider our initial determination of VIE status to determine whether we are the primary beneficiary by considering, among other things, whether we have the power to direct the activities of the VIE that most significantly impact its economic performance. Such activities would include, among other things, determining or limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing for the VIE. We also consider whether we have the obligation to absorb losses of the VIE or the right to receive benefits from the VIE.

As of June 30, 2012, we had a variable interest in one VIE in the form of a note receivable from Nantucket Acquisition in the amount of $8.8 million (see Note 8).

As a result of our issuing a notice of default with respect to the note, we determined that we were the primary beneficiary of the VIE. Therefore, we consolidated the operations of the VIE beginning June 30, 2011. Assets of the VIE may only be used to settle obligations of the VIE and creditors of the VIE have no recourse to the general credit of the Company. As of October 19, 2011, the Sherburne Commons property was reclassified to real estate held for sale. Consequently, the related assets and liabilities of the property are classified as assets of variable interest entity held for sale and liabilities of variable interest entity held for sale on our condensed consolidated balance sheets as of June 30, 2012 and December 31, 2011. Operating results for the property have been reclassified to discontinued operations on our condensed consolidated statement of operations for the six months ended June 30, 2012.

Because the Sherburne Commons property was reclassified to held for sale in the fourth quarter of 2011, the real estate is recorded at the lower of carrying value or the estimated fair value of the asset, net of estimated selling costs. Since June 30, 2011, leasing activity has been lower than originally anticipated and we continue to provide funds to meet Sherburne Commons’ operating shortfalls. As a result, we reduced our cash flow forecasts for purposes of determining whether the property was impaired. As a result of expected reduced leasing activity which reduced our cash flow forecasts for Sherburne Commons, we were required to adjust the property to its estimated fair value, net of estimated selling costs resulting in an impairment charge of $4.8 million, which is classified in discontinued operations as impairment of real estate sold and asset held for sale on our consolidated statement of operations for the year ended December 31, 2011.

Since the fourth quarter of 2011, the Sherburne Commons property has been actively marketed to prospective third-party buyers. In the second quarter of 2012, we received a formal offer from an independent third party to acquire the property. Based upon this evidence and management’s plan to sell the property, we determined that the offer approximates fair value. Consequently, we recorded an impairment charge of $1.1 million in the first quarter of 2012. As of the valuation date, the property was deemed to be a Level 2 asset as our estimate of fair value was based on a non-binding purchase offer. We do not believe that this asset was a Level 1 asset as a purchase and sale agreement had not been signed as of the valuation date, giving the potential buyer the right to opt out of the transaction at its discretion.

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Subsequent Events (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012
Purchase Price of Property	$ 79,218,000	[1]
Payment To Acquire Option	8,200,000
Property Management and Leasing Agreement, Description	We also executed a property management and leasing agreement with the Advisor pursuant to which the Advisor will perform property management and leasing services with respect to the Portland Properties and will receive property management fees, payable monthly, of 3.0% of monthly gross revenues from the Portland Properties and a one-time leasing fee with respect to the leasing of the Portland Properties of 2.5% of the rent payable by the tenant during the initial term of the lease, payable upon the execution of the lease
Acquisition Of Health Care Properties [Member]
Subsequent Event, Date	Aug. 03, 2012
Subsequent Event, Description	On August 3, 2012, through a wholly-owned subsidiary, we funded an investment in a joint venture, Cornerstone Healthcare Partners, LLC, that concurrently acquired a portfolio of two skilled nursing facilities located in the Portland, Oregon metropolitan area from Sheridan Care Center LLC, Sheridan Properties LLC, Fernhill Estates LLC and Fernhill Properties LLC (collectively, the Sellers).
Payments to Acquire Interest in Joint Venture	3,500,000
Subsequent Event, Amount	8,600,000
Subsequent Event Acquisition Costs	900,000
Acquisition Of Health Care Properties [Member] | Cornerstone Healthcare Partners, Llc [Member]
Purchase Price of Property	348,000
Payment To Acquire Option	8,200,000
Property, Description	Tigard is a 78 bed facility that is currently 77% occupied.
Acquisition Of Health Care Properties [Member] | Property Subject To Operating Lease [Member]
Lease Term	15 years
Additional Lease Term	5 years
Acquisition Of Health Care Properties [Member] | Co-Venturer [Member]
Payments to Acquire Interest in Joint Venture	200,000
Name Of Coventurer	Cornerstone Healthcare Realty Fund (CHREF)
Advisory Agreement Amended [Member]
Amended Advisory Agreement Description	The amendment revises the acquisition fee payable to the advisor from an amount equal to 2.0% of the gross proceeds from our public offering to an amount not to exceed 2.0% of our pro rata portion of the contract purchase price of the acquired property.
Loan Agreement With Sellers [Member]
Subsequent Event, Date	Aug. 01, 2012
Secured Debt	5,800,000
Debt, Weighted Average Interest Rate	5.00%
Purchase Price of Property	$ 152,013,000

[1] The table excludes Sherburne Commons, a variable interest entity for which we became the primary beneficiary and began consolidating its financial results as of June 30, 2011. As of October 19, 2011, Sherburne Commons was classified as held for sale (see Notes 8 and 10).

