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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on October 6, 2010

Registration No. 333-        

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549



FORM S-11
FOR REGISTRATION UNDER
THE SECURITIES ACT OF 1933 OF SECURITIES
OF CERTAIN REAL ESTATE COMPANIES



Eola Property Trust

(Exact Name of Registrant as Specified in Governing Instruments)

390 N. Orange Avenue, Suite 2400
Orlando, FL 32801
(407) 650-0593
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)



James R. Heistand
Executive Chairman
390 N. Orange Avenue, Suite 2400
Orlando, FL 32801
(407) 650-0593
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)



Copies to:

J. Warren Gorrell, Jr., Esq.
David W. Bonser, Esq.
Eve N. Howard, Esq.

Hogan Lovells US LLP
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Phone: (202) 637-5600
Facsimile: (202) 637-5910

 

Edward F. Petrosky, Esq.
J. Gerard Cummins, Esq.

Sidley Austin LLP
787 Seventh Avenue
New York, NY 10019
Phone: (212) 839-5300
Facsimile: (212) 839-5599

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

          If any of the Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. o

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

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(do not check if a smaller
reporting company)
  Smaller reporting company o

CALCULATION OF REGISTRATION FEE

       
 
Title of Securities
to be Registered

  Proposed Maximum
Aggregate Offering
Price(1)

  Amount of
Registration Fee

 

Common shares of beneficial interest, $0.01 par value per share

  $675,000,000   $48,128

 

(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

          The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale of the securities is not permitted.

Subject to Completion
Preliminary Prospectus, dated October 6, 2010

PROSPECTUS

            Shares

Eola Property Trust

Common Shares



        We are a fully integrated, self-administered and self-managed real estate investment trust, or REIT, specializing in the acquisition, ownership, management, redevelopment and disposition of high quality office buildings located in the Southeastern and mid-Atlantic United States. Upon completion of this offering and our formation transactions, we will own interests in a portfolio of 57 properties, totaling approximately 12.0 million rentable square feet.

        This is our initial public offering and no public market currently exists for our common shares of beneficial interest, or common shares. We are offering            common shares pursuant to this prospectus and expect the public offering price to be between $      and $      per share. All of the common shares offered by this prospectus are being sold by us. We intend to apply to have our common shares listed on the New York Stock Exchange, or the NYSE, under the symbol "EOLA."

        We intend to elect and to qualify to be taxed as a REIT for U.S. federal income tax purposes, commencing with the portion of our taxable year ending December 31, 2010. To assist us in qualifying as a REIT, shareholders generally are restricted from owning more than 9.8% of our outstanding common shares or our preferred shares of beneficial interest, in each case by value or number of shares, whichever is more restrictive. See "Description of Shares—Restrictions on Ownership and Transfer."

        Investing in our common shares involves risks. See "Risk Factors" beginning on page 19 of this prospectus for a discussion of the risks that you should consider before making a decision to invest in our common shares.



 
  Per Share   Total

Public offering price

  $   $

Underwriting discount

  $   $

Proceeds, before expenses, to us

  $   $

        We have granted the underwriters an option to purchase up to            additional common shares from us at the public offering price, less the underwriting discount, within 30 days after the date of this prospectus solely to cover overallotments, if any.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        The common shares sold in this offering will be ready for delivery on or about                , 2010.



BofA Merrill Lynch   Barclays Capital   Wells Fargo Securities



The date of this prospectus is                , 2010.


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TABLE OF CONTENTS

Summary

  1

Risk Factors

  19

Forward-Looking Statements

  48

Use of Proceeds

  50

Distribution Policy

  53

Capitalization

  56

Dilution

  57

Selected Financial Data

  58

Management's Discussion and Analysis of Financial Condition and Results of Operations

  62

Economic and Market Overview

  81

Business and Properties

  108

Management

  145

Certain Relationships and Related Transactions

  160

Investment Policies and Policies with Respect to Certain Activities

  162

Structure and Formation of Our Company

  168

Principal Shareholders

  174

Description of Shares

  176

Shares Eligible for Future Sale

  181

Certain Provisions of Maryland Law and Our Declaration of Trust and Bylaws

  183

Description of the Partnership Agreement of Eola Property Trust,  L.P. 

  189

Material United States Federal Income Tax Considerations

  195

ERISA Considerations

  223

Underwriting (Conflicts of Interest)

  225

Legal Matters

  231

Experts

  231

Change in Independent Registered Accounting Firm

  232

Where You Can Find More Information

  233

Index to Financial Statements

  F-1

        You should rely only on the information contained in this prospectus or in any free writing prospectus prepared by us or information to which we have referred you. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus and any free writing prospectus prepared by us is accurate only as of their respective dates or on the date or dates which are specified in these documents. Our business, financial condition, liquidity, results of operations, funds from operations, or FFO, and prospects may have changed since those dates.



        We use market data and industry forecasts and projections throughout this prospectus, including the sections entitled "Summary," "Economic and Market Overview" and "Business and Properties." We have obtained substantially all of this information from a market study prepared for us in connection with this offering by Rosen Consulting Group, or RCG, a nationally recognized real estate consulting firm. We have paid RCG a fee for such services. Such information is included in this prospectus in reliance on RCG's authority as an expert on such matters. See "Experts." Any forecasts or projections prepared by RCG are based on data (including third party data), models and experience of various professionals, and are based on various assumptions, all of which are subject to change without notice. In addition, we have obtained certain market and industry data from publicly available

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industry publications. These sources generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information are not guaranteed. The forecasts and projections are based on industry surveys and the preparers' experience in the industry, and there is no assurance that any of the forecasts or projections will be achieved. We believe that the surveys and market research others have performed are reliable, but we have not independently verified this information.



        Unless the context indicates otherwise: (1) the terms "our initial portfolio" and "our properties" as used in this prospectus and the statistical information presented in this prospectus regarding our initial portfolio and our properties include our wholly owned properties and our pro rata share of properties owned through our consolidated and unconsolidated joint ventures; (2) the terms "our consolidated portfolio" and "our consolidated properties" as used in this prospectus and the statistical information presented in this prospectus regarding our consolidated portfolio and our consolidated properties include our wholly owned properties and our properties owned through our consolidated joint ventures; and (3) the terms "our unconsolidated portfolio" and "our unconsolidated properties" as used in this prospectus and the statistical information presented in this prospectus regarding our unconsolidated portfolio and our unconsolidated properties include only our pro rata share of properties owned through our unconsolidated joint ventures. Please refer to "—Our Properties—Our Initial Portfolio" and "—Joint Ventures" under the heading "Business and Properties" for additional information.



        Our "annualized rent" is calculated by multiplying (i) rental payments (defined as base rent plus operating expenses, if payable by the tenant on a monthly basis, before rental abatements and including rental payments related to leases that had been executed but not commenced as of June 30, 2010 in lieu of rental payments under any existing leases for the same space) for the month ended June 30, 2010, by (ii) 12. In instances in which base rents and operating expenses are collected on an annual, semi-annual or quarterly basis, such amounts have been multiplied by a factor of 1, 2 or 4, respectively, to calculate the annualized figure. For triple net or modified gross leases, annualized rent has been converted to a full service gross basis by one of the following methods: (1) when we have access to the operating expenses of the tenant, expenses have been estimated by adding billed expense reimbursements to base rent; or (2) when we do not have access to the operating expenses of the tenant, expenses have been estimated by either (a) applying current Building Owners and Managers Association, or BOMA, estimated expense standards in markets where BOMA standards have been published or (b) using the expenses of tenants at comparable properties in the market.

        Certain of the leases in our initial portfolio are triple net leases and modified gross leases in which the tenant pays directly all or a portion of real estate taxes, insurance and other property-related expenses. As a result, such amounts are not included in rental payments and reimbursements as they are in the case of our gross leases. Throughout this prospectus, when we present "annualized rent," we have made adjustments to the rental payments received under our triple net leases and modified gross leases so that they are presented on an equivalent basis to our gross leases. We believe this is a more appropriate presentation as it allows comparability of rent per leased square foot and similar metrics among leases in our initial portfolio and comparability to market rental rates, which are typically quoted on a gross basis. However, it should be noted that, as a result of these adjustments, "annualized rent" does not represent the amount of rent and reimbursements actually received from our tenants.

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SUMMARY

        This summary highlights certain of the information included in this prospectus. It does not contain all of the information that you should consider before making a decision to invest in our common shares. You should read carefully the more detailed information set forth under "Risk Factors" and the other information included in this prospectus. Except where the context suggests otherwise, the terms "our company," "we," "us" and "our" refer to (1) Eola Property Trust, a Maryland real estate investment trust, together with its consolidated subsidiaries after giving effect to the formation transactions described in this prospectus, including Eola Property Trust, L.P., a Delaware limited partnership, which we refer to in this prospectus as our operating partnership, and (2) the businesses conducted prior to this offering by James R. Heistand, our Executive Chairman, through Eola Capital LLC, or Eola Capital, and Rudy Prio Touzet, our President and Chief Executive Officer, during his tenure at America's Capital Partners, LLC, or AmCP, as applicable. Our promoter is James R. Heistand, our Executive Chairman. Unless otherwise indicated, the information in this prospectus assumes (1) the consummation of our formation transactions, (2) the effectiveness of our Articles of Amendment and Restatement of Declaration of Trust, or our declaration of trust, and our Amended and Restated Bylaws, or our bylaws, (3) no exercise by the underwriters of their option to purchase up to an additional            common shares solely to cover overallotments, if any, (4) the common shares to be sold in this offering are sold at $            per share, which is the mid-point of the price range set forth on the cover page of this prospectus, and (5) the initial value of the units of limited partnership interest in our operating partnership, or OP units, is equal to the public offering price of our common shares.


Our Company

        We are a fully integrated, self-administered and self-managed REIT specializing in the acquisition, ownership, management, redevelopment and disposition of high quality office buildings located in the Southeastern and mid-Atlantic United States. Upon completion of this offering and our formation transactions, we will own interests in a portfolio of 57 properties totaling approximately 12.0 million rentable square feet. These properties are comprised of 32 consolidated properties and 25 properties held through unconsolidated joint ventures, all of which we will manage. Our ownership interest in our unconsolidated properties ranges from 8.7% to 30.0%. Our pro rata ownership share of our initial portfolio equates to approximately 8.3 million rentable square feet.

        Our initial portfolio as of June 30, 2010 was approximately 82.7% leased and had a remaining weighted-average lease term of approximately five years, assuming no exercise of early termination rights. As of June 30, 2010, our initial portfolio generated approximately $158.3 million of annualized rent and approximately $23.07 of annualized rent per leased square foot. Our top six markets by both rentable square footage and annualized rent are Atlanta, Orlando, Philadelphia, Jacksonville, Washington, D.C. and Tampa. As of June 30, 2010, these markets accounted for approximately 96.5% of the rentable square footage and approximately 96.7% of the annualized rent of our initial portfolio.

        We intend to focus primarily on owning and acquiring properties in markets that generally have been characterized by strong and stable employment bases, above-average job growth prospects and strong long-term growth potential as a result of their growing populations, net migration inflows and access to a talented and educated workforce. We believe that our top six markets provide attractive long-term return opportunities and that our integrated platform, market knowledge and industry and investor relationships give us a competitive advantage relative to our peers in each of our markets. Our in-house property management, asset management and leasing capabilities allow us to meet the needs of our existing tenants and identify value-enhancement opportunities, such as acquiring under-leased assets at attractive purchase prices and leasing them up over time. Through our focused strategy and extensive experience in our markets, we have developed an expansive network of market participants, including sales and leasing brokers, lenders, operators, tenants and institutional buyers and sellers of

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real estate. We believe these relationships, along with our reputation for reliably closing on our commitments, have allowed us to source and close off-market and limited-market opportunities.

        Our objective is to expand our holdings in our current markets by identifying properties where we can capitalize on our competitive strengths to generate an attractive return on our investment. In addition, we will seek to expand our presence in other Southeastern and mid-Atlantic markets by acquiring well-located assets in strong markets and hiring regional professionals with local market expertise. We also may enter new markets in the Eastern United States as we identify attractive investment opportunities. We will evaluate our portfolio on a regular basis and dispose of assets when returns appear to have been maximized and will look to recycle capital as appropriate.

        We believe that our senior management team's extensive experience in acquiring, owning, financing, structuring, managing, redeveloping and monetizing office properties in our markets provides us with a significant competitive advantage. In addition, we believe our execution of repeat transactions with multiple sophisticated institutional investors over an extended period is a testament to our historical performance and long-term stewardship of investor interests.

        We intend to elect and to qualify to be taxed as a REIT for U.S. federal income tax purposes, commencing with the portion of our taxable year ending December 31, 2010. We will conduct substantially all of our business through our operating partnership, of which we will serve as the sole general partner and own approximately    % upon completion of this offering and our formation transactions.


Competitive Strengths

        We believe we distinguish ourselves from other owners and operators of office properties through the following competitive strengths:

    High Quality Office Portfolio Located in Growth-Oriented Markets.  Our properties are located in select growth-oriented markets in the Southeastern and mid-Atlantic United States. We have high quality office properties that we believe have strong growth characteristics and are located in both central business districts, or CBDs, and suburban markets that generally are characterized by positive demographic trends and real estate fundamentals. As the economy recovers, we believe we are well positioned to take advantage of these positive longer-term demographic trends and real estate fundamentals.

    Robust Asset Management, Property Management and Leasing Platform.  We are a fully integrated real estate company with in-house asset management, property management and leasing capabilities. Utilizing this platform, we entered into more than 250 leases in 2009, representing approximately 1.4 million square feet, despite adverse market and economic conditions. We believe our tenant-focused approach, coupled with our disciplined expense control program, drives internal growth and maximizes operating results within our portfolio.

    Experienced and Committed Senior Management Team with a Proven Track Record.  We believe our in-depth market knowledge and extensive experience acquiring, owning, financing, structuring, managing, redeveloping and monetizing office properties in our markets provide us with a significant competitive advantage. Our senior management team is led by James R. Heistand, our Executive Chairman, and Rudy Prio Touzet, our President and Chief Executive Officer, and has an average of more than 19 years of experience in the real estate industry. Since 2000, Messrs. Heistand and Touzet collectively have overseen the acquisition of more than 24 million square feet of office space with a cost of approximately $3.0 billion, and the disposition of approximately 12 million square feet for gross proceeds of approximately $1.6 billion.

    Long-Standing Institutional Investor and Industry Relationships.  We believe our execution of repeat transactions with multiple institutional investors over an extended period is a testament to our

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      historical performance and long-term stewardship of investor interests. Some of our long-standing institutional investor relationships include affiliates of General Electric Capital Corporation, affiliates of Lehman Brothers Holdings, Inc., the Utah State Retirement Investment Fund and Dreilaender Fond. We also have long-standing relationships in the real estate and financial industries with real estate developers, brokers, advisors, general contractors, architects and consultants, as well as with investment banks, brokerage firms and commercial banks. We believe our long-standing institutional investor and industry relationships will allow us to identify and consummate attractive investment opportunities and financings and provide us with access to valuable market knowledge.

    Growth-Oriented and Conservative Capital Structure.  Upon completion of this offering and our formation transactions, we expect to have a ratio of our pro rata share of debt to total market capitalization of approximately    %. As of June 30, 2010 and taking into account the anticipated use of proceeds from this offering, we have no scheduled debt maturities prior to 2015 in our consolidated portfolio. We believe our conservative capital structure and strong liquidity position will provide us with financial and operational flexibility and allow us to pursue attractive acquisition opportunities as they arise.

    Diverse and Stable Tenant Base.  We have a diverse tenant base in our initial portfolio, with more than 800 tenants that operate in a variety of professional, financial, governmental and other businesses. We believe that our base of smaller-sized tenants provides us with valuable diversification and greater leverage in tenant negotiations. Other than the U.S. Government and CIGNA Corp., no tenant accounted for more than 3.2% of the annualized rent of our initial portfolio as of June 30, 2010.


Business and Growth Strategies

        Our primary objective is to create value for our shareholders by increasing cash flow from operations, achieving sustainable growth in FFO and realizing long-term capital appreciation. We intend to achieve these objectives by executing on the following business and growth strategies:

    Maximize Cash Flow by Continuing to Enhance the Operating Performance of Each Property.  We will provide property and asset management and leasing services to our portfolio, actively managing our properties and leveraging our tenant relationships to improve operating performance, maximize cash flow and enhance shareholder value. We believe that our initial portfolio has strong long-term growth prospects as a result of both the forecasted market recovery and our ability to increase operating income through intensive asset management.

    Pursue Acquisitions on Attractive Terms.  Our acquisition strategy is to pursue attractive returns by focusing primarily on office buildings and portfolios that are well located and competitively positioned within CBD and suburban markets throughout the Southeastern and mid-Atlantic United States. Given the recent economic downturn, we currently are focused on newer, high quality assets in our markets that may be challenged due to an overleveraged capital structure and/or decreased occupancy or other operational stress.

    Leverage Our Institutional Investor and Industry Relationships to Identify, Finance and Consummate Acquisition Opportunities.  We believe that our relationships with leading institutional investors and real estate and financial industry professionals will provide us with critical market intelligence, an ongoing acquisition pipeline, potential joint venture partners and financing alternatives. Our senior management team has significant relationships with institutional equity sources and, by leveraging these relationships, we believe that we will be able to execute on investment opportunities that would otherwise be unavailable or impractical for us.

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    Recycle Capital through Select Asset Sales.  We intend to pursue an efficient capital allocation strategy that maximizes the return on our invested capital. This may include selectively disposing of properties where we believe returns have been maximized and redeploying capital into acquisitions or other opportunities. We have consistently grown our portfolio through acquisitions, while at the same time strategically disposing of properties when we believe we have maximized the economic return from a particular investment.


Economic and Market Overview

        Except for the data presented for the properties in our portfolio and unless otherwise indicated, all information in this Economic and Market Overview section is derived from the market studies prepared by RCG.

        The U.S. economic recovery that officially began in the second half of 2009 continues to spread throughout the economy as underlying economic data, capital markets activity and asset pricing have rebounded from their lows. While the near-term conditions are anticipated to be characterized by a moderate but uneven recovery, RCG forecasts a more robust recovery beginning in 2011 with continued improvement in the business and financial sectors. RCG is forecasting slow growth in gross domestic product, or GDP, with an annual increase of 2.2% for 2010. However, in 2011 and 2012, RCG expects GDP to grow by 2.4% to 3.0% annually, driving the continued recovery from the recession while also creating jobs.

        The office-using employment sectors continued to recover in the first half of 2010, as nearly 139,000 jobs were added by the public and private sectors. The job creation is a positive sign that office leasing conditions may be beginning to recover. Going forward, RCG expects office-employment job growth to increase from 0.5% in 2010 to 1.7% by 2014.

        Through the second quarter of 2010, the national office market appeared to be nearing a bottom and, according to RCG, is expected to improve in the near-term as companies begin to expand as the general economy improves. The total office vacancy rate stood at 17.8% in the second quarter of 2010, down 10 basis points from the first quarter of 2010, leading RCG to believe that prospects for demand growth have resumed. Going forward, RCG expects the overall vacancy rate for the national office market to decline gradually through 2014, decreasing to 15.2%. RCG expects that asking rents will increase by 0.5% in 2010 and will increase an average of 2.8% per year between 2011 and 2014.

        RCG projects that the demographics in our top six markets—Atlanta, Orlando, Philadelphia, Jacksonville, Washington, D.C. and Tampa, which represent approximately 96.7% of the annualized rent of our initial portfolio as of June 30, 2010—will outperform the national market over the next four years in several respects. Certain demographic and market information for our top six markets is set forth below.

    Population Growth.  Population growth in our top six markets was nearly 150% of the national average from 2005 to 2009. From 2011 to 2014, population growth in our top six markets is expected to be 1.3% annually versus the national average of 1.0%. Furthermore, annual population growth in Atlanta and Orlando is expected to increase 2.2% and 1.8%, respectively, far outpacing the national average.

    Job Growth.  Consistent with outperformance in population growth, job growth in our top six markets on average exceeded the national average during the period from 2005 to 2009. From 2011 to 2014, job growth in our top six markets is expected to be 1.3% annually versus the national average of 1.1%, with greater outperformance expected in Washington, D.C. and Orlando.

    Unemployment Rate.  As of the second quarter of 2010, our top six markets had a weighted-average unemployment rate of 9.7%, compared to the national average of 9.5%. While

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      Washington, D.C. and Philadelphia consistently have outperformed the national average, we believe the outperformance in our top six markets will be driven by significant improvement in Orlando, Jacksonville and Tampa, each of which, according to RCG, is projected to exhibit a drop in the unemployment rate of at least three percentage points by 2014. By 2014, the weighted-average unemployment rate is projected to be 6.4% for our top six markets versus a national average of 7.0%.

    Vacancy Rate.  As of the second quarter of 2010, our top six markets had a weighted-average vacancy rate of 17.7% compared to the national average of 17.8%. Washington, D.C. and Philadelphia consistently have outperformed the national average and had vacancy rates of 15.6% and 15.3%, respectively, as of the second quarter of 2010. Moreover, RCG expects our top six markets to outperform the national average from 2011 to 2014, forecasting a decline of approximately 430 basis points in the vacancy rate in our top six markets over that period compared to a decline of approximately 240 basis points in the national office vacancy rate. By 2014, the weighted-average vacancy rate in our top six markets is projected to be 13.6% versus a national average of 15.2%.

        As a result of these attractive demographics and market statistics, we believe our initial portfolio is well positioned for internal growth.

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Our Properties

        Upon completion of this offering and our formation transactions, we will own interests in a portfolio of 56 office properties and one related retail property that is part of an office complex, totaling approximately 12.0 million rentable square feet. These properties are comprised of 32 consolidated properties and 25 properties owned through seven unconsolidated joint ventures. The following table presents an overview of our initial portfolio, based on information as of June 30, 2010.

Metropolitan Area/Property
  Percent
Ownership
(%)
  Year
Built
  Rentable
Square
Footage
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Annualized
Rent Per
Leased Square
Foot ($)(3)
 

Consolidated Properties

                                     

Atlanta, Georgia

                                     

Ten 10th Street (Millennium)

    100.0     2001     421,557     98.1     12,500,233     30.22  

Peachtree Marquis II(4)

    100.0     1987     464,277     99.1     8,826,079     19.17  

Two Ravinia Drive

    100.0     1987     437,826     82.2     6,664,372     18.53  

Peachtree Harris(4)

    100.0     1978     394,694     80.5     5,842,084     18.40  

Peachtree International(4)(5)

    100.0     1973     386,563     86.9     5,762,215     17.16  

Peachtree Marquis I(4)

    100.0     1980     460,437     65.2     5,551,432     18.49  

Peachtree South(4)(5)

    100.0     1969     306,914     73.7     3,531,635     15.62  

Peachtree Mall (retail)(4)(6)

    100.0     1969     124,929     71.7     2,839,675     31.70  

Peachtree North(4)(5)

    100.0     1967     302,951     49.6     2,532,508     16.85  

The Cornerstone Building at Peachtree Center

    100.0     1928     77,691     77.5     1,418,237     23.56  
                               
 

Metropolitan Area Subtotal / Weighted Average

                3,377,839     80.3     55,468,471     20.44  

Philadelphia, Pennsylvania

                                     

Two Liberty Place(7)

    89.0     1990     937,566     99.4     25,251,804     27.10  
                               
 

Metropolitan Area Subtotal / Weighted Average

                937,566     99.4     25,251,804     27.10  

Jacksonville, Florida

                                     

Independent Square(8)

    100.0     1975     647,251     92.2     13,215,792     22.14  

Capital Plaza I and II (2 buildings)(9)

    25.0     1990     307,856     82.3     4,912,660     19.40  

245 Riverside

    100.0     2003     135,286     94.6     2,818,518     22.02  

Capital Plaza III(9)

    25.0     1999     108,774     80.7     1,841,524     20.98  
                               
 

Metropolitan Area Subtotal / Weighted Average

                1,199,167     88.9     22,788,494     21.38  

Orlando, Florida

                                     

Bank of America Center

    100.0     1987     421,069     83.0     9,802,287     28.04  

Primera V

    100.0     2000     190,081     100.0     4,261,715     22.42  

Maitland Forum

    100.0     1985     267,913     76.6     3,979,989     19.38  

Maitland Park Center

    100.0     1984     102,169     73.6     1,534,292     20.41  

2400 Maitland Center

    100.0     1982     101,612     65.1     1,263,799     19.09  

Interlachen Corporate Center

    100.0     1986     79,312     69.1     1,051,122     19.19  

500 Winderley Place

    100.0     1985     101,040     50.8     849,927     16.56  
                               
 

Metropolitan Area Subtotal / Weighted Average

                1,263,196     78.6     22,743,131     22.92  

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Metropolitan Area/Property
  Percent
Ownership
(%)
  Year
Built
  Rentable
Square
Footage
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Annualized
Rent Per
Leased Square
Foot ($)(3)
 

Tampa, Florida

                                     

International Plaza Four(10)

    100.0     2008     250,097     59.2     4,406,661     29.75  

Westshore Corporate Center(11)

    100.0     1989     169,619     73.6     2,982,282     23.90  

Cypress Center I(12)

    100.0     1982     152,758     94.7     2,695,736     18.63  

Cypress Center III(12)

    100.0     1982     82,871     83.2     1,540,195     22.33  

Cypress Center II(12)

    100.0     1982     50,697     100.0     1,130,647     22.30  

Cypress West(12)

    100.0     1985     64,510     32.0     432,545     20.95  
                               
 

Metropolitan Area Subtotal / Weighted Average

                770,552     72.4     13,188,065     23.64  

Washington, D.C.

                                     

1110 Vermont Avenue(13)

    100.0     1980     305,543     81.7     11,772,649     47.18  
                               
 

Metropolitan Area Subtotal / Weighted Average

                305,543     81.7     11,772,649     47.18  

Columbia, South Carolina

                                     

Center Point (2 buildings)(14)

    95.0     1988     154,283     92.6     2,627,752     18.40  
                               
 

Metropolitan Area Subtotal / Weighted Average

                154,283     92.6     2,627,752     18.40  

Richmond, Virginia

                                     

Overlook I

    100.0     1998     62,664     100.0     1,266,883     20.22  

Overlook II

    100.0     1998     63,832     86.7     1,129,808     20.41  
                               
 

Metropolitan Area Subtotal / Weighted Average

                126,496     93.3     2,396,691     20.31  

Total/Weighted Average—Consolidated Properties (32 properties)

               
8,134,642
   
83.2
   
156,237,058
   
23.07
 
                               

Total/Weighted Average—Pro Rata Share of Consolidated Properties

                7,711,323     83.1     148,262,334     23.14  
                               

Unconsolidated Properties

                                     

Atlanta, Georgia

                                     

5660 New Northside Drive

    10.0     1989     272,650     87.9     5,124,860     21.37  

300 Windward Plaza

    10.0     2000     203,248     100.0     4,037,816     19.87  

Deerfield Point (2 buildings)

    10.0     1999     202,619     81.3     3,425,988     20.80  

Parkwood Point

    10.0     2001     219,357     89.8     3,368,442     17.10  

Interstate NW Business Park (4 buildings)

    30.0     1979     283,679     82.2     3,173,440     13.61  

100 Windward Plaza

    10.0     1998     132,250     100.0     2,251,478     17.02  

3720 Davinci Court

    25.0     2000     100,698     100.0     2,126,516     21.12  

Windward Pointe 200

    10.0     1997     129,448     76.3     1,947,143     19.71  

280 Interstate North Office Park

    10.0     1982     125,377     74.7     1,640,663     17.53  

3740 Davinci Court

    25.0     2001     100,751     74.6     1,470,738     19.58  

20 Technology Park

    25.0     1982     90,852     91.4     1,391,884     16.77  
                               
 

Metropolitan Area Subtotal / Weighted Average

                1,860,929     87.1     29,958,968     18.48  

Orlando, Florida

                                     

One Orlando Centre

    10.0     1987     355,783     92.6     8,385,109     25.45  

Millennia Park One

    10.0     1999     157,291     92.6     3,473,225     23.84  

Southhall Center

    10.0     1986     159,840     97.1     2,985,346     19.23  
                               
 

Metropolitan Area Subtotal / Weighted Average

                672,914     93.7     14,843,680     23.55  

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Metropolitan Area/Property
  Percent
Ownership
(%)
  Year
Built
  Rentable
Square
Footage
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Annualized
Rent Per
Leased Square
Foot ($)(3)
 

Washington, D.C.

                                     

Irvington Three

    20.0     2003     217,928     75.2     5,288,394     32.26  

Irvington One

    20.0     2001     154,469     74.8     3,838,754     33.23  

Irvington Four

    20.0     2007     224,258     33.2     2,826,624     37.92  

Irvington Two

    20.0     2001     153,866     50.1     2,618,119     33.93  
                               
 

Metropolitan Area Subtotal / Weighted Average

                750,521     57.4     14,571,890     33.80  

Tampa, Florida

                                     

Westshore 500

    8.7     1984     129,728     84.2     2,734,098     25.04  

Buschwood Park III

    20.0     1989     77,568     90.4     1,325,958     18.90  

Buschwood Park II

    20.0     1987     88,019     71.2     1,221,849     19.49  

Buschwood Park I

    20.0     1985     83,147     52.6     984,314     22.52  
                               
 

Metropolitan Area Subtotal / Weighted Average

                378,462     75.5     6,266,219     21.93  

Panama City, Florida

                                     

Beckrich One

    10.0     2002     33,739     90.5     907,628     29.74  

Beckrich Two

    10.0     2003     33,369     89.6     726,574     24.30  
                               
 

Metropolitan Area Subtotal / Weighted Average

                67,108     90.0     1,634,202     27.05  

Tallahassee, Florida

                                     

Southwood One

    10.0     2002     89,059     62.4     1,030,949     18.56  
                               
 

Metropolitan Area Subtotal / Weighted Average

                89,059     62.4     1,030,949     18.56  

Total/Weighted Average—Unconsolidated Properties (25 properties)

               
3,818,993
   
80.8
   
68,305,909
   
22.14
 
                               

Total/Weighted Average—Pro Rata Share of Unconsolidated Properties

                580,713     78.0     9,988,371     22.04  
                               

TOTAL/WEIGHTED AVERAGE—ALL PROPERTIES (57 properties)

                11,953,635     82.5     224,542,967     22.78  

TOTAL/WEIGHTED AVERAGE—INITIAL PORTFOLIO(15)

               
8,292,036

(16)
 
82.7
   
158,250,705
   
23.07
 

(1)
Based on leases signed as of June 30, 2010, and calculated as leased square footage divided by rentable square footage, expressed as a percentage.

(2)
Annualized rent is calculated by multiplying (i) rental payments (defined as base rent plus operating expenses, if payable by the tenant on a monthly basis, before rental abatements and including rental payments related to leases that had been executed but not commenced as of June 30, 2010 in lieu of rental payments under any existing leases for the same space) for the month ended June 30, 2010, by (ii) 12. In instances in which base rents and operating expenses are collected on an annual, semi-annual or quarterly basis, such amounts have been multiplied by a factor of 1, 2 or 4, respectively, to calculate the annualized figure. For triple net or modified gross leases, annualized rent has been converted to a full service gross basis by one of the following methods: (1) when we have access to the operating expenses of the tenant, expenses have been estimated by adding billed expense reimbursements to base rent; or (2) when we do not have access to the operating expenses of the tenant, expenses have been estimated by either (a) applying current BOMA estimated expense standards in markets where BOMA standards have been published or (b) using the expenses of tenants at comparable properties in the market. Rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were $6,190,841 for our consolidated properties, $2,685,095 for our unconsolidated properties and $6,456,757 for our initial portfolio.

(3)
Represents annualized rent divided by leased square footage, including leases executed but not commenced as of June 30, 2010.

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(4)
Three parking garages stand adjacent to the seven Peachtree Center properties (Peachtree Marquis I, Peachtree Marquis II, Peachtree Harris, Peachtree International, Peachtree North, Peachtree South and Peachtree Mall). The parking garages are subject to ground leases that expire between 2065 and 2067.

(5)
Property is subject to a ground lease that expires in 2060.

(6)
Peachtree Mall is our only retail property and connects the office towers of Peachtree Center in Atlanta. Property is subject to a ground lease that expires in 2060.

(7)
We have an option, and our partner has the right to require us, to acquire the remaining 11% interest in this property at a mutually agreed-upon price, at any time on or after the three-year anniversary of this offering and our formation transactions. Total rentable square footage and total annualized rent for the entire property are presented. This building includes 20 floors of residential condominiums that are owned and managed by a third party in which James R. Heistand, our Executive Chairman, and Rudy Prio Touzet, our President and Chief Executive Officer, collectively have a 1.25% non-managing member interest. Rentable square footage does not include this space.

(8)
Property includes an adjacent parking garage.

(9)
Total rentable square footage and total annualized rent for the entire property are presented.

(10)
Property is subject to a ground lease that expires in 2080. We currently own a 67% interest in this property and have an option to purchase the remaining 33% interest between November 1, 2010 and December 31, 2010, which we intend to exercise prior to or concurrently with the completion of this offering.

(11)
Property is subject to a ground lease that expires in 2077.

(12)
Approximately 6.30 acres of developable land is adjacent to Cypress Center I, Cypress Center II, Cypress Center III and Cypress West. This land currently is used as parking for those properties, and there are no current plans with respect to the improvement or development of this land.

(13)
Our acquisition of this property is subject to closing conditions that may not be in our control. See "Risk Factors—Risks Related to Our Business and Operations—Our acquisition of the 1110 Vermont Avenue property is subject to closing conditions that could delay or prevent the acquisition of this property." We currently are pursuing potential third parties to co-invest in the acquisition of this property. If we reach an agreement with such parties, our interest in this property would be held through a joint venture, and our ownership percentage may be significantly reduced.

(14)
Total rentable square footage and total annualized rent for the entire property are presented. Approximately 1.4 acres of developable land is adjacent to Center Point. There are no current plans with respect to the improvement or development of this land.

(15)
Amounts for our initial portfolio are based on total amounts for our wholly owned properties and our pro rata share for properties owned through our consolidated and unconsolidated joint ventures based on our economic ownership interest in those joint ventures.

(16)
Initial portfolio total consists of 6,814,508 leased square feet, 1,432,224 available square feet and 45,304 building management use square feet.


Summary of Risk Factors

        You should carefully consider the matters discussed under the heading "Risk Factors" beginning on page 19 of this prospectus prior to deciding whether to invest in our common shares. Some of these risks include:

    We will be significantly influenced by the economic and other conditions of the specific markets in which we operate, particularly Atlanta, and also Orlando, Philadelphia, Jacksonville, Washington, D.C. and Tampa, where we have high concentrations of properties.

    We have considerable lease expirations in 2010, 2011 and 2012 and face strong competition in the leasing market and may be unable to lease vacant space or renew existing leases or re-let space on terms that are as favorable as, or even similar to, the existing leases, or we may expend significant capital in our efforts to re-let space, which may materially and adversely affect us.

    We depend on tenants for our revenue and, accordingly, lease terminations and/or tenant defaults, particularly by one of our more significant tenants, could adversely affect the income

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      produced by our properties and seriously harm our operating performance, which could materially and adversely affect us.

    Adverse global market and economic conditions and dislocations in the credit markets could cause us to recognize impairment charges, which could materially and adversely affect our business, financial condition and results of operations.

    We expect to have approximately $413.4 million of consolidated indebtedness outstanding following this offering and are likely to incur additional mortgage and other indebtedness in the future, which may increase our business risks.

    Our current and future joint venture investments could be adversely affected by a lack of sole decision-making authority and reliance on the financial condition and liquidity of our joint venture partners.

    Our acquisition of the 1110 Vermont Avenue property is subject to closing conditions that could delay or prevent the acquisition of this property.

    Our growth depends on external sources of capital that are outside our control and may not be available to us on favorable terms or at all.

    Our success depends on key personnel whose continued service is not guaranteed and each of whom would be difficult to replace.

    Our management has limited experience operating a REIT and a public company, which may impede their ability to successfully manage our business.

    Future cash flows may not be sufficient to make distributions to our common shareholders at expected levels, which could result in a significant decrease in the market price of our common shares.

    If we do not qualify as a REIT or if we fail to remain qualified as a REIT, we will be subject to U.S. federal income tax and potentially state and local taxes, which would reduce the amount of cash available for distribution to our common shareholders.

    REIT distribution requirements could adversely affect our ability to execute our business plan or cause us to finance our needs during unfavorable market conditions.


Structure and Formation of Our Company

Structure

        Upon completion of this offering and our formation transactions, our operating partnership will hold substantially all of our assets and conduct substantially all of our business. We will contribute the net proceeds from this offering to our operating partnership in exchange for a number of OP units equal to the number of common shares issued in this offering. We will control our operating partnership as its sole general partner and as the holder of approximately      % of the aggregate OP units. Our executive officers and other employees and third party contributors initially will own the remaining OP units and will be limited partners in our operating partnership.

        All of our management services will be conducted by wholly owned subsidiaries of our operating partnership. Certain properties in which we will not own all of the equity interests, as well as properties in which we will not own any of the equity interests, will be managed by Eola TRS LLC, a wholly owned subsidiary of our operating partnership, which we refer to as our TRS. Our TRS will elect to be treated as a corporation for U.S. federal income tax purposes and, effective contemporaneously with that election, will elect jointly with us to be treated as a taxable REIT subsidiary of ours. Our TRS will conduct certain other activities that we may not engage in directly without adversely affecting our qualification as a REIT. We may form additional taxable REIT subsidiaries in the future.

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Formation Transactions

        Prior to or concurrently with the completion of this offering, we will engage in certain formation transactions which are designed to: consolidate our asset management, property management, leasing, acquisition and related businesses into our operating partnership; consolidate the ownership of a portfolio of properties, together with certain other real estate assets, into our operating partnership; facilitate this offering; enable us to raise necessary capital to repay existing indebtedness related to certain properties in our portfolio; enable us to qualify as a REIT for U.S. federal income tax purposes commencing with the portion of our taxable year ending December 31, 2010; and preserve the tax position of certain investors in our predecessor and its related entities that will receive common shares and/or OP units in connection with our formation transactions, which we refer to as our continuing investors.

        The significant elements of our formation transactions include:

    formation of our company, our operating partnership and our TRS;

    the contribution transactions, pursuant to which we will acquire our assets; and

    the assumption by us of indebtedness related to our initial portfolio, the repayment of certain outstanding indebtedness and other related financing transactions.

        The following diagram depicts our ownership structure and the ownership structure of our operating partnership upon completion of this offering and our formation transactions:

GRAPHIC

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Benefits of Formation Transactions to Related Parties

        In connection with this offering and our formation transactions, certain of our executive officers and other key employees, trustees and 5% shareholders will receive material benefits, including the following (amounts below are based on the mid-point of the price range set forth on the cover page of this prospectus).

    Consideration for Contribution of Interests in Our Assets

    James R. Heistand, our Executive Chairman, will receive            common shares, with an aggregate value of approximately $       million, in exchange for the contribution by him of all of his interests in our assets.

    Rudy Prio Touzet, our President and Chief Executive Officer, will receive            OP units and             common shares, with an aggregate value of approximately $       million, in exchange for the contribution by him of all of his interests in our assets.

    Henry F. Pratt, III, our Chief Operating Officer, will receive            common shares, with an aggregate value of approximately $       million, in exchange for the contribution by him of all of his interests in our assets.

    David O'Reilly, our Chief Financial Officer, will receive            common shares, with an aggregate value of approximately $       million, in exchange for the contribution by him of all of his interests in our assets.

    Scott Francis, our Chief Accounting Officer, will receive            common shares, with an aggregate value of approximately $       million, in exchange for the contribution by him of all of his interests in our assets.

    Messrs. Heistand, Touzet, Pratt, O'Reilly and Francis also will receive cash as a result of (i) customary real estate closing prorations, (ii) a return of restricted cash reserves that were previously funded by such parties and which are required to remain with the property-owning entities under the terms of loan documents and (iii) repayment of loans made by them. We currently estimate these cash payments will total approximately $             million, excluding customary real estate prorations, the amount of which will be determined by the timing of the completion of this offering and our formation transactions.

    Employment Agreements

        We will enter into an employment agreement with each of our executive officers that will be effective upon completion of this offering. These employment agreements will provide for base salary, bonus and other benefits, including accelerated vesting of equity awards upon a change in our control or termination of the executive's employment under certain circumstances. See "Management—Executive Compensation—Employment Agreements."

    Indemnification Agreements for Officers and Trustees

        We intend to enter into indemnification agreements with our trustees and executive officers that will be effective upon completion of this offering. These indemnification agreements will provide indemnification to these persons by us to the maximum extent permitted by Maryland law and certain procedures for indemnification, including advancement by us of certain expenses relating to claims brought against these persons under certain circumstances. See "Management—Limitation of Liability and Indemnification."

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    Registration Rights Agreement

        We will enter into a registration rights agreement with the various persons receiving our common shares and/or OP units in connection with our formation transactions, including each of our executive officers. See "Shares Eligible for Future Sale—Registration Rights Agreement."

    Contributor Indemnity Agreement

        We expect to cause any personal guaranties that were previously made by certain members of our senior management team in connection with mortgage loans secured by the properties and other assets being contributed to us to be released by the lenders concurrently with the completion of this offering. If we are unsuccessful in obtaining any such release, we will enter into a contributor indemnity agreement with such members of our senior management team pursuant to which we will indemnify each of them with respect to any loss incurred to the lender pursuant to such guaranty.


Credit Facility

        We currently are negotiating the terms of a $          million revolving credit facility that we expect to enter into upon completion of this offering and our formation transactions. There can be no assurance that we will be successful in obtaining such a facility.


Tax Status

        We intend to elect and qualify to be taxed as a REIT for U.S. federal income tax purposes, commencing with the portion of our taxable year ending December 31, 2010. Our qualification as a REIT depends upon our ability to meet, on a continuing basis, through actual investment and operating results, various complex requirements under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our common shares. We believe that our organization and proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT.

        So long as we qualify as a REIT, we generally will not be subject to U.S. federal income tax on our REIT taxable income that we distribute currently to our shareholders. If we fail to qualify for taxation as a REIT in any taxable year, and the statutory relief provisions of the Internal Revenue Code do not apply, we will be subject to U.S. federal income tax at regular corporate rates and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year during which we lost our REIT qualification. Distributions to shareholders in any year in which we are not a REIT would not be deductible by us, nor would they be required to be made. Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income or property, and certain of our subsidiaries that will be taxable REIT subsidiaries will be subject to U.S. federal, state and local income taxes.


Distribution Policy

        To satisfy the requirements to qualify as a REIT, and to avoid paying tax on our income, we intend to make regular quarterly distributions of all, or substantially all, of our REIT taxable income (including net capital gains) to our shareholders. We intend to make a pro rata distribution with respect to the period commencing on completion of this offering and ending on            , 2010, based on a distribution of $      per common share for a full quarter. On an annualized basis, this would be $      per common share, or an annualized distribution rate of approximately      % based on an assumed initial public offering price of $      per common share, which is the mid-point of the price range set forth on the cover page of this prospectus. We intend to maintain our initial distribution rate for the 12-month period following completion of this offering unless our actual results of operations or cash

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flows, economic conditions or other factors differ materially from the assumptions used in projecting our initial distribution rate.

        Our future distributions will be at the sole discretion of our board of trustees, and their form, timing and amount, if any, will depend upon our actual and projected financial condition, liquidity, results of operations and FFO and other factors that could differ materially from our current expectations. Our actual financial condition, liquidity, results of operations, FFO and ability to make distributions to our shareholders will be affected by a number of factors, including the revenue we receive from our properties, our operating expenses, interest expense, recurring capital expenditures, the ability of our tenants to meet their obligations and unanticipated expenditures, as well as prohibitions and other limitations under our financing arrangements and applicable law. To the extent that our cash available for distribution is less than 90% of our REIT taxable income, we may consider various means to cover any such shortfall, including borrowing under our revolving credit facility or other loans, selling certain of our assets or using a portion of the net proceeds we receive from this offering or future offerings of equity, equity-related or debt securities or declaring taxable stock dividends. We do not intend to reduce the annualized distribution rate per common share if the underwriters' overallotment option is exercised.


Restrictions on Ownership and Transfer of Our Shares

        In order to assist us in complying with the limitations on the concentration of ownership of REIT shares imposed by the Internal Revenue Code and for strategic reasons, our declaration of trust generally prohibits any person (other than a person who has been granted an exception) from directly or indirectly, actually or constructively, owning more than 9.8% of the aggregate of our outstanding common shares by value or by number of shares, whichever is more restrictive, or 9.8% of the aggregate of the outstanding shares of any class or series of our preferred shares of beneficial interest, or preferred shares, by value or by number of shares, whichever is more restrictive. However, our declaration of trust permits (but does not require) exceptions to be made for shareholders, provided that our board of trustees determines such exceptions will not jeopardize our qualification as a REIT.

        Our declaration of trust also prohibits any person from (1) beneficially or constructively owning our shares of beneficial interest that would result in our being "closely held" under Section 856(h) of the Internal Revenue Code at any time during the taxable year, (2) transferring our shares if such transfer would result in our shares being beneficially owned by fewer than 100 persons (determined without regard to any rules of attribution), (3) beneficially or constructively owning our shares that would result in our owning (actually or constructively) 10% or more of the ownership interest in a tenant of our real property if income derived from such tenant for our taxable year would result in more than a de minimis amount of non-qualifying income for purposes of the REIT tests and (4) beneficially or constructively owning our shares if such ownership would cause us otherwise to fail to qualify as a REIT.


Corporate Information

        Our principal executive office is located at 390 N. Orange Avenue, Suite 2400, Orlando, Florida 32801. Our telephone number is (407) 650-0593. Our website is                    . The information contained on, or otherwise accessible through, our website does not constitute a part of this prospectus. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website.

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The Offering

Common shares offered by us

                          common shares (plus up to          common shares that we may issue if the underwriters exercise their overallotment option in full)

Common shares to be outstanding after this offering and our formation transactions

                          common shares(1)

Common shares and OP units to be outstanding after this offering and our formation transactions

                          common shares and OP units(1)(2)

Use of proceeds

  We estimate that the net proceeds from this offering, after deducting the underwriting discount and estimated expenses, will be approximately $            million (or $            million if the underwriters exercise their overallotment option in full). We will contribute the net proceeds from this offering to our operating partnership. Our operating partnership intends to use the net proceeds from this offering as follows:

 

•       approximately $389.5 million to repay outstanding indebtedness and to pay costs associated with such repayment and loan assumption fees;

 

•       approximately $141.6 million, including estimated closing costs, to acquire the 1110 Vermont Avenue property;

 

•       approximately $51.9 million to acquire interests in properties from the current holders of those interests and to pay related costs;

 

•       approximately $15.0 million to fund a reserve account for capital expenditures; and

 

•       the remaining approximately $            million for general working capital purposes, including funding future acquisitions, capital expenditures, tenant improvements, leasing commissions and, potentially, making distributions.

  See "Use of Proceeds" on page 50.

Risk factors

  Investing in our common shares involves a high degree of risk. You should carefully read and consider the information set forth under the heading "Risk Factors" beginning on page 19 and other information included in this prospectus.

Proposed NYSE symbol

  "EOLA"

Conflicts of interest

  A portion of the net proceeds from this offering will be used to repay certain indebtedness, the lender of which is an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, one of the underwriters in this offering.

(1)
Excludes (i)             common shares issuable upon the exercise of the underwriters' overallotment option in full and (ii)            common shares reserved for future issuance under our equity incentive plan.

(2)
Includes            OP units expected to be issued in our formation transactions.

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Summary Selected Financial Data

        The following table sets forth summary selected financial and operating data on (i) a pro forma basis for our company and (ii) a combined historical basis for our predecessor. Our predecessor is comprised of the real estate holdings and operations of the entities that are under common control of James R. Heistand. We have not presented historical information for Eola Property Trust because we have not had any corporate activity since our formation other than the issuance of 1,000 common shares to Mr. Heistand in connection with our initial capitalization and because we believe that a discussion of the results of Eola Property Trust would not be meaningful.

        You should read the following summary selected financial data in conjunction with the combined historical consolidated financial statements of our predecessor and the related notes and with "Management's Discussion and Analysis of Financial Condition and Results of Operations," which are included elsewhere in this prospectus.

        The historical combined balance sheet information as of December 31, 2009 and 2008 of our predecessor and the combined statements of operations information for each of the years ended December 31, 2009, 2008 and 2007 of our predecessor have been derived from the historical audited combined financial statements included elsewhere in this prospectus. The historical combined balance sheet information as of June 30, 2010 of our predecessor and the combined statements of operations information for the six months ended June 30, 2010 and 2009 of our predecessor have been derived from the historical unaudited combined financial statements included elsewhere in this prospectus and include all adjustments, consisting of normal recurring adjustments, which management considers necessary for a fair presentation of the historical financial statements for such periods.

        Our unaudited summary selected pro forma condensed consolidated financial statements and operating information as of and for the six months ended June 30, 2010 and for the year ended December 31, 2009 assume completion of this offering and our formation transactions as of the beginning of the periods presented for the operating data and as of the stated date for the balance sheet data. Our pro forma financial information is not necessarily indicative of what our actual financial position and results of operations would have been as of the date and for the periods indicated, nor does it purport to represent our future financial position or results of operations.

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  Six Months Ended June 30,   Year Ended December 31,  
 
   
   
   
   
  Historical
Combined
 
 
   
  Historical Combined    
 
 
  Pro Forma
Consolidated
2010
  Pro Forma
Consolidated
2009
 
 
  2010   2009   2009   2008   2007  
 
  (Unaudited)
  (Unaudited)
  (Unaudited)
  (Unaudited)
   
   
   
 
 
  (In thousands, except per share data and number of properties)
 

Statement of Operations Data:

                                           

Revenues

                                           
 

Rental revenue

        $ 3,381   $ 3,838         $ 7,696   $ 5,116   $ 4,773  
 

Tenant reimbursements

          1,866     1,926           3,953     3,371     3,373  
 

Parking and other income

                               
 

Management and other fees

          11,167     7,398           17,782     16,834     15,097  
                               
   

Total revenues

          16,414     13,162           29,431     25,321     23,243  

Expenses

                                           
 

Property operating expenses

          2,944     3,391           6,237     4,300     4,214  
 

General and administrative

          8,953     6,226           15,731     14,088     15,446  
 

Depreciation and amortization

          2,962     2,200           4,896     3,543     3,227  
 

Property impairment

                        457          
                               
   

Total expenses

          14,859     11,817           27,321     21,931     22,887  
                               

Operating income (loss)

          1,555     1,345           2,110     3,390     356  

Other Income (Expenses)

                                           
 

Equity in earnings (loss) from real estate joint ventures

          (414 )   (2,105 )         (4,863 )   (18,735 )   (2,221 )
 

Interest and other income, net

          70     11           56     201     382  
 

Interest expense

          (1,676 )   (4,163 )         (7,650 )   (5,291 )   (5,158 )
                               
 

Other expenses

                                 
   

Total other income (expenses)

          (2,020 )   (6,257 )         (12,457 )   (23,825 )   (6,997 )
                               

Net income (loss)

          (465 )   (4,912 )         (10,347 )   (20,435 )   (6,641 )

Less: net (income) loss attributable to non-controlling interests - OP units

                                   

Less: net (income) loss attributable to non-controlling interests—property

          (1,548 )   (4,581 )         (9,065 )   (16,153 )   (2,764 )
                               

Net income (loss) attributable to the Company

        $ 1,083   $ (331 )       $ (1,282 ) $ (4,282 ) $ (3,877 )
                               

Per Share Data:

                                           
 

Pro forma earnings (loss) per share—basic and diluted

                                           
 

Pro forma weighted average common shares outstanding—basic and diluted

                                           

Balance Sheet Data (at period end):

                                           
 

Real estate investment, net

        $ 53,973   $ 56,166         $ 54,891   $ 56,929   $ 42,097  
 

Total assets

          87,273     81,455           80,997     84,412     88,220  
 

Notes payable and other debt

          83,122     78,624           80,886     79,325     60,325  
 

Total liabilities

          104,925     92,557           98,710     89,531     70,273  
 

Equity

          (10,059 )   (9,454 )         (11,194 )   (8,319 )   (3,789 )
 

Non-controlling interests - OP units

                                           
 

Non-controlling interests - property

          (7,593 )   (1,649 )         (6,519 )   3,200     21,736  
 

Total equity

          (17,652 )   (11,103 )         (17,713 )   (5,119 )   17,947  
 

Total liabilities and equity

          87,273     81,455           80,997     84,412     88,220  

Other Data:

                                           
 

Number of properties

          55     35           56     34     32  
 

Total rentable square footage

          11,685     5,404           11,705     5,274     5,103  
 

Total rentable square footage—pro rata share

          365     234           373     234     230  
 

Pro forma net operating income

                                           
 

Pro forma net operating income, including pro rata joint venture share

                                           
 

Pro forma earnings before interest, taxes, depreciation and amortization

                                           
 

Pro forma funds from operations

                                           
 

Pro forma diluted funds from operations per share

                                           
 

Cash flows from:

                                           
   

Operating activities

        $ 1,242   $ 2,277         $ 3,703   $ 1,932   $ 1,874  
   

Investing activities

          (2,440 )   128           (1,531 )   (399 )   (19,204 )
   

Financing activities

          2,719     (1,811 )         (3,067 )   33     17,026  

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  Pro Forma  
 
  Six Months Ended
June 30, 2010
  Year Ended
December 31, 2009
 
 
  (In thousands)
  (In thousands)
 

Reconciliation of FFO(1), EBITDA(2) and NOI(3) to Net Income:

             

Net income (loss) attributable to the Company

 
$
 
$
 

Add/(deduct):

             
 

Net income (loss) attributable to non-controlling interests - OP units

             
 

Depreciation and amortization(4)

             
 

Depreciation and amortization—unconsolidated properties

             
 

Gain on sale of discontinued operations

             
           

Funds from operations

  $     $   (5)

Add/(deduct):

             
 

Interest expense, net(4)

             
 

Interest expense, net—unconsolidated properties

             
 

Non real estate related depreciation and amortization(4)

             
 

Non real estate related depreciation and amortization—unconsolidated properties

             
 

Interest and other income, net

             
           

EBITDA

  $     $   (5)

Add/(deduct):

             
 

Management and other fees

             
 

General and administrative

             
 

Property impairment

             
           

Net operating income (NOI), including pro rata joint venture share

  $     $    

Deduct:

             
 

Pro rata joint venture share of net operating income

             
           

Net operating income

  $     $    

(1)
We calculate FFO before non-controlling interest, or FFO, in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT. FFO is defined by NAREIT as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, plus depreciation and amortization of real estate assets (excluding amortization of deferred financing costs), and after adjustments for unconsolidated partnerships and joint ventures.

FFO is a supplemental non-GAAP financial measure. Management uses FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, which do not relate to or are not indicative of our operating performance, FFO provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results of operations, the utility of FFO as a measure of our performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the NAREIT definition as we do, and, therefore, our FFO may not be comparable to such other REITs' FFO. Accordingly, FFO should not be considered as an alternative to net income available to common shareholders (determined in accordance with GAAP) as an indicator of our financial performance. While management believes that FFO is an important supplemental non-GAAP financial measure, management believes it is also important to stress that FFO should not be considered as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity. Further, FFO is not necessarily indicative of sufficient cash flow to fund all of our cash needs, including our ability to service indebtedness or make distributions.

(2)
EBITDA represents net income (losses) excluding: (i) interest; (ii) income tax expense, including deferred income tax benefits and expenses and income taxes applicable to sale of assets; and (iii) depreciation and amortization. EBITDA should not be considered as an alternative to net income available to common shareholders (determined in accordance with GAAP). We believe EBITDA is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our asset base (primarily depreciation and amortization) from our operating results. Our management also uses EBITDA as one measure in determining the value of acquisitions and dispositions.

(3)
We consider NOI to be an appropriate supplemental measure to net income because it helps both investors and management to understand the core operations of our properties. NOI should not be considered as an alternative to net income (determined in accordance with GAAP). We define NOI as operating revenue (including rental revenue, tenant reimbursements and parking and other income) less property operating expenses. NOI excludes depreciation and amortization, impairments, gain/loss on sale of real estate, interest expense and other non-operating items.

(4)
Net of amounts attributable to non-controlling interests in properties.

(5)
Includes an impairment charge of $457 for the year ended December 31, 2009.

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RISK FACTORS

        Investing in our common shares involves risks. You should carefully consider the following risk factors, together with all the other information contained in this prospectus, including our historical and pro forma combined financial statements and the notes thereto, before making an investment decision to purchase our common shares. The occurrence of any of the following risks could materially and adversely affect our business, prospects, financial condition, cash flows, liquidity, FFO and results of operations, the market price of our common shares, our ability to service our indebtedness and our ability to make cash distributions to our shareholders, which could cause you to lose all or a significant part of your investment in our common shares. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled "Forward-Looking Statements."

Risks Related to Our Business and Operations

We will be significantly influenced by the economic and other conditions of the specific markets in which we operate, particularly Atlanta, and also Orlando, Philadelphia, Jacksonville, Washington, D.C. and Tampa, where we have high concentrations of properties.

        The geographic concentration of our properties exposes us to the risk of economic downturns in the markets in which we operate to a greater extent than if our portfolio were more diversified geographically. We have a high concentration of properties located in Atlanta, Orlando, Philadelphia, Jacksonville, Washington, D.C. and Tampa, which accounted for approximately 37.8%, 15.3%, 14.2%, 11.2%, 9.3% and 8.9%, respectively, of the annualized rent of our initial portfolio as of June 30, 2010. Because of the concentration of our properties in these metropolitan areas, and in the Southeastern and mid-Atlantic United States more generally, we depend on the local economic conditions in these markets and are particularly susceptible to adverse conditions in these markets, including developments affecting real estate, employment, changes in demographics and natural disasters, such as hurricanes or floods. All of the markets in which we operate have experienced downturns in recent years that have resulted in, among other things, industry slowdowns, business layoffs and relocations, declining property values, reduced demand for office properties and lower rental rates. We can provide no assurances that these markets will return to historical growth patterns or recover from the recent economic downturn at the same pace as the national market, or at all. Continued adverse economic or real estate developments in the markets in which we have a concentration of properties, or in any of the other markets in which we operate, could materially and adversely affect us.

We have considerable lease expirations in 2010, 2011 and 2012, face strong competition in the leasing market and may be unable to lease vacant space or renew existing leases or re-let space on terms that are as favorable as, or even similar to, the existing leases, or we may expend significant capital in our efforts to re-let space, which may materially and adversely affect us.

        As of June 30, 2010, leases representing approximately 32.5% of the annualized rent of our initial portfolio are scheduled to expire by the end of 2012, assuming no exercise by our tenants of early termination rights (or approximately 40.0% of the annualized rent of our initial portfolio, assuming the exercise of all early termination rights). We compete with a number of other developers, owners and operators of office and office-oriented, mixed-use properties, many of whom may possess more substantial resources and access to capital than we have, as well as greater expertise or flexibility in designing space to meet prospective tenants' needs. As a result, we may be unable to renew leases with our existing tenants and, if our current tenants do not renew their leases, we may be unable to re-let the space to new tenants. Furthermore, to the extent that we are able to renew leases that are scheduled to expire in the short-term or re-let such space to new tenants, heightened competition resulting from adverse market conditions may require us to accept more unfavorable terms, including lower rental rates and rent concessions and tenant improvements that exceed those we have historically

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granted. In addition, recent volatility in the mortgage-backed securities markets has led to foreclosures and sales of foreclosed properties at depressed values, and we may have difficulty competing with competitors who have purchased properties in the foreclosure process, because their lower cost basis in their properties may allow them to offer space at reduced rental rates.

        If our competitors offer space at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose existing or potential tenants, and we may be pressured to reduce our rental rates below those we currently charge or to offer more substantial rent abatements, tenant improvements, early termination rights and other concessions in order to attract and retain tenants. Even if our tenants renew their leases or we are able to re-let the space, the terms and other costs of renewing or re-letting, including the cost of required renovations, increased tenant improvement allowances, leasing commissions, declining rental rates and other potential concessions, may be less favorable than the terms of our current leases and could require significant capital expenditures. If we are unable to lease unoccupied space or renew existing leases or re-let space on favorable terms in a reasonable time, or if rental rates decline or tenant improvement allowances, leasing commissions or other costs increase, we could be materially and adversely affected.

We depend on tenants for our revenue and, accordingly, lease terminations and/or tenant defaults, particularly by one of our more significant tenants, could adversely affect the income produced by our properties and seriously harm our operating performance, which could materially and adversely affect us.

        Our success depends on the financial stability of our tenants, any of which may experience a change in its business at any time that affects its operating performance, liquidity and/or financial condition. For example, the recent economic downturn may have adversely affected, or a delayed recovery may in the future adversely affect, one or more of our tenants. As a result, any of our tenants may fail to make rental payments when due, delay lease commencements, decline to extend or renew its leases upon expiration, exercise early termination rights (to the extent such rights are available to the tenant) or declare bankruptcy or become subject to bankruptcy proceedings. If any of the foregoing were to occur, we could lose significant rental income until the tenant is able to make payments or the space can be re-let to another tenant. If leases are terminated or defaulted upon, we may be unable to lease the property on the same terms (including rent) as the prior leases, or at all, which would result in us incurring a loss. In addition, if any tenant defaults or declares bankruptcy or becomes subject to bankruptcy proceedings, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our rights.

        The occurrence of any of the situations described above, particularly if it involves one of our more significant tenants, could seriously harm our operating performance. Our most significant tenant other than the U.S. Government, based on annualized rent as of June 30, 2010, was CIGNA Corp., which accounted for approximately 7.1% of the annualized rent of our initial portfolio and approximately 48.6% of the annualized rent of Two Liberty Place. Because the revenues generated by that property are substantially dependent upon CIGNA Corp., a bankruptcy proceeding or general downturn in the businesses of this tenant may result in the failure or delay of its rental payments, which could materially and adversely affect us. In addition, as of June 30, 2010, the U.S. Government had 22 leases at 11 different properties in our initial portfolio and accounted for approximately 8.8% of the annualized rent of our initial portfolio. The U.S. Government's failure to renew its leases with us upon their expiration on comparable terms, or at all, could materially and adversely affect us.

If our tenants are unable to obtain financing necessary to continue to operate their businesses and pay us rent, we could be materially and adversely affected.

        Many of our tenants rely on external sources of financing to operate their businesses. The U.S. financial and credit markets continue to experience significant liquidity disruptions, resulting in the unavailability of financing for many businesses. If our tenants are unable to obtain financing necessary

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to continue to operate their businesses, they may be unable to meet their rent obligations to us or enter into new leases with us or they may be forced to declare bankruptcy and reject our leases, which could materially and adversely affect us.

We may be unable to collect balances due from any tenants in bankruptcy.

        We cannot assure you that any tenant that files for bankruptcy protection or becomes subject to bankruptcy proceedings will continue to pay us rent. A bankruptcy filing by or relating to one of our tenants would bar all efforts by us to collect pre-bankruptcy debts from that tenant, or its property, unless we receive an order permitting us to do so from the bankruptcy court. If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim we hold may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. Moreover, restrictions under bankruptcy laws limit the amount of the claim we can make if a lease is rejected. As a result, it is likely that we will recover substantially less than the full value of any unsecured claims we hold.

Adverse global market and economic conditions and dislocations in the credit markets could cause us to recognize impairment charges, which could materially and adversely affect our business, financial condition and results of operations.

        We continually monitor events and changes in circumstances, including those resulting from the recent economic downturn, that could indicate that the carrying value of the real estate and related intangible assets in which we have an ownership interest may not be recoverable. When circumstances indicate that the carrying value of real estate and related intangible assets may not be recoverable, we assess the recoverability of these assets by determining whether the carrying value will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying value, we adjust the real estate and related intangible assets to the fair value and recognize an impairment loss. Because our predecessor acquired many of the properties in our initial portfolio in the last five years, when prices for commercial real estate in many markets were at or near their peaks, we may be particularly susceptible to future non-cash impairment charges as compared to companies that have carrying values well below current market values, which could materially and adversely affect our business, financial condition and results of operations.

        Projections of expected future cash flows require management to make assumptions to estimate future occupancy, rental rates, property operating expenses, the number of months it takes to re-let the property, and the number of years the property is held for investment, among other factors. The subjectivity of assumptions used in the future cash flow analysis, including discount rates, could result in an incorrect assessment of the property's fair value and, therefore, could result in the misstatement of the carrying value of our real estate and related intangible assets and our results of operations. Ongoing adverse market and economic conditions and market volatility will likely continue to make it difficult to value the real estate assets owned by us, as well as the value of our interests in unconsolidated joint ventures and/or our goodwill and other intangible assets. As a result of current adverse market and economic conditions, there may be significant uncertainty in the valuation, or in the stability of, the cash flows, discount rates and other factors related to such assets that could result in a substantial decrease in their value.

Our current and future joint venture investments could be adversely affected by a lack of sole decision-making authority and reliance on the financial condition and liquidity of our joint venture partners.

        Upon completion of this offering and our formation transactions, we will own interests in 29 properties through ten joint ventures, including seven unconsolidated joint ventures, representing approximately 5.3 million rentable square feet, or approximately 1.7 million rentable square feet based

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on our pro rata share. We may enter into additional joint ventures in the future to acquire, develop, improve or dispose of properties, thereby reducing the amount of capital required by us to make investments and diversifying our capital sources for growth. Such joint venture investments involve risks not otherwise present in a wholly owned property or a development or redevelopment project, including the following:

    we do not have exclusive control over the development, financing, leasing, management and other aspects of the property or joint venture, which may prevent us from taking actions that are in our best interest but opposed by our partners;

    two existing joint venture agreements restrict our ability to acquire properties in certain submarkets in which the applicable joint venture owns properties, unless our partner elects on behalf of such joint venture not to pursue the acquisition;

    joint venture agreements often restrict the transfer of a partner's interest or may otherwise restrict our ability to sell the interest when we desire or on advantageous terms;

    our existing joint venture agreements contain, and any future joint venture agreements may contain, buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner's interest or selling its interest to that partner;

    we would not be in a position to exercise sole decision-making authority regarding the property or joint venture, which could create the potential risk of creating impasses on decisions, such as acquisitions or sales;

    a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals;

    a partner may be in a position to take action contrary to our instructions, requests, policies or objectives, including our current policy with respect to maintaining our qualification as a REIT;

    a partner may fail to fund its share of required capital contributions or may become bankrupt, which would mean that we and any other remaining partners generally would remain liable for the joint venture's liabilities;

    our relationships with our partners are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the interests or assets underlying such relationship or may need to purchase such interests or assets at a premium to the market price to continue ownership;

    disputes between us and our partners may result in litigation or arbitration that would increase our expenses and prevent our officers and trustees from focusing their time and efforts on our business and could result in subjecting the properties owned by the joint venture to additional risk; or

    we may, in certain circumstances, be liable for the actions of our partners, and the activities of a partner could adversely affect our ability to qualify as a REIT, even though we do not control the joint venture.

        Any of the above might subject a property to liabilities in excess of those contemplated and adversely affect the value of our current and future joint venture investments.

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Our acquisition of the 1110 Vermont Avenue property is subject to closing conditions that could delay or prevent the acquisition of this property.

        We have entered into a definitive agreement to acquire the 1110 Vermont Avenue property. This acquisition is subject to closing conditions, including lender consents, that could delay or prevent the acquisition of this property. If we are unable to complete this acquisition or experience significant delays in executing the acquisition, our revenues will not include the approximately $11.8 million of annualized rent from 1110 Vermont Avenue as of June 30, 2010. In addition, if we fail to purchase this property, we will have no specific designated use for the net proceeds from this offering allocated to the purchase of this property and investors will be unable to evaluate in advance the manner in which we will invest, or the economic merits of the properties we may ultimately acquire with, such proceeds.

Competition for acquisitions may result in fewer acquisition opportunities and increased prices for properties, which may impede our growth and materially and adversely affect us.

        Our growth depends in part on our ability to identify attractive acquisition candidates or investment opportunities that are compatible with our acquisition strategy. We may not be successful in identifying such candidates or opportunities or in consummating acquisitions on favorable terms, if at all. In addition, we can provide no assurances regarding the availability of, or our ability to source and close, off-market or limited-market deals. Failure to identify or consummate acquisitions on favorable terms, or at all, would impede our growth and materially and adversely affect us.

        Further, we face significant competition for attractive investment opportunities from an indeterminate number of other real estate investors, including investors with significantly greater capital resources and access to capital than we have, such as domestic and foreign corporations and financial institutions, publicly traded and privately held REITs, private institutional investment funds, investment banking firms, life insurance companies and pension funds. Moreover, in light of current market conditions and depressed real estate values, owners of office properties may be reluctant to sell, resulting in fewer acquisition opportunities. As a result of such increased competition and limited opportunities, we may be unable to acquire additional properties as we desire or the purchase price of such properties may be significantly elevated, which may impede our growth and materially and adversely affect us.

Future acquisitions of properties may not yield anticipated returns, may result in disruptions to our business, may strain management resources and/or may be dilutive to our shareholders.

        Our business and growth strategies involve the acquisition of underperforming office properties. In evaluating a particular property, we make certain assumptions regarding the expected future performance of that property. However, newly acquired properties, whether or not they were previously underperforming, may fail to perform as expected, and we may not successfully manage and lease those properties to meet our expectations. In particular, our acquisition activities pose the following risks to our ongoing operations:

    we may be unable to integrate new acquisitions quickly and efficiently, particularly acquisitions of portfolios of properties, into our existing operations;

    we may not achieve the increased occupancy, cost savings and operational efficiencies projected at the time of acquiring a property;

    management may incur significant costs and expend significant resources evaluating and negotiating potential acquisitions, including those that we subsequently are unable to complete;

    we may acquire properties or other real estate-related investments that are not initially accretive to our results upon acquisition, and we may not successfully manage and lease those properties to meet our expectations;

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    management's attention may be diverted to the integration of acquired properties, which in some cases may turn out to be less compatible with our business and growth strategies than originally anticipated;

    the acquired properties may not perform as well as we anticipate due to various factors, including changes in macroeconomic conditions and the demand for office space;

    costs necessary to bring acquired properties up to standards established for their intended market position may exceed our expectations;

    we may be unable to obtain financing for acquisitions on favorable terms or at all;

    we may acquire properties without any recourse, or with only limited recourse, for liabilities, whether known or unknown, such as clean-up of environmental contamination, claims by tenants, vendors or other persons against the former owners of the properties, and claims for indemnification by general partners, trustees, officers, and others indemnified by the former owners of the properties; and

    we may issue common shares or OP units as consideration for a property acquisition, which would dilute our current shareholders if such acquisition is not accretive.

We may acquire properties with high vacancy rates, which could reduce our operating income and materially and adversely affect us.

        The recent economic downturn has reduced demand for office space, which is evidenced by increased vacancy rates. To the extent that the operating stress caused by such increased vacancy rates puts pressure on owners to seek liquidity, including through sales of their commercial real estate assets, we may acquire properties from these owners, and any properties we acquire from these owners may have high vacancy rates. We may be unable to lease up these properties successfully, and their high vacancy rates may prevent us from increasing, and may cause us to lower, rents and may force us to grant tenant improvements and other concessions to a greater extent than we have historically, all of which could reduce our operating income from those properties and materially and adversely affect us.

Our success depends on key personnel whose continued service is not guaranteed and each of whom would be difficult to replace.

        Our success depends upon the continued contributions of certain key personnel, particularly James R. Heistand, our Executive Chairman, and Rudy Prio Touzet, our President and Chief Executive Officer. Each of these executives would be difficult to replace because of his in-depth knowledge of our markets, extensive experience acquiring, financing and managing office properties, and long-standing relationships with brokers, lenders and institutional buyers and sellers in the real estate industry in our key markets. In addition, our property-level managers have long-standing relationships with local businesses and existing tenants and on-the-ground knowledge of our existing properties and target markets. Although we will enter into employment agreements upon completion of this offering with each of our executive officers, including Messrs. Heistand and Touzet, we can provide no assurances that any of them will remain employed by us. The loss of services of one or more of these executives or property-level managers could diminish our business and investment opportunities and weaken our relationships with lenders, business partners and existing and prospective tenants and thus slow our future growth, which could materially and adversely affect us. Further, such a loss could be negatively perceived in the capital markets, which could reduce the market value of our common shares.

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We may make structured debt or equity investments, which will subject us to unique risks associated with these kinds of investments.

        We may from time to time make structured debt or equity investments in which, at the time of our investment, we do not control the underlying property. These investments will involve special risks relating to the particular entity in which we invest, including its financial condition, liquidity, results of operations, business and prospects. In particular, these investments likely will be subordinated to other obligations. If an entity in which we invest defaults, there may not be sufficient funds remaining for us after payment to the holders of senior obligations. In that event, we would not recover some or all of our investment. In addition, even if we are able to foreclose on any underlying property following a default, we would be substituted for the defaulting entity and, to the extent income generated by any underlying property is not sufficient to meet outstanding debt obligations on the property, we may need to commit substantial additional capital to stabilize the property and prevent additional defaults. In addition, these investments will subject us to the risks inherent with real estate investments referred to elsewhere in this prospectus. Significant losses related to these kinds of investments could materially and adversely affect us.

We may become subject to litigation, which could have a material and adverse effect on us.

        In the future we may become subject to litigation, including claims relating to our operations, offerings and otherwise in the ordinary course of business. Some of these claims may result in significant defense costs and potentially significant judgments against us, some of which are not, or cannot be, insured against. We generally intend to defend ourselves vigorously; however, we cannot be certain of the ultimate outcomes of any claims that may arise in the future. Resolution of these types of matters against us may result in our having to pay significant fines, judgments or settlements, which, if uninsured, or if the fines, judgments and settlements exceed insured levels, could adversely impact our earnings and cash flows, thereby having an adverse effect on our financial condition, results of operations and market price of our common shares. Certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and cash flows, expose us to increased risks that would be uninsured, and/or adversely impact our ability to attract officers and trustees.

Risks Related to the Real Estate Industry

Our performance and value are subject to risks associated with real estate and with the real estate industry.

        Our economic performance and the value of our real estate assets, and consequently the value of our securities, are subject to the risk that if our properties do not generate revenues sufficient to meet our operating expenses, including debt service and capital expenditures, our cash flow and ability to make distributions to our shareholders will be adversely affected. In addition, there are significant expenditures associated with an investment in real estate (such as mortgage payments, real estate taxes and maintenance costs) that generally do not decline when circumstances reduce the income from the property. The following factors, among others, may adversely affect the operating performance and long- or short-term value of our properties:

    changes in the national, regional and local economic climate, particularly in markets in which we have a concentration of properties;

    local office market conditions, such as changes in the supply of, or demand for, space in properties similar to those that we own within a particular area;

    the financial stability of our tenants, including bankruptcies, financial difficulties or lease defaults by our tenants;

    vacancies or our inability to rent space on favorable terms;

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    the attractiveness of our properties to potential tenants;

    changes in interest rates and availability of permanent mortgage funds that may render the sale of a property difficult or unattractive or otherwise reduce returns to shareholders;

    changes in operating costs and expenses, including costs for maintenance, insurance and real estate taxes, and our ability to control rents in light of such changes;

    the need to periodically fund the costs to repair, renovate and re-let space;

    earthquakes, tornadoes, hurricanes and other natural disasters, civil unrest, terrorist acts or acts of war, which may result in uninsured or underinsured losses;

    changes in, or increased costs of compliance with, laws and/or governmental regulations, including those governing usage, zoning, the environment and taxes;

    decreases in the underlying value of our real estate; and

    changing submarket demographics.

        In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate could result in a general decrease in rents or an increased occurrence of defaults under existing leases, which would adversely affect our financial condition and results of operations. Any of the above factors may prevent us from realizing growth or maintaining the value of our properties.

The illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties.

        Real estate investments, including high-quality office properties such as many of those in our portfolio, are relatively illiquid. As a result, we may not be able to sell a property or properties quickly or on favorable terms in response to changing economic, financial and investment conditions when it otherwise may be prudent to do so. Current conditions in the U.S. economy and credit markets have made it difficult to sell properties at attractive prices. We cannot predict whether we will be able to sell any property for the price or on the terms set by us or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. We may be required to expend funds to correct defects or to make improvements before a property can be sold, and we cannot provide any assurances that we will have funds available to correct such defects or to make such improvements. Our inability to dispose of assets at opportune times or on favorable terms could adversely affect our cash flows and results of operations, thereby limiting our ability to make distributions to shareholders.

        Moreover, the Internal Revenue Code imposes restrictions on a REIT's ability to dispose of properties that are not applicable to other types of real estate companies. In particular, the tax laws applicable to REITs require that we hold our properties for investment, rather than primarily for sale in the ordinary course of business, which may cause us to forego or defer sales of properties that otherwise would be in our best interests. Therefore, we may not be able to vary our portfolio promptly in response to economic or other conditions or on favorable terms, which may adversely affect our cash flows, our ability to make distributions to shareholders and the market price of our common shares.

        In addition, our ability to dispose of some of our properties could be constrained by their tax attributes. Properties which we own for a significant period of time or which we acquire through tax deferred contribution transactions in exchange for OP units in our operating partnership may have low tax bases. If we dispose of these properties outright in taxable transactions, we may be required to distribute a significant amount of the taxable gain to our shareholders under the requirements of the Internal Revenue Code for REITs, which in turn would impact our cash flow and increase our leverage. In some cases, without incurring additional costs, we may be restricted from disposing of properties

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contributed in exchange for our OP units under tax protection agreements with contributors. To dispose of low basis or tax-protected properties efficiently, we may from time to time use like-kind exchanges, which qualify for non-recognition of taxable gain, but can be difficult to consummate and result in the property for which the disposed assets are exchanged inheriting their low tax bases and other tax attributes (including tax protection covenants).

Many real estate costs are fixed, even if income from our properties decreases.

        Many real estate costs, such as real estate taxes, insurance premiums and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease, a tenant fails to pay rent or other circumstances cause a reduction in property revenues. In addition, newly acquired properties may not produce significant revenues immediately, and the property's operating cash flow may be insufficient to pay the operating expenses and debt service associated with these new properties. If we are unable to offset real estate costs with sufficient revenues across our portfolio, our financial performance and liquidity could be materially and adversely affected.

Uninsured losses or losses in excess of our insurance coverage could materially and adversely affect us.

        Upon completion of this offering and our formation transactions, we will carry comprehensive general liability, fire, extended coverage, business interruption, rental loss coverage and umbrella liability coverage on all of our properties and earthquake, wind, flood and hurricane coverage on properties in areas where such coverage is warranted. We believe the policy specifications and insured limits of these policies are adequate and appropriate given the relative risk of loss, the cost of the coverage and industry practice. However, we may be subject to certain types of losses that are generally catastrophic in nature, such as losses due to wars, conventional terrorism, Chemical, Biological, Nuclear and Radiation, or CBNR, acts of terrorism and, in some cases, earthquakes, hurricanes and flooding, either because such coverage is not available or is not available at commercially reasonable rates. If we experience a loss that is uninsured or that exceeds policy limits, we could lose all or a significant portion of the capital we have invested in the damaged property, as well as the anticipated future revenue from the property. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it impractical or undesirable to use insurance proceeds to replace a property after it has been damaged or destroyed. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged. Furthermore, we may not be able to obtain adequate insurance coverage at reasonable costs in the future, as the costs associated with property and casualty renewals may be higher than anticipated.

        In addition, insurance risks associated with potential terrorism acts could sharply increase the premiums we pay for coverage against property and casualty claims. With the enactment of the Terrorism Risk Insurance Program Reauthorization Act of 2007, United States insurers cannot exclude conventional (non-CBNR) terrorism losses. These insurers must make terrorism insurance available under their property and casualty insurance policies; however, this legislation does not regulate the pricing of such insurance. In some cases, mortgage lenders have begun to insist that commercial property owners purchase coverage against terrorism as a condition of providing mortgage loans. Such insurance policies may not be available at a reasonable cost, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate coverage for such losses.

        Any uninsured losses or losses in excess of our insurance coverage as a result of the foregoing could materially and adversely affect us.

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Costs of complying with governmental laws and regulations may adversely affect our results of operations and liquidity and reduce the cash available for distribution to our shareholders.

        All real property and the operations conducted on real property are subject to federal, state, and local laws and regulations relating to environmental protection and human health and safety. Tenants' ability to operate and to generate income to pay their lease obligations may be affected by permitting and compliance obligations arising under such laws and regulations. Some of these laws and regulations may impose joint and several liability on tenants, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings.

        Compliance with new laws or regulations or stricter interpretation of existing laws by agencies or the courts may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. Additionally, our tenants' operations, the existing condition of land when we buy it, operations in the vicinity of our properties such as the presence of underground storage tanks or activities of unrelated third parties may affect our properties. In addition, there are various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply, and which may subject us to liability in the form of fines or damages for noncompliance. Any material expenditures, fines or damages we must pay will adversely affect our results of operations and liquidity and our ability to make distributions to our shareholders.

We face possible risks associated with the physical effects of climate change.

        We cannot predict with certainty whether climate change is occurring and, if so, at what rate. However, the physical effects of climate change could have a material adverse effect on our properties, operations and business. For example, many of our properties are located along the Gulf and East coasts. To the extent climate change causes changes in weather patterns, our markets could experience increases in storm intensity and rising sea-levels. Over time, these conditions could result in declining demand for office space in our buildings or our inability to operate the buildings at all. Climate change also may have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy and increasing the cost of snow removal at our properties. There can be no assurance that climate change will not have a material adverse effect on our properties, operations or business.

As the present or former owner or operator of real property, we could become subject to liability for environmental contamination, regardless of whether we caused such contamination, which could materially and adversely affect us.

        Under various federal, state, and local environmental laws, ordinances, and regulations, a current or former owner or operator of real property may be liable for the cost to remove or remediate hazardous or toxic substances, wastes, or petroleum products on, under, from, or in such property. These costs could materially and adversely affect us, and liability under these laws may attach whether or not the owner or operator knew of, or was responsible for, the presence of such contamination. Even if more than one person may have been responsible for the contamination, each liable party may be held entirely responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a property for damages based on personal injury, natural resources or property damage and/or for other costs, including investigation and clean-up costs, resulting from the environmental contamination. The presence of contamination on one of our properties, or the failure to properly remediate a contaminated property, could give rise to a lien in favor of the government for costs it may incur to address the contamination, or otherwise adversely affect our ability to sell or lease the property or borrow using the property as collateral. In addition, if contamination is discovered on

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our properties, environmental laws may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures on our part or prevent us from entering into leases with prospective tenants.

As the owner of real property, we could become subject to liability for adverse environmental conditions in the buildings on our properties, which could materially and adversely affect us.

        Some of our properties contain asbestos-containing building materials. Environmental laws require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos, adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators who fail to comply with these requirements. In addition, environmental laws and the common law may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos. Some of our properties also may contain or develop harmful mold or suffer from other air quality issues. Any of these materials or conditions could result in liability for personal injury and costs of remediating adverse conditions, which could materially and adversely affect us.

As the owner of real property, we could become subject to liability for failure to comply with environmental requirements regarding the handling and disposal of regulated substances and wastes or for non-compliance with health and safety requirements, which requirements are subject to change.

        Some of our tenants may handle regulated substances and wastes as part of their operations at our properties. Environmental laws regulate the handling, use, and disposal of these materials and subject our tenants, and potentially us, to liability resulting from non-compliance with these requirements. The properties in our portfolio also are subject to various federal, state, and local health and safety requirements, such as state and local fire requirements. If we or our tenants fail to comply with these various requirements, we might incur governmental fines or private damage awards. Moreover, we do not know whether or the extent to which existing requirements or their enforcement will change or whether future requirements will require us to make significant unanticipated expenditures that will materially and adversely impact our financial condition, results of operations, cash flows, cash available for distribution to shareholders, the market price of our common shares, and our ability to satisfy our debt service obligations. If our tenants become subject to liability for noncompliance, it could affect their ability to make rental payments to us.

Compliance or failure to comply with the Americans with Disabilities Act and other safety regulations and requirements could result in substantial costs.

        Under the Americans with Disabilities Act of 1990, or the ADA, places of public accommodation must meet certain federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. Although we believe that our properties are currently in material compliance with these regulatory requirements, we have not conducted an audit or investigation of all of our properties to determine our compliance with the ADA, and we cannot predict the ultimate cost of compliance with the ADA or other legislation. If one or more of our properties is not in compliance with the ADA or other legislation, we would be required to incur additional costs to achieve compliance. If we are required to make unanticipated expenditures to comply with the ADA, including removing access barriers, our cash flows and the amounts available for distribution to our shareholders may be adversely affected.

        Our properties also are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or

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whether compliance with future requirements would require significant unanticipated expenditures that would affect our cash flow and results of operations. If we incur substantial costs to comply with the ADA or other safety regulations and requirements, our financial condition, results of operations, the market price of our common shares, cash flows and our ability to satisfy our debt obligations and to make distributions to our shareholders could be adversely affected.

We are exposed to risks associated with property development and redevelopment.

        We may engage in development and redevelopment activities with respect to certain of our properties. To the extent that we do so, we will be subject to certain risks, including the availability and pricing of financing on favorable terms or at all; construction and/or lease-up delays; cost overruns, including construction costs that exceed our original estimates; contractor and subcontractor disputes, strikes, labor disputes or supply disruptions; failure to achieve expected occupancy and/or rent levels within the projected time frame, if at all; and delays with respect to obtaining or the inability to obtain necessary zoning, occupancy, land use and other governmental permits, and changes in zoning and land use laws. These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of development or redevelopment activities once undertaken, any of which could materially and adversely affect us.

Future terrorist attacks in the major metropolitan areas in which we own properties could significantly impact the demand for, and value of, our properties.

        Our portfolio maintains significant holdings in markets that have been and continue to be a high risk geographical area for terrorism and threats of terrorism, including Washington, D.C. Future terrorist attacks and other acts of terrorism or war would severely impact the demand for, and value of, our properties. Terrorist attacks in and around any of the major metropolitan areas in which we own properties also could directly impact the value of our properties through damage, destruction, loss or increased security costs, and could thereafter materially impact the availability or cost of insurance to protect against such acts. A decrease in demand could make it difficult to renew or re-let our properties at lease rates equal to or above historical rates, or at all. To the extent that any future terrorist attack otherwise disrupts our tenants' businesses, it may impair their ability to make timely payments under their existing leases with us, which would harm our operating results and could materially and adversely affect us.

Risks Related to Our Financing Activities

We expect to have approximately $413.4 million of consolidated indebtedness outstanding following this offering and are likely to incur additional mortgage and other indebtedness in the future, which may increase our business risks.

        Upon completion of this offering and our formation transactions, we anticipate that our total consolidated indebtedness will be approximately $413.4 million and our pro rata share of unconsolidated indebtedness will be approximately $87.8 million. In addition, we expect to enter into a $             million revolving credit facility upon completion of this offering, and we are likely to incur additional indebtedness to acquire properties or make other real estate-related investments, to fund property improvements and other capital expenditures or for other corporate purposes. We intend to maintain a ratio of our pro forma share of net debt to EBITDA in a target range of            to            ; however, we can provide no assurances that we will be successful in maintaining this ratio. Moreover, our organizational documents contain no limitations on the amount of indebtedness that we may incur; thus, we may become more highly leveraged in the future without shareholder approval.

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        Our level of debt and the limitations imposed on us by our financing agreements could have significant adverse consequences on us, including the following:

    our cash flow may be insufficient to allow us to meet our debt service requirements and to repay our debt, operate our properties, make distributions to our shareholders or successfully execute our growth strategy;

    we may be unable to borrow additional funds as needed on favorable terms, or at all, which could, among other things, adversely affect our ability to fund acquisitions or meet operational needs;

    we may be unable to refinance our indebtedness at maturity or the available refinancing terms may be less favorable than the terms of our original indebtedness;

    because a portion of our debt bears interest at variable rates, increases in interest rates could materially increase our interest expense;

    we may be forced to dispose of one or more of our properties, possibly on unfavorable terms;

    we may be at a competitive disadvantage compared to our competitors that have less debt;

    we may default on our payment obligations or violate restrictive covenants, in which case the lenders may accelerate our debt obligations and/or foreclose on our properties or our interests in the entities that own the properties that secure their loans; and

    our default under any indebtedness with cross-collateralization or cross default provisions could result in a default on other indebtedness.

        If any one of these events were to occur, we could be materially and adversely affected.

Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in a property or group of properties subject to mortgage debt.

        Incurring mortgage or other secured debt obligations increases the risk of loss because defaults on indebtedness secured by properties may result in lenders initiating foreclosure actions. If we default on any of our mortgage or other secured debt obligations, we could lose the property securing the loan that is in default. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but we would not receive any cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Internal Revenue Code. In addition, we may give full or partial guarantees to lenders of mortgage debt on behalf of the entities that own our properties. When we give a guarantee on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any of our properties are foreclosed on due to a default, our ability to pay cash distributions to our shareholders will be limited.

Our growth depends on external sources of capital that are outside our control and may not be available to us on favorable terms or at all.

        In order to qualify and maintain our qualification as a REIT, we must distribute at least 90% of our REIT taxable income annually, determined without regard to the dividends paid deduction and excluding any net capital gain. In addition, to the extent that we distribute less than 100% of our REIT taxable income, including any net capital gains, we will be subject to income tax at regular corporate rates. Because of these distribution requirements, we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow. Consequently, we intend to rely

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on third-party sources to fund a substantial portion of our future capital needs. We cannot assure you that capital will be available from such sources on favorable terms or at all. Any additional debt we incur will increase our leverage, expose us to the risk of default and impose operating restrictions on us, and any additional equity we raise could be dilutive to existing shareholders. Our access to third-party sources of capital depends, in part, on:

    general market conditions;

    the market's view of the quality of our assets;

    the market's perception of our growth potential;

    our current debt levels;

    our current and expected future earnings;

    our cash flow and cash distributions; and

    the market price of our common shares.

        If we are unable to obtain capital from third party sources, we may not be able to acquire or develop properties when strategic opportunities exist, meet the capital and operating needs of our properties, satisfy our debt service obligations or make the cash distributions to our shareholders necessary to qualify and maintain our qualification as a REIT.

Disruptions in the financial markets could adversely affect our ability to obtain sufficient third party financing for our capital needs, including expansion, acquisition and other activities, on favorable terms or at all, which could materially and adversely affect us.

        The U.S. stock and credit markets recently have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many stocks to fluctuate substantially and the spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and in some cases have resulted in the unavailability of financing, even for companies which otherwise are qualified to obtain financing. In addition, several banks and other institutions that historically have been reliable sources of financing have gone out of business, which has reduced significantly the number of lending institutions and the availability of credit. Continued volatility and uncertainty in the stock and credit markets may negatively impact our ability to access additional financing for our capital needs, including expansion, acquisition activities and other purposes, on favorable terms or at all, which may negatively affect our business. Additionally, due to this uncertainty, we may in the future be unable to refinance or extend our debt, or the terms of any refinancing may not be as favorable as the terms of our existing debt. If we are not successful in refinancing our debt when it becomes due, we may be forced to dispose of properties on disadvantageous terms, which might adversely affect our ability to service other debt and to meet our other obligations. A prolonged downturn in the financial markets may cause us to seek alternative sources of potentially less attractive financing and may require us to further adjust our business plan accordingly. These events also may make it more difficult or costly for us to raise capital through the issuance of new equity capital or the incurrence of additional secured or unsecured debt, which could materially and adversely affect us.

Existing loan agreements contain, and future financing arrangements likely will contain, restrictive covenants relating to our operations, which could materially and adversely affect us and our ability to make distributions to our shareholders.

        We are subject to certain restrictions pursuant to the restrictive covenants of our outstanding indebtedness, which may affect our distribution and operating policies and our ability to incur additional indebtedness. Loan documents evidencing our existing indebtedness (including our proposed

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$       million revolving credit facility) contain, and loan documents entered into in the future likely will contain, certain operating covenants that limit our ability to further mortgage our properties or discontinue insurance coverage. In addition, these agreements generally contain financial covenants, including certain coverage ratios and limitations on our ability to incur secured and unsecured debt, make dividend payments, sell all or substantially all of our assets, and engage in mergers and consolidations and certain acquisitions. Covenants under our existing indebtedness do, and under any future indebtedness likely will, restrict our ability to pursue certain business initiatives or certain acquisition transactions. If we fail to meet or satisfy any of these covenants in our debt agreements, we would be in default under these agreements, which could result in a cross-default under other debt agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their respective interests against existing collateral. In addition, certain of our debt agreements contain, and debt agreements entered into in the future may contain, specific cross-default provisions with respect to specified other indebtedness, giving the lenders the right to declare a default if we are in default under other loans in some circumstances. A default also could limit significantly our financing alternatives, which could cause us to curtail our investment activities and/or dispose of assets when we otherwise would not choose to do so. If we default on several of our debt agreements or any single significant debt agreement, we could be materially and adversely affected.

Failure to hedge effectively against interest rate changes may adversely affect our results of operations.

        We seek to manage our exposure to interest rate volatility by entering into interest rate hedging arrangements, such as interest rate cap agreements and interest rate swap agreements. Although these arrangements are intended to lessen the impact of rising interest rates on us, they also expose us to the risks that the other parties to the agreements will not perform their obligations, that these arrangements will not be effective in reducing our exposure to interest rate changes and that a court could rule that such agreements are unenforceable. We also could incur significant costs associated with the settlement of the agreements, and the underlying transactions may fail to qualify as highly effective cash flow hedges under Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 815, Derivatives and Hedging. At the time of this offering, we expect that a portion of our total indebtedness will be floating rate debt, a substantial portion of which is subject to hedging agreements. Hedging may reduce the overall returns on our investments, and the failure to hedge effectively against interest rate changes may materially adversely affect our results of operations.

        When a hedging agreement is required under the terms of our debt, it is often a condition, among other conditions, that the hedge counterparty agree to maintain a specified credit rating. With the current volatility in the financial markets, there is a reduced pool of eligible counterparties that are able to meet or are willing to assume these conditions, which has resulted in an increased cost for hedging agreements. This will make it more difficult and costly to enter into hedging agreements in the future. Additionally, due to the current volatility in the financial markets, there is an increased risk that hedge counterparties could have their credit rating downgraded to a level that would not be acceptable under the related debt. If we were unable to renegotiate the credit rating condition with the lender or find an alternative counterparty with an acceptable credit rating, we could be in default under the related debt, which, in the case of any secured debt, would subject us to the risk of foreclosure of the collateral.

Risks Related to Our Organization and Structure

Our management has limited experience operating a REIT and a public company, which may impede their ability to successfully manage our business.

        We have no history operating as a REIT or as a public company. In addition, certain members of our board of trustees and our senior management team have limited experience operating a business in

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accordance with the Internal Revenue Code requirements for maintaining qualification as a REIT and operating a public company. Upon completion of this offering, we will be required to develop and implement substantial control systems and procedures to assist us in qualifying and maintaining our qualification as a public REIT, satisfying our periodic and current reporting requirements under applicable SEC regulations and complying with NYSE listing standards. As a result, substantial work on our part will be required to implement and execute appropriate reporting and compliance processes, including internal control over financial reporting, assess their design, remediate any deficiencies identified and test the operation of such processes. We have limited experience implementing and executing such processes in a public company, and this process is expected to be both costly and challenging. In particular, we note that our former independent auditor identified a material weakness in our internal controls due to a lack of a sufficient number of trained accounting and finance personnel, which we are in the process of remediating. We cannot assure you that our management's past experience will be sufficient to develop and implement these systems and procedures and to operate our company successfully. Failure to effectively develop and implement such systems, policies and procedures could hinder our ability to operate as a public company and adversely affect our results of operations, cash flows and ability to make distributions to our shareholders. Furthermore, if we fail to qualify and maintain our qualification as a REIT, our distributions to shareholders would not be deductible for U.S. federal income tax purposes and we would be required to pay corporate tax at applicable rates on our taxable income, which would substantially reduce our earnings and may reduce the market price of our common shares.

We may pursue less vigorous enforcement of terms of the contribution and other agreements entered into in connection with our formation transactions because of conflicts of interest with certain of our officers and related parties.

        Pursuant to the contribution and other agreements entered into in connection with our formation transactions, certain of our executive officers and other contributors made limited representations and warranties to us regarding potential material adverse impacts on the entities and assets to be acquired by us in our formation transactions and agreed to indemnify us and our operating partnership for breaches of such representations and warranties. In addition, we will enter into an employment agreement with each of our executive officers. Because of our desire to maintain ongoing relationships with our executive officers and other contributors, we may choose not to enforce, or to enforce less vigorously, our rights under these agreements.

The consideration paid by us in exchange for the contribution of properties and other assets to us in our formation transactions may exceed the fair market value of these assets.

        We did not obtain independent fairness opinions in connection with our formation transactions and, in certain instances, the amount of consideration we will pay for our assets was not negotiated on an arm's length basis. Further, the value of the OP units and our common shares that we will issue as consideration for certain of the properties and assets that we will acquire in our formation transactions will increase or decrease if the market price of our common shares increases or decreases. The initial public offering price of our common shares will be determined in consultation with the underwriters. Among the factors that will be considered are our record of operations, our management, our historical and projected net income, FFO and cash available for distribution, our anticipated dividend yield, our growth prospects, the quality of our portfolio and our tenants, the current market valuations, financial performance and dividend yields of publicly traded companies considered by us and the underwriters to be comparable to us and the current state of the commercial real estate industry and the economy as a whole. The initial public offering price does not necessarily bear any relationship to the book value or fair market value of our properties and assets. As a result, the fair market value of the equity securities we issue and/or the amount of cash we pay to the contributors and sellers of properties and other assets in our formation transactions may exceed the fair market value of these properties and assets.

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Certain of our executive officers exercised significant influence with respect to the terms of our formation transactions.

        We did not conduct arm's length negotiations with certain of our executive officers with respect to the terms of our formation transactions, including the terms of the contribution agreements and the employment agreements with our executive officers. Therefore, the terms of these agreements may not be as favorable to us as if they were so negotiated. In structuring our formation transactions, certain of our executive officers exercised significant influence on the type and level of benefits that they and other members of our senior management team will receive from us, including the amount of cash and number of our common shares or OP units that they will receive in connection with their contribution to us of our properties and the benefits our senior management team will receive from us for their services.

We may assume unknown liabilities in connection with our formation transactions.

        As part of our formation transactions, we will acquire entities and assets that are subject to existing liabilities, some of which may be unknown or unquantifiable at the time this offering is completed. These assumed liabilities might include liabilities for cleanup or remediation of undisclosed environmental conditions, claims by tenants, vendors or other persons dealing with our predecessor (that had not been asserted or threatened prior to this offering), tax liabilities and accrued but unpaid liabilities incurred in the ordinary course of business or otherwise. While in some instances we may have the right to seek reimbursement against an insurer or another third party, recourse against the contributors and sellers of our properties and other assets for certain of these liabilities will be limited. There can be no assurance that we will be entitled to any such reimbursement or that we ultimately will be able to recover in respect of such rights for any of these historical liabilities, which may adversely affect our financial condition, results of operations, cash flows and the market price of our common shares.

Conflicts of interest exist or could arise in the future between the interests of our shareholders and the interests of holders of OP units, which may impede business decisions that could benefit our shareholders.

        Conflicts of interest exist or could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our operating partnership or any partner thereof, on the other. Our trustees and officers have duties to our company and our shareholders under applicable Maryland law in connection with their management of our company. At the same time, we, as general partner, have fiduciary duties and obligations to our operating partnership and its limited partners under Delaware law and the partnership agreement of our operating partnership in connection with the management of our operating partnership. Our duties as general partner to our operating partnership and its partners may come into conflict with the duties of our trustees and officers to our company and our shareholders. These conflicts may be resolved in a manner that is not in the best interests of our shareholders.

        Additionally, the partnership agreement of our operating partnership expressly limits our liability by providing that neither we, as the general partner of our operating partnership, nor any of our trustees or officers, will be liable or accountable for damages to our operating partnership, the limited partners or assignees for errors in judgment, mistakes of fact or law or for any act or omission if we, or such trustee or officer, acted in good faith. In addition, our operating partnership is required to indemnify us, and our officers, trustees, employees, agents and designees to the fullest extent permitted by applicable law from and against any and all claims arising from operations of our operating partnership, unless it is established that (1) the act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, (2) the indemnified party actually received an improper personal benefit in money, property or services or (3) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that

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the act or omission was unlawful. The provisions of Delaware law that allow the fiduciary duties of a general partner to be modified by a partnership agreement have not been resolved in a court of law, and we have not obtained an opinion of counsel covering the provisions set forth in the partnership agreement that purport to waive or restrict our fiduciary duties that would be in effect were it not for the partnership agreement.

The share ownership limits imposed by the Internal Revenue Code for REITs and our declaration of trust may restrict our business combination opportunities.

        In order for us to maintain our qualification as a REIT under the Internal Revenue Code, not more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) at any time during the last half of each taxable year following our first year. Our declaration of trust, with certain exceptions, authorizes our board of trustees to take the actions that are necessary and desirable to preserve our qualification as a REIT. Unless exempted by our board of trustees, no person may own more than 9.8% of the aggregate of our outstanding common shares by value or by number of shares, whichever is more restrictive, or 9.8% of the aggregate of the outstanding shares of any series or class of our preferred shares by value or by number of shares, whichever is more restrictive. Our board may, in its sole discretion, grant an exemption to the share ownership limits, subject to certain conditions and the receipt by our board of certain representations and undertakings. In addition, our board may change the share ownership limits as described under "Certain Provisions of Maryland Law and Our Declaration of Trust and Bylaws." Our declaration of trust also prohibits any person from (a) beneficially or constructively owning, as determined by applying certain attribution rules of the Internal Revenue Code, our shares that would result in us being "closely held" under Section 856(h) of the Internal Revenue Code or that would otherwise cause us to fail to qualify as a REIT or to have significant non-qualifying income from "related" parties or (b) transferring shares if such transfer would result in our shares being owned by fewer than 100 persons. The ownership limits imposed under the Internal Revenue Code and described in clause (a) of this paragraph are based upon direct or indirect ownership by "individuals" during the last half of a tax year. The share ownership limits contained in our declaration of trust key off the ownership at any time by any "person," which term includes entities. These share ownership limits in our declaration of trust are common in REIT charters and are intended to provide added assurance of compliance with the tax law requirements and to minimize administrative burdens. However, the share ownership limits also might delay or prevent a transaction or a change in our control that might involve a premium price for our common shares or otherwise be in the best interests of our shareholders.

Our authorized but unissued common shares and preferred shares may prevent a change in our control that might involve a premium price for our common shares or otherwise be in the best interests of our shareholders.

        Our declaration of trust authorizes us to issue additional authorized but unissued common or preferred shares. In addition, our board of trustees may, without shareholder approval, amend our declaration of trust to increase the aggregate number of our common shares or the number of shares of any class or series of preferred shares that we have authority to issue and classify or reclassify any unissued common shares or preferred shares and set the preferences, rights and other terms of the classified or reclassified shares. As a result, our board of trustees may establish a series of common shares or preferred shares that could delay or prevent a transaction or a change in our control that might involve a premium price for our common shares or otherwise be in the best interests of our shareholders.

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Certain provisions of Maryland law could inhibit changes in control.

        Certain provisions of the Maryland General Corporation Law, or MGCL, that are applicable to Maryland real estate investment trusts may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in our control under circumstances that otherwise could provide the holders of our common shares with the opportunity to realize a premium over the then-prevailing market price of our common shares, including:

    "business combination" provisions that, subject to limitations, prohibit certain business combinations between us and an "interested shareholder" (defined generally as any person who beneficially owns, directly or indirectly, 10% or more of the voting power of our voting shares or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstanding voting shares at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter impose fair price and/or supermajority and shareholder voting requirements on these combinations; and

    "control share" provisions that provide that "control shares" of our company (defined as voting shares that, when aggregated with other shares controlled by the shareholder, entitle the shareholder to exercise one of three increasing ranges of voting power in electing trustees) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or control of issued and outstanding "control shares") have no voting rights except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

        As permitted by Maryland law, we have elected, by resolution of our board of trustees, to opt out of the business combination provisions of the MGCL and, pursuant to a provision in our bylaws, to exempt any acquisition of our shares from the control share provisions of the MGCL. However, our board of trustees may by resolution elect to repeal the exemption from the business combination provisions of the MGCL and may by amendment to our bylaws opt into the control share provisions of the MGCL at any time in the future.

        Certain provisions of the MGCL applicable to Maryland real estate investment trusts permit our board of trustees, without shareholder approval and regardless of what is currently provided in our declaration of trust or bylaws, to adopt certain mechanisms, some of which (for example, a classified board) we do not have. These provisions may have the effect of limiting or precluding a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in our control under circumstances that otherwise could provide the holders of our common shares with the opportunity to realize a premium over the then current market price. Our declaration of trust contains a provision whereby we will elect, at such time as we become eligible to do so, to be subject to the provisions of Title 3, Subtitle 8 of the MGCL relating to the filling of vacancies on our board of trustees. See "Certain Provisions of Maryland Law and Our Declaration of Trust and Bylaws."

Certain provisions in the partnership agreement for our operating partnership may delay or prevent unsolicited acquisitions of us.

        Provisions in the partnership agreement for our operating partnership may delay or make more difficult unsolicited acquisitions of us or changes in our control. These provisions could discourage third parties from making proposals involving an unsolicited acquisition of us or a change in our control, although some shareholders might consider such proposals, if made, desirable. These provisions include, among others:

    redemption rights of qualifying parties;

    transfer restrictions on our OP units;

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    our ability, as general partner, in some cases, to amend the partnership agreement without the consent of the limited partners; and

    the right of the limited partners to consent to transfers of the general partnership interest and mergers, consolidations and other business combinations under specified circumstances.

Termination of the employment agreements with our executive officers could be costly and prevent a change in our control.

        The employment agreements with our executive officers each provide that if their employment with us terminates under certain circumstances (including upon a change in our control), we may be required to pay them significant amounts of severance compensation, including accelerated vesting of equity awards, thereby making it costly to terminate their employment. Furthermore, these provisions could delay or prevent a transaction or a change in our control that might involve a premium paid for our common shares or otherwise be in the best interests of our shareholders.

Our board of trustees may change significant corporate policies and practices without shareholder approval, which limits your control of our policies and practices.

        Our board of trustees has broad authority to determine our investment, financing, borrowing and distribution policies and our policies with respect to all other activities, including growth, capitalization and operations, without shareholder approval. Likewise, these policies may be amended or revised at the discretion of our board of trustees without a vote of our shareholders. As a result, the ability of our shareholders to control our policies and practices is extremely limited. We could make investments and engage in business activities that are different from, and possibly riskier than, the investments and businesses described in this prospectus. Further, our board of trustees may alter or eliminate our current policy on borrowing at any time without shareholder approval, and we may become more highly leveraged, which could result in increased debt service payments and an increased risk of default on our obligations. In addition, a change in our investment policies, including the manner in which we allocate our resources across our portfolio or the types of assets or markets in which we seek to invest, may increase our exposure to interest rate risk, real estate market fluctuations and liquidity risk. These and other changes to our policies could adversely affect our financial condition, results of operations, cash flows and the market price of our common shares.

Our declaration of trust contains provisions that make removal of our trustees difficult, which could make it difficult for our shareholders to effect changes to our management.

        Our declaration of trust provides that, subject to the rights of holders of one or more classes or series of preferred shares to elect or remove one or more trustees, a trustee may be removed only for cause and only by the affirmative vote of holders of at least two-thirds of the votes entitled to be cast in the election of trustees and that our board of trustees has the exclusive power to fill vacant trusteeships, even if the remaining trustees do not constitute a quorum. These provisions make it more difficult to change our management by removing and replacing trustees and may delay or prevent a change in our control that is in the best interests of our shareholders.

Our rights and the rights of our shareholders to take action against our trustees and officers are limited, which could limit our shareholders' recourse in the event of actions not in our shareholders' best interests.

        Under Maryland law generally, a trustee is required to perform his or her duties in good faith, in a manner he or she reasonably believes to be in the best interest of the company and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Under Maryland law, trustees are presumed to have acted with this standard of care. In addition, our declaration of trust

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limits the liability of our trustees and officers to us and our shareholders for money damages, except for liability resulting from:

    actual receipt of an improper benefit or profit in money, property or services; or

    active and deliberate dishonesty by the trustee or officer that was established by a final judgment as being material to the cause of action adjudicated.

        Our declaration of trust and bylaws obligate us, to the fullest extent permitted by Maryland law in effect from time to time, to indemnify and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to any present or former trustee or officer who is made or threatened to be made a party to the proceeding by reason of his or her service to us in that capacity. In addition, we may be obligated to advance the defense costs incurred by our trustees and officers. As a result, we and our shareholders may have more limited rights against our trustees and officers than might otherwise exist absent the current provisions in our declaration of trust and bylaws or that might exist with other companies.

All of the members of our senior management team have outside business interests that could require time and attention and may interfere with their ability to devote time to our business and affairs or present financial conflicts with us and may adversely affect our business.

        All of the members of our senior management team have outside business interests that are not being contributed to our company and that could require time and attention. These interests include ownership interests in office properties in Atlanta, Charlotte, Jacksonville and Tampa, as well as interests in properties that are under contract or letter of intent to be sold. See "Business and Properties—Excluded Assets." In some cases, one or more members of our senior management team may have financial conflicts between these properties and the properties in our initial portfolio. In addition, certain members of our senior management team will have certain management and fiduciary obligations related to these business interests that may interfere with their ability to devote time to our business and affairs and may adversely affect our business.

We are a holding company with no direct operations and will rely on funds received from our operating partnership to pay our obligations.

        We are a holding company and will conduct substantially all of our business through our operating partnership. We do not have, apart from our ownership of our operating partnership, any independent operations. As a result, we will rely on distributions from our operating partnership to make any distributions we might declare on our common shares. We also will rely on distributions from our operating partnership to meet any of our obligations, including any tax liability on taxable income allocated to us from our operating partnership (which might even make distributions to us less than the tax on such allocated taxable income) to the extent we distribute less than 100% of our REIT taxable income.

        In addition, because we are a holding company, your claims as shareholders will be structurally subordinated to all existing and future liabilities (whether or not for borrowed money) and preferred equity of our operating partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our operating partnership and its subsidiaries will be able to satisfy the claims of our shareholders only after all of our and our operating partnership's and its subsidiaries' liabilities and preferred equity have been paid in full.

        Upon completion of this offering and our formation transactions, we will own approximately      % of the OP units in our operating partnership (or      % if the underwriters exercise their overallotment option in full). However, our operating partnership may issue additional OP units to third parties in the future. Such issuances would reduce our ownership in our operating partnership and reduce the cash

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available for distribution to our shareholders. Because you will not directly own OP units, you will not have any voting rights with respect to any such issuances or other partnership level activities of our operating partnership.

If we fail to establish and maintain an effective system of integrated internal controls, we may not be able to accurately report our financial results.

        In connection with our operation as a public company, we will be required to report our operations on a consolidated basis and, in some cases, on a property by property basis. We are in the process of implementing an internal audit function and modifying our company-wide systems and procedures in a number of areas to enable us to report on a consolidated basis as we continue the process of integrating the financial reporting of the entities we will acquire in connection with this offering and our formation transactions. We note that our former independent auditor identified a material weakness in our internal controls due to a lack of a sufficient number of trained accounting and finance personnel, which we are in the process of remediating. If we fail to implement proper overall business controls, including as required to integrate the entities contributing property interests to us in connection with our formation transactions, our results of operations could be harmed or we could fail to meet our reporting obligations. In addition, the existence of a material weakness or significant deficiency could result in errors in our consolidated financial statements that could require a restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations, result in increased costs to remediate any deficiencies, attract regulatory scrutiny or lawsuits and cause investors to lose confidence in our reported financial information, leading to a decline in the market price of our common shares.

Risks Related to this Offering

There has been no public market for our common shares prior to this offering and an active, liquid trading market for our common shares may not develop or continue following this offering.

        Prior to this offering, there has been no public market for our common shares. An active trading market for our common shares may never develop or be sustained and securities analysts may choose not to cover us, which could affect the liquidity of our common shares, limit the ability of our shareholders to sell our common shares when desired or at all and could depress the market price of our common shares. In addition, the initial public offering price will be determined through negotiations between us and the representatives of the underwriters and may bear no relationship to the price at which our common shares will trade upon completion of this offering or the price at which you may be able to sell our common shares in the future.

The market price and trading volume of our common shares may be volatile and could decline substantially following this offering.

        The stock markets, including the NYSE, on which we intend to apply to list our common shares, historically have experienced significant price and volume fluctuations. As a result, the market price of our common shares is likely to be similarly volatile and subject to wide fluctuations, and investors in our common shares may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. The market price of our common shares could decline substantially in response to a number of factors, including those listed in this "Risk Factors" section of this prospectus and others such as:

    our actual or anticipated operating performance and the performance of other similar companies;

    actual or anticipated changes in our and our tenants' business strategies or prospects;

    actual or anticipated variations in our quarterly operating results or dividends;

    our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts;

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    publication of research reports about us, the commercial real estate sector or the real estate industry;

    equity issuances by us, or share resales by our shareholders, or the perception that such issuances or resales could occur;

    the passage of legislation or other regulatory developments that adversely affect us or the assets in which we seek to invest;

    increases in market interest rates that lead purchasers of our common shares to demand a higher yield;

    the use of significant leverage to finance our assets;

    changes in market valuations of similar companies;

    additions to or departures of our key personnel;

    actions by our shareholders;

    changes in accounting principles or actual, potential or perceived accounting problems;

    failure to qualify, or maintain our qualification, as a REIT;

    failure to satisfy the listing requirements of the NYSE;

    failure to comply with the requirements of the Sarbanes-Oxley Act;

    speculation in the press or investment community; and

    general market and economic conditions, including conditions in the Southeastern and mid-Atlantic United States, where we have a geographic concentration of properties.

        We can provide no assurance that the market price of our common shares will not fluctuate or decline significantly in the future or that shareholders will be able to sell their shares when desired on favorable terms, or at all.

        In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common shares. This type of litigation could result in substantial costs and divert our management's attention and resources, which could have a material adverse effect on our cash flows, our ability to execute our business strategy and our ability to make distributions to our shareholders.

The number of our common shares eligible for future sale may have adverse effects on the market price of our common shares.

        We are offering        common shares, as described in this prospectus. Upon completion of this offering, we will grant an aggregate of        restricted share units under our equity incentive plan to our executive officers, non-employee trustees and certain employees. Each of our executive officers, trustees and certain continuing investors may sell the common shares that they acquire in our formation transactions at any time following the expiration of the lock-up period for such shares, which expires 180 days after the date of this prospectus, or earlier with the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital Inc. and Wells Fargo Securities, LLC. We cannot predict the effect, if any, of future sales of our common shares, or the availability of shares for future sales, on the market price of our common shares. The market price of our common shares may decline significantly when the restrictions on resale by certain of our shareholders lapse or upon the registration of additional common shares pursuant to registration rights granted in connection with this offering and our formation transactions. Sales of substantial amounts of common shares or the perception that such sales could occur may materially and adversely affect the market price for our common shares and may adversely affect the terms upon which we may obtain additional capital through the sale of equity or equity-related securities in the future.

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        In addition, at any time following the expiration of the 180-day lock-up period of our company, we may issue additional common shares in subsequent public offerings or private placements for a variety of purposes. We are not required to offer any common shares to existing shareholders on a preemptive basis. Therefore, it may not be possible for existing shareholders to participate in such future share issuances, which may dilute existing shareholders' interests in us.

Future offerings of debt or equity securities, which could be senior to our common shares, may adversely affect the market price of our common shares.

        In the future, we may attempt to increase our capital resources by making additional offerings of debt or equity securities (or causing our operating partnership to issue debt securities), including medium-term notes, senior or subordinated notes and classes or series of preferred shares. Upon liquidation, holders of our debt securities and preferred shares and lenders with respect to other borrowings will be entitled to receive our available assets prior to distribution to the holders of our common shares. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common shares and may result in dilution to holders of our common shares. We are not required to offer any such additional debt or equity securities to existing common shareholders on a preemptive basis. Therefore, additional common share issuances, directly or through convertible or exchangeable securities, warrants or options, will dilute our existing common shareholders' ownership in us and such issuances, or the perception that such issuances may occur, may reduce the market price of our common shares. Our preferred shares, if issued, could have a preference on distributions, whether periodic or upon liquidation, which could eliminate or otherwise limit our ability to make distributions to our common shareholders. Because our decision to issue securities in any future offering or otherwise incur debt will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. Thus, our shareholders bear the risk of our future offerings reducing the market price of our common shares and diluting the value of their share holdings in us.

Future cash flows may not be sufficient to make distributions to our shareholders at expected levels, which could result in a significant decrease in the market price of our common shares.

        We may be unable to pay our estimated initial annual distribution to shareholders out of cash available for distribution. If sufficient cash is not available for distribution from our operations, we may have to fund distributions from working capital, borrow or raise equity to provide funds for such distributions or reduce the amount of such distributions or declare taxable stock dividends. If cash available for distribution generated by our assets is less than our current estimate, or if such cash available for distribution decreases in future periods from expected levels, we may be unable to make the expected cash distributions, which could result in a significant decrease in the market price of our common shares. In the event the underwriters' overallotment option is exercised, pending investment of the net proceeds therefrom, our ability to make such distributions out of cash from our operations may be further materially and adversely affected.

        Our future distributions will be at the sole discretion of our board of trustees and will depend upon our actual and projected financial condition, results of operations, cash flows, liquidity and FFO, our REIT qualification and such other matters as our board of trustees may deem relevant from time to time. We may not be able to make distributions in the future or may need to fund such distributions from external sources, as to which no assurances can be given. Among the factors that could impair our ability to make distributions to our shareholders are:

    reductions in cash flow resulting from the failure of tenants to pay their rent obligations to us or our failure to re-let space upon expiration or termination of leases;

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    our debt servicing requirements;

    capital expenditures;

    unanticipated expenses that reduce our cash flow;

    increases in interest rates;

    variances between actual and anticipated operating expenses;

    the need to reduce our leverage; and

    other restrictions under financing arrangements and applicable law.

        In addition, some of our distributions may include a return of capital. To the extent that we decide to make distributions in excess of our current and accumulated earnings and profits, such distributions generally would be considered a return of capital for U.S. federal income tax purposes to the extent of the holder's adjusted tax basis in its shares, and thereafter as gain on a sale or exchange of such shares. See "Material United States Federal Income Tax Considerations—Taxation of Shareholders." If we fund our future needs with debt, our future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been.

As a result of differences between the book value of assets contributed or acquired in our formation transactions and the price paid for our common shares in this offering, you will experience an immediate and material dilution in the book value per common share.

        As of June 30, 2010, the aggregate historical combined net tangible book value of the interests and assets to be transferred to our operating partnership in our formation transactions was approximately $       million, or $            per common share held by the former owners of our predecessor, assuming the exchange of OP units for our common shares on a one-for-one basis. As a result, the pro forma net tangible book value per common share upon completion of this offering and our formation transactions will be substantially less than the initial public offering price. Accordingly, the purchasers of our common shares in this offering will experience an immediate dilution of approximately $            in the pro forma net tangible book value per common share, based on the mid-point of the price range set forth on the cover page of this prospectus, or $            per common share if the underwriters exercise their overallotment option in full.

Market interest rates may have an effect on the value of our common shares.

        One of the factors that will influence the market price of our common shares will be the dividend yield on our common shares (as a percentage of the price of our common shares) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of our common shares to expect a higher dividend yield, which we may not be able, or may choose not, to provide. As a result, prospective purchasers may decide to purchase other securities rather than our common shares, which would reduce the demand for our common shares and result in a decline in the market price of our common shares.

Risks Related to Our Taxation as a REIT

Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code.

        Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other requirements on a continuing basis. Moreover, new legislation, court decisions or administrative

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guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for us to qualify as a REIT. Certain rules applicable to REITs are particularly difficult to interpret or to apply in the case of REITs investing in real estate mortgage loans that are acquired at a discount, subject to work-outs or modifications, or reasonably expected to be in default at the time of acquisition. In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.

If we do not qualify as a REIT or if we fail to remain qualified as a REIT, we will be subject to U.S. federal income tax and potentially state and local taxes, which would reduce the amount of cash available for distribution to our shareholders.

        We have been organized and we intend to operate in a manner that will enable us to qualify as a REIT for U.S. federal income tax purposes commencing with the portion of our taxable year ending December 31, 2010. Although we do not intend to request a ruling from the Internal Revenue Service, or the IRS, as to our REIT qualification, we have received an opinion of Hogan Lovells US LLP, or Hogan Lovells, with respect to our qualification as a REIT in connection with this offering of common shares. Investors should be aware, however, that opinions of counsel are not binding on the IRS or any court. The opinion of Hogan Lovells represents only the view of our counsel based on our counsel's review and analysis of existing law and on certain representations as to factual matters and covenants made by us, including representations relating to the values of our assets and the sources of our income. The opinion is expressed as of the date issued. Hogan Lovells will have no obligation to advise us or our common shareholders of any subsequent change in the matters stated, represented or assumed, or of any subsequent change in applicable law. Furthermore, both the validity of the opinion of Hogan Lovells and our qualification as a REIT depend on our satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other requirements on a continuing basis, the results of which will not be monitored by Hogan Lovells.

        Our ability to satisfy the REIT income and asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the REIT income and asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis.

        If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and dividends paid to our shareholders would not be deductible by us in computing our taxable income. Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our shareholders, which in turn could have an adverse impact on the market price of our common shares. Unless we were entitled to relief under certain Internal Revenue Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year in which we failed to qualify as a REIT.

Failure of our operating partnership to be treated as a partnership for U.S. federal income tax purposes would result in our failure to qualify as a REIT and the imposition of corporate tax on our operating partnership.

        Failure of our operating partnership to be treated as a partnership would have serious adverse consequences to our shareholders. If the IRS were to successfully challenge the tax status of our operating partnership for U.S. federal income tax purposes, our operating partnership or the affected subsidiary partnership would be taxable as a corporation. In such event, we would cease to qualify as a REIT and the imposition of a corporate tax on our operating partnership or a subsidiary partnership would reduce the amount of cash available for distribution from our operating partnership to us and ultimately to our shareholders.

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Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

        The maximum tax rate applicable to income from "qualified dividends" payable to U.S. shareholders that are individuals, trusts and estates has been reduced by legislation to 15% (through 2010). Dividends payable by REITs, however, generally are not eligible for the reduced rates and will continue to be subject to tax at rates applicable to ordinary income, which will be as high as 35% through 2010 (and in the absence of legislative action, as high as 39.6% starting in 2011). Although this legislation does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common shares.

REIT distribution requirements could adversely affect our ability to execute our business plan or cause us to finance our needs during unfavorable market conditions.

        We generally must distribute annually at least 90% of our REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order for U.S. federal corporate income tax not to apply to earnings that we distribute. To the extent that we satisfy this distribution requirement but distribute less than 100% of our taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our shareholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. We intend to make distributions to our shareholders to comply with the REIT requirements of the Internal Revenue Code.

        From time to time, we may generate taxable income greater than our income for financial reporting purposes prepared in accordance with GAAP. In addition, differences in timing between the recognition of taxable income and the actual receipt of cash may occur. As a result, we may find it difficult or impossible to meet distribution requirements in certain circumstances. In particular, where we experience differences in timing between the recognition of taxable income and the actual receipt of cash, the requirement to distribute a substantial portion of our taxable income could cause us to (1) sell assets in adverse market conditions, (2) borrow on unfavorable terms, (3) distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt or (4) make a taxable distribution of our common shares as part of a distribution in which shareholders may elect to receive our common shares or (subject to a limit measured as a percentage of the total distribution) cash, in order to comply with REIT requirements. These alternatives could increase our costs or reduce our equity. Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our common shares.

Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.

        Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income, property or net worth, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. In addition, we could, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Internal Revenue Code to maintain our qualification as a REIT. See "Material United States Federal Income Tax Considerations—Taxation of REITs in General." Any of these taxes would decrease cash available for the payment of our debt obligations and distributions to shareholders. Our TRS will be subject to U.S. federal corporate income tax on its net taxable income, if any. Moreover, if we have net income from "prohibited transactions," that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions by us and not by our TRS of property held primarily for sale to customers in the ordinary course of business. The determination as to

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whether a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale.

Complying with REIT requirements may force us to forgo and/or liquidate otherwise attractive investment opportunities.

        To qualify as a REIT, we must ensure that we meet the REIT gross income tests annually and that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries. See "Material United States Federal Income Tax Considerations—Requirements for Qualification as a REIT." If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio, or contribute to a taxable REIT subsidiary, otherwise attractive investments in order to maintain our qualification as a REIT. These actions could have the effect of reducing our income and amounts available for distribution to our shareholders. In addition, we may be required to make distributions to shareholders at disadvantageous times or when we do not have funds readily available for distribution, and may be unable to pursue investments that would otherwise be advantageous to us in order to satisfy the source of income or asset diversification requirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder our ability to make, and, in certain cases, maintain ownership of, certain attractive investments.

We may in the future choose to pay dividends in our own common shares, in which case shareholders may be required to pay income taxes in excess of the cash dividends they receive.

        We may seek in the future to distribute taxable dividends that are payable in cash and our common shares at the election of each shareholder. Taxable shareholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, shareholders may be required to pay income taxes with respect to such dividends in excess of the cash dividends received. If a U.S. shareholder sells the common shares that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our shares at the time of the sale. In addition, in such case, a U.S. shareholder could have a capital loss with respect to the common shares sold that could not be used to offset such dividend income. Furthermore, with respect to certain non-U.S. shareholders, we may be required to withhold U.S. federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in common shares. In addition, if a significant number of our shareholders determine to sell our common shares in order to pay taxes owed on dividends, it may put downward pressure on the market price of our common shares.

Our ownership of taxable REIT subsidiaries will be limited and our transactions with our taxable REIT subsidiaries will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm's length terms.

        A REIT may own up to 100% of the stock of one or more taxable REIT subsidiaries. A taxable REIT subsidiary may hold assets and earn income that would not be qualifying assets or income if held

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or earned directly by a REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a taxable REIT subsidiary. A corporation of which a taxable REIT subsidiary directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a taxable REIT subsidiary. Overall, no more than 25% of the value of a REIT's assets may consist of stock or securities of one or more taxable REIT subsidiaries. In addition, the rules applicable to taxable REIT subsidiaries limit the deductibility of interest paid or accrued by a taxable REIT subsidiary to its parent REIT to assure that the taxable REIT subsidiary is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a taxable REIT subsidiary and its parent REIT that are not conducted on an arm's length basis.

        Our TRS will pay U.S. federal, state and local income tax on its taxable income, and its after-tax net income will be available for distribution to us but is not required to be distributed by such domestic taxable REIT subsidiary to us. We anticipate that the aggregate value of the stock and securities of our TRS will be less than 25% of the value of our total assets (including the stock and securities of our TRS). Furthermore, we will monitor the value of our respective investments in our TRS for the purpose of ensuring compliance with the ownership limitations applicable to taxable REIT subsidiaries. In addition, we will scrutinize all of our transactions with our TRS to ensure that they are entered into on arm's length terms to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the 25% limitation discussed above or to avoid application of the 100% excise tax discussed above.

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FORWARD-LOOKING STATEMENTS

        Some of the statements contained in this prospectus constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "seeks," "intends," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "pro forma" or "potential" or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

        The forward-looking statements contained in this prospectus reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed in or implied by any forward-looking statement. We do not guarantee that the transactions and events described herein will happen as described (or that they will happen at all). Statements regarding the following subjects, among others, may be forward-looking:

    our use of the net proceeds from this offering;

    changes in our business and growth strategies;

    our ability to execute our business and growth strategies or to manage our growth effectively;

    our ability to source off-market or limited-market acquisitions in the future;

    the closing of our acquisition of the 1110 Vermont Avenue property and any future acquisitions;

    integration of acquired properties;

    our projected operating results, liquidity and financial condition;

    availability, terms and deployment of capital;

    our ability to re-let space on favorable terms;

    defaults on, early terminations of or non-renewal of leases by tenants;

    tenant bankruptcies;

    decreased rental rates or increased vacancy rates or our failure to increase occupancy rates from current levels;

    declining real estate valuations and impairment charges;

    adverse demographic changes in our markets;

    our expected leverage;

    future debt service obligations;

    estimates relating to our ability to make distributions to our shareholders in the future;

    changes in interest rates and the market value of our target assets;

    impact of changes in governmental regulations, tax law and rates, and similar matters;

    our ability to maintain our qualification as a REIT for U.S. federal income tax purposes;

    our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or the 1940 Act;

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    availability of, and our ability to attract and retain, qualified personnel;

    maintenance of insurance levels;

    the consequences of any future terrorist attacks; and

    market trends in our industry, the credit and capital markets or the general economy.

        While forward-looking statements reflect our good faith beliefs, assumptions and expectations, they are not guarantees of future results. Readers are cautioned not to place undue reliance on any of these forward-looking statements. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes, except as required by applicable law. For a further discussion of these and other factors that could cause future results to differ materially from those expressed or implied by any forward-looking statements, see the section above entitled "Risk Factors."

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USE OF PROCEEDS

        We estimate that the net proceeds we will receive from this offering will be approximately $             million, after deducting the underwriting discount and estimated offering expenses (or approximately $             million if the underwriters exercise their overallotment option in full), based on an assumed initial public offering price of $            per share, which is the mid-point of the price range set forth on the cover page of this prospectus. We will contribute the net proceeds from this offering to our operating partnership. Our operating partnership intends to use the net proceeds from this offering as follows:

    approximately $389.5 million to repay outstanding indebtedness and to pay costs associated with such repayment and loan assumption fees;

    approximately $141.6 million, including estimated closing costs, to acquire the 1110 Vermont Avenue property;

    approximately $51.9 million to acquire interests in properties from the current holders of those interests and to pay related costs; and

    approximately $15.0 million to fund a reserve account for capital expenditures.

        We expect to have approximately $             million remaining of unapplied net proceeds upon completion of this offering and our formation transactions (or approximately $             million if the underwriters exercise their overallotment option in full). Any remaining net proceeds will be used for general working capital purposes, including funding future acquisitions, capital expenditures, tenant improvements, leasing commissions and, potentially, making distributions. Pending application of cash proceeds, we will invest the net proceeds in interest-bearing accounts and short-term, interest-bearing securities in a manner that is consistent with our intention to qualify for taxation as a REIT.

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        We expect to use a portion of the net proceeds from this offering to repay approximately $380.4 million of our outstanding indebtedness in accordance with the chart below:

Property
  Annual
Interest Rate
  Maturity Date   Pro Rata Share of Balance Outstanding
as of June 30, 2010
 

Bank of America Center

    5.88 %   12/1/2011   $ 74,500,000  

Two Liberty Place

    5.41 %   3/1/2012     64,147,195 (1)

Two Ravinia Drive

    5.68 %   12/31/2010     51,600,000  

Two Liberty Place Mezzanine Loan

    5.94 %   2/27/2012     46,814,000 (2)

2400 Maitland Center, Interlachen Corporate Center and 500 Winderley Place

    6.87 %   9/20/2012     28,814,556  

245 Riverside, Overlook I and Overlook II(3)

    L+1.75 %(4)   7/9/2011     27,500,000 (5)

Maitland Forum

    L+1.80 %(6)   1/31/2012     26,693,503  

Center Point

    L+3.00 %(7)                      (8)   14,825,966 (9)

International Plaza Four

    6.16 %(10)   10/15/2012     14,251,512  

Maitland Park Center

    L+1.80 %(6)   1/31/2012     10,532,850  

Peachtree Marquis II(11)

    6.00 %   4/1/2021     7,584,660  

Management Company Term Loan

    5.75 %(12)   9/16/2014     3,400,000  

Independent Square Garage(13)

    7.07 %   9/26/2013     2,974,930  

Cypress Center 6.30 Acre Land Parcel(14)

    L+2.25 %(15)   4/11/2011     2,000,000  

Cypress Center I, Cypress Center II and Cypress Center III and Cypress West—Mezzanine Loan

    7.92 %   10/1/2011     1,884,934  

Capital Plaza I and II, Capital Plaza III

    12.00 %   5/5/2016     1,600,000 (16)

EB Investors Loan

    9.60 %   12/31/2010     1,057,153  

Independent Square—Mezzanine Loan

    9.00 %   4/30/2011     195,080  
                   

Total

              $ 380,376,338  
                   

(1)
Total amount outstanding as of June 30, 2010 was $72,075,500. Our joint venture partner has agreed to repay the remainder of the outstanding balance.

(2)
Total amount outstanding as of June 30, 2010 was $52,600,000. Our joint venture partner has agreed to repay the remainder of the outstanding balance.

(3)
The loan balance is allocated as follows: $15,000,000 to 245 Riverside and $12,500,000 to Overlook I and Overlook II.

(4)
The variable interest rate is based on one-month LIBOR. The effective interest rate was 2.10% as of June 30, 2010.

(5)
The balance outstanding as of June 30, 2010 was $34,210,000. We expect to repay $27,500,000 in full satisfaction of the loan with a portion of the net proceeds from this offering.

(6)
Requires monthly interest only payments of LIBOR + 1.80% until November 2010 and LIBOR + 3.5% through maturity. The variable interest rate is based on one-month LIBOR. The effective interest rate was 2.15% as of June 30, 2010.

(7)
The variable interest rate is based on one-month LIBOR. The effective interest rate was 3.35% as of June 30, 2010.

(8)
The original maturity date was in January 2009. We have been in ongoing negotiations with the lender regarding an extension or repayment of the loan. We intend to repay the loan in full with a portion of the net proceeds from this offering.

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(9)
The balance outstanding as of June 30, 2010 was $16,300,000, which was subsequently reduced by $1,474,034 pursuant to the sale of one of the properties securing the loan.

(10)
There is an interest rate swap on a notional amount of $12,742,461 at 6.155%. The remaining balance above this notional amount bears interest at one-month LIBOR + 4.00%. The effective interest rate on the floating rate portion of the loan was 4.35% as of June 30, 2010. The interest rate swap matures concurrently with the loan.

(11)
Represents a loan made by SunTrust Bank, Inc., a tenant in Peachtree Marquis II, to partially fund the tenant improvements in the space it leases in the building.

(12)
The interest rate is the greater of (i) one-month LIBOR + 3.75% or (ii) 5.75% per annum.

(13)
Includes three loans with outstanding balances of $429,157, $1,697,697 and $848,075, respectively, and interest rates of 7.00%, 7.63% and 6.00%, respectively. The loans are secured by the parking garage adjacent to Independent Square.

(14)
Land is adjacent to Cypress Center I, Cypress Center II and Cypress Center III in Tampa, Florida.

(15)
The variable interest rate is based on one-month LIBOR. The effective interest rate was 2.60% as of June 30, 2010.


(16)
The balance outstanding as of June 30, 2010 was $15,893,761. We expect to repay $1,600,000 in full satisfaction of the loan with a portion of the net proceeds from this offering.

        For additional information, see our historical and pro forma financial statements contained elsewhere in this prospectus.

        A portion of the net proceeds from this offering will be used to repay certain indebtedness, the lender of which is an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, one of the underwriters in this offering. See "Underwriting (Conflicts of Interest)—Conflicts of Interest."

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DISTRIBUTION POLICY

        To satisfy the requirements to qualify as a REIT, and to avoid paying tax on our income, we intend to make regular quarterly distributions of all, or substantially all, of our REIT taxable income (including net capital gains) to our shareholders. We intend to make a pro rata distribution with respect to the period commencing on completion of this offering and ending on            , 2010, based on a distribution of $      per common share for a full quarter. On an annualized basis, this would be $      per common share, or an annualized distribution rate of approximately      % based on an assumed initial public offering price of $            per common share, which is the mid-point of the price range set forth on the cover page of this prospectus. We estimate that this initial annual distribution rate will represent approximately        % of estimated cash available for distribution to our common shareholders for the 12-month period ending June 30, 2011. Our intended initial annual distribution rate has been established based on our estimate of cash available for distribution for the 12-month period ending June 30, 2011, which we have calculated based on adjustments to our pro forma net income for the 12-month period ending June 30, 2010 (after giving effect to this offering and our formation transactions). This estimate was based on our pro forma operating results and does not take into account our business and growth strategies, nor does it take into account any unanticipated expenditures we may have to make or any financings for such expenditures. In estimating our cash available for distribution for the 12-month period ending June 30, 2011, we have made certain assumptions as reflected in the table and footnotes below.

        Our estimate of cash available for distribution does not include the effect of any changes in our working capital resulting from changes in our working capital accounts. Our estimate also does not reflect the amount of cash estimated to be used for investing activities for acquisition and other activities. It also does not reflect the amount of cash estimated to be used for financing activities, other than scheduled loan principal payments on mortgage and other indebtedness that will be outstanding upon completion of this offering. Any such investing and/or financing activities may have a material adverse effect on our estimate of cash available for distribution. Because we have made the assumptions set forth above in estimating cash available for distribution, we do not intend this estimate to be a projection or forecast of our actual results of operations, FFO, liquidity or financial condition and have estimated cash available for distribution for the sole purpose of determining our estimated initial annual distribution amount. Our estimate of cash available for distribution should not be considered as an alternative to cash flow from operating activities (computed in accordance with GAAP) or as an indicator of our liquidity or our ability to make distributions. In addition, the methodology upon which we made the adjustments described below is not necessarily intended to be a basis for determining future distributions.

        We intend to maintain our initial distribution rate for the 12-month period following completion of this offering unless our actual results of operations or cash flows, economic conditions or other factors differ materially from the assumptions used in projecting our initial distribution rate. Distributions made by us will be authorized and determined by our board of trustees in its sole discretion out of funds legally available therefor and will be dependent upon a number of factors, including prohibitions and other limitations under our financing arrangements and applicable law and other factors described herein. We believe that our estimate of cash available for distribution constitutes a reasonable basis for setting the initial distribution rate; however, we cannot assure you that our estimate will prove accurate, and actual distributions may therefore be significantly below the expected distributions. We do not intend to reduce the annualized distribution rate per common share if the underwriters exercise their overallotment option; however, this could require us to borrow funds to make the distributions or to make the distributions from net offering proceeds.

        We cannot assure you that our estimated distributions will be made or sustained or that our board of trustees will not change our distribution policy in the future. Our future distributions will be at the sole discretion of our board of trustees, and their form, timing and amount, if any, will depend upon

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our actual and projected financial condition, liquidity, results of operations and FFO and other factors that could differ materially from our current expectations. Our actual financial condition, liquidity, results of operations, FFO and ability to make distributions to our shareholders will be affected by a number of factors, including the revenue we receive from our properties, our operating expenses, interest expense, recurring capital expenditures, the ability of our tenants to meet their obligations and unanticipated expenditures, as well as prohibitions and other limitations under our financing arrangements and applicable law. For more information regarding risk factors that could materially and adversely affect us, please see "Risk Factors." If our operations do not generate sufficient cash flow to enable us to pay our intended distributions, we may be required either to fund distributions from working capital, borrow or raise equity or to reduce such distributions.

        Distributions in excess of our current and accumulated earnings and profits will not be taxable to a taxable U.S. shareholder under current U.S. federal income tax law to the extent those distributions do not exceed the shareholder's adjusted tax basis in his or her common shares, but rather will reduce the adjusted basis of the shares. In that case, the gain (or loss) recognized on the sale of those shares or upon our liquidation will be increased (or decreased) accordingly. To the extent those distributions exceed a taxable U.S. shareholder's adjusted tax basis in his or her shares, they generally will be treated as a gain realized from the taxable disposition of those shares. The percentage of distributions to our shareholders that exceeds our current and accumulated earnings and profits may vary substantially from year to year. For a more complete discussion of the tax treatment of distributions to holders of our common shares, see "Material United States Federal Income Tax Considerations."

        U.S. federal income tax law requires that a REIT distribute annually at least 90% of its REIT taxable income, excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its REIT taxable income, including capital gains. For more information, please see "Material United States Federal Income Tax Considerations." We anticipate that our estimated cash available for distribution will exceed the annual distribution requirements applicable to REITs and the amount necessary to avoid the payment of tax on undistributed income. However, under some circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet these distribution requirements and we may need to borrow funds to make certain distributions.

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        The following table describes our pro forma net income for the 12 months ending June 30, 2010, and the adjustments we have made thereto in order to estimate our initial cash available for distribution to our common shareholders for the 12 months ending June 30, 2011:

Pro forma net income for the year ended December 31, 2009

  $    
 

Less: pro forma net income for the six months ended June 30, 2009

       
 

Add: pro forma net income for the six months ended June 30, 2010

       

Pro forma net income for the 12 months ended June 30, 2010

 
$
 
 

Add: pro forma real estate depreciation and amortization

       
 

Add: pro forma depreciation and amortization from equity method investments

       
 

Add: amortization of deferred financing costs

       
 

Add: non-cash interest expense

       
 

Less: net effect of straight-line rents and above (below) market lease intangible amortization

       
 

Add: net increases in contractual rent income

       
 

Less: net decreases in contractual rent income due to lease expirations, assuming no renewals

       
 

Add: non-cash compensation expense

       
       

Estimated cash flow from operating activities for the 12 months ending June 30, 2011

  $    
 

Less: estimated contractual obligations for tenant improvements and leasing commissions

       
 

Less: estimated annual provision for recurring capital expenditures

       
       

Total estimated cash flows used in investing activities

  $    
       

Estimated cash flow used in financing activities

       
       
 

Less: scheduled mortgage loan principal repayments for consolidated properties

       
       
 

Less: pro rata share of scheduled mortgage loan principal payments from equity method investments

       
       

Estimated cash flow used in financing activities for the 12 months ending June 30, 2011

  $    
       

Estimated cash available for distribution for the 12 months ending June 30, 2011

  $    
       
 

Our share of estimated cash available for distribution

       
       
 

Non-controlling partnership interests' share of estimated cash available for distribution

       
       

Total estimated initial annual distribution to shareholders

  $    
       
 

Estimated initial annual distribution per share

       
       
 

Payout ratio based on our share of estimated cash available for distribution

      %

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CAPITALIZATION

        The following table sets forth the historical capitalization of our predecessor at June 30, 2010, and our pro forma consolidated capitalization at June 30, 2010, as adjusted to give effect to our formation transactions, this offering and the use of proceeds from this offering as described in "Use of Proceeds." You should read this table together with "Use of Proceeds," "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated historical and pro forma financial statements and notes thereto included elsewhere in this prospectus.

 
  At June 30, 2010  
 
  Historical   Pro Forma
Consolidated
 
 
  (in thousands, except per
share data)

 

Notes payable and other debt(1)

  $ 83,122   $    

Equity

             
 

Common shares, $0.01 par value per share; 100,000 shares authorized and 1,000 shares issued and outstanding, historical, and 450,000,000 shares authorized and            shares issued and outstanding, on a pro forma basis(2)

        (3)  
 

Preferred shares, $0.01 par value per share; 10,000 shares authorized and 0 shares issued and outstanding, historical, and 50,000,000 shares authorized and 0 shares issued and outstanding, on a pro forma basis

         
 

Additional paid-in capital

        (3)  
           

Equity (deficit)

    (17,652 )      

Non-controlling interest - OP units

           

Non-controlling interests - property

           
 

Total equity (deficit)

    (17,652 )      
           

Total capitalization

  $ 65,470   $     
           

(1)
We also expect to enter into a $       million revolving credit facility, which we expect will be undrawn upon completion of this offering.

(2)
The outstanding common shares on a pro forma basis include (a)             common shares to be issued in connection with our formation transactions and (b)                         common shares to be sold in this offering, but excludes (i)             common shares issuable upon the exercise of the underwriters' overallotment option in full, (ii)             common shares reserved for future issuance under our equity incentive plan and (iii)              common shares that may be issued, at our option, upon exchange of OP units to be issued in our formation transactions.

(3)
This dollar amount assumes that            of our common shares will be sold in this offering and will increase or decrease depending upon whether such common shares are sold above or below the mid-point of the price range set forth on the cover page of this prospectus.

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DILUTION

        Purchasers of our common shares offered by this prospectus will experience an immediate and substantial dilution of the net tangible book value per common share from the assumed initial public offering price based on the mid-point of the price range set forth on the cover page of this prospectus of $      per share. As of June 30, 2010, we had a net tangible book value of approximately $           million, or $      per common share held by continuing investors, assuming the exchange of OP units into common shares on a one-for-one basis. After giving effect to the sale of our common shares in this offering, the application of the aggregate net proceeds from this offering and the completion of our formation transactions, the pro forma net tangible book value at June 30, 2010 attributable to common shareholders would have been $    million, or $      per common share. This amount represents an immediate increase in net tangible book value of $      per share to our continuing investors and an immediate dilution in pro forma net tangible book value of $      per share to new public investors. The following table illustrates this per share dilution.

Assumed initial public offering price per share based on the mid-point of the price range set forth on the cover page of this prospectus

  $
 

Net tangible book value per share at June 30, 2010, before our formation transactions and this offering(1)

   
 

Net increase in pro forma net tangible book value per share attributable to our formation transactions and this offering

   

Pro forma net tangible book value per share after our formation transactions and this offering(2)

   

Dilution in pro forma net tangible book value per share to new investors(3)

  $

(1)
Net tangible book value per common share at June 30, 2010 before our formation transactions and this offering was determined by dividing the net tangible book value of our predecessor at June 30, 2010 by the number of our common shares held by continuing investors after this offering, assuming the exchange for our common shares on a one-for-one basis of the OP units to be issued in connection with our formation transactions.

(2)
The pro forma net tangible book value per share after our formation transactions and this offering was determined by dividing net tangible book value of approximately $      million by      common shares and OP units to be outstanding after this offering, which amount excludes the common shares that may be issued by us upon exercise of the underwriters' overallotment option and      of our common shares available for issuance in the future under our equity incentive plan.

(3)
Dilution is determined by subtracting pro forma net tangible book value per common share after giving effect to our formation transactions and this offering from the assumed initial public offering price paid by a new investor for our common shares.

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SELECTED FINANCIAL DATA

        The following table sets forth summary selected financial and operating data on (i) a pro forma basis for our company and (ii) a combined historical basis for our predecessor. Our predecessor is comprised of the real estate holdings and operations of the entities that are under common control of James R. Heistand. We have not presented historical information for Eola Property Trust because we have not had any corporate activity since our formation other than the issuance of 1,000 common shares to Mr. Heistand in connection with our initial capitalization and because we believe that a discussion of the results of Eola Property Trust would not be meaningful.

        You should read the following summary selected financial data in conjunction with the combined historical consolidated financial statements of our predecessor and the related notes and with "Management's Discussion and Analysis of Financial Condition and Results of Operations," which are included elsewhere in this prospectus.

        The historical combined balance sheet information as of December 31, 2009 and 2008 of our predecessor and the combined statements of operations information for each of the years ended December 31, 2009, 2008 and 2007 of our predecessor have been derived from the historical audited combined financial statements included elsewhere in this prospectus. The historical combined balance sheet information as of June 30, 2010 of our predecessor and the combined statements of operations for the six months ended June 30, 2010 and 2009 of our predecessor have been derived from the historical unaudited combined financial statements included elsewhere in this prospectus. The historical combined balance sheet information as of December 31, 2007, 2006 and 2005 of our predecessor and the combined statements of operations for the years ended December 31, 2006 and 2005 of our predecessor have been derived from the unaudited combined financial statements of our predecessor. In the opinion of management, the historical combined balance sheet information as of December 31, 2007, 2006 and 2005 and the historical combined statements of operations for the years ended December 31, 2006 and 2005 include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the information set forth therein.

        Our unaudited summary selected pro forma condensed consolidated financial statements and operating information as of and for the six months ended June 30, 2010 and for the year ended December 31, 2009 assume completion of this offering and our formation transactions as of the beginning of the periods presented for the operating data and as of the stated date for the balance sheet data. Our pro forma financial information is not necessarily indicative of what our actual financial position and results of operations would have been as of the date and for the periods indicated, nor does it purport to represent our future financial position or results of operations.

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  Six Months Ended June 30,   Year Ended December 31,  
 
  Pro Forma
Consolidated

  Historical Combined   Pro Forma
Consolidated

  Historical Combined  
 
  2010   2010   2009   2009   2009   2008   2007   2006   2005  
 
  (Unaudited)
  (Unaudited)
  (Unaudited)
  (Unaudited)
   
   
   
  (Unaudited)
  (Unaudited)
 
 
  (In thousands, except per share data and number of properties)
 

Statement of Operations Data:

                                                       

Revenues

                                                       
 

Rental revenue

        $ 3,381   $ 3,838         $ 7,696   $ 5,116   $ 4,773   $ 5,205   $ 187  
 

Tenant reimbursements

          1,866     1,926           3,953     3,371     3,373     754      
 

Parking and other income

                                                       
 

Management and other fees

          11,167     7,398           17,782     16,834     15,097     14,200     10,644  
                                       
   

Total revenues

          16,414     13,162           29,431     25,321     23,243     20,159     10,831  

Expenses

                                                       
 

Property operating expenses

          2,944     3,391           6,237     4,300     4,214     2,983     28  
 

General and administrative

          8,953     6,226           15,731     14,088     15,446     10,893     9,754  
 

Depreciation and amortization

          2,962     2,200           4,896     3,543     3,227     2,860     77  
 

Property impairment

                            457                          
   

Total expenses

          14,859     11,817           27,321     21,931     22,887     16,736     9,859  
                                       

Operating income (loss)

          1,555     1,345           2,110     3,390     356     3,423     972  

Other Income (Expenses)

                                                       
 

Equity in earnings (loss) from real estate joint ventures

          (414 )   (2,105 )         (4,863 )   (18,735 )   (2,221 )   (894 )   435  
 

Interest and other income, net

          70     11           56     201     382     200     32  

Other expenses

                                         
 

Interest expense

          (1,676 )   (4,163 )         (7,650 )   (5,291 )   (5,158 )   (3,380 )   (501 )
                                       
   

Total other income (expenses)

          (2,020 )   (6,257 )         (12,457 )   (23,825 )   (6,997 )   (4,074 )   (34 )
                                       
   

Discontinued operations

                                        2,917  
                                       

Net income (loss)

          (465 )   (4,912 )         (10,347 )   (20,435 )   (6,641 )   (651 )   3,855  

Less: net (income) loss attributable to non-controlling interests - OP units

         
   
         
   
   
   
   
 

          (1,548 )   (4,581 )         (9,065 )   (16,153 )   (2,764 )   210     1,836  

Less: net (income) loss attributable to non-controlling interests—property

                                         
                                       

Net income (loss) attributable to the Company

        $ 1,083   $ (331 )       $ (1,282 ) $ (4,282 ) $ (3,877 ) $ (861 ) $ 2,019  
                                       

Per Share Data:

                                                       
 

Pro forma earnings (loss) per share—basic and diluted

                                                       
 

Pro forma weighted average common shares outstanding—basic and diluted

                                                       

Balance Sheet Data (at period end):

                                                       
 

Real estate investment, net

        $ 53,973   $ 56,166         $ 54,891   $ 56,929   $ 42,097   $ 40,880   $  
 

Total assets

          87,273     81,455           80,997     84,412     88,220     71,954     13,597  
 

Notes payable and other debt

          83,122     78,624           80,886     79,325     60,325     60,325     6,547  
 

Total liabilities

          104,925     92,557           98,710     89,531     70,273     64,419     7,416  
 

Equity

          (10,059 )   (9,454 )         (11,194 )   (8,319 )   (3,789 )   (330 )   975  
 

Non-controlling interests - OP units

                                                       
 

Non-controlling interests - property

          (7,593 )   (1,649 )         (6,519 )   3,200     21,736     7,865     5,206  
 

Total equity

          (17,652 )   (11,103 )         (17,713 )   (5,119 )   17,947     7,535     6,181  
 

Total liabilities and equity

          87,273     81,455           80,997     84,412     88,220     71,954     13,597  

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  Six Months Ended June 30,   Year Ended December 31,  
 
  Pro Forma
Consolidated

  Historical Combined   Pro Forma
Consolidated

  Historical Combined  
 
  2010   2010   2009   2009   2009   2008   2007   2006   2005  
 
  (Unaudited)
  (Unaudited)
  (Unaudited)
  (Unaudited)
   
   
   
  (Unaudited)
  (Unaudited)
 
 
  (In thousands, except per share data and number of properties)
 

Other Data:

                                                       
 

Number of properties

          55     35           56     34     32     11     4  
 

Total rentable square footage

          11,685     5,404           11,705     5,274     5,103     1,814     1,238  
 

Total rentable square footage—pro rata share

          365     234           373     234     230     180     168  
 

Pro forma net operating income

                                                       
 

Pro forma net operating income, including pro rata joint venture share

                                                       
 

Pro forma earnings before interest, taxes, depreciation and amortization

                                                       
 

Pro forma funds from operations

                                                       
 

Pro forma diluted funds from operations per share

                                                       
 

Cash flows from:

                                                       
   

Operating activities

        $ 1,242   $ 2,277         $ 3,703   $ 1,932   $ 1,874   $ 4,403   $ (7,148 )
   

Investing activities

          (2,440 )   128           (1,531 )   (399 )   (19,204 )   (56,526 )   (6,173 )
   

Financing activities

          2,719     (1,811 )         (3,067 )   33     17,026     53,767     13,403  

 

 
  Pro Forma  
 
  Six Months Ended
June 30, 2010
  Year Ended
December 31, 2009
 
 
  (In thousands)
  (In thousands)
 

Reconciliation of FFO(1), EBITDA(2) and NOI(3) to Net Income:

             

Net income (loss) attributable to the Company

  $     $    

Add/(deduct):

             
 

Net income (loss) attributable to non-controlling interests - OP units

             
 

Depreciation and amortization(4)

             
 

Depreciation and amortization—unconsolidated properties

             
 

Gain on sale of discontinued operations

                           
           

Funds from operations

  $     $   (5)

Add/(deduct):

             
 

Interest expense, net(4)

             
 

Interest expense, net—unconsolidated properties

             
 

Non real estate related depreciation and amortization(4)

             
 

Non real estate related depreciation and amortization—unconsolidated properties

                           
 

Interest and other income, net

             
           

EBITDA

  $     $   (5)

Add/(deduct):

             
 

Management and other fees

             
 

General and administrative

                           
 

Property impairment

             
           

Net operating income (NOI), including pro rata joint venture share

  $     $    

Deduct:

             
 

Pro rata joint venture share of net operating income

                           
           

Net operating income

  $     $    

(1)
We calculate FFO before non-controlling interest, or FFO, in accordance with the standards established by NAREIT. FFO is defined by NAREIT as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, plus depreciation and amortization of real estate assets (excluding amortization of deferred financing costs), and after adjustments for unconsolidated partnerships and joint ventures.

FFO is a supplemental non-GAAP financial measure. Management uses FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding

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    real estate related depreciation and amortization and gains and losses from property dispositions, which do not relate to or are not indicative of our operating performance, FFO provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results of operations, the utility of FFO as a measure of our performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the NAREIT definition as we do, and, therefore, our FFO may not be comparable to such other REITs' FFO. Accordingly, FFO should not be considered as an alternative to net income available to common shareholders (determined in accordance with GAAP) as an indicator of our financial performance. While management believes that FFO is an important supplemental non-GAAP financial measure, management believes it is also important to stress that FFO should not be considered as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity. Further, FFO is not necessarily indicative of sufficient cash flow to fund all of our cash needs, including our ability to service indebtedness or make distributions.

(2)
EBITDA represents net income (losses) excluding: (i) interest; (ii) income tax expense, including deferred income tax benefits and expenses and income taxes applicable to sale of assets; and (iii) depreciation and amortization. EBITDA should not be considered as an alternative to net income available to common shareholders (determined in accordance with GAAP). We believe EBITDA is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our asset base (primarily depreciation and amortization) from our operating results. Our management also uses EBITDA as one measure in determining the value of acquisitions and dispositions.

(3)
We consider NOI to be an appropriate supplemental measure to net income because it helps both investors and management to understand the core operations of our properties. NOI should not be considered as an alternative to net income (determined in accordance with GAAP). We define NOI as operating revenue (including rental revenue, tenant reimbursements and parking and other income) less property operating expenses. NOI excludes depreciation and amortization, impairments, gain/loss on sale of real estate, interest expense and other non-operating items.

(4)
Net of amounts attributable to non-controlling interests in properties.

(5)
Includes an impairment charge of $457 for the year ended December 31, 2009.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion should be read in conjunction with the selected financial data, the audited financial statements and the unaudited financial statements of the Eola Predecessor Companies and related notes thereto and the pro forma financial information of Eola Property Trust, appearing elsewhere in this prospectus. Where appropriate, the following discussion includes analysis of the expected effects of our formation transactions and this offering. These effects are reflected in the pro forma combined financial statements located elsewhere in this prospectus. As used in this section, unless the context otherwise requires, "we," "us," "our" and "our company" mean the Eola Predecessor Companies for the periods presented and Eola Property Trust and its consolidated subsidiaries upon completion of this offering and our formation transactions.

Overview

Our Company

        Eola Property Trust, a Maryland real estate investment trust, was formed on July 7, 2010 to acquire the entities owning various real estate assets and a management service company and to succeed to the business of our predecessor. We are engaged primarily in the acquisition, ownership, management, redevelopment and disposition of high quality office buildings located in the Southeastern and mid-Atlantic United States. Eola Property Trust has not had any corporate activity since its formation, other than the issuance of shares to James R. Heistand in connection with the initial capitalization of the company and the opening of a bank account. Accordingly, we believe that a discussion of the results of Eola Property Trust would not be meaningful, and we therefore have set forth below a discussion regarding the historical operations of our predecessor only. We have included an analysis of certain matters expected as a result of this offering and our formation transactions where we believe such presentation would be meaningful.

        Our predecessor is comprised of certain real estate holdings and a management service company and operations of the entities that are under control or influence of Mr. Heistand that will be contributed to Eola Property Trust. The combined entities in our predecessor, which consist of the entities contributing properties and real estate operations to our operating partnership in our formation transactions, include Eola Capital and its related asset management, property management and leasing businesses, three consolidated office properties and two vacant land parcels. Our predecessor also includes equity method investments, ranging from approximately 1% to 51%, in 52 properties owned by entities over which Mr. Heistand has significant influence, but for which he does not exercise control.

        Concurrently with this offering, we will complete our formation transactions, pursuant to which we will acquire, through a series of merger or contribution agreements, all of the interests in our predecessor and interests in certain other entities (which we refer to as our non-predecessor entities) and assets. We also have entered into a definitive agreement to acquire the 1110 Vermont Avenue property, which is subject to customary closing conditions. The effects of our formation transactions are reflected in the pro forma financial statements located elsewhere in this prospectus. We direct your attention to these pro forma financial statements, as well as the three-year audited statements of revenues and certain expenses for the non-predecessor entities. In light of the substantial number of equity method investments in our predecessor for properties that will be consolidated upon completion of this offering and our formation transactions, we believe that our pro forma financial statements represent a more meaningful presentation of our financial condition and results of operations as compared to our predecessor's historical financial statements.

        We have determined that the Eola Predecessor Companies is the acquirer for accounting purposes. The three consolidated properties in our predecessor that are being contributed in our formation transactions and the 52 equity method investments in properties that will remain unconsolidated joint

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ventures in our initial portfolio will be recorded at historical cost because no change in control occurred upon contribution to Eola Property Trust. The acquisition of the other interests for which a change in control will have occurred will be accounted for as business combinations under the acquisition method of accounting and recognized at the estimated fair value of acquired assets and assumed liabilities on the date of such acquisition. The fair value of the debt assumed is determined using current market interest rates for comparable debt financings.

        Upon completion of this offering and our formation transactions, we expect our operations to be carried on through our operating partnership and subsidiaries of our operating partnership, including our TRS. Our formation transactions are designed to: (1) consolidate our asset management, property management, leasing, acquisition and related businesses into our operating partnership; (2) consolidate the ownership of a portfolio of properties, together with certain other real estate assets, into our operating partnership; (3) facilitate this offering; (4) enable us to raise necessary capital to repay existing indebtedness related to certain properties in our portfolio; (5) enable us to qualify as a REIT for U.S. federal income tax purposes commencing with the portion of our taxable year ending December 31, 2010; and (6) preserve the tax position of certain continuing investors. As a result, we expect to be a fully integrated, self-administered and self-managed real estate company, providing substantial in-house expertise in asset management, property management, leasing, acquisitions, tenant improvement construction, repositioning, redevelopment and financing.

Revenue Base

        Upon completion of this offering and our formation transactions, we will own interests in a portfolio of 57 properties totaling approximately 12.0 million rentable square feet. These properties are comprised of 32 consolidated properties and 25 properties held through unconsolidated joint ventures, all of which we will manage. Our ownership interest in our unconsolidated properties will range from 8.7% to 30.0%. Our pro rata ownership share of our initial portfolio equates to approximately 8.3 million rentable square feet. All of our properties are located in the Southeastern and mid-Atlantic United States.

        Office Leases.    Historically, our predecessor primarily leased its office properties to tenants on a full service gross, modified gross or triple net lease basis, and we expect to continue to do so in the future. A full service gross lease has a base year expense stop, whereby the tenant pays a stated amount of expenses as part of the rent payment, while future increases (above the base year stop) in property operating expenses are billed to the tenant based on such tenant's proportionate square footage in the property. The increased property operating expenses, as well as any base operating expense amount stipulated in the leases, are reflected in operating expenses and amounts recovered from tenants are reflected as tenant recoveries in the statements of income. In a triple net lease, the tenant is responsible for all property taxes and operating expenses. As such, the base rent payment does not include any operating expenses, but rather all such expenses are billed to the tenant. The full amount of the expenses for this lease type is reflected in operating expenses, and the reimbursement is reflected in tenant recoveries. In a modified gross lease, which combines features of a full service gross lease and a triple net lease, the tenant reimburses the landlord or directly pays for some but not all expenses.

        Management and Advisory Service Fees.    Historically, our predecessor entered into management and leasing agreements with respect to the properties in its portfolio, and we expect to continue to do so for the properties in our initial portfolio in which we will not own all of the interests, as well as for certain additional properties in which we will not own an interest. Pursuant to these agreements, we collect management fees that are based on a percentage of rental receipts of managed properties, construction management fees that are based on a percentage of the cost of tenant and building improvements and leasing commission fees that are based on a percentage of gross rents payable under newly executed leases.

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Factors That May Influence Our Operating Results

        Business and Strategy.    We intend to focus primarily on owning and acquiring properties in markets that generally have been characterized by strong and stable employment bases, above-average job growth prospects and strong long-term growth potential as a result of their growing populations, net migration inflows and access to a talented and educated workforce. We believe that our top six markets—Atlanta, Orlando, Philadelphia, Jacksonville, Washington, D.C. and Tampa—provide attractive long-term return opportunities and that our integrated platform, market knowledge and industry and investor relationships give us a competitive advantage relative to our peers in each of our markets. Our in-house property management, asset management and leasing capabilities allow us to meet the needs of our existing tenants and identify value-enhancement opportunities, such as acquiring under-leased assets at attractive purchase prices and leasing them up over time. We believe that our relationships with leading institutional investors and real estate and financial industry professionals will provide us with critical market intelligence, an ongoing acquisition pipeline, potential joint venture partners and financing alternatives.

        Our objective is to expand our holdings in our current markets by identifying properties where we can capitalize on our competitive strengths to generate an attractive return on our investment. We currently are focused on newer, high quality assets in our markets that may be challenged due to an overleveraged capital structure and/or decreased occupancy or other operational stress. We also may consider expanding into other Southeastern, mid-Atlantic and Eastern U.S. markets in the event that we identify attractive investment opportunities. In addition, we may consider other opportunistic or distressed real estate investments, such as structured equity or debt investments with attractive control features, which may ultimately lead to ownership of the underlying asset. Finally, we intend to continue to redevelop and reposition properties to increase rental and occupancy rates at our properties.

        We plan to continue to acquire properties subject to existing mortgage financing and other indebtedness or to incur indebtedness in connection with acquiring or refinancing these properties. Debt service on such indebtedness will have a priority over any distributions with respect to our common shares.

        Rental and Other Property-Related Revenue.    We receive income primarily from rental revenue from our office properties. The amount of rental revenue generated by the properties in our portfolio depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space that becomes available from lease expirations. As of June 30, 2010, the occupancy of our initial portfolio was approximately 82.7%. The amount of rental revenue generated by us also depends on our ability to maintain or increase rental rates at our properties. We believe that the average rental rates for our properties generally are equal to or slightly above the current average quoted market rate. Negative trends in one or more of these factors could adversely affect our rental revenue in future periods. Future local, regional or national economic downturns affecting our markets or downturns in our tenants' industries that impair our ability to renew or re-lease space and the ability of our tenants to fulfill lease commitments, as in the case of tenant bankruptcies, likely would adversely affect our ability to maintain or increase rental rates at our properties. In addition, growth in rental revenue also will partially depend on our ability to acquire additional properties that are consistent with our acquisition strategy.

        Scheduled Lease Expirations.    Our ability to re-lease space subject to expiring leases will impact our results of operations and is affected by economic and competitive conditions in our markets as well as the desirability of our individual properties. As of June 30, 2010, in addition to approximately 1.4 million rentable square feet of currently available space in our initial portfolio, leases representing approximately 5.5% and 10.2%, respectively, of the rentable square footage of our initial portfolio are scheduled to expire during the remainder of 2010 and 2011, assuming no exercise of renewal options or early termination rights. The leases scheduled to expire in the remainder of 2010 and 2011 represent

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approximately 6.1% and 11.4%, respectively, of the annualized rent for our initial portfolio, assuming no exercise of renewal options or early termination rights.

        Conditions in Our Markets.    Our initial portfolio is comprised of our interests in 56 office properties and one related retail property that is part of an office complex, located in the Southeastern and mid-Atlantic United States. Positive or negative changes in economic or other conditions, adverse weather conditions and natural disasters in these markets may impact our overall performance.

        Operating Expenses.    Our operating expenses generally consist of utilities, property and ad valorem taxes, insurance and site maintenance costs. Increases in these expenses over tenants' base years are generally passed on to tenants in our full-service gross leased properties and are generally paid in full by tenants in our triple net lease properties.

        General and Administrative Expenses.    As a public company, we estimate our annual general and administrative expenses will increase by approximately $         million initially due to increased legal, insurance, accounting and other expenses related to corporate governance, SEC reporting and other compliance matters, compared to our predecessor's operations.

        Interest Rates.    We expect that future changes in interest rates will impact our overall performance. While we will seek to manage our exposure to future changes in interest rates through interest rate swap agreements and/or interest rate caps, portions of our overall outstanding debt, including borrowings under our revolving credit facility, will likely remain at floating rates.

        Taxable REIT Subsidiary.    Eola TRS LLC was formed as a Delaware limited liability company on September 20, 2010 and, upon completion of this offering and our formation transactions, will be a wholly owned subsidiary of our operating partnership. Our TRS will elect to be treated as a corporation for U.S. federal income tax purposes and, effective contemporaneously with that election, will elect jointly with us to be treated as a taxable REIT subsidiary of ours. Our TRS generally may provide non-customary and other services to our tenants and engage in activities that we may not engage in directly without adversely affecting our qualification as a REIT. We may form additional taxable REIT subsidiaries in the future. Because a taxable REIT subsidiary is subject to U.S. federal income tax, and state and local income tax (where applicable), as a regular corporation, the income earned by our TRS generally will be subject to an additional level of tax as compared to the income earned by our other subsidiaries and our predecessor.

Critical Accounting Policies

        Our discussion and analysis of the historical financial condition and results of operations of our predecessor are based upon its combined financial statements, which have been prepared in accordance with generally accepted accounting principles in the Unites States (GAAP). The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions in certain circumstances that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses in the reporting period. Actual amounts may differ from these estimates and assumptions. We have provided a summary of our significant accounting policies in the notes to the combined financial statements of the Eola Predecessor Companies included elsewhere in this registration statement. We have summarized below those accounting policies that require material subjective or complex judgments and that have the most significant impact on our financial condition and results of operations. We evaluate these estimates on an ongoing basis, based on information currently available to us and various assumptions that we believe are reasonable as of the date hereof. Other companies in similar businesses may use different estimation policies and methodologies, which may impact the comparability of our financial condition and results of operations to those of other companies.

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Basis of Presentation and Combination

        The financial statements of the Eola Predecessor Companies include the accounts of certain majority-owned investments controlled by Mr. Heistand, and certain investments that are less than majority-owned but are controlled by us through our ownership interest. All significant intercompany amounts have been eliminated. Control of an investment is demonstrated by, among other factors, (i) our ability to manage day-to-day operations, (ii) our ability to refinance debt and sell the investment without the consent of any other owner, and (iii) the inability of any other owner to replace us.

        The financial statements of the Eola Predecessor Companies also include the accounts of investments identified as variable interest entities, or VIEs, when we are determined to be the primary beneficiary. The determination of the primary beneficiary of a VIE considers all relationships between the investment and the VIE, including management agreements and other contractual arrangements, when determining the party that has the power to control the decisions that significantly impact the VIE's economic performance, as defined by accounting standards. As a result, Deerwood Holdings LLC, or Deerwood, which holds the investment in Capital Plaza I and II and Capital Plaza III, and CAT-B Holdings LLC, or CAT-B, which holds the investments in the Center Point property, were determined to be VIEs. Our company is considered the primary beneficiary. We have the power to control the decisions that significantly impact the economic performance of these VIEs. Consequently, Deerwood is combined in the accompanying combined financial statements for all periods presented and CAT-B is consolidated as of December 8, 2008, the date the power to control was obtained.

        Investments in real estate joint ventures represent non-controlling ownership interests in various real estate investments. We account for these investments using the equity method of accounting. Investments are initially recorded at cost and are subsequently adjusted for cash contributions and distributions and earnings (losses), which are generally allocated based on the provisions of the joint venture agreements.

        Certain investments have undergone recapitalization events during the periods presented in the accompanying combined financial statements. As a result of these recapitalization events, our interests may have changed from a non-controlling interest to a controlling interest or remained as a non-controlling interest. If the interest changed from a non-controlling interest to a controlling interest, the recapitalization was recorded as a purchase in the period the transaction occurred, and the controlling interest has been reflected in the combined financial statements since the transaction date. If the interest remained as a non-controlling interest, the interest continued to be recorded at its historical basis and any basis differential related to the new joint venture is amortized as part of "Equity in earnings (loss) from real estate joint ventures" going forward based upon the estimated lives of the underlying investment's assets.

Real Estate

        Land is carried at cost; land improvements, buildings and improvements, parking garages and improvements, and tenant improvements are carried at cost less accumulated depreciation. Additions and betterments are capitalized while maintenance and repairs which do not improve or extend the lives of the respective assets are expensed currently. Interest is capitalized on construction in progress and included in the cost of real estate to the extent that underlying capital expenditures support such capitalization.

        In leasing tenant space, we may provide funding to the lessee through a tenant allowance. In accounting for a tenant allowance, we determine whether the allowance represents funding for the construction of tenant improvements and evaluate the ownership, for accounting purposes, of such improvements. If we are considered the owner of the tenant improvements for accounting purposes, we capitalize the amount of the tenant allowance and depreciate it over the shorter of the useful life of

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the tenant improvements or the related lease term. If the tenant allowance represents a payment for a purpose other than funding tenant improvements, or in the event we are not considered the owner of the improvements for accounting purposes, the allowance is considered to be a lease acquisition cost (including lease inducements) and is recognized over the lease term as a reduction of rental revenue on a straight-line basis.

        Depreciation is recorded using the straight-line method over estimated useful lives of the buildings and improvements ranging from 10 to 50 years or the life of the related leases in the case of tenant allowances.

        We assign the purchase price of assets acquired and liabilities assumed to the acquired tangible assets (normally consisting of land, buildings, parking garages, and improvements) and identified intangible assets and liabilities (normally consisting of the value of in-place leases, including above-market and below-market leases). The costs are assigned based on the fair values of the assets acquired and liabilities assumed.

        The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land, buildings, parking garages, and improvements based on the estimation of the fair values of the assets.

        In determining the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management's estimate of fair value lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease and any below-market fixed rate renewal periods (for below-market lease values). The capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. The capitalized below-market lease values are accreted as an increase to rental income over the initial term and any fixed rate renewal periods in the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be expensed.

        The value of in-place leases is estimated based on the value associated with the costs avoided in originating leases compared to the acquired in-place leases, as well as the value associated with lost rental revenue and operating expense reimbursements during the assumed lease-up period. The value of in-place leases is amortized over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be expensed.

        We are required to expense property acquisition-related costs related to property acquisitions as incurred effective January 1, 2009. Prior to January 1, 2009, these costs were capitalized as part of the purchase price and allocated to the tangible and intangible assets acquired.

        We review our real estate and other related assets and liabilities included in the asset group for impairment whenever events or changes in circumstances indicate that the carrying value of the asset group may not be recoverable through operations. We determine whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges) of the asset group, with the carrying cost of the asset group. If impairment is indicated, a loss is recorded for the amount by which the carrying value of the asset group exceeds its fair value. We recorded an impairment charge of real property related to a combined real estate property of $0.5 million during the year ended December 31, 2009. No impairment of real property was recorded during 2010, 2008, or 2007.

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Investments in Real Estate Joint Ventures

        We account for our investments in real estate joint ventures under the equity method of accounting because we exercise significant influence over, but do not control, these entities. Our judgment with respect to the level of influence or control of an entity involves the consideration of various factors, including the form of our ownership interest, our representation in the entity's governance, our ability to participate in policy making decisions and the rights of the other investors to participate in the decision-making process and to replace us as manager and/or liquidate the venture, if applicable. Our assessment of our influence or control over an entity affects the presentation of these investments in our combined financial statements.

        These investments are recorded initially at cost and subsequently adjusted for equity in earnings (loss) and cash contributions and distributions from the real estate joint ventures. Any difference between the carrying amount of these investments on the balance sheet and the underlying equity in net assets is amortized as an adjustment to equity in earnings (loss) from joint ventures over the life of the related investment's assets. Under the equity method of accounting, our net equity investment is reflected on one line within the combined balance sheets, and our share of net income (loss) from the joint ventures is included within the combined statements of operations. The joint venture agreements may designate different percentage allocations among investors for profits and losses; however, our recognition of joint venture income or loss generally follows the joint venture's distribution priorities, which may change upon the achievement of certain investment return thresholds. We separately report investments in real estate joint ventures for which accumulated distributions have exceeded investments in and our share of net income of the joint ventures within "Losses and distributions in excess of contributions in real estate joint ventures" in the liability section of the combined balance sheets. The net equity of certain joint ventures may be less than zero if financing or operating distributions are greater than net income, as net income includes non-cash charges for depreciation and amortization. Distributions received that are considered a return on investment are reported as operating cash flows and distributions received that are considered a return of investment are reported as investing cash flows for combined statement of cash flow purposes.

        Our investments in real estate joint ventures are reviewed for impairment periodically, and we record impairment charges when events or circumstances change indicating that a decline in the fair values below the carrying values has occurred and such decline is other-than-temporary. The ultimate realization of the investment in real estate joint ventures is dependent on a number of factors, including the performance of each investment and market conditions. We recorded impairment charges related to our investments in eight real estate joint ventures of $0.3 million and $14.8 million during the years ended December 31, 2009 and 2008, respectively, which have been included in equity in earnings (loss) from real estate joint ventures in the combined statements of operations. No impairment charges of real property related to our investments in real estate joint ventures were recorded during 2010 or 2007 because any declines in value below our carrying amount were not deemed to be other than temporary.

Revenue Recognition

        We lease office space and parking space to tenants, including certain related parties, under operating lease agreements with varying terms. Rental revenue is recognized as earned. When scheduled rentals vary during the lease term, revenue is recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease. Accrued rental income is the aggregate difference between scheduled rental payments, which vary during the lease term, and rental revenue recognized on a straight-line basis over the lease term. Rental revenue is reported net of sales taxes collected from tenants, which are recorded as liabilities on the combined balance sheets.

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        Tenant reimbursements represent amounts from tenants for real estate taxes, common area maintenance charges and building and parking operating expenses and are recognized as earned.

        Management fees are based on a percentage of rental receipts of properties managed and are recognized as the rental receipts are collected. Leasing commissions are based on a percentage of gross rents payable under newly executed leases and are recorded when earned. Fees for construction supervision of tenant and building improvements are based on a percentage of the cost of improvements and are recorded upon completion of the improvements.

Non-Controlling Interests

        Effective January 1, 2009, we retrospectively adopted a newly issued accounting standard for non-controlling interests, which requires a non-controlling interest in an entity to be reported as equity and the amount of net income (loss) specifically attributable to the non-controlling interest to be included within net income (loss). This standard also requires consistency in the manner of reporting changes in the parent's ownership interest and requires fair value measurement of any non-controlling equity investment retained in a deconsolidation. Net income (loss) attributable to non-controlling interests in combined properties is a component of net income (loss).

Historical Results of Operations

        At December 31, 2009, our predecessor owned 56 properties and two land parcels, of which three properties and the two land parcels were consolidated in our predecessor's results of operations, and 53 properties were accounted for under the equity method. At June 30, 2010, our predecessor owned 55 properties and two land parcels, of which three properties and two land parcels were consolidated in our predecessor's results of operations and 52 properties were accounted for under the equity method.

Comparison of six months ended June 30, 2010 to six months ended June 30, 2009

    Revenues

        Rental Revenue.    Rental revenue includes rental revenues received from our properties. Rental revenue decreased $0.4 million, or 11%, to $3.4 million for the six months ended June 30, 2010, compared to $3.8 million for the six months ended June 30, 2009. The decrease in rental revenue was primarily attributable to losing, in November 2009, a tenant that occupied approximately 38,000 rentable square feet.

        Tenant Reimbursements.    Tenant recoveries remained constant at $1.9 million for the six months ended June 30, 2010 and 2009.

        Management and Advisory Service Fees—Affiliates.    Management and advisory service fees—affiliates are revenues derived from a percentage of rental receipts of managed properties, leasing commission fees that are based on a percentage of gross rents payable under newly executed leases, and construction management fees that are based on a percentage of the cost of tenant and building improvements. Total management and advisory service fees increased $3.8 million, or 51%, to $11.2 million for the six months ended June 30, 2010, compared to $7.4 million for the six months ended June 30, 2009. The increase in management and other fees was primarily due to the September 2009 acquisition of a non-controlling interest in a portfolio of properties totaling approximately 7.6 million rentable square feet, the majority of which we began leasing and managing in connection with the portfolio acquisition.

    Expenses

        Real Estate Operating Expenses.    Real estate operating expenses decreased $0.5 million, or 15%, to $2.9 million for the six months ended June 30, 2010, compared to $3.4 million for the six months ended

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June 30, 2009. The decrease was primarily due to a decrease in real estate taxes and general building maintenance expenses.

        Property and General Administrative Expenses.    Property and general administrative expenses were comparable period over period.

        Depreciation and Amortization.    Depreciation and amortization expense increased $0.8 million, or 36%, to $3.0 million for the six months ended June 30, 2010 compared to $2.2 million for the six months ended June 30, 2009. The increase in depreciation and amortization expense was primarily due to amortization of the cost of management and leasing contracts acquired in September 2009, in conjunction with the acquisition of the portfolio of office properties discussed above in Management and Advisory Service Fees—Affiliates.

        Management and Advisory Services Operating Expenses.    Management and advisory services operating expense increased $2.8 million, or 46%, to $8.9 million for the six months ended June 30, 2010 compared to $6.1 million for the six months ended June 30, 2009 primarily due to the growth of our company, and reflected primarily increases in personnel costs.

    Other Income (Expenses)

        Equity in Earnings (Loss) from Real Estate Joint Ventures.    Total equity in earnings (loss) from real estate joint ventures increased $1.7 million, or 81%, to $(0.4) million for the six months ended June 30, 2010 compared to $(2.1) million for the six months ended June 30, 2009. The increase in equity in earnings (loss) from real estate joint venture investments was primarily due to increased earnings of our investments in real estate joint ventures and equity earnings related to equity investments made subsequent to June 2009, along with a large one-time gain at one investment related to a discounted debt payoff.

        Interest and Other Income, Net.    Interest and other income, net was comparable period over period.

        Interest Expense.    Interest expense decreased $2.5 million, or 60%, to $1.7 million for the six months ended June 30, 2010 compared to $4.2 million for the six months ended June 30, 2009. The decrease in interest expense was primarily due to the reversal of late fees and default interest expense of $2.7 million on a mortgage payable that was recorded in 2009 and waived in 2010 in connection with ongoing negotiations with the lender.

Comparison of year ended December 31, 2009 to year ended December 31, 2008

    Revenue

        Rental Revenue.    Rental revenue increased $2.6 million, or 51%, to $7.7 million for the year ended December 31, 2009 compared to $5.1 million for the year ended December 31, 2008. The increase in rental revenue was primarily attributable to a full year of operations in 2009 of the Center Point property, which was acquired in December 2008.

        Tenant Reimbursements.    Tenant reimbursements increased $0.6 million, or 18%, to $4.0 million for the year ended December 31, 2009 compared to $3.4 million for the year ended December 31, 2008, primarily due to year over year increases in utilities and other common area maintenance expenses.

        Management and Advisory Service Fees—Affiliates.    Total management and advisory service fees—affiliates increased $1.0 million, or 6%, to $17.8 million for the year ended December 31, 2009 compared to $16.8 million for the year ended December 31, 2008. The increase in management and advisory service fees—affiliates was primarily due to the September 2009 acquisition of a

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non-controlling interest in a portfolio of properties totaling approximately 7.6 million rentable square feet, the majority of which we began leasing and managing in connection with the portfolio acquisition.

    Expenses

        Real Estate Operating Expenses.    Real estate operating expenses increased $1.9 million, or 44%, to $6.2 million for the year ended December 31, 2009 compared to $4.3 million for the year ended December 31, 2008. The increase in real estate operating expenses was primarily attributable to higher utilities and maintenance costs. In addition, approximately $0.3 million of the increase was due to the inclusion for a full year of operations in 2009 of the Center Point property, which was acquired in December 2008.