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Organization (Details Textual)	6 Months Ended
	Jun. 30, 2012
Entity Incorporation, Date Of Incorporation	Oct. 22, 2004
Cornerstone Realty Advisors [Member]
Limited Liability Company or Limited Partnership, Business, Formation Date	Nov. 30, 2004
Cornerstone Operating Partnership [Member]
Limited Liability Company or Limited Partnership, Business, Formation Date	Nov. 30, 2004
Limited Liability Company (LLC) or Limited Partnership (LP), Members or Limited Partners, Ownership Interest	99.88%
Limited Liability Company Llc Or Limited Partnership Lp Members Or Advisors Ownership Interest	0.12%

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Equity (Details) (USD $)	3 Months Ended								6 Months Ended
	Jun. 30, 2012		Mar. 31, 2012		Jun. 30, 2011		Mar. 31, 2011		Jun. 30, 2012	Jun. 30, 2011
Dividends Declared Cash	$ 0		$ 0		$ 468,000	[1]	$ 454,000	[1]
Dividends Payable Reinvested	0	[1],[2]	0	[1],[2]	0	[1],[2]	0	[1],[2]
Dividends Declared and Paid	0		0		468,000	[1]	454,000	[1]
Net cash provided by operating activities	$ (953,000)		$ (800,000)		$ (219,000)		$ 481,000		$ (1,753,000)	$ 262,000

[1] 100% of the distributions declared during the six months ended June 31, 2011 represented a return of capital for federal income tax purposes.

[2] In order to meet the requirements for being treated as a REIT under the Internal Revenue Code, we must pay distributions to our shareholders each taxable year equal to at least 90% of our net ordinary taxable income. Some of our distributions have been paid from sources other than operating cash flow, such as offering proceeds.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

15. Commitments and Contingencies

We monitor our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist, we are not currently aware of any environmental liability with respect to the properties that would have a material effect on our consolidated financial condition, results of operations or cash flows. Further, we are not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

Our commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In the opinion of management, these matters are not expected to have a material impact on our consolidated financial condition, results of operations, and cash flows. We are also subject to contingent losses related to the notes receivable and the note receivable from related party. For further details see Note 7 and 8. We are not presently subject to any material litigation nor, to our knowledge, any material litigation threatened against us which, if determined unfavorably to us, would have a material effect on our consolidated financial statements.

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Basis of Presentation and Summary of Significant Accounting Policies (Table)

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Fair Value Measurements, Recurring and Nonrecurring [Table Text Block]

The following table summarizes the assets measured at fair value on a nonrecurring basis during the six months ended June 30, 2012:

	Total Fair Value Measurement		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Net Losses for the Six Months Ended June 30, 2012
Variable interest entity held for sale	$	3,760,000	$	—	$	3,760,000	$	—	$	(1,140,000	)

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Consolidation of Variable Interest Entity (Details Textual) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2012 Sherburne Commons Property [Member]	Dec. 31, 2011 Sherburne Commons Property [Member]	Jun. 30, 2012 Nantucket Acquisition [Member]
Variable Interest Entity, Consolidated, Carrying Amount, Assets			$ 8,800,000
Real Estate Held For Sale Description		As of October 19, 2011, the Sherburne Commons property was reclassified to real estate held for sale.
Impairment of Real Estate Asset Held for Sale	$ 1,100,000	$ 4,800,000

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Investments in Real Estate (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012		Jun. 30, 2011	Dec. 31, 2011
Number of Real Estate Properties	9		9
Property held for sale, leased (in percentage)			80.10%	[1]
Depreciation	$ 300,000	$ 700,000	$ 700,000		$ 1,400,000
Amortization of Intangible Assets	2,000	35,000	4,000		93,000
Asset Impairment Charges			0		0
Leasing Commissions	700,000		700,000			400,000
Amortization of Leasing Commissions	38,000	32,000	68,000		64,000
Real Estate Held For Sale [Member]
Asset Impairment Charges	1,100,000
Leases, Acquired-In-Place, Market Adjustment [Member]
Finite-Lived Intangible Assets, Remaining Amortization Period (in years)			1 Years 6 Months
Above Market Leases [Member]
Finite-Lived Intangible Assets, Remaining Amortization Period (in years)			2 Years 3 Month 18 Days
Below Market Leases [Member]
Finite-Lived Intangible Assets, Remaining Amortization Period (in years)			6 Months
Maximum [Member]
Finite-Lived Intangible Asset, Useful Life (in years)			4 years
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life (in years)			1 month
Building and Building Improvements Including Real Estate Held For Sale [Member]
Amortization of Intangible Assets	$ 2,000,000,000	$ 35,000,000,000	$ 4,000,000,000		$ 93,000,000,000