        Property and General Administrative Expenses.    Property and general administrative expenses increased $0.1 million, or 50%, to $0.3 million for the year ended December 31, 2009 compared to $0.2 million for the year ended December 31, 2008. The increase was primarily related to additional professional service fees incurred on one building.

        Depreciation and Amortization.    Depreciation and amortization expense increased $1.4 million, or 40%, to $4.9 million for the year ended December 31, 2009 compared to $3.5 million for the year ended December 31, 2008. The increase in depreciation and amortization expense was primarily due to depreciation and amortization related to the acquisition of the Center Point property, and amortization related to the acquisition of management and leasing contracts in September 2009.

        Property Impairment.    We recorded a property impairment charge of $0.5 million during the year ended December 31, 2009 due to lower than expected performance of the underlying operations of one building.

        Management and Advisory Services Operating Expenses.    Management and advisory services operating expense increased $1.5 million, or 11%, to $15.4 million for the year ended December 31, 2009 compared to $13.9 million for the year ended December 31, 2008 primarily due to the growth of our company, as noted above, and reflected primarily increases in personnel costs.

    Other Income (Expenses)

        Equity in Earnings (Loss) from Real Estate Joint Ventures.    Total equity in earnings (loss) from real estate joint ventures increased $13.8 million, or 74%, to $(4.9) million for the year ended December 31, 2009 compared to $(18.7) million for the year ended December 31, 2008. The increase in equity in earnings (loss) from real estate joint ventures was primarily due to the recording of a $14.8 impairment charge on our interests in certain real estate joint ventures in 2008.

        Interest and Other Income, Net.    Interest and other income, net decreased $0.1 million, or 50%, to $0.1 million for the year ended December 31, 2009 compared to $0.2 million for the year ended December 31, 2008 due to lower returns on money market cash accounts.

        Interest Expense.    Interest expense increased $2.4 million, or 45%, to $7.7 million for the year ended December 31, 2009 compared to $5.3 million for the year ended December 31, 2008. The increase in interest expense was primarily attributable to default interest and late fees of $2.1 million related to a $16.3 million mortgage note payable, which was assumed in connection with the acquisition in December 2008 of the Center Point property.

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Comparison of year ended December 31, 2008 to year ended December 31, 2007

    Revenue

        Rental Revenue.    Rental revenue increased $0.3 million, or 6%, to $5.1 million for the year ended December 31, 2008 compared to $4.8 million for the year ended December 31, 2007. The increase in rental revenue was primarily attributable to the Center Point acquisition in December 2008.

        Tenant Reimbursements.    Operating expense reimbursements remained relatively flat at $3.4 million for the years ended December 31, 2008 and 2007.

        Management and Advisory Service Fee—Affiliates.    Total management and advisory service fees—affiliates increased $1.7 million, or 11%, to $16.8 million for the year ended December 31, 2008 compared to $15.1 million for the year ended December 31, 2007. The increase was due to a full year of management fees in 2008 related to equity method investments made during the second half of 2007.

    Expenses

        Real Estate Operating Expenses.    Real estate operating expenses remained relatively flat at approximately $4.3 million and $4.2 million for the years ended December 31, 2008 and 2007, respectively.

        Property and General Administrative Expenses.    Property and general administrative expenses were comparable period over period.

        Depreciation and Amortization.    Depreciation and amortization expense increased $0.3 million, or 9%, to $3.5 million for the year ended December 31, 2008 compared to $3.2 million for the year ended December 31, 2007. The increase in depreciation and amortization expense was primarily attributable to depreciation capital expenditures for tenant improvements made in early 2008.

        Management and Advisory Services Operating Expenses.    Management and advisory services operating expense decreased $1.4 million, or 9%, to $13.9 million for the year ended December 31, 2008 compared to $15.3 million for the year ended December 31, 2007. The decrease was primarily due to professional fees incurred in 2007 related to the purchase of real estate properties in late 2007 and early 2008.

    Other Operating Income (Expenses)

        Equity in Earnings (Loss) from Real Estate Joint Ventures.    Total equity in loss from real estate joint ventures increased $16.5 million, or 75%, to $(18.7) million for the year ended December 31, 2008 compared to $(2.2) million for the year ended December 31, 2007. The increase in equity in (loss) from real estate joint ventures was primarily due to a $14.9 million impairment charge on our investments in certain real estate joint ventures in 2008.

        Interest and Other Income, Net.    Interest and other income, net decreased $0.2 million, or 50%, to $0.2 million for the year ended December 31, 2008 compared to $0.4 million for the year ended December 31, 2007 due to lower returns on money market cash accounts.

        Interest Expense.    Interest expense remained relatively flat at $5.3 million and $5.2 million for the years ended December 31, 2008 and 2007, respectively.

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Liquidity and Capital Resources

    Analysis of Liquidity and Capital Resources

        We believe that this offering and our formation transactions will improve our financial performance through changes in our capital structure, including a reduction in our leverage and enabling us to access public equity and debt markets. On a pro forma basis after giving effect to this offering and our formation transactions, we expect that our pro rata share of debt to total market capitalization will be approximately    %.

        As of June 30, 2010, on a pro forma basis after giving effect to this offering and our formation transactions, we will have approximately $       million in restricted cash that we expect to use to fund tenant improvements and other costs with respect to the applicable properties. In addition, we intend to enter into a revolving credit facility under which we can borrow up to $       million. We intend to use the revolving credit facility to fund acquisition, redevelopment and repositioning opportunities, to fund tenant improvements and capital expenditures and for general corporate and working capital purposes.

        The nature of our business, coupled with the requirement imposed by REIT rules that we distribute a substantial majority of our REIT taxable income on an annual basis, will cause us to have substantial liquidity needs over both the short term and the long term. Our short-term liquidity requirements primarily consist of operating expenses and other expenditures associated with our properties, distributions to the limited partners in our operating partnership and expected distributions to our shareholders (including those required to maintain our REIT status), interest expense and scheduled principal payments on our debt and recurring capital expenditures. When we lease space to new tenants, or renew leases for existing tenants, we also incur expenditures for tenant improvements and leasing commissions. This amount, as well as the amount of recurring capital expenditures that we incur, will vary from year to year, in some cases significantly. We expect to meet our short-term liquidity requirements through net cash from operations, restricted cash that has been set aside for these purposes, reserves established from existing cash, the net proceeds from this offering and, if necessary, by borrowing under our revolving credit facility or obtaining new indebtedness.

        Our long-term liquidity needs consist primarily of funds necessary to pay for acquisitions, redevelopment and repositioning of properties, non-recurring capital improvements and repayment of debt at maturity. We do not expect that we will have sufficient funds on hand to cover all of these long-term cash requirements. We expect to meet our long-term liquidity requirements with net cash from operations, long-term secured and unsecured debt and the issuance of equity and debt securities, including units in our operating partnership, property dispositions and joint venture transactions. We also may fund property acquisitions and non-recurring capital improvements using our revolving credit facility.

        We believe that, as a publicly traded REIT, we will have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional debt and raising additional equity. However, as a new public company, we cannot assure you that this will be the case, especially in difficult market conditions, or that the terms of available capital will be attractive. Our ability to incur additional debt will be dependent on a number of factors, including our degree of leverage, our liquidity, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. Our ability to access the equity capital markets will be dependent on a number of factors as well, including our operating results and prospects, market perceptions about our company and general market conditions for REITs.

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    Indebtedness to be Outstanding after this Offering

        Upon completion of this offering and our formation transactions, we expect to have approximately $413.4 million of consolidated indebtedness outstanding, of which our pro rata share will be approximately $383.4 million, based on balances outstanding as of June 30, 2010. In addition, we expect that our pro rata share of unconsolidated indebtedness outstanding will be approximately $87.8 million, based on balances outstanding as of June 30, 2010 and based on those properties which we expect will be held in non-controlled joint ventures. See "Business and Properties—Outstanding Indebtedness." All of our consolidated indebtedness accrues interest at a fixed rate, after taking into account interest rate swap agreements. Approximately $8.8 million of our pro rata share of the indebtedness of our unconsolidated joint ventures is subject to variable interest rates as of June 30, 2010, after taking into account interest rate swap agreements.

        The following table sets forth information on a pro forma basis as of June 30, 2010 with respect to the amortization and maturities of the indebtedness we expect to be outstanding upon completion of this offering and our formation transactions, assuming no exercise of extension options.

 
  Amortization Payments   Maturity Payments   Total Payments  
Year
  Total   Pro Rata Share   Total   Pro Rata Share   Total   Pro Rata Share  

Consolidated Properties

                                     

Through December 31, 2010

    1,291,160     1,291,160             1,291,160     1,291,160  

2011

    6,101,862     6,101,862             6,101,862     6,101,862  

2012

    4,817,954     4,817,954             4,817,954     4,817,954  

2013

    2,470,498     2,470,498             2,470,498     2,470,498  

2014

    2,515,563     2,515,563             2,515,563     2,515,563  

2015

    2,517,900     2,517,900     156,537,716     156,537,716     159,055,615     159,055,615  

Thereafter

    5,387,076     5,387,076     231,768,164     201,768,164     237,155,241     207,155,241  
                           
 

Total—Consolidated Properties

  $ 25,102,012   $ 25,102,012   $ 388,305,880   $ 358,305,880   $ 413,407,892   $ 383,407,892  

Unconsolidated Properties

                                     

Through December 31, 2010

    206,082     17,919             206,082     17,919  

2011

    424,172     36,882     152,625,842     26,233,168     153,050,013     26,270,050  

2012

    599,710     59,049     67,412,713     11,874,552     68,012,423     11,933,601  

2013

    1,361,507     136,151     24,000,000     2,400,000     25,361,507     2,536,151  

2014

    1,438,928     143,893             1,438,928     143,893  

2015

    1,521,259     152,126             1,521,259     152,126  

Thereafter

    2,586,736     258,674     321,666,704     46,457,070     324,253,441     46,715,744  
                           
 

Total—Unconsolidated Properties

  $ 8,138,393   $ 804,693   $ 565,705,259   $ 86,964,791   $ 573,843,652   $ 87,769,484  

TOTAL—INITIAL PORTFOLIO

 
$

33,240,405
 
$

25,906,705
 
$

954,011,139
 
$

445,270,671
 
$

987,251,544
 
$

471,177,376
 

    Revolving Credit Facility

        We expect to enter into a $       million revolving credit facility upon completion of this offering and our formation transactions. There can be no assurance that we will be successful in obtaining such a facility.

Contractual Obligations

        The following table provides information with respect to our principal obligations and commitments, on a pro forma basis as of June 30, 2010 to reflect the obligations that we expect to have

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upon completion of this offering and our formation transactions. The table does not reflect available debt extensions.

 
  Payments Due by Period  
 
  (amounts in thousands)  
Contractual Obligation
  Total   2010   2011 - 2012   2013 - 2015   After 2015  

Long term debt obligations

  $ 413,408   $ 1,291   $ 10,920   $ 164,041   $ 237,156  

Interest payments

    135,044     13,351     49,297     67,857     4,539  

Minimum lease payments

    1,695     189     747     678     81  

Ground lease payments

    44,780     386     1,556     2,359     40,479  

Capital commitments

    7,000     7,000              

Tenant related commitments

    8,966     6,684     2,069     213      
                       

Total

  $ 610,893   $ 28,901   $ 64,589   $ 235,148   $ 282,255  
                       

        Certain of our debt agreements contain covenants that, among other things, restrict activities regarding cash reserve accounts, borrowings, liens, leasing and sale of property, and require us to meet certain financial ratios, none of which are considered material. We are in compliance with our debt covenants except with respect to the Center Point loan, the original maturity date of which was in January 2009. We intend to repay the Center Point loan in full with a portion of the net proceeds from this offering.

        In addition to the contractual obligations set forth in the table above, we expect to enter into employment agreements with certain of our executive officers. These employment agreements provide for salary, bonus, incentive compensation and other benefits, all as more fully described under "Management—Executive Compensation—Employment Agreements."

Off Balance Sheet Arrangements

        Our off-balance sheet arrangements consist primarily of our investments in joint ventures, which are common in the real estate industry and are described in Note 6 of the notes to the accompanying combined financial statements. Our joint ventures typically fund their cash needs through secured debt financings obtained by and in the name of the joint venture entity. The joint venture debt is secured by a first mortgage, is without recourse to the joint venture partners, and does not represent a liability of the partners, except to the extent the partners or their affiliates expressly guarantee the joint venture debt. As of June 30, 2010, our operating partnership had guaranteed $29.3 million of the total joint venture related mortgage or other indebtedness of the $573.8 million then outstanding. We may elect to fund cash needs of a joint venture through equity contributions (generally on a basis proportionate to our ownership interests), advances or partner loans, although such fundings are not required contractually or otherwise.

Cash Flows

    Comparison of six months ended June 30, 2010 to six months ended June 30, 2009

        Cash and cash equivalents were $3.7 million and $3.6 million at June 30, 2010 and 2009, respectively.

        Net cash provided by operating activities decreased by $1.0 million to $1.2 million for the six months ended June 30, 2010 compared to $2.3 million for the six months ended June 30, 2009. The decrease was primarily attributable to a decrease in losses related to equity investments, fluctuations in operating escrows, receivables, accrued interest payable, accounts payable and other liabilities.

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        Net cash (used in) provided by investing activities was $(2.4) million for the six months ended June 30, 2010 compared to $0.1 million net cash provided by investing activities for the six months ended June 30, 2009. The decrease was primarily attributable to a $5.0 million deposit made in conjunction with the pending acquisition of the 1110 Vermont property offset by $2.8 million of cash received from joint ventures to purchase real estate.

        Net cash provided by (used in) financing activities was $2.7 million for the six months ended June 30, 2010 compared to $(1.8) million for the six months ended June 30, 2009. The change was primarily attributable to increased proceeds of notes payable and reduced cash distributions to owners.

    Comparison of year ended December 31, 2009 to year ended December 31, 2008

        Cash and cash equivalents were $2.1 million and $3.0 million at December 31, 2009 and December 31, 2008, respectively.

        Net cash provided by operating activities increased by $1.8 million to $3.7 million for the year ended December 31, 2009 compared to $1.9 million for the year ended December 31, 2008. The increase was primarily attributable to a decrease in losses related to equity investments, fluctuations in operating escrows, receivables, deposits and prepaid expenses, accrued interest payable, accounts payable and other liabilities.

        Net cash (used in) investing activities was $(1.5) million for the year ended December 31, 2009 compared to $(0.4) million for the year ended December 31, 2008. The change was primarily attributable to the acquisition of management and leasing contracts in 2009 and the acquisition of additional equity and cost method investments in 2009, offset by a decrease in returns of equity method investments.

        Net cash (used in) provided by financing activities was $(3.1) million for the year ended December 31, 2009 compared to less than $0.1 million for the year ended December 31, 2008. The change was primarily attributable to a reduction in cash distributions to owners, increased borrowing under notes payable, funding of loans to members, and an increase in repayment of notes payable.

    Comparison of year ended December 31, 2008 to year ended December 31, 2007

        Cash and cash equivalents were $3.0 million and $1.5 million at December 31, 2008 and December 31, 2007, respectively.

        Net cash provided by operating activities increased by $0.1 million to $1.9 million for the year ended December 31, 2008 compared to approximately $1.8 million for the year ended December 31, 2007. The increase was attributable to fluctuations in various working capital accounts.

        Net cash (used in) investing activities was $(0.4) million for the year ended December 31, 2008 compared to $(19.2) million for the year ended December 31, 2007. The change was primarily attributable to less acquisition activity in 2008 related to equity method investments compared to 2007.

        Net cash provided by financing activities was less than $0.1 million for the year ended December 31, 2008 compared to $17.0 million net cash provided by financing activities for the year ended December 31, 2007. The change was primarily attributable to fluctuations in proceeds from capital contributions and cash distributions, offset by borrowings under notes payable.

Funds From Operations

        We calculate FFO before non-controlling interest, or FFO, in accordance with the standards established by NAREIT. FFO is defined by NAREIT as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, plus depreciation

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and amortization of real estate assets (excluding amortization of deferred financing costs), and after adjustments for unconsolidated partnerships and joint ventures.

        FFO is a supplemental non-GAAP financial measure. Management uses FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from property dispositions, which do not relate to or are not indicative of our operating performance, FFO provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs. However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effects and could materially impact our results of operations, the utility of FFO as a measure of our performance is limited. In addition, other equity REITs may not calculate FFO in accordance with the NAREIT definition as we do, and, therefore, our FFO may not be comparable to such other REITs' FFO. Accordingly, FFO should not be considered as an alternative to net income available to common shareholders (determined in accordance with GAAP) as an indicator of our financial performance. While management believes that FFO is an important supplemental non-GAAP financial measure, management believes it is also important to stress that FFO should not be considered as an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity. Further, FFO is not necessarily indicative of sufficient cash flow to fund all of our cash needs, including our ability to service indebtedness or make distributions.

        EBITDA represents net income (losses) excluding: (i) interest; (ii) income tax expense, including deferred income tax benefits and expenses and income taxes applicable to sale of assets; and (iii) depreciation and amortization. EBITDA should not be considered as an alternative to net income available to common shareholders (determined in accordance with GAAP). We believe EBITDA is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our asset base (primarily depreciation and amortization) from our operating results. Our management also uses EBITDA as one measure in determining the value of acquisitions and dispositions.

        We consider NOI to be an appropriate supplemental measure to net income because it helps both investors and management to understand the core operations of our properties. NOI should not be considered as an alternative to net income (determined in accordance with GAAP). We define NOI as operating revenue (including rental revenue, tenant reimbursements and parking and other income) less property operating expenses. NOI excludes depreciation and amortization, impairments, gain/loss on sale of real estate, interest expense and other non-operating items.

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        The following table sets forth a reconciliation of our pro forma net income to pro forma FFO before non-controlling interest for the periods presented.

 
  Pro Forma  
 
  Six Months Ended
June 30, 2010
  Year Ended
December 31, 2009
 
 
  (In thousands)
  (In thousands)
 

Reconciliation of FFO, EBITDA and NOI to Net Income:

             

Net income (loss) attributable to the Company

 
$
 
$
 

Add/(deduct):

             
 

Net income (loss) attributable to non-controlling interests - OP units

             
 

Depreciation and amortization(1)

             
 

Depreciation and amortization—unconsolidated properties

             
 

Gain on sale of discontinued operations

  $     $    
           

Funds from operations

          (2)  

Add/(deduct):

             
 

Interest expense, net(1)

             
 

Interest expense, net—unconsolidated properties

             
 

Non real estate related depreciation and amortization(1)

             
 

Non real estate related depreciation and amortization—unconsolidated properties

             
 

Interest and other income, net

  $     $    
           

EBITDA

          (2)  

Add/(deduct):

             
 

Management and other fees

             
 

General and administrative

             
 

Property impairment

  $     $    
           

Net operating income (NOI), including pro rata joint venture share

             

Deduct:

             
 

Pro rata joint venture share of net operating income

  $     $    
           

Net operating income

             

(1)
Net of amounts attributable to non-controlling interests in properties.

(2)
Includes an impairment charge of $457 for the year ended December 31, 2009.

Inflation

        Substantially all of our office leases provide for separate real estate tax and operating expense escalations. In addition, most of the leases provide for fixed rent increases. We believe that inflationary increases may be at least partially offset by the contractual rent increases and expense escalations described above.

Recently Adopted Pronouncements

        In December 2007, the FASB issued updated guidance, which applies to all transactions or events in which an entity obtains control of one or more businesses. This guidance (i) establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed, (ii) requires expensing of most transactions costs, and (iii) requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination. These provisions were adopted by us on January 1, 2009. The

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primary impact of adopting this guidance on our combined financial statements was the requirement to expense transaction costs relating to our acquisition activities starting in 2009.

        In February 2008, the FASB issued updated guidance which defers the effective date of previous guidance issued regarding the fair value of nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis, until fiscal years beginning after November 15, 2008. These provisions were adopted by us on January 1, 2009, and did not have a material impact on our combined financial statements.

        In May 2009 and February 2010, the FASB issued updated guidance to establish general standards of accounting for and disclosure of subsequent events. This guidance renamed the two types of subsequent events as recognized subsequent events or non-recognized subsequent events and modified the definition of the evaluation period for subsequent events as events or transactions that occur after the balance sheet date, but before the financial statements are issued. We adopted this guidance during 2009. The adoption of this guidance did not have a material impact on our combined financial statements.

        In June 2009, the FASB issued guidance, which establishes the FASB's Accounting Standards Codification, or the Codification, as the exclusive authoritative reference for nongovernmental U.S. GAAP for use in financial statements, except for SEC rules and interpretative releases, which are also authoritative for SEC registrants. As a result, the Codification provides guidance that all standards will carry the same level of authority. We adopted this guidance during 2009. The only impact of adopting this guidance was to update and remove certain references to technical accounting literature in the combined financial statements.

        In November 2008, the FASB ratified guidance related to equity method investment accounting. This guidance applies to all investments accounted for under the equity method and clarifies the accounting for certain transactions and impairment considerations involving equity method investments. This guidance became effective beginning in the first quarter of fiscal year 2010. The adoption of the new guidance did not have a significant impact on our combined financial statements.

        In June 2009, the FASB issued updated guidance, which amends guidance for determining whether an entity is a VIE and requires the performance of a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE. Under this guidance, an entity is required to consolidate a VIE if it has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. This guidance became effective beginning in the first quarter of fiscal year 2010. We adopted this guidance effective January 1, 2010 and applied it retrospectively to all prior periods presented in our combined financial statements. The cumulative result of this adoption was the consolidation of Deerwood, as described above under the subheading "—Critical Accounting Policies—Basis of Presentation and Combination."

        In August 2009, the FASB issued new guidance for the accounting for the fair value measurement of liabilities. The new guidance provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the approved techniques. The new guidance clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The guidance is effective for the first reporting period (including interim periods) beginning after issuance. The adoption of the standard did not have a significant impact on our combined financial statements.

        In January 2010, the FASB issued new guidance for fair value measurements and disclosures, which is intended to improve disclosures regarding fair value measurements. This update requires new

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disclosures for transfer in and out of Level 1 and 2, as well as disclosure about the valuation techniques and inputs used to measure fair value for Level 1 and 2. In addition, activity in Level 3 should present separately information about purchases, sales, issuances and settlements on a gross basis (rather than as one net number). A reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. The new disclosures and clarifications of existing disclosures are effective beginning in the first quarter of fiscal year 2010, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We believe the adoption of the standard will not have a significant impact on our financial position or results of operations.

Quantitative and Qualitative Disclosure About Market Risk

        Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. As more fully described in the interest rate risk section, we use derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings. We only enter into contracts with major financial institutions based on their credit rating and other factors.

        As of June 30, 2010, on a pro forma basis, our total outstanding consolidated debt was approximately $413.4 million, all of which was fixed rate debt. As of June 30, 2010, on a pro forma basis, our pro rata share of total outstanding debt with respect to our unconsolidated joint ventures was approximately $87.8 million, of which $75.5 million was fixed rate debt, $3.5 million was variable rate debt that was subject to interest rate swap agreements, and $8.8 million was variable rate debt that was not subject to any interest rate swap agreement. Based on the foregoing anticipated debt levels, a 100 basis point increase in market interest rates would not have a material impact on our future earnings or cash flows.

        Interest risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

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ECONOMIC AND MARKET OVERVIEW

        Except for the data presented for the properties in our portfolio and unless otherwise indicated, all information in this Economic and Market Overview section is derived from the market studies prepared by RCG. As used herein, RCG's forecast horizon is 2010 to 2014 and any references in a table or otherwise to one or more of those years is, by definition, a forecast or projection.

National U.S. Economic and Office Market Overview

        The U.S. economic recovery that officially began in the second half of 2009 continues to spread throughout the economy as underlying economic data, capital markets activity and asset pricing have rebounded from their lows. RCG forecasts a modest recovery through 2010 based on improvements in the business and financial sectors, with a more robust recovery expected between 2011 and 2014. RCG expects the pace of job growth to increase during the remainder of 2010, with the overall creation of more than one million new jobs by year-end 2010.

        The next 18 months likely will be characterized by a moderate but uneven recovery. RCG believes that employment, retail sales, interest rates, home prices and industrial production all will trend higher but that month-to-month improvements will be irregular. Specifically, RCG is forecasting slow growth in GDP with an annual increase of 2.2% for 2010. However, in 2011 and 2012, RCG expects GDP to grow by 2.4% to 3.0% annually, driving the continued recovery from the recession while also creating jobs.

        Several sectors already are showing strength in the job market. For example, the global liquidity resulting from the financial rescue operations of 2009 has supported renewed activity in the financial markets and continues to drive additional hiring by financial services firms. RCG believes that the national unemployment rate will remain elevated throughout 2010 despite employment gains, as signs of an improving economy bring many individuals who have not been searching for employment back into the job market, causing these individuals to be counted in the unemployment rate. RCG therefore expects unemployment, currently at 9.5% as of June 2010, to rise slightly to 9.6% by year-end, before falling steadily to 7.0% by 2014.

    Demand Drivers

    GRAPHIC

        The office-using employment sectors continued to recover in the first half of 2010, as nearly 139,000 jobs were added in the financial sector, the professional and business services sector and the office-using segment of the information services sector. This was the third consecutive quarter of job creation in the office-using sectors. The professional and business services sector continued to lead the recovery, adding more than 225,000 jobs in the first half of 2010. The job creation is a positive sign that office leasing conditions are on the road to recovery. However, an improvement in the office market is expected to lag the jobs recovery as companies are expected to backfill excess space and remain

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cautious until the economic recovery is more entrenched. Going forward, RCG expects office-employment job growth to increase from 0.5% in 2010 to 1.7% by 2014.

    Office Market Conditions

        The national office market appeared to be nearing a bottom through the second quarter of 2010 as the pace of deterioration in the occupancy rate began to slow from year-end 2009 and even showed a modest improvement from the first quarter of 2010. On the supply side, the construction pipeline remained substantially closed and deliveries of new office space were minimal—factors that are expected to position the office market for a recovery.

        The total office vacancy rate stood at 17.8% in the second quarter of 2010, down 10 basis points from the first quarter of 2010, leading RCG to believe that prospects for demand growth have resumed. For most office markets, the majority of currently vacant space became vacant during the first three quarters of 2009. With tenant move-outs now slowing over the last three quarters, the markets are poised to turn the corner. RCG expects the overall vacancy rate to decline gradually through 2014, decreasing to 15.2% by 2014.

GRAPHIC

        The U.S. CBD vacancy rate declined to 14.8% in the second quarter from 15.0% in the first quarter of 2010. With available space still on the market and relatively fewer tenants seeking to lease space, landlords continued to offer leasing incentives and decrease asking rents. RCG expects that market conditions in the CBD markets will continue to improve, with the vacancy rate expected to decline further to 14.6% by year-end 2010 and to 11.9% by 2014. RCG forecasts that asking rents in the CBD markets will post a nearly flat rate increase of 0.2% in 2010 and will increase an average of 3.3% per year between 2011 and 2014.

        During the past several years, certain suburban regions suffered from a combination of a decrease in tenant demand and speculative construction activity that came to market during the recession. The suburban vacancy rate increased slightly to 19.5% in the second quarter from 19.4% in the first quarter of 2010. However, RCG expects the suburban vacancy rate to decline to 19.3% at year-end 2010 and to decline further to 17.0% by year-end 2014 as tenant demand increases. With little leasing activity, landlords had limited pricing power and concession packages remained a significant portion of the total consideration of a lease. RCG expects that asking rents actually will increase by 0.7% in total in 2010 and will increase an average of 2.5% per year between 2011 and 2014.

    Investment Trends

        Investment activity showed strong signs of improvement in late 2009 and through the first half of 2010 as investors re-entered the market, leading to an increase in the number of private transactions. The availability of capital and the search for higher yielding investments drove investors back into the real estate markets, and this increase in demand began to drive up pricing and attract more sellers. Moreover, Green Street Advisors estimates that through August 2010, property values have risen 25%

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from the 2009 low, which means that nearly half of the decline that occurred from 2007 to 2009 has been erased.

        With short term treasury rates at historical lows, REIT dividend yields have attracted investors and driven demand for public real estate securities. While most of the new issuance activity has been in REIT equity and unsecured debt, issuances in the commercial mortgage-backed securities, or CMBS, market have slowly resumed. The first new private multi-borrower CMBS issuance came to market at the end of the first quarter of 2010 and the pipeline of new deals has grown.

        RCG believes that the capital markets will continue to improve throughout the year and that the real estate financing market will also continue to improve. RCG expects that several real estate mortgage securitizations will come to market in the second half of 2010 and that by 2011 a smaller and more conservative CMBS market will begin to emerge. The broader availability of CMBS debt and willingness of other lenders to enter the market will pave the way towards a more stable investment environment.

Selected Existing Office Market Overviews

        This section presents detailed information for our top six markets based on annualized rent: Atlanta, Orlando, Philadelphia, Jacksonville, Washington, D.C. and Tampa, which collectively accounted for approximately 96.7% of the annualized rent of our initial portfolio as of June 30, 2010.

        We believe that our markets exhibit positive economic characteristics, driving favorable office market fundamentals and positioning us to achieve attractive risk-adjusted returns. According to RCG, our top six markets have historically outperformed the national average in terms of both population growth and unemployment.

        This positive growth can be attributed to a number of factors, including a strong and stable employment base, favorable business environment and access to a talented and educated workforce. Although the recent downturn impacted our markets, we believe many of the factors that drove our top six markets to perform well from 2004 to 2009 remain and position our markets for future growth as the economy rebounds.

        Population growth in our top six markets was nearly 150% of the national average from 2005 to 2009. From 2011 to 2014, population growth in our top six markets is expected to be 1.3% annually versus the national average of 1.0%. Furthermore, annual population growth in Atlanta and Orlando is expected to increase 2.2% and 1.8%, respectively, far outpacing the national average.

        Consistent with outperformance in population growth, job growth in our top six markets on average exceeded the national average during the period from 2005 to 2009. From 2011 to 2014, job growth in our top six markets is expected to be 1.3% annually versus the national average of 1.1%, with greater outperformance expected in Washington, D.C. and Orlando.

        As of the second quarter of 2010, our top six markets had a weighted-average unemployment rate of 9.7%, compared to the national average of 9.5%. While Washington, D.C. and Philadelphia consistently have outperformed the national average, we believe the outperformance in our top six markets will be driven by significant improvement in Orlando, Jacksonville and Tampa, each of which, according to RCG, is projected to exhibit a drop in the unemployment rate of at least three percentage points by 2014. By 2014, the weighted-average unemployment rate is projected to be 6.4% for our top six markets versus a national average of 7.0%.

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        Included below are tables comparing the economic metrics of population growth, job growth and unemployment rate for our top six markets to the national average.

    Population Growth

Market
  2005   2006   2007   2008   2009   2010f   2011f   2012f   2013f   2014f   CAGR(1)
(2011f - 2014f)
 

Atlanta

    3.0 %   3.5 %   2.9 %   2.2 %   1.7 %   1.7 %   1.9 %   2.1 %   2.2 %   2.4 %   2.2 %

Orlando

    3.9 %   3.1 %   1.7 %   1.3 %   1.0 %   1.1 %   1.5 %   1.7 %   1.6 %   2.2 %   1.8 %

Philadelphia

    0.5 %   0.5 %   0.5 %   0.5 %   0.5 %   0.5 %   0.5 %   0.5 %   0.5 %   0.4 %   0.5 %

Jacksonville

    2.1 %   2.5 %   1.7 %   1.2 %   0.9 %   0.7 %   1.1 %   1.4 %   1.6 %   1.7 %   1.4 %

Washington, D.C. 

    1.4 %   0.7 %   0.9 %   1.2 %   1.8 %   1.4 %   1.4 %   1.5 %   1.5 %   1.6 %   1.5 %

Tampa

    2.4 %   1.7 %   1.0 %   0.7 %   0.6 %   0.5 %   0.7 %   1.0 %   1.2 %   1.3 %   1.0 %

Weighted Average

    1.9 %   1.8 %   1.4 %   1.2 %   1.2 %   1.0 %   1.2 %   1.3 %   1.4 %   1.5 %   1.3 %

National

    1.0 %   1.0 %   1.0 %   1.0 %   1.0 %   1.0 %   1.0 %   1.0 %   1.0 %   1.0 %   1.0 %

(1)
Compound annual growth rate.

    Job Growth

Market
  2005   2006   2007   2008   2009   2010f   2011f   2012f   2013f   2014f   CAGR(1)
(2011f - 2014f)
 

Atlanta

    3.3 %   2.9 %   0.8 %   (3.5 )%   (5.2 )%   1.3 %   1.4 %   1.5 %   0.9 %   1.2 %   1.2 %

Orlando

    5.1 %   3.9 %   1.1 %   (4.7 )%   (4.8 )%   0.4 %   1.0 %   1.4 %   1.0 %   1.9 %   1.3 %

Philadelphia

    0.8 %   0.6 %   0.5 %   (1.4 )%   (3.6 )%   0.8 %   0.7 %   0.8 %   0.6 %   1.0 %   0.8 %

Jacksonville

    3.7 %   3.0 %   (0.2 )%   (3.9 )%   (4.5 )%   0.7 %   0.8 %   1.2 %   0.8 %   1.6 %   1.1 %

Washington, D.C. 

    1.8 %   1.3 %   0.7 %   (0.7 )%   (1.9 )%   2.2 %   1.7 %   1.9 %   1.6 %   2.1 %   1.8 %

Tampa

    2.3 %   1.8 %   (1.4 )%   (5.1 )%   (4.9 )%   0.9 %   0.9 %   1.3 %   0.8 %   1.8 %   1.2 %

Weighted Average

    2.3 %   1.9 %   0.4 %   (2.5 )%   (3.8 )%   1.3 %   1.2 %   1.4 %   1.0 %   1.6 %   1.3 %

National

    1.8 %   1.6 %   0.9 %   (2.1 )%   (4.0 )%   0.9 %   1.0 %   1.2 %   0.9 %   1.2 %   1.1 %

(1)
Compound annual growth rate.

    Unemployment Rate

Market
  2005   2006   2007   2008   2009   2010f   2011f   2012f   2013f   2014f   Average
(2011f - 2014f)
 

Atlanta

    5.0 %   4.4 %   5.1 %   7.8 %   10.4 %   9.7 %   9.0 %   8.3 %   7.9 %   7.6 %   8.2 %

Orlando

    3.1 %   3.2 %   4.5 %   8.1 %   12.3 %   11.6 %   11.2 %   8.7 %   7.0 %   6.5 %   8.4 %

Philadelphia

    4.7 %   4.2 %   4.6 %   6.7 %   9.3 %   8.7 %   7.7 %   6.8 %   6.5 %   5.4 %   6.6 %

Jacksonville

    3.2 %   3.4 %   4.4 %   7.6 %   11.8 %   11.2 %   10.0 %   9.4 %   8.2 %   6.5 %   8.5 %

Washington, D.C. 

    3.1 %   3.0 %   3.1 %   4.9 %   6.6 %   6.1 %   5.8 %   5.0 %   4.9 %   4.5 %   5.0 %

Tampa

    3.4 %   3.4 %   5.1 %   8.7 %   12.7 %   12.2 %   11.9 %   10.7 %   9.5 %   8.8 %   10.2 %

Weighted Average

    4.0 %   3.8 %   4.5 %   7.2 %   10.4 %   9.8 %   8.9 %   8.0 %   7.3 %   6.4 %   7.7 %

National

    5.0 %   4.4 %   4.8 %   7.0 %   10.0 %   9.6 %   9.0 %   8.1 %   8.0 %   7.0 %   8.0 %

        Driven by positive economic indicators projected within our markets, RCG expects office market fundamentals within our markets to outperform the national average. RCG expects new construction deliveries to add approximately 2.2% of additional square footage to the overall office stock within our markets from 2010 to 2014, which is slightly above the national average of 2.0%. This modest growth coupled with the favorable economic drivers noted above are expected to result in an attractive supply/demand balance that will provide for improvements in asking rents and vacancy rates.

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        As of the second quarter of 2010, our top six markets had a weighted-average vacancy rate of 17.7% compared to the national average of 17.8%. Washington, D.C. and Philadelphia consistently have outperformed the national average and had vacancy rates of 15.6% and 15.3%, respectively, as of the second quarter of 2010. Moreover, RCG expects our top six markets to outperform the national average from 2011 to 2014, forecasting a decline of approximately 430 basis points in the vacancy rate in our top six markets over that period compared to a decline of approximately 240 basis points in the national office vacancy rate. By 2014, the weighted-average vacancy rate in our top six markets is projected to be 13.6% versus a national average of 15.2%.

        Included below are tables comparing vacancy rates and asking rent growth for our top six markets to the national average.

    Vacancy Rate—Office

Market
  2005   2006   2007   2008   2009   2010f   2011f   2012f   2013f   2014f   Average
('11 - '14)
 

Atlanta

    18.8 %   16.7 %   16.2 %   16.5 %   20.2 %   21.4 %   20.8 %   20.0 %   19.3 %   18.3 %   19.6 %

Orlando

    12.8 %   8.7 %   12.0 %   16.8 %   21.3 %   22.2 %   21.3 %   19.5 %   18.1 %   15.8 %   18.7 %

Philadelphia

    17.7 %   15.3 %   13.4 %   13.7 %   15.2 %   15.9 %   15.4 %   14.5 %   14.1 %   13.7 %   14.4 %

Jacksonville

    15.2 %   12.9 %   17.6 %   21.0 %   22.7 %   23.8 %   21.9 %   19.0 %   17.0 %   15.5 %   18.4 %

Washington, D.C. 

    9.4 %   9.6 %   9.8 %   11.2 %   15.6 %   15.6 %   14.5 %   12.8 %   12.2 %   10.8 %   12.6 %

Tampa

    12.4 %   11.4 %   13.6 %   17.1 %   20.6 %   20.4 %   19.6 %   17.8 %   16.5 %   14.1 %   17.0 %

Weighted Average

    13.6 %   12.4 %   12.5 %   13.9 %   17.4 %   17.9 %   17.0 %   15.6 %   14.9 %   13.6 %   15.3 %

National

    15.1 %   13.1 %   12.6 %   14.4 %   17.7 %   17.7 %   17.1 %   16.4 %   16.2 %   15.2 %   16.2 %

    Asking Rent Growth—Office

Market
  2005   2006   2007   2008   2009   2010f   2011f   2012f   2013f   2014f   CAGR(1)
(2011f - 2014f)
 

Atlanta

    0.1 %   0.6 %   6.3 %   3.5 %   (0.4 )%   1.3 %   1.8 %   2.1 %   2.3 %   2.4 %   2.2 %

Orlando

    4.7 %   4.1 %   8.0 %   1.5 %   (6.3 )%   (0.9 )%   1.1 %   2.2 %   2.7 %   3.0 %   2.3 %

Philadelphia

    (0.4 )%   2.0 %   3.5 %   1.6 %   (12.3 )%   9.9 %   0.8 %   1.8 %   2.7 %   3.5 %   2.2 %

Jacksonville

    3.1 %   (2.7 )%   1.9 %   3.4 %   (2.3 )%   (0.5 )%   0.7 %   1.8 %   3.0 %   4.0 %   2.4 %

Washington, D.C. 

    8.3 %   4.7 %   7.3 %   2.4 %   (2.2 )%   3.3 %   2.0 %   2.0 %   0.7 %   3.6 %   2.1 %

Tampa

    3.0 %   7.2 %   8.5 %   2.0 %   (2.0 )%   (3.1 )%   0.7 %   2.1 %   2.1 %   3.1 %   2.0 %

Weighted Average

    3.6 %   3.0 %   6.2 %   2.4 %   (4.1 )%   1.9 %   1.3 %   2.0 %   2.1 %   3.3 %   2.1 %

National

    2.3 %   9.4 %   11.5 %   4.5 %   (8.8 )%   0.5 %   1.2 %   3.0 %   3.1 %   3.6 %   2.8 %

(1)
Compound annual growth rate.

Atlanta, Georgia

        Upon completion of this offering and our formation transactions, we will own interests in 21 properties in Atlanta. These 21 properties represented approximately 37.8% of the annualized rent of

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our initial portfolio as of June 30, 2010. The following table sets forth additional information regarding our Atlanta properties as of June 30, 2010.

Property
  CBD/Suburban   Percent
Ownership
(%)
  Year
Built
  Rentable
Square
Footage
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Annualized
Rent Per
Leased
Square
Foot ($)(3)
 

Consolidated Properties

                                         

Ten 10th Street (Millennium)

  Suburban     100.0     2001     421,557     98.1     12,500,233     30.22  

Peachtree Marquis II(4)

  CBD     100.0     1987     464,277     99.1     8,826,079     19.17  

Two Ravinia Drive

  Suburban     100.0     1987     437,826     82.2     6,664,372     18.53  

Peachtree Harris(4)

  CBD     100.0     1978     394,694     80.5     5,842,084     18.40  

Peachtree International(4)(5)

  CBD     100.0     1973     386,563     86.9     5,762,215     17.16  

Peachtree Marquis I(4)

  CBD     100.0     1980     460,437     65.2     5,551,432     18.49  

Peachtree South(4)(5)

  CBD     100.0     1969     306,914     73.7     3,531,635     15.62  

Peachtree Mall (retail)(4)(6)

  CBD     100.0     1969     124,929     71.7     2,839,675     31.70  

Peachtree North(4)(5)

  CBD     100.0     1967     302,951     49.6     2,532,508     16.85  

The Cornerstone Building at Peachtree Center

  CBD     100.0     1928     77,691     77.5     1,418,237     23.56  
                                   
 

Total/Weighted Average—Consolidated Atlanta Properties

                    3,377,839     80.3     55,468,471     20.44  

Unconsolidated Properties

                                         

5660 New Northside Drive

  Suburban     10.0     1989     272,650     87.9     5,124,860     21.37  

300 Windward Plaza

  Suburban     10.0     2000     203,248     100.0     4,037,816     19.87  

Deerfield Point (2 buildings)

  Suburban     10.0     1999     202,619     81.3     3,425,988     20.80  

Parkwood Point

  Suburban     10.0     2001     219,357     89.8     3,368,442     17.10  

Interstate NW Business Park (4 buildings)

  Suburban     30.0     1979     283,679     82.2     3,173,440     13.61  

100 Windward Plaza

  Suburban     10.0     1998     132,250     100.0     2,251,478     17.02  

3720 Davinci Court

  Suburban     25.0     2000     100,698     100.0     2,126,516     21.12  

Windward Pointe 200

  Suburban     10.0     1997     129,448     76.3     1,947,143     19.71  

280 Interstate North Office Park

  Suburban     10.0     1982     125,377     74.7     1,640,663     17.53  

3740 Davinci Court

  Suburban     25.0     2001     100,751     74.6     1,470,738     19.58  

20 Technology Park

  Suburban     25.0     1982     90,852     91.4     1,391,884     16.77  
                                   
 

Total/Weighted Average—Unconsolidated Atlanta Properties

                    1,860,929     87.1     29,958,968     18.48  
 

Total/Weighted Average—Pro Rata Share of Unconsolidated Atlanta Properties

                   
286,674
   
86.4
   
4,378,956
   
17.69
 
 

TOTAL/WEIGHTED AVERAGE—ATLANTA INITIAL PORTFOLIO(7)

                   
3,664,513
   
80.8
   
59,847,427
   
20.21
 
 

Total/Weighted Average—Pro Rata Share of CBD Atlanta Properties

                   
2,518,456
   
77.0
   
36,303,866
   
18.71
 
 

Total/Weighted Average—Pro Rata Share of Suburban Atlanta Properties

                   
1,146,057
   
89.1
   
23,543,561
   
23.06
 

(1)
Based on leases signed as of June 30, 2010 and calculated as leased square footage divided by rentable square footage, expressed as a percentage.

(2)
Annualized rent is calculated by multiplying (i) rental payments (defined as base rent plus operating expenses, if payable by the tenant on a monthly basis, before rental abatements and including rental payments related to leases that had been executed but not commenced as of June 30, 2010 in lieu of rental payments under any existing leases for the same space) for the month ended June 30, 2010, by (ii) 12. In instances in which base rents and operating expenses are collected on an annual, semi-annual or quarterly basis, such amounts have been multiplied by a factor of 1, 2 or 4, respectively, to calculate the annualized figure. For triple net or modified gross leases, annualized rent has been converted to a full service gross basis by one of the following methods: (1) when we have access to the operating expenses of the tenant, expenses have been estimated by adding billed expense reimbursements to base rent; or (2) when we do not have access to the operating expenses of the tenant, expenses have been estimated by either (a) applying current BOMA estimated expense standards in markets where BOMA standards have been published or (b) using the expenses of tenants at comparable properties in the market.

(3)
Represents annualized rent divided by leased square footage, including leases executed but not commenced as of June 30, 2010.

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(4)
Three parking garages stand adjacent to the seven Peachtree Center properties (Peachtree Marquis I, Peachtree Marquis II, Peachtree Harris, Peachtree International, Peachtree North, Peachtree South and Peachtree Mall). The parking garages are subject to ground leases that expire between 2065 and 2067.

(5)
Property is subject to ground lease that expires in 2060.

(6)
Peachtree Mall is our only retail property and connects the office towers of Peachtree Center. Property is subject to a ground lease that expires in 2060.

(7)
Amounts for our Atlanta initial portfolio are based on total amounts for our wholly owned properties and our pro rata share for properties owned through our unconsolidated joint ventures based on our economic ownership interest in those joint ventures.

    Overview

        Atlanta is the capital of and most populous city in the state of Georgia. The Atlanta metropolitan statistical area, or MSA, is the seventh largest in the United States with a 2009 estimated population of approximately 5.5 million and an employment base of approximately 2.3 million as of June 2010. The Atlanta MSA has experienced healthy population growth and was the fifth-fastest growing metropolitan area in 2009.

        Atlanta's office market contains approximately 142.1 million square feet of office space as of the second quarter of 2010, with a large majority (89%) located in the expansive suburban submarkets. The largest users of office space in the market by total square footage are in the traditional finance, insurance and real estate industries. Additionally, business services, the office component of manufacturing firms and other service-related companies each lease a significant portion of the overall occupied office stock.

        The Atlanta MSA has transportation infrastructure composed of interstate highways, public transportation and an international airport. Atlanta is one of the few U.S. cities where three interstate highways converge (Interstate Highways 20, 75 and 85). The Atlanta MSA also is served by Interstate 285, an interstate highway that encircles the metropolitan area and provides the city with a "spoke-and-wheel" design for its interstate network. Metropolitan Atlanta Rapid Transit Authority, or MARTA, is a public authority that operates a network of bus routes and a rapid transit rail system. According to Airports Council International, Hartsfield-Jackson Atlanta International Airport was the world's busiest airport in terms of passenger traffic from 2000 to 2009. The airport has a $6 billion-plus capital improvement program underway, with a fifth runway completed in 2006 and plans for a new international terminal to be completed in 2012.

        Atlanta is driven by a diverse group of industries, including financial services, media, transportation, professional and business services, technology and construction. According to Fortune Magazine's Fortune 500 ranking of America's largest corporations in 2010, there are a total of ten Fortune 500 companies headquartered in the city of Atlanta, which ranked the city fourth in the U.S. in this category.

        Though the recession impacted Atlanta much as it did the rest of the nation, the market has started to rebound, as approximately 22,900 jobs were added to total payrolls during the first half of 2010. RCG expects annual job growth to reach 1.3% in 2010 and, thereafter, employment is expected to grow 1.2% annually through 2014, with the Atlanta MSA adding approximately 145,700 jobs during the five-year period between 2009 and 2014. RCG projects that the unemployment rate will fall to 7.6% by 2014.

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GRAPHIC

    CBD Office Market

        Atlanta is one of the most favorable business environments nationwide in terms of taxes and other business costs, which are expected to benefit the market in the longer term. Although it has struggled like other markets as a result of the recent downturn, the Atlanta market has shown some improvement through the first half of 2010. The vacancy rate in the Atlanta CBD decreased by 110 basis points in the first half of 2010 to 21.5%, although asking rents declined by 0.3% during the same period to $20.03 per square foot, as demand fundamentals remained weak. RCG expects that the recession will impair asking rent growth and demand fundamentals in the Atlanta CBD in the short term, with the vacancy rate increasing to 23.1% by year-end 2010, before slowly declining to 20.3% in 2014. RCG expects asking rents in the Atlanta CBD to decline by 1.1% in 2010 and to grow at an annual average rate of 2.3% in 2011 through 2014.

        The urban landscape of the Atlanta CBD is improving as a result of redevelopment initiatives by city leaders to revitalize the area's image as a thriving downtown, which could be positive for the market in the longer term. Additionally, as Class A rents are more competitive than those in the nearby Midtown and Buckhead submarkets, revitalization efforts in the Atlanta CBD could draw new high-profile tenants, thus boosting asking rents overall in the longer term. No new development projects are planned for the Atlanta CBD, preventing additional supply in the market during the forecast period. The limited near-term development, coupled with stronger economic growth, will benefit CBD office market fundamentals and could expedite the market's recovery.

GRAPHIC

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    Suburban Office Market

        Conditions in Atlanta's suburban office market weakened in the second quarter of 2010 as the new space completed during the year outpaced demand. As a result, the vacancy rate increased to 21.1% during the second quarter from 21.0% in the first quarter of 2010 and 19.9% at the end of 2009. New projects completed were located in the Buckhead and Midtown submarkets, with approximately 1.6 million square feet completed in the first half of 2010. RCG expects conditions to remain soft in 2010 before the Atlanta submarkets rebound in 2011.

        The recent delivery of new office space boosted asking rents by 1.7% during the first half of 2010, but RCG projects a 1.6% increase in rental rates for all of 2010 due to a supply and demand imbalance in Atlanta's suburban office market. No significant projects are in the pipeline for 2011, 2012 or 2013, which bodes well for the market in the medium- to long-term. RCG expects the vacancy rate in Atlanta's suburban office market to decline to 18.1% by the end of 2014. In addition, RCG expects asking rents in the Atlanta suburban office market to grow at an average annual rate of 2.1% from 2011 to 2014.

GRAPHIC

Orlando, Florida

        Upon completion of this offering and our formation transactions, we will own interests in ten properties in Orlando. These ten properties represented approximately 15.3% of the annualized rent of

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our initial portfolio as of June 30, 2010. The following table sets forth additional information regarding our Orlando properties as of June 30, 2010.

Property
  CBD/Suburban   Percent
Ownership
(%)
  Year
Built
  Rentable
Square
Footage
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Annualized
Rent Per
Leased
Square
Foot ($)(3)
 

Consolidated Properties

                                         

Bank of America Center

  CBD     100.0     1987     421,069     83.0     9,802,287     28.04  

Primera V

  Suburban     100.0     2000     190,081     100.0     4,261,715     22.42  

Maitland Forum

  Suburban     100.0     1985     267,913     76.6     3,979,989     19.38  

Maitland Park Center

  Suburban     100.0     1984     102,169     73.6     1,534,292     20.41  

2400 Maitland Center

  Suburban     100.0     1982     101,612     65.1     1,263,799     19.09  

Interlachen Corporate Center

  Suburban     100.0     1986     79,312     69.1     1,051,122     19.19  

500 Winderley Place

  Suburban     100.0     1985     101,040     50.8     849,927     16.56  
                                   
 

Total/Weighted Average—Consolidated Orlando Properties

                    1,263,196     78.6     22,743,131     22.92  

Unconsolidated Properties

                                         

One Orlando Centre

  CBD     10.0 %   1987     355,783     92.6     8,385,109     25.45  

Millennia Park One

  Suburban     10.0 %   1999     157,291     92.6     3,473,225     23.84  

Southhall Center

  Suburban     10.0 %   1986     159,840     97.1     2,985,346     19.23  
                                   
 

Total/Weighted Average—Unconsolidated Orlando Properties

                    672,914     93.7     14,843,680     23.55  
 

Total/Weighted Average—Pro Rata Share of Unconsolidated Orlando Properties

                   
67,291
   
93.7
   
1,484,368
   
23.55
 
 

TOTAL/WEIGHTED AVERAGE—ORLANDO INITIAL PORTFOLIO(4)

                   
1,330,487
   
79.3
   
24,227,499
   
22.95
 
 

Total/Weighted Average—Pro Rata Share of CBD Orlando Properties

                   
456,647
   
83.8
   
10,640,798
   
27.82
 
 

Total/Weighted Average—Pro Rata Share of Suburban Orlando Properties

                   
873,840
   
77.0
   
13,586,701
   
20.19
 

(1)
Based on leases signed as of June 30, 2010 and calculated as leased square footage divided by rentable square footage, expressed as a percentage.

(2)
Annualized rent is calculated by multiplying (i) rental payments (defined as base rent plus operating expenses, if payable by the tenant on a monthly basis, before rental abatements and including rental payments related to leases that had been executed but not commenced as of June 30, 2010 in lieu of rental payments under any existing leases for the same space) for the month ended June 30, 2010, by (ii) 12. In instances in which base rents and operating expenses are collected on an annual, semi-annual or quarterly basis, such amounts have been multiplied by a factor of 1, 2 or 4, respectively, to calculate the annualized figure. For triple net or modified gross leases, annualized rent has been converted to a full service gross basis by one of the following methods: (1) when we have access to the operating expenses of the tenant, expenses have been estimated by adding billed expense reimbursements to base rent; or (2) when we do not have access to the operating expenses of the tenant, expenses have been estimated by either (a) applying current BOMA estimated expense standards in markets where BOMA standards have been published or (b) using the expenses of tenants at comparable properties in the market.

(3)
Represents annualized rent divided by leased square footage, including leases executed but not commenced as of June 30, 2010.

(4)
Amounts for our Orlando initial portfolio are based on total amounts for our wholly owned properties and our pro rata share for properties owned through our unconsolidated joint ventures based on our economic ownership interest in those joint ventures.

    Overview

        The Orlando MSA is the 32nd largest in the United States with a 2009 estimated population of approximately 2.1 million and an employment base of approximately 1.0 million as of June 2010. Tourism is a key driver of the region's economy as three of the region's top ten employers are based primarily in the tourism industry, and the leisure and hospitality sector is the largest employment sector in the area. The Walt Disney Company is the largest employer in the region, with approximately 60,000 employees. As a result of the recession, tourism was weak in 2009, resulting in the loss of leisure and

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hospitality sector jobs in the Orlando MSA by 1.8%. However, the sector has shown signs of recovery, adding 1,600 jobs in the first half of 2010.

        The Orlando office market is comprised of nearly 38 million square feet as of the second quarter of 2010, with approximately 19.6% located in the CBD. The tourism, healthcare, trade, finance and technology industries have a strong presence in the region and are important drivers of demand for office space. The office market also benefits from Orlando's pro-business orientation and Florida's attractive tax climate.

        The Orlando economy actually added 8,000 jobs during the first half of 2010, and although total employment declined by 0.4% on a year-over-year basis, the pace of job losses has declined significantly from the 4.8% year-over-year decrease through December 2009. Through the first half of 2010, the only two sectors to post declines in total employment were the information services and financial activities sectors. All other sectors either were flat or registered job growth. Historically, the unemployment rate in Orlando has been very low, remaining in the 3% to 4% range between 2004 and September 2007. As of the end of the second quarter of 2010, the unemployment rate in Orlando stood at 11.2%.

        The recession resulted in a deceleration of population growth and a decline in the number of households in the region. However, with prospects for growth returning, RCG forecasts that total population and household formation will increase during the forecast horizon. Net migration, which slowed in 2009 to 8,400 new residents, is estimated to increase from approximately 9,000 new residents in 2010 to approximately 35,400 new residents by 2014. RCG predicts population growth and household formation will reach the low-2% range by year-end 2014.

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        RCG believes that the Orlando economy is poised for steady growth in the medium- to longer-term, beginning with a 0.4% increase in total employment in 2010 and growing to a 1.0% increase in 2011 and to a 1.9% increase by 2014. With job growth resuming, RCG predicts the unemployment rate in Orlando will decline from 11.6% at year-end 2010 to the mid-6% range by 2014. The Orlando MSA has a growing cluster of life sciences and medical employment, which bodes well for the market's recovery going forward. Public and private entities invested approximately $2 billion during the past two years to increase the presence and impact of the life sciences cluster. Major projects include the Medical City at Lake Nona, which includes the Burnham Institute for Medical Research, the University of Central Florida College of Medicine and the Orlando VA Medical Center. Orlando is also home to the headquarters of several pharmaceutical companies and two top-ranked research hospitals, Florida Hospital and Orlando Health. After posting a year-over-year increase of 1.8% in the second quarter of 2010, the educational and health services sector is expected to lead the economy out of the recession with growth of 2.2% in 2010, accelerating to 2.5% by 2014, according to RCG. RCG believes the market recovery also should be bolstered by gains in the transportation and utilities, professional and business services, and the leisure and hospitality sectors.

GRAPHIC

    CBD Office Market

        Market fundamentals remained soft in the Orlando CBD office market in the second quarter of 2010, as demand has not yet begun to recover. The vacancy rate in the Orlando CBD office market in the second quarter of 2010 was 20.0%, up from 19.7% at year-end 2009 and 17.4% at year-end 2008. Asking rents remained relatively flat in the first half of 2010, decreasing by 0.1% to $24.19 per square foot, after dropping by 8.8% in 2009. As landlords faced continued competition for a decreased pool of tenants, pricing has remained aggressive to secure transactions. RCG expects further weakening in 2010 as companies are reluctant to commit to leases and expand space until both their businesses and the economic recovery are more stable. RCG predicts that the vacancy rate in the Orlando CBD office market will increase to 20.5% by year-end 2010, while asking rents will decrease by 0.4% during the same period.

        RCG believes the Orlando CBD office market will begin to improve in 2011, with the vacancy rate expected to decline to 20.1% by year-end 2011. RCG expects tenant demand to improve throughout the following three years, pushing the vacancy rate in the Orlando CBD office market down to 12.2% by year-end 2014. RCG believes that developers will delay new construction until 2014, allowing excess

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supply to be absorbed in the meantime as demand improves. RCG expects asking rents in the Orlando CBD office market to grow by 2.7% per year on average between 2011 and 2014.

GRAPHIC

    Suburban Office Market

        Increased building activity and job losses impacted fundamentals in the Orlando suburban office market during 2009 and the first half of 2010. More than three million square feet have been delivered to the market since 2006, exacerbating the weak demand resulting from decreasing employment. In response to the combination of weak demand and the surge of new supply, the vacancy rate increased to 22.8% in the second quarter of 2010, up from 8.6% at year-end 2006. Landlords decreased asking rents by 5.0% in 2009, to $20.65 per square foot, in an attempt to attract new tenants. Price drops continued in the first half of 2010, with asking rents decreasing by 1.1%. Rent concessions also have become more common as the market has shifted in favor of tenants.

        Given the high vacancy rate and lack of capital for new construction, RCG does not expect there to be any significant new construction in Orlando's suburban office market for the foreseeable future. RCG believes that the lack of new construction should help the supply/demand balance in the coming years and that, once job growth resumes, healthy net absorption levels will increase and excess supply will be reduced. In the near term, RCG predicts fundamentals in the Orlando suburban office market to improve slightly in the second half of 2010, with the vacancy rate decreasing to 22.6% by year-end. However, asking rents are expected to contract by 1.0% by year-end 2010. RCG believes the Orlando suburban office market will begin to improve in 2011 and, by year-end 2014, the vacancy rate is

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expected to decrease to 16.7%. RCG expects asking rents in the Orlando suburban office market to grow 2.3% per year on average between 2011 and 2014.

GRAPHIC

Philadelphia, Pennsylvania

        Upon completion of this offering and our formation transactions, we will own one office property in Philadelphia. Two Liberty Place represented approximately 14.2% of the annualized rent of our initial portfolio as of June 30, 2010. The following table sets forth additional information regarding Two Liberty Place as of June 30, 2010.

Property
  CBD/Suburban   Percent
Ownership
(%)
  Year
Built
  Rentable
Square
Footage
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Annualized
Rent Per
Leased
Square
Foot ($)(3)
 

Consolidated Properties

                                         

Two Liberty Place(4)

  CBD     89.0     1990     937,566     99.4     25,251,804     27.10  
                                   
 

Total/Weighted Average—Consolidated Philadelphia Properties

                    937,566     99.4     25,251,804     27.10  
 

TOTAL/WEIGHTED AVERAGE—PHILADELPHIA INITIAL PORTFOLIO(5)

                   
834,434
   
99.4
   
22,474,106
   
27.10
 

(1)
Based on leases signed as of June 30, 2010 and calculated as leased square footage divided by rentable square footage, expressed as a percentage.

(2)
Annualized rent is calculated by multiplying (i) rental payments (defined as base rent plus operating expenses, if payable by the tenant on a monthly basis, before rental abatements and including rental payments related to leases that had been executed but not commenced as of June 30, 2010 in lieu of rental payments under any existing leases for the same space) for the month ended June 30, 2010, by (ii) 12. In instances in which base rents and operating expenses are collected on an annual, semi-annual or quarterly basis, such amounts have been multiplied by a factor of 1, 2 or 4, respectively, to calculate the annualized figure. For triple net or modified gross leases, annualized rent has been converted to a full service gross basis by one of the following methods: (1) when we have access to the operating expenses of the tenant, expenses have been estimated by adding billed expense reimbursements to base rent; or (2) when we do not have access to the operating expenses of the tenant, expenses have been estimated by either (a) applying current BOMA estimated expense standards in markets where BOMA standards have been published or (b) using the expenses of tenants at comparable properties in the market.

(3)
Represents annualized rent divided by leased square footage, including leases executed but not commenced as of June 30, 2010.

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(4)
We have an option, and our partner has the right to require us, to acquire the remaining 11% interest in this property at a mutually agreed-upon price, at any time on or after the three-year anniversary of this offering and our formation transactions. Total rentable square footage and total annualized rent for the entire property are presented. This building includes 20 floors of residential condominiums that are owned and managed by a third party, in which James R. Heistand, our Executive Chairman, and Rudy Prio Touzet, our President and Chief Executive Officer, collectively have a 1.25% non-managing member interest. Rentable square footage does not include this space.

(5)
Amounts for our Philadelphia initial portfolio are based on our pro rata share of Two Liberty Place, which is owned through a consolidated joint venture, based on our economic ownership interest in that joint venture.

    Overview

        The Philadelphia MSA is the fourth largest in the country with a 2009 estimated population of approximately 6.0 million people and an employment base of approximately 2.7 million as of June 2010. Philadelphia's world-class educational and healthcare institutions drive the regional economy, directly employing current residents, attracting new workers and students from around the globe and fostering innovation among other local companies. Overall, the educational and health services sector is the largest in the Philadelphia MSA, containing approximately 558,000 employees as of June 2010. The professional and business services employment sector encompasses a broad array of industries, including accounting, legal, engineering and architecture, as well as certain high-tech research and development. Employment in this sector is likely to experience greater increases than the rest of the Philadelphia MSA through the forecast period. From year-end 2009 through 2014, RCG expects approximately 34,800 new jobs to be created in this sector at an average annual rate of 1.7%.

        As of the second quarter of 2010, Philadelphia's office market was comprised of approximately 129.3 million square feet of space, making it the ninth-largest office market in the United States. Its size is comparable to that of Atlanta and San Francisco. Approximately two-thirds (67%) of the total office space in Philadelphia is located outside the CBD. Office tenants represent a diverse base of industries, including firms in the healthcare, education, financial services, and professional and business services sectors.

        Net migration slowed to 7,600 residents on average in 2008 and 2009 as a result of the recession, but RCG expects net migration will increase from 8,000 residents in 2010 to 10,000 new residents by 2012 as the economic recovery increases. The key driver of growth in the area is attracting and retaining recent graduates and a talented workforce to staff local knowledge industry jobs.

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        With the recovery expected to remain fragile through the near term, employment growth in the Philadelphia MSA is likely to be uneven across sectors, with some expanding and others still contracting on a year-over-year basis through December 2010. In absolute terms, the three main sectors driving growth in 2010 are expected to be the educational and health services, trade, and professional and business services sectors, which together are forecasted to add approximately 28,100 new jobs. Beyond the near term, RCG forecasts that employment growth will average 0.8% annually in the 2011 to 2014 timeframe.

GRAPHIC

    CBD Office Market

        With a lack of job growth in office-using employment sectors, demand in Philadelphia's CBD office market remains weak but is showing signs of improvement. The vacancy rate decreased to 12.1% in the second quarter of 2010 from 12.8% in the first quarter. Asking rents improved during this period, increasing 3.6% during the first half of 2010 to $26.02 per square foot. Looking ahead, RCG believes that much of the negative impact from the recession on the Philadelphia CBD office market has already passed, although fundamentals are expected to remain soft through 2010 in the absence of a strong rebound in job growth. RCG expects the vacancy rate to decrease slightly to 11.9% and asking rents to increase by 2.5% in 2010. The forecasted absence of new supply becoming available prior to 2014 is expected to help the market recover. Rising demand in 2011 and beyond is expected to cause the vacancy rate to decline to 9.4% by 2014. Between 2011 and 2014, RCG predicts that asking rents will increase on average by 3.1% per year.

GRAPHIC

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Jacksonville, Florida

        Upon completion of this offering and our formation transactions, we will own interests in four properties in Jacksonville. These four properties represented approximately 11.2% of the annualized rent of our initial portfolio as of June 30, 2010. The following table sets forth additional information regarding our Jacksonville properties as of June 30, 2010.

Property
  CBD/Suburban   Percent
Ownership
(%)
  Year
Built
  Rentable
Square
Footage
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Annualized
Rent Per
Leased
Square
Foot ($)(3)
 

Consolidated Properties

                                         

Independent Square(4)

  CBD     100.0     1975     647,251     92.2     13,215,792     22.14  

Capital Plaza I and II (2 buildings)(5)

  Suburban     25.0     1990     307,856     82.3     4,912,660     19.40  

245 Riverside

  CBD     100.0     2003     135,286     94.6     2,818,518     22.02  

Capital Plaza III(5)

  Suburban     25.0     1999     108,774     80.7     1,841,524     20.98  
                                   
 

Total/Weighted Average—Consolidated Jacksonville Properties

                    1,199,167     88.9     22,788,494     21.38  
 

TOTAL/WEIGHTED AVERAGE—JACKSONVILLE INITIAL PORTFOLIO(6)

                   
886,695
   
91.4
   
17,722,856
   
21.88
 
 

Total/Weighted Average—Pro Rata Share of CBD Jacksonville Properties

                   
782,537
   
92.6
   
16,034,311
   
22.12
 
 

Total/Weighted Average—Pro Rata Share of Suburban Jacksonville Properties

                   
104,158
   
81.9
   
1,688,546
   
19.81
 

(1)
Based on leases signed as of June 30, 2010 and calculated as leased square footage divided by rentable square footage, expressed as a percentage.

(2)
Annualized rent is calculated by multiplying (i) rental payments (defined as base rent plus operating expenses, if payable by the tenant on a monthly basis, before rental abatements and including rental payments related to leases that had been executed but not commenced as of June 30, 2010 in lieu of rental payments under any existing leases for the same space) for the month ended June 30, 2010, by (ii) 12. In instances in which base rents and operating expenses are collected on an annual, semi-annual or quarterly basis, such amounts have been multiplied by a factor of 1, 2 or 4, respectively, to calculate the annualized figure. For triple net or modified gross leases, annualized rent has been converted to a full service gross basis by one of the following methods: (1) when we have access to the operating expenses of the tenant, expenses have been estimated by adding billed expense reimbursements to base rent; or (2) when we do not have access to the operating expenses of the tenant, expenses have been estimated by either (a) applying current BOMA estimated expense standards in markets where BOMA standards have been published or (b) using the expenses of tenants at comparable properties in the market.

(3)
Represents annualized rent divided by leased square footage, including leases executed but not commenced as of June 30, 2010.

(4)
Property includes an adjacent parking garage.

(5)
Total rentable square footage and total annualized rent for the entire property are presented.

(6)
Amounts for our Jacksonville initial portfolio are based on total amounts for our wholly owned properties and our pro rata share for properties owned through our consolidated joint venture based on our economic ownership interest in that joint venture.

    Overview

        The Jacksonville MSA is the 48th largest in the country with a 2009 estimated population of approximately 1.3 million people and an employment base of approximately 581,500 as of June 2010.

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Jacksonville is the largest city by area in the United States and has the largest population within its city limits of any city in Florida.

        The Jacksonville office market contains nearly 23 million square feet, with 31.9% located in the CBD as of the second quarter of 2010. Jacksonville's economy is diversified, with trade, finance, healthcare and tourism as some of the largest industries driving demand for office space. Additionally, the clean energy/technology and privatized space industries have recently begun taking root in Jacksonville, and the city is poised to capitalize on the growth of these emerging sectors. The region's convenient location, reasonable cost of living and business-friendly government typically make it a popular location for corporate expansions and relocations.

        The local economy is driven by trade activity at the Port of Jacksonville and the region's extensive distribution networks. Jacksonville's comprehensive intermodal infrastructure provides a competitive advantage for businesses that depend on logistics and transport. The region has a deepwater port with three marine terminals, an international airport and access to a vast network of railways and roadways. As one of the largest vehicle-handling ports in the country, Jacksonville has a strong trade relationship with Japan and is set to expand its Asian relationships through the development of the Hanjin Shipping Company Terminal and the recent opening of Mitsui OSK's TraPac Container Terminal. As the gateway to Puerto Rico and with Brazil already as its second-largest trade partner in terms of value of goods exchanged, Jacksonville is poised to capitalize on the growing demand from the rest of Latin America and the Caribbean. Nonetheless, the slowing global economy curbed trade volume at the port. In 2009, the amount of total tonnage that came through the Port of Jacksonville decreased by 13.3% from 2008 levels.

        In line with the weak job market, net migration slowed in 2008 and 2009 after peaking in 2006. RCG anticipates net migration will slow down further through 2010 and then increase steadily through 2014. The Jacksonville MSA underwent strong population growth during the past several years, particularly in the 25-34 year-old age cohort. The city consistently ranks as a leading market for young professionals and job seekers. In the long run, RCG believes that the Jacksonville MSA's ability to attract and retain young professionals will be a key economic driver.

        In the first half of 2010, approximately 2,100 jobs were added in the Jacksonville MSA, and positive growth is expected to continue through year-end and beyond. RCG believes unemployment has reached or is near an inflection point and will decrease through 2014. As the only sector to maintain positive growth throughout the recent downturn, the educational and health services sector is expected to lead the recovery, ultimately growing by 2.6% in 2014. Gains in the professional and business services, leisure and hospitality, and other services sectors are expected to foster near-term growth as well. RCG predicts that employment growth will increase by 0.7% on an annual basis through 2010 and

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then accelerate to 1.6% by 2014, with total employment reaching approximately 610,000 jobs by year-end 2014.

GRAPHIC

    CBD Office Market

        Jacksonville's CBD office market weakened in 2009 in response to a decrease in tenant demand, which was driven by the professional and business services and financial services sectors, the two largest office-using sectors in Jacksonville. Significant weakening subsided in the first half of 2010, but demand still declined through the second quarter of 2010. The vacancy rate increased to 25.1% in the second quarter from 23.5% in the first quarter of 2010 and also at year-end 2009. Asking rents increased by 0.4% in the first half of 2010, after remaining flat in 2009. RCG expects further instability in market fundamentals in 2010 as recovery of the commercial real estate market lags the general economy, with asking rents inching up 0.3% on an annual basis and the vacancy rate improving to 24.2%.

        Long term, the Jacksonville CBD office market outlook is very positive. RCG believes that asking rents will begin to increase more rapidly beginning in 2011 as the vacancy rate continues to improve. One positive for market fundamentals is the limited construction pipeline, as no new office space has been developed since 2006 and no significant projects are currently in the pipeline. Additionally, older office product is increasingly being upgraded or converted to residential space, which should increase asking rents or, conversely, decrease the amount of available supply. Jacksonville has the lowest tax burden of any major city in Florida and the third-lowest nationwide, making it an attractive location for businesses. Moreover, Jacksonville's CBD has the most affordable office space of the major Florida office markets. Asking rents were $19.48 per square foot in the second quarter of 2010, compared with $24.19 and $36.91 per square foot in Orlando and Miami, respectively. RCG expects the vacancy rate to decline gradually, reaching 17.1% by year-end 2014, while asking rents are expected to grow 2.4%

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per year on average between 2011 and 2014 in response to growing tenant demand. Building activity should resume in 2014, with an estimated 150,000 square feet delivered that year.

GRAPHIC

    Suburban Office Market

        The effects of the recession took a toll on the Jacksonville suburban office market in 2009 and lingered in the first half of 2010. The vacancy rate remained high and asking rents continued to decline. During the second quarter of 2010, the vacancy rate increased to 24.6% from 22.7% in the first quarter and 22.3% at year-end 2009. Asking rents declined by 1.5% in the first half of 2010, following a 3.5% decrease in 2009. Landlords were previously opting to attract and retain tenants through larger concession and tenant improvement packages rather than decreasing rent, but deteriorating conditions forced asking rents down as well. No new office space was delivered during the first half of 2010 after a combined total of approximately 2.5 million square feet was added to the market from 2005 to 2009.

        Looking ahead, RCG believes that market dynamics in the Jacksonville suburban office market should begin to recover in 2011. Going forward, the vacancy rate is expected to improve as job growth increases, dropping to 14.7% by year-end 2014. RCG expects asking rents in the Jacksonville suburban office market to decline by 1.0% in 2010, but return to positive growth in 2011. RCG believes rent growth will accelerate to 3.0% per year on average between 2012 and 2014. RCG does not expect any new space in the Jacksonville suburban office market to be delivered in the near term, as the market is still dealing with the excess supply introduced during the period of heavy building that occurred prior to the recent downturn. Building activity should resume as market fundamentals improve and the balance between supply and demand is restored.

GRAPHIC

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Washington, D.C.

        Upon completion of this offering and our formation transactions, we will own interests in five office properties in the Washington, D.C. metropolitan area. These five properties represented approximately 9.3% of the annualized rent of our initial portfolio as of June 30, 2010. The following table sets forth additional information regarding our Washington, D.C. properties as of June 30, 2010.

Property
  CBD/
Suburban
  Percent
Ownership
(%)
  Year
Built
  Rentable
Square
Footage
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Annualized
Rent Per
Leased
Square
Foot ($)(3)
 

Consolidated Properties

                                         

1110 Vermont Avenue(4)

  CBD     100.0     1980     305,543     81.7     11,772,649     47.18  
                                   
 

Total/Weighted Average—Consolidated Washington, D.C. Properties

                    305,543     81.7     11,772,649     47.18  

Unconsolidated Properties

                                         

Irvington Three

  Suburban     20.0     2003     217,928     75.2     5,288,394     32.26  

Irvington One

  Suburban     20.0     2001     154,469     74.8     3,838,754     33.23  

Irvington Four

  Suburban     20.0     2007     224,258     33.2     2,826,624     37.92  

Irvington Two

  Suburban     20.0     2001     153,866     50.1     2,618,119     33.93  
                                   
 

Total/Weighted Average—Unconsolidated Washington, D.C. Properties

                    750,521     57.4     14,571,890     33.80  
 

Total/Weighted Average—Our Pro Rata Share of Unconsolidated Washington, D.C. Properties

                   
150,104
   
57.4
   
2,914,378
   
33.80
 
 

TOTAL/WEIGHTED AVERAGE—WASHINGTON, D.C. INITIAL PORTFOLIO(5)

                   
455,647
   
73.7
   
14,687,027
   
43.75
 
 

Total/Weighted Average—Pro Rata Share of CBD Washington, D.C. Properties

                   
305,543
   
81.7
   
11,772,649
   
47.18
 
 

Total/Weighted Average—Pro Rata Share of Suburban Washington, D.C. Properties

                   
150,104
   
57.4
   
2,914,378
   
33.80
 

(1)
Based on leases signed as of June 30, 2010 and calculated as leased square footage divided by rentable square footage, expressed as a percentage.

(2)
Annualized rent is calculated by multiplying (i) rental payments (defined as base rent plus operating expenses, if payable by the tenant on a monthly basis, before rental abatements and including rental payments related to leases that had been executed but not commenced as of June 30, 2010 in lieu of rental payments under any existing leases for the same space) for the month ended June 30, 2010, by (ii) 12. In instances in which base rents and operating expenses are collected on an annual, semi-annual or quarterly basis, such amounts have been multiplied by a factor of 1, 2 or 4, respectively, to calculate the annualized figure. For triple net or modified gross leases, annualized rent has been converted to a full service gross basis by one of the following methods: (1) when we have access to the operating expenses of the tenant, expenses have been estimated by adding billed expense reimbursements to base rent; or (2) when we do not have access to the operating expenses of the tenant, expenses have been estimated by either (a) applying current BOMA estimated expense standards in markets where BOMA standards have been published or (b) using the expenses of tenants at comparable properties in the market.

(3)
Represents annualized rent divided by leased square footage, including leases executed but not commenced as of June 30, 2010.

(4)
Our acquisition of this property is subject to closing conditions that may not be in our control. See "Risk Factors—Risks Related to Our Business and Operations—Our acquisition of the 1110 Vermont Avenue property is subject to closing conditions that could delay or prevent the acquisition of this property." We currently are pursuing potential third parties to co-invest in the acquisition of this property. If we reach an

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    agreement with such parties, our interest in this property would be held through a joint venture, and our ownership percentage may be significantly reduced.

(5)
Amounts for our Washington, D.C. initial portfolio are based on total amounts for our wholly owned properties and our pro rata share for properties owned through our unconsolidated joint venture based on our economic ownership interest in that joint venture.

    Overview

        The Washington, D.C. MSA is the sixth largest in the United States with a 2009 estimated population of approximately 5.5 million people and an employment base of nearly 3.0 million as of June 2010. Washington, D.C. has the fourth-largest regional economy in the United States and can be divided into three economic regions: Northern Virginia, the District of Columbia and suburban Maryland. The District of Columbia is driven by the government sector, law firms, and consultancies. Suburban Maryland is largely driven by technology, educational and health services and professional and business services. According to a 2009 report from the Milken Institute, the Washington, D.C. MSA's technology cluster is the fourth largest in the nation, with approximately 275,000 technology employees. Average high-tech wages in the Washington, D.C. MSA are two-thirds more than average private sector wages.

        The Washington, D.C. MSA has one of the largest office markets in the country with nearly 290.8 million square feet as of the second quarter of 2010. Collectively driving demand throughout the regional office market is the government—both in terms of directly leasing to agencies and indirectly for consultants, lobbyists, law firms, think-tanks and other organizations looking to engage in political activity. The technology industry is the second largest sector and established firms tend to prefer suburban office parks for flexibility and easy transportation access.

        The Washington, D.C. MSA's economy has not been immune to the recent economic downturn, but the large federal and state government payrolls provided some stability. RCG expects federal procurement, the principal driver of economic growth in the Washington, D.C. MSA, to increase as the flow of federal stimulus money results in job growth as new projects are awarded.

        The Washington, D.C. MSA's economy continued to trend in a positive direction during the first half of 2010. Employers added approximately 40,800 jobs during the first half of 2010 and on a year-over-year basis, employment increased 0.6% through June 2010 as more people entered the workforce. RCG expects payrolls to expand at a 2.2% annual rate in 2010. A large portion of the hiring should occur in the professional and business services, educational and health services, and government sectors. RCG predicts payroll expansion to average 1.8% annually between 2011 and 2014. The unemployment rate decreased to 6.1% at the end of the second quarter of 2010, nearly double the low reached in mid-2007 but still significantly below the national unemployment rate of 9.5% at that time. Moving forward, RCG anticipates that the unemployment rate will remain at 6.1% through the end of 2010. Increased hiring should lower the unemployment rate to the mid-4% range by 2014.

        RCG believes that Washington, D.C. will have one of the strongest U.S. economies during the short term. The Washington, D.C. MSA benefits not only from the growing federal government but also from the types of private sector positions that tend to cluster around government centers. Additionally, the Washington D.C. MSA's large technology cluster will help fuel growth as innovation occurs. Not only do these drivers of employment support payroll expansion, but many of these positions are well paid, helping to spur other segments of the local economy.

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GRAPHIC

    Washington, D.C. CBD Office Market

        Driving demand for office space in Washington, D.C.'s approximately 103.8 million square-foot CBD market are primarily government agencies and government-related firms. The U.S. General Services Administration, or GSA, provided most of the significant leasing activity in recent quarters, and the recent downturn allowed the GSA to take advantage of favorable terms to lease space in Class A properties that previously had been outside its budget. As most federal agencies are expected to expand in the coming years, the government is likely to increase its office footprint.

        Since 1998, the Washington, D.C. CBD office market maintained a relatively low vacancy rate. As of the second quarter of 2010, the vacancy rate stood at 14.3%, 10 basis points lower than the first quarter of 2010 and on par with year-end 2009. Asking rents increased by 6.7% in the first half of 2010 to $49.85 per square foot, but RCG believes that the market will remain soft through 2010, with asking rents stable through year-end as landlords are unlikely to regain pricing power. Moreover, as landlords continue to compete for new tenants and to retain existing tenants, widespread usage of concession packages will remain.

        A total of approximately 2.5 million square feet of construction deliveries are expected for 2010, while demand for office space is expected to rebound. New supply should roughly balance new demand, leading RCG to expect the vacancy rate to increase just slightly to 14.5% at the end of 2010. Thereafter, RCG anticipates that construction activity will decrease significantly, allowing excess space to be absorbed by tenants. RCG forecasts that there will be a decline in new development between 2011 and 2013, with the construction pipeline opening once again by 2014. The increased public and private sector hiring beginning in 2010 is expected to provide downward pressure on the vacancy rate, and RCG expects the vacancy rate to reach single digits by 2013.

        Given the rise in federal spending and its impact on demand for office space in the coming quarters, RCG believes that the Washington, D.C. CBD office market should rank among the strongest office markets as the country emerges from the recent economic downturn. The rise in office demand from government and government-contracted firms should supplement much of the demand lost from the decrease in capital spending from private sector entities. Additionally, RCG expects asking rents in the Washington, D.C. CBD office market to stabilize through the remainder of 2010 and to grow 3.7% per year on average between 2011 and 2014.

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GRAPHIC

    Suburban Maryland Office Market

        The suburban Maryland office market, which is adjacent to the Washington, D.C. CBD, directly benefits from its geographic nexus to the nation's capital. Demand for space is driven by District-based organizations looking for lower rents: government agencies and contractors, firms in the professional and business services sector, and increasingly, those in the communications industry. Furthermore, suburban Maryland's Interstate 270 corridor is one of the top biotechnology centers in the country, in large part because of its proximity to national research universities, institutions and federal agencies.

        As payrolls stabilized in late 2009 and the first half of 2010, the demand for office space in the suburban Maryland office market from private sector tenants turned upward, and the vacancy rate stabilized at 17.8% in the second quarter of 2010. As a result, average asking rents increased 2.8% to $27.79 per square foot.

        Although the approximately 313,000 square feet of new space delivered in the first half of 2010 was nearly two-thirds pre-leased, RCG expects that the market will be negatively affected by a supply overhang and the lack of a strong rebound in tenant demand in the near term, causing the vacancy rate to reach 17.9% by year-end 2010. Beginning in 2011, however, RCG expects increased leasing activity to lower the vacancy rate steadily to 14.8% by year-end 2014.

        RCG anticipates that asking rents will end 2010 1.0% greater than 2009. Between 2011 and 2014, RCG predicts that asking rents will increase on average by 2.4% per year.

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Tampa, Florida

        Upon completion of this offering and our formation transactions, we will own interests in ten properties in Tampa. These ten properties represented approximately 8.9% of the annualized rent of our initial portfolio as of June 30, 2010. The following table sets forth additional information regarding our Tampa properties as of June 30, 2010.

Property
  CBD/
Suburban
  Percent
Ownership
(%)
  Year
Built
  Rentable
Square
Footage
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Annualized
Rent Per
Leased
Square
Foot ($)(3)
 

Consolidated Properties

                                         

International Plaza Four(4)

  Suburban     100.0     2008     250,097     59.2     4,406,661     29.75  

Westshore Corporate Center(5)

  Suburban     100.0     1989     169,619     73.6     2,982,282     23.90  

Cypress Center I(6)

  Suburban     100.0     1982     152,758     94.7     2,695,736     18.63  

Cypress Center III(6)

  Suburban     100.0     1982     82,871     83.2     1,540,195     22.33  

Cypress Center II(6)

  Suburban     100.0     1982     50,697     100.0     1,130,647     22.30  

Cypress West(6)

  Suburban     100.0     1985     64,510     32.0     432,545     20.95  
                                   
 

Total/Weighted Average—Consolidated Tampa Properties

                    770,552     72.4     13,188,065     23.64  

Unconsolidated Properties

                                         

Westshore 500

  Suburban     8.7     1984     129,728     84.2     2,734,098     25.04  

Buschwood Park III

  Suburban     20.0     1989     77,568     90.4     1,325,958     18.90  

Buschwood Park II

  Suburban     20.0     1987     88,019     71.2     1,221,849     19.49  

Buschwood Park I

  Suburban     20.0     1985     83,147     52.6     984,314     22.52  
                                   
 

Total/Weighted Average—Unconsolidated Tampa Properties

                    378,462     75.5     6,266,219     21.93  
 

Total/Weighted Average—Our Pro Rata Share of Unconsolidated Tampa Properties

                   
61,027
   
73.4
   
944,154
   
21.07
 
 

TOTAL/WEIGHTED AVERAGE—TAMPA INITIAL PORTFOLIO(7)

                   
831,579
   
72.5
   
14,132,220
   
23.45
 

(1)
Based on leases signed as of June 30, 2010 and calculated as leased square footage divided by rentable square footage, expressed as a percentage.

(2)
Annualized rent is calculated by multiplying (i) rental payments (defined as base rent plus operating expenses, if payable by the tenant on a monthly basis, before rental abatements and including rental payments related to leases that had been executed but not commenced as of June 30, 2010 in lieu of rental payments under any existing leases for the same space) for the month ended June 30, 2010, by (ii) 12. In instances in which base rents and operating expenses are collected on an annual, semi-annual or quarterly basis, such amounts have been multiplied by a factor of 1, 2 or 4, respectively, to calculate the annualized figure. For triple net or modified gross leases, annualized rent has been converted to a full service gross basis by one of the following methods: (1) when we have access to the operating expenses of the tenant, expenses have been estimated by adding billed expense reimbursements to base rent; or (2) when we do not have access to the operating expenses of the tenant, expenses have been estimated by either (a) applying current BOMA estimated expense standards in markets where BOMA standards have been published or (b) using the expenses of tenants at comparable properties in the market.

(3)
Represents annualized rent divided by leased square footage, including leases executed but not commenced as of June 30, 2010.

(4)
Property is subject to a ground lease that expires in 2080. We currently own a 67% interest in this property and have an option to purchase the remaining 33% interest between November 1, 2010 and December 31, 2010, which we intend to exercise prior to or concurrently with the completion of this offering.

(5)
Property is subject to a ground lease that expires in 2077.

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(6)
Approximately 6.30 acres of developable land is adjacent to Cypress Center I, Cypress Center II, Cypress Center III and Cypress West. This land currently is used as parking for those properties, and there are no current plans with respect to the improvement or development of this land.

(7)
Amounts for our Tampa initial portfolio are based on total amounts for our wholly owned properties and our pro rata share for properties owned through our unconsolidated joint ventures based on our economic ownership interest in those joint ventures.

    Overview

        The Tampa MSA is the 18th largest in the United States with a 2009 estimated population of more than 2.7 million and an employment base of more than 1.1 million as of June 2010. Tampa is a regional economic hub, with Interstates 75 and 4 connecting the city to the rest of Florida and a rail network linking the region with all major freight nodes and ports east of the Mississippi River. Moreover, the Port of Tampa is the largest port in Florida and the 14th largest in the United States and serves as a major gateway to the Caribbean and Central and South America for trade and other international activity. The Port of Tampa generates an estimated $8 billion annually and supports more than 100,000 jobs in the region.

        Tampa's office market is comprised of nearly 45.0 million square feet as of the second quarter of 2010, with approximately 85.8% classified as suburban. Tampa's suburban office market has higher market rents and lower vacancy rates than Tampa's CBD market. The finance, insurance and real estate industries constitute a large portion of the office tenants, but Tampa also contains a number of growing industries, such as the life sciences and technology industries. These sectors are growing as a result of the presence of higher-education institutions and research centers.

        Along with the rest of the country, the Tampa economy was affected by the recession, but it is beginning to show signs of improvement. While total employment decreased 0.9% on a year-over-year basis through June 2010, the area added 5,400 jobs during the first half of 2010. Nearly half of the sectors showed growth in the first half of the year, including trade, professional and business services and government sectors, whereas many of the housing-related sectors, including construction and financial activities, continued to shed jobs. Tampa's unemployment rate decreased to 11.9% in June 2010 from 12.9% in March 2010. RCG believes there will be continued volatility in the unemployment figures through year-end 2010 but that a sustainable decline in unemployment will begin in 2011.

        In the long term, forecasted positive demographic growth, improved consumer confidence and the growth of several innovative industries bode well for Tampa's economic future. In line with the national recovery, RCG forecasts job growth to return to a positive rate in 2010. Between 2011 and 2014, job growth should average 1.2% per year. As the only sector that did not shed any jobs during the recession, the educational and health services sector will lead the recovery with average job growth of 2.2% annually between 2010 and 2014, according to RCG. The market should be further supported by job growth in the professional and business services, trade, and leisure and hospitality sectors. Additionally, the life sciences, biosciences and technology industries are becoming increasingly important employment clusters in Tampa. Not only is Tampa the gateway to the Florida "High-Tech Corridor," a 23-county area that is home to more than 3,000 high-tech companies, but it also ranks in the top 20 locations nationwide for medical device manufacturing. Moreover, the University of South Florida and the H. Lee Moffitt Cancer Center and Research Institute are major medical and biosciences research centers located in Tampa. Although the healthcare and technology industries are relatively new to the region, RCG predicts they will be main drivers of growth and should be key factors in the market's recovery.

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GRAPHIC

    Suburban Office Market

        RCG expects that Tampa's cost advantages and government support for growing industries, as well as its port and access to transportation networks, will contribute to the health of its suburban office market over the forecast period. Market fundamentals were mixed through the second quarter of 2010 in Tampa's suburban office market. The vacancy rate decreased to 18.9% in the second quarter of 2010 from 19.5% in the first quarter of 2010, whereas asking rents declined as landlords adjusted rents to remain competitive. Asking rents contracted by 3.7% in the first half of 2010, after declining by 0.7% in 2009. RCG expects fundamentals to remain weak in 2010 as the market bottoms, with the vacancy rate increasing to 19.3%. The Tampa suburban office market is expected to begin to recover in 2011, in line with more robust job growth and subdued construction activity. RCG predicts that the vacancy rate in the Tampa suburban office market should gradually move closer to pre-recession levels, reaching 12.3% at year-end 2014. RCG expects asking rents in the Tampa suburban office market to decline by 3.0% in 2010 and to grow 2.4% per year on average between 2011 and 2014.