[1] The table excludes Sherburne Commons, a variable interest entity for which we became the primary beneficiary and began consolidating its financial results as of June 30, 2011. As of October 19, 2011, Sherburne Commons was classified as held for sale (see Notes 8 and 10).

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (USD $)	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Parent [Member]	Noncontrolling Interest [Member]	Total
Balance at Dec. 31, 2010	$ 23,000	$ 117,520,000	$ (16,690,000)	$ 100,853,000	$ 117,000	$ 100,970,000
Balance (in shares) at Dec. 31, 2010	23,074,381
Issuance of common stock	0	0	0	0	0	0
Issuance of common stock (in shares)	0	0	0	0	0	0
Redeemed shares	0	(369,000)	0	(369,000)	0	(369,000)
Redeemed shares (in shares)	(47,146)	0	0	0	0	0
Reduction of excess offering costs						0
Dividends declared	0	(922,000)	0	(922,000)	(6,000)	(928,000)
Net loss	0	0	(45,659,000)	(45,659,000)	(52,000)	(45,711,000)
Balance at Jun. 30, 2011	23,000	116,229,000	(62,349,000)	53,903,000	59,000	53,962,000
Balance (in shares) at Jun. 30, 2011	23,027,235
Balance at Dec. 31, 2011	23,000	116,238,000	(68,748,000)	47,513,000	(1,887,000)	45,626,000
Balance (in shares) at Dec. 31, 2011	23,028,285
Issuance of common stock	0	0	0	0	0	0
Issuance of common stock (in shares)	0	0	0	0	0	0
Redeemed shares	0	0	0	0	0	0
Redeemed shares (in shares)	0	0	0	0	0	0
Reduction of excess offering costs		988,000		988,000		988,000
Dividends declared	0	0	0	0	0	0
Net loss	0	0	(4,075,000)	(4,075,000)	(528,000)	(4,603,000)
Balance at Jun. 30, 2012	$ 23,000	$ 117,226,000	$ (72,823,000)	$ 44,426,000	$ (2,415,000)	$ 42,011,000
Balance (in shares) at Jun. 30, 2012	23,028,285

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Investments in Real Estate

6 Months Ended

Jun. 30, 2012

Real Estate [Abstract]

Real Estate Disclosure [Text Block]

4. Investments in Real Estate

As of June 30, 2012, our portfolio consisted of nine properties which were approximately 80.1% leased. The following table provides summary information regarding our properties.

Property(1)	Location		Date Purchased		Square Footage		Purchase Price			Debt		June 30 2012 %  Leased
Shoemaker Industrial Buildings		Santa Fe Springs, CA		June 30, 2006		18,921	$	2,400,000		$	—		75.7	%
20100 Western Avenue		Torrance, CA		December 1, 2006		116,433		19,650,000			—		100.0	%
Marathon Center		Tampa Bay, FL		April 2, 2007		52,020		4,450,000			—		37.6	%
Orlando Small Bay Portfolio:
Carter Commerce Center		Winter Garden, FL		November 15, 2007		49,125		64.9	%
Goldenrod Commerce Center		Orlando, FL		November 15, 2007		78,646		85.8	%
Hanging Moss Commerce Center		Orlando, FL		November 15, 2007		94,200		80.4	%
Monroe South Commerce Center		Sanford, FL		November 15, 2007		172,500		62.0	%
						394,471		37,128,000			6,679,000		71.5	%
Monroe North Commerce Center		Sanford, FL		April 17, 2008		181,348		14,275,000			6,556,000		97.3	%
1830 Santa Fe		Santa Ana, CA		August 5, 2010		12,200		1,315,000			—		100.0	%
						775,393	$	79,218,000		$	13,235,000		80.1	%

(1) The table excludes Sherburne Commons, a variable interest entity for which we became the primary beneficiary and began consolidating its financial results as of June 30, 2011. As of October 19, 2011, Sherburne Commons was classified as held for sale (see Notes 8 and 10).

As of June 30, 2012, adjusted cost and accumulated depreciation and amortization related to investments in real estate and related intangible lease assets and liabilities were as follows:

	Land		Buildings and Improvements			Acquired Above- Market Leases			In-Place Lease Value			Acquired Below- Market Leases
Investments in real estate and related intangible lease assets (liabilities)	$	11,733,000	$	34,206,000		$	1,401,000		$	1,181,000		$	(620,000	)
Less: accumulated depreciation and amortization		—		(1,535,000	)		(1,373,000	)		(1,152,000	)		597,000
Net investments in real estate and related intangible lease assets (liabilities)	$	11,733,000	$	32,671,000		$	28,000		$	29,000		$	(23,000	)

 As of December 31, 2011, adjusted cost and accumulated depreciation and amortization related to investments in real estate and related intangible lease assets and liabilities were as follows:

	Land		Buildings and Improvements			Acquired Above- Market Leases			In-Place Lease Value			Acquired Below- Market Leases
Investments in real estate and related intangible lease assets (liabilities)	$	11,733,000	$	34,180,000		$	1,401,000		$	1,181,000		$	(620,000	)
Less: accumulated depreciation and amortization		—		(850,000	)		(1,365,000	)		(1,134,000	)		576,000
Net investments in real estate and related intangible lease assets (liabilities)	$	11,733,000	$	33,330,000		$	36,000		$	47,000		$	(44,000	)

Depreciation expense associated with buildings and improvements, including real estate held for sale, for the three months ended June 30, 2012 and 2011 was $0.3 million and $0.7 million, respectively. Depreciation expense for the six months ended June 30, 2012 and 2011 was $0.7 million and $1.4 million, respectively. We are required to make subjective assessments as to the useful lives of our depreciable assets. In making such assessments, we consider each asset’s expected period of future economic benefit to estimate the appropriate useful lives.

Net amortization expense associated with the intangible lease assets and liabilities, including those associated with real estate held for sale, for the three months ended June 30, 2012 and 2011 was $2,000, and $35,000, respectively. Net amortization expense for the six months ended June 30, 2012 and 2011 was $4,000, and $93,000, respectively. Estimated net amortization expense for July 1, 2012 through December 31, 2012 and for each of the five following years ended December 31 is as follows:

	Amortization of Intangible  Lease Assets
July 1, 2012 to December 31, 2012	$	1,000
2013	$	19,000
2014	$	8,000
2015	$	6,000
2016	$	—
2017 and thereafter	$	—

The estimated useful lives of intangible lease assets range from approximately one month to four years. As of June 30, 2012, the weighted-average amortization periods for in-place leases, acquired above-market leases and acquired below-market leases were 1.5 years, 2.3 years and 0.5 years, respectively.

Impairments

In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), we regularly conduct comprehensive reviews of our real estate assets for impairment. ASC 360 requires that asset values be analyzed whenever events or changes in circumstances indicate that the carrying value of a property may not be fully recoverable.

The intended use of an asset, either held for sale or held and used, can significantly impact how impairment is measured. If an asset is intended to be held and used, the impairment analysis is based on a two-step test.

The first test measures estimated expected future cash flows (undiscounted and without interest charges) over the holding period, including a residual value, against the carrying value of the property. If the asset fails that test, the asset’s carrying value is compared to the estimated fair value from a market-participant standpoint, with the excess of the asset’s carrying value over the estimated fair value recognized as an impairment charge to earnings.

We recorded no impairment charges related to properties held and used for the six months ended June 30, 2012 and 2011.

Real Estate Held for Sale

In the fourth quarter of 2011, we reclassified Nantucket Acquisition LLC, a VIE for which we are the primary beneficiary, to real estate held for sale. The financial results for this property have been reclassified to discontinued operations for all periods presented (see Note 16).

When assets are classified as held for sale, they are recorded at the lower of carrying value or the estimated fair value of the asset, net of estimated selling costs. Accordingly, we assessed Sherburne Commons, the property owned by Nantucket Acquisition LLC, to determine whether its carrying value exceeded its estimated fair value, net of estimated selling costs, as of June 30, 2012. We estimated fair value, net of estimated selling costs, for Sherburne Commons based on a formal offer to acquire the property received from an independent third party. Consequently, we recorded an impairment charge of $1.1 million in the first quarter of 2012. The property was deemed to be a Level 2 asset as our estimate of fair value was based on a non-binding purchase offer. We do not believe that this asset was a Level 1 asset as a purchase and sale agreement had not been signed as of the valuation date, giving the potential buyer the right to opt out of the transaction at its discretion (see Note 3).

Leasing Commissions

Leasing commissions are capitalized at cost and amortized on a straight-line basis over the related lease term. As of June 30, 2012 and December 31, 2011, we recorded $0.7 million and $0.4 million in leasing commissions, respectively. Amortization expense for the three months ended June 30, 2012 and 2011 was $38,000 and $32,000, respectively. Amortization expense for the six months ended June 30, 2012 and 2011 was $68,000 and $64,000 respectively.