GRAPHIC

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BUSINESS AND PROPERTIES

Overview

        We are a fully integrated, self-administered and self-managed REIT specializing in the acquisition, ownership, management, redevelopment and disposition of high quality office buildings located in the Southeastern and mid-Atlantic United States. Upon completion of this offering and our formation transactions, we will own interests in a portfolio of 57 properties totaling approximately 12.0 million rentable square feet. These properties are comprised of 32 consolidated properties and 25 properties held through unconsolidated joint ventures, all of which we will manage. Our ownership interest in our unconsolidated properties ranges from 8.7% to 30.0%. Our pro rata ownership share of our initial portfolio equates to approximately 8.3 million rentable square feet.

        Our initial portfolio as of June 30, 2010 was approximately 82.7% leased and had a remaining weighted-average lease term of approximately five years, assuming no exercise of early termination rights. As of June 30, 2010, our initial portfolio generated approximately $158.3 million of annualized rent and approximately $23.07 of annualized rent per leased square foot. Our top six markets by both rentable square footage and annualized rent are Atlanta, Orlando, Philadelphia, Jacksonville, Washington, D.C. and Tampa. As of June 30, 2010, these markets accounted for approximately 96.5% of the rentable square footage and approximately 96.7% of the annualized rent of our initial portfolio.

        We intend to focus primarily on owning and acquiring properties in markets that generally have been characterized by strong and stable employment bases, above-average job growth prospects and strong long-term growth potential as a result of their growing populations, net migration inflows and access to a talented and educated workforce. We believe that our top six markets provide attractive long-term return opportunities and that our integrated platform, market knowledge and industry and investor relationships give us a competitive advantage relative to our peers in each of our markets. Our in-house property management, asset management and leasing capabilities allow us to meet the needs of our existing tenants and identify value-enhancement opportunities, such as acquiring under-leased assets at attractive purchase prices and leasing them up over time. Through our focused strategy and extensive experience in our markets, we have developed an expansive network of market participants, including sales and leasing brokers, lenders, operators, tenants and institutional buyers and sellers of real estate. We believe these relationships, along with our reputation for reliably closing on our commitments, have allowed us to source and close off-market and limited-market opportunities.

        Our objective is to expand our holdings in our current markets by identifying properties where we can capitalize on our competitive strengths to generate an attractive return on our investment. In addition, we will seek to expand our presence in other Southeastern and mid-Atlantic markets by acquiring well-located assets in strong markets and hiring regional professionals with local market expertise. We also may enter new markets in the Eastern United States as we identify attractive investment opportunities. We will evaluate our portfolio on a regular basis and dispose of assets when returns appear to have been maximized and will look to recycle capital as appropriate.

        We believe that our senior management team's extensive experience in acquiring, owning, financing, structuring, managing, redeveloping and monetizing office properties in our markets provides us with a significant competitive advantage. In addition, we believe our execution of repeat transactions with multiple sophisticated institutional investors over an extended period is a testament to our historical performance and long-term stewardship of investor interests.

        We intend to elect and to qualify to be taxed as a REIT for U.S. federal income tax purposes, commencing with the portion of our taxable year ending December 31, 2010. We will conduct substantially all of our business through our operating partnership, of which we will serve as the sole general partner and own approximately    % upon completion of this offering and our formation transactions.

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Our History

        Our company was created through the combination of members of senior management and personnel from numerous predecessor entities founded and operated by James R. Heistand, our Executive Chairman, and Rudy Prio Touzet, our President and Chief Executive Officer. Since 2000, Messrs. Heistand and Touzet collectively have overseen the acquisition of more than 24 million square feet of office space with a cost of approximately $3.0 billion, and the disposition of approximately 12 million square feet for gross proceeds of approximately $1.6 billion.

        Mr. Heistand founded Associated Capital Properties, Inc., or ACP, in 1989, and served as the company's chairman through 1997, directing all areas of operations, strategic planning, acquisitions, development and financings. Mr. Touzet joined the management team at ACP in 1997 from Cushman & Wakefield, where he had been employed since 1981 and had most recently served as the company's managing director for Florida. While at ACP, Messrs. Heistand and Touzet and other members of our senior management team acquired over 6.5 million square feet in 84 assets and expanded the company's footprint from Orlando into Jacksonville and South Florida over an eight year period. ACP was monetized in a sale to Highwoods Properties, Inc., or Highwoods, in 1997 at a value of approximately $622 million. At the time of the sale, ACP was the largest private owner of office buildings in the state of Florida. Subsequently, Mr. Heistand served as senior vice president for Highwoods' Florida operations until 1999 and as a member of Highwoods' board of directors from 1998 to 2000. In addition, Mr. Touzet served as Highwoods' vice president of South Florida before leaving the company in 1998.

        In 1999, Mr. Heistand acquired The DASCO Companies, or DASCO, a platform focused on the acquisition and development of medical office properties located throughout the United States, for approximately $0.5 million. DASCO teamed with Lehman Brothers Holdings, Inc., or Lehman Brothers, over the next several years to acquire 16 properties comprising an aggregate of over 750,000 square feet and to develop an additional 12 properties comprising an aggregate of approximately 675,000 square feet nationally, at an aggregate cost of approximately $148 million. DASCO was sold to CNL Retirement Properties, Inc. in 2004 at a value of approximately $241 million.

        Concurrently with the acquisition of the DASCO platform in 1999, Mr. Heistand formed Capital Partners, Inc., which later became Eola Capital, and teamed with equity partners to acquire an approximately two million square foot portfolio of office assets in Jacksonville, Florida from Highwoods for approximately $176 million. From 2000 through 2007, Eola Capital, with backing from its three private investment funds and from institutional partners, including affiliates of General Electric Capital Corporation, and Lehman Brothers, continued to expand into markets throughout the Southeastern United States, including Atlanta, Jacksonville, Tampa, South Florida and Virginia. During this time, Eola Capital acquired more than 13 million square feet of office space with a total value of approximately $1.3 billion.

        After leaving Highwoods in 1998, Mr. Touzet co-founded AmCP and teamed with equity partners to acquire an approximately 3.2 million square foot portfolio in South Florida from Highwoods for approximately $321 million. AmCP focused on investments in both equity and debt in office properties. With initial institutional backing from affiliates of Lehman Brothers and General Electric Capital Corporation, and later from other institutional investors, including Dreilaender Fond, or DLF, and the Utah State Retirement Investment Fund, or URS, AmCP expanded into Southeastern and mid-Atlantic markets, including Atlanta, Tampa, Orlando, Philadelphia, Northern Virginia and Washington, D.C., often by hiring local talent with extensive market relationships. By 2007, AmCP owned, managed and operated over $2 billion of assets totaling approximately 11 million square feet. Mr. Touzet left AmCP in early 2007 and formed Banyan Street Holdings, LLC to take advantage of emerging debt opportunities in the real estate sector.

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        By the end of 2007, Messrs. Heistand and Touzet teamed up to recapitalize a portion of Eola Capital's existing portfolio using Eola Capital's operating platform along with Mr. Touzet's existing debt and equity capital relationships. This debt and equity recapitalization included over four million square feet in Tampa, Charlotte and Jacksonville and was a liquidity event for General Electric Capital Corporation and Lehman Brothers. This transaction reignited the real estate co-investment efforts of Messrs. Heistand and Touzet and allowed Eola Capital to introduce its abilities to another institutional pension client. In addition, the transaction provided a forum for Messrs. Heistand and Touzet to demonstrate successfully their abilities to navigate through even the most turbulent market environments.

        In 2009, Messrs. Heistand and Touzet expanded their relationship together by joining forces to acquire the remaining interest in AmCP from Mr. Touzet's former partner and brought the portfolio under the Eola umbrella. The acquisition of the AmCP portfolio increased the size of Eola Capital's office portfolio by approximately 5.5 million square feet and provided a basis for strategic expansion up the East Coast into the mid-Atlantic region with entry positions in the Washington, D.C. and Philadelphia markets.

Competitive Strengths

        We believe we distinguish ourselves from other owners and operators of office properties through the following competitive strengths:

    High Quality Office Portfolio Located in Growth-Oriented Markets.  Our properties are located in select growth-oriented markets in the Southeastern and mid-Atlantic United States. We have high quality office properties that we believe have strong growth characteristics and are located in both CBD and suburban markets that generally are characterized by positive demographic trends and real estate fundamentals. As of June 30, 2010, approximately 61% of the annualized rent of our initial portfolio was derived from properties located in CBDs and approximately 39% was derived from properties located in suburban areas. We consider a majority of the rentable square footage in our initial portfolio to be Class A office space. We generally consider Class A office properties to be those that have desirable locations and high quality finishes, are well maintained and professionally managed and are capable of achieving rental and occupancy rates that are typically above those prevailing in their respective markets; however, the determination of an office property's class designation is subjective, and other companies may have a different view. In addition, many of our existing markets historically have been characterized by one or more of the following characteristics: strong and stable employment bases, above-average job growth prospects and strong long-term growth potential as a result of their growing populations, net migration inflows and access to a talented and educated workforce. As the economy recovers, we believe we are well positioned to take advantage of these positive longer-term demographic trends and real estate fundamentals.

    Robust Asset Management, Property Management and Leasing Platform.  We are a fully integrated real estate company with in-house asset management, property management and leasing capabilities. We believe that this platform is efficient, highly scalable and capable of supporting significant growth. For example, over the course of 2009, we substantially increased the size of our portfolio while decreasing the corporate level employee costs of our portfolio at that time from $0.48 per square foot to $0.37 per square foot. Utilizing this platform, we entered into more than 250 leases in 2009, representing approximately 1.4 million square feet, despite adverse market and economic conditions.

      Our dedicated personnel and targeted policies and procedures concentrate on anticipating and meeting the individual needs of our existing tenants, identifying value-enhancement opportunities, maximizing retention and ultimately fostering long-term tenant relationships.

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      Upon completion of this offering or shortly thereafter, we expect to have approximately 150 employees spread throughout ten property management offices in the Southeastern and mid-Atlantic United States. We believe our tenant-focused approach, coupled with our disciplined expense control program, drives internal growth and maximizes operating results within our portfolio.

      Renaissance Park—We view our Renaissance Park acquisition in 2005 as illustrative of our robust asset management, property management and leasing platform. Renaissance Park was an approximately 532,000 square foot, user-owned single-tenant office asset located in Tampa, Florida. In order to price the acquisition appropriately and to realize the value inherent in the asset, we addressed the following key hurdles:

      Repositioning and renovating the buildings in order to reconfigure them for multi-tenant use;

      Estimating the costs of subdividing and redeveloping the buildings;

      Underwriting of projected operating expenses based on new multi-tenant configuration and extensive amenity base; and

      Accurately assessing and projecting the depth and velocity of the leasing market.

          We acquired the asset for approximately $69.0 million in February 2005 without the seller commencing a formal marketing process. At the time of acquisition, the asset was 56% leased versus an 85.5% occupancy rate for the Tampa market, and the average in-place rental rate was $19.72 per square foot versus asking rents of $18.65 per square foot for the Tampa market. Subsequent to acquisition, we effectively executed on an approximately $7.6 million renovation project on time and under budget and increased in-place rental rates to $24.87 per square foot while achieving 99% occupancy. These results compared favorably to asking rents of $19.72 per square foot and an occupancy rate of 89.7% for the Tampa market at the time. We sold the property in October 2006 to a REIT for approximately $103.6 million.

    Experienced and Committed Senior Management Team with a Proven Track Record.  We believe our in-depth market knowledge and extensive experience acquiring, owning, financing, structuring, managing, redeveloping and monetizing office properties in our markets provide us with a significant competitive advantage. Our senior management team is led by James R. Heistand, our Executive Chairman, and Rudy Prio Touzet, our President and Chief Executive Officer, and has an average of more than 19 years of experience in the real estate industry. Since 2000, Messrs. Heistand and Touzet collectively have overseen the acquisition of more than 24 million square feet of office space with a cost of approximately $3.0 billion, and the disposition of approximately 12 million square feet for gross proceeds of approximately $1.6 billion, the substantial majority of which was in our existing markets. In addition, three members of our senior management team and more than 20 of our other employees, have experience in the public REIT sector. Upon completion of this offering and our formation transactions, members of our senior management team are expected to own, on a fully diluted basis (assuming no exercise of the underwriters' overallotment option), approximately    % of our common shares.

    Long-Standing Institutional Investor and Industry Relationships.  We believe our execution of repeat transactions with multiple institutional investors over an extended period is a testament to our historical performance and long-term stewardship of investor interests. Some of our long-standing institutional investor relationships include affiliates of General Electric Capital Corporation (14 years, 14 transactions), affiliates of Lehman Brothers (14 years, 42 transactions), URS (seven years, 14 transactions) and DLF (five years, six transactions). Upon completion of this offering and our formation transactions, certain of these institutional investors, including

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      URS and DLF, will collectively own, on a fully diluted basis (assuming no exercise of the underwriters' overallotment option), approximately    % of our common shares. We also have long-standing relationships in the real estate and financial industries with real estate developers, brokers, advisors, general contractors, architects and consultants, as well as with investment banks, brokerage firms and commercial banks, in each case on the local, regional and national levels. We believe our long-standing institutional investor and industry relationships will allow us to identify and consummate attractive investment opportunities and financings and provide us with access to valuable market knowledge.

      International Plaza Four—Beginning in 2004, we developed a relationship with a high quality regional developer and owner of office properties and other real estate assets in the Southeastern United States. In 2004, AmCP, led by Mr. Touzet, acquired the Primera V property in the Lake Mary submarket of Orlando on an off-market basis from this developer. In early 2009, we became aware of this owner's interest in selling the International Plaza Four property in the Westshore submarket in Tampa and, due to the owner's prior experience with Mr. Touzet and AmCP, we were well positioned to capitalize on the acquisition opportunity.

      International Plaza Four is a 250,097 square foot, eight-story Class A office building located adjacent to an upscale shopping mall in the highly desirable Westshore submarket. The building represents new construction, completed in 2009, and is LEED (Leadership in Energy and Environmental Design) certified. Select building amenities include exceptional exterior landscaping, a covered parking deck, a fitness center with lockers and showers, and a computer controlled access system.

      In June 2009, we agreed to purchase this asset and shortly thereafter the owner filed for Chapter 11 bankruptcy protection. We were able to navigate the bankruptcy process successfully and ultimately closed on the acquisition in October 2009 at roughly 50% of the owner's cost basis and at a basis that we believe was substantially lower than competitive properties in the submarket. We then recapitalized our interest in the asset with an equity investment by an institutional investor in November of the same year.

      At the time of acquisition, the asset was approximately 58% leased versus an 81.2% occupancy rate for the Westshore submarket, and the average in-place rental rate was approximately $19.75 per square foot versus asking rents of $20.83 per square foot for the Westshore submarket. As of September 30, 2010, after only one year under our management, this property was approximately 72.4% leased and maintained an average in-place rental rate of $29.75 per square foot.

      Given our attractive cost basis in this well-positioned asset, we believe that we have a competitive leasing advantage in this market and expect to benefit as market fundamentals recover.

    Growth-Oriented and Conservative Capital Structure.  Upon completion of this offering and our formation transactions, we expect to have a ratio of our pro rata share of debt to total market capitalization of approximately    % and a ratio of our pro rata share of net debt to EBITDA of            . As of June 30, 2010 and taking into account the anticipated use of proceeds from this offering, we have no scheduled debt maturities prior to 2015 in our consolidated portfolio and approximately $            million in book value of unencumbered assets. In addition, we expect to enter into a $         million revolving credit facility upon completion of this offering. We believe our conservative capital structure and strong liquidity position will provide us with financial and operational flexibility and allow us to pursue attractive acquisition opportunities as they arise, in contrast to many of our private and public competitors that are constrained by highly leveraged capital structures and declining operating results within their existing portfolios.

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    Diverse and Stable Tenant Base.  We have a diverse tenant base in our initial portfolio, with more than 800 tenants that operate in a variety of professional, financial, governmental and other businesses. We believe that our base of smaller-sized tenants provides us with valuable diversification and greater leverage in tenant negotiations. As of June 30, 2010, we had approximately 580 tenant leases in our consolidated portfolio averaging approximately 11,650 square feet per lease with a median size of approximately 4,470 square feet, and approximately 850 tenant leases in our initial portfolio averaging approximately 11,500 square feet per lease with a median size of approximately 4,690 square feet. Other than the U.S. Government and CIGNA Corp., no tenant accounted for more than 3.2% of the annualized rent of our initial portfolio as of June 30, 2010.

Business and Growth Strategies

        Our primary objective is to create value for our shareholders by increasing cash flow from operations, achieving sustainable growth in FFO and realizing long-term capital appreciation. We intend to achieve these objectives by executing on the following business and growth strategies:

    Maximize Cash Flow by Continuing to Enhance the Operating Performance of Each Property.  We will provide property and asset management and leasing services to our portfolio, actively managing our properties and leveraging our tenant relationships to improve operating performance, maximize cash flow and enhance shareholder value. We believe that our initial portfolio has strong long-term growth prospects as a result of both the forecasted market recovery and our ability to increase operating income through intensive asset management. As of June 30, 2010, our initial portfolio was approximately 82.7% leased, compared to an approximately 86% average occupancy in our top six markets from 2005 through 2009, according to RCG. In order to mitigate the impact of the recent economic downturn, we aggressively pursued early lease renewals and extensions with our tenants in order to maintain occupancy within our portfolio. We believe the occupancy of our initial portfolio will increase as economic conditions improve and this lease-up, together with contractual rent increases embedded in our leases, will position us to deliver strong operating results going forward.

    Pursue Acquisitions on Attractive Terms.  Our acquisition strategy is to pursue attractive returns by focusing primarily on office buildings and portfolios that are well located and competitively positioned within CBD and suburban markets throughout the Southeastern and mid-Atlantic United States. These properties will include Class A and Class B office properties that can be acquired at or below replacement cost and that will provide us with an opportunity to create value through leasing, debt restructuring and/or active property and asset management. Given the recent economic downturn, we currently are focused on newer, high quality assets in our markets that may be challenged due to an overleveraged capital structure and/or decreased occupancy or other operational stress. We also may consider expanding beyond our existing markets into other Southeastern, mid-Atlantic and Eastern U.S. markets in the event that we identify attractive investment opportunities. In markets where we do not have an existing footprint, we likely will hire or partner with regional professionals with local market expertise to assist us in executing on and creating value from new acquisitions. We also intend to use our public REIT structure and ability to issue OP units to acquire assets in a tax efficient manner and on an opportunistic basis. Finally, we may consider other opportunistic or distressed real estate investments, such as structured equity or debt investments with attractive control features, which may ultimately lead to ownership of the underlying asset.

    1110 Vermont Avenue—Our pending acquisition of 1110 Vermont Avenue illustrates our strategy of pursuing acquisition opportunities on attractive terms. The Washington, D.C. metropolitan area is a market that we have targeted for investment because of its favorable long-term supply and demand fundamentals. In late 2009, we leveraged a broker

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        relationship in Washington, D.C. to identify potential strategic relationships through which we might be able to provide recapitalization opportunities to high quality developers and owners of office assets in the Washington, D.C. area.

        Through an introduction facilitated by this broker relationship, we entered into an agreement with a local development company whereby we agreed to fund that company's overhead and certain other operating costs through October 2010 with the intention of ultimately becoming a capital partner on high quality office assets in this target market. This agreement provided us with the right to advise on potential debt and equity restructurings associated with three office assets comprising approximately 650,000 square feet. Pursuant to this right, we sourced the pending acquisition of 1110 Vermont Avenue.

        1110 Vermont Avenue is a 305,543 square foot, twelve-story Class A office building located in the desirable midtown submarket within Washington, D.C.'s East End office district. The property was originally built in 1980 and underwent a major interior and façade renovation from 2006 to 2007. The building was approximately 82% leased as of June 30, 2010, and offers highly desirable amenities, including structured parking, a fitness center and ancillary retail and restaurant space.

    Leverage Our Institutional Investor and Industry Relationships to Identify, Finance and Consummate Acquisition Opportunities.  We believe that our relationships with leading institutional investors and real estate and financial industry professionals will provide us with critical market intelligence, an ongoing acquisition pipeline, potential joint venture partners and financing alternatives. We may utilize institutional capital sources in a joint venture or other format to acquire, redevelop or otherwise improve a property or properties, thereby reducing the amount of capital required by us to make investments. Diversifying our sources of equity capital will allow us to mitigate or reduce concentration or other risk exposures. Our senior management team has significant relationships with institutional equity sources and, by leveraging these relationships, we believe that we will be able to execute on investment opportunities that would otherwise be unavailable or impractical for us, whether because of the lack of awareness of an off-market or limited-market opportunity, the size of the transaction, the potential impact of market concentration within our portfolio, the location of the asset in a new market or the time needed to improve the asset's operations.

    Recycle Capital through Select Asset Sales.  We intend to pursue an efficient capital allocation strategy that maximizes the return on our invested capital. This may include selectively disposing of properties where we believe returns have been maximized and redeploying capital into acquisitions or other opportunities. We have consistently grown our portfolio through acquisitions, while at the same time strategically disposing of properties when we believe we have maximized the economic return from a particular investment. Since 2000, members of our senior management team collectively have overseen the acquisition of more than 24 million square feet of office space with a value of approximately $3.0 billion, and the disposition of approximately 12 million square feet for gross proceeds of approximately $1.6 billion. In all cases, we intend to operate in a manner that is consistent with our qualification as a REIT.

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Our Properties

    Our Initial Portfolio

        Upon completion of this offering and our formation transactions, we will own interests in a portfolio of 56 office properties and one related retail property that is part of an office complex, totaling approximately 12.0 million rentable square feet. These properties are comprised of 32 consolidated properties and 25 properties owned through seven unconsolidated joint ventures. The following table presents an overview of our initial portfolio, based on information as of June 30, 2010.

Metropolitan Area/Property
  Percent
Ownership
(%)
  Year
Built
  Rentable
Square
Footage
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Annualized
Rent Per
Leased Square
Foot ($)(3)
 

Consolidated Properties

                                     

Atlanta, Georgia

                                     

Ten 10th Street (Millennium)

    100.0     2001     421,557     98.1     12,500,233     30.22  

Peachtree Marquis II(4)

    100.0     1987     464,277     99.1     8,826,079     19.17  

Two Ravinia Drive

    100.0     1987     437,826     82.2     6,664,372     18.53  

Peachtree Harris(4)

    100.0     1978     394,694     80.5     5,842,084     18.40  

Peachtree International(4)(5)

    100.0     1973     386,563     86.9     5,762,215     17.16  

Peachtree Marquis I(4)

    100.0     1980     460,437     65.2     5,551,432     18.49  

Peachtree South(4)(5)

    100.0     1969     306,914     73.7     3,531,635     15.62  

Peachtree Mall (retail)(4)(6)

    100.0     1969     124,929     71.7     2,839,675     31.70  

Peachtree North(4)(5)

    100.0     1967     302,951     49.6     2,532,508     16.85  

The Cornerstone Building at Peachtree Center

    100.0     1928     77,691     77.5     1,418,237     23.56  
                               
 

Metropolitan Area Subtotal / Weighted Average

                3,377,839     80.3     55,468,471     20.44  

Philadelphia, Pennsylvania

                                     

Two Liberty Place(7)

    89.0     1990     937,566     99.4     25,251,804     27.10  
                               
 

Metropolitan Area Subtotal / Weighted Average

                937,566     99.4     25,251,804     27.10  

Jacksonville, Florida

                                     

Independent Square(8)

    100.0     1975     647,251     92.2     13,215,792     22.14  

Capital Plaza I and II (2 buildings)(9)

    25.0     1990     307,856     82.3     4,912,660     19.40  

245 Riverside

    100.0     2003     135,286     94.6     2,818,518     22.02  

Capital Plaza III(9)

    25.0     1999     108,774     80.7     1,841,524     20.98  
                               
 

Metropolitan Area Subtotal / Weighted Average

                1,199,167     88.9     22,788,494     21.38  

Orlando, Florida

                                     

Bank of America Center

    100.0     1987     421,069     83.0     9,802,287     28.04  

Primera V

    100.0     2000     190,081     100.0     4,261,715     22.42  

Maitland Forum

    100.0     1985     267,913     76.6     3,979,989     19.38  

Maitland Park Center

    100.0     1984     102,169     73.6     1,534,292     20.41  

2400 Maitland Center

    100.0     1982     101,612     65.1     1,263,799     19.09  

Interlachen Corporate Center

    100.0     1986     79,312     69.1     1,051,122     19.19  

500 Winderley Place

    100.0     1985     101,040     50.8     849,927     16.56  
                               
 

Metropolitan Area Subtotal / Weighted Average

                1,263,196     78.6     22,743,131     22.92  

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Metropolitan Area/Property
  Percent
Ownership
(%)
  Year
Built
  Rentable
Square
Footage
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Annualized
Rent Per
Leased Square
Foot ($)(3)
 

Tampa, Florida

                                     

International Plaza Four(10)

    100.0     2008     250,097     59.2     4,406,661     29.75  

Westshore Corporate Center(11)

    100.0     1989     169,619     73.6     2,982,282     23.90  

Cypress Center I(12)

    100.0     1982     152,758     94.7     2,695,736     18.63  

Cypress Center III(12)

    100.0     1982     82,871     83.2     1,540,195     22.33  

Cypress Center II(12)

    100.0     1982     50,697     100.0     1,130,647     22.30  

Cypress West(12)

    100.0     1985     64,510     32.0     432,545     20.95  
                               
 

Metropolitan Area Subtotal / Weighted Average

                770,552     72.4     13,188,065     23.64  

Washington, D.C.

                                     

1110 Vermont Avenue(13)

    100.0     1980     305,543     81.7     11,772,649     47.18  
                               
 

Metropolitan Area Subtotal / Weighted Average

                305,543     81.7     11,772,649     47.18  

Columbia, South Carolina

                                     

Center Point (2 buildings)(14)

    95.0     1988     154,283     92.6     2,627,752     18.40  
                               
 

Metropolitan Area Subtotal / Weighted Average

                154,283     92.6     2,627,752     18.40  

Richmond, Virginia

                                     

Overlook I

    100.0     1998     62,664     100.0     1,266,883     20.22  

Overlook II

    100.0     1998     63,832     86.7     1,129,808     20.41  
                               
 

Metropolitan Area Subtotal / Weighted Average

                126,496     93.3     2,396,691     20.31  

Total/Weighted Average—Consolidated Properties (32 properties)

               
8,134,642
   
83.2
   
156,237,058
   
23.07
 
                               

Total/Weighted Average—Pro Rata Share of Consolidated Properties

                7,711,323     83.1     148,262,334     23.14  
                               

Unconsolidated Properties

                                     

Atlanta, Georgia

                                     

5660 New Northside Drive

    10.0     1989     272,650     87.9     5,124,860     21.37  

300 Windward Plaza

    10.0     2000     203,248     100.0     4,037,816     19.87  

Deerfield Point (2 buildings)

    10.0     1999     202,619     81.3     3,425,988     20.80  

Parkwood Point

    10.0     2001     219,357     89.8     3,368,442     17.10  

Interstate NW Business Park (4 buildings)

    30.0     1979     283,679     82.2     3,173,440     13.61  

100 Windward Plaza

    10.0     1998     132,250     100.0     2,251,478     17.02  

3720 Davinci Court

    25.0     2000     100,698     100.0     2,126,516     21.12  

Windward Pointe 200

    10.0     1997     129,448     76.3     1,947,143     19.71  

280 Interstate North Office Park

    10.0     1982     125,377     74.7     1,640,663     17.53  

3740 Davinci Court

    25.0     2001     100,751     74.6     1,470,738     19.58  

20 Technology Park

    25.0     1982     90,852     91.4     1,391,884     16.77  
                               
 

Metropolitan Area Subtotal / Weighted Average

                1,860,929     87.1     29,958,968     18.48  

Orlando, Florida

                                     

One Orlando Centre

    10.0     1987     355,783     92.6     8,385,109     25.45  

Millennia Park One

    10.0     1999     157,291     92.6     3,473,225     23.84  

Southhall Center

    10.0     1986     159,840     97.1     2,985,346     19.23  
                               
 

Metropolitan Area Subtotal / Weighted Average

                672,914     93.7     14,843,680     23.55  

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Metropolitan Area/Property
  Percent
Ownership
(%)
  Year
Built
  Rentable
Square
Footage
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Annualized
Rent Per
Leased Square
Foot ($)(3)
 

Washington, D.C.

                                     

Irvington Three

    20.0     2003     217,928     75.2     5,288,394     32.26  

Irvington One

    20.0     2001     154,469     74.8     3,838,754     33.23  

Irvington Four

    20.0     2007     224,258     33.2     2,826,624     37.92  

Irvington Two

    20.0     2001     153,866     50.1     2,618,119     33.93  
                               
 

Metropolitan Area Subtotal / Weighted Average

                750,521     57.4     14,571,890     33.80  

Tampa, Florida

                                     

Westshore 500

    8.7     1984     129,728     84.2     2,734,098     25.04  

Buschwood Park III

    20.0     1989     77,568     90.4     1,325,958     18.90  

Buschwood Park II

    20.0     1987     88,019     71.2     1,221,849     19.49  

Buschwood Park I

    20.0     1985     83,147     52.6     984,314     22.52  
                               
 

Metropolitan Area Subtotal / Weighted Average

                378,462     75.5     6,266,219     21.93  

Panama City, Florida

                                     

Beckrich One

    10.0     2002     33,739     90.5     907,628     29.74  

Beckrich Two

    10.0     2003     33,369     89.6     726,574     24.30  
                               
 

Metropolitan Area Subtotal / Weighted Average

                67,108     90.0     1,634,202     27.05  

Tallahassee, Florida

                                     

Southwood One

    10.0     2002     89,059     62.4     1,030,949     18.56  
                               
 

Metropolitan Area Subtotal / Weighted Average

                89,059     62.4     1,030,949     18.56  

Total/Weighted Average—Unconsolidated Properties (25 properties)

               
3,818,993
   
80.8
   
68,305,909
   
22.14
 
                               

Total/Weighted Average—Pro Rata Share of Unconsolidated Properties

                580,713     78.0     9,988,371     22.04  
                               

TOTAL/WEIGHTED AVERAGE—ALL PROPERTIES (57 properties)

                11,953,635     82.5     224,542,967     22.78  

TOTAL/WEIGHTED AVERAGE—INITIAL PORTFOLIO(15)

               
8,292,036

(16)
 
82.7
   
158,250,705
   
23.07
 

(1)
Based on leases signed as of June 30, 2010, and calculated as leased square footage divided by rentable square footage, expressed as a percentage.

(2)
Annualized rent is calculated by multiplying (i) rental payments (defined as base rent plus operating expenses, if payable by the tenant on a monthly basis, before rental abatements and including rental payments related to leases that had been executed but not commenced as of June 30, 2010 in lieu of rental payments under any existing leases for the same space) for the month ended June 30, 2010, by (ii) 12. In instances in which base rents and operating expenses are collected on an annual, semi-annual or quarterly basis, such amounts have been multiplied by a factor of 1, 2 or 4, respectively, to calculate the annualized figure. For triple net or modified gross leases, annualized rent has been converted to a full service gross basis by one of the following methods: (1) when we have access to the operating expenses of the tenant, expenses have been estimated by adding billed expense reimbursements to base rent; or (2) when we do not have access to the operating expenses of the tenant, expenses have been estimated by either (a) applying current BOMA estimated expense standards in markets where BOMA standards have been published or (b) using the expenses of tenants at comparable properties in the market. Rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were $6,190,841 for our consolidated properties, $2,685,095 for our unconsolidated properties and $6,456,757 for our initial portfolio.

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(3)
Represents annualized rent divided by leased square footage, including leases executed but not commenced as of June 30, 2010.

(4)
Three parking garages stand adjacent to the seven Peachtree Center properties (Peachtree Marquis I, Peachtree Marquis II, Peachtree Harris, Peachtree International, Peachtree North, Peachtree South and Peachtree Mall). The parking garages are subject to ground leases that expire between 2065 and 2067.

(5)
Property is subject to a ground lease that expires in 2060.

(6)
Peachtree Mall is our only retail property and connects the office towers of Peachtree Center in Atlanta. Property is subject to a ground lease that expires in 2060.

(7)
We have an option, and our partner has the right to require us, to acquire the remaining 11% interest in this property at a mutually agreed-upon price, at any time on or after the three-year anniversary of this offering and our formation transactions. Total rentable square footage and total annualized rent for the entire property are presented. This building includes 20 floors of residential condominiums that are owned and managed by a third party in which James R. Heistand, our Executive Chairman, and Rudy Prio Touzet, our President and Chief Executive Officer, collectively have a 1.25% non-managing member interest. Rentable square footage does not include this space.

(8)
Property includes an adjacent parking garage.

(9)
Total rentable square footage and total annualized rent for the entire property are presented.

(10)
Property is subject to a ground lease that expires in 2080. We currently own a 67% interest in this property and have an option to purchase the remaining 33% interest between November 1, 2010 and December 31, 2010, which we intend to exercise prior to or concurrently with the completion of this offering.

(11)
Property is subject to a ground lease that expires in 2077.

(12)
Approximately 6.30 acres of developable land is adjacent to Cypress Center I, Cypress Center II, Cypress Center III and Cypress West. This land currently is used as parking for those properties, and there are no current plans with respect to the improvement or development of this land.

(13)
Our acquisition of this property is subject to closing conditions that may not be in our control. See "Risk Factors—Risks Related to Our Business and Operations—Our acquisition of the 1110 Vermont Avenue property is subject to closing conditions that could delay or prevent the acquisition of this property." We currently are pursuing potential third parties to co-invest in the acquisition of this property. If we reach an agreement with such parties, our interest in this property would be held through a joint venture, and our ownership percentage may be significantly reduced.

(14)
Total rentable square footage and total annualized rent for the entire property are presented. Approximately 1.4 acres of developable land is adjacent to Center Point. There are no current plans with respect to the improvement or development of this land.

(15)
Amounts for our initial portfolio are based on total amounts for our wholly owned properties and our pro rata share for properties owned through our consolidated and unconsolidated joint ventures based on our economic ownership interest in those joint ventures.

(16)
Initial portfolio total consists of 6,814,508 leased square feet, 1,432,224 available square feet and 45,304 building management use square feet.

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Geographic Diversification

        The following table shows the geographic diversification of our consolidated portfolio as of June 30, 2010.

Location
  Number
of
Properties
  Number
of
Tenants
  Rentable
Square
Footage
  Percentage
of Rentable
Square
Footage(%)
  Percent
Leased
(%)(1)
  Annualized
Rent($)(2)
  Percentage
of
Annualized
Rent(%)
  Annualized
Rent Per
Leased
Square
Foot($)(3)
 

Atlanta

    10     256     3,377,839     41.5     80.3     55,468,471     35.5     20.44  

Philadelphia

    1     16     937,566     11.5     99.4     25,251,804     16.2     27.10  

Jacksonville

    4     65     1,199,167     14.7     88.9     22,788,494     14.6     21.38  

Orlando

    7     115     1,263,196     15.5     78.6     22,743,131     14.6     22.92  

Tampa

    6     52     770,552     9.5     72.4     13,188,065     8.4     23.64  

Washington, D.C. 

    1     19     305,543     3.8     81.7     11,772,649     7.5     47.18  

Other

    3     22     280,779     3.5     92.9     5,024,444     3.2     19.26  
                                   

Total/Weighted Average

    32     545     8,134,642     100.0     83.2     156,237,058     100.0     23.07  
                                   

(1)
Based on leases signed as of June 30, 2010, and calculated as leased square footage divided by rentable square footage, expressed as a percentage.

(2)
See page ii for our definition of annualized rent. Rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were $6,190,841.

(3)
Represents annualized rent divided by leased square footage, including leases executed but not commenced as of June 30, 2010.

        The following table shows the geographic diversification of our initial portfolio as of June 30, 2010.

Location
  Number
of
Properties
  Number
of
Tenants
  Pro Rata
Rentable
Square
Footage
  Percentage
of Pro Rata
Rentable
Square
Footage(%)
  Percent
Leased
(%)(1)
  Pro Rata
Annualized
Rent($)(2)
  Percentage
of Pro Rata
Annualized
Rent(%)
  Pro Rata
Annualized
Rent Per
Leased
Square
Foot($)(3)
 

Atlanta

    21     370     3,664,513     44.2     80.8     59,847,427     37.8     20.21  

Orlando

    10     163     1,330,487     16.0     79.3     24,227,499     15.3     22.95  

Philadelphia

    1     16     834,434     10.1     99.4     22,474,106     14.2     27.10  

Jacksonville

    4     65     886,695     10.7     91.4     17,722,856     11.2     21.88  

Washington, D.C. 

    5     41     455,647     5.5     73.7     14,687,027     9.3     43.75  

Tampa

    10     115     831,579     10.0     72.5     14,132,220     8.9     23.45  

Other

    6     39     288,682     3.5     91.9     5,159,571     3.3     19.45  
                                   

Total/Weighted Average

    57     809     8,292,036     100.0     82.7     158,250,705     100.0     23.07  
                                   

(1)
Based on leases signed as of June 30, 2010, and calculated as leased square footage divided by rentable square footage, expressed as a percentage.

(2)
See page ii for our definition of annualized rent. Pro rata rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were $6,456,757.

(3)
Represents pro rata annualized rent divided by pro rata leased square footage, including leases executed but not commenced as of June 30, 2010.

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    Tenant Industry Diversification

        The following table shows the tenant industry diversification of our consolidated portfolio as of June 30, 2010.

Industry
  Number
of
Leases
  Percentage
of
Total
Leases(%)
  Leased
Square
Footage
  Percentage
of
Leased
Square
Footage(%)
  Annualized
Rent($)(1)
  Percentage
of
Annualized
Rent(%)
  Annualized
Rent Per
Leased Square
Foot($)(2)
 

Finance and Insurance

    91     15.8     2,046,887     30.2     50,719,637     32.5     24.78  

Professional, Scientific and Technical Services

    202     35.0     2,049,275     30.3     46,969,296     30.1     22.92  

Public Administration

    28     4.9     574,378     8.5     11,774,896     7.5     20.50  

Information

    42     7.3     400,802     5.9     10,424,644     6.7     26.01  

Accommodation and Food Services

    70     12.1     420,828     6.2     10,038,803     6.4     23.85  

Real Estate and Rental and Leasing

    25     4.3     266,514     3.9     5,903,863     3.8     22.15  

Other Services (except Public Administration)

    23     4.0     177,961     2.6     4,483,343     2.9     25.19  

Healthcare and Social Assistance

    20     3.5     170,059     2.5     3,709,320     2.4     21.81  

Other

    76     13.2     614,997     9.1     12,213,255     7.8     19.86  

Building Management Use

            50,282     0.7              
                               

Total/Weighted Average

    577     100.0     6,771,983     100.0     156,237,058     100.0     23.07  
                               

(1)
See page ii for our definition of annualized rent. Rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were $6,190,841.

(2)
Represents annualized rent divided by leased square footage, including leases executed but not commenced as of June 30, 2010.

        The following table shows the tenant industry diversification of our initial portfolio as of June 30, 2010.

Industry
  Number
of
Leases
  Percentage
of
Total
Leases(%)
  Pro Rata
Leased
Square
Footage
  Percentage
of Pro Rata
Leased
Square
Footage(%)
  Pro Rata
Annualized
Rent($)(1)
  Percentage
of Pro Rata
Annualized
Rent(%)
  Pro Rata
Annualized
Rent Per
Leased Square
Foot($)(2)
 

Finance and Insurance

    156     18.4     1,949,547     28.4     48,603,106     30.7     24.93  

Professional, Scientific and Technical Services

    275     32.4     2,105,675     30.7     48,311,680     30.5     22.94  

Public Administration

    30     3.5     578,422     8.4     11,884,880     7.5     20.55  

Information

    50     5.9     412,362     6.0     10,625,224     6.7     25.77  

Administrative and Support and Waste Management and Remediation Services

    14     1.6     305,783     4.5     6,640,247     4.2     21.72  

Real Estate and Rental and Leasing

    45     5.3     283,135     4.1     6,354,876     4.0     22.44  

Other Services (except Public Administration)

    30     3.5     186,006     2.7     4,630,215     2.9     24.89  

Accommodation and Food Services

    94     11.1     164,812     2.4     4,468,878     2.8     27.11  

Healthcare and Social Assistance

    34     4.0     183,428     2.7     4,028,069     2.5     21.96  

Other

    122     14.4     645,337     9.4     12,703,530     8.0     19.69  

Building Management Use

            45,304     0.7              
                               

Total/Weighted Average

    850     100.0     6,859,812     100.0     158,250,705     100.0     23.07  
                               

(1)
See page ii for our definition of annualized rent. Pro rata rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were $6,456,757.

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(2)
Represents pro rata annualized rent divided by pro rata leased square footage, including leases executed but not commenced as of June 30, 2010.

    Tenant Diversification

        The following table sets forth information regarding the ten largest tenants in our consolidated portfolio based on annualized rent as of June 30, 2010.

Tenant
  Number
of
Leases
  Number
of
Properties
  Expiration
Date
  Leased
Square
Footage
  Percentage
of
Rentable
Square
Footage(%)
  Annualized
Rent($)(1)
  Percentage
of
Annualized
Rent(%)
  Annualized
Rent Per
Leased
Square
Foot($)(2)
 

U.S. Government

    20     9   2010 - 2024     591,807     7.3     13,782,824     8.8     23.29  

CIGNA Corp. 

    2     2   2013 - 2016(3)     473,448     5.8     12,532,688     8.0     26.47  

SunTrust Bank, Inc. 

    2     2   2019 - 2021     259,845     3.2     4,971,312     3.2     19.13  

PricewaterhouseCoopers, LLP

    1     1   2012     153,261     1.9     4,859,896     3.1     31.71  

WPP Plc

    1     1   2018     78,847     1.0     3,931,498     2.5     49.86  

Wells Fargo & Co. 

    4     4   2010 - 2015     176,228     2.2     3,770,717     2.4     21.40  

Unisys Corporation

    1     1   2019     89,488     1.1     2,760,705     1.8     30.85  

Adecco S.A. 

    3     3   2011 - 2013     121,004     1.5     2,712,821     1.7     22.42  

The Sage Group Plc

    1     1   2017     86,150     1.1     2,584,500     1.7     30.00  

Bank of America Corp. 

    2     2   2010 - 2013     74,733     0.9     2,287,364     1.5     30.61  
                                       

Total/Weighted Average

                    2,104,811     25.9     54,194,326     34.7     25.75  
                                       

(1)
See page ii for our definition of annualized rent. Rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were $3,251,889.

(2)
Represents annualized rent divided by leased square footage, including leases executed but not commenced as of June 30, 2010.

(3)
One lease for 10,766 square feet expires in 2013, and one lease for 462,682 square feet expires in 2016.

        The following table sets forth information regarding the ten largest tenants in our initial portfolio based on annualized rent as of June 30, 2010.

Tenant
  Number
of
Leases
  Number
of
Properties
  Expiration
Date
  Pro Rata
Leased
Square
Footage
  Percentage
of Pro Rata
Rentable
Square
Footage(%)
  Pro Rata
Annualized
Rent($)(1)
  Percentage
of Pro Rata
Annualized
Rent(%)
  Pro Rata
Annualized
Rent Per
Leased
Square
Foot($)(2)
 

U.S. Government

    22     11   2010 - 2024     596,111     7.2     13,897,574     8.8     23.31  

CIGNA Corp. 

    2     2   2013 - 2016(3)     422,553     5.1     11,181,544     7.1     26.46  

SunTrust Bank, Inc. 

    3     3   2012 - 2021     260,331     3.1     4,988,951     3.2     19.16  

PricewaterhouseCoopers, LLP

    1     1   2012     153,261     1.8     4,859,896     3.1     31.71  

WPP Plc

    1     1   2018     78,847     1.0     3,931,498     2.5     49.86  

Adecco S.A. 

    4     4   2011 - 2014     121,158     1.5     2,715,918     1.7     22.42  

The Sage Group Plc

    1     1   2017     86,150     1.0     2,584,500     1.6     30.00  

Unisys Corporation

    1     1   2019     79,644     1.0     2,457,027     1.6     30.85  

Bank of America Corp. 

    3     3   2010 - 2013     76,337     0.9     2,321,039     1.5     30.41  

Buchanan Ingersoll & Rooney PC

    1     1   2021     68,546     0.8     1,994,689     1.3     29.10  
                                       

Total/Weighted Average

                    1,942,939     23.4     50,932,637     32.3     26.21  
                                       

(1)
See page ii for our definition of annualized rent. Pro rata rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were $3,251,889.

(2)
Represents pro rata annualized rent divided by pro rata leased square footage, including leases executed but not commenced as of June 30, 2010.

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(3)
One lease for 10,766 square feet expires in 2013, and one lease for 411,787 square feet expires in 2016, based on our pro rata share of leased square footage.

    Lease Expirations

        The following table shows lease expirations of our consolidated portfolio as of June 30, 2010, during each of the next ten years and thereafter, assuming no exercise of renewal options or early termination rights.

Year of Lease Expiration(1)
  Number of
Expiring
Leases
  Rentable
Square
Footage
Expiring
  Percentage of
Rentable
Square
Footage (%)
  Expiring
Annualized
Rent ($)(2)
  Percentage of
Annualized
Rent (%)
  Annualized
Rent Per
Leased
Square Foot
Under
Expiring
Leases($)(3)
 

Available

        1,362,659     16.8              

2010(4)

    72     437,846     5.4     9,248,515     5.9     21.12  

2011

    102     784,965     9.6     16,927,226     10.8     21.56  

2012

    98     890,848     11.0     22,910,697     14.7     25.72  

2013

    68     525,792     6.5     11,875,326     7.6     22.59  

2014

    60     557,948     6.9     11,246,860     7.2     20.16  

2015

    56     648,932     8.0     12,881,778     8.2     19.85  

2016

    40     962,335     11.8     22,357,422     14.3     23.23  

2017

    18     448,657     5.5     11,061,597     7.1     24.65  

2018

    16     335,887     4.1     10,951,161     7.0     32.60  

2019

    19     340,659     4.2     9,405,596     6.0     27.61  

Thereafter

    28     787,832     9.7     17,370,880     11.1     22.05  

Building Management Use

        50,282     0.6              
                           
 

Total/Weighted Average

    577     8,134,642     100.0     156,237,058     100.0     23.07  
                           

(1)
As of June 30, 2010, our consolidated portfolio had a weighted-average remaining lease term of 5.1 years, assuming no exercise of early termination rights, and 4.3 years, assuming the exercise of all early termination rights. Leases accounting for approximately 1.5 million square feet in our consolidated portfolio are subject to early termination rights of tenants. A common feature of our tenant leases is the requirement of tenants to pay certain early termination fees upon the exercise of any early termination rights.

(2)
See page ii for our definition of annualized rent. Rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were $6,190,841.

(3)
Represents expiring annualized rent divided by rentable square footage expiring.

(4)
Includes month-to-month leases.

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        The following table shows lease expirations of our initial portfolio as of June 30, 2010, during each of the next ten years and thereafter, assuming no exercise of renewal options or early termination rights.

Year of Lease Expiration(1)
  Number of
Expiring
Leases
  Pro Rata
Rentable
Square
Footage
Expiring
  Percentage of
Pro Rata
Rentable
Square
Footage (%)
  Pro Rata
Expiring
Annualized
Rent ($)(2)
  Percentage of
Pro Rata
Annualized
Rent (%)
  Pro Rata
Annualized
Rent Per Leased
Square Foot
Under
Expiring
Leases ($)(3)
 

Available

        1,432,224     17.3              

2010(4)

    101     458,575     5.5     9,704,001     6.1     21.16  

2011

    152     842,216     10.2     18,022,325     11.4     21.40  

2012

    143     935,687     11.3     23,777,919     15.0     25.41  

2013

    116     593,104     7.2     13,313,347     8.4     22.45  

2014

    88     581,012     7.0     11,782,636     7.4     20.28  

2015

    85     583,649     7.0     11,670,980     7.4     20.00  

2016

    66     953,807     11.5     21,874,862     13.8     22.93  

2017

    26     400,753     4.8     10,334,847     6.5     25.79  

2018

    17     332,072     4.0     10,839,468     6.8     32.64  

2019

    20     326,052     3.9     8,976,607     5.7     27.53  

Thereafter

    36     807,582     9.7     17,953,713     11.3     22.23  

Building Management Use

        45,304     0.5              
                           
 

Total/Weighted Average

    850     8,292,036     100.0     158,250,705     100.0     23.07  
                           

(1)
As of June 30, 2010, our initial portfolio had a weighted-average remaining lease term of 5.0 years, assuming no exercise of early termination rights, and 4.3 years, assuming the exercise of all early termination rights. Leases accounting for approximately 1.4 million square feet in our initial portfolio are subject to early termination rights of tenants. A common feature of our tenant leases is the requirement of tenants to pay certain early termination fees upon the exercise of any early termination rights.

(2)
See page ii for our definition of annualized rent. Pro rata rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were $6,456,757.

(3)
Represents pro rata expiring annualized rent divided by pro rata rentable square footage expiring.

(4)
Includes month-to-month leases.

    Lease Distributions

        The following table sets forth information relating to the distribution of leases in our consolidated portfolio, based on rentable square footage leased as of June 30, 2010.

Square Footage Under Lease
  Number
of
Leases
  Percentage of
Leases(%)
  Leased
Square
Footage
  Percentage
of Leased
Square
Footage(%)
  Annualized
Rent($)(1)
  Percentage of
Annualized
Rent
  Annualized
Rent
Per Leased
Square Foot($)(2)
 

2,500 or less

    184     31.9     230,311     3.4     5,445,831     3.5     23.65  

2,501 - 10,000

    238     41.2     1,234,604     18.2     26,927,416     17.2     21.81  

10,001 - 20,000

    81     14.0     1,157,891     17.1     27,682,588     17.7     23.91  

20,001 - 40,000

    40     6.9     1,152,712     17.0     25,664,406     16.4     22.26  

40,001 - 100,000

    26     4.5     1,496,643     22.1     35,195,737     22.5     23.52  

Greater than 100,000

    8     1.4     1,449,540     21.4     35,321,081     22.6     24.37  

Building Management Use

            50,282     0.7              
                               

Total

    577     100.0     6,771,983     100.0     156,237,058     100.0     23.07  
                               

(1)
See page ii for our definition of annualized rent. Rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were $6,190,841.

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(2)
Represents annualized rent divided by leased square footage, including leases executed but not commenced as of June 30, 2010.

        The following table sets forth information relating to the distribution of leases in our initial portfolio, based on rentable square footage leased as of June 30, 2010.

Square Footage Under Lease
  Number
of
Leases
  Percentage of
Leases(%)
  Pro Rata
Leased
Square
Footage
  Percentage
of Pro Rata
Leased
Square
Footage(%)
  Pro Rata
Annualized
Rent($)(1)
  Percentage of
Pro Rata
Annualized
Rent(%)
  Pro Rata
Annualized
Rent Per
Leased
Square Foot($)(2)
 

2,500 or less

    242     28.5     242,000     3.5     5,701,373     3.6     23.56  

2,501 - 10,000

    376     44.2     1,340,105     19.5     29,029,505     18.3     21.66  

10,001 - 20,000

    131     15.4     1,261,560     18.4     29,917,094     18.9     23.71  

20,001 - 40,000

    52     6.1     1,186,493     17.3     26,494,653     16.7     22.33  

40,001 - 100,000

    38     4.5     1,455,125     21.2     34,812,176     22.0     23.92  

Greater than 100,000

    11     1.3     1,329,225     19.4     32,295,904     20.4     24.30  

Building Management Use

            45,304     0.7              
                               

Total

    850     100.0     6,859,812     100.0     158,250,705     100.0     23.07  
                               

(1)
See page ii for our definition of annualized rent. Pro rata rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were $6,456,757.

(2)
Represents pro rata annualized rent divided by pro rata leased square footage, including leases executed but not commenced as of June 30, 2010.

    Historical Percentage Leased and Annualized Rent

        The following table sets forth the percentage leased and the annualized rent per leased square foot for the properties in our initial portfolio, as a group, in which we owned interests as of the dates indicated.

Date
  Number of
Properties
  Pro Rata Rentable
Square Footage
  Percentage
Leased(%)(1)
  Pro Rata Annualized
Rent Per Leased
Square Foot($)(2)
 

June 30, 2010

    57     8,292,036     82.7     23.07  

December 31, 2009

    56     8,080,572     81.4     22.48  

December 31, 2008

    33     2,293,461     89.8     20.77  

December 31, 2007

    31     2,266,416     91.2     19.86  

(1)
Based on leases signed as of the date indicated, and calculated as leased square footage divided by rentable square footage, expressed as a percentage.

(2)
Represents pro rata annualized rent divided by pro rata leased square footage, including leases executed but not commenced as of the date indicated.

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    Historical Tenant Improvements and Leasing Commissions

        The following table sets forth certain historical information regarding tenant improvement and leasing commission costs per square foot for tenants at the properties in our consolidated portfolio during our period of ownership, as of the dates indicated.

 
  Year Ended December 31,    
   
 
 
  Six Months
Ended
June 30, 2010
  Weighted Average
January 1, 2007 to
June 30, 2010
 
 
  2007(1)   2008   2009(2)  

Renewals(3)

                               
 

Number of leases

    13     20     24     26     24  
 

Square feet

    207,371     223,326     223,232     132,663     224,919  
 

Tenant improvement costs per square foot(4)

    2.30     2.65     0.83     0.50     1.68  
 

Leasing commission costs per square foot(4)

    6.67     3.29     1.67     4.19     3.87  
                       
 

Total tenant improvement and leasing commission costs per square foot(4)

  $ 8.97   $ 5.94   $ 2.49   $ 4.69   $ 5.55  
                       
 

Tenant improvement costs per square foot per year of lease term(4)

    0.41     0.85     0.42     0.12     0.46  
 

Leasing commission costs per square foot per year of lease term(4)

    1.18     1.06     0.85     1.00     1.07  
                       
 

Total tenant improvement and leasing commission costs per square foot per year of lease term(4)

  $ 1.59   $ 1.91   $ 1.28   $ 1.11   $ 1.53  
                       

New leases

                               
 

Number of leases

    14     14     23     32     24  
 

Square feet

    120,674     64,408     119,934     193,380     142,512  
 

Tenant improvement costs per square foot(4)

    19.82     18.37     18.06     12.49     16.36  
 

Leasing commission costs per square foot(4)

    9.37     6.73     6.41     5.23     6.71  
                       
 

Total tenant improvement and leasing commission costs per square foot(4)

  $ 29.19   $ 25.10   $ 24.47   $ 17.72   $ 23.07  
                       
 

Tenant improvement costs per square foot per year of lease term(4)

    2.78     3.45     3.28     2.23     2.77  
 

Leasing commission costs per square foot per year of lease term(4)

    1.31     1.27     1.16     0.93     1.13  
                       
 

Total tenant improvement and leasing commission costs per square foot per year of lease term(4)

  $ 4.09   $ 4.72   $ 4.44   $ 3.17   $ 3.90  
                       

Total

                               
 

Number of leases

    27     34     47     58     48  
 

Square feet

    328,045     287,734     343,166     326,043     367,431  
 

Tenant improvement costs per square foot(4)

    8.74     6.17     6.85     7.61     7.37  
 

Leasing commission costs per square foot(4)

    7.66     4.06     3.32     4.80     4.97  
                       
 

Total tenant improvement and leasing commission costs per square foot(4)

  $ 16.41   $ 10.23   $ 10.17   $ 12.42   $ 12.35  
                       
 

Tenant improvement costs per square foot per year of lease term(4)

    1.41     1.71     2.14     1.51     1.63  
 

Leasing commission costs per square foot per year of lease term(4)

    1.24     1.13     1.04     0.95     1.10  
                       
 

Total tenant improvement and leasing commission costs per square foot per year of lease term(4)

  $ 2.65   $ 2.84   $ 3.18   $ 2.47   $ 2.73  
                       

(1)
Includes three properties acquired in June 2007 (245 Riverside, Overlook I and Overlook II) and two properties acquired in November 2007 (Maitland Park Center and Maitland Forum).

(2)
Includes 17 properties acquired in September 2009 (2400 Maitland Center, 500 Winderley Place, Bank of America Center, The Cornerstone Building at Peachtree Center, Interlachen Corporate Center, Peachtree Harris, Peachtree International, Peachtree Mall, Peachtree Marquis I, Peachtree Marquis II, Peachtree North, Peachtree South, Primera V, Ten 10th Street (Millennium), Two Liberty Place, Two Ravinia Drive and Westshore Corporate Center) and one property acquired in October 2009 (International Plaza Four).

(3)
Represents existing tenants that, upon expiration of their leases, enter into new leases for the same space. Month-to-month leases are not included in renewal statistics.

(4)
Assumes all tenant improvements and leasing commissions that have been spent as of June 30, 2010 are paid in the calendar year in which the leases commenced, which may be different than the year in which they were actually paid.

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        The following table sets forth certain historical information regarding tenant improvement and leasing commission costs per square foot for tenants at the properties in our initial portfolio during our period of ownership, as of the dates indicated.

 
  Year Ended December 31,    
   
 
 
  Six Months
Ended
June 30, 2010
  Weighted Average
January 1, 2007 to
June 30, 2010
 
 
  2007(1)   2008(2)   2009(3)  

Renewals(4)

                               
 

Number of leases

    22     35     55     41     44  
 

Square feet

    133,904     190,756     195,706     156,765     193,620  
 

Tenant improvement costs per square foot(5)

    3.36     4.22     1.30     0.57     2.36  
 

Leasing commission costs per square foot(5)

    4.16     4.49     1.91     4.03     3.57  
                       
 

Total tenant improvement and leasing commission costs per square foot(5)

  $ 7.52   $ 8.70   $ 3.21   $ 4.61   $ 5.93  
                       
 

Tenant improvement costs per square foot per year of lease term(5)

    0.87     1.08     0.58     0.14     0.68  
 

Leasing commission costs per square foot per year of lease term(5)

    1.08     1.15     0.85     0.97     1.03  
                       
 

Total tenant improvement and leasing commission costs per square foot per year of lease term(5)

  $ 1.95   $ 2.23   $ 1.43   $ 1.11   $ 1.71  
                       

New leases

                               
 

Number of leases

    30     51     58     59     57  
 

Square feet

    112,480     94,542     133,812     217,332     159,603  
 

Tenant improvement costs per square foot(5)

    21.85     16.02     17.28     13.50     16.52  
 

Leasing commission costs per square foot(5)

    10.02     5.91     6.40     5.67     6.76  
                       
 

Total tenant improvement and leasing commission costs per square foot(5)

  $ 31.87   $ 21.93   $ 23.69   $ 19.17   $ 23.28  
                       
 

Tenant improvement costs per square foot per year of lease term(5)

    2.75     3.00     3.13     2.39     2.74  
 

Leasing commission costs per square foot per year of lease term(5)

    1.26     1.11     1.16     1.00     1.12  
                       
 

Total tenant improvement and leasing commission costs per square foot per year of lease term(5)

  $ 4.01   $ 4.11   $ 4.29   $ 3.39   $ 3.86  
                       

Total

                               
 

Number of leases

    52     86     113     100     101  
 

Square feet

    246,384     285,298     329,518     374,097     353,222  
 

Tenant improvement costs per square foot(5)

    11.80     8.13     7.79     8.08     8.76  
 

Leasing commission costs per square foot(5)

    6.83     4.96     3.74     4.98     5.01  
                       
 

Total tenant improvement and leasing commission costs per square foot(5)

  $ 18.64   $ 13.08   $ 11.52   $ 13.07   $ 13.77  
                       
 

Tenant improvement costs per square foot per year of lease term(5)

    2.06     1.85     2.18     1.61     1.89  
 

Leasing commission costs per square foot per year of lease term(5)

    1.19     1.13     1.04     0.99     1.08  
                       
 

Total tenant improvement and leasing commission costs per square foot per year of lease term(5)

  $ 3.25   $ 2.99   $ 3.22   $ 2.60   $ 2.97  
                       

(1)
Includes three wholly owned properties acquired in June 2007 (245 Riverside, Overlook I and Overlook II) and two wholly owned properties acquired in November 2007 (Maitland Park Center and Maitland Forum).

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    Includes our pro rata share of the following properties that were acquired in 2007 and will be held through joint ventures following completion of this offering and our formation transactions: Buschwood Park III and One Orlando Centre (May 2007); 100 Windward Plaza, 300 Windward Plaza, 280 Interstate North Office Park, 5660 New Northside Drive, Beckrich One, Beckrich Two, Deerfield Point (2 buildings), Millennia Park One, Southhall Center, Southwood One and Windward Pointe 200 (June 2007); and Parkwood Point (September 2007).

(2)
Includes our pro rata share of the following properties that were acquired in April 2008 and will be held through joint ventures following completion of this offering and our formation transactions: Buschwood Park I and Buschwood Park II.

(3)
Includes 16 wholly owned properties acquired in September 2009 (2400 Maitland Center, 500 Winderley Place, Bank of America Center, The Cornerstone Building at Peachtree Center, Interlachen Corporate Center, Peachtree Harris, Peachtree International, Peachtree Mall, Peachtree Marquis I, Peachtree Marquis II, Peachtree North, Peachtree South, Primera V, Ten 10th Street (Millennium), Two Ravinia Drive and Westshore Corporate Center) and one wholly owned property acquired in October 2009 (International Plaza Four). Includes our pro rata share of the following properties that were acquired in 2009 and will be held through joint ventures following completion of this offering and our formation transactions: Westshore 500 (February 2009) and Two Liberty Place, Irvington One, Irvington Two, Irvington Three and Irvington Four (September 2009).

(4)
Represents existing tenants that, upon expiration of their leases, enter into new leases for the same space. Month-to-month leases are not included in renewal statistics.

(5)
Assumes all tenant improvements and leasing commissions that have been spent as of June 30, 2010 are paid in the calendar year in which the leases commenced, which may be different from the year in which they were actually paid.

    Historical Capital Expenditures

        The following table sets forth certain information regarding recurring capital expenditures at the properties in our consolidated portfolio during our period of ownership, as of the dates indicated.

 
  Year Ended December 31,    
   
 
 
  Six Months
Ended
June 30, 2010
  Weighted Average
January 1, 2007 -
June 30, 2010
 
 
  2007(1)(2)   2008   2009(2)(3)  

Recurring capital expenditures

  $ 357,700   $ 611,513   $ 401,699   $ 103,315        

Total square feet of consolidated properties

    2,200,864     2,200,864     7,829,099     7,829,099        

Recurring capital expenditures per square foot

  $ 0.16   $ 0.28   $ 0.05   $ 0.01   $ 0.07  

(1)
Includes three properties acquired in June 2007 (245 Riverside, Overlook I and Overlook II) and two properties acquired in November 2007 (Maitland Park Center and Maitland Forum).

(2)
Recurring capital expenditures for properties acquired during the period are annualized.

(3)
Includes 17 properties acquired in September 2009 (2400 Maitland Center, 500 Winderley Place, Bank of America Center, The Cornerstone Building at Peachtree Center, Interlachen Corporate Center, Peachtree Harris, Peachtree International, Peachtree Mall, Peachtree Marquis I, Peachtree Marquis II, Peachtree North, Peachtree South, Primera V, Ten 10th Street (Millennium), Two Liberty Place, Two Ravinia Drive and Westshore Corporate Center) and one property acquired in October 2009 (International Plaza Four).

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        The following table sets forth certain information regarding recurring capital expenditures at the properties in our initial portfolio during our period of ownership, as of the dates indicated.

 
  Year Ended December 31,    
   
 
 
  Six Months
Ended
June 30, 2010
  Weighted Average
January 1, 2007 -
June 30, 2010
 
 
  2007(1)(2)   2008(2)(3)   2009(2)(4)  

Pro rata share of recurring capital expenditures

  $ 290,273   $ 681,472   $ 503,866   $ 122,141        

Pro rata share of square feet of properties

    2,265,773     2,300,006     7,986,493     7,986,493        

Recurring capital expenditures per square foot

  $ 0.13   $ 0.30   $ 0.06   $ 0.02   $ 0.08  

(1)
Includes three wholly owned properties acquired in June 2007 (245 Riverside, Overlook I and Overlook II) and two wholly owned properties acquired in November 2007 (Maitland Park Center and Maitland Forum). Includes our pro rata share of the following properties that were acquired in 2007 and will be held through joint ventures following completion of this offering and our formation transactions: Buschwood Park III and One Orlando Centre (May 2007); 100 Windward Plaza, 300 Windward Plaza, 280 Interstate North Office Park, 5660 New Northside Drive, Beckrich One, Beckrich Two, Deerfield Point (2 buildings), Millennia Park One, Southhall Center, Southwood One, and Windward Pointe 200 (June 2007); and Parkwood Point (September 2007).

(2)
Recurring capital expenditures for properties acquired during the period are annualized.

(3)
Includes our pro rata share of the following properties that were acquired in April 2008 and will be held through joint ventures following completion of this offering and our formation transactions: Buschwood Park I and Buschwood Park II.

(4)
Includes 16 wholly owned properties acquired in September 2009 (2400 Maitland Center, 500 Winderley Place, Bank of America Center, The Cornerstone Building at Peachtree Center, Interlachen Corporate Center, Peachtree Harris, Peachtree International, Peachtree Mall, Peachtree Marquis I, Peachtree Marquis II, Peachtree North, Peachtree South, Primera V, Ten 10th Street (Millennium), Two Ravinia Drive and Westshore Corporate Center) and one wholly owned property acquired in October 2009 (International Plaza Four). Includes our pro rata share of the following properties that were acquired in 2009 and will be held through joint ventures following completion of this offering and our formation transactions: Westshore 500 (February 2009) and Two Liberty Place, Irvington One, Irvington Two, Irvington Three and Irvington Four (September 2009).

Significant Properties

        We are presenting additional data below for Two Liberty Place, which is our only property that accounted for 10% or more of our total consolidated assets or 10% or more of our consolidated gross revenues as of, and for the year ended, December 31, 2009, after giving effect to this offering and our formation transactions.

    Two Liberty Place, Philadelphia, Pennsylvania

        Located in historic downtown Philadelphia, Two Liberty Place is a Class A, 57-floor landmark asset with 937,566 rentable square feet of office space. Built in 1990, the building is connected to an upscale shopping mall and a luxury hotel and has direct connection to all mass transit lines in the area. As of June 30, 2010, the office space was 99.4% leased, with annualized rent of approximately $25.3 million and annualized rent per leased square foot of $27.10. The building includes 20 floors of luxury residential condominiums that are owned and managed by a third party in which Messrs. Heistand and

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Touzet collectively have a 1.25% non-managing member interest. We own an 89% interest in Two Liberty Place through a consolidated joint venture and have an option to acquire the remaining 11% interest beginning on the three-year anniversary of the completion of this offering and our formation transactions. See "—Joint Ventures" below. This property currently is managed by a third party pursuant to a management agreement that is terminable by us without penalty on 60 days' notice which right we intend to exercise.

        The following table sets forth certain information regarding the primary tenant of Two Liberty Place as of June 30, 2010.

Primary
Tenant(1)
  Principal
Nature of
Business
  Lease
Expiration
  Renewal
Options
  Date of
Early
Termination
Option
  Leased
Square
Footage
  Percentage
of Property
Leased
Square
Footage
(%)
  Annualized
Rent(2)
  Percentage
of Property
Annualized
Rent
(%)
  Annualized
Rent Per
Leased
Square
Foot($)(3)
 

CIGNA Corp. 

  Finance and Insurance     9/30/2016   3 × 5 years   None     462,682     49.6     12,283,132     48.6     26.55  

(1)
CIGNA Corp. is the only tenant occupying 10% or more of the rentable square footage at Two Liberty Place.

(2)
See page ii for our definition of annualized rent.

(3)
Represents annualized rent divided by leased square footage.

        The following table sets forth the lease expirations at Two Liberty Place as of June 30, 2010, during each of the next ten years and thereafter, assuming no exercise of renewal options or early termination rights.

Year of Lease Expiration(1)
  Number of
Expiring
Leases
  Rentable
Square
Footage
Expiring
  Percentage of
Property
Rentable
Square Footage
(%)
  Expiring
Annualized
Rent($)(2)
  Percentage of
Property
Annualized Rent
(%)
  Annualized Rent
Per Leased
Square Foot
Under Expiring
Leases($)(3)
 

Available

        5,617     0.6              

2010

                         

2011

                         

2012

    2     52,988     5.7     1,325,437     5.2     25.01  

2013

                         

2014

                         

2015

                         

2016

    3     518,023     55.3     13,742,333     54.4     26.53  

2017

    1     26,883     2.9     782,295     3.1     29.10  

2018

    4     51,180     5.5     1,359,506     5.4     26.56  

2019

    3     136,307     14.5     4,003,522     15.9     29.37  

Thereafter

    3     146,568     15.6     4,038,710     16.0     27.56  
                           
 

Total/Weighted Average

    16     937,566     100.0     25,251,804     100.0     27.10  
                           

(1)
As of June 30, 2010, the weighted-average remaining lease term at Two Liberty Place was 7.3 years, assuming no exercise of early termination rights, and 6.5 years, assuming the exercise of all early termination rights. Leases accounting for approximately 163,956 square feet are subject to early termination rights of tenants. A common feature of our tenant leases is the requirement of tenants to pay certain early termination fees upon the exercise of any early termination rights.

(2)
See page ii for our definition of annualized rent.

(3)
Represents expiring annualized rent divided by rentable square footage expiring.

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        The following table sets forth the percentage leased, annualized rent per leased square foot and the average effective annual rent per leased square foot for Two Liberty Place as of the dates indicated.

Date(1)
  Percentage
Leased(%)
  Annualized Rent Per
Leased Square Foot($)
  Average Effective Annual
Rent Per Leased Square
Foot($)(2)
 

June 30, 2010

    99.4     27.10     24.89  

December 31, 2009

    99.1     27.03     24.89  

(1)
Because we did not own this property prior to 2009, we are unable to show data for years prior to 2009.

(2)
Average effective annual rent per leased square foot represents (i) the contractual rent for leases in place as of June 30, 2010, calculated on a straight-line basis, but without regard to tenant improvement allowances and leasing commissions (any non-gross leases have been grossed up to make them equivalent to full-service gross leases), divided by (ii) the net rentable square footage under leases as of the same date.

        Other than recurring capital expenditures, we have no plans with respect to any major renovation, improvement or redevelopment of Two Liberty Place.

        Upon completion of this offering and our formation transactions, Two Liberty Place will not be encumbered with mortgage debt; however, it may be included in the portfolio of properties securing our $       million revolving credit facility.

        The current real estate tax rate for Two Liberty Place is $89.79 per $1,000 of assessed value. The total annual tax for Two Liberty Place for the tax year ending December 31, 2009 is $2,762,796 (at a taxable assessed value of $30,769,280).

        The following table sets forth the following information for Two Liberty Place: (1) federal tax basis upon completion of this offering and our formation transactions, (2) depreciation rate, (3) method of depreciation and (4) life claimed with respect to such property or component thereof for purposes of depreciation.

Property
  Federal Tax Basis   Depreciation Rate   Method(1)   Life Claimed(2)  

Two Liberty Place

  $ 113,759,978   2.56% / 6.67%   Straight-line     39 / 15 years  

(1)
Unless otherwise noted, depreciation method and life claimed for each property and component thereof is determined by reference to the IRS-mandated method for depreciating assets placed into service after 1986, known as the Modified Accelerated Cost Recovery System.

(2)
The first time period reflects the life over which depreciation is claimed for the building and the second time period reflects the life over which depreciation is claimed for the building-related improvements, such as plant and equipment.

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Acquisition Pipeline

    1110 Vermont Avenue

        In connection with this offering and our formation transactions, we plan to expand our portfolio through the acquisition of the 1110 Vermont Avenue property in Washington, D.C. This property is a 305,543 square foot, twelve-story Class A office building located in the desirable midtown submarket within Washington, D.C.'s East End office district. The property was originally built in 1980 and underwent a major interior and façade renovation in 2006-07. The building was approximately 82% leased as of June 30, 2010, and offers highly desirable amenities, including structured parking, a fitness center and ancillary retail and restaurant space.

        In April 2010, we agreed to acquire the property for aggregate consideration of approximately $141.6 million, including estimated closing costs. We intend to use a portion of the net proceeds from this offering to acquire this property. The agreement provides for various customary closing conditions. We currently are pursuing potential third parties to co-invest in the acquisition of this property. If we reach an agreement with such parties, our interest in this property would be held through a joint venture, and our ownership percentage may be significantly reduced. We can provide no assurances that we will be able to acquire this property in a timely manner or at all.

    Others

        The 1110 Vermont Avenue property was sourced through an agreement that we entered into with a local development company in Washington, D.C. See "—Competitive Strengths." We currently are evaluating the other assets covered by this agreement for potential recapitalization opportunities, and other sources have made additional introductions within certain of our markets that may lead to additional acquisitions that are in various stages of review, but none of which are probable. We can provide no assurances that we will enter into an agreement to acquire any such additional properties.

Joint Ventures

        Upon completion of this offering and our formation transactions, we will own interests in ten joint ventures that collectively own 29 properties. Seven of these joint ventures are reflected as equity interests in unconsolidated joint ventures for purposes of our financial statements, and three are

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consolidated for purposes of our financial statements. The following table provides a summary of our joint ventures and the properties owned by those joint ventures.

Joint Venture/Property
  Metropolitan
Area
  Our
Ownership
Percentage
(%)
  Percent
Leased
(%)(1)
  Rentable
Square
Footage
  Pro Rata
Rentable
Square
Footage
  Annualized
Rent($)(2)
  Pro Rata
Annualized
Rent($)
 

Two Liberty Joint Venture(3)

        89.0                                

Two Liberty Place(4)

  Philadelphia, PA           99.4     937,566     834,434     25,251,804     22,474,106  
                                 
 

Two Liberty Joint Venture Subtotal / Weighted Average

              99.4     937,566     834,434     25,251,804     22,474,106  

VFG Joint Venture(5)

       
10.0

(6)
                             

5660 New Northside Drive

  Atlanta, GA           87.9     272,650     27,265     5,124,860     512,486  

300 Windward Plaza

  Atlanta, GA           100.0     203,248     20,325     4,037,816     403,782  

Millennia Park One

  Orlando, FL           92.6     157,291     15,729     3,473,225     347,323  

Deerfield Point (2 buildings)

  Atlanta, GA           81.3     202,619     20,262     3,425,988     342,599  

Parkwood Point

  Atlanta, GA           89.8     219,357     21,936     3,368,442     336,844  

Southhall Center

  Orlando, FL           97.1     159,840     15,984     2,985,346     298,535  

100 Windward Plaza

  Atlanta, GA           100.0     132,250     13,225     2,251,478     225,148  

Windward Pointe 200

  Atlanta, GA           76.3     129,448     12,945     1,947,143     194,714  

280 Interstate North Office Park

  Atlanta, GA           74.7     125,377     12,538     1,640,663     164,066  

Southwood One

  Tallahassee, FL           62.4     89,059     8,906     1,030,949     103,095  

Beckrich One

  Panama City, FL           90.5     33,739     3,374     907,628     90,763  

Beckrich Two

  Panama City, FL           89.6     33,369     3,337     726,574     72,657  
                                 
 

VFG Joint Venture Subtotal / Weighted Average

              87.9     1,758,247     175,825     30,920,112     3,092,011  

Irvington Joint Venture(5)

       
20.0

(7)
                             

Irvington Three

  Washington, D.C.           75.2     217,928     43,586     5,288,394     1,057,679  

Irvington One

  Washington, D.C.           74.8     154,469     30,894     3,838,754     767,751  

Irvington Four

  Washington, D.C.           33.2     224,258     44,852     2,826,624     565,325  

Irvington Two

  Washington, D.C.           50.1     153,866     30,773     2,618,119     523,624  
                                 
 

Irvington Joint Venture Subtotal / Weighted Average

              57.4     750,521     150,104     14,571,890     2,914,378  

Center Point Joint Venture(3)

       
95.0
                               

Center Point (2 buildings)(8)

  Columbia, SC           92.6     154,283     146,569     2,627,752     2,496,365  
                                 
 

Center Point Joint Venture Subtotal / Weighted Average

              92.6     154,283     146,569     2,627,752     2,496,365  

Deerwood Joint Venture(3)

       
25.0
                               

Capital Plaza I and II (2 buildings)

  Jacksonville, FL           82.3     307,856     76,964     4,912,660     1,228,165  

Capital Plaza III

  Jacksonville, FL           80.7     108,774     27,194     1,841,524     460,381  
                                 
 

Deerwood Joint Venture Subtotal / Weighted Average

              81.9     416,630     104,158     6,754,184     1,688,546  

DAV Joint Venture(5)

       
25.0
                               

3720 Davinci Court

  Atlanta, GA           100.0     100,698     25,175     2,126,516     531,629  

3740 Davinci Court

  Atlanta, GA           74.6     100,751     25,188     1,470,738     367,685  

20 Technology Park

  Atlanta, GA           91.4     90,852     22,713     1,391,884     347,971  
                                 
 

DAV Joint Venture Subtotal / Weighted Average

              88.5     292,301     73,075     4,989,138     1,247,284  

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Joint Venture/Property
  Metropolitan
Area
  Our
Ownership
Percentage
(%)
  Percent
Leased
(%)(1)
  Rentable
Square
Footage
  Pro Rata
Rentable
Square
Footage
  Annualized
Rent($)(2)
  Pro Rata
Annualized
Rent($)
 

INW Joint Venture(5)

        30.0 (7)                              

Interstate NW Business Park (4 buildings)

  Atlanta, GA           82.2     283,679     85,104     3,173,440     952,032  
                                 
 

INW Joint Venture Subtotal / Weighted Average

              82.2     283,679     85,104     3,173,440     952,032  

OOC Joint Venture(5)

       
10.0

(7)
                             

One Orlando Centre

  Orlando, FL           92.6     355,783     35,578     8,385,109     838,511  
                                 
 

OOC Joint Venture Subtotal / Weighted Average

              92.6     355,783     35,578     8,385,109     838,511  

BSH Joint Venture(5)

       
20.0

(7)
                             

Buschwood Park III

  Tampa, FL           90.4     77,568     15,514     1,325,958     265,192  

Buschwood Park II

  Tampa, FL           71.2     88,019     17,604     1,221,849     244,370  

Buschwood Park I

  Tampa, FL           52.6     83,147     16,629     984,314     196,863  
                                 
 

BSH Joint Venture Subtotal / Weighted Average

              71.0     248,734     49,747     3,532,121     706,424  

500 WS Joint Venture(5)

       
8.7

(6)(7)
                             

Westshore 500

  Tampa, FL           84.2     129,728     11,280     2,734,098     237,730  
                                 
 

500 WS Joint Venture Subtotal / Weighted Average

              84.2     129,728     11,280     2,734,098     237,730  

Joint Venture Portfolio—Total / Weighted Average

             
90.3
   
5,327,472
   
1,665,873
   
102,939,649
   
36,647,387
 
                                 

(1)
Based on leases signed as of June 30, 2010, and calculated as leased square footage divided by rentable square footage, expressed as a percentage.

(2)
Annualized rent is calculated by multiplying (i) rental payments (defined as base rent plus operating expenses, if payable by the tenant on a monthly basis, before rental abatements and including rental payments related to leases that had been executed but not commenced as of June 30, 2010 in lieu of rental payments under any existing leases for the same space) for the month ended June 30, 2010, by (ii) 12. In instances in which base rents and operating expenses are collected on an annual, semi-annual or quarterly basis, such amounts have been multiplied by a factor of 1, 2 or 4, respectively, to calculate the annualized figure. For triple net or modified gross leases, annualized rent has been converted to a full service gross basis by one of the following methods: (1) when we have access to the operating expenses of the tenant, expenses have been estimated by adding billed expense reimbursements to base rent; or (2) when we do not have access to the operating expenses of the tenant, expenses have been estimated by either (a) applying current BOMA estimated expense standards in markets where BOMA standards have been published or (b) using the expenses of tenants at comparable properties in the market. Rental abatements committed to as of June 30, 2010 for the twelve months ending June 30, 2011 were approximately $345,209.

(3)
Consolidated for purposes of our financial statements.

(4)
We have an option, and our partner has the right to require us, to acquire the remaining 11% interest in this property at a mutually agreed-upon price, at any time on or after the three-year anniversary of this offering and our formation transactions.

(5)
Unconsolidated for purposes of our financial statements.

(6)
If certain returns are achieved, our joint venture partner is entitled to receive amounts in excess of its percentage interest in this joint venture.

(7)
If certain returns are achieved, we are entitled to receive amounts in excess of our percentage interest in this joint venture.

(8)
Approximately 1.4 acres of developable land is adjacent to Center Point. There are no current plans with respect to the improvement or development of this land.

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    Description of Joint Venture Agreements

        We serve as the manager or managing member of each of our ten joint ventures. We do not, however, exercise exclusive control over the joint ventures, as the agreements generally provide our respective partners with the right to consent to certain actions that are not expected to be taken in the ordinary course of the joint venture's business. In addition, most of our joint venture agreements grant both partners a buy-sell right pursuant to which, subject to certain exceptions, either partner may initiate procedures requiring the other partner to choose between selling its interest to the other partner or buying the other partner's interest. Additional information on our joint ventures and the agreements governing those joint ventures is set forth below.

    Two Liberty Joint Venture

        Upon completion of this offering and our formation transactions, we will have an 89% interest in the Two Liberty joint venture, which owns one office property in Philadelphia. At any time on or after the three-year anniversary of this offering and our formation transactions, we have an option, and our partner has the right to require us, to acquire the remaining 11% interest in this property at a mutually agreed-upon price. In the event we cannot agree upon a price, the price will be the fair market value of the interest, as determined by an independent appraiser.

        We will serve as the managing member of the Two Liberty joint venture in charge of its day-to-day operations with the authority to manage and conduct operations and affairs of the joint venture and its subsidiaries. Our partner, URS, will have the right to consent to certain major decisions, including transferring interests in the property, acquiring additional properties, incurring additional debt and taking certain other limited actions not expected to be taken in the ordinary course of business of the joint venture. We cannot be removed as the managing member of this joint venture.

    VFG Joint Venture

        Upon completion of this offering and our formation transactions, we will have a 10% beneficial interest in the VFG joint venture, consisting of a 50% interest in a joint venture with an affiliate of Lehman Brothers, or the Lehman VFG JV, which owns a 20% interest in a joint venture with a large institutional investor, or the VFG Holdings JV. The VFG joint venture indirectly owns 12 office properties located in Atlanta, Orlando, Tallahassee and Panama City, Florida.

        We will serve as the managing member of the Lehman VFG JV and our wholly owned subsidiary will serve as the manager of the VFG Holdings JV, responsible for the day-to-day operations of the respective joint ventures, subject to the consent of the non-managing members with respect to certain major decisions. Major decisions include, among others, transferring interests in the properties, approving an annual business plan and leasing guidelines, and incurring additional debt or modifying the terms of existing debt. Pursuant to the terms of both the Lehman VFG JV and the VFG Holdings JV, the respective managing members can be removed as managing members only for cause. The VFG Holdings JV restricts our ability to acquire properties in the submarkets in which the VFG Holdings JV owns properties, unless our partner elects on behalf of the VFG Holdings JV not to participate in such acquisition.

    Irvington Joint Venture

        Upon completion of this offering and our formation transactions, we will have a 20% interest in the Irvington joint venture, consisting of an 80% interest in an upper-tier joint venture, which owns a 25% interest in a joint venture with URS. The Irvington joint venture owns four office properties located in the Washington, D.C. metropolitan area.

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        We will serve as co-managing member of the upper-tier joint venture with shared responsibility for its day-to-day operations. Certain major decisions require the approval of both managing members but, if a joint decision cannot be reached within ten days, our decision will control. Major decisions include, among others, transferring interests in the properties, approving any budget or business plan, and incurring additional debt or modifying the terms of existing debt. We cannot be removed as a managing member, and we have the right to remove our partner as a managing member under certain circumstances, including if our partner's interest drops below 10%.

        The upper-tier joint venture will serve as the managing member of the lower-tier joint venture responsible for its day-to-day operations, subject to the consent of URS with respect to certain major decisions. Major decisions include, among others, transferring interests in the properties, acquiring additional properties, approving an annual business plan and leasing guidelines, and incurring additional debt or modifying the terms of existing debt. Except in certain limited circumstances, the upper-tier joint venture cannot be removed as the managing member of this joint venture.

    Center Point Joint Venture

        Upon completion of this offering and our formation transactions, we will have a 95% interest in the Center Point joint venture, which owns one office property and an adjacent vacant parcel of land in Columbia, South Carolina.

        We will serve as the managing member of the Center Point joint venture in charge of its day-to-day operations with the authority to manage and conduct operations and affairs of the joint venture and its subsidiaries and to make decisions regarding the joint venture and its subsidiaries. Our partner, an affiliate of Lehman Brothers, has the right to consent to certain major decisions, including transferring interests in the properties, acquiring additional properties, approving an annual business plan, incurring additional debt or modifying the terms of existing debt and taking other actions, or entering into transactions, not in the ordinary course of business of the joint venture. We can be removed as the managing member of this joint venture only for cause.

    Deerwood Joint Venture

        Upon completion of this offering and our formation transactions, we will have a 25% interest in the Deerwood joint venture, which owns two office properties located in Jacksonville.

        We will serve as the manager of the Deerwood joint venture in charge of its day-to-day operations with the overall authority to manage and conduct operations and affairs of the joint venture and its subsidiaries and to make decisions regarding the joint venture and its subsidiaries. No approval of our joint venture partner is required for us to take any action to manage the Deerwood joint venture; however, in connection with certain major decisions, including transferring interests in the properties, acquiring additional properties, appointing or replacing the managing member, incurring additional debt or modifying the terms of existing debt, transfers of interests in the joint venture, and taking other actions or entering into transactions, not in the ordinary course of business of the joint venture, our partner has a put right to sell its interests to us. The price paid pursuant to the exercise of this put right is based on the amount our partner would have received in a fully taxable sale of the property, based on the fair market value of the property as of the exercise date. Our partner in the Deerwood joint venture has no right to remove us as a manager of the Deerwood joint venture. Because our rights with respect to this joint venture provide us with effective control, this joint venture is consolidated for purposes of our financial statements.

    DAV Joint Venture

        Upon completion of this offering and our formation transactions, we will have a 25% interest in the DAV joint venture, which owns three office properties located in Atlanta.

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        We will serve as the managing member of the DAV joint venture responsible for its day-to-day operations, subject to the consent of our partner, an affiliate of Lehman Brothers, with respect to certain major decisions. Major decisions include, among others, approving an annual operating budget and any modifications to the business plan of the joint venture, transferring interests in the properties, acquiring additional properties, and incurring additional debt or modifying the terms of existing debt. We can be removed as a managing member only for cause, which includes if the joint venture has for four consecutive full fiscal quarters earned less than 80% of the net income projected in the approved business plan.

    INW Joint Venture

        Upon completion of this offering and our formation transactions, we will have a 30% interest in the INW joint venture, which owns one office property located in Atlanta.

        Our wholly owned subsidiary will serve as the manager of the INW joint venture responsible for its day-to-day operations, subject to the consent of our partner, a large institutional investor, with respect to certain major decisions. Major decisions include, among others, transferring interests in the property, acquiring additional properties, approving an annual business plan, incurring additional debt or modifying the terms of existing debt and taking other actions, or entering into transactions, not in the ordinary course of business of the joint venture. We can be removed as a manager only for cause. The INW joint venture restricts our ability to acquire properties in the submarket in which the INW joint venture owns properties, unless our partner elects on behalf of the INW joint venture not to participate in such acquisition.

    OOC Joint Venture

        Upon completion of this offering and our formation transactions, we will have a 10% interest in the OOC joint venture, which owns one office property located in Orlando.

        We will serve as the managing member of the OOC joint venture responsible for its day-to-day operations, subject to the consent of our partner, an affiliate of Lehman Brothers, with respect to certain major decisions. Major decisions include, among others, approving an annual operating budget and any modifications to the business plan of the joint venture, transferring interests in the property, acquiring additional properties, and incurring additional debt or modifying the terms of existing debt. We can be removed as a managing member of this joint venture only for cause.

    BSH Joint Venture

        Upon completion of this offering and our formation transactions, we will have a 20% beneficial interest in the BSH joint venture, which owns three office properties located in Tampa.

        We will serve as the managing member of the BSH joint venture responsible for its day-to-day operations, subject to the consent of our partner, an affiliate of a large foreign institutional investor, with respect to certain major decisions. Major decisions include, among others, transferring interests in the properties, acquiring additional properties, approving an annual business plan and leasing plan, and incurring additional debt or modifying the terms of existing debt. We cannot be removed as the managing member of this joint venture.

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    500 WS Joint Venture

        Upon completion of this offering and our formation transactions, we will have an approximately 8.7% beneficial interest in the 500 WS joint venture, which owns one property in Tampa. This joint venture is comprised of an upper-, mid- and lower-tier joint venture. The lower-tier joint venture indirectly owns 100% of the property, the mid-tier joint venture serves as the managing member of the lower-tier joint venture, and the upper-tier joint venture serves as the managing member of the mid-tier joint venture. We will have an approximately 18% interest in the upper-tier joint venture with a partner owned by certain individual investors. The upper-tier joint venture owns a 100% capital interest in the mid-tier joint venture, in which an affiliate of a large foreign institutional investor has a promoted interest. The mid-tier joint venture in turn owns an approximately 48% interest in the lower-tier joint venture, and an affiliate of the same institutional investor that is a partner in the mid-tier joint venture owns the remaining 52%.

        We will serve as the managing member of the upper-tier joint venture, which in turn is the managing member of the mid-tier joint venture, which in turn is the managing member of the lower-tier joint venture. We will be responsible for the day-to-day operations of the joint ventures, subject to the consent of the non-managing members of the upper- and lower-tier joint ventures with respect to certain major decisions. Major decisions include, among others, transferring interests in the property, acquiring additional properties, approving an annual business plan, and incurring additional debt or modifying the terms of existing debt. The non-managing partner of the mid-tier joint venture has no rights with respect to management decisions. Additionally, pursuant to the terms of the lower-tier operating agreement, the managing member can be removed as a managing member only for cause. The managing member of the upper- and mid-tier joint ventures cannot be removed by the non-managing member.

Outstanding Indebtedness

        Upon completion of this offering and our formation transactions, we expect to have approximately $413.4 million of outstanding consolidated indebtedness and approximately $87.8 million of our pro rata share of unconsolidated indebtedness, based on balances outstanding as of June 30, 2010. Our pro rata share of debt subject to variable interest rates was approximately $8.9 million as of June 30, 2010, after taking into account interest rate swap agreements.

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        The following table sets forth certain information as of June 30, 2010 with respect to the indebtedness that we expect to be outstanding upon completion of this offering and our formation transactions. Unless otherwise noted, all of our outstanding indebtedness as of June 30, 2010 requires the payment of only interest prior to maturity.