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Notes Payable (Details Textual) (USD $)	3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended		12 Months Ended		1 Months Ended			3 Months Ended		6 Months Ended	1 Months Ended				3 Months Ended		6 Months Ended		1 Months Ended	6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Nov. 28, 2009	Jun. 30, 2012 Transamerica Life Insurance Company [Member]	Jun. 30, 2011 Transamerica Life Insurance Company [Member]	Jun. 30, 2012 Transamerica Life Insurance Company [Member]	Jun. 30, 2011 Transamerica Life Insurance Company [Member]	Dec. 31, 2008 Transamerica Life Insurance Company [Member]	Dec. 31, 2011 Transamerica Life Insurance Company [Member]	Sep. 30, 2011 Hsh Nordbank Ag [Member]	Aug. 31, 2011 Hsh Nordbank Ag [Member]	Jul. 31, 2011 Hsh Nordbank Ag [Member]	Jun. 30, 2012 Hsh Nordbank Ag [Member]	Jun. 30, 2011 Hsh Nordbank Ag [Member]	Jun. 30, 2012 Hsh Nordbank Ag [Member]	Feb. 29, 2012 Wells Fargo Bank National Association [Member]	Dec. 31, 2011 Wells Fargo Bank National Association [Member]	Aug. 31, 2011 Wells Fargo Bank National Association [Member]	Nov. 30, 2009 Wells Fargo Bank National Association [Member]	Jun. 30, 2012 Wells Fargo Bank National Association [Member]	Jun. 30, 2011 Wells Fargo Bank National Association [Member]	Jun. 30, 2012 Wells Fargo Bank National Association [Member]	Jun. 30, 2011 Wells Fargo Bank National Association [Member]	Dec. 22, 2011 South Industrial Park Property 2011 [Member]	Jun. 30, 2012 Notes Payable [Member]	Jun. 30, 2011 Notes Payable [Member]	Jun. 30, 2012 Notes Payable [Member] Amortization Of Financial Cost [Member]	Jun. 30, 2011 Notes Payable [Member] Amortization Of Financial Cost [Member]	Jun. 30, 2012 Notes Payable [Member] Amortization Of Financial Cost [Member]	Jun. 30, 2011 Notes Payable [Member] Amortization Of Financial Cost [Member]
Long Term Debt With Maturity In February 2014	$ 13,200,000		$ 13,200,000
Long Term Debt With Maturity In November 2014	0		0
Debt Issuance Cost																											400,000	900,000
Amortization of deferred financing costs	117,000	11,000	72,000	200,000																									0	84,000	0	84,000
Credit Facility Agreement Description															We amended our credit agreement with HSH Nordbank AG, New York Branch ("HSH Nordbank") in a series of amendments extending the credit facility maturity date from September 20, 2010 to December 16, 2011.		The July 2011 amendment to this credit agreement extended the maturity date from September 30, 2011 to December 16, 2011 and increased the margin spread over LIBOR from a range of 350 to 375 basis points to a fixed 375 basis points from June 1, 2011 to September 30, 2011 and to 400 basis points from October 1, 2011 to the maturity date.
Line of Credit Facility, Decrease, Forgiveness												300,000	300,000	300,000
Line of Credit Facility Repayment		7,800,000														7,800,000
Line of Credit Facility, Amount Outstanding					0
Line of Credit Facility, Increase (Decrease) for Period, Description																					Borrowing amount of up to $22.4 million, which was reduced to $15.9 million
Line of Credit Facility, Interest Rate Description																		The interest rate on amended loan decreased from 300 basis points over one-month LIBOR to 200 basis points over one-month LIBOR, with the one-month LIBOR floor remaining fixed at 150 basis points.		Interest on the amended loan increased to 300 basis points over one-month LIBOR with a 150 basis point LIBOR floor.	At an interest rate of 140 basis points over one-month LIBOR	Reduced the interest rate from 300 basis points over one-month LIBOR to 200 basis points over one-month LIBOR, with the LIBOR floor remaining fixed at 150 basis points.
Debt Instrument Maturity Date Extension																		Feb. 13, 2014		Feb. 13, 2012	Aug. 13, 2011
Debt Instrument Principal Repayment																		7,500,000	900,000	500,000		7,500,000				900,000
Loan Expenses																		65,000
Long-term Debt, Gross						6,600,000		6,600,000			6,700,000								14,400,000			6,700,000		6,700,000
Long-term Debt, Weighted Average Interest Rate						5.89%		5.89%											2.54%			3.80%		3.80%
Interest expense	167,000	320,000	433,000	611,000		100,000	100,000	200,000	200,000													60,000	64,000	200,000	130,000
Business Acquisition, Name of Acquired Entity										Monroe North Commerce Center
Business Acquisition, Date of Acquisition Agreement								Apr. 17, 2008
Loans Assumed										7,400,000
Line of Credit Facility, Expiration Date								Nov. 01, 2014
Line of Credit Facility, Periodic Payment			$ 50,370

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Investments in Real Estate (Tables)

6 Months Ended

Jun. 30, 2012

Real Estate [Abstract]

Schedule of Real Estate Properties [Table Text Block]

As of June 30, 2012, our portfolio consisted of nine properties which were approximately 80.1% leased. The following table provides summary information regarding our properties.

Property(1)	Location		Date Purchased		Square Footage		Purchase Price			Debt		June 30 2012 %  Leased
Shoemaker Industrial Buildings		Santa Fe Springs, CA		June 30, 2006		18,921	$	2,400,000		$	—		75.7	%
20100 Western Avenue		Torrance, CA		December 1, 2006		116,433		19,650,000			—		100.0	%
Marathon Center		Tampa Bay, FL		April 2, 2007		52,020		4,450,000			—		37.6	%
Orlando Small Bay Portfolio:
Carter Commerce Center		Winter Garden, FL		November 15, 2007		49,125		64.9	%
Goldenrod Commerce Center		Orlando, FL		November 15, 2007		78,646		85.8	%
Hanging Moss Commerce Center		Orlando, FL		November 15, 2007		94,200		80.4	%
Monroe South Commerce Center		Sanford, FL		November 15, 2007		172,500		62.0	%
						394,471		37,128,000			6,679,000		71.5	%
Monroe North Commerce Center		Sanford, FL		April 17, 2008		181,348		14,275,000			6,556,000		97.3	%
1830 Santa Fe		Santa Ana, CA		August 5, 2010		12,200		1,315,000			—		100.0	%
						775,393	$	79,218,000		$	13,235,000		80.1	%

Real Estate and Accumulated Depreciation by Property [Table Text Block]

As of June 30, 2012, adjusted cost and accumulated depreciation and amortization related to investments in real estate and related intangible lease assets and liabilities were as follows:

	Land		Buildings and Improvements			Acquired Above- Market Leases			In-Place Lease Value			Acquired Below- Market Leases
Investments in real estate and related intangible lease assets (liabilities)	$	11,733,000	$	34,206,000		$	1,401,000		$	1,181,000		$	(620,000	)
Less: accumulated depreciation and amortization		—		(1,535,000	)		(1,373,000	)		(1,152,000	)		597,000
Net investments in real estate and related intangible lease assets (liabilities)	$	11,733,000	$	32,671,000		$	28,000		$	29,000		$	(23,000	)

 As of December 31, 2011, adjusted cost and accumulated depreciation and amortization related to investments in real estate and related intangible lease assets and liabilities were as follows:

	Land		Buildings and Improvements			Acquired Above- Market Leases			In-Place Lease Value			Acquired Below- Market Leases
Investments in real estate and related intangible lease assets (liabilities)	$	11,733,000	$	34,180,000		$	1,401,000		$	1,181,000		$	(620,000	)
Less: accumulated depreciation and amortization		—		(850,000	)		(1,365,000	)		(1,134,000	)		576,000
Net investments in real estate and related intangible lease assets (liabilities)	$	11,733,000	$	33,330,000		$	36,000		$	47,000		$	(44,000	)

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Estimated net amortization expense for July 1, 2012 through December 31, 2012 and for each of the five following years ended December 31 is as follows:

	Amortization of Intangible  Lease Assets
July 1, 2012 to December 31, 2012	$	1,000
2013	$	19,000
2014	$	8,000
2015	$	6,000
2016	$	—
2017 and thereafter	$	—