 
   
   
   
  Outstanding Balance
at June 30, 2010
 
 
  Percentage
Ownership
(%)
  Annual
Interest Rate
  Maturity
Date
 
Property
  Total   Pro Rata Share  

Consolidated Properties

                               

Fixed Rate

                               

Westshore Corporate Center(1)

    100.0     5.79 %   5/1/2015     14,986,870     14,986,870  

Peachtree Center(2)

                               
 

A-Note

    100.0     6.044 %   6/30/2015     140,000,000     140,000,000  
 

B-Note

    100.0     6.044 %(3)   6/30/2015     10,000,000     10,000,000  

Ten 10th Street (Millennium)

                               
 

A-Note(4)

    100.0     6.38 %   1/6/2016     73,070,000     73,070,000  
 

B-Note(5)

    100.0     6.38 %   1/6/2016     7,879,604     7,879,604  

Ten 10th Street (Millennium)—Mezzanine Loan(5)

    100.0     6.38 %   1/6/2016     7,622,282     7,622,282  

Independent Square(6)

    100.0     5.93 %   4/11/2016     85,000,000     85,000,000  

Capital Plaza I and II and Capital Plaza III(7)

    25.0     6.20 %   5/5/2016     40,000,000     10,000,000  

Primera V

    100.0     6.15 %   10/1/2016     26,000,000     26,000,000  

The Cornerstone Building at Peachtree Center(8)

    100.0     6.00 %   4/1/2018     8,849,136     8,849,136  
                             
 

Subtotal

                    $ 413,407,892   $ 383,407,892  
 

Premium / (Discount)

                             

Total—Consolidated Properties

                    $ 413,407,892   $ 383,407,892  

Unconsolidated Properties

                               

Fixed Rate

                               

Interstate NW Business Park

    30.0     5.96 %   10/5/2011     20,300,000     6,090,000  

3720 Davinci Court and 3740 Davinci Court

    25.0     5.95 %   12/5/2011     27,100,000     6,775,000  

20 Technology Park

    25.0     5.95 %   12/5/2011     9,400,000     2,350,000  

Irvington Four

    20.0     6.09 %   7/31/2012     53,189,000     10,637,800  

Parkwood Point

                               
 

A-Note

    10.0     5.50 %(9)   1/1/2013     19,000,000     1,900,000  
 

B-Note

    10.0     0.00 %   1/1/2013     5,000,000     500,000  

Irvington One, Two and Three

    20.0     5.98 %   4/1/2016     133,704,000     26,740,800  

One Orlando Centre

    10.0     5.90 %   5/11/2017     68,250,000     6,825,000  

Buschwood Park III

    20.0     5.84 %   6/11/2017     9,200,000     1,840,000  

100 Windward Plaza and 300 Windward Plaza(10)

    10.0     6.08 %   7/5/2017     47,634,792     4,763,479  

Millennia Park One(10)

    10.0     6.08 %   7/5/2017     27,996,592     2,799,659  

Southhall Center(10)

    10.0     6.08 %   7/5/2017     17,890,061     1,789,006  

Beckrich One and Beckrich Two(10)

    10.0     6.08 %   7/5/2017     12,471,930     1,247,193  

Southwood One

    10.0     6.08 %   7/5/2017     11,956,853     1,195,685  
                             
   

Subtotal (Fixed Rate)

                    $ 463,093,228   $ 75,453,623  

Variable Rate

                               

Buschwood Park I and Buschwood Park II

    20.0     L + 1.65 %(11)   4/22/2011 (12)   14,355,842     2,871,168  

5660 New Northside Drive and 280 Interstate North Office Park

    10.0     L + 1.85 %(13)   7/9/2011     42,800,000 (14)   4,280,000  

Deerfield Point and Windward Pointe 200

    10.0     L + 1.85 %(13)   7/9/2011     38,670,000 (15)   3,867,000  

Westshore 500(16)

    8.7     L + 3.00 %   2/15/2012 (17)   14,924,582     1,297,692  
                             
   

Subtotal (Variable Rate)

                    $ 110,750,424   $ 12,315,861  

Total—Unconsolidated Properties

                   
$

573,843,652
 
$

87,769,484
 
                             

TOTAL—INITIAL PORTFOLIO

                    $ 987,251,544   $ 471,177,376  

(1)
Requires payments of interest and amortization through maturity.

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(2)
Includes Peachtree Marquis I, Peachtree Marquis II, Peachtree Harris, Peachtree International, Peachtree Mall, Peachtree North and Peachtree South, including the parking garages associated with those properties. See "—Outstanding Indebtedness—Description of Certain Indebtedness" below regarding the split into "A/B" note structure at the original maturity date of July 6, 2012.

(3)
Prior to the original maturity date of July 6, 2012, monthly interest-only debt service payments remain due and payable. After July 6, 2012, interest shall accrue but is payable only upon the occurrence of certain limited events. Upon completion of this offering and the formation transactions, the Peachtree Center B-Note will be valued at fair value based on the expected pay-off at maturity. Interest will be charged based on a market interest rate for similar instruments applied to its current fair value. This contingent liability will be adjusted each reporting period to consider changes in the expected payoff. See "—Outstanding Indebtedness—Description of Certain Indebtedness" below.

(4)
Requires interest-only payments through January 6, 2011 after which the loan requires monthly payments of interest and amortization through maturity.

(5)
Requires payments of interest and amortization through maturity.

(6)
Requires interest-only payments through April 11, 2011, after which the loan requires payments of interest and amortization through maturity.

(7)
Requires interest-only payments through May 5, 2011, after which the loan requires payments of interest and amortization through maturity.

(8)
Requires payments of interest and amortization through May 1, 2013. On May 1, 2013, at the sole discretion of the lender, the interest rate may be adjusted or the loan may be declared due and payable in full. Monthly payments after May 1, 2013 are determined by amortizing the then principal balance based on a 30-year amortization schedule at the adjusted interest rate.

(9)
The interest rate is 5.50% per annum from April 16, 2010 through May 1, 2011, 6.75% per annum from May 2, 2011 through May 1, 2012 and 8.00% per annum from May 2, 2012 through the maturity date.

(10)
Requires interest-only payments through July 5, 2012, after which, the loan requires payments of interest and amortization through maturity.

(11)
The borrower entered into an interest rate swap agreement, which effectively fixed the interest rate on $11,000,000 at 5.20% through the stated maturity date. An interest rate of one-month LIBOR + 1.65% (equivalent to an effective interest rate of 2.00% per annum as of June 30, 2010) is due on the balance outstanding in excess of the swapped amount.

(12)
Two one-year extension options are remaining.

(13)
The variable interest rate is based on one-month LIBOR. The effective interest rate was 2.20% per annum as of June 30, 2010.

(14)
The loan balance is allocated as follows: $31,550,000 to 5660 New Northside Drive and $11,250,000 to 280 Interstate North Office Park.

(15)
The loan balance is allocated as follows: $26,365,000 to Deerfield Point and $12,305,000 to Windward Pointe 200.

(16)
Requires payments of interest and amortization through maturity. The borrower entered into an interest rate swap agreement, which effectively fixed the interest rate at 4.925% per annum through the stated maturity date.

(17)
One-year extension option remaining.

Description of Certain Indebtedness

        The following is a summary of certain provisions of the agreements evidencing certain of our material indebtedness and does not purport to be complete and is subject to and qualified in its entirety by reference to the applicable agreements, copies of which are filed as exhibits to the registration statement of which this prospectus is a part.

    Mortgage Loan Secured by Peachtree Center Portfolio

        The properties at Peachtree Center are subject to senior mortgage debt in the principal amount of $207.6 million.

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        Maturity, Interest and Fees.    In connection with this offering and our formation transactions, we have entered into a loan restructuring agreement with Greenwich Capital pursuant to which, at the original maturity date of July 6, 2012, the $207.6 million loan will be split into an "A/B" note structure, with an "A-Note" of $140.0 million and a "B-Note" of $67.6 million. Upon execution of the loan restructuring agreement, members of the property-owning entities deposited $15.0 million into a reserve account for tenant improvements and leasing commissions for the properties. We will reimburse these members for this deposit out of a portion of the net proceeds from this offering. Prior to the original maturity date of July 6, 2012, the loan will bear interest at a rate of 6.044%, and monthly debt service payments on the total debt of $207.6 million shall remain due and payable. Upon the split into an A/B note structure on July 6, 2012, each of the A-Note and the B-Note will have a maturity date of June 30, 2015. The A-Note will bear interest at 6.044% and debt service will be due and payable monthly. The B-Note also will bear interest at 6.044%, but debt service shall be payable only upon the occurrence of a sale or refinancing transaction after January 1, 2015, subject to a payoff equal to a lender- and borrower-approved appraised value of the properties securing the loan.

        Capital Event Payments.    In the event of a sale or other disposition of the properties after July 6, 2012, or in the event of a refinancing transaction after January 1, 2015, the following waterfall of payments will apply: first, the A-Note, including accrued and unpaid interest and any other amounts due under the A-Note, will be repaid in full; second, we will receive payments representing a 10% cumulative annual yield on the $15.0 million reserve account referred to above, after which the entire balance of our reserve account will be fully repaid; third, remaining proceeds will be paid 70% to us and 30% to the lender until the principal amount of the B-Note has been paid in full; and finally, remaining proceeds will be paid 80% to us and 20% to the lender until all B-Note accrued and unpaid interest is repaid. Any remaining proceeds will then be distributed to us. After applying the foregoing waterfall of payments, the entire loan amount shall be deemed satisfied even if any amounts due on the A-Note or B-Note have not been fully repaid.

        Security.    The loan is made to six separate borrower subsidiaries and is secured by a fee and leasehold deed on the Peachtree Center properties (Peachtree Marquis I, Peachtree Marquis II, Peachtree Harris, Peachtree International, Peachtree Mall, Peachtree North, Peachtree South and three parking garages at Peachtree), as well as a security interest in all tangible and intangible property at the properties and an assignment of all leases and rents relating to the properties. The loan is guaranteed by, among others, James R. Heistand, our Executive Chairman, and Rudy Prio Touzet, our President and Chief Executive Officer. We will indemnify Messrs. Heistand and Touzet for any losses incurred by them with respect to these guaranties.

        Prepayment.    The loan may be prepaid in full during the three months prior to July 6, 2012. After July 6, 2012, the loan may not be prepaid pursuant to a refinancing transaction until on or after January 1, 2015. The loan may be prepaid in connection with a sale of the properties securing the loan at any time after July 6, 2012, as long as the sale price is equal to or greater than a lender- and borrower-approved appraised value of the properties securing the loan.

        Events of Default.    The loan agreement contains customary events of default, including, among others, failure to make payments when due, defaults in compliance with the covenants contained in the documents evidencing and securing the loan and bankruptcy or other insolvency events.

    Revolving Credit Facility

        We currently are negotiating the terms of a $         million revolving credit facility that we expect to enter into upon completion of this offering and our formation transactions. There can be no assurance that we will be successful in obtaining such a facility.

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Excluded Assets

        Our executive officers will continue to own various interests in real estate assets that either are under contract or letter of intent to be sold or are otherwise not suitable to be owned by us due to the nature of the properties, which include retail, residential and mining properties and a marina. In addition, members of our senior management team own the following interests in real estate assets which will not be contributed to us in our formation transactions:

    An approximately 4.8% managing member interest in a portfolio of 42 office properties and five land parcels located in Charlotte, Tampa and Jacksonville (which properties will be managed by us). This interest is not being contributed in connection with our formation transactions due to ongoing negotiations to restructure the loan that is secured by those properties.

    An approximately 19.5% managing member interest in an office property located in Tallahassee, Florida (which property will be managed by us). This interest is not being contributed in connection with our formation transactions because the value of the property is less than the mortgage debt that encumbers it.

    An approximately 9.2% and 1.8% managing member interest, respectively, in two office buildings located in Atlanta (which properties will be managed by us). These interests are not being contributed in connection with our formation transactions because the values of the properties are less than the mortgage debt that encumbers them.

    A 19% non-controlling interest in an office property located in Atlanta, which is not being contributed in connection with our formation transactions because of a default under the mortgage loan secured by the property.

    A 40% non-controlling interest in a vacant land parcel in Tampa, which is not being contributed in connection with our formation transactions because development is not a primary component of our business and growth strategy. This parcel currently is being marketed for sale.

    One vacant land parcel in Tampa and one vacant land parcel in Orlando, which are not being contributed in connection with our formation transactions because development is not a primary component of our business and growth strategy. Each of these parcels currently is being marketed for sale.

    A 2% non-controlling interest in a portfolio of six office properties located in Durham, North Carolina, Northern Virginia, Baltimore and Tampa, which is not being contributed in connection with our formation transactions because it is an immaterial non-controlling interest.

    A 1% non-controlling interest in an office property located in Northern Virginia, which is not being contributed in connection with our formation transactions because it is an immaterial non-controlling interest.

        Upon completion of this offering and our formation transactions, we will enter into agreements with the entities controlled by our executive officers that will grant us a right of first offer to acquire all of the foregoing interests if such entities desire to transfer such interests (other than in connection with a sale of the entire property), subject to any existing rights of other parties.

        We do not expect that the foregoing investments will require a material portion of the time of any of our executive officers.

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Regulation

    General

        Our properties are subject to various covenants, laws, ordinances and regulations, including regulations relating to common areas and fire and safety requirements. We believe that each of the properties in our initial portfolio has the necessary permits and approvals to operate its business.

    Americans With Disabilities Act

        Our properties must comply with Title III of the ADA to the extent that such properties are "public accommodations" as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. We believe that the properties in our initial portfolio are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA. However, noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations as appropriate in this respect.

    Environmental Matters

        Under various laws relating to the protection of the environment, a current or previous owner or operator (including tenants) of real estate may be liable for contamination resulting from the presence or discharge of hazardous or toxic substances at that property, and may be required to investigate and clean up such contamination at that property or emanating from that property. These costs could be substantial and liability under these laws may attach without regard to whether the owner or operator knew of, or was responsible for, the presence of the contaminants, and the liability may be joint and several. The presence of contamination or the failure to remediate contamination at our properties may expose us to third-party liability or materially adversely affect our ability to sell, lease or develop the real estate or to borrow using the real estate as collateral.

        Some of our properties contain asbestos-containing building materials. The asbestos is appropriately contained, in accordance with current environmental regulations, and we have no current plans to remove the asbestos. Environmental laws require that owners or operators of buildings with asbestos-containing building materials properly manage and maintain these materials, adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators for failure to comply with these requirements. In addition, these laws may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos-containing building materials.

        Some of our properties may contain or develop harmful mold or suffer from other adverse conditions, which could lead to liability for adverse health effects and costs of remediation. The presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected property or increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants, employees of our tenants and others if property damage or health concerns arise.

        All of our properties are subject to a Phase I or similar environmental assessment by independent environmental consultants at the time of acquisition or shortly after acquisition. The purpose of Phase I assessments is to identify the presence or likely presence of environmental contamination on the

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property. Phase I assessments include a review of historical documents regarding the property, a public records review, a site visit to the property and preparation and issuance of a written report. Phase I assessments do not typically include subsurface investigations nor evaluate environmental compliance concerns or building conditions, such as the condition of asbestos containing materials.

        Some of our tenants may handle regulated substances and wastes as part of their operations at our properties. Environmental laws regulate the handling, use, and disposal of these materials and subject our tenants, and potentially us, to liability resulting from non-compliance with these requirements. The properties in our portfolio also are subject to various federal, state, and local health and safety requirements, such as state and local fire requirements. If we or our tenants fail to comply with these various requirements, we might incur governmental fines or private damage awards. Moreover, we do not know whether existing requirements will change or whether future requirements will require us to make significant unanticipated expenditures that will materially adversely impact our financial condition, results of operations, cash flows, cash available for distribution to shareholders, the market price of our common shares, and our ability to satisfy our debt service obligations. We typically require our tenants to comply with applicable environmental requirements and to indemnify us for any related liabilities caused by a tenant's noncompliance. If our tenants become subject to liability for noncompliance, it could affect their ability to make rental payments to us.

Insurance

        Upon completion of this offering and our formation transactions, we will carry comprehensive general liability, fire, extended coverage, business interruption, rental loss coverage and umbrella liability coverage on all of our properties and earthquake, wind, flood and hurricane coverage on properties in areas where such coverage is warranted, with limits of liability that we deem adequate. Similarly, we will be insured against the risk of direct physical damage in amounts we believe to be adequate to reimburse us, on a replacement basis, for costs incurred to repair or rebuild each property, including loss of rental income during the reconstruction period. We will select policy specifications and insured limits which we believe to be appropriate given the relative risk of loss, the cost of the coverage and industry practice. We will not carry insurance for generally uninsured losses such as loss from riots, war or acts of God. In the opinion of our management, the properties in our initial portfolio will be adequately insured upon completion of this offering and our formation transactions.

Competition

        We compete with a number of developers, owners and operators of office and commercial real estate, many of which own properties similar to ours in the same markets in which our properties are located and some of which have greater financial resources and access to capital than we do. In operating and managing our portfolio, we compete for tenants based on a number of factors, including location, rental rates, security, flexibility and expertise to design space to meet prospective tenants' needs and the manner in which the property is operated, maintained and marketed. As leases at our properties expire, we may encounter significant competition to renew or re-let space in light of the large number of competing properties within the markets in which we operate. As a result, we may be required to provide rent concessions or abatements, incur charges for tenant improvements and grant other inducements, including early termination rights or below-market renewal options, or we may not be able to timely lease vacant space. In that case, our financial condition, liquidity, results of operations and FFO and the market price of our common shares and our ability to satisfy our debt service obligations and to make distributions to you may be materially and adversely affected.

        We also face competition when pursuing acquisition and disposition opportunities. Our competitors may be able to pay higher property acquisition prices, may have private access to opportunities not available to us and otherwise may be in a better position to acquire a property. Competition also may have the effect of reducing the number of suitable acquisition opportunities available to us, increase the

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price required to consummate an acquisition opportunity and generally reduce the demand for commercial office space in our markets. Likewise, competition with sellers of similar properties to locate suitable purchasers may result in us receiving lower proceeds from a sale or in us not being able to dispose of a property at a time of our choosing due to the lack of an acceptable return.

Property Management

        We are a fully integrated real estate company with in-house asset management, property management and leasing capabilities. In addition to providing these services for our consolidated and unconsolidated properties, we will provide the same services for certain properties in which members of our senior management team have an interest but that will not be contributed to us as part of our formation transactions. See "—Excluded Assets." We do not expect to provide asset management, property management, leasing or other services for third parties, although we may pursue a build-to-suit opportunity in which the tenant would retain a 100% interest in the building on a selected basis from time to time.

        While we maintain our principal office in Orlando, Florida, upon completion of this offering or shortly thereafter, we expect to operate property management offices as set forth below.

Office Location
  Number of
Employees
  Total Number
of Properties Managed
by Respective Office
  Number of Managed
Properties To Be
Owned by Us
 

Atlanta

    58     23     21  

Orlando

    25     10     10  

Jacksonville

    21     11     4  

Tampa

    16     23     10  

Charlotte

    13     22      

Philadelphia(1)

    8     1     1  

Washington, D.C. 

    6     5     5  

Other

    6     7     6  
               

Total

    153 (2)   102     57  

(1)
This property currently is managed by a third party pursuant to a management agreement that is terminable by us without penalty on 60 days' notice, which right we intend to exercise.

(2)
Does not include corporate-level employees in Jacksonville and Orlando.

Employees

        As of June 30, 2010, we had approximately 175 employees.

Legal Proceedings

        From time to time, we are subject to various lawsuits, claims and other legal and administrative proceedings that arise in the ordinary course of our business. We are not currently a party, as plaintiff or defendant, to any legal proceedings that we believe to be material or which, individually or in the aggregate, would be expected to have a material adverse effect on our business, financial condition, liquidity, results of operation or FFO if determined adversely to us.

Corporate Information

        Our principal executive office is located at 390 N. Orange Avenue, Suite 2400, Orlando, Florida 32801. Our telephone number is (407) 650-0593. Our website is                        . The information contained on, or otherwise accessible through, our website does not constitute a part of this prospectus. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website.

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MANAGEMENT

Our Trustees, Trustee Nominees, Executive Officers and Key Employees

        Upon completion of this offering, our board of trustees will consist of seven members, a majority of whom are independent within the meaning of the corporate governance listing standards of the NYSE. Pursuant to our organizational documents, each of our trustees is elected by our shareholders to serve until the next annual meeting of our shareholders and until his or her successor is duly elected and qualifies. Our bylaws provide that a majority of the entire board of trustees may at any time increase or decrease the number of trustees. However, unless our declaration of trust and bylaws are amended, the number of trustees may never be less than the minimum number required under Maryland law nor more than 15.

        The following table sets forth certain information concerning our executive officers and trustees and certain other key employees upon completion of this offering:

Name
  Age   Position

James R. Heistand

    58   Executive Chairman of the Board of Trustees

Rudy Prio Touzet

    51   President, Chief Executive Officer and Trustee

Henry F. Pratt, III

    50   Chief Operating Officer

David O'Reilly

    36   Chief Financial Officer

Scott Francis

    34   Chief Accounting Officer

        Trustee Nominee*

        Trustee Nominee*

        Trustee Nominee*

        Trustee Nominee*

        Trustee Nominee*

*
Independent within the meaning of the NYSE listing standards.

Biographical Summaries of Executive Officers and Trustees

        James R. Heistand will serve as the Executive Chairman of our board of trustees. Prior to the formation of our company, Mr. Heistand founded Eola Capital in 2000 and has served as its chairman since its inception. Previously Mr. Heistand served as chairman of the executive committee of DASCO, an owner and operator of medical office buildings throughout the United States, from 1999 until its sale in 2004. In 1989, he founded and served as chairman of ACP, where he directed all areas of the company's operations, including its strategic planning, acquisitions, development and financings, until its sale in 1997 to Highwoods, a publicly traded REIT (NYSE:HIW). Mr. Heistand subsequently served as a senior vice president for Highwoods from 1997 to 1999 and as a member of its board of directors from 1998 until 2000. Prior to founding ACP, Mr. Heistand served as the president of Major Development Corporation, a subsidiary of Major Realty Corporation, formerly a publicly held, full-service commercial, residential and industrial development company. Mr. Heistand currently serves on the board of directors of United Legacy Bank in Orlando, Florida and is a member of the chairman's circle of the real estate advisory board for the Warrington College of Business Administration at the University of Florida. Mr. Heistand graduated from the University of Florida with a B.S. in Real Estate Finance. Our board of trustees determined that Mr. Heistand should serve as a trustee based on his extensive knowledge of our company and his experience in the real estate industry.

        Rudy Prio Touzet will serve as our President and Chief Executive Officer and as a member of our board of trustees. Prior to the formation of our company, Mr. Touzet served as chief executive officer of Eola Capital since September 2009. In 2007, Mr. Touzet founded Banyan Street Holdings, LLC to

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invest in real estate-related assets, including non-performing debt. In 1998, he co-founded AmCP and served as its president until 2007, during which time the company invested and operated approximately 13.8 million square feet of office properties, with a value of approximately $1.9 billion, throughout the Southeastern and mid-Atlantic United States in joint ventures with domestic and international investors. In 1997, Mr. Touzet joined ACP and served as its executive vice president until its sale to Highwoods, where he served as the head of Highwoods South Florida operations until leaving to form AmCP in 1998. From 1981 until 1997, Mr. Touzet was employed by Cushman & Wakefield, where he held a number of positions, including Managing Director, Florida Area, from 1994 to 1997. Mr. Touzet graduated from the University of Miami with a B.B.A. in International Finance and Marketing. Our board of trustees determined that Mr. Touzet should serve as a trustee based on his extensive knowledge of our company and his experience in the real estate industry.

        Henry F. Pratt, III will serve as our Chief Operating Officer. Prior to the formation of our company, Mr. Pratt served as chief operating officer of Eola Capital since 2000 and also as its president since June 2009, where he directed all facets of its property operations, including asset and property management, marketing, leasing, tenant improvements and building renovation projects. In 1997, Mr. Pratt joined ACP as director of operations and held this position after the sale to Highwoods until 2000. Prior to joining ACP, Mr. Pratt was the building operations manager for LaSalle Partners Limited Partnership from 1996 to 1997. From 1980 to 1996, Mr. Pratt was the director of operations for Independent Insurance Group, where he was responsible for a staff of over 60 employees and the company's approximately three million square foot office portfolio that included more than 100 buildings located throughout the Southeastern United States. Mr. Pratt is a member of NAIOP—the Commercial Real Estate Development Association and BOMA.

        David O'Reilly will serve as our Chief Financial Officer. Prior to the formation of our company, Mr. O'Reilly served as the director of capital markets for Eola Capital since August 2009, where he helped direct the strategic vision of the company, including its expansion into markets in the mid-Atlantic United States. Mr. O'Reilly also was responsible for sourcing both debt and equity capital at the entity and property level for Eola Capital. Prior to joining Eola Capital, Mr. O'Reilly was a senior vice president in the real estate investment banking group at Barclays Capital Inc. from September 2008 to June 2009. From 2001 to September 2008, Mr. O'Reilly was in the real estate investment banking group at Lehman Brothers, where he advised on REIT and real estate-related transactions and held a number of positions, including most recently senior vice president. Mr. O'Reilly received a B.S. in Civil Engineering from Tufts University and an M.B.A. from Columbia University.

        Scott Francis will serve as our Chief Accounting Officer. Prior to the formation of our company, Mr. Francis served as the chief financial officer for Eola Capital since 2005, where he was responsible for managing all financial and tax reporting for the company and its joint ventures and oversaw risk management, human resources and information technology. Prior to joining Eola Capital, Mr. Francis served as the director of finance for Insurance Office of America, the ninth largest private insurance agency in the United States, from 2004 to 2005, where he was responsible for managing all financial and tax reporting for the company and its 12 subsidiaries. From 1998 to 2004, Mr. Francis worked in public accounting as a tax manager for primarily middle-market companies, focusing primarily in construction and real estate. He received a B.S. in Accounting from the University of Florida and is a licensed Certified Public Accountant and a member of the Florida Institute of Certified Public Accountants.

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Corporate Governance Profile

        We have structured our corporate governance in a manner we believe closely aligns our interests with those of our shareholders. Notable features of our corporate governance structure include the following:

    our board of trustees is not staggered, with each of our trustees subject to re-election annually;

    of the seven persons who will serve on our board of trustees, five, or 71.4%, of our trustees, have been determined by us to be independent for purposes of the NYSE's corporate governance listing standards and Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act;

    we anticipate that at least one of our trustees will qualify as an "audit committee financial expert" as defined by the SEC;

    we have opted out of the business combination and control share acquisition statutes in the MGCL; and

    we do not have a shareholder rights plan.

        Our trustees will stay informed about our business by attending meetings of our board of trustees and its committees and through supplemental reports and communications. Our independent trustees will meet regularly in executive sessions without the presence of our corporate officers or non-independent trustees.

Role of Our Board in Risk Oversight

        One of the key functions of our board of trustees will be informed oversight of our risk management process. Our board of trustees will administer this oversight function directly, with support from its three standing committees, our audit committee, our nominating and corporate governance committee and our compensation committee, each of which will address risks specific to their respective areas of oversight. For example, our audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. Our audit committee also will monitor compliance with legal and regulatory requirements and oversee the performance of our internal audit function. Our nominating and corporate governance committee will monitor the effectiveness of our corporate governance guidelines, including whether they are successful in preventing illegal or improper liability-creating conduct. Our compensation committee will assess and monitor whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.

        Our board of trustees and its standing committees also will hear reports from the members of management responsible for the matters considered in order to enable our board of trustees and each committee to understand and discuss risk identification and risk management.

Board Committees

        Upon completion of this offering, our board of trustees will establish three standing committees: an audit committee, a compensation committee, and a nominating and corporate governance committee. The principal functions of each of these committees, which will consist solely of independent trustees, are briefly described below. Our board of trustees may from time to time establish other committees to facilitate our management.

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Audit Committee

        Upon completion of this offering, our audit committee will be comprised of                ,                 and                . We expect that the chairman of our audit committee will qualify as an "audit committee financial expert" as that term is defined by the applicable SEC regulations and NYSE corporate governance listing standards. We expect that our board of trustees will determine that each audit committee member is "financially literate" as that term is defined by the NYSE corporate governance listing standards. Prior to completion of this offering, we expect to adopt an audit committee charter, which will detail the principal functions of our audit committee, including oversight related to:

    our accounting and financial reporting processes;

    the integrity of our consolidated financial statements and financial reporting process;

    our systems of disclosure controls and procedures and internal control over financial reporting;

    our compliance with financial, legal and regulatory requirements;

    the evaluation of the qualifications, independence and performance of our independent registered public accounting firm;

    the performance of our internal audit function; and

    our overall risk profile.

        Our audit committee also will be responsible for engaging an independent registered public accounting firm, reviewing with the independent registered public accounting firm the plans and results of the audit engagement, approving professional services provided by the independent registered public accounting firm, including all audit and non-audit services, reviewing the independence of the independent registered public accounting firm, considering the range of audit and non-audit fees and reviewing the adequacy of our internal accounting controls. Our audit committee also will prepare the audit committee report required by SEC regulations to be included in our annual proxy statement.

Compensation Committee

        Upon completion of this offering, our compensation committee will be comprised of                ,                 and                . Prior to completion of this offering, we expect to adopt a compensation committee charter, which will detail the principal functions of our compensation committee, including:

    reviewing and approving on an annual basis the corporate goals and objectives relevant to our chief executive officer's compensation, evaluating our chief executive officer's performance in light of such goals and objectives and determining and approving the remuneration of our chief executive officer based on such evaluation;

    reviewing and approving the compensation of all of our other officers;

    reviewing our executive compensation policies and plans;

    implementing and administering our incentive and equity-based compensation plans;

    determining the number of shares underlying, and the terms of, stock option and restricted share awards to be granted to our trustees, executive officers and other employees pursuant to these plans;

    assisting management in complying with our proxy statement and annual report disclosure requirements;

    producing a report on executive compensation to be included in our annual proxy statement; and

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    reviewing, evaluating and recommending changes, if appropriate, to the remuneration for trustees.

Nominating and Corporate Governance Committee

        Upon completion of this offering, our nominating and corporate governance committee will be comprised of                ,                 and                . Prior to completion of this offering, we expect to adopt a nominating and corporate governance committee charter, which will detail the principal functions of our compensation committee, including:

    identifying and recommending to the full board of trustees qualified candidates for election as trustees and recommending nominees for election as trustees at the annual meeting of shareholders;

    developing and recommending to our board of trustees corporate governance guidelines and implementing and monitoring such guidelines;

    reviewing and making recommendations on matters involving the general operation of our board of trustees, including board size and composition, and committee composition and structure;

    recommending to our board of trustees nominees for each committee of our board of trustees;

    annually facilitating the assessment of our board of trustees' performance as a whole and of the individual trustees, as required by applicable law, regulations and the NYSE corporate governance listing standards; and

    overseeing our board of trustees' evaluation of management.

Code of Business Conduct and Ethics

        Upon completion of this offering, our board of trustees will adopt a code of business conduct and ethics that applies to our trustees and executive officers and other employees. Among other matters, our code of business conduct and ethics will be designed to deter wrongdoing and to promote:

    honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

    full, fair, accurate, timely and understandable disclosure in our SEC reports and other public communications;

    compliance with applicable governmental laws, rules and regulations;

    prompt internal reporting of violations of the code to appropriate persons identified in the code; and

    accountability for adherence to the code.

        Any waiver of the code of business conduct and ethics for our executive officers or trustees will require approval by a majority of our independent trustees, and any such waiver will require prompt disclosure as required by law or NYSE regulations.

Executive Compensation

    Compensation Discussion and Analysis

        We believe that the primary goal of executive compensation is to align the interests of our executive officers with those of our shareholders in a way that allows us to attract and retain the best executive talent. Our board of trustees has not yet formed our compensation committee. Accordingly, we have not adopted compensation policies with respect to, among other things, setting base salaries,

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awarding bonuses or making future grants of equity awards to our executive officers. We anticipate that our compensation committee, once formed, will design a compensation program that rewards, among other things, favorable shareholder returns, share appreciation, our company's competitive position within our segment of the real estate industry and each executive officer's long-term career contributions to our company. We expect that compensation incentives designed to further these goals will take the form of annual cash compensation and equity awards, and long-term cash and equity incentives measured by performance targets to be established by our compensation committee. In addition, our compensation committee may determine to make awards to new executive officers in order to attract talented professionals to serve us. We will pay base salaries and annual bonuses and expect to make grants of restricted share units under our equity incentive plan to certain of our executive officers, effective upon completion of this offering, in accordance with their employment agreements. These awards under our equity incentive plan will be granted to recognize such individuals' efforts on our behalf in connection with our formation and this offering and to provide a retention element to their compensation. Our "named executive officers" during 2010 are expected to be James R. Heistand, our Executive Chairman; Rudy Prio Touzet, our President and Chief Executive Officer; Henry F. Pratt, III, our Chief Operating Officer; and David O'Reilly, our Chief Financial Officer.

    Elements of Executive Officer Compensation

        The following is a summary of the elements of and amounts expected to be paid under our compensation plans for fiscal year 2010 to our executive officers. Because we were only recently formed, meaningful individual compensation information is not available for prior periods. In addition, no compensation will be paid by us in 2010 to our executive officers until completion of this offering.

        The anticipated annualized 2010 compensation for each of our executive officers listed in the table below was determined based on a review of publicly disclosed compensation packages of executives of other public real estate companies and other information provided to us by The Schonbraun McCann Group LLP, our compensation consultant. Our executive officers will enter into employment agreements upon completion of this offering and will continue to be parties to such employment agreements for their respective terms or until such time as our compensation committee determines in its discretion that revisions to such employment agreements are advisable and our company and the executive officer agree to the proposed revisions.

        Annual Base Salary.    Base salary will be designed to compensate our executive officers at a fixed level of compensation that serves as a retention tool throughout the executive's career. In determining base salaries, we expect that our compensation committee will consider each executive's role and responsibility, unique skills, future potential with our company, salary levels for similar positions in our core markets and internal pay equity.

        Annual Cash Bonus.    Annual cash bonuses will be designed to incentivize our executive officers at a variable level of compensation based on the performance of both our company and such individual. In connection with our annual cash bonus program, we expect that our compensation committee will determine annual performance criteria that are flexible and that change with the needs of our business. Our annual cash bonus plan will be designed to reward the achievement of specific, pre-established financial and operational objectives.

        Equity Awards.    We will provide equity awards pursuant to our equity incentive plan. Equity awards will be designed to focus our executive officers on and reward them for achieving our long-term goals and enhancing shareholder value. In determining equity awards, we anticipate that our compensation committee will take into account our company's overall financial performance. The awards expected to be made under our equity incentive plan in 2010 will be granted to recognize such

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individuals' efforts on our behalf in connection with our formation and this offering, and to provide a retention element to their compensation.

        Retirement Savings Opportunities.    All eligible employees will be able to participate in a 401(k) Retirement Savings Plan, or 401(k) plan. We intend to provide this plan to help our employees save some amount of their cash compensation for retirement in a tax efficient manner. Under the 401(k) plan, employees will be eligible to defer a portion of their salary, and we, at our discretion, may make a matching contribution and/or a profit sharing contribution. We do not currently intend to provide an option for our employees to invest in our shares through the 401(k) plan.

        Health and Welfare Benefits.    We intend to provide to all full-time employees a competitive benefits package, which is expected to include health and welfare benefits, such as medical, dental, disability insurance, and life insurance benefits. The plans under which these benefits will be offered are not expected to discriminate in scope, terms or operation in favor of officers and will be available to all full-time employees.

    Summary Compensation Table

        The following table sets forth on an annualized basis for 2010 the annual base salary and other compensation expected to be payable to each of our named executive officers as of the completion of this offering. We will enter into an employment agreement with each of our named executive officers that will take effect upon completion of this offering. See "—Executive Compensation—Employment Agreements."

Name and Principal Position
  Year   Salary ($)   Target
Bonus ($)(1)
  Stock
Awards ($)
  Option
Awards ($)
  Non-Equity
Incentive Plan
Compensation
($)
  All Other
Compensation
($)
  Total ($)

James R. Heistand
Executive Chairman

    2010                            

Rudy Prio Touzet
President and Chief Executive Officer

   
2010
                           

Henry F. Pratt, III
Chief Operating Officer

   
2010
                           

David O'Reilly
Chief Financial Officer

   
2010
                           

(1)
Bonuses for 2010 will be awarded by our compensation committee after the end of the 2010 fiscal year based on a combination of individual and corporate performance.

    IPO Grants of Plan-Based Awards

 
   
   
   
   
   
   
   
   
  All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
   
   
 
   
  Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
  Estimated Future Payouts
Under Equity Incentive
Plan Awards
  All Other
Stock
Awards:
Number of
Shares
or Units
(#)
  Exercise
or Base
Price of
Option
Awards
($/Sh)
  Grant Date
Fair Value
of Stock and
Option
Awards
($)
Name
  Grant
Date
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
($)
  Target
($)
  Maximum
($)

James R. Heistand

    (1)                                        

Rudy Prio Touzet

    (1)                                        

Henry F. Pratt, III

    (1)                                        

David O'Reilly

    (1)                                        

(1)
Each of these awards is expected to be issued upon completion of this offering.

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    Narrative Discussion of IPO Grants of Plan-Based Awards

        In addition to base salary, annual bonus and non-equity incentive compensation, certain of our executive officers and trustees will be entitled to receive additional long-term equity incentive compensation designed to reward the individual's contribution to our formation and initial public offering, as well as provide an additional retention element for the recipient. Upon completion of this offering, each of our named executive officers will be granted restricted share units, all subject to vesting requirements. Our non-employee trustees will also be granted restricted share units, all subject to vesting requirements.

        Notwithstanding the vesting requirements of the restricted share units, all long-term equity incentive compensation awards will vest upon the death or disability of the executive officer or, for awards other than stock options that are not intended to qualify as performance based awards under Section 162(m) of the Internal Revenue Code, if the executive officer's employment is terminated by us without cause, by the executive officer for good reason or by the executive officer following a change in our control.

    Equity Incentive Plan

        Prior to completion of this offering, our board of trustees will adopt, and our shareholder will approve, our 2010 Equity Incentive Plan, or our equity incentive plan, for the purpose of attracting and retaining non-employee trustees, executive officers and other key employees and service providers, including officers, employees and service providers of our subsidiaries and affiliates, and to stimulate their efforts toward our continued success, long-term growth and profitability. Our equity incentive plan provides for the grant of options to purchase our common shares, share awards (including restricted common shares and restricted share units), share appreciation rights, performance shares, performance units and other equity-based awards, including long-term incentive plan, or LTIP, units, which are convertible on a one-for-one basis with OP units in our operating partnership. We have reserved a total of            common shares for issuance pursuant to our equity incentive plan, subject to certain adjustments set forth in our equity incentive plan. Each LTIP unit issued under our equity incentive plan will count as one common share for purposes of calculating the limit on common shares that may be issued under our equity incentive plan. This summary is qualified in its entirety by the detailed provisions of our equity incentive plan, which is filed as an exhibit to the registration statement of which this prospectus is a part.

        Section 162(m) of the Internal Revenue Code limits publicly held companies to an annual deduction for U.S. federal income tax purposes of $1,000,000 for compensation paid to each of their chief executive officer and their three highest compensated executive officers (other than the chief executive officer or the chief financial officer) determined at the end of each year, referred to as covered employees. However, performance-based compensation is excluded from this limitation. Our equity incentive plan is designed to permit our compensation committee to grant awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m), but it is not required under our equity incentive plan that awards qualify for this exception. Our equity incentive plan provides that no participant in the plan will be permitted to acquire, or will have any right to acquire, common shares thereunder if such acquisition would be prohibited by the share ownership limits contained in our declaration of trust or would impair our status as a REIT.

        Administration of our Equity Incentive Plan.    Our equity incentive plan will be administered by our compensation committee, and our compensation committee will determine all terms of awards under our equity incentive plan. Our compensation committee will also determine who will receive awards under our equity incentive plan, the type of award and its terms and conditions and the number of common shares subject to the award, if the award is equity-based. Our compensation committee will also interpret the provisions of our equity incentive plan. During any period of time in which we do not

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have a compensation committee, our equity incentive plan will be administered by our board of trustees or another committee appointed by our board of trustees. References below to our compensation committee include a reference to our board of trustees or another committee appointed by our board of trustees for those periods in which our board of trustees or such other committee appointed by our board of trustees is acting.

        Eligibility.    All of our employees and the employees of our subsidiaries and affiliates, including our operating partnership, are eligible to receive awards under our equity incentive plan. In addition, our non-employee trustees and consultants and advisors who perform services for us and our subsidiaries and affiliates may receive awards under our equity incentive plan, other than incentive stock options. Each member of our compensation committee that administers our equity incentive plan will be both a "non-employee director" within the meaning of Rule 16b-3 of the Exchange Act, and an "outside director" within the meaning of Section 162(m) of the Internal Revenue Code.

        Share Authorization.    The number of common shares that may be issued under our equity incentive plan, consisting of authorized but unissued shares, is equal to            . In connection with stock splits, distributions, recapitalizations and certain other events, our board will make proportionate adjustments that it deems appropriate in the aggregate number of common shares that may be issued under our equity incentive plan and the terms of outstanding awards. If any options or share appreciation rights terminate, expire or are canceled, forfeited, exchanged or surrendered without having been exercised or paid or if any stock awards, performance shares, performance units or other equity-based awards are forfeited or expire or otherwise terminate without the delivery of any common shares or are settled in cash, the common shares subject to such awards will again be available for purposes of our equity incentive plan.

        The maximum number of common shares subject to options or share appreciation rights that can be issued under our equity incentive plan to any person is            common shares in any single calendar year (or            common shares in the year that the person is first employed). The maximum number of common shares that can be issued under our equity incentive plan to any person other than pursuant to an option or share appreciation right is            common shares in any single calendar year (or            common shares in the year that the person is first employed). The maximum amount that may be earned as an annual incentive award or other cash award in any calendar year by any one person is            (or             in the year that the person is first employed) and the maximum amount that may be earned as a performance award or other cash award in respect of a performance period by any one person is            (or            for a performance period beginning with or immediately after the year that the person is first employed).

        No awards under our equity incentive plan were outstanding prior to completion of this offering. The initial awards described above under "—Executive Compensation—IPO Grants of Plan-Based Awards" will become effective upon completion of this offering.

        Options.    Our equity incentive plan authorizes our compensation committee to grant incentive stock options (under Section 421 of the Internal Revenue Code) and options that do not qualify as incentive stock options. The exercise price of each option will be determined by our compensation committee, provided that the price cannot be less than 100% of the fair market value of the common shares on the date on which the option is granted. If we were to grant incentive stock options to any 10% shareholder, the exercise price may not be less than 110% of the fair market value of our common shares on the date of grant.

        The term of an option cannot exceed ten years from the date of grant. If we were to grant incentive stock options to any 10% shareholder, the term cannot exceed five years from the date of grant. Our compensation committee determines at what time or times each option may be exercised and the period of time, if any, after retirement, death, disability or termination of employment during

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which options may be exercised. Options may be made exercisable in installments. The exercisability of options may be accelerated by our compensation committee. The exercise price of an option may not be amended or modified after the grant of the option, and an option may not be surrendered in consideration of or exchanged for a grant of a new option having an exercise price below that of the option which was surrendered or exchanged without shareholder approval.

        The exercise price for any option or the purchase price for restricted common shares is generally payable (i) in cash or cash equivalents, (ii) to the extent the award agreement provides, by the surrender of common shares (or attestation of ownership of common shares) with an aggregate fair market value on the date on which the option is exercised, or common shares are purchased, of the exercise or purchase price, or (iii) with respect to an option only, to the extent the award agreement provides, by payment through a broker in accordance with procedures established by the Federal Reserve Board.

        Share Awards.    Our equity incentive plan also provides for the grant of share awards (which includes restricted common shares and share units). A share award is an award of common shares that may be subject to restrictions on transferability and other restrictions as our compensation committee determines in its sole discretion on the date of grant. The restrictions, if any, may lapse over a specified period of time or through the satisfaction of conditions, in installments or otherwise, as our compensation committee may determine. A participant who receives restricted common shares will have all of the rights of a shareholder as to those shares, including, without limitation, the right to vote and the right to receive dividends or distributions on the shares, except that our board of trustees may require any dividends to be reinvested in shares. A participant who receives share units will have no such rights. During the period, if any, when share awards are non-transferable or forfeitable, a participant is prohibited from selling, transferring, assigning, pledging, exchanging, hypothecating or otherwise encumbering or disposing of his or her award shares.

        Share Appreciation Rights.    Our equity incentive plan authorizes our compensation committee to grant share appreciation rights that provide the recipient with the right to receive, upon exercise of the share appreciation right, cash, common shares or a combination of the two. The amount that the recipient will receive upon exercise of the share appreciation right generally will equal the excess of the fair market value of our common shares on the date of exercise over the fair market value of our common shares on the date of grant. Share appreciation rights will become exercisable in accordance with terms determined by our compensation committee. Share appreciation rights may be granted in tandem with an option grant or independently from an option grant. The term of a share appreciation right cannot exceed ten years from the date of grant.

        Performance Units.    Our equity incentive plan also authorizes our compensation committee to grant performance units. Performance units represent the participant's right to receive a compensation amount, based on the value of the common shares, if performance goals established by our compensation committee are met. Our compensation committee will determine the applicable performance period, the performance goals and such other conditions that apply to the performance unit. Performance goals may relate to our financial performance or the financial performance of our operating units, the participant's performance or such other criteria determined by our compensation committee. If the performance goals are met, performance units will be paid in cash, common shares or a combination thereof.

        Bonuses.    Cash performance bonuses payable under our equity incentive plan may be based on the attainment of performance goals that are established by our compensation committee and relate to one or more performance criteria described in our equity incentive plan. Cash performance bonuses must be based upon objectively determinable bonus formulas established in accordance with our equity incentive plan.

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        Dividend Equivalents.    Our compensation committee may grant dividend equivalents in connection with the grant of any equity-based award. Dividend equivalents may be paid currently or accrued as contingent cash obligations and may be payable in cash, common shares or a combination of the two. Our compensation committee will determine the terms of any dividend equivalents.

        Other Equity-Based Awards.    Our compensation committee may grant other types of share-based awards under our equity incentive plan, including LTIP units (which are described below). Other equity-based awards are payable in cash, common shares or other equity, or a combination thereof, and may be restricted or unrestricted, as determined by our compensation committee. The terms and conditions that apply to other equity-based awards are determined by our compensation committee.

        LTIP units are a special class of OP units in our operating partnership. Each LTIP unit awarded under our equity incentive plan will be equivalent to an award of one common share under our equity incentive plan, reducing the number of common shares available for other equity awards on a one-for-one basis. We will not receive a tax deduction with respect to the grant, vesting or conversion of any LTIP unit. The vesting period for any LTIP units, if any, will be determined at the time of issuance. Each LTIP unit, whether vested or not, will receive the same quarterly per unit profit distribution as the other outstanding OP units in our operating partnership, which profit distribution will generally equal the per share distribution on a common share. This treatment with respect to quarterly distributions is similar to the expected treatment of our share awards, which will receive full distributions whether vested or not. Initially, each LTIP unit will have a capital account of zero and, therefore, the holder of the LTIP unit would receive nothing if our operating partnership were liquidated immediately after the LTIP unit is awarded. However, the partnership agreement of our operating partnership requires that "book gain" or economic appreciation in our assets realized by our operating partnership, whether as a result of an actual asset sale or upon the revaluation of our assets, as permitted by applicable regulations promulgated by the U.S. Treasury Department, or Treasury Regulations, be allocated first to LTIP units until the capital account per LTIP unit is equal to the capital account per unit of our operating partnership. The applicable Treasury Regulations provide that assets of our operating partnership may be revalued upon specified events, including upon additional capital contributions by us or other partners of our operating partnership. Upon equalization of the capital account of the LTIP unit with the per unit capital account of the OP units and full vesting of the LTIP unit, the LTIP unit will be convertible into an OP unit at any time. There is a risk that a LTIP unit will never become convertible because of insufficient gain realization to equalize capital accounts and, therefore, the value that a grantee will realize for a given number of vested LTIP units may be less than the value of an equal number of common shares. See "Description of the Partnership Agreement of Eola Property Trust, L.P." for a further description of the rights of limited partners in our operating partnership.

        Change in Control.    If we experience a change in control in which outstanding options, share appreciation rights, share awards, performance shares, performance units or other equity-based awards that are not exercised prior to the change in control will not be assumed or continued by the surviving entity: (i) all restricted common shares will vest, and all share units will vest and the underlying common shares will be delivered immediately before the change in control, and (ii) at our board of trustees' discretion either all options and share appreciation rights will become exercisable 15 days before the change in control and terminate upon the consummation of the change in control, or all options, share appreciation rights, restricted common shares and share units will be cashed out before the change in control. In the case of performance shares, if more than half of the performance period has lapsed, the performance shares will be converted into restricted common shares based on actual performance to date. If less than half of the performance period has lapsed, or if actual performance is not determinable, the performance shares will be converted into restricted common shares assuming target performance has been achieved.

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        In summary, a change in control under our equity incentive plan occurs if:

    a person, entity or affiliated group (with certain exceptions) acquires, in a transaction or series of transactions, more than      % of the total combined voting power of our outstanding securities;

    we experience a reorganization, merger, consolidation or sale or other disposition of all or substantially all of our assets, unless (i) the holders of our voting shares immediately prior to the merger have at least      % of the combined voting power of the securities in the surviving entity or its parent in substantially the same proportions as before the transaction, (ii) no person owns      % or more of the shares of the surviving entity unless such ownership existed before the transaction, and (iii) at least a majority of the members of the board of the surviving entity were members of the incumbent board when the transaction was approved;

    we are liquidated or dissolved; or

    individuals who, when our equity incentive plan is adopted, constitute our board of trustees cease for any reason to constitute a majority of our board of trustees, treating any individual whose election or nomination was approved by a majority of the incumbent trustees as an incumbent trustee for this purpose.

        Amendment; Termination.    Our board of trustees may amend, suspend or terminate our equity incentive plan at any time; provided that no amendment, suspension or termination may adversely impair the benefits of participants with outstanding awards without the participants' consent. Our shareholders must approve any amendment if such approval is required under applicable law or stock exchange requirements. Our shareholders also must approve any amendment that changes the no-repricing provisions of our equity incentive plan. Unless terminated sooner by our board of trustees or extended with shareholder approval, our equity incentive plan will terminate on the tenth anniversary of the adoption of the plan.

    Employment Agreements

        We will enter into an employment agreement with each of our executive officers that will take effect upon completion of this offering. The employment agreements will be for a            -year term with automatic one-year renewals.

        Our employment agreement with Mr. Heistand will provide for a base salary of $            and a grant of $            of restricted share units, with the actual number of restricted share units to be determined based on the initial public offering price of our common shares.

        Our employment agreement with Mr. Touzet will provide for a base salary of $        and a grant of $        of restricted share units, with the actual number of restricted share units to be determined based on the initial public offering price of our common shares.

        Our employment agreement with Mr. Pratt will provide for a base salary of $        and a grant of $        of restricted share units, with the actual number of restricted share units to be determined based on the initial public offering price of our common shares.

        Our employment agreement with Mr. O'Reilly will provide for a base salary of $        and a grant of $        of restricted share units, with the actual number of restricted share units to be determined based on the initial public offering price of our common shares.

        Each of our executive officers will be eligible to receive a cash bonus, subject to determination by our compensation committee.

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        Upon termination of any of our executive officers, other than as a result of a termination for cause, or a resignation without good reason, death or disability, as those terms are defined in their employment agreements, each executive will, upon execution of a release acceptable to us, be eligible to receive, in addition to any compensation earned but not paid through the date of termination, the following benefits:

    a lump sum cash payment equal to            times the sum of (A) the executive's then current base salary and (B) the average of the two highest annual cash bonuses, if any, paid or approved for payment to the executive during the preceding three completed performance years, or if the executive has not been employed for at least three completed performance years, the target bonus for the year of termination; and

    the right to continued participation by the executive and his spouse and dependent children in our group health plans on the same terms as before the termination through the end of the COBRA continuation period.

        The employment agreements define good reason, being a basis for termination by the employee of his employment agreement that allows for payment of the benefits listed above, to include a material diminution in the individual's authority or certain similar events following a change in control of our company. For purposes of the employment agreements, "change in control" is defined the same way as it is in our equity incentive plan.

        We will also enter into a non-competition agreement with each of our executive officers. This agreement will provide for a non-compete period that is the longer of either the             -year period beginning as of the date of the non-competition agreement or the period of the executive's service with us plus an additional one-year period.

Trustee Compensation

        We intend to approve and implement a compensation program for our non-employee trustees, including each of the independent trustee nominees, that consists of annual retainer fees and long-term equity awards. Each non-employee trustee will receive an annual base fee for his or her services of $        , payable in quarterly installments in conjunction with quarterly meetings of our board of trustees and an annual award of            restricted share units, which will vest on the one-year anniversary of the date of grant, subject to the trustee's continued service on our board of trustees. In addition, each non-employee trustee who serves on the audit, compensation and nominating and corporate governance committees will receive an annual cash retainer of $        , $        and $        , respectively, and the chairs of the audit, compensation and nominating and corporate governance committees will receive an additional annual cash retainer of $        , $        and $        , respectively. We also will reimburse each of our trustees for his or her travel expenses incurred in connection with his or her attendance at full board of trustees and committee meetings. We have not made any payments to any of our trustees or trustee nominees to date.

        Concurrently with the completion of this offering, we will grant $        of restricted share units to each of our trustee nominees, pursuant to our equity incentive plan. These awards of restricted share units will vest ratably and annually over a        -year vesting period, subject to the trustee's continued service on our board of trustees.

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Limitation of Liability and Indemnification

        We intend to enter into indemnification agreements with each of our executive officers and trustees that will obligate us to indemnify them to the maximum extent permitted by Maryland law. The form of indemnification agreement provides that:

    if a trustee or executive officer is a party or is threatened to be made a party to any proceeding by reason of such trustee's or executive officer's status as our trustee, officer or employee, we must indemnify such trustee or executive officer for all expenses and liabilities actually and reasonably incurred by him or her, or on his or her behalf, unless it has been established that:

    the act or omission of the trustee or executive officer was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty;

    the trustee or executive officer actually received an improper personal benefit in money, property or services; or

    with respect to any criminal action or proceeding, the trustee or executive officer had reasonable cause to believe that his or her conduct was unlawful;

provided, however, that we will (i) have no obligation to indemnify such trustee or executive officer for a proceeding by or in the right of our company, for expenses and liabilities actually and reasonably incurred by him or her, or on his or her behalf, if it has been adjudged that such trustee or executive officer is liable to us with respect to such proceeding and (ii) have no obligation to indemnify or advance expenses of such trustee or executive officer for a proceeding brought by such trustee or executive officer against our company, except for a proceeding brought to enforce indemnification under Section 2-418 of the MGCL or as otherwise provided by our bylaws, our declaration of trust, a resolution of our board of trustees or an agreement approved by our board of trustees. Under the MGCL, a Maryland corporation may not indemnify a trustee or officer in a suit by or in the right of the corporation in which the director or officer was adjudged liable on the basis that a personal benefit was improperly received.

        Upon application by one of our trustees or executive officers to a court of appropriate jurisdiction, the court may order indemnification of such trustee or executive officer if:

    the court determines that such trustee or executive officer is entitled to indemnification under Section 2-418(d)(1) of the MGCL, in which case the trustee or executive officer shall be entitled to recover from us the expenses of securing such indemnification; or

    the court determines that such trustee or executive officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the trustee or executive officer has met the standards of conduct set forth in Section 2-418(b) of the MGCL or has been adjudged liable for receipt of an "improper personal benefit" under Section 2-418(c) of the MGCL; provided, however, that our indemnification obligations to such trustee or executive officer will be limited to the expenses actually and reasonably incurred by him or her, or on his or her behalf, in connection with any proceeding by us or in our right or in which the officer or trustee shall have been adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL.

        Notwithstanding, and without limiting, any other provisions of the indemnification agreements, if a trustee or executive officer is a party or is threatened to be made a party to any proceeding by reason of such trustee's or executive officer's status as our trustee, officer or employee, and such trustee or executive officer is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such proceeding, we must indemnify such trustee or executive officer for all expenses actually and reasonably incurred by him or her, or on his or her behalf, in connection with

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each successfully resolved claim, issue or matter, including any claim, issue or matter in such a proceeding that is terminated by dismissal, with or without prejudice.

        We must pay all indemnifiable expenses in advance of the final disposition of any proceeding if the trustee or executive officer furnishes us with a written affirmation of the trustee's or executive officer's good faith belief that the standard of conduct necessary for indemnification by us has been met and a written undertaking to reimburse us if a court of competent jurisdiction determines that the trustee or executive officer is not entitled to indemnification.

        Our declaration of trust and bylaws obligate us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (1) any present or former trustee or officer (including any individual who, at our request, serves or has served as a director, officer, partner, trustee, employee or agent of another real estate investment trust, corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise) against any claim or liability to which he or she may become subject by reason of service in such capacity and (2) any present or former trustee or officer who has been successful in the defense of a proceeding to which he or she was made a party by reason of service in such capacity. Our declaration of trust and bylaws also permit us, with the approval of our board of trustees, to indemnify and advance expenses to any person who served a predecessor of ours in any of the capacities described above and to any employee or agent of our company or a predecessor of our company.

Rule 10b5-1 Sales Plans

        Our trustees and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell our common shares on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the trustee or officer when entering into the plan, without further direction from them. The trustee or officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our trustees and executive officers also may buy or sell additional common shares outside a Rule 10b5-1 plan when they are not in possession of material nonpublic information subject to compliance with the terms of our insider trading policy. Prior to the 180-day anniversary of the date of this prospectus (subject to potential extension or early termination), the sale of any common shares under such plan would be subject to the lock-up agreement that the trustee or officer has entered into with the underwriters.

Compensation Committee Interlocks and Insider Participation

        Upon completion of this offering and our formation transactions, we do not anticipate that any of our executive officers will serve as a member of a board of trustees or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our board of trustees or compensation committee.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Formation Transactions

        Prior to or concurrently with the completion of this offering, we will engage in our formation transactions in order to, among other things, consolidate our asset management, property management, leasing, acquisition and related businesses and to consolidate the ownership of the properties in our initial portfolio into our operating partnership and one or more subsidiaries. In connection with our formation transactions, we have entered into a contribution agreement, or the Eola contribution agreement, with certain of our executive officers and/or their related entities and other individuals or entities that are affiliated with Eola Capital, which we refer to as the Eola contributors. Pursuant to the Eola contribution agreement, the Eola contributors will contribute all of their interests in our properties to our operating partnership in exchange for OP units and common shares. We have entered into separate contribution agreements with other individuals and entities to acquire the remaining interests in the properties in our initial portfolio for cash, OP units and/or common shares. In addition, Eola Capital is a party to a merger agreement with a newly formed subsidiary of our operating partnership, pursuant to which Eola Capital, and its related asset management, property management and leasing businesses will be merged with and into our subsidiary, and the members of Eola Capital, including certain of our executive officers and/or their affiliates, will receive OP units as consideration. In connection with our formation transactions, certain of our executive officers, trustees and 5% shareholders will receive material benefits. See "Structure and Formation of Our Company—Formation Transactions."

        In September 2009, in connection with the acquisition of interests in AmCP, James Heistand, our Executive Chairman, and Rudy Prio Touzet, our President and Chief Executive Officer, executed promissory notes in favor of Eola Capital in the current principal amounts of approximately $1,606,000 and $864,000, respectively. The notes had an interest rate of the greater of LIBOR + 3.75% or 5.75% per annum and had a maturity date of September 2014. Effective as of September 30, 2010, these notes were retired.

Partnership Agreement

        Upon completion of this offering, we will enter into the partnership agreement of our operating partnership with the various persons receiving OP units in our formation transactions, including our executive officers. Pursuant to the partnership agreement, persons holding OP units as a result of our formation transactions will have the right beginning one year after the completion of this offering to cause our operating partnership to redeem each of their OP units for cash equal to the then-current market value of one common share (determined in accordance with and subject to adjustment under the partnership agreement), or, at our election, common shares on a one-for-one basis, subject to adjustment under certain circumstances and to the restrictions on ownership and transfer of our common shares set forth in our declaration of trust and described under the section entitled "Description of Shares—Restrictions on Ownership and Transfer." See "Description of the Partnership Agreement of Eola Property Trust, L.P."

Employment and Noncompetition Agreements

        We will enter into an employment agreement and a noncompetition agreement with each of our executive officers that will be effective upon completion of this offering. The employment agreements provide for base salary, bonus and other benefits, including accelerated vesting of equity awards upon a change in control of us or termination of the executive's employment under certain circumstances. See "Management—Executive Compensation—Employment Agreements."

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Indemnification Agreements for Officers and Trustees

        We intend to enter into indemnification agreements with our trustees and executive officers that will be effective upon completion of this offering. These indemnification agreements will provide indemnifications to these persons by us to the maximum extent permitted by Maryland law and certain procedures for indemnification, including advancement by us of certain expenses relating to claims brought against these persons under certain circumstances. See "Management—Limitation of Liability and Indemnification."

Registration Rights Agreement

        We will enter into a registration rights agreement with the various persons receiving our common shares and/or OP units in connection with our formation transactions, including our executive officers. See "Shares Eligible for Future Sale—Registration Rights Agreement."

Right of First Offer Agreements

        Upon completion of this offering and our formation transactions, we will enter into agreements with entities controlled by our executive officers that will grant us a right of first offer to acquire all their interests in certain assets that are not being contributed in connection with our formation transactions, if such entities desire to transfer such interests (other than in connection with a sale of the entire property), subject to any existing rights of other parties. See "Business and Properties—Excluded Assets."

Contributor Indemnity Agreement

        We expect to cause any personal guaranties that were previously made by certain members of our senior management team in connection with mortgage loans secured by the properties and other assets being contributed to us to be released by the lenders concurrently with the completion of this offering. If we are unsuccessful in obtaining any such release, we will enter into a contributor indemnity agreement with such members of our senior management team pursuant to which we will indemnify each of them with respect to any loss incurred to the lender pursuant to such guaranty.

Other Contracts with Affiliates

    Management Agreements

        In connection with our formation transactions, we will assume certain management agreements pursuant to which we will provide property management and construction management services for certain properties that are not being contributed in connection with our formation transactions and in which certain of our executive officers will retain an interest. See "Business and Properties—Excluded Assets." Pursuant to these agreements, we will receive property management fees of 3% to 4% of the monthly gross receipts from the operations of the properties and construction management fees of 5% to 10% of the total aggregate cost of the project. The agreements are scheduled to expire between 2011 and 2015, and some agreements contain four automatic one-year renewal options. Decisions regarding termination or amendment of the management agreements will require the approval of a majority of the independent members of our board of trustees.

    Leasing Agreements

        In connection with our formation transactions, we will assume certain leasing agreements pursuant to which we will act as the leasing agent for certain properties that are not being contributed in connection with our formation transactions and in which certain of our executive officers will retain an interest. See "Business and Properties—Excluded Assets." As the leasing agent for these properties, we

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will receive leasing commissions of 2% to 4% of the gross rent to be received for the term of the lease, depending on the type of the lease. The agreements are scheduled to expire between 2011 and 2015, and some agreements contain four automatic one-year renewal options. Decisions regarding termination or amendment of the leasing agreements will require the approval of a majority of the independent members of our board of trustees.

    CP Aviation, LLC

        We will enter into a lease with CP Aviation, LLC, or CP Aviation, which will continue to be owned by certain members of our senior management team upon completion of this offering, providing us the right to use an airplane owned by CP Aviation in exchange for our payment of certain hourly operating costs and taxes associated with our use of this airplane. Decisions regarding termination or amendment of the leasing agreement will require the approval of a majority of the independent members of our board of trustees.


INVESTMENT POLICIES AND POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

        The following is a discussion of certain of our investment, financing and other policies. These policies have been determined by our board of trustees and, in general, may be amended or revised from time to time by our board of trustees without a vote of our shareholders. However, any change to any of these policies would be made by our board of trustees only after a review and analysis of that change, in light of then-existing business and other circumstances, and then only if our trustees believe, in the exercise of their business judgment, that it is advisable to do so and in our and our shareholders' best interests.

Investment Policies

    Investments in Real Estate or Interests in Real Estate

        We will conduct substantially all of our investment activities through our operating partnership and its subsidiaries. Our policy is to acquire assets primarily for current income generation. Our investment objectives are to maximize the cash flow of our properties, acquire properties with cash flow growth potential, provide quarterly cash distributions and achieve long-term capital appreciation for our shareholders through increases in the value of our company. We have not established a specific policy regarding the relative priority of these investment objectives. For a discussion of our initial portfolio and our business and growth strategies, see "Business and Properties."

        We expect to pursue our investment objectives primarily through the ownership by our operating partnership of our existing properties and other acquired properties and assets. We currently intend to invest primarily in office properties and to focus on office properties in those areas in which we currently operate and to strategically select new markets when opportunities are available that meet our investment criteria. However, future investment activities will not be limited to any geographic area, property type or to a specified percentage of our assets. While we may diversify in terms of property locations, size and market, we do not have any limit on the amount or percentage of our assets that may be invested in any one property or any one geographic area. We intend to engage in such future investment activities in a manner that is consistent with our qualification as a REIT for U.S. federal income tax purposes. In addition, we may purchase or lease income-producing office or other types of properties for long-term investment, expand and improve the properties we presently own or other acquired properties, or sell such properties, in whole or in part, when circumstances warrant.

        We also intend to participate with third parties in property ownership, through joint ventures or other types of co-ownership. These types of investments permit us to own interests in larger assets without unduly restricting our diversification and, therefore, enhance our flexibility to structure our

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portfolio. We will not, however, enter into a joint venture or other partnership arrangement to make an investment that would not otherwise meet our investment policies.

        Equity investments in acquired properties may be subject to existing mortgage financing and other indebtedness or to new indebtedness, which may be incurred in connection with acquiring or refinancing these properties. Debt service on such financing or indebtedness will have a priority over any dividends with respect to our common shares. Investments also are subject to our policy not to be treated as an "investment company" under the 1940 Act.

    Investments in Real Estate Mortgages

        While our initial portfolio consists of, and our business objectives emphasize, equity investments in office properties, we may, at the discretion of our board of trustees and without a vote of our shareholders, invest in mortgages and other types of real estate interests in a manner that is consistent with our qualification as a REIT. We do not presently intend to invest in mortgages or deeds of trust, but may invest in participating or convertible mortgages if we conclude that we may benefit from the gross revenues or any appreciation in value of the property. If we choose to invest in mortgages, we would expect to invest in mortgages secured by office properties. However, there is no restriction on the proportion of our assets that may be invested in a type of mortgage or any single mortgage or type of mortgage loan. Investments in real estate mortgages run the risk that one or more borrowers may default under the mortgages and that the collateral securing those mortgages may not be sufficient to enable us to recoup our full investment.

    Investments in Securities of or Interests in Persons Primarily Engaged in Real Estate Activities and Other Issuers

        We may invest in the securities of other issuers in connection with acquisitions of indirect interests in properties (normally general or limited partnership interests in special purpose partnerships owning properties). We may offer equity or debt securities in exchange for property or to repurchase or otherwise reacquire our common shares. Subject to the percentage of ownership limitations and gross income tests necessary for REIT qualification, we may in the future invest in preferred equity, mezzanine and other structured debt investments, debt securities of other REITs, other entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities. We do not intend for our investments in securities to require us to register as an investment company under the 1940 Act, and we intend to divest such securities before any such registration would be required.

    Investment in Other Securities

        Other than as described above, we do not intend to invest in any additional securities such as bonds, preferred shares or common shares.

    Dispositions

        We currently do not intend to dispose of any of our properties. However, we will consider dispositions of properties that we may acquire in the future, subject to REIT qualification requirements and the prohibited transaction rules applicable to REITs, if our senior management team determines that a sale of a property would be in our best interest based on current and expected future market conditions, growth prospects for the property, the price being offered for the property, the historical and projected future operating performance of the property, the tax consequences of the sale and other factors and circumstances surrounding the proposed sale. Certain trustees and executive officers who hold OP units may have their decision as to the desirability of a proposed disposition influenced by the tax consequences to them resulting from the disposition of a certain property.

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Financing and Leverage Policies

        We anticipate using a number of different sources to finance our acquisitions and operations, including cash flows from operations, asset sales, seller financing, issuance of debt securities, private financings (such as additional bank credit facilities, which may or may not be secured by our assets), property-level mortgage debt, common or preferred equity issuances or any combination of these sources, to the extent available to us, or other sources that may become available from time to time. Any debt that we incur may be recourse or non-recourse and may be secured or unsecured. We also may take advantage of additional joint venture or other partnering opportunities as such opportunities arise in order to acquire properties that would otherwise be unavailable to us. We may use the proceeds of our borrowings to acquire our target assets, to refinance existing debt or for general corporate purposes.

        We expect to use leverage conservatively, assessing the appropriateness of new equity or debt capital based on market conditions, including realistic assumptions regarding future cash flow, the creditworthiness of tenants and future rental rates, with the ultimate objective of becoming an issuer of investment grade debt. Our declaration of trust and bylaws do not limit the amount or percentage of debt that we may incur. Although our board of trustees has not adopted a policy limiting the total amount of debt that we may incur, we intend upon full deployment of the net proceeds from this offering and utilization of our credit facility to target a ratio of our pro rata share of net debt to EBITDA of       to      . Our board of trustees will consider a number of factors in evaluating the amount of debt that we may incur. Our board of trustees may from time to time modify its views regarding the appropriate amount of debt financing in light of then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general conditions in the credit and capital markets, fluctuations in the market price of our common shares, growth and acquisition opportunities and other factors. Our decision to use leverage in the future to finance our assets will be at our discretion and will not be subject to the approval of our shareholders.

Lending Policies

        We do not have a policy limiting our ability to make loans to other persons. We may consider offering purchase money financing in connection with the sale of properties where the provision of that financing will increase the value to be received by us for the property sold. We also may make loans to joint ventures in which we participate. However, we do not intend to engage in significant lending activities. Any loan we make will be consistent with maintaining our status as a REIT.

Equity Capital Policies

        To the extent that our board of trustees determines to obtain additional capital, we may issue debt or equity securities, including additional OP units and senior securities, retain earnings (subject to provisions in the Internal Revenue Code requiring distributions of income to maintain REIT qualification) or pursue a combination of these methods. As long as our operating partnership is in existence, the proceeds of all equity capital raised by us will be contributed to our operating partnership in exchange for additional OP units, which will dilute the ownership interests of the limited partners in our operating partnership.

        Existing shareholders will have no preemptive right to our common shares or preferred shares or OP units issued in any securities offering by us, and any such issuance might cause a dilution of a shareholder's investment in us. We may in the future issue our common shares or OP units in connection with acquisitions of property.

        We may, under certain circumstances, purchase our common shares or other securities in the open market or in private transactions with our shareholders, provided that those purchases are approved by our board of trustees. Our board of trustees has no present intention of causing us to repurchase any

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of our common shares or other securities, and any such action would only be taken in conformity with applicable federal and state laws and the applicable requirements for qualification as a REIT.

Conflict of Interest Policies

        Overview.    Conflicts of interest could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our operating partnership or any partner thereof, on the other. Our trustees and officers have duties to our company and our shareholders under applicable Maryland law in connection with their management of our company. At the same time, we, as general partner, have fiduciary duties and obligations to our operating partnership and to its limited partners under Delaware law and the partnership agreement of our operating partnership in connection with the management of our operating partnership. Our duties as general partner to our operating partnership and its partners may come into conflict with the duties of our trustees and officers to our company and our shareholders.

        Unless otherwise provided for in the relevant partnership agreement, Delaware law generally requires a general partner of a Delaware limited partnership to adhere to fiduciary duty standards under which it owes its limited partners the highest duties of good faith, fairness and loyalty and which generally prohibit such general partner from taking any action or engaging in any transaction as to which it has a conflict of interest.

        The partnership agreement of our operating partnership provides that the provisions limiting our liability, as the general partner, to our operating partnership and the limited partners act as an express limitation of any fiduciary or other duties that we would otherwise owe our operating partnership and the limited partners. The provisions of Delaware law that allow the common law fiduciary duties of a general partner to be modified by a partnership agreement have not been resolved in a court of law, and we have not obtained an opinion of counsel covering the provisions set forth in the partnership agreement that purport to waive or restrict our fiduciary duties that would be in effect under common law were it not for the partnership agreement.

        The partnership agreement of our operating partnership expressly limits our liability by providing that neither we, as the general partner of our operating partnership, nor any of our trustees or officers, will be liable or accountable in damages to our operating partnership, the limited partners or assignees for errors in judgment, mistakes of fact or law or for any act or omission if we, or such trustee or officer, acted in good faith. In addition, our operating partnership is required to indemnify us, and our officers, trustees, employees, agents and designees to the fullest extent permitted by applicable law from and against any and all claims arising from operations of our operating partnership, unless it is established that (1) the act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, (2) the indemnified party actually received an improper personal benefit in money, property or services or (3) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that the act or omission was unlawful.

        Policies Applicable to All Trustees and Officers.    We intend to adopt certain policies that are designed to eliminate or minimize certain potential conflicts of interest, including a policy for the review, approval or ratification of any related party transactions. We will adopt a code of business conduct and ethics that prohibits conflicts of interest between us on the one hand, and our employees, officers and trustees on the other hand, unless such transactions are approved by a majority of our disinterested trustees. In addition, our board of trustees is subject to certain provisions of Maryland law that are designed to eliminate or minimize conflicts. However, we cannot assure you that these policies or provisions of law will always be successful in eliminating the influence of such conflicts. If such policies or provisions of law are not successful, decisions could be made that might fail to reflect fully the interests of all shareholders.

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Interested Trustee and Officer Transactions

        Pursuant to Maryland law, a contract or other transaction between us and a trustee or between us and any corporation or other entity in which any of our trustees is a trustee or director or has a material financial interest is not void or voidable solely on the grounds of such common trusteeship or interest, the presence of such trustee at the meeting at which the contract or transaction is authorized, approved or ratified or the counting of the trustee's vote in favor thereof, provided that:

    the fact of the common trusteeship or interest is disclosed or known to our board of trustees or a committee of our board, and our board or committee authorizes, approves or ratifies the transaction or contract by the affirmative vote of a majority of disinterested trustees, even if the disinterested trustees constitute less than a quorum;

    the fact of the common trusteeship or interest is disclosed or known to our shareholders entitled to vote thereon, and the transaction or contract is authorized, approved or ratified by a majority of the votes cast by the shareholders entitled to vote other than the votes of shares owned of record or beneficially by the interested trustee or corporation, firm or other entity; or

    the transaction or contract is fair and reasonable to us at the time it is authorized, ratified or approved.

        Furthermore, under Delaware law (where our operating partnership is formed), we, acting as general partner, have a fiduciary duty to our operating partnership and, consequently, such transactions are also subject to the duties of care and loyalty that we, as a general partner, owe to limited partners in our operating partnership (to the extent such duties have not been eliminated pursuant to the terms of the partnership agreement).

        We will adopt a policy which requires that all contracts and transactions between us, our operating partnership or any of our subsidiaries, on the one hand, and any of our trustees or executive officers or any entity in which such trustee or executive officer is a director or trustee or has a material financial interest, on the other hand, must be approved by the affirmative vote of a majority of the disinterested trustees. Where appropriate, in the judgment of the disinterested trustees, our board of trustees may obtain a fairness opinion or engage independent counsel to represent the interests of non-affiliated security holders, although our board of trustees will have no obligation to do so.

Policies with Respect to Other Activities

        We will have authority to offer common shares, preferred shares or options to purchase shares, or securities convertible into or exchangeable or exercisable for common shares, in exchange for property and to repurchase or otherwise acquire our common shares or other securities in the open market or otherwise, and we may engage in such activities in the future. As described in "Description of the Partnership Agreement of Eola Property Trust, L.P.," we may, but are not obligated to, issue common shares to holders of OP units upon exercise of their redemption rights. Our board of trustees has the power, without further shareholder approval, to amend our declaration of trust to increase the number of authorized common shares or preferred shares and to authorize us to issue additional common shares or preferred shares, in one or more series, including senior securities, in any manner, and on the terms and for the consideration, it deems appropriate. See "Description of Shares." We have not engaged in trading, underwriting or agency distribution or sale of securities of other issuers other than our operating partnership and do not intend to do so. At all times, we intend to make investments in such a manner as to qualify as a REIT, unless because of circumstances or changes in the Internal Revenue Code, or the Treasury Regulations, our board of trustees determines that it is no longer in our best interest to qualify as a REIT. In addition, we intend to make investments in such a way that we will not be treated as an investment company under the 1940 Act.

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Reporting Policies

        We intend to make available to our shareholders our annual reports, including our audited financial statements. Upon completion of this offering, we will become subject to the information reporting requirements of the Exchange Act. Pursuant to those requirements, we will be required to file annual and periodic reports, proxy statements and other information, including audited financial statements, with the SEC.

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STRUCTURE AND FORMATION OF OUR COMPANY

Structure

        Upon completion of this offering and our formation transactions, our operating partnership will hold substantially all of our assets and conduct substantially all of our business. We will contribute the net proceeds from this offering to our operating partnership in exchange for a number of OP units equal to the number of common shares issued in this offering. We will control our operating partnership as its sole general partner and as the holder of approximately      % of the aggregate OP units (or      % if the underwriters exercise their overallotment option in full). Our executive officers and other employees and third party contributors initially will own the remaining OP units and will be limited partners in our operating partnership.

        All of our management services will be conducted by wholly owned subsidiaries of our operating partnership. Certain properties in which we will not own all of the equity interests, as well as properties in which we will not own any of the equity interests, will be managed by our TRS. Our TRS will elect to be treated as a corporation for U.S. federal income tax purposes and, effective contemporaneously with that election, will elect jointly with us to be treated as a taxable REIT subsidiary of ours. Our TRS will conduct certain other activities that we may not engage in directly without adversely affecting our qualification as a REIT. We may form additional taxable REIT subsidiaries in the future.

Formation Transactions

        Prior to or concurrently with the completion of this offering, we will engage in the formation transactions described below, which are designed to: consolidate our asset management, property management, leasing, acquisition and related businesses into our operating partnership; consolidate the ownership of a portfolio of properties, together with certain other real estate assets, into our operating partnership; facilitate this offering; enable us to raise necessary capital to repay existing indebtedness related to certain properties in our portfolio; enable us to qualify as a REIT for U.S. federal income tax purposes commencing with the portion of our taxable year ending December 31, 2010; and preserve the tax position of certain continuing investors.

        In connection with our formation transactions, the following transactions have occurred or will occur concurrently with or prior to completion of this offering:

    Eola Property Trust was formed as a Maryland real estate investment trust on July 7, 2010. We intend to elect to be taxed and to operate in a manner that will enable us to qualify as a REIT for U.S. federal income tax purposes commencing with the portion of our taxable year ending December 31, 2010.

    Eola Property Trust, L.P. was formed as a Delaware limited partnership on July 7, 2010.

    Eola TRS LLC was formed as a Delaware limited liability company on September 20, 2010. Our TRS will elect to be treated as a corporation for U.S. federal income tax purposes and, effective contemporaneously with that election, will elect jointly with us to be treated as a taxable REIT subsidiary of ours.

    We will sell common shares in this offering and contribute the net proceeds from this offering to our operating partnership in exchange for a like number of OP units.

    Eola Office Partners LLC, or Eola Office Partners, which is the majority owner of Eola Capital, will merge with and into Eola Property Trust.

    Eola Capital, with its related asset management, property management and leasing businesses, will merge with a newly formed subsidiary of our operating partnership.

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    Pursuant to a series of contribution and other agreements, prior to or concurrently with the completion of this offering, our operating partnership will acquire the interests in the properties that comprise our initial portfolio from the current holders of those interests, including members of our senior management team and/or their affiliates. The contribution and other agreements are subject to customary closing conditions, including the completion of this offering.

        As part of our formation transactions, holders of interests in the properties that comprise our initial portfolio (except for the 1110 Vermont Avenue property, which is described below) will receive consideration as follows (amounts below for common shares and OP units are based on the mid-point of the price range set forth on the cover page of this prospectus):

    In exchange for the contribution of all of their interests in the properties in our initial portfolio and our related asset management, property management and leasing businesses, certain members of our senior management team and other individuals affiliated with Eola Capital will receive an aggregate of                 OP units and                common shares, with an aggregate value of approximately $       million.

    In exchange for the contribution of its interests in nine properties, URS will receive                common shares, with an aggregate value of approximately $33.4 million. In addition, under certain circumstances, URS is entitled to receive additional common shares, representing a portion of the common shares that otherwise would be payable to members of Eola Office Partners and Eola Capital in connection with the merger transactions described above. URS also will receive approximately $204.7 million in connection with our repayment of outstanding indebtedness with a portion of the net proceeds from this offering (based on June 30, 2010 outstanding balances).

    In exchange for the contribution of their interests in 11 properties, DLF and its affiliates will receive             common shares with an aggregate value of approximately $39.8 million. In addition, in exchange for its interests in the same 11 properties, a third party will receive OP units with an aggregate value of approximately $28,000.

    In exchange for the contribution of their interests in five properties, certain third party partners will receive approximately $31.5 million in cash.

    In connection with the contribution of their interests in 24 properties, limited partners in entities in which affiliates of Eola Capital serve as the general partner, including certain of our executive officers, will receive distributions of              common shares, with an aggregate value of approximately $5.8 million, and approximately $8.0 million in cash.

    In certain cases, the contributing parties (including certain members of our senior management team and other persons affiliated with Eola Capital) will receive cash as a result of (i) customary real estate closing prorations, (ii) a return of restricted cash reserves that were previously funded by such parties and which are required to remain with the property-owning entities under the terms of loan documents and (iii) repayment of loans made by such contributing parties. We currently estimate these cash payments will total approximately $26.4 million, excluding customary real estate prorations, the amount of which will be determined by the timing of the completion of this offering and our formation transactions.

    In exchange for the interests of an affiliate of an institutional investor in two properties and certain other consideration, we have agreed to repay the approximately $14.8 million mortgage loan secured by the Center Point property in full. In addition, this institutional investor will receive approximately $0.9 million in cash in connection with the restructuring of one of our unconsolidated joint ventures.

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    In connection with the contribution of interests in five properties, the manager at these properties will receive approximately $2.5 million in cash as consideration for, among other things, the termination of the management contracts relating to such properties.

        Since URS and DLF are entitled to an aggregate dollar amount of common shares based upon the price of the common shares sold in this offering, the number of common shares to be received by them is subject to increase or decrease. In the event the number of common shares to be issued to URS and DLF is increased as a result of common shares in this offering being sold at a price below the mid-point of the price range set forth on the cover page of this prospectus, the common shares and OP units to be received by members of our senior management team and other individuals affiliated with Eola Capital will be reduced by a like amount. In the event the number of common shares to be issued to URS and DLF is decreased as a result of common shares in this offering being sold at a price above the mid-point of the price range set forth on the cover page of this prospectus, the common shares and OP units to be received by members of our senior management team and other individuals affiliated with Eola Capital will be increased by a like amount.

        In addition, as part of our formation transactions, we expect to acquire the 1110 Vermont Avenue property from a third party for approximately $141.6 million in cash, including estimated closing costs. We currently are pursuing potential third parties to co-invest in the acquisition of this property. If we reach an agreement with such parties, our interest in this property would be held through a joint venture, and our ownership percentage may be significantly reduced. This acquisition is subject to conditions that could prevent or delay our acquisition of the property. See "Risk Factors—Risks Related to Our Business and Operations—Our acquisition of the 1110 Vermont Avenue property is subject to closing conditions that could delay or prevent the acquisition of this property."

        In connection with the contribution and merger transactions described above, we have obtained representations from the contributing parties, including certain members of our senior management team and/or their affiliates (which we refer to as the Eola contributors), regarding their authorization to effect the contemplated transactions and their ownership of the assets or interests being contributed, which representations survive indefinitely and are not subject to any limit on liability in the event of a breach of such representations. In addition, the Eola contributors have entered into an agreement with us and our operating partnership that provides limited representations regarding the entities and assets being contributed in our formation transactions, and entitles us and our operating partnership to indemnification for breaches of those representations and warranties on a joint and several basis by the Eola contributors. Such indemnification is capped at a maximum of 15% of the value of all OP units and common shares received by the Eola contributors under the terms of the various contribution and merger agreements. As our sole recourse for potential indemnification claims, we have received from the Eola contributors a pledge in an aggregate amount equal to 15% of the total number of OP units and common shares received under the various contribution and merger agreements. The number of pledged common shares and OP units will be fixed as of the completion of this offering and, accordingly, will not increase if the trading price of our common shares drops below the initial public offering price or decrease if the trading price of our common shares rises above the initial public offering price. The pledged collateral will be released on the one-year anniversary of the completion of this offering to the extent that claims have not been made against the outstanding collateral.

        As part of our formation transactions, we also will assume and pay off certain indebtedness as follows:

    We will assume approximately $413.4 million of consolidated indebtedness (based on June 30, 2010 outstanding balances).

    Our unconsolidated joint ventures will continue to have outstanding indebtedness for which we will not be directly liable. Our pro rata share of this indebtedness will be approximately $87.8 million (based on June 30, 2010 outstanding balances).

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    We expect to use a portion of the net proceeds from this offering to repay approximately $380.4 million of our outstanding consolidated indebtedness (based on June 30, 2010 outstanding balances).

        The following chart shows the anticipated structure and ownership of our company, after giving effect to our formation transactions and this offering, on a fully diluted basis (assuming no exercise by the underwriters of their overallotment option):

GRAPHIC

Benefits of Formation Transactions to Related Parties

        In connection with this offering and our formation transactions, certain of our executive officers and other key employees, trustees and 5% shareholders will receive material benefits, including the following (amounts below are based on the mid-point of the price range set forth on the cover page of this prospectus).

    Consideration for Contribution of Interests in Our Assets

    James R. Heistand, our Executive Chairman, will receive      common shares, with an aggregate value of approximately $       million, in exchange for the contribution by him of all of his interests in our assets.

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    Rudy Prio Touzet, our President and Chief Executive Officer, will receive      OP units and       common shares, with an aggregate value of approximately $       million, in exchange for the contribution by him of all of his interests in our assets.

    Henry F. Pratt, III, our Chief Operating Officer, will receive      common shares, with an aggregate value of approximately $       million, in exchange for the contribution by him of all of his interests in our assets.

    David O'Reilly, our Chief Financial Officer, will receive      common shares, with an aggregate value of approximately $       million, in exchange for the contribution by him of all of his interests in our assets.

    Scott Francis, our Chief Accounting Officer, will receive      common shares, with an aggregate value of approximately $       million, in exchange for the contribution by him of all of his interests in our assets.

    Messrs. Heistand, Touzet, Pratt, O'Reilly and Francis also will receive cash as a result of (i) customary real estate closing prorations, (ii) a return of restricted cash reserves that were previously funded by such parties and which are required to remain with the property-owning entities under the terms of loan documents and (iii) repayment of loans made by them. We currently estimate these cash payments will total approximately $       million, excluding customary real estate prorations, the amount of which will be determined by the timing of the completion of this offering and our formation transactions.

    Employment Agreements

        We will enter into an employment agreement with each of our executive officers that will be effective upon completion of this offering. These employment agreements provide for base salary, bonus and other benefits, including accelerated vesting of equity awards upon a change in our control or termination of the executive's employment under certain circumstances. See "Management—Executive Compensation—Employment Agreements."

    Indemnification Agreements for Officers and Trustees

        We intend to enter into indemnification agreements with our trustees and executive officers that will be effective upon the completion of this offering. These indemnification agreements will provide indemnifications to these persons by us to the maximum extent permitted by Maryland law and certain procedures for indemnification, including advancement by us of certain expenses relating to claims brought against these persons under certain circumstances. See "Management—Limitation of Liability and Indemnification."

    Registration Rights Agreement

        We will enter into a registration rights agreement with the various persons receiving our common shares and/or OP units in connection with our formation transactions, including our executive officers. See "Shares Eligible for Future Sale—Registration Rights Agreement."

    Contributor Indemnity Agreement

        We expect to cause any personal guaranties that were previously made by certain members of our senior management team in connection with mortgage loans secured by the properties and other assets being contributed to us to be released by the lenders concurrently with the completion of this offering. If we are unsuccessful in obtaining any such release, we will enter into a contributor indemnity agreement with such members of our senior management team pursuant to which we will indemnify each of them with respect to any loss incurred to the lender pursuant to such guaranty.

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Determination of Consideration in our Formation Transactions

        We will acquire direct or indirect ownership interests in each of the properties in our initial portfolio in connection with our formation transactions. The consideration paid to each of the contributors or sellers in our formation transactions will be based upon the terms of the applicable contribution agreements and merger agreements negotiated among us and our operating partnership, on the one hand, and the various contributors or sellers, on the other hand. Under these agreements, each contributor or seller will receive either (i) a fixed value of consideration, payable in OP units or common shares, (ii) a fixed amount of cash, (iii) a fixed number of OP units or common shares, the value of which will depend on the initial public offering price of our common shares, or (iv) a combination of the foregoing. In certain cases, the number or value of OP units and common shares will be subject to adjustment for customary real estate closing prorations and changes in indebtedness encumbering the properties, among other things. Where the consideration is based upon a fixed value of consideration, payable in OP units or common shares, the number of OP units or common shares to be issued will be equal to (i) the negotiated value for the contributed property interests, divided by (ii) the initial public offering price of our common shares.

        The consideration received by the contributors or sellers in our formation transactions was determined pursuant to arm's length negotiations among the contributors or sellers, except in the case of the Eola contributors, based on several factors, including, but not limited to, the applicable property's occupancy and rental revenue; potential for growth in net operating income of the property through increase in occupancy and rental rates; property location, age and amenities; opportunities for reduction in operating expenses; in-place rents relative to the market rates; projected tenant improvements and leasing commissions; current market and submarket conditions and demographics, as well as the future outlook for each market and submarket; strength of significant tenants and lease terms; the property's competitive position within its market; historical lease renewal rates; and near-term capital expenditure requirements. The consideration received by the Eola contributors in our formation transactions was not determined pursuant to arm's length negotiations.

        Through various transactions during the two years prior to this offering, our promoter, James R. Heistand, acquired minority interests in certain assets that are being contributed to our operating partnership in connection with our formation transactions. Mr. Heistand's interests in these assets range from less than 1% up to approximately 10% and include the following properties: Westshore 500; International Plaza Four; the Peachtree Center properties (Peachtree Marquis I, Peachtree Marquis II, Peachtree Harris, Peachtree International, Peachtree North, Peachtree South, Peachtree Mall and three related parking garages); and the ACP properties (Ten 10th Street (Millennium), The Cornerstone Building at Peachtree Center, Two Ravinia Drive, Interlachen Corporate Center, 2400 Maitland Center, 500 Winderley Place, the Bank of America Center, Primera V, Westshore Corporate Center, Irvington One, Irvington Two, Irvington Three, Irvington Four and Two Liberty Place). Mr. Heistand acquired these interests, in addition to other interests not being contributed to us, for approximately $3.4 million.

        We did not obtain independent fairness opinions in connection with our formation transactions. Accordingly, there can be no assurance that the fair market value of the equity securities we issue and/or the amount of cash that we pay to the contributors and sellers will not exceed the fair market value of the properties and other assets acquired by us in our formation transactions. See "Risk Factors—Risks Related to Our Organization and Structure—The consideration paid by us in exchange for the contribution of properties and other assets to us in our formation transactions may exceed the fair market value of these assets."

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PRINCIPAL SHAREHOLDERS

        The following table sets forth certain information regarding the beneficial ownership of our common shares and OP units by:

    each of our trustees and trustee nominees;

    each of our executive officers;

    each holder of five percent or more of each class of our common shares; and

    all of our trustees, trustee nominees and executive officers as a group.

        This table gives effect to the expected issuance of our common shares and OP units in connection with this offering and our formation transactions. The extent to which a person holds common shares as opposed to OP units is described in the footnotes below.

        The SEC has defined "beneficial ownership" of a security to mean the possession, directly or indirectly, of voting power and/or investment power over such security. A shareholder also is deemed to be, as of any date, the beneficial owner of all securities that such shareholder has the right to acquire within 60 days after that date through (a) the exercise of any option, warrant or right, (b) the conversion of a security, (c) the power to revoke a trust, discretionary account or similar arrangement or (d) the automatic termination of a trust, discretionary account or similar arrangement. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, our common shares subject to options or other rights (as set forth above) held by that person that are exercisable as of                    , 2010 or will become exercisable within 60 days thereafter, are deemed outstanding, while such shares are not deemed outstanding for purposes of computing percentage ownership of any other person. Each person named in the table has sole voting and investment power with respect to all of our common shares and OP units shown as beneficially owned by such person, except as otherwise indicated in the table or footnotes below.

        Unless otherwise indicated, the address of each named person is c/o Eola Property Trust, 390 N. Orange Avenue, Suite 2400, Orlando, Florida 32801.

Beneficial Owner
  Number of Shares and
OP Units Beneficially
Owned
  Percentage of All
Shares(1)
  Percentage
of All
Shares and
OP Units(2)
 

Executive Officers, Trustees and Trustee Nominees

                   

James R. Heistand

            %     %

Rudy Prio Touzet

            %     %

Henry F. Pratt, III

            %     %

David O'Reilly

            %     %

            %     %

            %     %

            %     %

            %     %

All trustees, trustee nominees and executive officers as a group (    persons)

            %     %

More than Five Percent Beneficial Owners

                   

None

                   

*
Represents less than 1.0% of our common shares and OP units outstanding upon completion of this offering.

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(1)
Assumes          of our common shares are outstanding immediately following the completion of this offering and our formation transactions. In addition, amounts for individuals assume that all OP units held by the person are exchanged for our common shares, and amounts for all trustees, trustee nominees and executive officers as a group assume all OP units held by them are exchanged for our common shares in each case, regardless of when such OP units are exchangeable. The total number of our common shares outstanding used in calculating this percentage assumes that none of the OP units held by other persons are exchanged for our common shares.

(2)
Assumes          of our common shares and        OP units are outstanding immediately following the completion of this offering, which OP units may be redeemed for cash or, at our option, exchanged for our common shares as described in "Description of the Partnership Agreement of Eola Property Trust, L.P."

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DESCRIPTION OF SHARES

        The following summary of the material terms of our shares of beneficial interest does not purport to be complete and is subject to and qualified in its entirety by reference to applicable Maryland law and to our declaration of trust and bylaws, copies of which are filed as exhibits to the registration statement of which this prospectus is a part. See "Where You Can Find More Information."

General

        Our declaration of trust provides that we may issue up to 450,000,000 common shares of beneficial interest, $0.01 par value per share, and 50,000,000 preferred shares of beneficial interest, $0.01 par value per share. Our declaration of trust authorizes our board of trustees to amend our declaration of trust to increase or decrease the aggregate number of authorized common shares or the number of shares of any class or series without shareholder approval. After giving effect to this offering and our formation transactions,           common shares will be issued and outstanding on a fully diluted basis (         shares if the underwriters exercise their overallotment option in full), and no preferred shares will be issued and outstanding.

        Under Maryland law, shareholders generally are not personally liable for our debts or obligations solely as a result of their status as shareholders.

        The common shares that we are offering will be issued by us and are not a deposit or other obligation of any bank, are not an insurance policy of any insurance company and are not insured or guaranteed by the FDIC, any other governmental agency or any insurance company. The common shares will not benefit from any insurance guarantee association coverage or any similar protection.

Common Shares

        All common shares offered by this prospectus will be duly authorized, validly issued, fully paid and nonassessable.

Voting Rights of Common Shares

        Subject to the provisions of our declaration of trust regarding the restrictions on transfer and ownership of our shares of beneficial interest and except as may otherwise be specified in the terms of any class or series of shares of beneficial interest, each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders, including the election of trustees, and, except as provided with respect to any other class or series of shares of beneficial interest, the holders of such common shares will possess the exclusive voting power. There will be no cumulative voting in the election of trustees.

        Under the Maryland statute governing real estate investment trusts formed under the laws of that state, or the Maryland REIT law, a Maryland real estate investment trust generally cannot amend its declaration of trust or merge with another entity unless declared advisable by a majority of its board of trustees and approved by the affirmative vote of shareholders holding at least two-thirds of the shares entitled to vote on the matter unless a lesser percentage (but not less than a majority of all the votes entitled to be cast on the matter) is set forth in the real estate investment trust's declaration of trust. Our declaration of trust provides that these actions (other than certain amendments to the provisions of our declaration of trust related to the removal of trustees, the restrictions on ownership and transfer of our shares of beneficial interest and the termination of our existence) may be taken if declared advisable by a majority of our board of trustees and approved by the vote of shareholders holding at least a majority of the votes entitled to be cast on the matter. However, Maryland law permits a corporation to transfer all or substantially all of its assets without the approval of the shareholders of the corporation to one or more persons if all of the equity interests of the person or persons are

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owned, directly or indirectly, by the corporation. In addition, because operating assets may be held by a corporation's subsidiaries, as in our situation, these subsidiaries may be able to transfer all or substantially all of such assets without a vote of our shareholders.

Dividends, Distributions, Liquidation and Other Rights

        Subject to the preferential rights of any other class or series of our shares and to the provisions of our declaration of trust regarding the restrictions on transfer of common shares, holders of our common shares are entitled to receive dividends on such common shares if, as and when authorized by our board of trustees, and declared by us out of assets legally available therefor. Such holders also are entitled to share ratably in the assets of our company legally available for distribution to our shareholders in the event of our liquidation, dissolution or winding up after payment or establishment of reserves for all debts and liabilities of our company.

        Holders of common shares have no preference, conversion, exchange, sinking fund or redemption rights, have no preemptive rights to subscribe for any securities of our company and have no appraisal rights. Subject to the provisions of our declaration of trust regarding the restrictions on transfer of shares, common shares will have equal dividend, liquidation and other rights.

Power to Reclassify Our Unissued Common Shares

        Our declaration of trust authorizes our board of trustees to classify and reclassify any unissued common shares or preferred shares into other classes or series of shares and to establish the number of shares in each class or series and to set the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption for each such class or series. As a result, our board of trustees could authorize the issuance of preferred shares that have priority over the common shares with respect to dividends, distributions and rights upon liquidation and with other terms and conditions that could have the effect of delaying, deterring or preventing a transaction or a change in control that might involve a premium price for holders of our common shares or otherwise might be in their best interest. No preferred shares are presently outstanding, and we have no present plans to issue any preferred shares.

Power to Increase or Decrease Authorized Common Shares and Issue Additional Common and Preferred Shares

        We believe that the power of our board of trustees to amend our declaration of trust to increase or decrease the number of authorized shares, to issue additional authorized but unissued common shares or preferred shares and to classify or reclassify unissued common shares or preferred shares and thereafter to cause to issue such classified or reclassified shares will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs that might arise. The additional classes or series will be available for issuance without further action by our shareholders, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Although our board of trustees does not intend to do so, it could authorize us to issue a class or series that could, depending upon the terms of the particular class or series, delay, defer or prevent a transaction or a change in control of our company that might involve a premium price for holders of our shares or otherwise be in the best interest of our shareholders. See "Certain Provisions of Maryland Law and Our Declaration of Trust and Bylaws—Anti-takeover Effect of Certain Provisions of Maryland Law and Our Declaration of Trust and Bylaws."

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Restrictions on Ownership and Transfer

        In order for us to qualify as a REIT under the Internal Revenue Code, our shares must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares (after taking into account options to acquire common shares) may be owned, directly, indirectly or through attribution, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) at any time during the last half of a taxable year (other than the first year for which an election to be a REIT has been made).

        In order to assist us in complying with the limitations on the concentration of ownership of REIT shares imposed by the Internal Revenue Code, our declaration of trust generally prohibits any person (other than a person who has been granted an exception) from actually or constructively owning more than 9.8% of the aggregate of our outstanding common shares by value or by number of shares, whichever is more restrictive, or 9.8% of the aggregate of the outstanding shares of any class or series of our preferred shares by value or by number of shares, whichever is more restrictive. However, our declaration of trust permits (but does not require) exceptions to be made for shareholders provided that our board of trustees determines that such exceptions will not jeopardize our qualification as a REIT.

        Our declaration of trust also prohibits any person from (1) beneficially or constructively owning our shares of beneficial interest that would result in our being "closely held" under Section 856(h) of the Internal Revenue Code, (2) transferring our shares if such transfer would result in our being beneficially owned by fewer than 100 persons (determined without regard to any rules of attribution), (3) beneficially or constructively owning our shares of beneficial interest that would result in our owning (actually or constructively) 10% or more of the ownership interest in a tenant of our real property if income derived from such tenant for our taxable year would result in more than a de minimis amount of non-qualifying income for purposes of the REIT tests and (4) beneficially or constructively owning our shares of beneficial interest that would cause us otherwise to fail to qualify as a REIT. Any person who acquires or attempts or intends to acquire beneficial ownership of our shares that will or may violate any of the foregoing restrictions on transferability and ownership is required to give notice immediately to us and provide us with such other information as we may request in order to determine the effect of such transfers on our qualification as a REIT. The foregoing restrictions on transferability and ownership will not apply if our board of trustees determines that it is no longer in our best interest to attempt to qualify, or to qualify, or to continue to qualify, as a REIT. In addition, our board of trustees may determine that compliance with the foregoing restrictions is no longer required for our qualification as a REIT.

        Our board of trustees, in its sole discretion, may exempt a person from the above share ownership limits and any of the restrictions described above. However, our board of trustees may not grant an exemption to any person unless our board of trustees obtains such representation, covenant and understanding as our board of trustees may deem appropriate in order to determine that granting the exemption would not result in our losing our qualification as a REIT. As a condition of granting the exemption, our board of trustees may require a ruling from the IRS or an opinion of counsel in either case in form and substance satisfactory to our board of trustees, in its sole discretion, in order to determine or ensure our qualification as a REIT.

        In addition, our board of trustees from time to time may increase the share ownership limits. However, the share ownership limits may not be increased if, after giving effect to such increase, five or fewer individuals could own or constructively own in the aggregate, more than 49.9% in value of the shares then outstanding.

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        However, if any transfer of our shares of beneficial interest occurs which, if effective, would result in any person beneficially or constructively owning shares in excess, or in violation, of the above transfer or ownership limitations, known as a prohibited owner, then that number of shares, the beneficial or constructive ownership of which otherwise would cause such person to violate the transfer or ownership limitations (rounded up to the nearest whole share), will be automatically transferred to a charitable trust for the exclusive benefit of a charitable beneficiary, and the prohibited owner will not acquire any rights in such shares. This automatic transfer will be considered effective as of the close of business on the business day before the violative transfer. If the transfer to the charitable trust would not be effective for any reason to prevent the violation of the above transfer or ownership limitations, then the transfer of that number of shares that otherwise would cause any person to violate the above limitations will be void. Shares held in the charitable trust will continue to constitute issued and outstanding shares. The prohibited owner will not benefit economically from ownership of any shares held in the charitable trust, will have no rights to dividends or other distributions and will not possess any rights to vote or other rights attributable to the shares held in the charitable trust. The trustee of the charitable trust will be designated by us and must be unaffiliated with us or any prohibited owner and will have all voting rights and rights to dividends or other distributions with respect to shares held in the charitable trust, and these rights will be exercised for the exclusive benefit of the trust's charitable beneficiary. Any dividend or other distribution paid before our discovery that shares have been transferred to the trustee will be paid by the recipient of such dividend or distribution to the trustee upon demand, and any dividend or other distribution authorized but unpaid will be paid when due to the trustee. Any dividend or distribution so paid to the trustee will be held in trust for the trust's charitable beneficiary. Subject to Maryland law, effective as of the date that such shares have been transferred to the charitable trust, the trustee, in its sole discretion, will have the authority to:

    rescind as void any vote cast by a prohibited owner prior to our discovery that such shares have been transferred to the charitable trust; and

    recast such vote in accordance with the desires of the trustee acting for the benefit of the trust's charitable beneficiary.

However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind and recast such vote.

        Within 20 days of receiving notice from us that shares have been transferred to the charitable trust, and unless we buy the shares first as described below, the trustee will sell the shares held in the charitable trust to a person, designated by the trustee, whose ownership of the shares will not violate the share ownership limits in our declaration of trust. Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited owner and to the charitable beneficiary. The prohibited owner will receive the lesser of:

    the price paid by the prohibited owner for the shares or, if the prohibited owner did not give value for the shares in connection with the event causing the shares to be held in the charitable trust (for example, in the case of a gift or devise), the market price of the shares on the day of the event causing the shares to be held in the charitable trust; and

    the price per share received by the trustee from the sale or other disposition of the shares held in the charitable trust (less any commission and other expenses of a sale).

        The trustee may reduce the amount payable to the prohibited owner by the amount of dividends and distributions paid to the prohibited owner and owed by the prohibited owner to the trustee. Any net sale proceeds in excess of the amount payable to the prohibited owner will be paid immediately to the charitable beneficiary. If, before our discovery that shares have been transferred to the charitable trust, such shares are sold by a prohibited owner, then:

    such shares will be deemed to have been sold on behalf of the charitable trust; and

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    to the extent that the prohibited owner received an amount for such shares that exceeds the amount that the prohibited owner was entitled to receive as described above, the excess must be paid to the trustee upon demand.

        In addition, shares held in the charitable trust will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of:

    the price per share in the transaction that resulted in such transfer to the charitable trust (or, in the case of a gift or devise, the market price at the time of the gift or devise); and

    the market price on the date we, or our designee, accept such offer.

        We may reduce the amount payable to the prohibited owner by the amount of dividends and distributions paid to the prohibited owner and owed by the prohibited owner to the trustee. We may pay the amount of such reduction to the trustee for the benefit of the charitable beneficiary. We will have the right to accept the offer until the trustee has sold the shares held in the charitable trust. Upon such a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited owner and any dividends or other distributions held by the trustee will be paid to the charitable beneficiary.

        All certificates representing shares of beneficial interest bear a legend referring to the restrictions described above.

        Every owner of more than 5% (or such lower percentage as required by the Internal Revenue Code or the regulations promulgated thereunder) in value of the outstanding shares within 30 days after the end of each taxable year will be required to give written notice to us stating the name and address of such owner, the number of shares of each class and series of our shares that the owner beneficially owns and a description of the manner in which the shares are held. Each owner shall provide to us such additional information as we may request in order to determine the effect, if any, of the owner's beneficial ownership on our qualification as a REIT and to ensure compliance with our share ownership limits. In addition, each shareholder shall upon demand be required to provide to us such information as we may request, in good faith, in order to determine our qualification as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance.

        Our share ownership limits could delay, defer or prevent a transaction or a change in our control that might involve a premium price for holders of our common shares or might otherwise be in the best interests of our shareholders.

Transfer Agent and Registrar

        We expect the transfer agent and registrar for our common shares will be                          .

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SHARES ELIGIBLE FOR FUTURE SALE

General

        After giving effect to the transactions described in this prospectus, we will have                common shares outstanding. In addition, upon completion of this offering,            common shares will be reserved for issuance upon exchange of OP units and            common shares will be reserved for issuance with respect to            restricted share units issued to our executive officers, non-employee trustees and certain employees.

        Of these shares, the                shares sold in this offering (or            shares if the underwriters' overallotment option is exercised in full) will be freely transferable without restriction or further registration under the Securities Act, subject to the limitations on ownership set forth in our declaration of trust and except for any shares purchased in this offering by our "affiliates," as that term is defined by Rule 144 under the Securities Act. The remaining            shares expected to be outstanding immediately after completion of this offering, plus any shares purchased by affiliates in this offering, will be "restricted" securities as defined in Rule 144.

        Our common shares are newly issued securities for which there is no established trading market. No assurance can be given as to (1) the likelihood that an active market for our common shares will develop, (2) the liquidity of any such market, (3) the ability of shareholders to sell the shares or (4) the prices that shareholders may obtain for any of the shares. No prediction can be made as to the effect, if any, that future sales of shares or the availability of shares for future sale will have on the market price prevailing from time to time. Sales of substantial amounts of common shares, or the perception that such sales could occur, may affect adversely prevailing market prices of the common shares. See "Risk Factors—Risks Related to this Offering."

        For a description of certain restrictions on transfers of our common shares held by certain of our shareholders, see "Description of Shares—Restrictions on Ownership and Transfer."

Rule 144

        In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.

        An affiliate of ours who has beneficially owned our common shares for at least six months would be entitled to sell, within any three-month period, a number of shares that does not exceed the greater of:

    1% of our common shares then outstanding; or

    the average weekly trading volume of our common shares on the NYSE during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC.

        Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates also are subject to manner of sale provisions, notice requirements and the availability of current public information about us.

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Redemption Right

        Our operating partnership will issue an aggregate of                OP units to persons contributing interests in properties and other assets in connection with our formation transactions. Beginning on or after the date which is one year after completion of this offering, persons holding OP units as a result of our formation transactions will have the right to require our operating partnership to redeem each of their OP units for cash equal to the then-current market value of one common share (determined in accordance with and subject to adjustment under the partnership agreement) or, at our election, common shares on a one-for-one basis, subject to adjustment under certain circumstances and to the restrictions on ownership and transfer of our common shares set forth in our declaration of trust and described under the section entitled "Description of Shares—Restrictions on Ownership and Transfer." See "Description of the Partnership Agreement of Eola Property Trust, L.P."

Registration Rights Agreement

        Upon completion of this offering and our formation transactions, we will enter into a registration rights agreement with the various persons receiving our common shares and/or OP units in connection with our formation transactions, including our executive officers. Under the registration rights agreement, subject to certain exceptions, we will be required to seek to register all common shares that these persons may acquire in connection with the exercise of the redemption rights under the partnership agreement with respect to their OP units. In addition, subject to certain exceptions, commencing on the date that is 365 days after the date of this prospectus (or 180 days after the date of this prospectus for holders of more than two million common shares), the holders of common shares will have the right to require us to register their common shares for resale; provided, however, the holders collectively may not exercise such registration rights more than once in any consecutive six month period. We will agree to pay all expenses related to our registration obligations under the registration rights agreement, except that such expenses will not include any brokerage and sales commissions or any transfer taxes relating to the sale of such shares.

Grants Under 2010 Equity Incentive Plan

        We intend to adopt our equity incentive plan immediately prior to completion of this offering. Our equity incentive plan provides for the grant of incentive awards to our employees, officers, trustees and other service providers. We intend to issue an aggregate of            restricted share units to our executive officers, non-employee trustees and certain employees upon completion of this offering under this plan, and intend to reserve an additional            common shares for issuance under this plan.

        We intend to file with the SEC a registration statement on Form S-8 covering the common shares issuable under our equity incentive plan. Common shares covered by such registration statement will be eligible for transfer or resale without restriction under the Securities Act unless held by affiliates.

Lock-Up Agreements

        In addition to the limits placed on the sale of our common shares by operation of Rule 144 and other provisions of the Securities Act, our executive officers and trustees and certain of our continuing investors have agreed not to sell or transfer any common shares or securities convertible into, exchangeable or exercisable for (including OP units), or repayable with, common shares, subject to certain exceptions, for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital Inc. and Wells Fargo Securities, LLC. However, each of our trustees and executive officers and other continuing investors may transfer or dispose of our shares during this 180-day lock-up period in the case of gifts or for estate planning purposes where the transferee agrees to a similar lock-up agreement for the remainder of the 180-day lock-up period, provided that no report is required to be filed by the transferor under the Exchange Act as a result of the transfer.

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CERTAIN PROVISIONS OF MARYLAND LAW AND OUR DECLARATION OF
TRUST AND BYLAWS

        The following summary of certain provisions of Maryland law and our declaration of trust and bylaws does not purport to be complete and is subject to and qualified in its entirety by reference to applicable Maryland law and to our declaration of trust and bylaws, copies of which are filed as exhibits to the registration statement of which this prospectus is a part. See "Where You Can Find More Information."

Our Board of Trustees

        Our declaration of trust and bylaws provide that the number of trustees of our company may be established by our board of trustees, but may not be fewer than the minimum number required under Maryland law nor more than 15. Initially, we expect to have seven trustees. Our declaration of trust and bylaws provide that any vacancy, including a vacancy created by an increase in the number of trustees, may be filled only by a majority of the remaining trustees, even if the remaining trustees do not constitute a quorum. Any individual elected to fill such vacancy will serve for the remainder of the full term and until a successor is duly elected and qualifies.

        Pursuant to our bylaws, each of our trustees is elected by our shareholders to serve until the next annual meeting of shareholders and until his or her successor is duly elected and qualifies under Maryland law. Holders of our common shares will have no right to cumulative voting in the election of trustees. Trustees are elected by a plurality of the votes cast.

        Our bylaws provide that at least a majority of our trustees must be "independent," with independence being defined in the manner established by our board of trustees and in a manner consistent with listing standards established by the NYSE.

Removal of Trustees

        Our declaration of trust provides that, subject to the rights of holders of one or more classes or series of preferred shares to elect or remove one or more trustees, a trustee may be removed only for cause (as defined in our declaration of trust) and only by the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of trustees and that our board of trustees has the exclusive power to fill vacant trusteeships, even if the remaining trustees do not constitute a quorum. These provisions may preclude shareholders from removing incumbent trustees and filling the vacancies created by such removal with their own nominees.

Business Combinations

        Under provisions of the MGCL that apply to Maryland real estate investment trusts, certain "business combinations" (including a merger, consolidation, share exchange or, in certain circumstances specified under the statute, an asset transfer or issuance or reclassification of equity securities) between a Maryland real estate investment trust and any interested shareholder, or an affiliate of such an interested shareholder, are prohibited for five years after the most recent date on which the interested shareholder becomes an interested shareholder. Maryland law defines an interested shareholder as:

    any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the trust's outstanding voting shares; or

    an affiliate or associate of the trust who, at any time within the two-year period prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding voting shares of the trust.

        A person is not an interested shareholder under the statute if the board of trustees approves in advance the transaction by which the person otherwise would have become an interested shareholder.

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In approving a transaction, however, the board of trustees may provide that its approval is subject to compliance at or after the time of the approval, with any terms and conditions determined by the board of trustees.

        After the five-year prohibition, any business combination between the trust and an interested shareholder generally must be recommended by the board of trustees and approved by the affirmative vote of at least:

    80% of the votes entitled to be cast by holders of outstanding voting shares of the trust; and

    two-thirds of the votes entitled to be cast by holders of voting shares of the trust other than shares held by the interested shareholder with whom (or with whose affiliate) the business combination is to be effected or shares held by an affiliate or associate of the interested shareholder, unless, among other conditions, the corporation's common shareholders receive a minimum price (as described under Maryland law) for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for its shares.

        These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a trust's board of trustees prior to the time that the interested shareholder becomes an interested shareholder. Pursuant to the statute, our board of trustees has by resolution opted out of the business combination provisions of the MGCL and, consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and an interested shareholder, unless our board in the future alters or repeals this resolution. As a result, any person who later becomes an interested shareholder may be able to enter into business combinations with us without compliance by our company with the supermajority vote requirements and the other provisions of the statute.

        We cannot assure you that our board of trustees will not determine to become subject to such business combination provisions in the future. However, an alteration or repeal of this resolution of our board of trustees will not have any effect on any business combinations that have been consummated or upon any agreements existing at the time of such modification or repeal.

Control Share Acquisitions

        Maryland law provides that "control shares" of a Maryland real estate investment trust acquired in a "control share acquisition" have no voting rights except to the extent approved at a special meeting of shareholders by the affirmative vote of two-thirds of the votes entitled to be cast on the matter, excluding shares in a Maryland real estate investment trust in respect of which any of the following persons is entitled to exercise or direct the exercise of the voting power of such shares in the election of trustees: (1) a person who makes or proposes to make a control share acquisition, (2) an officer of the trust or (3) an employee of the trust who is also a trustee of the trust. "Control shares" are voting shares that, if aggregated with all other such shares previously acquired by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise voting power in electing trustees within one of the following ranges of voting power:

    one-tenth or more but less than one-third;

    one-third or more but less than a majority; or

    a majority or more of all voting power.

Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval. A "control share acquisition" means the acquisition, directly

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or indirectly, of ownership of, or the power to direct the exercise of voting power with respect to, issued and outstanding control shares, subject to certain exceptions.

        A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions (including an undertaking to pay expenses and making an "acquiring person statement" as described in the MGCL), may compel our board of trustees to call a special meeting of shareholders to be held within 50 days of demand to consider the voting rights of the control shares. If no request for a special meeting is made, we may present the question at any shareholders meeting.

        If voting rights of control shares are not approved at the meeting or if the acquiring person does not deliver an "acquiring person statement" as required by Maryland law, then, subject to certain conditions and limitations, the trust may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or of any meeting of shareholders at which the voting rights of such shares are considered and not approved. If voting rights for control shares are approved at a shareholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other shareholders may exercise appraisal rights, unless appraisal rights are eliminated under the declaration of trust. Our declaration of trust eliminates all appraisal rights of shareholders. The control share acquisition statute does not apply (1) to shares acquired in a merger, consolidation or share exchange if we are a party to the transaction or (2) to acquisitions approved or exempted by the declaration of trust or bylaws of the trust.

        Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our common shares. There is no assurance, however, that our board of trustees will not amend or eliminate this provision at any time in the future.

Subtitle 8

        Subtitle 8 of Title 3 of the MGCL permits a Maryland real estate investment trust with a class of equity securities registered under the Exchange Act and at least three independent trustees to elect to be subject, by provision in its declaration of trust or bylaws or a resolution of its board of trustees and notwithstanding any contrary provision in the declaration of trust or bylaws, to any or all of the following five provisions:

    a classified board;

    a two-thirds shareholder vote requirement for removing a trustee;

    a requirement that the number of trustees be fixed only by vote of the trustees;

    a requirement that a vacancy on the board be filled only by the remaining trustees and for the remainder of the full term of the class of trustees in which the vacancy occurred; and

    a requirement that requires the request of the holders of at least a majority of all votes entitled to be cast to call a special meeting of shareholders.

        Our declaration of trust provides that, at such time as we become eligible to make a Subtitle 8 election, we elect to be subject to the provisions of Subtitle 8 relating to the filling of vacancies on our board of trustees. Through provisions in our declaration of trust and bylaws unrelated to Subtitle 8, we already (1) require the affirmative vote of the holders of not less than two-thirds of all of the votes entitled to be cast on the matter for the removal of any trustee from our board, which removal will be allowed only for cause, (2) vest in our board the exclusive power to fix the number of trusteeships, subject to limitations set forth in our declaration of trust and bylaws, and fill vacancies and (3) require, unless called by the chairman of our board of trustees, our president or chief executive officer or our board of trustees, the written request of shareholders entitled to cast not less than a majority of all

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votes entitled to be cast at such meeting to call a special meeting. We have not elected to create a classified board. In the future, our board of trustees may elect, without shareholder approval, to create a classified board or adopt one or more of the other provisions of Subtitle 8.

Amendment of Our Declaration of Trust and Bylaws and Approval of Extraordinary Transactions

        Under the Maryland REIT law, a Maryland real estate investment trust generally cannot amend its declaration of trust or merge with another entity unless declared advisable by a majority of the board of trustees and approved by the affirmative vote of shareholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter unless a lesser percentage, but not less than a majority of all of the votes entitled to be cast on the matter, is set forth in the real estate investment trust's declaration of trust. Our declaration of trust provides that these actions (other than certain amendments to the provisions of our declaration of trust related to the removal of trustees, the restrictions on ownership and transfer of our shares and termination of the trust) may be taken if declared advisable by a majority of our board of trustees and approved by the vote of shareholders holding at least a majority of the votes entitled to be cast on the matter.

        Our board of trustees has the exclusive power to adopt, alter or repeal any provision of our bylaws and to make new bylaws.

Meetings of Shareholders

        Under our bylaws, annual meetings of shareholders are to be held each year at a date and time as determined by our board of trustees. Special meetings of shareholders may be called only by a majority of the trustees then in office, by the chairman of our board of trustees, our president or our chief executive officer. Additionally, subject to the provisions of our bylaws, special meetings of the shareholders shall be called by our secretary upon the written request of shareholders entitled to cast at least a majority of the votes entitled to be cast at such meeting. Only matters set forth in the notice of the special meeting may be considered and acted upon at such a meeting. Maryland law and our bylaws provide that any action required or permitted to be taken at a meeting of shareholders may be taken without a meeting by unanimous written consent, if that consent sets forth that action and is signed by each shareholder entitled to vote on the matter.

Advance Notice of Trustee Nominations and New Business

        Our bylaws provide that, with respect to an annual meeting of shareholders, nominations of persons for election to our board of trustees and the proposal of business to be considered by shareholders at the annual meeting may be made only:

    pursuant to our notice of the meeting;

    by or at the direction of our board of trustees; or

    by a shareholder who was a shareholder of record both at the time of giving of the notice of the meeting and at the time of the annual meeting, who is entitled to vote at the meeting and who has complied with the advance notice procedures set forth in our bylaws.

        With respect to special meetings of shareholders, only the business specified in our notice of meeting may be brought before the meeting of shareholders. Nominations of persons for election to our board of trustees may be made only:

    pursuant to our notice of the meeting;

    by or at the direction of our board of trustees; or

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    provided that our board of trustees has determined that trustees shall be elected at such meeting, by a shareholder who is a shareholder of record both at the time of giving of the notice required by our bylaws and at the time of the meeting, who is entitled to vote at the meeting and who has complied with the advance notice provisions set forth in our bylaws.

        The purpose of requiring shareholders to give advance notice of nominations and other proposals is to afford our board of trustees the opportunity to consider the qualifications of the proposed nominees or the advisability of the other proposals and, to the extent considered necessary by our board of trustees, to inform shareholders and make recommendations regarding the nominations or other proposals. The advance notice procedures also permit a more orderly procedure for conducting our shareholder meetings. Although our bylaws do not give our board of trustees the power to disapprove timely shareholder nominations and proposals, our bylaws may have the effect of precluding a contest for the election of trustees or proposals for other action if the proper procedures are not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of trustees to our board of trustees or to approve its own proposal.

Anti-takeover Effect of Certain Provisions of Maryland Law and Our Declaration of Trust and Bylaws

        The provisions of our declaration of trust on removal of trustees and the advance notice provisions of our bylaws could delay, defer or prevent a transaction or a change in control of our company that might involve a premium price for holders of our common shares or otherwise be in the best interests of our shareholders. Likewise, if our board of trustees were to opt into the business combination provisions of the MGCL or certain of the provisions of Subtitle 8 of Title 3 of the MGCL, to the extent we have not already done so, or if the provision in our bylaws opting out of the control share acquisition provisions of the MGCL were amended or rescinded, these provisions of the MGCL could have similar anti-takeover effects.

Indemnification and Limitation of Trustees' and Officers' Liability

        The Maryland REIT law permits a Maryland real estate investment trust to include in its declaration of trust a provision limiting the liability of its trustees and officers to the trust and its shareholders for money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty established by a final judgment as being material to the cause of action. Our declaration of trust contains such a provision that eliminates such liability to the maximum extent permitted by Maryland law.

        The Maryland REIT law permits a Maryland real estate investment trust to indemnify and advance expenses to its trustees, officers, employees and agents to the same extent as permitted by the MGCL for directors and officers of a Maryland corporation. The MGCL permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or are threatened to be made a party by reason of their service in those or other capacities unless it is established that:

    the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty;

    the director or officer actually received an improper personal benefit in money, property or services; or

    in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

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        However, under the MGCL, a Maryland corporation may not indemnify a director or officer for an adverse judgment in a suit by or in the right of the corporation or if the trustee or officer was adjudged liable on the basis that personal benefit was improperly received, unless in either case a court orders indemnification and then only for expenses.

        In addition, the MGCL permits a corporation to advance reasonable expenses to a director or officer upon the corporation's receipt of:

    a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and

    a written undertaking by the director or on the director's behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the trustee did not meet the standard of conduct.

        Our declaration of trust and bylaws obligate us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to:

    any present or former trustee or officer (including any individual who, at our request, serves or has served as a director, officer, partner, trustee, employee or agent of another real estate investment trust, corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise) against any claim or liability to which he or she may become subject by reason of service in such capacity; and

    any present or former trustee or officer who has been successful in the defense of a proceeding to which he or she was made a party by reason of service in such capacity.

        Our declaration of trust and bylaws also permit us, with the approval of our board of trustees, to indemnify and advance expenses to any person who served a predecessor of ours in any of the capacities described above and to any employee or agent of our company or a predecessor of our company.

        In addition, upon completion of this offering, we intend to enter into indemnification agreements with each of our trustees and executive officers that provide for indemnification to the maximum extent permitted by Maryland law.

        Insofar as the foregoing provisions permit indemnification of trustees, officers or persons controlling us for liability arising under the Securities Act, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Share Ownership Limits

        Subject to certain exceptions, our declaration of trust provides that no person (other than a person who has been granted an exception) may actually or constructively own more than 9.8% of the aggregate of our outstanding common shares by value or by number of shares, whichever is more restrictive, or 9.8% of the aggregate of the outstanding shares of any class or series of our preferred shares by value or by number of shares, whichever is more restrictive. For more information regarding these restrictions and the constructive ownership rules, see "Description of Shares—Restrictions on Ownership and Transfer."

REIT Qualification

        Our declaration of trust provides that our board of trustees may revoke or otherwise terminate our REIT election, without approval of our shareholders, if it determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT.

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DESCRIPTION OF THE PARTNERSHIP AGREEMENT
OF EOLA PROPERTY TRUST, L.P.

        We have summarized the material terms and provisions of the Amended and Restated Agreement of Limited Partnership of Eola Property Trust, L.P., which we refer to as the "partnership agreement." This summary is not complete. For more detail, you should refer to the partnership agreement itself, a copy of which is filed as an exhibit to the registration statement of which this prospectus is a part. See "Where You Can Find More Information." For purposes of this section, references to "we," "our," "us" and "our company" refer to Eola Property Trust.

General

        Eola Property Trust, L.P., our operating partnership, was formed on July 7, 2010, to acquire, own and operate our assets. We are considered to be an umbrella partnership real estate investment trust, or an UPREIT, in which all of our assets are owned in a limited partnership, our operating partnership, of which we are the sole general partner. For purposes of satisfying the asset and income tests for qualification as a REIT for U.S. federal income tax purposes, our proportionate share of the assets and income of our operating partnership will be deemed to be our assets and income. We will conduct substantially all of our business through our operating partnership and its subsidiaries, and we are liable for its obligations.

        Our operating partnership is structured to make distributions with respect to OP units that will be equivalent to the distributions made to our common shareholders. The partnership agreement will permit limited partners in our operating partnership to redeem their OP units for cash or, at our election, our common shares on a one-for-one basis (in a taxable transaction) beginning one year after the date of issuance, which will enable limited partners, if our shares are then listed, to achieve liquidity for their investment.

        We are the sole general partner of our operating partnership, and, upon completion of this offering and our formation transactions, we will own approximately        % of the OP units in our operating partnership (or        % if the underwriters exercise their overallotment option in full). Certain persons who contribute interests in properties and/or other assets pursuant to our formation transactions will receive OP units for such contributions. See "Structure and Formation of Our Company." Except as otherwise expressly provided in the partnership agreement, we, as the sole general partner, have the exclusive power to manage and conduct the business of our operating partnership. The limited partners of our operating partnership have no authority in their capacity as limited partners to transact business for, or participate in the management activities or decisions of, our operating partnership except as required by applicable law. Consequently, we, as general partner, have full power and authority to do all things we deem necessary or desirable to conduct the business of our operating partnership, as described below. The limited partners have no power to remove us as general partner as long as our shares are publicly traded.

Capital Contributions

        We will transfer substantially all of the net proceeds from this offering to our operating partnership as a capital contribution in the amount of the gross offering proceeds received from investors, and we will receive a number of OP units equal to the number of common shares issued to investors. Our operating partnership will be deemed to have simultaneously paid the selling commissions and other costs associated with this offering. If our operating partnership requires additional funds at any time in excess of capital contributions made by us or from borrowing, we may borrow funds from a financial institution or other lender and lend such funds to our operating partnership on the same terms and conditions as are applicable to our borrowing of such funds. In addition, we are authorized to cause our operating partnership to issue OP units for less than fair

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market value if we conclude in good faith that such issuance is in the best interest of our operating partnership and our shareholders.

Operations

        The partnership agreement requires that our operating partnership be operated in a manner that will enable us to (1) satisfy the requirements for classification as a REIT for U.S. federal income tax purposes, (2) avoid any U.S. federal income or excise tax liability and (3) ensure that our operating partnership will not be classified as a "publicly traded partnership" for purposes of Section 7704 of the Internal Revenue Code, which classification could result in our operating partnership being taxed as a corporation, rather than as a partnership.

Distributions

        The partnership agreement requires that our operating partnership distribute available cash to its partners on at least a quarterly basis in accordance with their relative percentage interests or specified preferences, if any. Available cash is all cash revenues and funds received plus any reduction in reserves and minus interest and principal payments on debt, all cash expenditures (including capital expenditures), investments in any entity, any additions to reserves and other adjustments, as determined by us in our sole and absolute discretion. Distributions will be made in a manner such that a holder of one OP unit will receive the same amount of distributions from our operating partnership as the amount paid by us to a holder of one common share.

        Unless we otherwise specifically agree in the partnership agreement or in an agreement entered into at the time a new class or series is created, no OP unit will be entitled to a distribution in preference to any other OP unit. A partner will not in any event receive a distribution of available cash with respect to an OP unit for a quarter or shorter period if the partner is entitled to receive a distribution out of that same available cash with respect to a share of our company for which that OP unit has been exchanged or redeemed.

        Upon the liquidation of our operating partnership, after payment of debts and obligations, any remaining assets of our operating partnership will be distributed to the holders of the OP units that are entitled to any preference in distribution upon liquidation in accordance with the rights of any such class or series, and the balance, if any, will be distributed to the partners in accordance with their capital accounts, after giving effect to all contributions, distributions and allocations for all periods.

Allocations of Net Income and Net Loss

        Net income and net loss of our operating partnership are determined and allocated with respect to each fiscal year of our operating partnership. Except as otherwise provided in the partnership agreement, an allocation of a share of net income or net loss is treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing net income or net loss. Except as otherwise provided in the partnership agreement, net income and net loss are allocated to the general partner and the other holders of the OP units in accordance with their respective percentage interests in the OP units at the end of each fiscal year. Upon the occurrence of certain specific events, our operating partnership will revalue its assets and any net increase in valuation will be allocated first to holders of LTIP units, if any, to equalize the capital accounts of such holders with the capital accounts of OP unit holders. The partnership agreement contains provisions for special allocations intended to comply with certain regulatory requirements, including the requirements of Treasury Regulations Sections 1.704-1(b), 1.704-2 and 1.752-3(a). See "Material United States Federal Income Tax Considerations."

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LTIP Units

        Following this offering, we may at any time cause our operating partnership to issue LTIP units to members of our senior management team. These LTIP units will vest on such terms as determined by our compensation committee. In general, LTIP units are a special class of OP units in our operating partnership and will receive the same quarterly per unit profit distributions as the other outstanding OP units in our operating partnership. Initially, each LTIP unit will have a capital account of zero and, therefore, the holder of the LTIP unit would receive nothing if our operating partnership were liquidated immediately after the LTIP unit is awarded. However, the partnership agreement requires that "book gain" or economic appreciation in our assets realized by our operating partnership, whether as a result of an actual asset sale or upon the revaluation of our assets, as permitted by applicable Treasury Regulations, be allocated first to LTIP units until the capital account per LTIP unit is equal to the capital account per unit of our operating partnership. The applicable Treasury Regulations provide that assets of our operating partnership may be revalued upon specified events, including upon additional capital contributions by us or other partners of our operating partnership. Upon equalization of the capital account of the LTIP unit with the per unit capital account of the OP units and full vesting of the LTIP unit, the LTIP unit will be convertible into an OP unit at any time. There is a risk that a LTIP unit will never become convertible because of insufficient gain realization to equalize capital accounts and, therefore, the value that a holder will realize for a given number of vested LTIP units may be less than the value of an equal number of common shares.

Transfers

        We, as general partner, generally may not transfer any of our OP units in our operating partnership, including any of our limited partner interests, or voluntarily withdraw as the general partner of our operating partnership, except in connection with a merger, consolidation or other combination with or into another person, a sale of all or substantially all of our assets or any reclassification, recapitalization or change of our outstanding shares.

        With certain limited exceptions, the limited partners may not transfer their interests in our operating partnership, in whole or in part, without our prior written consent, which consent may be withheld in our sole and absolute discretion. We also have the right to prohibit transfers by limited partners under certain circumstances if it would have certain adverse tax consequences to us or our operating partnership.

        Except with our consent to the admission of the transferee as a limited partner, no transferee shall have any rights by virtue of the transfer other than the rights of an assignee, and will not be entitled to vote OP units in any matter presented to the limited partners for a vote. We, as general partner, will have the right to consent to the admission of a transferee of the interest of a limited partner, which consent may be given or withheld by us in our sole and absolute discretion.

Mergers and Sales of Assets

        We may engage in a merger, consolidation or other combination transaction, or sell, exchange, transfer or otherwise dispose of all or substantially all of our assets, only if the transaction has been approved by the consent of the partners holding OP units representing more than 50% of the percentage interests (as defined in the partnership agreement) entitled to vote thereon, including any OP units held by us, and in connection with such transaction all limited partners have the right to receive consideration which, on a per unit basis, is equivalent in value to the consideration to be received by our shareholders, on a per share basis, and such other conditions are met that are expressly provided for in the partnership agreement. In addition, we may engage in a merger, consolidation or other combination with or into another person where following the consummation of such transaction, the equity holders of the surviving entity are substantially identical to our shareholders.

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Redemption Right

        As a general rule, limited partners will have the right to cause our operating partnership to redeem their OP units at any time beginning one year following the date of the issuance of the OP units held by any such limited partner. If we give the limited partners notice of our intention to make an extraordinary distribution of cash or property to our shareholders or effect a merger, a sale of all or substantially all of our assets, or any other similar extraordinary transaction, each limited partner may exercise its right to redeem its OP units, regardless of the length of time such limited partner has held its OP units.

        Unless we elect to assume and perform our operating partnership's obligation with respect to the unit redemption right, as described below, a limited partner exercising a unit redemption right will receive cash from our operating partnership in an amount equal to the market value of our common shares for which the OP units would have been redeemed if we had assumed and satisfied our operating partnership's obligation by paying the redemption amount in our common shares, as described below. The market value of our common shares for this purpose (assuming a market then exists) will be equal to the average of the closing trading price of our common shares on the NYSE for the ten trading days before the day on which we received the redemption notice.

        We have the right to elect to acquire the OP units being redeemed directly from a limited partner in exchange for either cash in the amount specified above or a number of our common shares equal to the number of OP units offered for redemption, adjusted as specified in the partnership agreement to take into account prior share dividends or any subdivisions or combinations of our common shares. As general partner, we will have the sole discretion to elect whether the redemption right will be satisfied by us in cash or our common shares. No redemption or exchange can occur if delivery of common shares by us would be prohibited either under the provisions of our declaration of trust or under applicable federal or state securities laws, in each case regardless of whether we would in fact elect to assume and satisfy the unit redemption right with shares.

Issuance of Additional Partnership Interests

        We, as general partner, are authorized to cause our operating partnership to issue additional OP units or other partnership interests to its partners, including us and our affiliates, or other persons. These OP units may be issued in one or more classes or in one or more series of any class, with designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to one or more other classes of partnership interests (including OP units held by us), as determined by us in our sole and absolute discretion without the approval of any limited partner, subject to the limitations described below.

        No OP unit or interest may be issued to us as general partner or limited partner unless:

    our operating partnership issues OP units or other partnership interests in connection with the grant, award or issuance of shares or other equity interests in us having designations, preferences and other rights such that the economic interests attributable to the newly issued shares or other equity interests in us are substantially similar to the designations, preferences and other rights, except voting rights, of the OP units or other partnership interests issued to us, and we contribute to our operating partnership the proceeds from the issuance of the shares or other equity interests received by us; or

    our operating partnership issues the additional OP units or other partnership interests to all partners holding OP units or other partnership interests in the same class in proportion to their respective percentage interests in that class.

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Indemnification and Limitation of Liability

        The partnership agreement expressly limits our liability by providing that neither we, as the general partner of our operating partnership, nor any of our trustees or officers, will be liable or accountable in damages to our operating partnership, the limited partners or assignees for errors in judgment, mistakes of fact or law or for any act or omission if we, or such trustee or officer, acted in good faith. In addition, our operating partnership is required to indemnify us, and our officers, trustees, employees, agents and designees to the fullest extent permitted by applicable law from and against any and all claims arising from operations of our operating partnership, unless it is established that (1) the act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, (2) the indemnified party actually received an improper personal benefit in money, property or services or (3) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that the act or omission was unlawful. Our operating partnership also must pay or reimburse the reasonable expenses of any such person upon its receipt of a written affirmation of the person's good faith belief that the standard of conduct necessary for indemnification has been met and a written undertaking to repay any amounts paid or advanced if it is ultimately determined that the person did not meet the standard of conduct for indemnification.

Amendment of Partnership Agreement

        Amendments to the partnership agreement may be proposed by us, as general partner, or by any limited partner holding partnership interests representing 25% or more of the percentage interests entitled to vote thereon. In general, the partnership agreement may be amended only with the approval of the general partner and the written consent of the partners holding partnership interests representing more than 50% of the percentage interests entitled to vote thereon. However, as general partner, we will have the power, without the consent of the limited partners, to amend the partnership agreement as may be required:

    to add to our obligations as general partner or surrender any right or power granted to us as general partner or any affiliate of ours for the benefit of the limited partners;

    to reflect the admission, substitution, termination or withdrawal of partners in compliance with the partnership agreement;

    to set forth the designations, rights, powers, duties and preferences of the holders of any additional partnership interests issued in accordance with the authority granted to us as general partner;

    to reflect a change that does not adversely affect the limited partners in any material respect, or to cure any ambiguity, correct or supplement any provision in the partnership agreement not inconsistent with law or with other provisions of the partnership agreement, or make other changes with respect to matters arising under the partnership agreement that will not be inconsistent with law or with the provisions of the partnership agreement;

    to modify the manner in which capital accounts are computed;

    to include provisions referenced in future U.S. federal income tax guidance relating to compensatory partnership interests that we determine are reasonably necessary in respect of such guidance; and

    to satisfy any requirements, conditions or guidelines contained in any order, directive, opinion, ruling or regulation of a federal, state or local agency or contained in federal, state or local law.

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        The approval of a majority of the partnership interests held by limited partners other than us is necessary to amend provisions regarding, among other things:

    the issuance of partnership interests in general and the restrictions imposed on the issuance of additional partnership interests to us in particular;

    the prohibition against removing us as general partner by the limited partners;

    restrictions on our power to conduct businesses other than owning partnership interests of our operating partnership and the relationship of our common shares to OP units;

    limitations on transactions with affiliates;

    our liability as general partner for monetary or other damages to our operating partnership;

    partnership consent requirements for the sale or other disposition of substantially all the assets of our operating partnership; or

    the transfer of partnership interests held by us or the dissolution of our operating partnership.

        Amendments to the partnership agreement that would, among other things, (i) convert a limited partner's interest into a general partner's interest, (ii) modify the limited liability of a limited partner, (iii) alter the interest of a partner in profits or losses, or the right to receive any distributions, except as permitted under the partnership agreement with respect to the admission of new partners or the issuance of additional OP units, or (iv) materially alter the unit redemption right of the limited partners, must be approved by each affected limited partner or any assignee who is a bona fide financial institution that loans money or otherwise extends credit to a holder of OP units or partnership interests that would be adversely affected by the amendment.

Term

        Our operating partnership will continue until dissolved pursuant to the partnership agreement or as otherwise provided by law.

Tax Matters

        Pursuant to the partnership agreement, the general partner is the tax matters partner of our operating partnership. Accordingly, through our role as the general partner of our operating partnership, we have authority to make tax elections under the Internal Revenue Code on behalf of our operating partnership, and to take such other actions as permitted under the partnership agreement.

Conflicts of Interest

        Conflicts of interest exist or could arise in the future as a result of our relationships with our operating partnership or any limited partner of our operating partnership. Our trustees and officers have duties to our company and our shareholders under applicable Maryland law in connection with their management of our company. At the same time, we, as sole general partner, have fiduciary duties to our operating partnership and to its limited partners under Delaware law in connection with the management of our operating partnership. Our duties as sole general partner to our operating partnership and its partners may come into conflict with the duties of our trustees and officers to our company and our shareholders.

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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

        The following is a discussion of the material United States federal income tax considerations relating to our qualification and taxation as a "real estate investment trust" for U.S. federal income tax purposes, or "REIT," and the acquisition, holding, and disposition of our common shares. As used in this section, references to the terms "company," "we," "our," and "us" mean only Eola Property Trust and not its subsidiaries or other lower-tier entities, except as otherwise indicated. This summary is based upon the Internal Revenue Code, the Treasury Regulations, rulings and other administrative interpretations and practices of the Internal Revenue Service, or the IRS (including administrative interpretations and practices expressed in private letter rulings which are binding on the IRS only with respect to the particular taxpayers who requested and received those rulings), and judicial decisions, all as currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. We have not sought and will not seek an advance ruling from the IRS regarding any matter discussed in this section. The summary is also based upon the assumption that we will operate our company and its subsidiaries and affiliated entities in accordance with their applicable organizational documents. This summary is for general information only, and does not purport to discuss all aspects of U.S. federal income taxation that may be important to a particular investor in light of its investment or tax circumstances, or to investors subject to special tax rules, including:

    broker-dealers;

    financial institutions;

    holders who receive our common shares through the exercise of employee stock options or otherwise as compensation;

    insurance companies;

    non-U.S. shareholders (as defined below), except to the extent discussed below in "—Taxation of Shareholders—Taxation of Non-U.S. Shareholders";

    persons holding 10% or more (by vote or value) of our outstanding common shares, except to the extent discussed below;

    persons holding our shares as part of a "straddle," "hedge," "conversion transaction," "synthetic security" or other integrated investment;

    persons holding our common shares on behalf of other persons as nominees;

    persons holding our common shares through a partnership or similar pass-through entity;

    persons subject to the alternative minimum tax provisions of the Internal Revenue Code;

    REITs;

    regulated investment companies, or RICs;

    subchapter S corporations;

    foreign (non-U.S.) governments;

    tax-exempt organizations, except to the extent discussed below in "—Taxation of Shareholders—Taxation of Tax-Exempt U.S. Shareholders,"

    trusts and estates; or

    U.S. expatriates.

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        This summary assumes that shareholders will hold our common shares as a capital asset, which generally means as property held for investment.

        The U.S. federal income tax treatment of holders of our common shares depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. In addition, the tax consequences to any particular shareholder of holding our common shares will depend on the shareholder's particular tax circumstances. You are urged to consult your tax advisor regarding the U.S. federal, state, local, and foreign income and other tax consequences to you in light of your particular investment or tax circumstances of acquiring, holding, exchanging, or otherwise disposing of our common shares.

Taxation of Eola Property Trust

        Eola Office Partners has in effect an election to be taxed as an S Corporation under Section 1361 of the Internal Revenue Code. Eola Office Partners will merge with and into us prior to the pricing of this offering in a transaction that is intended to be treated as a "F reorganization" under the Internal Revenue Code. Effective no later than the date of this merger, we will elect to be treated as an association taxable as a corporation for federal income tax purposes. As a result of the merger, we will be treated as a continuation of Eola Office Partners for U.S. federal income tax purposes. Eola Office Partners will revoke its S Corporation election effective prior to the date of this merger. We intend to elect to be taxed as a REIT, commencing with the portion of our taxable year following the date for which the revocation of the S Corporation election of Eola Office Partners is effective and ending on December 31, 2010, and we intend to make this election upon the filing of the U.S. federal income tax return required to be filed by a REIT for such portion of 2010.

        We believe that we have been organized, and expect to operate in such a manner as to qualify for taxation as a REIT. The law firm of Hogan Lovells US LLP ("Hogan Lovells") has acted as our tax counsel in connection this offering. We will receive an opinion of Hogan Lovells to the effect that, commencing with the portion of our taxable year following the date for which the revocation of the S Corporation election of Eola Office Partners is effective and ending on December 31, 2010, we have been organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, and that our proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT. It must be emphasized that the opinion of Hogan Lovells will be based on various assumptions relating to our organization and operation, and is conditioned upon factual representations and covenants made by our management regarding our organization, assets, income, the present and future conduct of our business operations, and other items regarding our ability to meet the various requirements for qualification as a REIT, and assumes that such representations and covenants are accurate and complete and that we will take no action inconsistent with our qualification as a REIT. Although we intend to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given by Hogan Lovells or by us that we will qualify as a REIT for any particular year. The opinion will be expressed as of the date issued. Hogan Lovells does not have and will not have any obligation to advise us or our shareholders of any subsequent change in the matters stated, represented or assumed, or of any subsequent change in the applicable law. You should be aware that opinions of counsel are not binding on the IRS, and no assurance can be given that the IRS will not challenge the conclusions set forth in such opinions. The opinion of Hogan Lovells will not foreclose the possibility that we may have to utilize one or more of the REIT savings provisions discussed below, which could require us to pay an excise or penalty tax (which could be significant in amount) in order for us to maintain our REIT qualification. Qualification and taxation as a REIT depends on our ability to meet on a continuing basis, through actual operating results, distribution levels, and diversity of stock and

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asset ownership, various qualification requirements imposed upon REITs by the Internal Revenue Code, the compliance with which will not be monitored by Hogan Lovells. In addition, our ability to qualify as a REIT may depend in part upon the operating results, organizational structure and entity classification for U.S. federal income tax purposes of certain entities in which we invest. Our ability to qualify as a REIT also requires that we satisfy certain asset tests, some of which depend upon the fair market values of assets that we own directly or indirectly. Such values may not be susceptible to a precise determination. Accordingly, no assurance can be given that the actual results of our operations for any taxable year will satisfy such requirements for qualification and taxation as a REIT.

Taxation of REITs in General

        As indicated above, our qualification and taxation as a REIT depend upon our ability to meet, on a continuing basis, various qualification requirements imposed upon REITs by the Internal Revenue Code. The material qualification requirements are summarized below under "—Requirements for Qualification as a REIT." Although we intend to operate so that we qualify as a REIT, no assurance can be given that the IRS will not challenge our qualification, or that we will be able to operate in accordance with the REIT requirements in the future. See "—Failure to Qualify as a REIT." Provided that we qualify as a REIT, we will be entitled to a deduction for dividends that we pay and, therefore, will not be subject to U.S. federal corporate income tax on our taxable income that is currently distributed to our shareholders. This treatment substantially eliminates the "double taxation" at the corporate and shareholder levels that generally results from investment in a corporation. In general, income generated by a REIT is taxed only at the shareholder level upon a distribution of dividends by the REIT to its shareholders.

        Any net operating losses, foreign tax credits and other tax attributes of a REIT generally do not pass through to our shareholders, subject to special rules for certain items such as the capital gains that we recognize. See "—Taxation of Shareholders." Even if we qualify for taxation as a REIT, we will be subject to U.S. federal income tax in the following circumstances:

    We will be taxed at regular U.S. federal corporate rates on any undistributed "REIT taxable income," including undistributed net capital gains, for any taxable year. REIT taxable income is the taxable income of the REIT subject to specified adjustments, including a deduction for dividends paid.

    We (or our shareholders) may be subject to the "alternative minimum tax" on our items of tax preference, if any.

    If we have net income from prohibited transactions, which are, in general, sales or other dispositions of inventory or property held primarily for sale to customers in the ordinary course of business, other than foreclosure property, such income will be subject to a 100% tax. See "—Requirements for Qualification as a REIT—Gross Income Tests—Income from Prohibited Transactions," and "—Requirements for Qualification as a REIT—Gross Income Tests—Income from Foreclosure Property," below.

    If we elect to treat property that we acquire in connection with certain leasehold terminations or a foreclosure of a mortgage loan as "foreclosure property," we may thereby avoid (a) the 100% prohibited transactions tax on gain from a resale of that property (if the sale would otherwise constitute a prohibited transaction); and (b) the inclusion of any income from such property as nonqualifying income for purposes of the REIT gross income tests discussed below. Income from the sale or operation of the property may be subject to U.S. federal corporate income tax at the highest applicable rate (currently 35%).

    If we fail to satisfy the 75% gross income test or the 95% gross income test, as discussed below, but our failure is due to reasonable cause and not due to willful neglect and we nonetheless

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      maintain our REIT qualification because of specified cure provisions, we will be subject to a 100% tax on an amount equal to (a) the greater of (1) the amount by which we fail the 75% gross income test or (2) the amount by which we fail the 95% gross income test, as the case may be, multiplied by (b) a fraction intended to reflect our profitability.

    If we violate the asset tests (other than certain de minimis violations) or other requirements applicable to REITs, as described below, but our failure is due to reasonable cause and not due to willful neglect and we nonetheless maintain our REIT qualification because of specified cure provisions, we will be required to pay a tax equal to at least $50,000 per failure, and, in the case of certain asset test failures, will be determined as the amount of net income generated by the assets in question multiplied by the highest corporate tax rate (currently 35%) if that amount exceeds $50,000 per failure.

    If we fail to distribute during each calendar year at least the sum of (a) 85% of our REIT ordinary income for such year, (b) 95% of our REIT capital gain net income for such year, and (c) any undistributed taxable income from prior periods (or the required distribution), we will be subject to a non-deductible 4% excise tax on the excess of the required distribution over the sum of (1) the amounts that we actually distributed (taking into account excess distributions from prior years), plus (2) retained amounts upon which we paid income tax at the corporate level.

    We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record-keeping requirements intended to monitor our compliance with rules relating to the composition of our shareholders, as described below in "—Requirements for Qualification as a REIT."

    We will be subject to a 100% penalty tax on amounts we receive (or on certain expenses deducted by a taxable REIT subsidiary) if certain arrangements among us, our tenants and any of our taxable REIT subsidiaries do not reflect arm's length terms.

    If we acquire appreciated assets from a corporation that is not a REIT (i.e., a corporation taxable under subchapter C of the Internal Revenue Code) in a transaction in which the adjusted tax basis of the assets in our hands is determined by reference to the adjusted tax basis of the assets in the hands of the subchapter C corporation, we will be subject to tax on such appreciation at the highest corporate income tax rate then applicable if we subsequently recognize gain on a disposition of any such assets during the ten-year period following their acquisition from the subchapter C corporation. The results described in this paragraph assume that the non-REIT corporation will not elect, in lieu of this treatment, to be subject to an immediate tax when the asset is acquired by us.

    We may elect to retain and pay U.S. federal income tax on our net long-term capital gain. In that case, a shareholder would include its proportionate share of our undistributed long-term capital gain (to the extent we make a timely designation of such gain to the shareholder) in its income, would be deemed to have paid the tax we paid on such gain, and would be allowed a credit for its proportionate share of the tax deemed to have been paid, and an adjustment would be made to increase the shareholder's tax basis in our common shares.

    The earnings of any subsidiaries that are subchapter C corporations, including any taxable REIT subsidiary, are subject to U.S. federal corporate income tax.

        Notwithstanding our qualification as a REIT, we and our subsidiaries may be subject to a variety of taxes, including payroll taxes and state, local, and foreign income, property and other taxes on our assets, operations and/or net worth. We could also be subject to tax in situations and on transactions not presently contemplated.

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Requirements for Qualification as a REIT

        The Internal Revenue Code defines a REIT as a corporation, trust or association:

    (1)
    that is managed by one or more trustees or directors;

    (2)
    the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;

    (3)
    that would be taxable as a domestic corporation but for sections 856 through 859 of the Internal Revenue Code;

    (4)
    that is neither a financial institution nor an insurance company subject to applicable provisions of the Internal Revenue Code;

    (5)
    the beneficial ownership of which is held by 100 or more persons;

    (6)
    during the last half of each taxable year not more than 50% in value of the outstanding shares of which is owned directly or indirectly by five or fewer "individuals" (as defined in the Internal Revenue Code to include certain entities and as determined by applying certain attribution rules);

    (7)
    that makes an election to be taxable as a REIT, or has made this election for a previous taxable year which has not been revoked or terminated, and satisfies all of the relevant filing and other administrative requirements established by the IRS that must be met to elect and maintain REIT qualification;

    (8)
    that uses a calendar year for U.S. federal income tax purposes,

    (9)
    that meets other tests described below, including with respect to the nature of its income and assets; and

    (10)
    that has no earnings and profits from any non-REIT taxable year at the close of any taxable year.

        The Internal Revenue Code provides that conditions (1), (2), (3) and (4) must be met during the entire taxable year, and condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a shorter taxable year. Conditions (5) and (6) need not be satisfied during a corporation's initial tax year as a REIT (which, in our case, will be 2010). Our declaration of trust provides restrictions regarding the ownership and transfers of our shares, which are intended to assist us in satisfying the share ownership requirements described in conditions (5) and (6) above. For purposes of condition (6), an "individual" generally includes a supplemental unemployment compensation benefit plan, a private foundation or a portion of a trust permanently set aside or used exclusively for charitable purposes. However, a trust that is a qualified trust under Internal Revenue Code Section 401(a) generally is not considered an individual, and beneficiaries of a qualified trust are treated as holding shares of a REIT in proportion to their actual interests in the trust for purposes of condition (6) above.

        To monitor compliance with the share ownership requirements, we are generally required to maintain records regarding the actual ownership of our shares. To do so, we must demand written statements each year from the record holders of significant percentages of our shares pursuant to which the record holders must disclose the actual owners of the shares (i.e., the persons required to include in gross income the dividends paid by us). We must maintain a list of those persons failing or refusing to comply with this demand as part of our records. We could be subject to monetary penalties if we fail to comply with these record-keeping requirements. A shareholder that fails or refuses to comply with the demand is required by Treasury Regulations to submit a statement with its tax return disclosing the actual ownership of our shares and other information.

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        We are organized as a Maryland real estate investment trust and, therefore, meet condition (3). We intend to elect to be taxed as a REIT for U.S. federal income tax purposes with respect to the portion of our taxable year beginning upon the revocation of the S corporation election of Eola Office Partners and ending December 31, 2010, when we file our U.S. federal income tax return for such short taxable year, in satisfaction of condition (7). To satisfy requirement (8), we have adopted December 31 as our year end. We will have no earnings and profits from a non-REIT year in satisfaction of condition (10).

        The Internal Revenue Code provides relief from violations of the REIT gross income requirements, as described below under "—Requirements for Qualification as a REIT—Gross Income Tests," in cases where a violation is due to reasonable cause and not to willful neglect, and other requirements are met, including the payment of a penalty tax that is based upon the magnitude of the violation. In addition, certain provisions of the Internal Revenue Code extend similar relief in the case of certain violations of the REIT asset requirements (see "—Requirements for Qualification as a REIT—Asset Tests" below) and other REIT requirements, again provided that the violation is due to reasonable cause and not willful neglect, and other conditions are met, including the payment of a penalty tax. If we fail to satisfy any of the various REIT requirements, there can be no assurance that these relief provisions would be available to enable us to maintain our qualification as a REIT, and, if such relief provisions are available, the amount of any resultant penalty tax could be substantial.

Effect of Subsidiary Entities

        Ownership of Partnership Interests.    In the case of a REIT that is a partner in an entity that is treated as a partnership for U.S. federal income tax purposes, Treasury Regulations provide that the REIT is deemed to own its proportionate share of the partnership's assets, and to earn its proportionate share of the partnership's income, for purposes of the asset and gross income tests applicable to REITs, as described below. A REIT's proportionate share of a partnership's assets and income is based on the REIT's pro rata share of the capital interests in the partnership. However, solely for purposes of the 10% value test, described below, the determination of a REIT's interest in partnership assets is based on the REIT's proportionate interest in the equity and certain debt securities issued by the partnership. In addition, the assets and gross income of the partnership are deemed to retain the same character in the hands of the REIT. Thus, our proportionate share of the assets and items of income of any of our subsidiary partnerships will be treated as our assets and items of income for purposes of applying the REIT requirements. Any investment in partnerships involves special tax considerations, including the possibility of a challenge by the IRS of the status of any subsidiary partnership as a partnership, as opposed to an association taxable as a corporation, for U.S. federal income tax purposes. If any of these entities were treated as an association for U.S. federal income tax purposes, it would be taxable as a corporation and therefore could be subject to an entity-level tax on its income. In such a situation, the character of our assets and items of gross income would change and could preclude us from satisfying the REIT asset tests or the gross income tests as discussed in "—Requirements for Qualification as a REIT—Asset Tests" and "—Requirements for Qualification as a REIT—Gross Income Tests," and in turn could prevent us from qualifying as a REIT, unless we are eligible for relief from the violation pursuant to relief provisions. See "—Requirements for Qualification as a REIT—Gross Income Tests," "—Requirements for Qualification as a REIT—Asset Tests," and "—Failure to Qualify as a REIT," below, for discussion of the effect of failure to satisfy the REIT tests for a taxable year, and of the relief provisions. In addition, any change in the status of any subsidiary partnership for tax purposes might be treated as a taxable event, in which case we could have taxable income that is subject to the REIT distribution requirements without receiving any cash.

        Under the Internal Revenue Code and the Treasury Regulations, income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership in exchange for

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an interest in the partnership must be allocated for tax purposes so that the contributing partner is charged with, or benefits from, the unrealized gain or unrealized loss associated with the property at the time of the contribution. The amount of the unrealized gain or unrealized loss is generally equal to the difference between the fair market value of the contributed property at the time of contribution, and the adjusted tax basis of such property at the time of contribution (a "book-tax difference"). Such allocations are solely for U.S. federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners.

        To the extent that any of our subsidiary partnerships acquire appreciated (or depreciated) properties by way of capital contributions from their partners, allocations would need to be made in a manner consistent with these requirements. Where a partner contributes cash to a partnership at a time that the partnership holds appreciated (or depreciated) property, the Treasury Regulations provide for a similar allocation of these items to the other (i.e., non-contributing) partners. These rules may apply to a contribution that we make to any subsidiary partnerships of the cash proceeds received in offerings of our common shares. As a result, the partners of our subsidiary partnerships, including us, could be allocated greater or lesser amounts of depreciation and taxable income in respect of a partnership's properties than would be the case if all of the partnership's assets (including any contributed assets) had a tax basis equal to their fair market values at the time of any contributions to that partnership. This could cause us to recognize, over a period of time, taxable income in excess of cash flow from the partnership, which might adversely affect our ability to comply with the REIT distribution requirements discussed below and result in a greater portion of our distribution being taxable as a dividend.

        Ownership of Disregarded Subsidiaries.    If a REIT owns a corporate subsidiary that is a qualified REIT subsidiary, or QRS, that subsidiary is generally disregarded for U.S. federal income tax purposes, and all assets, liabilities and items of income, deduction and credit of the subsidiary are treated as assets, liabilities and items of income, deduction and credit of the REIT itself, including for purposes of the gross income and asset tests applicable to REITs, as described below. A QRS is any corporation other than a taxable REIT subsidiary that is directly or indirectly wholly owned by a REIT. Other entities that are wholly owned by us, including single member limited liability companies that have not elected to be taxed as corporations for U.S. federal income tax purposes, are also generally disregarded as separate entities for U.S. federal income tax purposes, including for purposes of the REIT income and asset tests. Disregarded subsidiaries, along with any partnerships in which we hold an equity interest, are sometimes referred to herein as "pass-through subsidiaries." In the event that a disregarded subsidiary ceases to be wholly owned by us (for example, if any equity interest in the subsidiary is acquired by a person other than us or another disregarded subsidiary of ours) the subsidiary's separate existence would no longer be disregarded for U.S. federal income tax purposes. Instead, the subsidiary would have multiple owners and would be treated as either a partnership or a taxable corporation. Such an event could, depending on the circumstances, adversely affect our ability to satisfy the various asset and gross income requirements applicable to REITs, including the requirement that REITs generally may not own, directly or indirectly, more than 10% of the securities of another corporation unless it is a taxable REIT subsidiary or a QRS. See "—Requirements for Qualification as a REIT—Gross Income Tests" and "—Requirements for Qualification as a REIT—Asset Tests."

        Ownership of Taxable REIT Subsidiaries.    We initially will own an interest in one taxable REIT subsidiary and may acquire securities in additional taxable REIT subsidiaries in the future. In general, a REIT may jointly elect with a subsidiary corporation, whether or not wholly owned, to treat such subsidiary corporation as a taxable REIT subsidiary. The separate existence of a taxable REIT subsidiary or other taxable corporation is not ignored for U.S. federal income tax purposes. Accordingly, a taxable REIT subsidiary or other taxable corporation generally would be subject to corporate income tax on its earnings, which may reduce the cash flow generated by us and our subsidiaries in the aggregate, and may reduce our ability to make distributions to our shareholders.

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        A REIT is not treated as holding the assets of a taxable REIT subsidiary or other taxable subsidiary corporation or as receiving any income that the subsidiary earns. Rather, the stock issued by a taxable subsidiary corporation to a REIT is an asset in the hands of the REIT, and the REIT generally treats the dividends paid to it from such taxable subsidiary corporation, if any, as income. This treatment can affect the income and asset test calculations that apply to the REIT. Because a REIT does not include the assets and income of a taxable REIT subsidiary or other taxable subsidiary corporations in determining the REIT's compliance with the REIT requirements, such entities may be used by the REIT to undertake indirectly activities that the REIT rules might otherwise preclude the REIT from doing directly or through pass-through subsidiaries. If dividends are paid to us by any taxable REIT subsidiary that we own, then a portion of the dividends that we distribute to shareholders who are taxed at individual rates generally will be eligible (for tax years beginning in 2010) for taxation at preferential qualified dividend income tax rates rather than at ordinary income rates. See "—Requirements for Qualification as a REIT—Annual Distribution Requirements" and "—Taxation of Shareholders—Taxation of Taxable U.S. Shareholders."

        Generally, a taxable REIT subsidiary can perform impermissible tenant services without causing us to receive impermissible tenant services income under the REIT income tests. However, current restrictions imposed on taxable REIT subsidiaries are intended to ensure that such entities will be subject to appropriate levels of U.S. federal income taxation. First, a taxable REIT subsidiary may not, subject to certain limitations, deduct interest paid or accrued by a taxable REIT subsidiary to an affiliated REIT to the extent that such payments exceed, generally, 50% of the taxable REIT subsidiary's adjusted taxable income for that year (although the taxable REIT subsidiary may carry forward to, and deduct in, a succeeding year the disallowed interest amount if the 50% test is satisfied in that year). In addition, the rules impose a 100% excise tax on transactions between a taxable REIT subsidiary and its parent REIT or the REIT's tenants that are not conducted on an arm's length basis. We intend that all of our transactions with our taxable REIT subsidiaries will be conducted on an arm's length basis.

        Ownership of Interests In Other REITs.    We expect that, after the completion of our formation transactions, we will own, directly or indirectly, substantially all of the equity in three entities which have elected to be taxed as REITs for U.S. federal income tax purposes. As REITs, each of these entities is subject to the various REIT qualification requirements. We believe that these entities have been organized and have operated in a manner to qualify for taxation as a REIT for U.S. federal income tax purposes, and will continue to be organized and operated in this manner. If any of these entities were to fail to qualify as a REIT, our stock investment in such entity would cease to be a qualifying real estate asset for purposes of the 75% gross asset test and would become subject to the 5% asset test, the 10% voting stock limitation, and the 10% value limitation generally applicable to our ownership in corporations (other than REITs, qualified REIT subsidiaries and taxable REIT subsidiaries). If any of these entities failed to qualify as a REIT, we would not meet the 10% voting securities limitation and the 10% value limitation with respect to our interest in such entity, and accordingly, we also would fail to qualify as a REIT.

Gross Income Tests

        To qualify as a REIT, we must satisfy two gross income requirements on an annual basis. First, at least 75% of our gross income for each taxable year must be derived from investments relating to real property or mortgages on real property, including:

    "rents from real property";

    dividends or other distributions on, and gain from the sale of, shares in other REITs;

    gain from the sale of real property or mortgages on real property, in either case, not held for sale to customers;

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    interest income derived from mortgage loans secured by real property; and

    income attributable to temporary investments of new capital in stocks and debt instruments during the one-year period following our receipt of new capital that we raise through equity offerings or issuance of debt obligations with at least a five-year term.

        Second, at least 95% of our gross income in each taxable year must be derived from some combination of income that qualifies under the 75% gross income test described above, as well as (a) other dividends, (b) interest, and (c) gain from the sale or disposition of stock or securities, in either case, not held for sale to customers.

        For purposes of one or both of the 75% and 95% gross income tests, the following items of income are excluded from the computation of gross income: (1) gross income from prohibited transactions; (2) certain foreign currency income; and (3) income and gain from certain hedging transactions. See "—Requirements for Qualification as a REIT—Gross Income Tests—Income from Hedging Transactions."

        Rents from Real Property.    Rents received by us will qualify as "rents from real property" in satisfying the gross income requirements described above only if the following conditions are met:

    First, if rent attributable to personal property leased in connection with a lease of real property, is greater than 15% of the total rent received under the lease, then the portion of rent attributable to the personal property will not qualify as rents from real property;

    Second, the amount of rent must not be based in whole or in part on the income or profits of any person. Amounts received as rent, however, generally will not be excluded from rents from real property solely by reason of being based on fixed percentages of gross receipts or sales;

    Third, rents we receive from a "related party tenant" will not qualify as rents from real property in satisfying the gross income tests unless the tenant is a taxable REIT subsidiary, at least 90% of the property is leased to unrelated tenants, and the rent paid by the taxable REIT subsidiary is substantially comparable to rent paid by the unrelated tenants for comparable space. Amounts attributable to certain rental increases charged to a controlled taxable REIT subsidiary can fail to qualify even if the above conditions are met. A tenant is a related party tenant if the REIT, or an actual or constructive owner of 10% or more of the REIT, actually or constructively holds 10% or more of the tenant; and

    Fourth, for rents to qualify as rents from real property for the purpose of satisfying the gross income tests, we generally must not operate or manage the property or furnish or render services to the tenants of such property, other than through an "independent contractor" who is adequately compensated and from whom we derive no revenue or through a taxable REIT subsidiary. To the extent that impermissible services are provided by an independent contractor, the cost of the services generally must be born by the independent contractor. We are permitted to provide directly to tenants services that are "usually or customarily rendered" in connection with the rental of space for occupancy only and not otherwise considered to be provided for the tenants' convenience. We may provide a minimal amount of "non-customary" services to tenants of our properties, other than through an independent contractor, but we intend that our income from these services will not exceed 1% of our total gross income from the property. If the impermissible tenant services income exceeds 1% of our total income from a property, then all of the income from that property will fail to qualify as rents from real property. If the total amount of impermissible tenant services income does not exceed 1% of our total income from the property, the services will not "taint" the other income from the property (that is, it will not cause the rent paid by tenants of that property to fail to qualify as rents from real property), but the impermissible tenant services income will not qualify as rents from real property. We are

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      deemed to have received income from the provision of impermissible services in an amount equal to at least 150% of our direct cost of providing the service.

        We cannot provide any assurance that the IRS will agree with our positions related to whether any services we provide directly to tenants are "usually or customarily rendered" in connection with the rental of space for occupancy only. We intend to monitor the activities at our properties and do not intend to provide services that will cause us to fail to meet the gross income tests.

        Interest Income.    Interest generally will be non-qualifying income for purposes of the 75% or 95% gross income tests if it depends in whole or in part on the income or profits of any person. However, interest based on a fixed percentage or percentages of receipts or sales may still qualify under the gross income tests. We do not expect to derive significant amounts of interest that will not qualify under the 75% or 95% gross income tests.

        Dividend Income.    We may receive distributions from taxable REIT subsidiaries or other corporations that are not REITs or QRSs. These distributions generally are treated as dividend income to the extent of the earnings and profits of the distributing corporation. Such distributions will generally constitute qualifying income for purposes of the 95% gross income test, but not for purposes of the 75% gross income test. Any dividends that we receive from a REIT will be qualifying income for purposes of both the 95% and 75% gross income tests.

        Income from Hedging Transactions.    From time to time we may enter into hedging transactions with respect to one or more of our assets or liabilities. Any such hedging transactions could take a variety of forms, including the use of derivative instruments such as interest rate swap or cap agreements, option agreements, and futures or forward contracts. Income of a REIT, including income from a pass-through subsidiary, arising from "clearly identified" hedging transactions that are entered into to manage the risk of interest rate or price changes with respect to borrowings, including gain from the disposition of such hedging transactions, to the extent the hedging transactions hedge indebtedness incurred, or to be incurred, by the REIT to acquire or carry real estate assets, will not be treated as gross income for purposes of the either the 75% or the 95% gross income tests. Income of a REIT arising from hedging transactions that are entered into to manage the risk of currency fluctuations with respect to any item of income or gain satisfying the 75% and 95% gross income tests will not be treated as gross income for purposes of either the 95% gross income test or the 75% gross income test provided that the transaction is "clearly identified." In general, for a hedging transaction to be "clearly identified," (1) it must be identified as a hedging transaction before the end of the day on which it is acquired, originated, or entered into; and (2) the items of risks being hedged must be identified "substantially contemporaneously" with entering into the hedging transaction (generally not more than 35 days after entering into the hedging transaction). To the extent that we hedge with other types of financial instruments or in other situations, the resultant income will be treated as income that does not qualify under the 95% or 75% gross income tests unless the hedge meets certain requirements, and we elect to integrate it with a specified asset and to treat the integrated position as a synthetic debt instrument. We intend to structure any hedging transactions in a manner that does not jeopardize our qualification as a REIT but there can be no assurance we will be successful in this regard.

        Income from Prohibited Transactions.    Net income that we derive from a prohibited transaction is excluded from gross income solely for purposes of the gross income tests and subject to a 100% tax. Any foreign currency gain (as defined in Section 988(b)(2) of the Internal Revenue Code) in connection with a prohibited transaction will be taken into account in determining the amount of income subject to the 100% tax. The term "prohibited transaction" generally includes a sale or other disposition of property (other than foreclosure property, as discussed below) that is held primarily for sale to customers in the ordinary course of a trade or business by us. We intend to conduct our operations so that no asset that we own (or are treated as owning) will be treated as, or as having

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been, held for sale to customers, and that a sale of any such asset will not be treated as having been in the ordinary course of our business. Whether property is held "primarily for sale to customers in the ordinary course of a trade or business" depends on the particular facts and circumstances. No assurance can be given that any property that we sell will not be treated as property held for sale to customers, or that we can comply with certain safe-harbor provisions of the Internal Revenue Code that would prevent such treatment. The 100% tax does not apply to gains from the sale of property that is held through a taxable REIT subsidiary or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate rates. We intend to structure our activities to avoid transactions that are prohibited transactions.

        Income from Foreclosure Property.    We generally will be subject to tax at the maximum corporate rate (currently 35%) on any net income from foreclosure property, including any gain from the disposition of the foreclosure property, other than income that constitutes qualifying income for purposes of the 75% gross income test. Foreclosure property is real property and any personal property incident to such real property (1) that we acquire as the result of having bid on the property at foreclosure, or having otherwise reduced the property to ownership or possession by agreement or process of law, after a default (or upon imminent default) on a lease of the property or a mortgage loan held by us and secured by the property, (2) for which we acquired the related loan or lease at a time when default was not imminent or anticipated, and (3) with respect to which we made a proper election to treat the property as foreclosure property. Any gain from the sale of property for which a foreclosure property election has been made will not be subject to the 100% tax on gains from prohibited transactions described above, even if the property would otherwise constitute inventory or dealer property. To the extent that we receive any income from foreclosure property that does not qualify for purposes of the 75% gross income test, we intend to make an otherwise available election to treat the related property as foreclosure property.

        Failure to Satisfy the Gross Income Tests.    We intend to monitor our sources of income, including any non-qualifying income received by us, and manage our assets so as to ensure our compliance with the gross income tests. If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may still qualify as a REIT for such year if we are entitled to relief under applicable provisions of the Internal Revenue Code. These relief provisions will be generally available if (1) our failure to meet these tests was due to reasonable cause and not due to willful neglect and (2) following our identification of the failure to meet the 75% and/or 95% gross income tests for any taxable year, we file a schedule with the IRS setting forth a description of each item of our gross income that satisfies the gross income tests for purposes of the 75% or 95% gross income test for such taxable year in accordance with Treasury Regulations. It is not possible to state whether we would be entitled to the benefit of these relief provisions in all circumstances. As discussed above under "—Taxation of REITs in General," even where these relief provisions apply, the Internal Revenue Code imposes a tax based upon the profit attributable to the amount by which we fail to satisfy the particular gross income test, which could be significant in amount. Any redetermined rents, redetermined deductions or excess interest we generate will be subject to a 100% penalty tax. In general, redetermined rents are rents from real property that are overstated as a result of services furnished by a taxable REIT subsidiary to our tenants, and redetermined deductions and excess interest represent amounts that are deducted by a taxable REIT subsidiary for amounts paid to us that are in excess of the amounts that would have been deducted based on arm's length negotiations. Rents that we receive will not constitute redetermined rents if they qualify for safe-harbor provisions contained in the Internal Revenue Code. Safe-harbor provisions are provided where:

    amounts are excluded from the definition of impermissible tenant service income as a result of satisfying the 1% de minimis exception;

    the taxable REIT subsidiary renders a significant amount of similar services to unrelated parties and the charges for such services are substantially comparable;

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    rents paid to the REIT by tenants leasing at least 25% of the net leasable space of the REIT's property who are not receiving services from the taxable REIT subsidiary are substantially comparable to the rents paid by the REIT's tenants leasing comparable space who are receiving such services from the taxable REIT subsidiary and the charge for the service is separately stated; and

    the taxable REIT subsidiary's gross income from the service is not less than 150% of the subsidiary's direct cost of furnishing the service.

        Although we anticipate that any fees paid to a taxable REIT subsidiary for tenant services will reflect arm's length rates, a taxable REIT subsidiary may under certain circumstances provide tenant services that do not satisfy any of the safe-harbor provisions described above. Nevertheless, these determinations are inherently factual, and the IRS has broad discretion to assert that amounts paid between related parties should be reallocated to accurately reflect their respective incomes. If the IRS successfully made such an assertion, we would be required to pay a 100% penalty tax on the redetermined rent, redetermined deductions or excess interest, as applicable.

Asset Tests

        At the close of each calendar quarter, we must satisfy the following tests relating to the nature of our assets. For purposes of the asset tests, a REIT is not treated as owning the stock of a QRS or an equity interest in any entity treated as a partnership otherwise disregarded for U.S. federal income tax purposes. Instead, a REIT is treated as owning its proportionate share of the assets held by such entity.

    At least 75% of the value of our total assets must be represented by some combination of "real estate assets," cash, cash items, U.S. government securities, and, under some circumstances, stock or debt instruments purchased with new capital. For this purpose, real estate assets include interests in real property, such as land, buildings, leasehold interests in real property, stock of other corporations that qualify as REITs, and some types of mortgage-backed securities and mortgage loans. Assets that do not qualify for purposes of the 75% asset test are subject to the additional asset tests described below.

    Not more than 25% of our total assets may be represented by securities other than those described in the first bullet above.

    Except for securities described in the first bullet above and securities in taxable REIT subsidiaries or QRSs, the value of any one issuer's securities owned by us may not exceed 5% of the value of our total assets.

    Except for securities described in the first bullet above and securities in taxable REIT subsidiaries or QRSs, we may not own more than 10% of any one issuer's outstanding voting securities.

    Except for securities described in the first bullet above, securities in taxable REIT subsidiaries or QRSs, and certain types of indebtedness that are not treated as securities for purposes of this test, as discussed below, we may not own more than 10% of the total value of the outstanding securities of any one issuer.

    Not more than 25% of our total assets may be represented by securities of one or more taxable REIT subsidiaries.

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        The 10% value test does not apply to certain "straight debt" and other excluded securities, as described in the Internal Revenue Code, including (1) loans to individuals or estates, (2) obligations to pay rents from real property, (3) rental agreements described in Section 467 of the Internal Revenue Code (generally, obligations related to deferred rental payments, other than with respect to transactions with related party tenants), (4) securities issued by other REITs, (5) certain securities issued by a state, the District of Columbia, a foreign government, or a political subdivision of any of the foregoing, or the Commonwealth of Puerto Rico, and (6) any other arrangement as determined by the IRS. In addition, (1) a REIT's interest as a partner in a partnership is not considered a security for purposes of the 10% value test; (2) any debt instrument issued by a partnership (other than straight debt or other excluded security) will not be considered a security issued by the partnership if at least 75% of the partnership's gross income is derived from sources that would qualify for the 75% REIT gross income test; and (3) any debt instrument issued by a partnership (other than straight debt or other excluded security) will not be considered a security issued by a partnership to the extent of the REIT's interest as a partner in the partnership.

        For purposes of the 10% value test, "straight debt" means a written unconditional promise to pay on demand on a specified date a sum certain in money if (1) the debt is not convertible, directly or indirectly, into stock, (2) the interest rate and interest payment dates are not contingent on profits, the borrower's discretion, or similar factors other than certain contingencies relating to the timing and amount of principal and interest payments, as described in the Internal Revenue Code, and (3) in the case of an issuer which is a corporation or a partnership, securities that otherwise would be considered straight debt will not be so considered if we, and any of our "controlled taxable REIT subsidiaries" (as defined in the Internal Revenue Code), hold securities of the corporate or partnership issuer which (a) are not straight debt or other excluded securities (prior to the application of this rule), and (b) have an aggregate value greater than 1% of the issuer's outstanding securities (including, for the purposes of a partnership issuer, our interest as a partner in the partnership). We intend to maintain adequate records of the value of our assets to ensure compliance with the asset tests and to take any available actions within 30 days after the close of any quarter as may be required to cure any noncompliance with the asset tests. See below under "—Requirements for Qualification as a REIT—Asset Tests—Failure to Satisfy the Asset Tests." We may not obtain independent appraisals to support our conclusions concerning the values of some or all of our assets. We do not intend to seek an IRS ruling as to the classification of our properties for purposes of the REIT asset tests. Accordingly, there can be no assurance that the IRS will not contend that our assets or our interest in other securities will not cause a violation of the REIT asset requirements.

Failure to Satisfy the Asset Tests

        The asset tests must be satisfied not only on the last day of the calendar quarter in which we, directly or through pass-through subsidiaries, acquire securities in the applicable issuer, but also on the last day of the calendar quarter in which we increase our ownership of securities in such issuer, including as a result of increasing our interest in pass-through subsidiaries. After initially meeting the asset tests at the close of any quarter, we will not lose our qualification as a REIT for failure to satisfy the asset tests at the end of a later quarter solely by reason of changes in asset values (including a failure caused solely by change in the foreign currency exchange rate used to value a foreign asset). If we fail to satisfy the asset tests because we acquire assets during a quarter, we can cure this failure by disposing of sufficient nonqualifying assets or acquiring sufficient qualifying assets within 30 days after the close of that quarter. We intend to maintain adequate records of value of our assets to ensure compliance with the asset tests and to take any available action within 30 days after the close of any quarter as may be required to cure any noncompliance with the asset tests. Although we plan to take steps to ensure that we satisfy such tests for any quarter with respect to which testing is to occur, there can be no assurance that such steps will always be successful. If we fail to timely cure any

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noncompliance with the asset tests, we would cease to qualify as a REIT, unless we satisfy certain relief provisions.

        The failure to satisfy the 5% asset test, or the 10% vote or value asset tests can be remedied even after the 30-day cure period under certain circumstances. Specifically, if we fail these asset tests at the end of any quarter and such failure is not cured within 30 days thereafter, we may dispose of sufficient assets (generally within six months after the last day of the quarter in which our identification of the failure to satisfy these asset tests occurred) to cure such a violation that does not exceed the lesser of 1% of our assets at the end of the relevant quarter or $10,000,000. If we fail any of the other asset tests or our failure of the 5% and 10% asset tests is in excess of the de minimis amount described above, as long as such failure was due to reasonable cause and not willful neglect, we are permitted to avoid disqualification as a REIT, after the 30-day cure period, by taking steps including the disposing of sufficient assets to meet the asset test (generally within six months after the last day of the quarter in which our identification of the failure to satisfy the REIT asset test occurred), paying a tax equal to the greater of $50,000 or the highest corporate income tax rate (currently 35%) of the net income generated by the non-qualifying assets during the period in which we failed to satisfy the asset test, and filing in accordance with applicable Treasury Regulations a schedule with the IRS that describes the assets that caused us to fail to satisfy the asset test(s). We intend to take advantage of any and all relief provisions that are available to us to cure any violation of the asset tests applicable to REITs. In certain circumstances, utilization of such provisions could result in us being required to pay an excise or penalty tax, which could be significant in amount.

Annual Distribution Requirements

        In order to qualify as a REIT, we are required to distribute dividends, other than capital gain dividends, to our shareholders in an amount at least equal to:

    the sum of: (1) 90% of our "REIT taxable income," computed without regard to our net capital gains and the deduction for dividends paid, and (2) 90% of our net income, if any, (after tax) from foreclosure property, minus

    the sum of specified items of "non-cash income."

        For purposes of this test, "non-cash income" means income attributable to leveled stepped rents, original issue discount included in our taxable income without the receipt of a corresponding payment, cancellation of indebtedness or a like kind exchange that is later determined to be taxable.

        We generally must make dividend distributions in the taxable year to which they relate. Dividend distributions may be made in the following year in two circumstances. First, if we declare a dividend in October, November, or December of any year with a record date in one of these months and pay the d dividend on or before January 31 of the following year. Such distributions are treated as both paid by us and received by each shareholder on December 31 of the year in which they are declared. Second, distributions may be made in the following year if they are declared before we timely file our tax return for the year and if made with or before the first regular dividend payment after such declaration. These distributions are taxable to our shareholders in the year in which paid, even though the distributions relate to our prior taxable year for purposes of the 90% distribution requirement.