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Investments in Real Estate (Details) (USD $)	6 Months Ended
	Jun. 30, 2012
Area of Real Estate Property	775,393	[1]
Purchase Price of Property	$ 79,218,000	[1]
Mortgage Loans on Real Estate	13,235,000	[1]
Property held for sale, leased (in percentage)	80.10%	[1]
Shoemaker Industrial Buildings [Member]
Location Real Estate Property	Santa Fe Springs, CA	[1]
Real Estate and Accumulated Depreciation, Date Acquired	Jun. 30, 2006	[1]
Area of Real Estate Property	18,921	[1]
Purchase Price of Property	2,400,000	[1]
Mortgage Loans on Real Estate	0	[1]
Property held for sale, leased (in percentage)	75.70%	[1]
20100 Western Avenue [Member]
Location Real Estate Property	Torrance, CA	[1]
Real Estate and Accumulated Depreciation, Date Acquired	Dec. 01, 2006	[1]
Area of Real Estate Property	116,433	[1]
Purchase Price of Property	19,650,000	[1]
Mortgage Loans on Real Estate	0	[1]
Property held for sale, leased (in percentage)	100.00%	[1]
Marathon Cente [Member]
Location Real Estate Property	Tampa Bay, FL	[1]
Real Estate and Accumulated Depreciation, Date Acquired	Apr. 02, 2007	[1]
Area of Real Estate Property	52,020	[1]
Purchase Price of Property	4,450,000	[1]
Mortgage Loans on Real Estate	0	[1]
Property held for sale, leased (in percentage)	37.60%	[1]
Orlando Small Bay Portfolio [Member]
Area of Real Estate Property	394,471	[1]
Purchase Price of Property	37,128,000	[1]
Mortgage Loans on Real Estate	6,769,000	[1]
Property held for sale, leased (in percentage)	71.50%	[1]
Orlando Small Bay Portfolio [Member] | Carter Commerce Center [Member]
Location Real Estate Property	Winter Garden, FL	[1]
Real Estate and Accumulated Depreciation, Date Acquired	Nov. 15, 2007	[1]
Area of Real Estate Property	49,125	[1]
Property held for sale, leased (in percentage)	64.90%	[1]
Orlando Small Bay Portfolio [Member] | Goldenrod Commerce Center [Member]
Location Real Estate Property	Orlando, FL	[1]
Real Estate and Accumulated Depreciation, Date Acquired	Nov. 15, 2007	[1]
Area of Real Estate Property	78,646	[1]
Property held for sale, leased (in percentage)	85.80%	[1]
Orlando Small Bay Portfolio [Member] | Hanging Moss Commerce Center [Member]
Location Real Estate Property	Orlando, FL	[1]
Real Estate and Accumulated Depreciation, Date Acquired	Nov. 15, 2007	[1]
Area of Real Estate Property	94,200	[1]
Property held for sale, leased (in percentage)	80.40%	[1]
Orlando Small Bay Portfolio [Member] | Monroe South Commerce Center [Member]
Location Real Estate Property	Sanford, FL	[1]
Real Estate and Accumulated Depreciation, Date Acquired	Nov. 15, 2007	[1]
Area of Real Estate Property	172,500	[1]
Property held for sale, leased (in percentage)	62.00%	[1]
Monroe North Commerce Center [Member]
Location Real Estate Property	Sanford, FL	[1]
Real Estate and Accumulated Depreciation, Date Acquired	Apr. 17, 2008	[1]
Area of Real Estate Property	181,348	[1]
Purchase Price of Property	14,275,000	[1]
Mortgage Loans on Real Estate	6,556,000	[1]
Property held for sale, leased (in percentage)	97.30%	[1]
1830 Santa Fe [Member]
Location Real Estate Property	Santa Ana, CA	[1]
Real Estate and Accumulated Depreciation, Date Acquired	Aug. 05, 2010	[1]
Area of Real Estate Property	12,200	[1]
Purchase Price of Property	1,315,000	[1]
Mortgage Loans on Real Estate	$ 0	[1]
Property held for sale, leased (in percentage)	100.00%	[1]

[1] The table excludes Sherburne Commons, a variable interest entity for which we became the primary beneficiary and began consolidating its financial results as of June 30, 2011. As of October 19, 2011, Sherburne Commons was classified as held for sale (see Notes 8 and 10).

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Notes Payable

6 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

14. Notes Payable

We have total debt obligations of $13.2 million that will mature in February and November of 2014. In connection with our notes payable, we incurred financing costs totaling $0.4 million and $0.9 million, as of June 30, 2012 and December 31, 2011, respectively. These financing costs have been capitalized and are being amortized over the life of their respective financing agreements. For the three months ended June 30, 2012 and 2011, $11,000 and $117,000, respectively, of deferred financing costs were amortized and included in interest expense in our condensed consolidated statements of operations. For the six months ended June 30, 2012 and 2011, $72,000 and $200,000, respectively, of deferred financing costs were amortized and included in interest expense in our condensed consolidated statements of operations.

HSH Nordbank AG

We amended our credit agreement with HSH Nordbank AG, New York Branch (“HSH Nordbank”) in a series of amendments extending the credit facility maturity date from September 20, 2010 to December 16, 2011. As a part of these amendments, we made a principal reduction payment and paid extension fees.

The July 2011 amendment to this credit agreement extended the maturity date from September 30, 2011 to December 16, 2011 and increased the margin spread over LIBOR from a range of 350 to 375 basis points to a fixed 375 basis points from June 1, 2011 to September 30, 2011 and to 400 basis points from October 1, 2011 to the maturity date. Additionally, this amendment eliminated our requirement to make principal reduction payments of $0.3 million in July, August, and September of 2011, respectively. In connection with this extension and the sale of the Goldenwest property (see Note 16), we made a principal payment of $7.8 million.