        In order for distributions to be counted as satisfying the annual distribution requirement for REITs, and to provide us with a REIT-level tax deduction, the distributions must not be "preferential dividends." A dividend is not a preferential dividend if the distribution is (1) pro rata among all outstanding shares within a particular class, and (2) in accordance with the preferences among different classes of shares as set forth in our organizational documents.

        To the extent that we distribute at least 90%, but less than 100%, of our "REIT taxable income," as adjusted, we will be subject to tax at ordinary corporate tax rates on the retained portion. We may

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elect to retain, rather than distribute, our net long-term capital gains and pay tax on such gains. In this case, we could elect for our shareholders to include their proportionate share of such undistributed long-term capital gains in income, and to receive a corresponding credit for their share of the tax that we paid. Our shareholders would then increase their adjusted basis of their shares by the difference between (1) the amounts of capital gain dividends that we designated and that they included in their taxable income, minus (2) the tax that we paid on their behalf with respect to that income.

        To the extent that in the future we may have available net operating losses carried forward from prior tax years, such losses may reduce the amount of distributions that we must make in order to comply with the REIT distribution requirements. Such losses, however, (1) will generally not affect the character, in the hands of our shareholders, of any distributions that are actually made as ordinary dividends or capital gains; and (2) cannot be passed through or used by our shareholders. See "—Taxation of Shareholders—Taxation of Taxable U.S. Shareholders—Distributions Generally."

        If we fail to distribute during each calendar year at least the sum of (a) 85% of our REIT ordinary income for such year, (b) 95% of our REIT capital gain net income for such year, and (c) any undistributed taxable income from prior periods, we would be subject to a non-deductible 4% excise tax on the excess of such required distribution over the sum of (x) the amounts actually distributed, and (y) the amounts of income we retained and on which we paid corporate income tax.

        In addition, if we were to recognize "built-in-gain" (as defined below) on the disposition of any assets acquired from a "C" corporation in a transaction in which our basis in the assets was determined by reference to the "C" corporation's basis (for instance, if the assets were acquired in a tax-free reorganization), we would be required to distribute at least 90% of the built-in-gain net of the tax we would pay on such gain. "Built-in-gain" is the excess of (a) the fair market value of the asset (measured at the time of acquisition) over (b) the basis of the asset (measured at the time of acquisition).

        It is possible that, from time to time, we may not have sufficient cash to meet the distribution requirements due to timing differences between our actual receipt of cash, including receipt of distributions from our subsidiaries and our inclusion of items in income for U.S. federal income tax purposes. In the event that such timing differences occur, in order to meet the distribution requirements, it might be necessary for us to arrange for short-term, or possibly long-term, borrowings, or to pay dividends in the form of taxable in-kind distributions of property. Alternatively, we may declare a taxable dividend payable in cash or shares at the election of each shareholder, where the aggregate amount of cash to be distributed in such dividend may be subject to limitation.

        We may be able to rectify a failure to meet the distribution requirements for a year by paying "deficiency dividends" to shareholders in a later year, which may be included in our deduction for dividends paid for the earlier year. In this case, we may be able to avoid losing REIT qualification or being taxed on amounts distributed as deficiency dividends. We will be required to pay interest based on the amount of any deduction taken for deficiency dividends.

Record-Keeping Requirements

        We are required to maintain records and request on an annual basis information from specified shareholders. These requirements are designed to assist us in determining the actual ownership of our outstanding shares and maintaining our qualifications as a REIT. Failure to comply could result in monetary fines.

Failure to Qualify as a REIT

        If we fail to satisfy one or more requirements for REIT qualification other than the gross income or asset tests, we could avoid disqualification if our failure is due to reasonable cause and not to willful

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neglect and we pay a penalty of $50,000 for each such failure. Relief provisions are available for failures of the gross income tests and asset tests, as described above in "—Requirements for Qualification as a REIT—Gross Income Tests" and "—Requirements for Qualification as a REIT—Asset Tests." If we fail to qualify for taxation as a REIT in any taxable year, and the relief provisions described above do not apply, we would be subject to tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates. We cannot deduct distributions to shareholders in any year in which we are not a REIT, nor would we be required to make distributions in such a year. In this situation, to the extent of current and accumulated earnings and profits, distributions to U.S. shareholders that are individuals, trusts and estates will generally be taxable at capital gains rates (through 2010). In addition, subject to the limitations of the Internal Revenue Code, corporate distributees may be eligible for the dividends received deduction. Unless we are entitled to relief under specific statutory provisions, we would also be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year during which we lost qualification. It is not possible to state whether, in all circumstances, we would be entitled to statutory relief.

Tax Aspects of Our Ownership of Interests in Our Operating Partnership

General

        Substantially all of our investments are owned indirectly through our operating partnership, which will own our properties either directly or through certain subsidiaries. This discussion focuses on the tax aspects of our ownership of properties through partnerships. In general, partnerships are "pass-through" entities that are not subject to U.S. federal income tax. Rather, partners are allocated their proportionate shares of the items of income, gain, loss, deduction and credit of a partnership, and are potentially subject to tax thereon, without regard to whether the partners receive a distribution from the partnership. We currently intend to include in our gross income our proportionate share of the foregoing partnership items for purposes of the various REIT income tests and in the computation of our REIT taxable income. Moreover, for purposes of the REIT asset tests, we currently intend to include our proportionate share of assets held through our operating partnership and those of its subsidiaries that are either disregarded as separate entities or treated as partnerships for U.S. federal income tax purposes. See "—Requirements for Qualification as a REIT—Effect of Subsidiary Entities—Ownership of Partnership Interests" above.

Entity Classification

        If our operating partnership or any non-corporate subsidiary were treated as an association, the entity would be taxable as a corporation and, therefore, would be subject to U.S. federal and state income tax on its taxable income. In such a situation, the character of our assets and items of gross income would change and could preclude us from qualifying as a REIT (see "—Requirements for Qualification as a REIT—Asset Tests" and "—Requirements for Qualification as a REIT—Gross Income Tests" above). The tax treatment of Eola Property Trust, and the U.S. federal income tax consequences of the ownership of our common shares would be materially different from the consequences described herein if our operating partnership and all of its subsidiaries (other than a IRS) were not classified as partnerships or disregarded as separate entities for U.S. federal income tax purposes. Pursuant to Treasury Regulations under Section 7701 of the Internal Revenue Code, a partnership will be treated as a partnership for U.S. federal income tax purposes unless it elects to be treated as a corporation or would be treated as a corporation because it is a "publicly traded partnership."

        Neither our operating partnership nor any of its non-corporate subsidiaries that are not taxable REIT subsidiaries or QRSs has elected or will elect to be treated as a corporation. Therefore, subject to the disclosure below, our operating partnership and each subsidiary that is not a taxable REIT subsidiary or QRS will be treated as a partnership for U.S. federal income tax purposes (or, if such an

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entity has only one partner or member, disregarded entirely for U.S. federal income tax purposes). Pursuant to Section 7704 of the Internal Revenue Code, a partnership that does not elect to be treated as a corporation nevertheless will be treated as a corporation that is not a taxable REIT subsidiary or QRS for U.S. federal income tax purposes if it is a "publicly traded partnership" and it does not derive at least 90% of its gross income from certain specified sources of "qualifying income" within the meaning of that section. A "publicly traded partnership" is any partnership (i) the interests in which are traded on an established securities market or (ii) the interests in which are readily tradable on a "secondary market or the substantial equivalent thereof." OP units will not be traded on an established securities market and we will take the reporting position for U.S. federal income tax purposes that our operating partnership is not a publicly traded partnership. There is a significant risk, however, that the right of a holder of OP units to redeem the units for our common shares could cause OP units to be considered readily tradable on the substantial equivalent of a secondary market. Under the relevant Treasury Regulations, interests in a partnership will not be considered readily tradable on a secondary market or on the substantial equivalent of a secondary market if the partnership qualifies for specified "safe harbors," which are based on the specific facts and circumstances relating to the partnership. We believe that our operating partnership will qualify for at least one of these safe harbors at all times in the foreseeable future. We cannot provide any assurance that our operating partnership will continue to qualify for one of the safe harbors mentioned above. If our operating partnership were a publicly traded partnership, it would be taxed as a corporation unless at least 90% of its gross income consists of "qualifying income" under Section 7704 of the Internal Revenue Code. Qualifying income is generally real property rents and other types of passive income. We believe that our operating partnership will have sufficient qualifying income so that it would be taxed as a partnership, even if it were a publicly traded partnership. The income requirements applicable to us to qualify as a REIT under the Internal Revenue Code and the definition of qualifying income under the publicly traded partnership rules are very similar. Although differences exist between these two income tests, we do not believe that these differences would cause our operating partnership not to satisfy the 90% gross income test applicable to publicly traded partnerships.

        If our operating partnership were taxable as a corporation, most, if not all, of the tax consequences described herein would be inapplicable. In particular, we would not qualify as a REIT because the value of our ownership interest in our operating partnership would exceed 5% of our assets and we would be considered to hold more than 10% of the voting securities (and more than 10% of the value of the outstanding securities) of another corporation (see "—Requirements for Qualification as a REIT—Asset Tests" above). In this event, the value of our shares could be materially adversely affected (see "—Failure to Qualify as a REIT" above).

Allocations of our Operating Partnership's Income, Gain, Loss and Deduction

        A partnership agreement will generally determine the allocation of income and loss among partners. However, such allocations will be disregarded for U.S. federal income tax purposes if they do not comply with the provisions of Section 704(b) of the Internal Revenue Code and the Treasury Regulations promulgated thereunder. Generally, Section 704(b) of the Internal Revenue Code and the Treasury Regulations promulgated thereunder require that partnership allocations respect the economic arrangement of the partners. If an allocation is not recognized for U.S. federal income tax purposes, the item subject to the allocation will be reallocated in accordance with the partners' interests in the partnership, which will be determined by taking into account all of the facts and circumstances relating to the economic arrangement of the partners with respect to such item. The allocations of taxable income and loss provided for in our operating partnership's partnership agreement are intended to comply with the requirements of Section 704(b) of the Internal Revenue Code and the regulations promulgated thereunder.

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Tax Allocations with Respect to Our Properties

        Pursuant to Section 704(c) of the Internal Revenue Code, income, gain, loss and deduction attributable to appreciated or depreciated property, such as any property, that is contributed to a partnership in exchange for an interest in the partnership must be allocated in a manner such that the contributing partners charged with, or benefits from, the difference between the adjusted tax basis and the fair market value of such property at the time of contribution. This difference is known as book-tax difference. Our operating partnership's partnership agreement requires that such allocations be made in a manner consistent with Section 704(c) of the Internal Revenue Code. Any property purchased by our operating partnership for cash initially will have an adjusted tax basis equal to its fair market value, and Section 704(c) of the Internal Revenue Code will not apply. In the future, however, our operating partnership may admit partners in exchange for a contribution of appreciated property. Treasury Regulations issued under Section 704(c) of the Internal Revenue Code provide partnerships with a choice of several methods of accounting for book-tax differences.

        Under certain available methods, the carryover basis of contributed properties in the hands of our operating partnership (i) would cause us to be allocated lower amounts of depreciation deductions for tax purposes than would be allocated to us if all contributed properties were to have a tax basis equal to their fair market value at the time of the contribution and (ii) in the event of a sale of such properties, could cause us to be allocated taxable gain in excess of the economic or book gain allocated to us as a result of such sale, with a corresponding benefit to the contributing partners. An allocation described in (ii) above might cause us to recognize taxable income in excess of cash proceeds in the event of a sale or other disposition of property, which might adversely affect our ability to comply with the REIT distribution requirement and may result in a greater portion of our distributions being taxed as dividends. We have not yet decided what method will be used to account for book-tax differences for properties that may be acquired by our operating partnership in the future.

Certain Tax Considerations Related to our Formation Transactions

        As described above in the section titled "—Taxation of Eola Property Trust," Eola Office Partners will merge with and into us prior to the pricing of this offering in a transaction that is intended to be treated as a reorganization under the Internal Revenue Code. If the merger qualifies as a reorganization for U.S. federal income tax purposes, we will succeed to the earnings and profits, if any, of Eola Office Partners, and our tax basis of those assets acquired from Eola Office Partners will be determined by reference to the tax basis of the asset in the hands of Eola Office Partners.

        To qualify as a REIT, any earnings and profits accumulated in a year in which a REIT, or any entity the earnings and profits of which the REIT succeeds to, was not a REIT, must be distributed as of the close of the taxable year in which the REIT accumulates or acquires such earnings and profits. Eola Office Partners has in effect an election to be taxed as an S Corporation under Section 1361 of the Internal Revenue Code. As a general matter, assuming that Eola Office Partners has at all times qualified as an S Corporation, Eola Office Partners generally would, at the time of our formation transactions, have no earnings and profits. If, however, Eola Office Partners did not qualify as an S corporation for U.S. federal income tax purposes, and assuming the merger were to constitute a reorganization for U.S. federal income tax purposes, we would succeed to earnings and profits accumulated by Eola Office Partners, if any, which we would be required to distribute by the close of the taxable year in which the merger occurs.

        In addition, in the case of assets that a REIT acquires from a C corporation in a transaction in which the tax basis of the C corporation's assets in our hands is determined by reference to the tax basis of the asset in the hands of the C corporation (a "carry-over basis transaction"), if the REIT disposes of any such asset in a taxable transaction during the ten-year period beginning on the date of the carry-over basis transaction, then the REIT will be required to pay tax at the highest regular

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corporate tax rate on the gain recognized to the extent of the excess of (a) the fair market value of the asset over (b) the REIT's tax basis in the asset, in each case determined as of the date of the carry-over basis transaction. The foregoing results with respect to the recognition of gain assume that the C corporation will refrain from making an election to receive different treatment under applicable Treasury Regulations on its tax return for the year in which we acquire the asset from the C corporation. Furthermore, our tax basis in the assets we acquire in a carry-over basis transaction may be lower than the assets' fair market values. This lower tax basis could cause us to have lower depreciation deductions and more gain on a subsequent sale of the assets than would be the case if we had directly purchased the assets in a taxable transaction. Assuming Eola Office Partners at all times so qualified as an S Corporation for U.S. federal income tax purposes, we will not be treated as acquiring assets from a C corporation in a carry-over basis transaction as a result of the merger of Eola Office Partners into us.

        If the merger of Eola Office Partners into us does not qualify as a reorganization for U.S. federal income tax purposes, the merger generally would be treated as a sale by Eola Office Partners of its assets to us in a taxable transaction, and Eola Office Partners likely would recognize taxable gain. In such a case, as the legal successor-in-interest to Eola Office Partners, we would succeed to any tax liability of Eola Office Partners with respect to such gain (although, at the time of the merger, assuming that Eola Office Partners qualified as an S Corporation at the time of the merger, Eola Office Partners generally would not have any such U.S. federal income tax liability (but may for certain state and local tax purposes)), but we would not succeed to the earnings and profits, if any, of Eola Office Partners, and our tax basis in the assets we acquire from Eola Office Partners would not be determined by reference to the tax basis of the asset in the hands of Eola Office Partners.

Taxation of Shareholders

Taxation of Taxable U.S. Shareholders

        This section summarizes the taxation of U.S. shareholders that are not tax-exempt organizations. For these purposes, a U.S. shareholder is a beneficial owner of our common shares that for U.S. federal income tax purposes is:

    a citizen or resident of the U.S.;

    a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S. or of a political subdivision thereof (including the District of Columbia);

    an estate whose income is subject to U.S. federal income taxation regardless of its source; or

    any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) it has a valid election in place to be treated as a U.S. person.

        If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common shares, the U.S. federal income tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding our common shares should consult its own tax advisor regarding the U.S. federal income tax consequences to the partner of the acquisition, ownership and disposition of our common shares by the partnership.

        Distributions Generally.    So long as we qualify as a REIT, the distributions that we make to our taxable U.S. shareholders out of current or accumulated earnings and profits that we do not designate as capital gain dividends or as qualified dividend income will generally be taken into account by shareholders as ordinary income and will not be eligible for the dividends received deduction for corporations. In determining the extent to which a distribution with respect to our common shares

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constitutes a dividend for U.S. federal income tax purposes, our earnings and profits will be allocated first to distributions with respect to our preferred shares, if any, and then to our common shares. Dividends received from REITs are generally not eligible to be taxed at the preferential qualified dividend income rates available (but only through 2010) to individual U.S. shareholders who receive dividends from taxable subchapter C corporations.

        Capital Gain Dividends.    We may elect to designate distributions of our net capital gain as "capital gain dividends." Distributions that we designate as capital gain dividends will generally be taxed to U.S. shareholders as long-term capital gains without regard to the period for which the U.S. shareholder that receives such distribution has held its shares. Designations made by us will only be effective to the extent that they comply with Revenue Ruling 89-81, which requires that distributions made to different classes of shares be composed proportionately of dividends of a particular type. If we designate any portion of a dividend as a capital gain dividend, a U.S. shareholder will receive an IRS Form 1099-DIV indicating the amount that will be taxable to the U.S. shareholder as capital gain. Corporate U.S. shareholders may be required to treat up to 20% of some capital gain dividends as ordinary income. Recipients of capital gain dividends from us that are taxed at corporate income tax rates will be taxed at the normal corporate income tax rates on these dividends. We may elect to retain and pay taxes on some or all of our net long term capital gains, in which case U.S. shareholders will be treated as having received, solely for U.S. federal income tax purposes, our undistributed capital gains as well as a corresponding credit or refund, as the case may be, for taxes that we paid on such undistributed capital gains. See "—Requirements for Qualification as a REIT—Annual Distribution Requirements."

        We will classify portions of any designated capital gain dividend or undistributed capital gain as either:

    a long-term capital gain distribution, which would be taxable to non-corporate U.S. shareholders at a maximum rate of 15% (through 2010), and taxable to U.S. shareholders that are corporations at a maximum rate of 35%; or

    an "unrecaptured Section 1250 gain" distribution, which would be taxable to non-corporate U.S. shareholders at a maximum rate of 25%, to the extent of previously claimed depreciation deductions.

        Distributions from us in excess of our current and accumulated earnings and profits will not be taxable to a U.S. shareholder to the extent that they do not exceed the adjusted basis of the U.S. shareholder's common shares in respect of which the distributions were made. Rather, the distribution will reduce the adjusted basis of these shares. To the extent that such distributions exceed the adjusted basis of a U.S. shareholder's common shares, the U.S. shareholder generally must include such distributions in income as long-term capital gain, or short-term capital gain if the shares have been held for one year or less. In addition, any dividend that we declare in October, November or December of any year and that is payable to a shareholder of record on a specified date in any such month will be treated as both paid by us and received by the shareholder on December 31 of such year, provided that we actually pay the dividend before the end of January of the following calendar year.

        To the extent that we have available net operating losses and capital losses carried forward from prior tax years, such losses may reduce the amount of distributions that we must make in order to comply with the REIT distribution requirements. See "—Taxation of Eola Property Trust" and "—Requirements for Qualification as a REIT—Annual Distribution Requirements." Such losses, however, are not passed through to U.S. shareholders and do not offset income of U.S. shareholders from other sources, nor would such losses affect the character of any distributions that we make, which are generally subject to tax in the hands of U.S. shareholders to the extent that we have current or accumulated earnings and profits.

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        Qualified Dividend Income.    With respect to U.S. shareholders who are taxed at the rates applicable to individuals, we may elect to designate a portion of our distributions paid to such U.S. shareholders as "qualified dividend income." A portion of a distribution that is properly designated as qualified dividend income is taxable to non-corporate U.S. shareholders as capital gain, provided that the U.S. shareholder has held the common shares with respect to which the distribution is made for more than 60 days during the 121-day period beginning on the date that is 60 days before the date on which such common shares became ex-dividend with respect to the relevant distribution. The maximum amount of our distributions eligible to be designated as qualified dividend income for a taxable year is equal to the sum of:

    the qualified dividend income received by us during such taxable year from non-REIT corporations (including any taxable REIT subsidiary in which we own an interest);

    the excess of any "undistributed" REIT taxable income recognized during the immediately preceding year over the U.S. federal income tax paid by us with respect to such undistributed REIT taxable income; and

    the excess of any income recognized during the immediately preceding year attributable to the sale of a built-in-gain asset that was acquired in a carry-over basis transaction from a non-REIT "C" corporation over the U.S. federal income tax paid by us with respect to such built-in gain.

        Generally, dividends that we receive will be treated as qualified dividend income for purposes of the first bullet above if (A) the dividends are received from (i) a U.S. corporation (other than a REIT or a RIC), (ii) any taxable REIT subsidiary we form, or (iii) a "qualifying foreign corporation," and (B) specified holding period requirements and other requirements are met. If we designate any portion of a dividend as qualified dividend income, a U.S. shareholder will receive an IRS Form 1099-DIV indicating the amount that will be taxable to the holder as qualified dividend income.

        Passive Activity Losses and Investment Interest Limitations.    Distributions made by us and gain arising from the sale or exchange by a U.S. shareholder of our common shares will not be treated as passive activity income. As a result, U.S. shareholders will not be able to apply any "passive losses" against income or gain relating to our common shares. Distributions made by us, to the extent they do not constitute a return of capital, generally will be treated as investment income for purposes of computing the investment interest limitation. A U.S. shareholder that elects to treat capital gain dividends, capital gains from the disposition of shares, or qualified dividend income as investment income for purposes of the investment interest limitation will be taxed at ordinary income rates on such amounts. We intend to notify U.S. shareholders regarding the portions of distributions for each year that constitute ordinary income, return of capital and capital gain.

        Dispositions of Our Common Shares.    In general, a U.S. shareholder will realize gain or loss upon the sale, redemption or other taxable disposition of our common shares in an amount equal to the difference between the sum of the fair market value of any property and the amount of cash received in such disposition and the U.S. shareholder's adjusted tax basis in the common shares at the time of the disposition. In general, a U.S. shareholder's adjusted basis in our common shares generally will equal the U.S. shareholder's acquisition cost, increased by the excess for net capital gains deemed distributed to the U.S. shareholder (discussed above) less tax deemed paid on it and reduced by returns on capital.

        In general, capital gains recognized by individuals and other non-corporate U.S. shareholders upon the sale or disposition of our common shares will be subject to a maximum U.S. federal income tax rate of 15% (through 2010), if our common shares are held for more than one year, and will be taxed at ordinary income rates (of up to 35% through 2010) if our common shares are held for one year or less. Gains recognized by U.S. shareholders that are corporations are subject to U.S. federal income tax at a maximum rate of 35%, whether or not such gains are classified as long-term capital gains.

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        Capital losses recognized by a U.S. shareholder upon the disposition of our common shares that was held for more than one year at the time of disposition will be considered long-term capital losses, and are generally available only to offset capital gain income of the shareholder but not ordinary income (except in the case of individuals, who may offset up to $3,000 of ordinary income each year). In addition, any loss upon a sale or exchange of our common shares by a U.S. shareholder who has held the shares for six months or less, after applying holding period rules, will be treated as a long-term capital loss to the extent of distributions that we make that are required to be treated by the U.S. shareholder as long-term capital gain.

        Expansion of Medicare Tax.    The Health Care and Reconciliation Act of 2010 requires that, in certain circumstances, certain U.S. shareholders that are individuals, estates, and trusts pay a 3.8% tax on "net investment income," which includes, among other things, dividends on and gains from the sale or other disposition of shares, effective for taxable years beginning after December 31, 2012. Prospective investors should consult their own tax advisors regarding this new legislation.

        New Legislation Relating To Foreign Accounts.    Under newly enacted legislation, certain payments made after December 2012 to "foreign financial institutions" in respect of accounts of U.S. shareholders at such financial institutions may be subject to withholding at a rate of 30%. U.S. shareholders should consult their tax advisors regarding the effect, if any, of this new legislation on their ownership and disposition of their common shares. See "—Taxation of Shareholders—Taxation of Non-U.S. Shareholders—Withholding on Payments to Certain Foreign Entities."

Taxation of Tax-Exempt U.S. Shareholders

        U.S. tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from U.S. federal income taxation. Such entities, however, may be subject to taxation on their unrelated business taxable income, or UBTI. While some investments in real estate may generate UBTI, the IRS has ruled that dividend distributions from a REIT to a tax-exempt entity generally do not constitute UBTI. Based on that ruling, and provided that (1) a tax-exempt shareholder has not held our common shares as "debt financed property" within the meaning of the Internal Revenue Code (i.e., where the acquisition or holding of the property is financed through a borrowing by the U.S. tax-exempt shareholder), (2) our common shares are not otherwise used in an unrelated trade or business, and (3) we do not hold an asset that gives rise to "excess inclusion income," distributions that we make and income from the sale of our common shares generally should not give rise to UBTI to a U.S. tax-exempt shareholder. Tax-exempt U.S. shareholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans exempt from U.S. federal income taxation under sections 501(c)(7), (c)(9), (c)(17) or (c)(20) of the Internal Revenue Code, respectively, or single parent title-holding corporations exempt under Section 501(c)(2) whose income is payable to any of the aforementioned tax-exempt organizations, are subject to different UBTI rules, which generally require such shareholders to characterize distributions from us as UBTI unless the organization is able to properly claim a deduction for amounts set aside or placed in reserve for certain purposes so as to offset the income generated by its investment in our common shares. These shareholders should consult with their own tax advisors concerning these set aside and reserve requirements.

        In certain circumstances, a pension trust (1) that is described in Section 401(a) of the Internal Revenue Code, (2) is tax exempt under Section 501(a) of the Internal Revenue Code, and (3) that owns more than 10% of our common shares could be required to treat a percentage of the dividends as UBTI, if we are a "pension-held REIT." We will not be a pension-held REIT unless:

    either (1) one pension trust owns more than 25% of the value of our shares, or (2) one or more pension trusts, each individually holding more than 10% of the value of our shares, collectively own more than 50% of the value of our shares; and

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    we would not have qualified as a REIT but for the fact that Section 856(h)(3) of the Internal Revenue Code provides that shares owned by such trusts shall be treated, for purposes of the requirement that not more than 50% of the value of the outstanding shares of a REIT is owned, directly or indirectly, by five or fewer "individuals" (as defined in the Internal Revenue Code to include certain entities), as owned by the beneficiaries of such trusts.

        Certain restrictions on ownership and transfer of our common shares contained in our declaration of trust generally should prevent a person from owning more than 10% of the value of our common shares, and thus we are not likely to become a pension-held REIT. Tax-exempt U.S. shareholders are urged to consult their tax advisors regarding the U.S. federal, state, local and foreign income and other tax consequences of owning our common shares.

Taxation of Non-U.S. Shareholders

        The following is a summary of certain U.S. federal income tax consequences of the acquisition, ownership and disposition of our common shares applicable to non-U.S. shareholders of our common shares. For purposes of this summary, "non-U.S. shareholder" is a beneficial owner of our common shares that is not a U.S. shareholder (as defined above under "—Taxation of Shareholders—Taxation of Taxable U.S. Shareholders") or an entity that is treated as a partnership for U.S. federal income tax purposes. The following discussion is based on current law, and is for general information only. It addresses only selected, and not all, aspects of U.S. federal income taxation.

        Distributions Generally.    As described in the discussion below, distributions paid by us with respect to our common shares will be treated for U.S. federal income tax purposes as:

    ordinary income dividends;

    return of capital distributions; or

    long-term capital gain.

        This discussion assumes that our common shares will continue to be considered regularly traded on an established securities market located in the United States for purposes of the Foreign Investment in Real Property Tax Act of 1980, or FIRPTA, provisions described below. If our common shares are no longer regularly traded on an established securities market, the tax considerations described below would materially differ.

        Ordinary Income Dividends.    A distribution paid by us to a non-U.S. shareholder will be treated as an ordinary income dividend if the distribution is payable out of our earnings and profits and:

    not attributable to our net capital gain; or

    the distribution is attributable to our net capital gain from the sale of "U.S. real property interests," or USRPI, and the non-U.S. shareholder owns 5% or less of the value of our common shares at all times during the one year period ending on the date of the distribution.

        In general, non-U.S. shareholders will not be considered to be engaged in a U.S. trade or business solely as a result of their ownership of our common shares. In cases where the dividend income from a non-U.S. shareholder's investment in our common shares is, or is treated as, effectively connected with the non-U.S. shareholder's conduct of a U.S. trade or business, the non-U.S. shareholder generally will be subject to U.S. federal income tax at graduated rates, in the same manner as U.S. shareholders are taxed with respect to such dividends. Such income must generally be reported on a U.S. income tax return filed by or on behalf of the non-U.S. shareholder. The income may also be subject to the 30% branch profits tax in the case of a non-U.S. shareholder that is a corporation.

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        Generally, we will withhold and remit to the IRS 30% of distributions (including distributions that may later be determined to have been made in excess of current and accumulated earnings and profits, and would not, therefore, constitute a dividend for U.S. federal income tax purposes) that could not be treated as capital gain with respect to the non-U.S. shareholder (and that are not deemed to be capital gain dividends for purposes of FIRPTA withholding rules described below) unless:

    a lower treaty rate applies and the non-U.S. shareholder files an IRS Form W-8BEN evidencing eligibility for that reduced treat rate with us; or

    the non-U.S. shareholder files an IRS Form W-8ECI with us claiming that the distribution is income effectively connected with the non-U.S. shareholder's trade or business.

        Return of Capital Distributions.    Unless (A) our common shares constitute a USRPI, as described in "—Taxation of Shareholders—Taxation of Non-U.S. Shareholders—Dispositions of Our Common Shares" below, or (B) either (1) the non-U.S. shareholder's investment in our common shares is effectively connected with a U.S. trade or business conducted by such non-U.S. shareholder (in which case the non-U.S. shareholder will be subject to the same treatment as U.S. shareholders with respect to such gain) or (2) the non-U.S. shareholder is a nonresident alien individual who was present in the U.S. for 183 days or more during the taxable year and has a "tax home" in the U.S. (in which case the non-U.S. shareholder will be subject to a 30% tax on the individual's net capital gain for the year), distributions that we make which are not dividends out of our earnings and profits will not be subject to U.S. federal income tax. If we cannot determine at the time a distribution is made whether or not the distribution will exceed current and accumulated earnings and profits, the distribution will be subject to withholding at the rate applicable to dividends. The non-U.S. shareholder may seek a refund from the IRS of any amounts withheld if it subsequently is determined that the distribution was, in fact, in excess of our current and accumulated earnings and profits.

        If our common shares constitute a USRPI, as described below, distributions that we make in excess of the sum of (1) the non-U.S. shareholder's proportionate share of our earnings and profits, and (2) the non-U.S. shareholder's basis in its shares, will be taxed under FIRPTA at the rate of tax, including any applicable capital gains rates, that would apply to a U.S. shareholder of the same type (e.g., an individual or a corporation, as the case may be) and the collection of the tax will be enforced by a refundable withholding tax (to the extent we do not otherwise withhold upon such distribution) at a rate of 10% of the amount by which the distribution exceeds the shareholder's share of our earnings and profits.

        Capital Gain Dividends.    A distribution paid by us to a non-U.S. shareholder will be treated as long-term capital gain if the distribution is paid out of our current or accumulated earnings and profits and:

    the distribution is attributable to our net capital gain (other than from the sale of USRPI) and we timely designate the distribution as a capital gain dividend; or

    the distribution is attributable to our net capital gain from the sale of USRPI and the non-U.S. shareholder owns more than 5% of the value of common shares at any point during the one-year period ending on the date on which the distribution is paid.

        Long-term capital gain that a non-U.S. shareholder is deemed to receive from a capital gain dividend that is not attributable to the sale of USRPI generally will not be subject to U.S. federal income tax in the hands of the non-U.S. shareholder unless:

    the non-U.S. shareholder's investment in our common shares is effectively connected with a U.S. trade or business of the non-U.S. shareholder, in which case the non-U.S. shareholder will be subject to the same treatment as U.S. shareholders with respect to any gain, except that a non-U.S. shareholder that is a corporation also may be subject to the 30% branch profits tax; or

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    the non-U.S. shareholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and has a "tax home" in the United States in which case the nonresident alien individual will be subject to a 30% tax on his capital gains.

        Under FIRPTA, distributions that are attributable to net capital gain from the sale by us of USRPIs and paid to a non-U.S. shareholder that owns more than 5% of the value of our common shares at any time during the one-year period ending on the date on which the distribution is paid will be subject to U.S. tax as income effectively connected with a U.S. trade or business. The FIRPTA tax will apply to these distributions whether or not the distribution is designated as a capital gain dividend, and, in the case of a non-U.S. shareholder that is a corporation, such distributions also may be subject to the 30% branch profits tax.

        Any distribution paid by us that is treated as a capital gain dividend or that could be treated as a capital gain dividend with respect to a particular non-U.S. shareholder will be subject to special withholding rules under FIRPTA. We will withhold and remit to the IRS 35% of any distribution that could be treated as a capital gain dividend with respect to the non-U.S. shareholder, to the extent that the distribution is attributable to the sale by us of USRPIs. The amount withheld is creditable against the non-U.S. shareholder's U.S. federal income tax liability or refundable when the non-U.S. shareholder properly and timely files a tax return with the IRS.

        Undistributed Capital Gain.    Although the law is not entirely clear on the matter, it appears that amounts designated by us as undistributed capital gains in respect of our common shares held by non-U.S. shareholders generally should be treated in the same manner as actual distributions by us of capital gain dividends. Under this approach, the non-U.S. shareholder would be able to offset as a credit against their U.S. federal income tax liability resulting therefrom their proportionate share of the tax paid by us on the undistributed capital gains treated as long-term capital gains to the non-U.S. shareholder, and generally receive from the IRS a refund to the extent their proportionate share of the tax paid by us were to exceed the non-U.S. shareholder's actual U.S. federal income tax liability on such long-term capital gain. If we were to designate any portion of our net capital gain as undistributed capital gain, a non-U.S. shareholder should consult its tax advisors regarding taxation of such undistributed capital gain.

        Dispositions of Our Common Shares.    Unless our common shares constitute a USRPI, a sale of our common shares by a non-U.S. shareholder generally will not be subject to U.S. federal income taxation under FIRPTA. Generally, with respect to any particular shareholder, our common shares will constitute a USRPI only if each of the following three statements is true.

    Fifty percent or more of our assets on any of certain testing dates during a prescribed testing period consist of interests in real property located within the United States, excluding for this purpose, interests in real property solely in a capacity as creditor;

    We are not a "domestically-controlled qualified investment entity." A domestically-controlled qualified investment entity includes a REIT, less than 50% of value of which is held directly or indirectly by non-U.S. shareholders at all times during a specified testing period. Although we expect that we likely will be domestically-controlled, we cannot make any assurance that we are or will remain a domestically-controlled qualified investment entity; and

    Either (a) our common shares are not "regularly traded," as defined by applicable Treasury Regulations, on an established securities market; or (b) our common shares are "regularly traded" on an established securities market and the selling non-U.S. shareholder has held over 5% of our outstanding common shares any time during the five-year period ending on the date of the sale.

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qualified investment entity. These rules would apply if a non-U.S. shareholder (1) disposes of our common shares within a 30-day period preceding the ex-dividend date of a distribution, any portion of which, but for the disposition, would have been taxable to such non-U.S. shareholder as gain from the sale or exchange of a USRPI, (2) acquires, or enters into a contract or option to acquire, other common shares during the 61-day period that begins 30 days prior to such ex-dividend date and (3) if our common shares are "regularly traded" on an established securities market in the United State, such non-U.S. shareholder has not owned more than 5% of our outstanding common shares at any time during the one-year period ending on the date of such distribution.

        If gain on the sale of our common shares were subject to taxation under FIRPTA, the non-U.S. shareholder would be required to file a U.S. federal income tax return and would be subject to the same treatment as a U.S. shareholder with respect to such gain, subject to the applicable alternative minimum tax and a special alternative minimum tax in the case of non-resident alien individuals, and the purchaser of the shares could be required to withhold 10% of the purchase price and remit such amount to the IRS.

        Gain from the sale of our common shares that would not otherwise be subject to FIRPTA will nonetheless be taxable in the United States to a non-U.S. shareholder as follows: (1) if the non-U.S. shareholder's investment in our common shares is effectively connected with a U.S. trade or business conducted by such non-U.S. shareholder, the non-U.S. shareholder will be subject to the same treatment as a U.S. shareholder with respect to such gain, or (2) if the non-U.S. shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a "tax home" in the United States, the nonresident alien individual will be subject to a 30% tax on the individual's capital gain.

        Withholding on Payments to Certain Foreign Entities.    The Hiring Incentives to Restore Employment Act imposes withholding taxes on certain types of payments made to "foreign financial institutions" and certain other non-U.S. entities unless additional certification, information reporting and other specified requirements are satisfied. Failure to comply with the new reporting requirements could result in withholding tax being imposed on payments of interest, dividends, sales proceeds and other payments to foreign intermediaries and certain Non-U.S. shareholders. This legislation is generally effective for payments made after December 31, 2012 (i.e., on or after January 1, 2013). Prospective investors should consult their own tax advisors regarding this new legislation.

Backup Withholding Tax and Information Reporting

        U.S. Shareholders.    In general, information-reporting requirements will apply to distributions with respect to, and the proceeds of the sale of, our common shares discussed herein to some holders, unless an exception applies.

        The payor is required to backup withhold tax on such payments if (a) the payee fails to furnish a taxpayer identification number, or TIN, to the payor or to establish an exemption from backup withholding, or (b) the IRS notifies the payor that the TIN furnished by the payee is incorrect.

        In addition, a payor of dividends or interest on our common shares discussed herein will be required to backup withhold tax if (a) there has been a notified payee under-reporting with respect to interest, dividends or original issue discount described in Section 3406(c) of the Internal Revenue Code or (b) there has been a failure of the payee to certify under the penalty of perjury that the payee is not subject to backup withholding under the Internal Revenue Code.

        Some U.S. shareholders may be exempt from backup withholding. Any amounts withheld under the backup withholding rules from a payment to a U.S. shareholder will be allowed as a credit against the holder's U.S. federal income tax and may entitle the holder to a refund, provided that the required information is furnished to the IRS.

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        The payor will be required to furnish annually to the IRS and to holders of our common shares information relating to the amount of dividends and interest paid on our common shares, and that information reporting may also apply to payments of proceeds from the sale of our common shares. Some holders are generally not subject to information reporting.

        Non-U.S. Shareholder.    With certain exceptions, as a general matter, the information reporting and backup withholding requirements described above for a U.S. shareholder will apply to a non-U.S. shareholder with respect to distributions on, or the proceeds from the sale of, our common shares.

        Generally, non-U.S. shareholders will satisfy the information reporting requirement by providing a proper IRS withholding certificate (such as the Form W-8BEN). In the absence of a proper withholding certificate, applicable Treasury Regulations provide presumptions regarding the status of holders of our common shares when payments to the holders cannot be reliably associated with appropriate documentation provided to the payer. If a non-U.S. shareholder fails to comply with the information reporting requirement, payments to such person may be subject to the full withholding tax even if such person might have been eligible for a reduced rate of withholding or no withholding under applicable income tax treaty. Any payment subject to a withholding tax will not be again subject to any backup withholding. Because the application of these Treasury Regulations varies depending on the holder's particular circumstances, you are advised to consult your tax advisor regarding the information reporting requirements applicable to you.

Other Tax Considerations

Sunset of Reduced Tax Rate Provisions

        Several of the tax considerations described herein are subject to a sunset provision. The sunset provisions generally provide that for taxable years beginning after December 31, 2010, certain provisions that are currently in the Internal Revenue Code will revert back to a prior version of those provisions. These provisions include those related to the reduced maximum income tax rate for capital gain of 15% (rather than 20%) for taxpayers taxed at individual rates, qualified dividend income, including the application of the 15% capital gain rate to qualified dividend income, and certain other tax rate provisions described herein. The impact of this reversion is not discussed herein. Prospective shareholders should consult their tax advisors regarding the effect of sunset provisions on an investment in our common shares.

Legislative or Other Actions Affecting REITs

        The present U.S. federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time. The REIT rules are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department which may result in statutory changes as well as revisions to regulations and interpretations. Changes to the U.S. federal tax laws and interpretations thereof could adversely affect an investment in our common shares.

State, Local and Foreign Taxes

        We, our subsidiaries, and/or shareholders may be subject to state, local or foreign taxation in various jurisdictions, including those in which we or they transact business, own property or reside. We may own properties located in numerous U.S. jurisdictions, and may be required to file tax returns in some or all of those jurisdictions. Our state and local tax treatment and the state, local and foreign tax treatment of our shareholders may not conform to the U.S. federal income tax treatment discussed above. Prospective shareholders should consult their tax advisors regarding the application and effect of state, local and foreign income and other tax laws on an investment in our common shares.

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Tax Shelter Reporting

        If a holder of our common shares recognizes a loss as a result of a transaction with respect to our common shares of at least (i) $2 million or more in a single taxable year or $4 million or more in a combination of taxable years, for a shareholder that is an individual, S corporation, trust, or a partnership with at least one non-corporate partner, or (ii) $10 million or more in a single taxable year or $20 million or more in a combination of taxable years, for a shareholder that is either a corporation or a partnership with only corporate partners, such shareholder may be required to file a disclosure statement with the IRS on Form 8886. Direct holders of portfolio securities are in many cases exempt from this reporting requirement, but holders of REIT securities currently are not excepted. The fact that a loss is reportable under these Treasury Regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. The Internal Revenue Code imposes significant penalties for failure to comply with these requirements. Shareholders should consult their tax advisors concerning any possible disclosure obligation with respect to the receipt or disposition of our common shares, or transactions that we might undertake directly or indirectly. Moreover, shareholders should be aware that we and other participants in the transactions in which we are involved (including their advisors) might be subject to disclosure or other requirements pursuant to these regulations.

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ERISA CONSIDERATIONS

        A fiduciary of a pension, profit sharing, retirement or other employee benefit plan, or plan, subject to the Employee Retirement Income Security Act of 1974, as amended, or ERISA, should consider the fiduciary standards under ERISA in the context of the plan's particular circumstances before authorizing an investment of a portion of such plan's assets in our common shares. Accordingly, such fiduciary should consider (i) whether the investment satisfies the diversification requirements of Section 404(a)(1)(C) of ERISA, (ii) whether the investment is in accordance with the documents and instruments governing the plan as required by Section 404(a)(1)(D) of ERISA, and (iii) whether the investment is prudent under ERISA. In addition to the imposition of general fiduciary standards of investment prudence and diversification, ERISA, and the corresponding provisions of the Internal Revenue Code, prohibit a wide range of transactions involving the assets of the plan and persons who have certain specified relationships to the plan ("parties in interest" within the meaning of ERISA, "disqualified persons" within the meaning of the Internal Revenue Code). Thus, a plan fiduciary considering an investment in our common shares also should consider whether the acquisition or the continued holding of our common shares might constitute or give rise to a direct or indirect prohibited transaction that is not subject to an exemption issued by the Department of Labor, or the DOL. Similar restrictions apply to many governmental and foreign plans which are not subject to ERISA. Thus, those considering investing in our common shares on behalf of such a plan should consider whether the acquisition or the continued holding of our common shares might violate any such similar restrictions.

        The DOL has issued final regulations, or the DOL Regulations, as to what constitutes assets of an employee benefit plan under ERISA. Under the DOL Regulations, if a plan acquires an equity interest in an entity, which interest is neither a "publicly offered security" nor a security issued by an investment company registered under the 1940 Act, the plan's assets would include, for purposes of the fiduciary responsibility provision of ERISA, both the equity interest and an undivided interest in each of the entity's underlying assets unless certain specified exceptions apply. The DOL Regulations define a publicly offered security as a security that is "widely held," "freely transferable," and either part of a class of securities registered under the Exchange Act, or sold pursuant to an effective registration statement under the Securities Act (provided the securities are registered under the Exchange Act within 120 days after the end of the fiscal year of the issuer during which the public offering occurred). Our common shares are being sold in an offering registered under the Securities Act and will be registered under the Exchange Act.

        The DOL Regulations provide that a security is "widely held" only if it is part of a class of securities that is owned by 100 or more investors independent of the issuer and of one another. A security will not fail to be "widely held" because the number of independent investors falls below 100 subsequent to the initial public offering as a result of events beyond the issuer's control. We expect our common shares to be "widely held" upon completion of this offering.

        The DOL Regulations provide that whether a security is "freely transferable" is a factual question to be determined on the basis of all relevant facts and circumstances. The DOL Regulations further provide that when a security is part of an offering in which the minimum investment is $10,000 or less, as is the case with this offering, certain restrictions ordinarily will not, alone or in combination, affect the finding that such securities are "freely transferable." We believe that the restrictions imposed under our declaration of trust on the transfer of our common shares are limited to the restrictions on transfer generally permitted under the DOL Regulations and are not likely to result in the failure of our common shares to be "freely transferable." The DOL Regulations only establish a presumption in favor of the finding of free transferability, and, therefore, no assurance can be given that the DOL will not reach a contrary conclusion.

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        Assuming that our common shares will be "widely held" and "freely transferable," we believe that our common shares will be publicly offered securities for purposes of the DOL Regulations and that our assets will not be deemed to be "plan assets" of any plan that invests in our common shares.

        Each holder of our common shares will be deemed to have represented and agreed that its purchase and holding of such common shares (or any interest therein) will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Internal Revenue Code or violate any similar laws.

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UNDERWRITING (CONFLICTS OF INTEREST)

        Merrill Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital Inc. and Wells Fargo Securities, LLC are acting as representatives of each of the underwriters named below. Subject to the terms and conditions set forth in a purchase agreement among us, our operating partnership and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the number of common shares set forth opposite its name below.

Underwriter
  Number
of Shares

Merrill Lynch, Pierce, Fenner & Smith Incorporated

   

Barclays Capital Inc. 

   

Wells Fargo Securities, LLC

   
     
 

Total

   
     

        Subject to the terms and conditions set forth in the purchase agreement, the underwriters have agreed, severally and not jointly, to purchase all of the shares sold under the purchase agreement if any of these shares are purchased. If an underwriter defaults, the purchase agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreement may be terminated.

        We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

        The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreement, such as the receipt by the underwriters of officer's certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Commissions and Discounts

        The representatives have advised us that the underwriters propose initially to offer the shares to the public at the public offering price set forth on the cover page of this prospectus and to dealers at that price less a concession not in excess of $            per share. The underwriters may allow, and the dealers may reallow, a discount not in excess of $            per share to other dealers. After the initial offering, the public offering price, concession or any other term of this offering may be changed.

        The following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their overallotment option.

 
  Per Share   Without Option   With Option  

Public offering price

  $     $     $    

Underwriting discount

  $     $     $    

Proceeds, before expenses, to us

  $     $     $    

        The expenses of this offering, not including the underwriting discount, are estimated at $          and are payable by us.

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Overallotment Option

        We have granted an overallotment option to the underwriters to purchase up to        additional shares at the public offering price less the underwriting discount. The underwriters may exercise this option for 30 days from the date of this prospectus solely to cover overallotments, if any. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the purchase agreement, to purchase a number of additional shares proportionate to that underwriter's initial amount reflected in the above table.

Directed Share Program

        At our request, the underwriters have reserved for sale, at the initial public offering price, up to five percent (5%) of the shares offered by this prospectus for sale to some of our trustees, officers, employees, business associates and related persons. If these persons purchase reserved shares, it will reduce the number of shares available for sale to the general public. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus.

No Sales of Similar Securities

        We, our executive officers and trustees and certain of our continuing investors have agreed not to sell or transfer any common shares or securities convertible into, exchangeable or exercisable for (including OP units) or repayable with, common shares, subject to certain exceptions, for 180 days after the date of this prospectus without first obtaining the written consent of the representatives. Specifically, we and these other persons have agreed, with certain limited exceptions, not to directly or indirectly:

    offer, pledge, sell or contract to sell any common shares,

    sell any option or contract to purchase any common shares,

    purchase any option or contract to sell any common shares,

    grant any option, right or warrant for the sale of any common shares,

    lend or otherwise dispose of or transfer any common shares,

    request or demand that we file a registration statement related to the common shares, or

    enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common shares whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.

        This lock-up provision applies to common shares and to securities convertible into or exchangeable or exercisable for (including OP units) or repayable with, common shares. It also applies to common shares and such securities owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition. In the event that either (x) during the last 17 days of the lock-up period referred to above, we issue an earnings release or material news or a material event relating to us occurs or (y) prior to the expiration of the lock-up period, we announce that we will release earnings results or become aware that material news or a material event will occur during the 16-day period beginning on the last day of the lock-up period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

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New York Stock Exchange Listing

        We intend to apply to have our common shares listed on the NYSE under the symbol "EOLA." In order to meet the requirements for listing on that exchange, the underwriters will undertake to sell a minimum number of shares to a minimum number of beneficial owners as required by that exchange.

Determination of Offering Price

        Before this offering, there has been no public market for our common shares. The initial public offering price will be determined through negotiations between us and the representatives. In addition to prevailing market conditions, the factors to be considered in determining the initial public offering price will be:

    the valuation multiples of publicly traded companies that the representatives believe to be comparable to us;

    our financial information;

    the history of, and the prospects for, our company and the industry in which we compete;

    an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues;

    the present state of our development; and

    the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

        An active, liquid trading market for our common shares may not develop. It is also possible that after this offering our common shares will not trade in the public market at or above the initial public offering price.

        The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.

Price Stabilization, Short Positions and Penalty Bids

        Until the distribution of our common shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our common shares. However, the representatives may engage in transactions that stabilize the price of our common shares, such as bids or purchases to peg, fix or maintain that price.

        In connection with this offering, the underwriters may purchase and sell our common shares in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in this offering. "Covered" short sales are sales made in an amount not greater than the underwriters' overallotment option. The underwriters may close out any covered short position by either exercising their overallotment option or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the overallotment option. "Naked" short sales are sales in excess of the overallotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common shares in the open market after pricing that could adversely affect investors who purchase in this offering. Stabilizing transactions consist of

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various bids for or purchases of common shares made by the underwriters in the open market prior to completion of this offering.

        The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

        Similar to other purchase transactions, the underwriters' purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common shares or preventing or retarding a decline in the market price of our common shares. As a result, the market price of our common shares may be higher than the price that might otherwise exist in the open market.

        Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the market price of our common shares. In addition, neither we nor any of the underwriters makes any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

Electronic Distribution

        A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same basis as other allocations.

        Other than the prospectus in electronic format, the information on any underwriter's or selling group member's web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

Conflicts of Interest

        An affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, one of the underwriters in this offering, serves as the lender under an approximately $27.2 million mortgage loan secured by the Maitland Forum property, an approximately $10.7 million mortgage loan secured by the Maitland Park Center property and a $5 million revolving line of credit, of which $2.75 million is outstanding (each based on June 30, 2010 outstanding balances), each of which we expect to repay using a portion of the net proceeds from this offering. As such, such affiliate will receive the portion of the net proceeds from this offering that are used to repay such indebtedness.

Other Relationships

        In addition, certain of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates and they may receive customary fees and commissions for these transactions.

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Notice to Prospective Investors in the EEA

        In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State") an offer to the public of any common shares which are the subject of this offering contemplated by this prospectus may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any common shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

    (a)
    to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

    (b)
    to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;

    (c)
    by the underwriters to fewer than 100 natural or legal persons (other than "qualified investors" as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer; or

    (d)
    in any other circumstances falling within Article 3(2) of the Prospectus Directive;

provided that no such offer of shares shall result in a requirement for the publication by us or any representative of a prospectus pursuant to Article 3 of the Prospectus Directive.

        Any person making or intending to make any offer of shares within the EEA should only do so in circumstances in which no obligation arises for us or any of the underwriters to produce a prospectus for such offer. Neither we nor the underwriters have authorized, nor do they authorize, the making of any offer of shares through any financial intermediary, other than offers made by the underwriters which constitute the final offering of shares contemplated in this prospectus.

        For the purposes of this provision, and your representation below, the expression an "offer to the public" in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase any shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression "Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

        Each person in a Relevant Member State who receives any communication in respect of, or who acquires any shares under, the offer of shares contemplated by this prospectus will be deemed to have represented, warranted and agreed to and with us and each underwriter that:

    (a)
    it is a "qualified investor" within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive; and

    (b)
    in the case of any shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (1) the shares acquired by it in this offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than "qualified investors" (as defined in the Prospectus Directive), or in circumstances in which the prior consent of the representatives has been given to the offer or resale; or (2) where shares have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of those shares to it is not treated under the Prospectus Directive as having been made to such persons.

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Notice to Prospective Investors in Switzerland

        We have not and will not register with the Swiss Financial Market Supervisory Authority (FINMA) as a foreign collective investment scheme pursuant to Article 119 of the Federal Act on Collective Investment Scheme of 23 June 2006, as amended (CISA), and accordingly the shares being offered pursuant to this prospectus have not and will not be approved, and may not be licenseable, with FINMA. Therefore, the shares have not been authorized for distribution by FINMA as a foreign collective investment scheme pursuant to Article 119 CISA and the shares offered hereby may not be offered to the public (as this term is defined in Article 3 CISA) in or from Switzerland. The shares may solely be offered to "qualified investors," as this term is defined in Article 10 CISA, and in the circumstances set out in Article 3 of the Ordinance on Collective Investment Scheme of 22 November 2006, as amended (CISO), such that there is no public offer. Investors, however, do not benefit from protection under CISA or CISO or supervision by FINMA. This prospectus and any other materials relating to the shares are strictly personal and confidential to each offeree and do not constitute an offer to any other person. This prospectus may only be used by those qualified investors to whom it has been handed out in connection with the offer described herein and may neither directly or indirectly be distributed or made available to any person or entity other than its recipients. It may not be used in connection with any other offer and shall in particular not be copied and/or distributed to the public in Switzerland or from Switzerland. This prospectus does not constitute an issue prospectus as that term is understood pursuant to Article 652a and/or 1156 of the Swiss Federal Code of Obligations. We have not applied for a listing of the shares on the SIX Swiss Exchange or any other regulated securities market in Switzerland, and consequently, the information presented in this prospectus does not necessarily comply with the information standards set out in the listing rules of the SIX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the SIX Swiss Exchange.

Notice to Prospective Investors in the Dubai International Financial Centre

        This document relates to an exempt offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority. This document is intended for distribution only to persons of a type specified in those rules. It must not be delivered to, or relied on by, any other person. The Dubai Financial Services Authority has no responsibility for reviewing or verifying any documents in connection with exempt offers. The Dubai Financial Services Authority has not approved this document nor taken steps to verify the information set out in it, and has no responsibility for it. The shares which are the subject of the offering contemplated by this prospectus may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this document you should consult an authorised financial adviser.

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LEGAL MATTERS

        Certain legal matters relating to this offering, including the validity of common shares offered hereby and certain tax matters, will be passed upon for us by Hogan Lovells US LLP. Sidley Austin LLP will act as counsel to the underwriters.


EXPERTS

        The combined financial statements and schedule III of Eola Predecessor Companies at December 31, 2009 and 2008 and for each of the three years in the period ended December 31, 2009, and the balance sheet of Eola Property Trust as of September 17, 2010, appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon appearing elsewhere herein which, as to the years 2009, 2008 and 2007 relative to Eola Predecessor Companies are based in part on the reports of KPMG LLP, independent registered public accounting firm. The financial statements referred to above are included in reliance upon such reports given on the authority of such firms as experts in accounting and auditing.

        The consolidated balance sheets of VFG Holdings LLC and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, members' equity and cash flows for the years ended December 31, 2009 and 2008 and the period from May 9, 2007 (Inception) through December 31, 2007, have been included in this prospectus in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

        The combined statements of revenue and certain expenses of Eola Portfolio for the years ended December 31, 2009, 2008 and 2007; the combined statements of revenue and certain expenses of ACP Southeast Portfolio for the years ended December 31, 2009, 2008 and 2007; and the combined statements of revenue and certain expenses of ACP Mid-Atlantic Portfolio for the years ended December 31, 2009, 2008 and 2007, have been included in this prospectus in reliance upon the reports of KPMG LLP, independent auditors, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

        KPMG LLP's reports on the combined statements of revenue and certain expenses of Eola Portfolio, ACP Southeast Portfolio, and ACP Mid-Atlantic Portfolio for the years ended December 31, 2009, 2008 and 2007 contain a paragraph that states the combined statements of revenue and certain expenses were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in note 2 to the combined statements of revenue and certain expenses, and they are not intended to be a complete presentation of Eola Portfolio's, ACP Southeast Portfolio's and ACP Mid-Atlantic Portfolio's revenue and expenses.

        The reports of KPMG LLP, independent registered public accounting firm, on the consolidated balance sheet of JAX-ISQ LLC and subsidiaries as of December 31, 2009, and the related consolidated statements of operations, members' equity and cash flows for the year then ended, not included herein; the consolidated balance sheets of Orlando Centre Syndication Partners JV LP and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, partners' capital and cash flows for the years then ended, and the period from May 2, 2007 (Inception) through December 31, 2007, not included herein; and the consolidated balance sheets of MFM REIT LLC and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, members' equity and cash flows for the years then ended, not included herein, have been included in this prospectus upon the authority of said firm as experts in accounting and auditing.

        RAFFA, P.C., an independent registered public accounting firm, has audited the statement of revenue and certain expenses of 1110 Vermont Renaissance Associates, LLC for the year ended

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December 31, 2009 as set forth in their report. We have included the aforementioned financial statements in this prospectus and elsewhere in the registration statement in reliance upon the reports of RAFFA, P.C., given upon the authority of said firm as experts in accounting and auditing.

        Unless otherwise indicated, all statistical and economic market data included in this prospectus, including information relating to the economic conditions within our markets contained in "Summary" and "Economic and Market Overview" is derived from market information prepared for us by Rosen Consulting Group, a nationally recognized real estate consulting firm, and is included in this prospectus in reliance on Rosen Consulting Group's authority as an expert in such matters.


CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        KPMG LLP, or KPMG, was previously engaged to audit the combined financial statements of Eola Property Trust and the Eola Predecessor Companies as of and for the years ended December 31, 2009, 2008 and 2007, as well as (i) the consolidated financial statements of VFG Holdings LLC as of and for the years ended December 31, 2009 and 2008 and the period from May 9, 2007 (Inception) through December 31, 2007, (ii) the consolidated financial statements of JAX-ISQ LLC as of and for the year ended December 31, 2009, (iii) the consolidated financial statements of Orlando Centre Syndication Partners JV LP as of and for the years ended December 31, 2009 and 2008 and the period from May 2, 2007 (Inception) through December 31, 2007, and (iv) the consolidated financial statements of MFM REIT LLC as of and for the years ended December 31, 2009 and 2008 (collectively "Investees"). On August 25, 2010, our executive management team approved the dismissal of KPMG as our independent registered public accounting firm with respect to the audit of the combined financial statements of Eola Property Trust and the Eola Predecessor Companies and the Investees, which was effective immediately, and appointed Ernst & Young LLP, or E&Y, as our independent registered public accounting firm for the years ended December 31, 2009, 2008 and 2007. Our executive management team and KPMG, however, agreed that KPMG would complete the audits of the combined statements of revenue and certain expenses of Eola Portfolio, ACP Southeast Portfolio and ACP Mid-Atlantic Portfolio (collectively, the "Significant Proposed Acquisitions") presented under Rule 3-14 of Regulation S-X for the years ended December 31, 2009, 2008 and 2007, which are included in this prospectus, and that KPMG would be dismissed as the independent auditor for the Significant Proposed Acquisitions upon completion. KPMG has since completed the audits of the combined statements of revenue and certain expenses of the Significant Proposed Acquisitions.

        KPMG did not issue any reports on the financial statements of Eola Property Trust or the Eola Predecessor Companies. KPMG's reports on the financial statements of our Investees and the Significant Proposed Acquisitions, included in this prospectus, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that the reports on the financial statements of our Significant Proposed Acquisitions were prepared for the purpose of complying with Rule 3-14 of Regulation S-X and are not intended to be complete presentations of the revenue and expenses of the Significant Proposed Acquisitions. During our two most recent fiscal years and any subsequent interim period preceding the dismissal of KPMG, there were no disagreements with KPMG on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to KPMG's satisfaction, would have caused KPMG to make reference to the matter in their report, and there have been no "reportable events" as defined in Item 304(a)(1)(v) of Regulation S-K, except that KPMG advised us of a material weakness related to a lack of a sufficient number of adequately trained accounting personnel with appropriate expertise in U.S. generally accepted accounting principles. We are in the process of addressing the material weakness identified by KPMG as described above, and intend to remedy such weakness by the completion of this offering.

        Prior to the engagement of E&Y, we did not consult with such firm regarding the application of accounting principles to a specific completed or contemplated transaction, or any matter that was either

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the subject of a disagreement or a reportable event. We also did not consult with E&Y regarding the type of audit opinion which might be rendered on our financial statements and no oral or written report was provided by E&Y.

        We have provided KPMG with a copy of this disclosure prior to its filing with the SEC and have requested KPMG to furnish us with a letter addressed to the SEC stating whether it agrees with the above statements regarding KPMG and, if not, stating the respects in which it does not agree. A copy of this letter, dated October 6, 2010, is filed as Exhibit 16.1 to the registration statement of which this prospectus forms a part.


WHERE YOU CAN FIND MORE INFORMATION

        We maintain a website at www.                        .com. The information contained on, or otherwise accessible through, our website does not constitute a part of this prospectus. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website.

        We have filed with the SEC a registration statement on Form S-11, including exhibits, schedules and amendments filed with the registration statement, of which this prospectus is a part, under the Securities Act with respect to the common shares we propose to sell in this offering. This prospectus does not contain all of the information set forth in the registration statement and exhibits and schedules to the registration statement. For further information with respect to our company and the common shares to be sold in this offering, reference is made to the registration statement, including the exhibits and schedules thereto. Statements contained in this prospectus as to the contents of any contract or other document referred to in this prospectus are not necessarily complete and, where that contract or other document has been filed as an exhibit to the registration statement, each statement in this prospectus is qualified in all respects by the exhibit to which the reference relates. Copies of the registration statement, including the exhibits and schedules to the registration statement, may be examined without charge at the public reference room of the SEC, 100 F Street, N.E., Washington, D.C. 20549. Information about the operation of the public reference room may be obtained by calling the SEC at 1-800-SEC-0330. Copies of all or a portion of the registration statement can be obtained from the public reference room of the SEC upon payment of prescribed fees. Our SEC filings, including the registration statement, are also available to you, free of charge, on the SEC's website at http://www.sec.gov.

        We are subject to the information and reporting requirements of the Exchange Act and, accordingly, file annual, quarterly and periodic reports and other information with the SEC. These reports and other information are available for inspection and copying at the SEC's public reference facilities and the website of the SEC referred to above.

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INDEX TO FINANCIAL STATEMENTS

Eola Property Trust

   

Pro Forma Condensed Consolidated Financial Statements (unaudited):

   
 

Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2010

  F-5
 

Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 2010

  F-6
 

Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2009

  F-7
 

Notes and Management's Assumptions to Unaudited Pro Forma Condensed Consolidated Financial Statements

  F-8

Consolidated Historical Financial Statements

   
 

Report of Independent Registered Public Accounting Firm

  F-17
 

Balance Sheet as of September 17, 2010

  F-18
 

Notes to Balance Sheet as of September 17, 2010

  F-19

Eola Predecessor Companies

   
 

Report of Independent Registered Public Accounting Firm

  F-21
 

Combined Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009 and 2008

  F-22
 

Combined Statements of Operations for the Six Months Ended June 30, 2010 and 2009 (unaudited), and Years Ended December 31, 2009, 2008 and 2007

  F-23
 

Combined Statements of Changes in Equity (Deficit) for the Six Months Ended June 30, 2010 (unaudited) and Years Ended December 31, 2009, 2008, and 2007

  F-24
 

Combined Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (unaudited) and Years Ended December 31, 2009, 2008, and 2007

  F-25
 

Notes to Eola Predecessor Companies Combined Financial Statements

  F-26
 

Schedule III—Real Estate and Accumulated Depreciation

  F-51
 

JAX-ISQ LLC - Report of Independent Registered Public Accounting Firm

  F-52
 

Orlando Centre Syndication Partners JV LP - Report of Independent Registered Public Accounting Firm

  F-53
 

MFM REIT LLC - Report of Independent Registered Public Accounting Firm

  F-54

VFG Holdings LLC and Subsidiaries

   
 

Report of Independent Registered Public Accounting Firm

  F-55
 

Consolidated Balance Sheets as of December 31, 2009 and 2008

  F-56
 

Consolidated Statements of Operations for the Years Ended December 31, 2009 and 2008 and the Period from May 9, 2007 (Inception) through December 31, 2007

  F-57
 

Consolidated Statements of Members' Equity for the Years Ended December 31, 2009 and 2008 and the Period from May 9, 2007 (Inception) through December 31, 2007

  F-58
 

Consolidated Statements of Cash Flows for the Years Ended December 31, 2009 and 2008 and the Period from May 9, 2007 (Inception) through December 31, 2007

  F-59
 

Notes to Consolidated Financial Statements

  F-60

Eola Portfolio

   
 

Independent Auditors' Report

  F-78
 

Combined Statements of Revenue and Certain Expenses for the Six Months Ended June 30, 2010 (unaudited) and Years Ended December 31, 2009, 2008, and 2007

  F-79
 

Notes to Combined Statements of Revenue and Certain Expenses

  F-80

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ACP Southeast Portfolio

   
 

Independent Auditors' Report

  F-84
 

Combined Statements of Revenue and Certain Expenses for the Six Months Ended June 30, 2010 (unaudited) and Years Ended December 31, 2009, 2008, and 2007

  F-85
 

Notes to Combined Statements of Revenue and Certain Expenses

  F-86

ACP Mid-Atlantic Portfolio

   
 

Independent Auditors' Report

  F-90
 

Combined Statements of Revenue and Certain Expenses for the Six Months Ended June 30, 2010 (unaudited) and Years Ended December 31, 2009, 2008, and 2007

  F-91
 

Notes to Combined Statements of Revenue and Certain Expenses

  F-92

1110 Vermont Renaissance Associates,  LLC

   
 

Independent Auditor's Report

  F-95
 

Statements of Revenue and Certain Expenses for the Six Months Ended June 30, 2010 and 2009 (unaudited) and Year Ended December 31, 2009

  F-96
 

Notes to Combined Statements of Revenue and Certain Expenses

  F-97

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Eola Property Trust

Pro Forma Condensed Consolidated Financial Statements

(unaudited)

        The unaudited pro forma condensed consolidated financial information presented below reflects the audited historical financial statements of the Eola Predecessor Companies (the "Predecessor"), as adjusted to give pro forma effect to the formation transactions, this offering (the "Offering") of the common shares of beneficial interest (the "Common Shares") of Eola Property Trust (the "Company," "we," "our" or "us") and the application of the net proceeds therefrom. The historical operations of the Company have not been reflected in the unaudited pro forma condensed consolidated financial statements as the operations were not significant. We are providing this information to aid you in your analysis of the financial aspects of the Offering. The majority of the proceeds from the Offering will be used to:

    purchase controlling interests in certain equity method investments of the Predecessor and an office building from a third party (the "Acquisition Properties"(see the footnotes to the financial statements noted below for a listing of the properties included));

    repay certain notes payable and other debt; and

    purchase additional non-controlling interests in certain equity method investments of the Predecessor.

        Our unaudited pro forma condensed consolidated financial information has been derived from and should be read in conjunction with the following financial statements which are included elsewhere in this prospectus:

    the combined financial statements and related notes of the Predecessor as of June 30, 2010 (unaudited) and December 31, 2009 and 2008 and for the six months ended June 30, 2010 and 2009 (unaudited) and years ended December 31, 2009, 2008 and 2007;

    the combined statements of revenue and certain expenses and related notes of Eola Portfolio, ACP Southeast Portfolio and ACP Mid-Atlantic Portfolio, for the six months ended June 30, 2010 (unaudited) and years ended December 31, 2009, 2008 and 2007 (included in the Acquisition Properties); and

    the statements of revenue and certain expenses and related notes of 1110 Vermont Renaissance Associates, LLC for the six months ended June 30, 2010 and 2009 (unaudited) and year ended December 31, 2009 (included in the Acquisition Properties).

        This information should also be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

        The unaudited pro forma condensed consolidated balance sheet data at June 30, 2010 reflects the historical information of the Predecessor as of such date, as adjusted to give pro forma effect to the formation transactions, this Offering and the application of the net proceeds therefrom as if they had occurred on June 30, 2010. The historical balances of the combined properties in the Predecessor, as well as the historical balances of the uncombined properties, are reflected at carry over basis as they are not deemed to have resulted in a change of control. Purchases of non-controlling interests in the combined properties are considered equity transactions and require no step-up. Increases in additional interests in equity method investments that do not result in a change of control are reflected at fair value as step acquisitions. The value the Predecessor's controlling and non-controlling interest holders will receive for their contributions relate to their Predecessor ownership interest only and do not include any value associated with the settlement of any other relationship with the Predecessor. The

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Eola Property Trust
Pro Forma Condensed Consolidated Financial Statements

(unaudited)


assets and liabilities of the Acquisition Properties, however, have been recorded at fair value due to our purchase of a controlling interest. The purchase price allocations have not been finalized and are subject to change based upon recording of actual transaction costs, finalization of working capital adjustments, and completion of appraisals of tangible and intangible assets of the Acquisition Properties.

        The unaudited pro forma condensed consolidated statements of operations data for the six months ended June 30, 2010 and the year ended December 31, 2009 reflect the historical information of the Predecessor adjusted to give pro forma effect to the formation transactions, the Offering and the application of the net proceeds therefrom, as if they occurred on January 1, 2009.

        The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. The unaudited pro forma condensed consolidated statements of operations data and the unaudited pro forma condensed consolidated balance sheet data do not purport to represent the results of operations which would have occurred had such transactions been consummated on the dates indicated or the financial position for any future date or period.

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Eola Property Trust

Pro Forma Condensed Consolidated Balance Sheet

As of June 30, 2010

(unaudited and in thousands, except per share amounts)

 
  Predecessor   Distribution
of Excluded
Assets
  Acquisitions
and
Contributions
  Proceeds
from
Offering
  Financing
and Equity
Transactions
  Other
Pro Forma
Adjustments
  Company
Pro Forma
 
 
  (A)
  (B)
  (C)
  (D)
  (E)
  (F)
   
 

Assets

                                           

Real estate investment, net

  $ 53,973                                      

Cash and cash equivalents

    3,653                                      

Restricted cash

    3,576                                      

Investments in real estate joint ventures

    3,913                                     (G)

Lease intangible assets

    5,062                                      

Prepaid expenses and other assets

    17,096                                      
                                           
 

Total assets

  $ 87,273                                      
                                           

Liabilities and equity (deficit)

                                           

Liabilities

                                           

Notes payable and other debt

  $ 83,122                                      

Accounts payable, accrued interest and other liabilities

    16,096                                      

Lease intangible liabilities

                                         

Losses and distributions in excess of contributions in real estate joint ventures

    5,707                                      
                                           
 

Total liabilities

  $ 104,925                                      

Equity (deficit)

                                           

Equity (deficit)

  $ (17,652 )                                    

Non-controlling interests - OP units

                                         

Non-controlling interests - property

                                         
                                           
 

Total equity (deficit)

  $ (17,652 )                                    
                                           
 

Total liabilities and equity (deficit)

  $ 87,273                                      
                                           

See accompanying notes.

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Eola Property Trust

Pro Forma Condensed Consolidated Statement of Operations

For the Six Months Ended June 30, 2010

(unaudited and in thousands, except per share amounts)

 
  Predecessor   Distribution
of Excluded
Assets
  Acquisitions
and
Contributions
  Financing
and Equity
Transactions
  Other
Pro Forma
Adjustments
  Company
Pro Forma
 
 
  (AA)
  (BB)
  (CC)
  (DD)
  (EE)
   
 

Revenues

                                     

Rental revenue

  $ 3,381                                

Tenant reimbursements

    1,866                                

Parking and other income

                                   

Management and other fees

    11,167                                
                                     
 

Total revenues

    16,414                                

Expenses

                                     

Property operating expenses

    2,944                                

General and administrative

    8,953                                

Depreciation and amortization

    2,962                                
                                     
 

Total expenses

    14,859                                
                                     

Operating income (loss)

    1,555                                

Other Income (Expenses)

                                     

Equity in earnings (loss) from real estate joint ventures

    (414 )                             (FF)

Interest and other income, net

    70                                

Interest expense

    (1,676 )                              

Other expenses

                                   
                                     
 

Total other income (expenses)

    (2,020 )                              
                                     

Net income (loss)

  $ (465 )                              
                                     

Less: net (income) loss attributable to non-controlling interests - OP units

                                     

Less: net (income) loss attributable to non-controlling interests - property

                                     

Net income (loss) attributable to the Company

                                     

Pro forma earnings per share—basic and diluted

                                     

Pro forma weighted average common shares outstanding—basic and diluted

                                     

See accompanying notes.

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Eola Property Trust

Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended December 31, 2009

(unaudited and in thousands, except per share amounts)

 
  Predecessor   Distribution
of Excluded
Assets
  Acquisitions
and
Contributions
  Financing
and Equity
Transactions
  Other
Pro Forma
Adjustments
  Company
Pro Forma
 
 
  (AA)
  (BB)
  (CC)
  (DD)
  (EE)
   
 

Revenues

                                     

Rental revenue

  $ 7,696                                

Tenant reimbursements

    3,953                                

Parking and other income

                                   

Management and other fees

    17,782                                
                                     
 

Total revenues

    29,431                                

Expenses

                                     

Property operating expenses

    6,237                                

General and administrative

    15,731                                

Depreciation and amortization

    4,896                                

Property impairment

    457                                
                                     
 

Total expenses

    27,321                                
                                     

Operating income (loss)

    2,110                                

Other Income (Expenses)

                                     

Equity in earnings (loss) from real estate joint ventures

    (4,863 )                             (FF)

Interest and other income, net

    56                                

Interest expense

    (7,650 )                              

Other expenses

                                   
                                     
 

Total other income (expenses)

    (12,457 )                              
                                     

Net income (loss)

  $ (10,347 )                              
                                     

Less: net (income) loss attributable to non-controlling interests - OP units

                                     

Less: net (income) loss attributable to non-controlling interests - property

                                     

Net income (loss) attributable to the Company

                                     

Pro forma earnings per share—basic and diluted

                                     

Pro forma weighted average common shares outstanding—basic and diluted

                                     

See accompanying notes.

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Eola Property Trust

Notes and Management's Assumptions to Unaudited Pro Forma

Condensed Consolidated Financial Statements

(In thousands, except as otherwise noted or per share amounts)

1. Adjustments to the Pro Forma Condensed Consolidated Balance Sheet

        The adjustments to the pro forma condensed consolidated balance sheet as of June 30, 2010 are as follows:

(A)
Reflects the historical combined balance sheet of the Predecessor as of June 30, 2010.

(B)
Reflects the distribution of assets and liabilities related to an airplane owned by Eola Office Partners LLC to its members.

Prepaid expenses and other assets

       

Notes payable and other debt

       

Equity

       
(C)
We will acquire the following controlling interests through a series of acquisitions and contribution transactions. The following pro forma adjustments are necessary to reflect the initial allocation of the estimated fair value of the entities.

(i)
The allocation of fair value shown in the table below is based on the Company's preliminary estimates and is subject to change based on the final determination of the fair value of the assets and liabilities acquired.

 
  Purchase Price  
Property
  Cash(1)   Common
Shares(2)
  OP Units(2)   Notes
Payable and
Other Debt(3)
  Non-Controlling
Interests(4)
  Total  

Eola Portfolio

                                     

ACP Southeast Portfolio

                                     

ACP Mid-Atlantic Portfolio(5)

                                     

1110 Vermont Office Property

                                     
 

Total

                                     

(1)
Represents cash to be paid for the ownership interest in the properties. The amount also includes acquisition and other costs of $        .

(2)
Represents the value to be received in either our common shares or our operating partnership's partnership interests ("OP Units") at the Offering date.

(3)
Represents the estimated fair value of the mortgage loans to be assumed, including accrued interest, or newly obtained in connection with the purchase of the properties. See adjustments in Note E for the repayment of certain notes payable and other debt.

(4)
Represents the non-controlling interests of holder(s) who will retain an interest in the properties.

(5)
See the adjustment in Note F(iv) for Irvington One, Irvington Two, Irvington Three and Irvington Four (the "Irvington Joint Venture").

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Table of Contents


Eola Property Trust

Notes and Management's Assumptions to Unaudited Pro Forma

Condensed Consolidated Financial Statements

(In thousands, except as otherwise noted or per share amounts)

    (ii)
    The table below reflects the allocation of the purchase prices based upon the fair value of the Acquisition Properties.

Balance Sheet Account(1)
  Eola
Portfolio
  ACP
Southeast
Portfolio
  ACP
Mid-Atlantic
Portfolio
  1110 Vermont
Office Property
  Total  

Real estate investment, net

                               

Cash and cash equivalents

                               

Restricted cash

                               

Investments in real estate joint ventures

                               

Lease intangible assets

                               

Prepaid expenses and other assets

                               

Notes payable and other debt

                               

Accounts payable, accrued interest and other liabilities

                               

Lease intangible liabilities

                               

Equity(2)

                               

Non-controlling interests - OP Units

                               

Non-controlling interests - property

                               

(1)
The purchase price allocations have been made in accordance with our allocation policies, which are consistent with the Predecessor's. See footnotes to the combined financial statements of the Predecessor. We used the Acquisition Properties' contractual purchase prices as their estimated fair value. We will use the actual fair values, as determined by us, when we close on the purchase of the properties and record any gains or losses related to our acquisitions at that date. Proration of other operating balance sheet accounts (current operating assets and liabilities) have not been included as their estimated values approximate each other and are not deemed to be significant. All of the purchase prices of our property acquisitions represent what are considered to be arms-length transactions for the purchase of the related properties only and do not include the settlement of any pre-existing relationships.

(2)
The amount includes acquisition costs, which are expensed as incurred.
(D)
Reflects the issuance of        Common Shares in the Offering, based on an offering price of $        per share, and net of transaction costs related to the Offering. At June 30, 2010, $        of offering expenses have been accrued and $        have been prepaid.

Gross proceeds from the Offering

       

Underwriting discount, commissions and offering expenses

       
       
 

Net proceeds from the Offering

       
       

Cash and cash equivalents

       

Prepaid expenses and other assets

       

Accounts payable, accrued interest and other liabilities

       

Equity

       

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Table of Contents


Eola Property Trust

Notes and Management's Assumptions to Unaudited Pro Forma

Condensed Consolidated Financial Statements

(In thousands, except as otherwise noted or per share amounts)

(E)
To adjust for certain financing and equity transactions, outlined in the "Use of Proceeds" section of this prospectus, concurrent with the Offering. Any resulting gains or losses from the repayments have not been reflected in the pro forma statement of operations as they are considered nonrecurring.

        The table summarizes the entries outlined below:

 
  E (i)   E (ii)   E (iii)   E (iv)   E (v)   Total  

Notes payable and other debt

                                     

Accounts payable, accrued interest and other liabilities

                                     

Equity

                                     

Cash and cash equivalents

                                     

Restricted cash

                                     

Prepaid expenses and other assets

                                     
    (i)
    To effectively settle principal balance and accrued interest for notes payable of Capital Plaza I and II and Capital Plaza III in the amounts of $        and $        , respectively, for $            in cash.

Notes payable and other debt

       

Accounts payable, accrued interest and other liabilities

       

Equity

       

Cash and cash equivalents

       
    (ii)
    To effectively settle principal balance and accrued interest for notes payable of 245 Riverside, Overlook I and Overlook II in the amounts of $        , $        and $        , respectively, for $            in cash.

Notes payable and other debt

       

Accounts payable, accrued interest and other liabilities

       

Equity

       

Cash and cash equivalents

       
    (iii)
    Reflects additional repayment of $        of principal balance and accrued interest for notes payable, the payment of prepayment penalties, exit fees, swap breakage costs and defeasance costs related to such repaid indebtedness, and assumption fees in connection with assumed debt in the formation transactions.

Notes payable and other debt

       

Accounts payable, accrued interest and other liabilities

       

Equity

       

Cash and cash equivalents

       

Restricted cash

       

Prepaid expenses and other assets

       

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Table of Contents


Eola Property Trust

Notes and Management's Assumptions to Unaudited Pro Forma

Condensed Consolidated Financial Statements

(In thousands, except as otherwise noted or per share amounts)

    (iv)
    Reflects the contribution by our partner in ACP Mid-Atlantic that will be used to pay down their pro rata portion of the mortgage loan outstanding on Two Liberty Place.

Cash and cash equivalents

       

Equity

       
    (v)
    The Company will fund a $        reserve account with proceeds from the Offering to pay for capital expenditures associated with Peachtree Center.

Cash and cash equivalents

       

Restricted cash

       
(F)
The following adjustments reflect other formation transactions as if they had occurred as of June 30, 2010.

        The table summarizes the entries outlined below:

 
  F (i)   F (ii)   F (iii)   F (iv)   F (v)   Total  

Cash and cash equivalents

                                     

Investment in real estate joint ventures, net

                                     

Accounts payable, accrued interest and other liabilities

                                     

Equity

                                     

Non-controlling interests - property

                                     
    (i)
    To adjust for the elimination of investments in real estate joint venture balances of the Predecessor where the controlling interest or new investments are being purchased with proceeds from the Offering. The full amount of the new basis of the interest has been reflected in other pro forma adjustments. The net effect of this elimination will not be included in the pro forma statements of operations as they are considered nonrecurring.

Investments in real estate joint ventures, net

       

Equity

       
    (ii)
    Reflects the reclassification of the historical equity (deficit) for non-controlling interests in certain properties that remain non-controlling interests - property.

Equity

       

Non-controlling interests - property

       
    (iii)
    Reflects the increase in the Company's ownership interest in investments in real estate joint ventures.

Cash and cash equivalents

       

Equity

       

Investments in real estate joint ventures, net

       

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Table of Contents


Eola Property Trust

Notes and Management's Assumptions to Unaudited Pro Forma

Condensed Consolidated Financial Statements

(In thousands, except as otherwise noted or per share amounts)

    (iv)
    To adjust for the purchase of indirect 20% non-controlling interests in real estate joint ventures that currently own the properties known as the Irvington Joint Venture.

Investments in real estate joint ventures, net

       

Non-controlling interests - property

       

Cash and cash equivalents

       
    (v)
    Reflects the Company's agreement to fund $        in restricted cash related to the Irvington Joint Venture.

Investments in real estate joint ventures, net

       

Accounts payable, accrued interest and other liabilities

       
(G)
Reflects the condensed combined balance sheet for the Company's unconsolidated joint ventures as of June 30, 2010.

 
  June 30, 2010  

Assets

       

Real estate investment, net

       

Other assets

       
       
 

Total assets

       

Liabilities and equity

       

Notes payable

       

Accounts payable, accrued interest and other liabilities

       

Equity

       
       
 

Total liabilities and equity

       

Company's share of equity

       
       

Company's share of notes payable

       
       

2. Adjustments to the Pro Forma Condensed Consolidated Statements of Operations

        The adjustments to the pro forma condensed consolidated statements of operations for the six months ended June 30, 2010 and year ended December 31, 2009 are as follows:

(AA)
Reflects the historical condensed combined statements of operations of the Predecessor for the six months ended June 30, 2010 and for the year ended December 31, 2009.

(BB)
Reflects the elimination of income and expenses related to an airplane owned by Eola Office Partners LLC to its members.

 
  Six Months
Ended
June 30, 2010
  Year Ended
December 31,
2009
 

Management and other fees

             

General and administrative

             

Depreciation and amortization

             

Interest expense

             

F-12


Table of Contents


Eola Property Trust

Notes and Management's Assumptions to Unaudited Pro Forma

Condensed Consolidated Financial Statements

(In thousands, except as otherwise noted or per share amounts)

(CC)
Reflects the historical statements of revenue and certain expenses of the Acquisition Properties for the six months ended June 30, 2010 and for the year ended December 31, 2009 included elsewhere in this prospectus. The tables also reflect adjustments as a result of the Offering and other formation transactions for the six months ended June 30, 2010 and for the year ended December 31, 2009.

(i)
The table below represents the Acquisition Properties, which are comprised of the Eola Portfolio, ACP Southeast Portfolio, ACP Mid-Atlantic Portfolio and 1110 Vermont Office Property.

 
  Six Months Ended June 30, 2010  
 
  Eola
Portfolio(1)
  ACP
Southeast
Portfolio(1)
  ACP
Mid-Atlantic
Portfolio(1)
  1110 Vermont
Office Property(1)
  Pro Forma
Adjustments(2)
  Pro Forma  

Rental revenue

                                     

Tenant reimbursements

                                     

Parking and other income

                                     

Management and other fees

                                     
                           
 

Total revenues

                                     

Property operating expenses

                                     

General and administrative

                                     

Depreciation and amortization

                                     
                           
 

Total expenses

                                     

Interest expense

                                     
                           
 

Net income (loss)

                                     
                           

 
  Year Ended December 31, 2009  
 
  Eola
Portfolio(1)
  ACP
Southeast
Portfolio(1)
  ACP
Mid-Atlantic
Portfolio(1)
  1110 Vermont
Office Property(1)
  Pro Forma
Adjustments(2)
  Pro Forma  

Rental revenue

                                     

Tenant reimbursements

                                     

Parking and other income

                                     

Management and other fees

                                     
                           
 

Total revenues

                                     

Property operating expenses

                                     

General and administrative

                                     

Depreciation and amortization

                                     
                           
 

Total expenses

                                     

Interest expense

                                     
                           
 

Net income (loss)

                                     
                           

(1)
Based on the historical operations of these properties, which are included in the individual financial statements included elsewhere in this prospectus.

F-13


Table of Contents


Eola Property Trust

Notes and Management's Assumptions to Unaudited Pro Forma

Condensed Consolidated Financial Statements

(In thousands, except as otherwise noted or per share amounts)

(2)
Represents adjustments to the historical operations based upon the Company's ownership of the properties and includes above and below market rent and depreciation and amortization expense. Straight-line rent has not been adjusted as it approximates what it would have been under the Company's ownership. Depreciation and amortization expense is based upon the Company's ownership and depreciation and amortization policies, which are consistent with the Predecessor's policies. See the footnotes to the Predecessor's combined financial statements for those policies. Interest expense is adjusted in Note DD.

(DD)
To adjust interest expense and to reflect interest on debt outstanding on a pro forma basis as set forth below.

 
  Six Months Ended June 30, 2010  
 
  Predecessor   Eola
Portfolio
  ACP
Southeast
Portfolio
  ACP
Mid-Atlantic
Portfolio
  1110 Vermont
Office Property
  Total  

Interest expense on notes payable being repaid

                                     

Interest expense on notes payable being forgiven

                                     

Interest expense on notes payable adjusted to fair value

                                     

Amortization of loan costs

                                     

Other

                                     
                           
 

Total adjustment to interest expense

                                     
                           

 

 
  Year Ended December 31, 2009  
 
  Predecessor   Eola
Portfolio
  ACP
Southeast
Portfolio
  ACP
Mid-Atlantic
Portfolio
  1110 Vermont
Office Property
  Total  

Interest expense on notes payable being repaid

                                     

Interest expense on notes payable being forgiven

                                     

Interest expense on notes payable adjusted to fair value

                                     

Amortization of loan costs

                                     

Other

                                     
                           
 

Total adjustment to interest expense

                                     
                           

F-14


Table of Contents


Eola Property Trust

Notes and Management's Assumptions to Unaudited Pro Forma

Condensed Consolidated Financial Statements

(In thousands, except as otherwise noted or per share amounts)

(EE)
The following adjustments reflect other formation transactions as if they had occurred as of January 1, 2009.

(i)
To adjust equity in earnings (loss) from real estate joint ventures for the elimination of historical activity, including inter-company activities, related to investments where the controlling interest is being acquired as part of the Offering.

 
  Six Months
Ended June 30,
2010
  Year Ended
December 31,
2009
 

Management and other fees

             

Property operating expenses

             

Depreciation and amortization

             

Equity in earnings (loss) from real estate joint ventures

             
    (ii)
    Reflects the increase in the Company's ownership interest in investments in real estate joint ventures.

 
  Six Months
Ended June 30,
2010
  Year Ended
December 31,
2009
 

Equity in earnings (loss) from real estate joint ventures

             
    (iii)
    To adjust for additional general and administrative expenses that we estimate to be incurred operating as a public company. These additional costs include, but are not limited to, additional compensation, board of trustees fees and expenses, trustees and officers insurance, legal and accounting fees and other costs.

 
  Six Months
Ended June 30,
2010
  Year Ended
December 31,
2009
 

General and administrative

             
    (iv)
    The Company has assumed that its taxable REIT subsidiary will operate at breakeven and has not included a provision for income taxes.

    (v)
    Adjustment to allocate net (income) loss attributable to non-controlling interests - OP Units and non-controlling interests - property based upon their proportional ownership interests after the completion of the Offering.

 
  Six Months
Ended June 30,
2010
  Year Ended
December 31,
2009
 

Net (income) loss attributable to non-controlling interests - property

             

Net (income) loss attributable to non-controlling interests - OP Units

             

F-15


Table of Contents


Eola Property Trust

Notes and Management's Assumptions to Unaudited Pro Forma

Condensed Consolidated Financial Statements

(In thousands, except as otherwise noted or per share amounts)

(FF)
Reflects the condensed consolidated statements of operations for the Company's unconsolidated joint ventures for the six months ended June 30, 2010 and the year ended December 31, 2009.

 
  Six Months
Ended
June 30, 2010
  Year Ended
December 31,
2009
 

Total revenues

             

Expenses

             

Property operating expenses

             

General and administrative

             

Depreciation and amortization

             
           
 

Total expenses

             

Other income (expenses)

             

Interest expense

             
           

Net income (loss)

             
           

Company's share of net income (loss)

             
           

F-16


Table of Contents


Eola Property Trust

Report of Independent Registered Public Accounting Firm

The Shareholder of
Eola Property Trust:

        We have audited the accompanying balance sheet of Eola Property Trust (the Company) as of September 17, 2010. This balance sheet is the responsibility of the Company's management. Our responsibility is to express an opinion on this balance sheet based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion.

        In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Eola Property Trust at September 17, 2010 in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP
Indianapolis, Indiana
October 6, 2010

F-17


Table of Contents


Eola Property Trust

Balance Sheet

As of September 17, 2010

Assets

       
 

Cash

  $ 1,000  
       
 

Total assets

  $ 1,000  
       

Shareholder's Equity

       
 

Common shares of beneficial interest, $0.01 par value per share, 100,000 shares authorized, 1,000 shares issued and outstanding

  $ 10  
 

Preferred shares of beneficial interest, $0.01 par value per share, 10,000 shares authorized, 0 shares outstanding

     
 

Additional paid-in-capital

    990  
       
   

Total shareholder's equity

  $ 1,000  
       

See accompanying notes to balance sheet.