On November 28, 2011, this loan was repaid in its entirety with a portion of the proceeds from the sale of the Mack Deer Valley and Pinnacle Park Business Center properties.

Wells Fargo Bank, National Association

On November 13, 2007, we entered into a loan agreement with Wells Fargo, successor-by-merger to Wachovia Bank, N.A., to facilitate the acquisition of properties during our offering period. The terms of the loan agreement provided for a borrowing amount of up to $22.4 million, which was reduced to $15.9 million as of November 30, 2009, at an interest rate of 140 basis points over one-month LIBOR, secured by specified real estate properties. The loan agreement had a maturity date of November 13, 2010, and provided for prepayment without penalty. Through a series of amendments executed through June 30, 2011, we extended the maturity date from November 13, 2010 to August 13, 2011.

On August 12, 2011, the loan agreement was amended to extend the maturity to February 13, 2012. In connection with this amendment, the 2111 South Industrial Park property and Shoemaker Industrial Buildings were added to the loan collateral, and we made a principal payment of $0.5 million. The terms of the amended loan provide for two one-year extensions, subject to meeting certain loan-to-value and debt service coverage ratios and require monthly principal payments. Interest on the amended loan increased to 300 basis points over one-month LIBOR with a 150 basis point LIBOR floor.

On December 22, 2011, in connection with the sale of the 2111 South Industrial Park property (see Note 16), we made a principal payment of approximately $0.9 million.

On February 13, 2012, we amended our loan agreement with Wells Fargo, extending the maturity date from February 13, 2012 to February 13, 2014. In connection with this amendment, we made a principal payment of $7.5 million and paid fees and expenses totaling approximately $65,000. The interest rate on the amended loan decreased from 300 basis points over one-month LIBOR to 200 basis points over one-month LIBOR, with the one-month LIBOR floor remaining fixed at 150 basis points. Any amounts repaid under the loan agreement may not be re-borrowed. All other terms of the loan agreement remain in full force and effect.

As of June 30, 2012 and December 31, 2011, we had net borrowings of approximately $6.7 million and $14.4 million under the loan agreement, respectively. The weighted-average interest rate for the six months ended June 30, 2012 and the year ended December 31, 2011 was 3.80% and 2.54%, respectively. During the three months ended June 30, 2012 and 2011, we incurred $60,000 and $64,000 of interest expense, respectively, related to this loan agreement. During the six months ended June 30, 2012 and 2011, we incurred $0.2 million and $130,000 of interest expense, respectively, related to this loan agreement.

The loan agreement contains various reporting covenants, including providing periodic balance sheets, statements of income and expenses of borrower and each guarantor, statements of income and expenses and changes in financial position of each secured property and cash flow statements of the borrower and each guarantor. As of June 30, 2012, we were in compliance with all financial covenants.

The principal payments due on the Wells Fargo loan for July 1, 2012 to December 31, 2012 and for each of the five following years ended December 31 is as follows:

Year		Principal Amount
July 1, 2012 to December 31, 2012	$	180,000
2013	$	360,000
2014	$	6,139,000
2015	$	—
2016	$	—
2017 and thereafter	$	—

Transamerica Life Insurance Company

In connection with our acquisition of Monroe North Commerce Center, on April 17, 2008, we entered into an assumption and amendment of note, mortgage and other loan documents (the “Loan Assumption Agreement”) with Transamerica Life Insurance Company (“Transamerica”). Pursuant to the Loan Assumption Agreement, we assumed the outstanding principal balance of $7.4 million on the Transamerica secured mortgage loan. The loan matures on November 1, 2014 and bears interest at a fixed rate of 5.89% per annum. As of June 30, 2012 and December 31, 2011, we have an outstanding balance of $6.6 million and $6.7 million, respectively, under this loan agreement. This Loan Assumption Agreement contains various reporting covenants including an annual income statement, rent roll, operating budget and narrative summary of leasing prospects for vacant spaces. As of June 30, 2012, we were in compliance with all reporting covenants. The monthly payment on this loan is $50,370. During the three months ended June 30, 2012 and 2011, we incurred $0.1 million and $0.1 million of interest expense, respectively, related to this loan agreement. During the six months ended June 30, 2012 and 2011, we incurred $0.2 million and $0.2 million of interest expense, respectively, related to this loan agreement. The principal payments due on the Monroe North Commerce Center mortgage loan for July 1, 2012 to December 31, 2012 and for each of the five following years ended December 31 is as follows:

Year	Principal Amount
July 1, 2012 to December 31, 2012	$	92,000
2013	$	230,000
2014	$	6,234,000
2015	$	—
2016	$	—
2017 and thereafter	$	—