F-18


Table of Contents


Eola Property Trust

Notes to Balance Sheet

September 17, 2010

1. ORGANIZATION

        Eola Property Trust (the "Company") was formed on July 7, 2010 as a Maryland real estate investment trust. The Company intends to file a Registration Statement on Form S-11 with the Securities and Exchange Commission with respect to a proposed initial public offering (the "Offering") of its common shares of beneficial interest ("Common Shares"). The Company intends to contribute proceeds from the Offering to Eola Property Trust, L.P. (the "Operating Partnership"), which was formed as a Delaware limited partnership, in exchange for partnership interests. The Operating Partnership will hold substantially all of the Company's assets and conduct substantially all of its business. The Company and the Operating Partnership were formed to own and operate a portfolio of office buildings located in the Southeastern and mid-Atlantic United States. The Company will operate as a fully integrated, self-administered and self-managed real estate investment trust ("REIT") specializing in the acquisition, ownership, management, redevelopment and disposition of office properties.

        Prior to or concurrent with the consummation of the Offering, the Company and the Operating Partnership, together with certain partners and members of the affiliated partnerships and limited liability companies of Eola Predecessor Companies, Eola Portfolio, ACP Mid-Atlantic Portfolio, ACP Southeast Portfolio and 1110 Vermont Office Property, and other parties which hold direct or indirect ownership interests in the properties to be acquired (collectively, the "Participants"), will engage in certain formation transactions (the "Formation Transactions"). The Formation Transactions are designed to: (i) consolidate the asset management, property management, leasing, acquisition and related businesses of Eola Capital LLC into the Operating Partnership; (ii) consolidate the ownership of a portfolio of properties, together with certain other real estate assets, into the Operating Partnership and the Company's taxable REIT subsidiary (the "TRS"); (iii) enable the Company to raise the necessary capital to acquire an interest in another property, repay mortgage debt relating thereto and pay other indebtedness; (iv) fund costs, capital expenditures and working capital; (v) provide a vehicle for future acquisitions; (vi) enable the Company to comply with requirements under the U.S. federal income tax laws and regulations relating to REITs; and (vii) preserve tax advantages for certain investors. The Company will acquire the interests in the real estate properties and the other real estate assets, as well as the property management, leasing, acquisition and related businesses of Eola Capital LLC, and assume specified liabilities, in exchange for units of limited partnership interest in the Operating Partnership ("OP units"), Common Shares and/or cash.

        The operations of the Company will be carried on primarily through the Operating Partnership. It is the intent of the Company to elect and qualify to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with a portion of the taxable year ending December 31, 2010. The Company formed a TRS, which will manage certain properties in which the Company will not own all of the equity interests, as well as properties in which the Company will not own any of the equity interests. The TRS will elect to be treated as a corporation for U.S. federal income tax purposes and, effective contemporaneously with that election, will elect jointly with the Company to be treated as a TRS of the Company. The TRS will conduct certain other activities that the Company may not engage in directly without adversely affecting its qualification as a REIT.

F-19


Table of Contents


Eola Property Trust

Notes to Balance Sheet

September 17, 2010

2. SUMMARY OF ACCOUNTING POLICIES

Basis of Presentation

        The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts in the balance sheet and accompanying notes. Actual results could differ from those estimates.

Income Taxes

        The Company intends to be taxed as a REIT if the Offering is successfully completed. As a REIT, the Company will be permitted to deduct distributions paid to its shareholders, eliminating the U.S. federal taxation of income represented by such distributions at the Company level.

        REITs are subject to a number of organizational and operational requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S. federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates.

3. OFFERING COSTS

        In connection with the Offering, affiliates have incurred or will incur legal, accounting and related costs, which will be reimbursed by the Company upon the consummation of the Offering. Such costs will be deducted from the gross proceeds of the Offering.

4. SHARE BASED COMPENSATION

        In connection with the Offering, the Company expects to adopt certain compensation plans which will permit the issuance of share-based compensation awards. These awards will be granted pursuant to the 2010 Equity Incentive Plan, which will be finalized prior to completion of the Offering. Awards granted under this plan will generally require service-based vesting over a period of years subsequent to the grant date. To the extent that stock options are awarded, the Company expects that awards will be granted with exercise prices at least equal to the fair value of the Company's stock on the grant date. The Company will account for the awards granted in the future under applicable stock based compensation guidance contained in Financial Accounting Standards Board Accounting Standards Codification ("ASC") ASC 718.

5. SUBSEQUENT EVENTS

        The Company evaluated subsequent events through the date this balance sheet was issued.

F-20


Table of Contents


Eola Predecessor Companies

Report of Independent Registered Public Accounting Firm

The Shareholder of Eola Property Trust:

        We have audited the accompanying combined balance sheets of Eola Predecessor Companies (referred to as the "Company") as of December 31, 2009 and 2008, and the related combined statements of operations, changes in equity (deficit), and cash flows for each of the years in the three year period ended December 31, 2009. Our audits also included the financial statement schedule of the Company listed in the Index to Financial Statements at F-1. These combined financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements and schedule based on our audits. We did not audit the financial statements of certain equity method investees which represented equity in earnings (loss) from real estate joint ventures of ($3,315), ($2,532) and ($1,282), for the years ended December 31, 2009, 2008 and 2007, respectively (in thousands). Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for these equity method investees (see Note 6), is based solely on the reports of the other auditors.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.

        In our opinion based on our audits and the reports of other auditors, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of Eola Predecessor Companies as of December 31, 2009 and 2008, and the combined results of their operations and their cash flows for each of the years in the three year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Ernst & Young LLP
Indianapolis, Indiana
October 6, 2010

F-21


Table of Contents


Eola Predecessor Companies

Combined Balance Sheets

(Dollars in thousands)

 
   
  December 31,  
 
  June 30,
2010
 
 
  2009   2008  
 
  (unaudited)
   
   
 

Assets:

                   

Real estate investment, net

                   
 

Land and improvements

  $ 18,579   $ 18,579   $ 18,777  
 

Buildings and improvements

    34,339     34,283     34,318  
 

Tenant improvements

    8,486     8,422     8,127  
               
   

Total cost

    61,404     61,284     61,222  
 

Accumulated depreciation

    (7,431 )   (6,393 )   (4,293 )
               
   

Real estate investment, net

    53,973     54,891     56,929  

Cash and cash equivalents

    3,653     2,132     3,027  

Restricted cash:

                   
 

Operating escrows

    1,934     1,053     1,447  
 

Capital expenditure reserves

    1,642     2,097     2,517  

Receivables

    2,419     1,794     1,970  

Investments in real estate joint ventures

    3,913     3,021     3,205  

Due from affiliates

    292     835     527  

Accrued rental revenue

    1,212     1,222     892  

Intangible lease assets, net

    5,062     5,692     7,179  

Deferred costs, net

    4,203     4,564     1,639  

Corporate furniture and equipment, net of accumulated depreciation of $2,408 (unaudited), $2,124, and $1,565, respectively

    2,998     3,103     3,525  

Deposits and prepaid expenses

    5,972     593     1,555  
               

Total Assets

  $ 87,273   $ 80,997   $ 84,412  
               

Liabilities and Equity (Deficit)

                   

Liabilities:

                   
 

Notes payable and other debt

  $ 83,122   $ 80,886   $ 79,325  
 

Accrued interest payable

    9,468     9,611     5,680  
 

Accounts payable and other liabilities

    6,628     3,491     4,526  
 

Losses and distributions in excess of contributions in real estate joint ventures

    5,707     4,722      
               
   

Total liabilities

    104,925     98,710     89,531  
               

Equity (deficit):

                   
 

Controlling interest

    (10,059 )   (11,194 )   (8,319 )
 

Non-controlling interest

    (7,593 )   (6,519 )   3,200  
               
 

Total equity (deficit)

    (17,652 )   (17,713 )   (5,119 )
               

Total Liabilities and Equity (Deficit)

  $ 87,273   $ 80,997   $ 84,412  
               

See accompanying notes to combined financial statements.

F-22


Table of Contents


Eola Predecessor Companies

Combined Statements of Operations

(Dollars in thousands)

 
  Six Months
Ended June 30,
  Year Ended December 31,  
 
  2010   2009   2009   2008   2007  
 
  (unaudited)
   
   
   
 

Revenues

                               

Rental revenue

  $ 3,381   $ 3,838   $ 7,696   $ 5,116   $ 4,773  

Tenant reimbursements

    1,866     1,926     3,953     3,371     3,373  

Management and advisory service fees-affiliates

    11,167     7,398     17,782     16,834     15,097  
                       
 

Total revenues

    16,414     13,162     29,431     25,321     23,243  

Expenses

                               

Real estate operating expenses

    2,944     3,391     6,237     4,300     4,214  

Property general and administrative expenses

    80     105     294     173     183  

Depreciation and amortization

    2,962     2,200     4,896     3,543     3,227  

Property impairment

            457          

Management and advisory services operating expenses

    8,873     6,121     15,437     13,915     15,263  
                       
 

Total expenses

    14,859     11,817     27,321     21,931     22,887  

Operating income

    1,555     1,345     2,110     3,390     356  

Other Income (Expenses)

                               

Equity in earnings (loss) from real estate joint ventures, net

    (414 )   (2,105 )   (4,863 )   (18,735 )   (2,221 )

Interest and other income, net

    70     11     56     201     382  

Interest expense

    (1,676 )   (4,163 )   (7,650 )   (5,291 )   (5,158 )
                       

Total other income (expenses)

    (2,020 )   (6,257 )   (12,457 )   (23,825 )   (6,997 )
                       

Net loss

    (465 )   (4,912 )   (10,347 )   (20,435 )   (6,641 )
                       

Net loss attributable to non-controlling interests

    (1,548 )   (4,581 )   (9,065 )   (16,153 )   (2,764 )
                       

Net income (loss) attributable to controlling interest

  $ 1,083   $ (331 ) $ (1,282 ) $ (4,282 ) $ (3,877 )
                       

See accompanying notes to combined financial statements.

F-23


Table of Contents


Eola Predecessor Companies

Combined Statements of Changes in Equity (Deficit)

Six Months Ended June 30, 2010 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

 
  Controlling
Interest
  Non-controlling
Interests
  Total  

Equity (deficit), January 1, 2007

  $ (330 ) $ 7,864   $ 7,534  
 

Transfer of controlling interest to non-controlling interests

    (141 )   141      
 

Contributions

    1,225     18,497     19,722  
 

Distributions

    (807 )   (1,862 )   (2,669 )
 

Net loss

    (3,877 )   (2,764 )   (6,641 )
               

Equity (deficit), December 31, 2007

    (3,930 )   21,876     17,946  
 

Contributions

    2,211     1,644     3,855  
 

Distributions

    (2,318 )   (4,167 )   (6,485 )
 

Net loss

    (4,282 )   (16,153 )   (20,435 )
               

Equity (deficit), December 31, 2008

    (8,319 )   3,200     (5,119 )
 

Transfer of controlling interest to non-controlling interests

    115     (115 )    
 

Contributions

    2,154     2,195     4,349  
 

Distributions

    (2,256 )   (1,868 )   (4,124 )
 

Loans to members

    (1,690 )   (911 )   (2,601 )
 

Repayment of member loans

    84     45     129  
 

Net loss

    (1,282 )   (9,065 )   (10,347 )
               

Equity (deficit), December 31, 2009

    (11,194 )   (6,519 )   (17,713 )
 

Contributions

    762     747     1,509  
 

Distributions

    (879 )   (365 )   (1,244 )
 

Repayment of member loans

    169     92     261  
 

Net income (loss)

    1,083     (1,548 )   (465 )
               

Equity (deficit), June 30, 2010

  $ (10,059 ) $ (7,593 ) $ (17,652 )
               

See accompanying notes to combined financial statements.

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Eola Predecessor Companies

Combined Statements of Cash Flows

(Dollars in thousands)

 
  Six Months
Ended June 30,
  Year Ended December 31,  
 
  2010   2009   2009   2008   2007  
 
  (unaudited)
   
   
   
 

Operating Activities

                               

Net loss

  $ (465 ) $ (4,912 ) $ (10,347 ) $ (20,435 ) $ (6,641 )

Adjustments to reconcile net loss to net cash provided by operating activities:

                               
 

Depreciation and amortization

    2,962     2,200     4,896     3,543     3,227  
 

Impairment charge

            457          
 

Amortization of deferred financing costs

    65     59     122     99     84  
 

Accrued rental revenue

    10     (146 )   (330 )   (315 )   (347 )
 

Equity in (earnings) loss from real estate joint ventures, net

    414     2,105     4,863     18,735     2,221  
 

Return on investment in real estate joint ventures

    24         17          

Changes in operating assets and liabilities:

                               
 

Operating escrows

    (881 )   135     394     (137 )   358  
 

Receivables

    (625 )   792     176     564     (1,586 )
 

Deferred costs, deposits and prepaid expenses

    (3,798 )   61     866     (1,060 )   228  
 

Due from affiliates

    543     (13 )   (308 )   24     80  
 

Accrued interest payable

    (143 )   2,223     3,931     1,968     2,206  
 

Accounts payable and other liabilities

    3,136     (227 )   (1,034 )   (1,054 )   2,044  
                       
 

Net cash provided by operating activities

    1,242     2,277     3,703     1,932     1,874  

Investing Activities

                               

Capital expenditures and deposits for purchase of real estate

    (5,300 )   (394 )   (717 )   (2,847 )   (2,708 )

Cash received from joint venture partners for deposit for purchase of real estate

    2,750                  

Change in capital expenditures reserves

    455     321     420     442     171  

Cash from acquisition of real estate

                959      

Investment in management contracts

            (1,260 )        

Investments in real estate joint ventures

    (1,133 )   (1,150 )   (1,966 )   (2,163 )   (20,064 )

Return of investment in real estate joint ventures

    788     1,351     1,992     3,210     3,397  
                       

Net cash (used in) provided by investing activities

    (2,440 )   128     (1,531 )   (399 )   (19,204 )

Financing Activities

                               

Proceeds from notes payable and other debt

    5,000     750     5,650     5,100      

Repayment of notes payable and other debt

    (2,763 )   (1,451 )   (4,089 )   (2,400 )    

Loans to members

            (2,601 )        

Repayment of member loans

    261         129          

Contributions

    1,509     1,150     2,067     3,855     19,722  

Distributions

    (1,244 )   (2,221 )   (4,124 )   (6,485 )   (2,669 )

Financing costs for notes payable and other debt

    (44 )   (39 )   (99 )   (37 )   (27 )
                       

Net cash provided by (used in) financing activities

    2,719     (1,811 )   (3,067 )   33     17,026  
                       

Increase (Decrease) in Cash and Cash Equivalents

    1,521     594     (895 )   1,566     (304 )

Cash and cash equivalents at beginning of the period

    2,132     3,027     3,027     1,461     1,765  
                       

Cash and cash equivalents at end of the period

  $ 3,653   $ 3,621   $ 2,132   $ 3,027   $ 1,461  
                       

Supplemental disclosure of non-cash investing and financing activities:

                               

Assignment of management contracts

  $   $   $ 2,282   $   $  
                       

See accompanying notes to combined financial statements.

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Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

1. Organization and Description of Business

        Eola Predecessor Companies (the "Company") is not a legal entity but rather a combination of certain real estate and management entities in which Mr. James Heistand ("Mr. Heistand") controls or has a direct or indirect interest therein. The real estate and management entities included in the accompanying combined financial statements represent those entities in which Mr. Heistand intends to contribute to Eola Property Trust (the "REIT") or a newly formed limited partnership, Eola Property Trust, L.P. (the "Operating Partnership"), as part of the formation transactions related to the REIT's initial public offering (the "Offering"). The real estate and management entities include direct ownership of real estate properties and a management company and investments in entities that hold an indirect investment in real estate properties.

        The Company's investments in real estate properties are subject to risks incidental to the ownership and operation of commercial real estate. These risks include, among others, the risks normally associated with changes in general economic conditions and particularly economic conditions within our markets, trends in the real estate industry, creditworthiness of tenants, competition for tenants and customers, changes in tax laws, interest rate levels, availability and cost of financing, and potential liability under environmental and other laws.

        The entities included within the combined financial statements generally are limited liability companies (the "LLCs") that will continue in existence until dissolved in accordance with the provisions of their individual operating agreements and are funded through the equity contributions of their respective owners. Pursuant to the terms of each LLC agreement, profits, losses, and distributions are generally allocated to the members in accordance with their ownership percentages.

        The Company specializes in acquiring, owning, managing, redeveloping and disposing of central business district ("CBD") and suburban office buildings located in the Southeastern and mid-Atlantic United States. As of December 31, 2009, the Company had ownership interests in the following real estate properties and management entities.

COMBINED PROPERTIES
  Type   Location   Ownership Interest(1)  

Eola Capital LLC(2)

  Service   Orlando, Florida     63.75 %

Center Point (3 Buildings)(3)

  Suburban Office   Columbia, South Carolina     38.1 %

Center Point IV land(3)

  Land   Columbia, South Carolina     38.1 %

Capital Plaza I and II (2 buildings)(3)

  Suburban Office   Jacksonville, Florida     15 %

Capital Plaza III(3)

  Suburban Office   Jacksonville, Florida     15 %

Cypress IV land(4)

  Land   Tampa, Florida     50 %

UNCOMBINED PROPERTIES(5)

               

Independent Square(6)

  CBD Office   Jacksonville, Florida     6.12 %

Interstate NW Business Park (4 buildings)(7)

  Suburban Office   Atlanta, Georgia     2.21 %

20 Technology Park(8)

  Suburban Office   Atlanta, Georgia     1.85 %

3720 Davinci Court(8)

  Suburban Office   Atlanta, Georgia     1.85 %

3740 Davinci Court(8)

  Suburban Office   Atlanta, Georgia     1.85 %

One Orlando Centre(9)

  CBD Office   Orlando, Florida     1.12 %

245 Riverside(10)

  CBD Office   Jacksonville, Florida     1.12 %

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

UNCOMBINED PROPERTIES(5)
  Type   Location   Ownership Interest(1)  

Overlook I(10)

  Suburban Office   Richmond, Virginia     1.12 %

Overlook II(10)

  Suburban Office   Richmond, Virginia     1.12 %

100 Windward Plaza(10)

  Suburban Office   Atlanta, Georgia     1.12 %

280 Interstate North Office Park(10)

  Suburban Office   Atlanta, Georgia     1.12 %

300 Windward Plaza(9)

  Suburban Office   Atlanta, Georgia     1.12 %

5660 New Northside Drive(10)

  Suburban Office   Atlanta, Georgia     1.12 %

Beckrich One(10)

  Suburban Office   Panama City, Florida     1.12 %

Beckrich Two(10)

  Suburban Office   Panama City, Florida     1.12 %

Deerfield Point (2 buildings)(10)

  Suburban Office   Atlanta, Georgia     1.12 %

Millennia Park One(10)

  Suburban Office   Orlando, Florida     1.12 %

Southhall Center(10)

  Suburban Office   Orlando, Florida     1.12 %

Southwood One(10)

  Suburban Office   Tallahassee, Florida     1.12 %

Windward Pointe 200(10)

  Suburban Office   Atlanta, Georgia     1.12 %

Cypress Center I(11)

  Suburban Office   Tampa, Florida     2.48 %

Cypress Center II(11)

  Suburban Office   Tampa, Florida     2.48 %

Cypress Center III(11)

  Suburban Office   Tampa, Florida     2.48 %

Cypress West(11)

  Suburban Office   Tampa, Florida     2.48 %

Cypress Commons(11)

  Suburban Office   Tampa, Florida     2.48 %

Parkwood Point(10)

  Suburban Office   Atlanta, Georgia     1.12 %

Maitland Forum(12)

  Suburban Office   Orlando, Florida     2.95 %

Maitland Park Center(13)

  Suburban Office   Orlando, Florida     2.95 %

Buschwood Park I(14)

  Suburban Office   Tampa, Florida     1.78 %

Buschwood Park II(14)

  Suburban Office   Tampa, Florida     1.78 %

Buschwood Park III(14)

  Suburban Office   Tampa, Florida     1.78 %

Westshore 500(15)

  Suburban Office   Tampa, Florida     0.73 %

2400 Maitland Center(16)

  Suburban Office   Orlando, Florida     1.95 %

500 Winderley Place(16)

  Suburban Office   Orlando, Florida     1.95 %

Bank of America Center(16)

  CBD Office   Orlando, Florida     1.85 %

Interlachen Corporate Center(16)

  Suburban Office   Orlando, Florida     1.95 %

Peachtree Harris(17)

  CBD Office   Atlanta, Georgia     2.67 %

Peachtree International(17)

  CBD Office   Atlanta, Georgia     2.67 %

Peachtree Mall(17)

  Retail   Atlanta, Georgia     2.67 %

Peachtree Marquis I(17)

  CBD Office   Atlanta, Georgia     2.67 %

Peachtree Marquis II(17)

  CBD Office   Atlanta, Georgia     2.67 %

Peachtree North(17)

  CBD Office   Atlanta, Georgia     2.67 %

Peachtree South(17)

  CBD Office   Atlanta, Georgia     2.67 %

Primera V(16)

  Suburban Office   Orlando, Florida     3.71 %

Ten 10th Street (Millennium)(16)

  Suburban Office   Atlanta, Georgia     3.71 %

Two Liberty Place(16)

  CBD Office   Philadelphia, Pennsylvania     1.27 %

Two Ravinia Drive(16)

  Suburban Office   Atlanta, Georgia     1.95 %

Westshore Corporate Center(16)

  Suburban Office   Tampa, Florida     3.84 %

Irvington Four(19)

  Suburban Office   Washington, D.C.     0.59 %

Irvington One(19)

  Suburban Office   Washington, D.C.     0.59 %

Irvington Three(19)

  Suburban Office   Washington, D.C.     0.59 %

Irvington Two(19)

  Suburban Office   Washington, D.C.     0.59 %

International Plaza Four(20)

  Suburban Office   Tampa, Florida     2.29 %

(1)
Represents Mr. Heistand's effective direct or indirect ownership interest.

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

(2)
Eola Capital LLC is a majority owned subsidiary of Eola Office Partners. Eola Capital LLC provides real estate related services (management, leasing, construction management, acquisition and advisory services) to the properties included in this table and other affiliate and non-affiliate properties in exchange for contractually based fees. The operations of the management company have been included in the combined financial statements for all periods presented.

(3)
These properties' operations have been included in the combined financial statements for all periods presented.

(4)
Represents land adjacent to existing properties.

(5)
Represents investments accounted for under the equity method of accounting. The investment entity through which the Company has an indirect ownership interest in the property is noted below and further described in Note 6.

(6)
Property owned through an indirect interest in JAX-ISQ, LLC.

(7)
Property owned through an indirect interest in INW Holding, LLC.

(8)
Property owned through an indirect interest in DAV Holdings, LLC.

(9)
Property owned through an indirect interest in Orlando Centre Syndication Partners JV LP.

(10)
Property owned through an indirect interest in VFG Holdings, LLC.

(11)
Property owned through an indirect interest in CAT-FLA Manager, LLC. Includes Cypress Commons, which was sold on June 1, 2010.

(12)
Property owned through an indirect interest in MFM REIT LLC.

(13)
Property owned through an indirect interest in MPC REIT LLC.

(14)
Property owned through an indirect interest in BSH Portfolio LLC.

(15)
Property owned through an indirect interest in 500 WS Holding LLC.

(16)
Property owned through an indirect interest in JRH-RPT Capital LLC.

(17)
Property owned through an indirect interest in ACP/DLF Peachtree Center LLC.

(18)
Property owned through an indirect interest in Dulles Corners Properties, LLC.

(19)
Property owned through an indirect interest in ACP Irvington Center LLC.

(20)
Property owned through an indirect interest in IP4 Owner LLC.

2. Summary of Significant Accounting Policies

Basis of Presentation and Combination

        The accompanying combined financial statements include the accounts of all majority-owned investments controlled by the Company, and all investments that are less than majority-owned but are controlled by the Company through its ownership interest. All significant inter-company amounts have been eliminated. Control of an investment is demonstrated by, among other factors, (i) the Company's ability to manage day-to-day operations, (ii) the Company's ability to refinance debt and sell the investment without the consent of any other owner, and (iii) the inability of any other owner to replace the Company's ability to control.

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

        The accompanying combined financial statements also include the accounts of investments identified as variable interest entities, or VIEs, when the Company is determined to be the primary beneficiary. The determination of the primary beneficiary of a VIE considers all relationships between the investor and the VIE, including management agreements and other contractual arrangements, when determining the party that has the power to control the decisions that significantly impact the VIE's economic performance, as defined by accounting standards. The Company elected to adopt Financial Accounting Standards Board Accounting Standards Codification ("ASC") ASC 810-Consolidations, Variable Interest Entities retrospectively beginning January 1, 2007. As a result, Deerwood Holdings LLC ("Deerwood"), which holds the investment in Capital Plaza I, II and III, and CAT-B Holdings LLC ("CAT-B"), which holds the investments in Center Point I, II, V and Center Point IV land, were determined to be VIEs. The Company is considered the primary beneficiary. The Company has the power to control the decisions that significantly impact the economic performance of these VIEs. Consequently, Deerwood is combined in the accompanying combined financial statements for all periods presented and CAT-B is combined as of December 8, 2008, the date the power to control was obtained. The carrying amounts and classifications of assets and liabilities included in the Company's combined balance sheets for Deerwood and CAT-B are as follows:

 
  June 30,
2010
  December 31,
2009
  December 31,
2008
 

Total assets

  $ 66,782   $ 67,165   $ 70,762  

Total liabilities

    83,128     82,491     79,370  

        Investments in real estate joint ventures represent non-controlling ownership interests in various real estate investments. The Company accounts for these investments using the equity method of accounting. Investments are initially recorded at cost and are subsequently adjusted for cash contributions and distributions and earnings (losses), which are generally allocated based on the provisions of the joint venture agreements.

        Certain investments have undergone recapitalization events during the periods presented in the accompanying combined financial statements. As a result of these recapitalization events, the Company's interests may have changed from a non-controlling interest to a controlling interest or remained as a non-controlling interest. If the interest changed from a non-controlling interest to a controlling interest, the recapitalization was recorded as a purchase in the period the transaction occurred, and the controlling interest has been reflected in the combined financial statements since the transaction date. If the interest remained as a non-controlling interest, the interest continued to be recorded at its historical basis and any basis differential related to the new joint venture is amortized as part of "Equity in earnings (loss) from real estate joint ventures" going forward based upon the estimated lives of the underlying investment's assets.

Real Estate

        Land is carried at cost; land improvements, buildings and improvements, parking garages and improvements, and tenant improvements are carried at cost less accumulated depreciation. Additions and betterments are capitalized while maintenance and repairs which do not improve or extend the lives of the respective assets are expensed currently. Interest is capitalized on construction in progress and included in the cost of real estate to the extent that underlying capital expenditures support such

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)


capitalization. Construction in progress was $123, $40, and $145 as of June 30, 2010, and December 31, 2009 and 2008, respectively.

        In leasing tenant space, the Company may provide funding to the lessee through a tenant allowance. In accounting for a tenant allowance, the Company determines whether the allowance represents funding for the construction of tenant improvements and evaluates the ownership, for accounting purposes, of such improvements. If the Company is considered the owner of the tenant improvements for accounting purposes, the Company capitalizes the amount of the tenant allowance and depreciates it over the shorter of the useful life of the tenant improvements or the related lease term. If the tenant allowance represents a payment for a purpose other than funding tenant improvements, or in the event the Company is not considered the owner of the improvements for accounting purposes, the allowance is considered to be a lease acquisition cost (including lease inducements) and is recognized over the lease term as a reduction of rental revenue on a straight-line basis.

        Depreciation is recorded using the straight-line method over estimated useful lives as follows:

Land improvements   10 to 15 years
Buildings   40 to 50 years
Building improvements   Lesser of building life or related useful life
Tenant improvements   Lesser of respective lease term or useful life

        The Company assigns the purchase price of assets acquired and liabilities assumed to the acquired tangible assets (normally consisting of land, buildings, parking garages, and improvements) and identified intangible assets and liabilities (normally consisting of the value of in-place leases, including above-market and below-market leases). The costs are assigned based on the fair values of the assets acquired and liabilities assumed.

        The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land, buildings, parking garages, and improvements based on the estimation of the fair values of the assets.

        In determining the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease and any below-market fixed rate renewal periods (for below-market lease values). The capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. The capitalized below-market lease values are accreted as an increase to rental income over the initial term and any fixed rate renewal periods in the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be expensed.

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Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

        The value of in-place leases is estimated based on the value associated with the costs avoided in originating leases compared to the acquired in-place leases, as well as the value associated with lost rental revenue and operating expense reimbursements during the assumed lease-up period. The value of in-place leases is amortized over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be expensed.

        The Company is required to expense property acquisition-related costs related to property acquisitions as incurred effective January 1, 2009. Prior to January 1, 2009, these costs were capitalized as part of the purchase price and allocated to the tangible and intangible assets acquired.

        Management reviews its real estate and other related assets and liabilities included in the asset group for impairment whenever events or changes in circumstances indicate that the carrying value of the asset group may not be recoverable through operations. Management determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges) of the asset group, with the carrying cost of the asset group. If impairment is indicated, a loss is recorded for the amount by which the carrying value of the asset group exceeds its fair value. The Company recorded an impairment charge of real property related to a combined real estate property of $457 during the year ended December 31, 2009. The Company estimated the fair value of the building using Level 3 inputs (see fair value measurements below), based largely upon unobservable market data. No impairment of combined real properties was recorded by the Company for the six months ended June 30, 2010 and 2009 (unaudited) and for the years ended December 31, 2008 and 2007.

Use of Estimates

        The preparation of the combined financial statements requires management to use estimates and assumptions which affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Significant items subject to such estimates and assumptions include, but are not limited to, allocation of the purchase price of acquired real estate investments among tangible and intangible assets, determination of the useful life of property and other long-lived assets, valuation and impairment analysis of investments in real estate, property and other long-lived assets, and valuation of the allowance for doubtful accounts. Actual results could differ from those estimates.

Investments in Real Estate Joint Ventures

        The Company accounts for its investments in real estate joint ventures under the equity method of accounting because it exercises significant influence over, but does not control, these entities. The Company's judgment with respect to its level of influence or control of an entity involves the consideration of various factors, including the form of the Company's ownership interest, its representation in the entity's governance, the size of its investment, its ability to participate in policy making decisions and the rights of the other investors to participate in the decision-making process and to replace the Company as manager and/or liquidate the venture, if applicable. The Company's

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)


assessment of its influence or control over an entity affects the presentation of these investments in the Company's combined financial statements.

        These investments are recorded initially at cost and subsequently adjusted for equity in earnings (loss) and cash contributions and distributions from the real estate joint ventures. Any difference between the carrying amount of these investments on the balance sheet and the underlying equity in net assets is amortized as an adjustment to equity in earnings (loss) from joint ventures over the life of the related investment's assets. Under the equity method of accounting, the net equity investment of the Company is reflected on one line within the combined balance sheets, and the Company's share of net income or loss from the joint ventures is included within the combined statements of operations. The joint venture agreements may designate different percentage allocations among investors for profits and losses; however, the Company's recognition of joint venture income or loss generally follows the joint venture's distribution priorities, which may change upon the achievement of certain investment return thresholds. The Company separately reports investments in real estate joint ventures for which accumulated distributions have exceeded investments in and its share of net income of the joint ventures within "Losses and distributions in excess of contributions in real estate joint ventures" in the liability section of the combined balance sheets. The net equity of certain joint ventures may be less than zero if financing or operating distributions are greater than net income, as net income includes non-cash charges for depreciation and amortization. Distributions received that are considered a return on investment are reported as operating cash flows and distributions received that are considered a return of investment are reported as investing cash flows for combined statement of cash flow purposes.

        The Company's investments in real estate joint ventures are reviewed for impairment periodically and the Company records impairment charges when events or circumstances change indicating that a decline in the fair values below the carrying values has occurred and such decline is other-than-temporary. The ultimate realization of the investment in real estate joint ventures is dependent on a number of factors, including the performance of each investment and market conditions. The Company recorded impairment charges of real property related to its investments in real estate joint ventures of $301 and $14,823 during the years ended December 31, 2009 and 2008, respectively, which have been included in equity in earnings (loss) from real estate joint ventures. The Company estimated the fair value of the equity interests using Level 3 inputs (see fair value measurements below), including estimating future net cash flows, risk adjusted discount rates and estimated asset values using largely unobservable information.

Cash and Cash Equivalents

        The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Restricted Cash

        A portion of the operating escrows is held in depository accounts and released periodically by the lender after funding of required reserves and mortgage note payments. The remaining portion of operating escrows is restricted to fund real estate taxes, insurance, and required repairs and is released by the lender upon approval of a disbursement request.

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Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

        Capital expenditure reserves represent funds restricted for building and tenant improvements and lease acquisition costs. These funds are released by the lender upon approval of a disbursement request.

Receivables

        Receivables are recorded at the principal amount outstanding and are shown net of an allowance for doubtful accounts. The Company evaluates the collectability of receivables, including accrued rental income, based on numerous factors, including past history with tenants, their creditworthiness, and historical write off experience. Initially, the Company estimates an allowance for doubtful accounts based on these factors. This estimate is periodically adjusted when the Company becomes aware of a specific tenant's inability to meet its financial obligations (e.g., upon a bankruptcy filing) or as a result of changes in the overall aging of receivables. Uncollectible receivables are charged off after management has exhausted all reasonable collection efforts. The allowance for uncollectible accounts was not significant in any period presented.

Deferred Costs

        Costs related to obtaining leases are deferred as lease acquisition costs and amortized using the straight-line method over the lease terms. Costs related to obtaining long-term financing are deferred and amortized to interest expense using the straight-line method over the term of related indebtedness, which approximates amortization by the effective interest method. If the lease terminates early, or if the loan is repaid prior to maturity, the remaining lease acquisition costs or loan costs are written off. Costs related to the acquisition of a management contract are deferred and amortized using the straight-line method over the term of the contract.

Offering Costs

        In contemplation of the Offering the Company has incurred legal and accounting costs of $2,840 for the six months ended June 30, 2010, which is included in deposits and prepaid expenses on the combined balance sheet at June 30, 2010. The unpaid amount of $1,911 is included in accounts payable and other liabilities. Such costs will be reimbursed by the REIT upon the successful completion of the Offering. If the Offering is not successful, these Offering costs will be expensed.

Corporate Furniture and Equipment

        Corporate furniture and equipment is carried at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over estimated useful lives of 5 years for the aircraft (with a salvage value) and 3 to 7 years for furniture and other equipment. Additions and betterments are capitalized while maintenance and repairs which do not improve or extend the lives of the respective assets are expensed currently.

Fair Value Measurements

        The Company has adopted guidance for accounting for fair value measurements of financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring

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Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)


basis. On January 1, 2009, the Company adopted guidance for fair value measurements related to nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The guidance establishes a framework for measuring fair value and expands disclosures about fair value measurements including a fair value hierarchy based upon three levels of inputs that may be used to measure fair value. The following describes the three levels:

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

    Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, 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.

    Level 3—Model-based techniques that use at least one significant assumption not observable in the market.

        The fair values included in these combined financial statements represent management's best estimates of the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company's own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available under the circumstances.

        The carrying value of cash and cash equivalents, restricted cash, receivables, and accounts payable and other liabilities approximates fair value at June 30, 2010, December 31, 2009 and 2008, due to the short term nature of these instruments. The fair value of notes payable is disclosed in Note 7.

Revenue Recognition

        The Company leases office space and parking space to tenants under operating lease agreements with varying terms. Rental revenue is recognized as earned. When scheduled rentals vary during the lease term, revenue is recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease. Accrued rental income is the aggregate difference between scheduled rental payments, which vary during the lease term, and rental revenue recognized on a straight-line basis over the lease term. Rental revenue is reported net of sales taxes collected from tenants, which are recorded as liabilities on the combined balance sheets.

        Tenant reimbursements represent amounts from tenants for real estate taxes, common area maintenance charges and building and parking operating expenses and are recognized as earned.

        Management fees are based on a percentage of rental receipts of properties managed and are recognized as the rental receipts are collected. Advisory services include leasing and construction supervisory services. Leasing commissions are based on a percentage of gross rents payable under newly executed leases and are recorded when earned. Fees for construction supervision of tenant and building improvements are based on a percentage of the cost of improvements and are recorded upon completion of the improvements.

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Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

Income Taxes

        During the periods presented, the entities included in the combined financial statements have qualified to be taxed as partnerships for U.S. federal and state income tax purposes. As a result, the entities' income or loss is passed through to their owners for inclusion in their separate income tax returns.

        Because many types of transactions are susceptible to varying interpretations under U.S. federal and state income tax laws and regulations, the Company's tax positions may be subject to change at a later date upon final determination by the taxing authorities. When applicable, interest and penalties are reflected as a component of income tax expense. The Company does not believe that a reserve is necessary for uncertain tax positions for the six months ended June 30, 2010 and 2009 and for the years ended December 31, 2009, 2008 and 2007. State and local taxes were insignificant during each of the periods presented.

Non-controlling Interests

        Effective January 1, 2009, the Company retrospectively adopted a newly issued accounting standard for non-controlling interests, which requires a non-controlling interest in an entity to be reported as equity and the amount of net income (loss) specifically attributable to the non-controlling interest to be included within net income (loss). This standard also requires consistency in the manner of reporting changes in the controlling entity's ownership interest and requires fair value measurement of any non-controlling equity investment when the controlling interest is transferred. Net income (loss) attributable to non-controlling interests in combined properties is a component of net income (loss).

Segment Information

        The Company's operations are comprised of two business segments: (i) real estate operations and (ii) management and advisory services. The Company's real estate portfolio is located throughout the Southeastern and mid-Atlantic United States; however, management does not distinguish or group its operations on a geographical basis for purposes of allocating resources or measuring performance. The Company reviews operating and financial data for each property on an individual basis. The individual properties have been aggregated into the real estate operations reportable segment based upon their similarities with regard to both the nature and economics of the properties, tenants and operational processes, as well as long-term average financial performance. The combined statements of operations reflect the operating activities of the two reportable segments. The assets related to the Company's management and advisory services segment are not significant. The following represents the depreciation and amortization and interest expense attributable to the Company's management and advisory services segment:

 
  Six Months Ended June 30,   Year Ended December 31,  
 
  2010   2009   2009   2008   2007  

Depreciation and amortization

  $ 1,164   $ 236   $ 965   $ 454   $ 466  

Interest expense

    237     24     186     174     434  

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

Interim Reporting

        The unaudited combined financial statements and notes of the Company as of and for the six months ended June 30, 2010 and 2009 have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (SEC). In the opinion of management, all adjustments considered necessary for a fair presentation of the Company's unaudited interim combined balance sheet, statements of operations, and cash flows have been included and are of a normal and recurring nature. The unaudited combined statements of operations and cash flows for the six months ended June 30, 2010 and 2009 are not necessarily indicative of full year results.

Recently Adopted Pronouncements

        In December 2007, the Financial Accounting Standards Board (FASB) issued updated guidance, which applies to all transactions or events in which an entity obtains control of one or more businesses. This guidance (i) establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed, (ii) requires expensing of most transactions costs, and (iii) requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination. These provisions were adopted by the Company on January 1, 2009. The primary impact of adopting this guidance on the Company's combined financial statements was the requirement to expense transaction costs relating to its acquisition activities starting in 2009.

        In February 2008, the FASB issued updated guidance which defers the effective date of previous guidance issued regarding the fair value of nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis, until fiscal years beginning after November 15, 2008. These provisions were adopted by the Company on January 1, 2009, and did not have a material impact on the combined financial statements.

        In May 2009 and February 2010, the FASB issued updated guidance to establish general standards of accounting for and disclosure of subsequent events. This guidance renames the two types of subsequent events as recognized subsequent events or non-recognized subsequent events and modified the definition of the evaluation period for subsequent events as events or transactions that occur after the balance sheet date, but before the financial statements are issued. The Company adopted this guidance during 2009. The adoption of this guidance did not have a material impact on the Company's combined financial statements.

        In June 2009, the FASB issued guidance, which establishes the FASB's Accounting Standards Codification (the "Codification") as the exclusive authoritative reference for nongovernmental U.S. GAAP for use in financial statements, except for SEC rules and interpretative releases, which are also authoritative for SEC registrants. As a result, the Codification provides guidance that all standards will carry the same level of authority. The Company adopted this guidance during 2009. The only impact of adopting this guidance was to update and remove certain references to technical accounting literature in the combined financial statements.

        In November 2008, the FASB ratified guidance related to equity method investment accounting. This guidance applies to all investments accounted for under the equity method and clarifies the

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Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)


accounting for certain transactions and impairment considerations involving equity method investments. This guidance became effective beginning in the first quarter of fiscal year 2010. The adoption of the new guidance did not have a significant impact on the combined financial statements.

        In June 2009, the FASB issued updated guidance, which amends guidance for determining whether an entity is a VIE and requires the performance of a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE. Under this guidance, an entity is required to consolidate a VIE if it has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. This guidance became effective beginning in the first quarter of fiscal year 2010. The Company adopted this guidance effective January 1, 2010 and applied it retrospectively to all prior periods presented in the combined financial statements. The cumulative result of this adoption was the consolidation of Deerwood described in the basis of presentation note.

        In August 2009, the FASB issued new guidance for the accounting for the fair value measurement of liabilities. The new guidance provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the approved techniques. The new guidance clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The guidance is effective for the first reporting period (including interim periods) beginning after issuance. The adoption of the standard did not have a significant impact on the combined financial statements.

        In January 2010, the FASB issued new guidance for fair value measurements and disclosures, which is intended to improve disclosures regarding fair value measurements. This update requires new disclosures for transfers in and out of Level 1 and 2, as well as disclosure about the valuation techniques and inputs used to measure fair value for Level 1 and 2. In addition, activity in Level 3 should present separately information about purchases, sales, issuances and settlements on a gross basis (rather than as one net number). A reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. The new disclosures and clarifications of existing disclosures are effective beginning in the first quarter of fiscal year 2010, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company believes the adoption of the standard will not have a significant impact on the Company's financial position or results of operations.

3. Acquisition of Real Estate

        On December 8, 2008, the 90% owner of the Center Point properties assigned its membership interests to the Company for no consideration. The Company determined that the entity holding these assets was a VIE and the Company was the primary beneficiary. As a result, the Company consolidated the assets and liabilities, and its operations have been combined in the combined financial statements as of December 8, 2008. Prior to the assignment, the Company accounted for its investment in the

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)


properties using the equity method. The transaction, considered an acquisition of real estate, was recorded at fair value, which was allocated to the assets and liabilities as follows:

Real estate

  $ 13,739  

Cash and restricted cash

    1,875  

Intangible lease assets

    1,772  

Other assets

    13  

Mortgage note payable

    (16,300 )

Accounts payable and other liabilities

    (1,099 )
       

  $  
       

        Unaudited pro forma summary information is presented below for the years ended December 31, 2008 and 2007 assuming the transfer of the Center Point properties had occurred on January 1, 2007. Preparation of the pro forma summary information was based upon assumptions deemed appropriate by the Company's management. Revenues of the properties for the three years preceding the transaction were $3,417, $4,563 and $2,705 for the years ended December 31, 2007, 2006 and 2005, respectively, and certain operating expenses were $3,269, $4,364 and $1,231 for the years ended December 31, 2007, 2006 and 2005, respectively. The unaudited pro forma summary information presented below is not necessarily indicative of the results that actually would have occurred if the transactions indicated above had been consummated at the beginning of the periods presented, and it is not intended to be a projection of future results.

 
  Year Ended December 31,  
 
  2008
Pro Forma
  2007
Pro Forma
 
 
  (unaudited)
 

Total revenues

  $ 28,626   $ 26,660  

Net loss

  $ (21,436 ) $ (8,548 )

4. Intangible Lease Assets

        Intangible lease assets consist of the following:

 
  June 30, 2010   December 31,
2009
  December 31,
2008
 
 
  (unaudited)
   
   
 

In-place leases and lease commission

  $ 10,748   $ 10,748   $ 10,788  

Less: accumulated amortization

    (5,687 )   (5,058 )   (3,661 )
               

    5,061     5,690     7,127  

Above-market leases

    184     184     184  

Less: accumulated amortization

    (183 )   (182 )   (132 )
               

    1     2     52  
               

Total

  $ 5,062   $ 5,692   $ 7,179  
               

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Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

        At December 31, 2009, the weighted average amortization period and estimated amortization for intangible lease assets for the next five years were as follows:

 
  Weighted
average
lives
(years)
  2010   2011   2012   2013   2014   Thereafter  

In-place leases

    5   $ 1,257   $ 1,173   $ 960   $ 768   $ 762   $ 770  
                               

        Amortization expense was $631, $757, $1,436 $1,201, and $1,154 for the six months ended June 30, 2010 and 2009 and for the years ended December 31, 2009, 2008 and 2007, respectively.

5. Deferred Costs

        Deferred costs consist of the following:

 
  June 30, 2010   December 31,
2009
  December 31,
2008
 
 
  (unaudited)
   
   
 

Lease acquisition costs

  $ 2,400   $ 1,632   $ 1,442  

Accumulated amortization

    (827 )   (641 )   (350 )
               

    1,573     991     1,092  

Deferred financing costs

    921     878     1,076  

Accumulated amortization

    (418 )   (353 )   (529 )
               

    503     525     547  

Management contract acquisition costs

    3,541     3,541      

Accumulated amortization

    (1,414 )   (493 )    
               

    2,127     3,048      
               

Total

  $ 4,203   $ 4,564   $ 1,639  
               

        Amortization expense for lease acquisition costs and management contracts was $1,009, $82, $736, $142, and $138 for the six months ended June 30, 2010 and 2009 and for the years ended December 31, 2009, 2008 and 2007, respectively. Amortization of deferred financing costs into interest expense was $65, $59, $122, $99, and $84 for the six months ended June 30, 2010 and 2009 and for the years ended December 31, 2009, 2008 and 2007.

6. Equity Method Investments

        Joint ventures are common in the real estate industry. The Company uses joint ventures to acquire new properties and diversify its investment in a particular property or portfolio. Substantially all of the joint venture properties are subject to operating agreements that contain certain protective and participating rights such as rights of first refusal, buy-sell provisions (in cases where the parties have a disagreement), major decision rights based on both parties' active involvement or other sale or marketing rights for partners, which rights are customary in real estate joint venture agreements and the industry.

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

        The Company uses the equity method of accounting for investments where it exercises significant influence over the operations and policies of the venture but does not control the venture. Investments carried on the equity method consisted of the following at December 31, 2009.

Joint Venture
  Ownership
Interest(1)
  Number of
Properties
 

Orlando Centre Syndication Partners JV LP(2)

    1.12 %(3)   1  

INW Holding LLC(4)

    2.21     1  

VFG Holdings LLC(2)

    1.12 (3)   15  

MFM REIT LLC(2)

    2.95 (3)   1  

MPC REIT LLC(2)

    2.95     1  

JAX—ISQ LLC(5)

    6.12 (6)(3)   1  

DAV Holdings LLC(4)

    1.85     3  

BSH Portfolio LLC(7)

    1.78     3  

500 WS Holdings LLC(8)

    .73     1  

CAT—FLA Manager LLC(2)(9)

    2.48     5  

IP4 Owner LLC(8)

    2.29     1  

ACP/DLF Peachtree Center LLC(8)

    2.67     7  

Dulles Corners Properties LLC(8)

    3.71     1  

ACP/DLF Primera LLC(8)

    3.71     1  

ACP/Westshore LLC(8)

    3.84     1  

Maitland Portfolio JRH-RPT(8)

    1.95     3  

Bank of America JRH-RPT(8)

    1.85     1  

Two Ravinia Drive JRH-RPT(8)

    1.95     1  

Four Irvington JRH-RPT(8)

    0.59     1  

Irvington Centre JRH-RPT(8)

    0.59     3  

Two Liberty Place JRH-RPT(8)

    1.27     1  

(1)
Represents Mr. Heistand's effective direct or indirect ownership interest.

(2)
Acquired in 2007.

(3)
These entities were audited by other auditors.

(4)
Acquired in 2006.

(5)
Acquired in 2005.

(6)
The outside partner has substantive participating rights and, therefore, the Company does not control this investment.

(7)
Acquired in 2008.

(8)
Acquired in 2009.

(9)
Includes Cypress Commons, which was sold on June 1, 2010.

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements (Continued)

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

        The summarized balance sheet financial information shown below includes all investments carried on the equity method as of June 30, 2010 and December 31, 2009 and 2008 as follows:

Balance Sheets
  June 30,
2010
  December 31,
2009
  December 31,
2008
 
 
  (unaudited)
   
   
 

Real estate investment, net

  $ 1,300,600   $ 1,317,234   $ 619,896  

Other assets

    235,320     249,372     90,525  
               

Total assets

  $ 1,535,920   $ 1,566,606   $ 710,421  
               

Mortgage notes payable

  $ 1,365,084   $ 1,409,062   $ 578,367  

Other liabilities

    62,559     58,379     27,883  
               

Total liabilities

    1,427,643     1,467,441     606,250  

Equity

    108,277     99,165     104,171  
               

Total liabilities and equity

  $ 1,535,920   $ 1,566,606   $ 710,421  
               

The Company's share of:

                   

Equity

  $ 13,904   $ 14,038   $ 18,505  

Less: Basis difference due to impairment charge

    (15,124 )   (15,124 )   (14,823 )

Less: Other net basis differences

    (574 )   (615 )   (477 )
               

Investments in real estate joint ventures, net

  $ (1,794 ) $ (1,701 ) $ 3,205  
               

        The Company has a basis difference in its investments in real estate joint ventures. The other net basis differences are being amortized/accreted over the life of the related properties, which is typically no greater than 40 years, and the amortization is included in the reported amount of equity in earnings (loss) from real estate joint ventures.

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements (Continued)

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

        As of December 31, 2009, scheduled principal repayments on joint venture properties' mortgages and other indebtedness are as follows:

 
  Total  

Past due(2)

  $ 34,210  

2010

    135,491  

2011

    207,931  

2012

    464,254  

2013

    31,187  

2014

    3,177  

Thereafter

    534,278  
       

Total principal maturities

    1,410,529  

Less: net discounts and other

    (1,467 )
       

Total mortgage notes payable

  $ 1,409,062  
       

(1)
Represents Mr. Heistand's direct or indirect ownership interest.

(2)
At December 31, 2009, the mortgage note payable by VFG Holdings LLC ("VFG"), with an outstanding balance of $34,210 was due July 2009 and was in default and interest only was paid monthly at LIBOR plus 1.75%, (1.983% at December 31, 2009). Default interest (6.983% at December 31, 2009) was accrued after the maturity date at 5% above the standard interest rate (LIBOR plus 1.75%) which is compounded monthly. Additional interest under the default rate of $831 has been accrued since the date of default. The mortgage note is collateralized by three underlying properties of VFG whose aggregate asset carrying value at December 31, 2009 totaled approximately $27,000. The mortgage note is non-recourse to VFG and there are no cross-collateral or cross-default arrangements between the mortgage note and other properties or mortgage notes held by VFG. The lender has agreed to cancel the mortgage note and permit a transfer of the three underlying properties by VFG to the Company in exchange for a payment of $27,500, which transaction is expected to close concurrently with the closing of the Offering.

        The mortgage notes payable are collateralized by substantially all of the assets of the joint ventures and are guaranteed, under certain circumstances, by certain individuals who have indirect ownership interests in the joint ventures.

        In April 2010, mortgage notes payable for MFM REIT LLC ("MFM") and MPC REIT LLC ("MPC") of $27,159 and $10,670 at December 31, 2009, respectively, were modified to extend the maturity to January 31, 2012. With this modification, MFM and MPC paid principal reductions of $359 and $141, respectively, at the closing of the loan modifications, as well as an extension fee of approximately $138 and $54, respectively.

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements (Continued)

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

        The summarized statements of operations financial information shown below includes all investments carried on the equity method for the six months ended June 30, 2010 and 2009 and for the years ended December 31, 2009, 2008 and 2007 as follows:

 
  Six Months Ended
June 30,
  Year Ended December 31,  
 
  2010   2009   2009   2008   2007  

Statement of operations:

                               

Rental revenue

  $ 101,307   $ 47,434   $ 225,540   $ 98,506   $ 66,968  
                       

Operating expenses

    50,309     20,811     99,910     41,208     26,369  

Depreciation and amortization

    43,609     28,871     107,652     54,822     33,567  

General and administrative expenses

    3,165     2,183     5,050     2,717     2,172  

Impairment charge

            14,597         495  
                       

Total operating expenses

    97,083     51,865     227,209     98,747     62,603  

Operating income (loss)

    4,224     (4,431 )   (1,669 )   (241 )   4,365  

Interest expense

    40,029     15,937     80,833     36,102     25,762  

Gain on early extinguishment of debt

    (24,297 )                
                       

Loss from continuing operations

    (11,508 )   (20,368 )   (82,502 )   (36,343 )   (21,397 )

Gain on sale of property

                    800  

Income from discontinued operations

                377     22  
                       

Net loss

    (11,508 )   (20,368 )   (82,502 )   (35,966 )   (20,575 )

Third party investors' share of net loss

    (11,082 )   (18,263 )   (77,916 )   (32,032 )   (18,347 )

The Company's share of net loss

    (426 )   (2,105 )   (4,586 )   (3,934 )   (2,228 )

Amortization of excess investment

    12         24     22     7  

The Company's impairment of its investments in real estate joint ventures

            (301 )   (14,823 )    
                       

Equity in loss from real estate joint ventures

  $ (414 ) $ (2,105 ) $ (4,863 ) $ (18,735 ) $ (2,221 )
                       

        During 2009 and 2008, the Company recognized non-cash impairment charges of $301 and $14,823, respectively, which represented the other-than-temporary decline in the fair value below the carrying value of eight of the Company's investment in certain equity investments. A loss in value of an investment under the equity method of accounting, which is other than a temporary decline, must be recognized. Such impairments result from fair values derived based on discounted cash flows and other valuation techniques that are more sensitive to current market conditions. The Company has determined that its valuation of these investments was categorized within Level 3 of the fair value hierarchy, as it utilized significant unobservable inputs in its assessment. In addition, during 2009 and 2007, certain of the joint ventures recognized non-cash impairment charges totaling $14,597 and $495, respectively, of which the Company's share was approximately $1,249 and $25, respectively.

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Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements (Continued)

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

7. Notes Payable and Other Debt

        Notes payable consist of the following at June 30, 2010 (unaudited) and December 31, 2009 and 2008:

 
   
  December 31,  
 
  June 30,
2010
 
 
  2009   2008  
 
  (unaudited)
   
   
 

Mortgage Notes Payable(1)(2)

                   

Mortgage note payable, interest only payable monthly at 6.20% until May 2011, then $245 principal and interest payable monthly, unpaid balance due at maturity, May 2016, prepayment may be subject to additional interest costs(3)

  $ 40,000   $ 40,000   $ 40,000  

Mortgage note payable-affiliate, interest only at LIBOR plus 3.00% and prime rate plus 4% while in default (7.25% default rate and 4.19% at December 31, 2009 and 2008, respectively) payable monthly, principal due January 2009, an interest rate cap had the effect of capping LIBOR at 5.0% until January 2009(3)(4)(5)

    16,300     16,300     16,300  

Subordinated note payable, interest at 12% payable monthly to the extent net cash flow and/or capital proceeds (as defined) exist, additional interest may be due based on net cash flow, and capital proceeds, principal and unpaid interest due May 2016, prepayment may be subject to additional interest costs, subordinated to $40,000 mortgage note payable(3)(6)

    15,894     15,894     15,894  

Mortgage note payable, interest only at LIBOR plus 2.25%
(2.48% and 4.08% at December 31, 2009 and 2008, respectively) payable monthly, principal due April 2011(3)

    2,000     2,000     2,000  

Corporate Notes Payable(7)

                   

Subordinated note payable, interest at 9.0% payable quarterly, unpaid balance due at maturity, extended through April 2011 in 2010(3)(9)

    195     195     396  

Note payable, interest at the greater of LIBOR plus 3.75% or 5.75% payable monthly, (5.75% at December 31, 2009) principal of $200 payable quarterly, maturity September 2014(3)

    3,400     3,800      

Note payable, interest at LIBOR plus .85% (2.05% at December 31, 2008) payable monthly, was repaid in 2009(3)

            3,735  

Note payable, $19 principal plus interest at LIBOR plus 4.05% (4.28% at December 31, 2009) payable monthly, unpaid balance due at maturity, October 2012(3)(8)(9)

    2,583     2,697      

Revolving line of credit, capacity $5 million, interest at LIBOR plus 5.5% in 2009 and LIBOR plus 2% in 2008 (5.73% and 2.46% at December 31, 2009 and 2008, respectively) payable monthly, maturity March 2011 with an annual commitment fee of 0.75% on undrawn balance(3)

    2,750         1,000  
               

  $ 83,122   $ 80,886   $ 79,325  
               

(1)
All of the real estate held for investment has been pledged as collateral for the mortgage notes payable.

(2)
The debt agreements contain covenants that, among other things, restrict activities regarding cash reserve accounts, borrowings, liens, leasing and sale of property, and sometimes require the Company to meet certain financial ratios. The Company was in compliance with its debt covenants as of December 31, 2009, with the exception of the mortgage note payable described in note 4 below.

(3)
This note is guaranteed by Mr. Heistand and certain non-controlling owners in the Company.

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements (Continued)

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

(4)
Since January 2009, the mortgage note payable, with an outstanding balance of $16,300, has been in default and interest only is being paid on a month-to-month basis at the greater of an interest rate (defined as LIBOR plus 3%) plus 3.0% and prime plus 4.0%, or the maximum rate permitted by applicable law, whichever is lower. The Company and the lender, which is a related party (Note 11), on May 21, 2010, executed a pre-negotiation agreement whereby the lender has acknowledged that the Company has made monthly payments of principal and interest at the contract rate of 3.3% from the maturity date, and the lender has waived and forgiven accrued interest at the default rate of 7.25% and all applicable late fees, which amounted to $1,879, and has been recorded as a reduction of interest expense for the six months ended June 30, 2010. The Company recorded default interest expense and late fees of $1,164 and $1,562 during the six months ended June 30, 2009 and the year ended December 31, 2009, respectively. The agreement does not contemplate any waiver or forgiveness of the Company's obligation to pay principal and interest or preclude the lender from foreclosing on the secured properties. If the Offering is not completed, the properties (consisting of Center Point and Center Point land) will be deeded to the lender in full satisfaction of the debt. The property represents $13,215 of assets at June 30, 2010 and generated $3,008 of revenues for the year ended December 31, 2009.

(5)
A guarantee of $10,000 of the principal balance, under certain circumstances, has been provided by the controlling interest and certain non-controlling interest holders. If the properties are deeded to the lender, the lender has agreed to waive any remedies it may have under the guarantee.

(6)
Interest is compounded monthly on unpaid principal balance. The Company has accrued interest of $9,273, $7,826 and $5,432 at June 30, 2010 and December 31, 2009 and 2008, respectively, related to this note.

(7)
The debt agreements contain covenants that require the Company to meet certain financial ratios. The Company was in compliance with its debt covenants as of June 30, 2010 and December 31, 2009 and 2008.

(8)
The note payable is collateralized by certain investment in real estate joint venture interests.

(9)
The note payable is collateralized by an asset included in corporate furniture and equipment. In addition, the Company is jointly and severally liable (50/50) on a total note payable of $5,166 and $5,394 at June 30, 2010 and December 31, 2009, respectively. The Company and the third party also have an agreement whereby either party may seek payment from the other party for amounts incurred in excess of their 50% share of the note payable or related interest expense. The Company has determined that the value of the collateral asset is sufficient and that the party that is jointly and severally liable has the financial ability to repay its share of the obligation.

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements (Continued)

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

Future principal maturities of notes payable are as follows at December 31, 2009:

Past due (see note 4 above)

  $ 16,300  

2010

    1,028  

2011

    3,495  

2012

    3,532  

2013

    1,322  

2014

    1,155  

Thereafter

    54,054  
       

  $ 80,886  
       

        Cash paid for interest in each period, net of any amounts capitalized, was as follows:

 
  Six Months Ended
June 30,
  Year Ended
December 31,
 
 
  2010   2009   2009   2008   2007  

Cash paid for interest

  $ 1,754   $ 1,882   $ 3,598   $ 3,224   $ 2,868  

        The fair value of notes payable was approximately $97,000, $89,000 and $90,200 at June 30, 2010, and December 31, 2009 and 2008, respectively. The fair value of the notes payable is determined by using Level 3 inputs by discounting the future cash flows of each instrument at the Company's estimated borrowing rates ranging from 5.79% to 8.69% on fixed rate loans, and 5.61% to 8.07% on variable rate loans that reflects, among other things, market interest rates and the Company's credit standing.

8. Equity

        Equity ownership interests in the combined entities include both controlling and non-controlling interests. Controlling interests represent those interests owned by Mr. Heistand. Generally, profits, losses and distributions are allocated pro rata based on ownership of the parties. Prior to the adoption of new accounting guidance related to non-controlling interests, the Company ceased allocation of losses to non-controlling interest holders when the equity accounts of those holders reached zero. Beginning on January 1, 2009, losses were allocated to non-controlling holders on a pro rata basis regardless of the balance of those equity accounts.

        Ownership interests generally cannot be transferred without the consent of the other parties, or the consent of the controlling interest holder. In certain situations, the interest holders have entered into ownership agreements that govern the terms on which securities held by these holders can be transferred. These agreements contain customary transfer restrictions including rights of first refusal, drag-along and tag-along rights, all of which will terminate upon the closing of the Offering. There are no circumstances whereby any of the combined entities or the controlling interest holder could be required to redeem the non-controlling interests in any situation outside the control of the controlling interest holder.

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements (Continued)

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

        Included in equity are the following member loans:

 
  December 31,
2009
 

Notes receivable from affiliated owner, Mr. Heistand, interest at the greater of one-month LIBOR plus 3.75% or 5.75% (5.75% at December 31, 2009) payable monthly, principal of $84.5 payable quarterly starting December 16, 2009, maturity September 2014. 

  $ 1,606  

Notes receivable from non-controlling interest holder, interest at the greater of one-month LIBOR plus 3.75% or 5.75% (5.75% at December 31, 2009) payable monthly, principal of $45.5 payable quarterly starting December 16, 2009, maturing September 2014

    865  
       

Total

  $ 2,471  
       

        These notes were retired effective as of September 30, 2010.

9. Employee Benefit Plan

        The Company has a defined contribution employee benefit plan which covers all eligible employees of the management company. The plan allows contributions by plan participants in accordance with the Internal Revenue Code. The Company matches a percentage of each employee's contributions consistent with the provisions of the plan, and may make discretionary contributions. The amount charged to expense in the combined financial statements for the six months ended June 30, 2010 and 2009 and for the years ended December 31, 2009, 2008, and 2007 was $84, $48, $104, $113, and $233, respectively. Such amounts are included on the combined statements of operations in management and advisory services operating expenses.

10. Leases

As Lessor

        The Company leases office, parking, and retail space under operating lease agreements that expire at various dates through January 2026. The lease agreements typically provide for a specified monthly payments and some contain options to renew for additional periods. Certain leases provide for tenant reimbursement of real estate taxes, common area maintenance charges, and building and parking operating expenses. In addition, the Company leases parking space to an affiliate under an operating lease that expires January 2026.

        Future minimum rents (excluding tenant reimbursements) to be received under non-cancelable tenant operating leases are as follows at December 31, 2009:

2010

  $ 9,155  

2011

    8,825  

2012

    7,887  

2013

    5,291  

2014

    5,244  

Thereafter

    8,404  
       

  $ 44,806  
       

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements (Continued)

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

As Lessee

        The Company leases office space from affiliated entities under various operating lease agreements that expire through May 2017. Rental expense is recognized as incurred. When scheduled rentals vary during the lease term, rental expense is recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease. Accrued rental expense is the aggregate difference between scheduled rent payments, which vary during the lease term, and rent expense recognized on a straight-line basis over the lease term. The lease expiring in 2010 has been extended through April 2017. Rent expense under these leases was approximately $142, $122, $269, $276, and $183 for the six months ended June 30, 2010 and 2009 and for the years ended December 31, 2009, 2008, and 2007, respectively. At December 31, 2009, future minimum rents under the leases are as follows:

2010

  $ 138  

2011

    142  

2012

    139  

2013

    60  

2014

    62  
       
 

Total

  $ 541  
       

11. Transactions with Related Parties

        The Company has engaged in various transactions with related parties due to common ownership. These transactions are described below:

Revenues and Expenses

        Substantially all management and advisory service fees are received from entities affiliated by common ownership, including the majority of the real estate entities that are accounted for by the Company using the equity method of accounting. In addition, the Company leases space from four equity method affiliates. The Company paid $180, $173, $348, $322 and $209 for the six months ended June 30, 2010 and 2009 and the years ended December 31, 2009, 2008 and 2007, respectively, in rent to the affiliates.

        In 2007, the Company incurred and paid $2,123 of consulting fees to certain of the members of one of the combined entities relating to services provided in connection with acquisition due diligence, which are included in management and advisory services operating expenses in the combined statement of operations for the year ended December 31, 2007.

Due from Affiliates

        Amounts due from affiliates include amounts due from various affiliated entities under contract with Eola Capital LLC for management fees and administrative and expense reimbursements.

Notes Payable

        A company related through common ownership has a 25% participating interest (as co-lender) in the subordinated note payable (see Note 7).

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements (Continued)

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)

        The mortgage note payable with an outstanding balance of $16,300 is held by an affiliate (see Note 7). Interest paid related to this note is $268, $293, $564, $989, and $330 for the six months ended June 30, 2010 and 2009 and the years ended December 31, 2009, 2008 and 2007, respectively.

12. Concentrations of Business and Credit Risk

        The Company leases office, parking, and retail space to various commercial businesses in four states in the Southeast and mid-Atlantic regions of the United States. The terms of the leases generally require basic rent payments at the beginning of each month. Based on the financial condition of a tenant, the tenant may be required to make a security deposit at the inception of the lease. Credit risk associated with the lease agreements is limited to the amount of rents receivable from tenants, less any applicable security deposits and the future rents under the non-cancelable terms of the lease agreement. The Company has three tenants whose individual rental income exceeded 10% of the Company's total rental income and represented in the aggregate 63%, 62% and 62% of total rental income for the years ended December 31, 2009, 2008, and 2007, respectively. There were no significant changes in these three tenants during the six months ended June 30, 2010 and 2009. The three tenants individually represented 29%, 17% and 17% of total rental income for the year ended December 31, 2009, and the percentages were similar for all periods presented.

        All of the Company's cash and cash equivalents and certain amounts of restricted cash are maintained in national financial institutions. The Company has exposure to credit risk to the extent that its cash and cash equivalents and restricted cash exceed amounts covered by U.S. federal deposit insurance. At June 30, 2010 and December 31, 2009 and 2008, substantially all cash and cash equivalents and restricted cash were uninsured. In management's opinion, the capitalization and operating history of the financial institutions are such that the likelihood of material loss is remote.

13. Commitments and Contingencies

        The Company is a party to certain legal actions arising in the normal course of business. Management does not expect there to be adverse consequence from these actions that would be material to the combined financial statements.

        A member of the Company's management team can be provided a non-controlling interest in certain of the Company's entities if certain defined valuation events are achieved, including the Offering. The amount of the interest to be provided is dependent upon the value realized in the valuation event. Due to uncertainties involved with achieving the defined valuation events, no amounts have been recorded in the combined financial statements.

        In April 2010, the Company agreed to acquire an office property for aggregate consideration of approximately $141.6 million, including estimated closing and other costs. As of June 30, 2010, the Company has funded a non-refundable deposit and other costs of approximately $5,500, of which $2,750 was drawn against the Company's line of credit and the remaining $2,750 was provided by joint venture partners that will participate in the acquisition. An additional $750 deposit was funded in September 2010 with borrowings from the line of credit. These participation deposits are non-refundable to the joint venture partners and were used to pay down borrowings under the line of credit during the six months ended June 30, 2010. The Company intends to use a portion of the net proceeds from this Offering to acquire this property. The agreement provides for various customary closing conditions. The Company currently is pursuing potential third parties to co-invest in the acquisition of

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Table of Contents


Eola Predecessor Companies

Notes to Eola Predecessor Companies Combined Financial Statements (Continued)

Six Months Ended June 30, 2010 and 2009 (unaudited) and
Years Ended December 31, 2009, 2008, and 2007

(Dollars in thousands)


this property. If the Company reaches an agreement with such parties, its interest in this property would be held through a joint venture, and its ownership percentage may be significantly reduced. The Company can provide no assurances that it will be able to acquire this property in a timely manner or at all.

Guarantees of Indebtedness

        Joint venture debt is the liability of the joint venture and is typically secured by the joint venture property, which is non-recourse to the Company. Mortgages which are guaranteed are secured by the property of the joint venture and that property could be sold in order to satisfy the outstanding obligation.

        Certain joint venture debt is guaranteed by controlling and non-controlling interest holders who have indirect ownership interests in the joint ventures.

14. Subsequent Events

        On August 31, 2010, the Company sold its Center Point V building located in Columbia, South Carolina for $1,675.

        In August 2010, ACP/DLF Peachtree Center LLC ("Peachtree"), a joint venture of the Company, entered into a loan restructuring agreement pursuant to which, at the original maturity date of July 6, 2012, the $207.6 million loan will be split into an "A/B" note structure, with an "A-Note" of $140.0 million and a "B-Note" of $67.6 million. Upon execution of the loan restructuring agreement, members of the property-owning entities deposited $15.0 million into a reserve account for tenant improvements and leasing commissions for the properties. Prior to the original maturity date of July 6, 2012, the loan will bear interest at a rate of 6.044%, and monthly debt service payments on the total debt of $207.6 million shall remain due and payable. Upon the split into an A/B note structure on July 6, 2012, each of the A-Note and the B-Note will have a maturity date of June 30, 2015. The A-Note will bear interest at 6.044% and debt service will be due and payable monthly. The B-Note also will bear interest at 6.044%, but debt service shall be payable only upon the occurrence of a sale or refinancing transaction after January 1, 2015, subject to a payoff equal to a lender- and borrower-approved appraised value of the properties securing the loan.

        In the event of a sale or other disposition of the properties after July 6, 2012, or in the event of a refinancing transaction after January 1, 2015, the following waterfall of payments will apply: first, the A-Note, including accrued and unpaid interest and any other amounts due under the A-Note, will be repaid in full; second, the members of Peachtree will receive payments representing a 10% cumulative annual yield on the $15.0 million reserve account referred to above, after which the entire balance of the reserve account will be fully repaid; third, remaining proceeds will be paid 70% to the Company and 30% to the lender until the principal amount of the B-Note has been paid in full; and finally, remaining proceeds will be paid 80% to the Company and 20% to the lender until all B-Note accrued and unpaid interest is repaid. Any remaining proceeds will then be distributed to Peachtree. After applying the foregoing waterfall of payments, the entire loan amount shall be deemed satisfied even if any amounts due on the A-Note or B-Note have not been fully repaid.

        The Company evaluated subsequent events through the date these combined financial statements were issued.

F-50


Table of Contents


Eola Predecessor Companies

Schedule III—Real Estate and Accumulated Depreciation

December 31, 2009

 
   
   
   
  Cost
Capitalized
and
Impairment
Charges
Subsequent
to
Acquisition
   
   
   
   
   
   
 
 
   
  Initial Cost to Company   Gross Amount Carried at End of Period    
   
   
 
Property Location(a)
  Encumbrance   Land and
Improvements
  Building and
Improvements
  Land and
Improvements
  Building and
Improvements
  Total
December 31, 2009(b)
  Accumulated
Depreciation
December 31, 2009
  Date of
Construction
  Date of
Acquisition
 

Jacksonville, Florida

                                                             
 

10301 Deerwood
Boulevard(O)

      (1) $ 2,788   $ 7,364   $ 210   $ 2,788   $ 7,574   $ 10,362   $ 1,032     1990     2006  
 

10401 Deerwood
Boulevard(O)

      (1)   9,255     22,723     3,492     9,255     26,215     35,470     4,892     1990     2006  

Tampa, Florida

                                                             
 

Cypress(L)

  $ 2,000     2,100             2,100         2,100         n/a     2008  

Columbia, South Carolina

                                                             
 

2000 Center Point
Boulevard(O)

      (2)   1,610     3,168     45     1,610     3,213     4,823     222     1988     2008  
 

100 Center Point
Circle(O)

      (2)   2,158     4,830     12     2,158     4,842     7,000     247     1989     2008  
 

1370 Browning
Road(O)(L)

      (2)   866     1,123     (460 )   668     861     1,529         1997     2008  
                                                 

Total

        $ 18,777   $ 39,208   $ 3,299   $ 18,579   $ 42,705   $ 61,284   $ 6,393              
                                                 

(a)
Legend of Property Codes:
(O) = Office Property
(L) = Undeveloped Land

(b)
The unaudited aggregate cost for U.S. federal income tax purposes at December 31, 2009 was approximately $71,000.

(1)
Property is collateralized under mortgage note totaling $40,000 and a mezzanine note totaling $15,894.

(2)
Property is collateralized under mortgages with a related party totaling $16,300.

        Changes in rental properties and accumulated depreciation for the periods ended December 31, 2009, 2008 and 2007 are as follows (dollars in thousands):

 
  2009   2008   2007  

Rental Properties

                   

Balance at beginning of year

  $ 61,222   $ 44,733   $ 42,389  
 

Additions

    519     16,489     2,344  
 

Impairment charge on rental property

    (457 )        
               

Balance at end of year

  $ 61,284   $ 61,222   $ 44,733  
               

Accumulated Depreciation

                   

Balance at beginning of year

  $ 4,293   $ 2,636   $ 1,236  
 

Depreciation expense

    2,100     1,657     1,400  
               

Balance at end of year

  $ 6,393   $ 4,293   $ 2,636  
               

        Depreciation is recorded using the straight-line method over estimated useful lives as follows:

Land improvements   10 to 15 years
Buildings   40 to 50 years
Building improvements   Lesser of building life or related useful life
Tenant improvements   Lesser of respective lease term or useful life

F-51


Table of Contents

Report of Independent Registered Public Accounting Firm

The Members
JAX-ISQ LLC:

        We have audited the consolidated balance sheet of JAX-ISQ LLC and subsidiaries (the Company) as of December 31, 2009, and the related consolidated statements of operations, members' equity, and cash flows for the year then ended (not presented herein). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of JAX-ISQ LLC and subsidiaries as of December 31, 2009, and the results of their operations and their cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

April 5, 2010
Jacksonville, Florida
Certified Public Accountants

F-52


Table of Contents


Report of Independent Registered Public Accounting Firm

The Members
Orlando Centre Syndication Partners JV LP:

        We have audited the consolidated balance sheets of Orlando Centre Syndication Partners JV LP and subsidiaries (the Partnership) as of December 31, 2009 and 2008 and the related consolidated statements of operations, partners' capital, and cash flows for the years ended December 31, 2009 and 2008, and the period from May 2, 2007 (Inception) through December 31, 2007 (not presented herein). These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Orlando Centre Syndication Partners JV LP and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years ended December 31, 2009 and 2008, and the period from May 2, 2007 (Inception) through December 31, 2007, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

March 29, 2010
Jacksonville, Florida
Certified Public Accountants

F-53


Table of Contents


Report of Independent Registered Public Accounting Firm

The Members
MFM REIT LLC:

        We have audited the consolidated balance sheets of MFM REIT LLC and subsidiaries (the Company) as of December 31, 2009 and 2008 and the related consolidated statements of operations, members' equity, and cash flows for the years then ended (not presented herein). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MFM REIT LLC and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

April 28, 2010
Jacksonville, Florida
Certified Public Accountants

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Table of Contents


Report of Independent Registered Public Accounting Firm

The Members
VFG Holdings LLC:

        We have audited the accompanying consolidated balance sheets of VFG Holdings LLC and subsidiaries (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, members' equity, and cash flows for the years ended December 31, 2009 and 2008, and the period from May 9, 2007 (Inception) through December 31, 2007. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of VFG Holdings LLC and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years ended December 31, 2009 and 2008, and the period from May 9, 2007 (Inception) through December 31, 2007, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

May 18, 2010, except for note 14, as to which the date is September 30, 2010
Jacksonville, Florida
Certified Public Accountants

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Table of Contents


VFG Holdings LLC and Subsidiaries

Consolidated Balance Sheets

December 31, 2009 and 2008

 
  2009   2008  

Assets

             

Real estate, held for investment:

             
 

Land

  $ 40,870,701     43,467,814  
 

Land improvements

    14,374,741     14,796,870  
 

Buildings and improvements

    174,391,483     179,636,808  
 

Tenant improvements

    63,495,008     66,507,825  
 

Construction in progress

    488,441     829,068  
           
   

Total cost

    293,620,374     305,238,385  
 

Accumulated depreciation

    44,702,711     28,628,756  
           
   

Net real estate, held for investment

    248,917,663     276,609,629  

Cash and cash equivalents

    2,567,577     2,155,539  

Restricted cash:

             
 

Operating escrows

    6,622,103     3,881,885  
 

Capital expenditures reserves

    7,458,825     10,734,366  

Receivables, net of allowance for doubtful accounts of $512,364 and $32,117, respectively

    182,284     588,847  

Accrued rental income

    6,212,982     3,210,815  

Intangible lease assets, net of accumulated amortization

    12,372,905     19,552,677  

Deferred costs, net of accumulated amortization

    6,393,976     4,484,088  

Derivative instruments, at fair value

    37,922      

Deposits and prepaid expenses

    539,314     503,086  
           

  $ 291,305,551     321,720,932  
           

Liabilities and Members' Equity

             

Liabilities:

             
 

Mortgage notes payable

  $ 260,970,655     261,527,370  
 

Accrued interest payable

    1,819,177     889,040  
 

Accounts payable and other liabilities (includes approximately $127,000 and $151,000 payable to related parties at December 31, 2009 and 2008, respectively)

    3,928,852     3,137,131  
 

Intangible lease liabilities, net of accumulated amortization

    2,573,767     5,538,497  
           
   

Total liabilities

    269,292,451     271,092,038  

Members' equity

    22,013,100     50,628,894  
           

  $ 291,305,551     321,720,932  
           

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Operations

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007

 
  2009   2008   2007  

Revenue:

                   
 

Rental income (includes $2,891,451, $2,828,561 and $1,473,472 received from related parties in 2009, 2008 and 2007, respectively)

  $ 34,875,594     34,190,837     17,622,959  
   

Operating expense reimbursements

    3,499,825     3,913,810     1,771,197  
   

Interest income

    68,596     423,950     485,234  
               

    38,444,015     38,528,597     19,879,390  
               

Expenses:

                   
 

Real estate operating expenses (includes approximately $3,312,000, $3,346,000 and $2,182,000 incurred with related parties in 2009, 2008 and 2007, respectively)

    15,083,466     14,648,886     7,304,596  
 

General and corporate administration

    1,850,593     1,120,963     932,838  
 

Depreciation

    22,600,533     20,108,571     11,215,677  
 

Amortization of in-place lease assets and lease acquisition costs

    6,372,173     6,991,165     3,637,677  
 

Interest expense

    12,675,721     15,089,021     9,272,816  
 

Provision for impairment

    11,077,323          
               

    69,659,809     57,958,606     32,363,604  
               
   

Loss from continuing operations

    (31,215,794 )   (19,430,009 )   (12,484,214 )
               

Discontinued operations:

                   
 

Operating income from discontinued operations

        41,385     22,187  
 

Gain on disposition of discontinued operations

        335,735      
               

        377,120     22,187  
               
   

Net loss

  $ (31,215,794 )   (19,052,889 )   (12,462,027 )
               

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Members' Equity

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007

 
  Institutional
Investor
  VFG Holdings
Owner LLC
  Total  

Balance, May 9, 2007 (Inception)

  $          

Contributions

    76,559,440     21,952,360     98,511,800  

Distributions

    (400,025 )   (400,025 )   (800,050 )

Net loss

    (10,031,472 )   (2,430,555 )   (12,462,027 )
               

Balance, December 31, 2007

    66,127,943     19,121,780     85,249,723  

Distributions

    (10,364,428 )   (5,203,512 )   (15,567,940 )

Net loss

    (15,260,390 )   (3,792,499 )   (19,052,889 )
               

Balance, December 31, 2008

    40,503,125     10,125,769     50,628,894  

Contributions

    1,300,000     1,300,000     2,600,000  

Net loss

    (25,032,917 )   (6,182,877 )   (31,215,794 )
               

Balance, December 31, 2009

  $ 16,770,208     5,242,892     22,013,100  
               

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Cash Flows

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007

 
  2009   2008   2007  

Cash flows from operating activities:

                   
 

Net loss

  $ (31,215,794 )   (19,052,889 )   (12,462,027 )
 

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

                   
   

Provisions for (recoveries of) doubtful accounts, net

    544,706     (887 )   198,312  
   

Provision for impairment

    11,077,323          
   

Depreciation

    22,600,533     20,108,571     11,215,677  
   

Amortization

    6,292,098     7,050,554     3,934,630  
   

Amortization of intangible lease assets and liabilities to rental income

    (1,771,253 )   (2,193,462 )   (984,110 )
   

Amortization of deferred financing costs

    520,099     858,019     441,717  
   

Gain on disposition of discontinued operations

        (335,735 )    
   

Change in fair value of derivative instruments

    154,078     8,279     140,721  
   

Lease acquisition costs paid

    (3,338,336 )   (2,156,928 )   (947,854 )
   

Changes in:

                   
     

Operating escrows

    (2,740,218 )   698,278     (2,444,365 )
     

Receivables

    (138,146 )   (40,010 )   (974,411 )
     

Accrued rental income

    (3,002,167 )   (2,111,146 )   (1,287,719 )
     

Deposits and prepaid expenses

    (36,228 )   20,202     97,691  
     

Accrued interest payable

    930,137     (285,644 )   1,395,105  
     

Accounts payable and other liabilities

    541,705     (1,389,650 )   541,057  
               
       

Net cash provided by (used in) operating activities

    418,537     1,177,552     (1,135,576 )
               

Cash flows from investing activities:

                   
 

Business acquisition

            (351,166,279 )
 

Capital expenditures

    (5,133,325 )   (5,054,337 )   (1,700,603 )
 

Decrease in capital expenditures reserves

    3,275,541     5,800,597     (17,712,122 )
 

Proceeds from sale of discontinued operations

        13,233,701      
               
       

Net cash (used in) provided by investing activities

    (1,857,784 )   13,979,961     (370,579,004 )
               

Cash flows from financing activities

                   
 

Deferred financing costs paid

            (3,206,317 )
 

Interest rate cap payments

    (192,000 )       (149,000 )
 

Proceeds from mortgage notes payable

            280,578,246  
 

Repayment of mortgage notes payable

    (556,715 )   (526,884 )   (127,249 )
 

Contributions from members

    2,600,000         98,511,800  
 

Distributions to members

        (15,567,940 )   (800,050 )
               
       

Net cash provided by (used in) financing activities

    1,851,285     (16,094,824 )   374,807,430  
               
       

Net increase (decrease) in cash equivalents

    412,038     (937,311 )   3,092,850  

Cash and cash equivalents, beginning of year

    2,155,539     3,092,850      
               

Cash and cash equivalents, end of year

  $ 2,567,577     2,155,539     3,092,850  
               

Supplemental cash flow information:

                   
 

Cash paid for interest, net of $18,666, $37,160, and $5,143 capitalized in 2009, 2008, and 2007, respectively

  $ 11,206,819     15,027,303     8,767,378  
               

Supplemental disclosure of noncash investing and financing activities:

                   
 

Capital expenditures financed through accounts payable

  $ 241,122          
               

In 2008, the Company sold its membership interest in its wholly-owned limited liability company subsidiary, 150 Manager LLC. The net assets sold are disclosed in note 3.

In 2007, the Company acquired real estate and lease intangible assets and assumed liabilities and lease intangible liabilities. The fair value of these assets and liabilities are disclosed in note 2.

See accompanying notes to consolidated financial statements.

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VFG Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007

(1)   Summary of Significant Accounting Policies

(a) Nature of Business

        VFG Holdings LLC was formed as a Delaware limited liability company on May 9, 2007. VFG Holdings LLC is governed by an operating agreement between a large institutional investor (Institutional Investor) and VFG Holdings Owner LLC (Owner), a Delaware limited liability company which provides for the continuous existence of VFG Holdings LLC until the earlier of the sale or disposition of all or substantially all of the assets of VFG Holdings LLC or dissolution by the members, but no later than December 31, 2066. VFG Holdings LLC and its wholly-owned limited liability company subsidiaries are engaged in the ownership and management of income-producing real estate consisting of 16 office buildings in Florida, Georgia, and Virginia. The properties were purchased from a single seller at various dates in 2007. On June 20, 2007, 15 buildings were purchased (100 Windward Plaza, 245 Riverside, 280 Interstate North Office Park, 300 Windward Plaza, 5660 New Northside Drive, Beckrich One, Beckrich Two, Deerfield Point I, Deerfield Point II, Millennia Park One, Overlook I, Overlook II, Southhall Center, Southwood One, and Windward Pointe 200), on August 7, 2007, the 150 West Main building was purchased (subsequently sold on February 1, 2008—see note 2), and on September 19, 2007, the Parkwood Point building was purchased. The members' liability is limited to their respective capital contributions.

(b) Consolidation

        The consolidated financial statements include the accounts of VFG Holdings LLC and its wholly-owned limited liability company subsidiaries (collectively referred to as the Company). All significant intercompany accounts and transactions have been eliminated.

(c) Real Estate

    Purchase Accounting

        The Company assigns the purchase price of assets acquired and liabilities assumed to the acquired tangible assets (normally consisting of land, building, and improvements) and identified intangible assets and liabilities (normally consisting of the value of in-place leases, including above-market and below-market leases). The costs are assigned based on the fair values of the assets acquired and liabilities assumed.

        The fair value of tangible assets of an acquired property is determined by valuing the property as if it were vacant, and the "as-if-vacant" value is then allocated to land, building, and improvements based on the determination of the fair values of the assets.

        In determining the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease and any below-market fixed rate renewal periods (for below-market lease values). The capitalized above-market lease values are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. The capitalized below-

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Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007


market lease values are accreted as an increase to rental income over the initial term and any fixed rate renewal periods in the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be amortized.

        The value of in-place leases is estimated based on the value associated with the costs avoided in originating leases compared to the acquired in-place leases, as well as the value associated with lost rental revenue and operating expense reimbursements during the assumed lease-up period. The value of in-place leases is amortized expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be expensed.

    Real Estate, Held for Investment

        Land is carried at cost; land improvements, buildings and improvements, and tenant improvements are carried at cost and are reduced in the aggregate by accumulated depreciation. Additions and betterments are capitalized while maintenance and repairs which do not improve or extend the lives of the respective assets are expensed currently. Interest is capitalized on construction in progress and included in the cost of real estate to the extent that underlying capital expenditures support such capitalization.

        In leasing tenant space, the Company may provide funding to the lessee through a tenant allowance. In accounting for a tenant allowance, the Company determines whether the allowance represents funding for the construction of tenant improvements and evaluates the ownership, for accounting purposes, of such improvements. If the Company is considered the owner of the tenant improvements for accounting purposes, the Company capitalizes the amount of the tenant allowance and depreciates it over the shorter of the useful life of the tenant improvements or the related lease term. If the tenant allowance represents a payment for a purpose other than funding tenant improvements, or in the event the Company is not considered the owner of the improvements for accounting purposes, the allowance is considered to be a lease acquisition cost and is recognized over the lease term as a reduction of rental revenue on a straight-line basis.

        Depreciation is recorded using the straight-line method over estimated useful lives of 15 years for land improvements, 50 years for buildings and improvements and the shorter of the estimated useful lives or the respective lease term for tenant improvements.

        When real estate is disposed of, the related cost, accumulated depreciation or amortization, and any accrued rental income are removed from the consolidated balance sheets and gains or losses from the dispositions are reflected in net income or loss. Gains from disposition of real estate are generally recognized using the full accrual method, provided that various accounting criteria relating to the terms of the sale and any subsequent involvement by the Company with the real estate sold are met.

    Real Estate, Held for Sale

        Real estate is classified as held for sale when management's intent is to sell the asset and the applicable accounting criteria are satisfied. This determination requires management to make estimates and assumptions, including assessing the probability that potential sales transactions may or may not occur. Actual results could differ from those assumptions. Upon designation as held for sale, the carrying values of the assets are recorded at the lower of the carrying value or the estimated fair value,

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Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007

less costs to sell. Except for accrued rental income and lease intangible assets and liabilities, assets associated with real estate held for sale are no longer depreciated or amortized. When real estate held for sale is disposed of, the related cost, accumulated depreciation or amortization and any accrued rental income are removed from the consolidated balance sheets and gains and losses from dispositions are reflected in net income or loss. None of the Company's properties were classified as held for sale at December 31, 2009 and 2008; however three properties became subject to a forbearance agreement and became classified as held for sale subsequent to December 31, 2009 (note 6) when they met the criterion for such classification under the relevant accounting literature.

    Real Estate, Discontinued Operations

        The Company reports the results of operations of disposed properties, including any gain or loss recognized upon disposition, in discontinued operations if both of the following conditions are met: (a) the operations and cash flows of the property have been (or will be) eliminated from the ongoing operations of the Company and (b) the Company will not have any significant continuing involvement in the operations of the property after the disposal transaction. Each of the Company's properties has operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company.

    Impairment

        Management reviews its real estate, and other related assets and liabilities included in the asset group, for impairment whenever events or changes in circumstances indicate that the carrying value of the asset group may not be recoverable through operations. Management determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges) of the asset group, with the carrying value of the asset group. If impairment is indicated, a loss is recorded for the amount by which the carrying value of the asset group exceeds its fair value. No impairment was recorded during 2008 and 2007. In 2009, the Company recorded an impairment loss of $11,077,323 on properties associated with the forbearance agreement referenced in note 6. The values are based on the highest purchase offers received subsequent to year-end from a third party. The completion of the sale of these properties remains subject to the lender's approval and the buyers' due diligence and ability to obtain financing.

(d) Cash Equivalents

        The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

(e) Receivables

        Receivables are recorded at the principal amount outstanding and are shown net of an allowance for doubtful accounts. The Company evaluates the collectability of receivables based on numerous factors, including past history with tenants, their creditworthiness and historical write-off experience. Initially, the Company estimates an allowance for doubtful accounts based on these factors. This estimate is periodically adjusted when the Company becomes aware of a specific tenant's inability to meet its financial obligations (e.g., upon a bankruptcy filing) or as a result of changes in the overall

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VFG Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007


aging of receivables. Uncollectible receivables are charged off after management has exhausted all reasonable collection efforts. Generally, interest is not accrued on delinquent receivables.

(f) Deferred Costs

        Costs related to obtaining leases are deferred as lease acquisition costs and amortized using the straight-line method over the lease terms. Costs related to obtaining long-term financing are deferred and amortized to interest expense using the straight-line method over the term of related indebtedness, which approximates amortization by the effective interest method. If the lease is terminated early, or if the loan is repaid prior to maturity, the remaining lease acquisition costs or loan costs are written-off.

(g) Derivative Instruments

        The Company utilizes interest rate caps to manage the impact of interest rate changes under variable rate mortgage notes payable. These financial instruments are not entered into for trading or speculative purposes and were not designated as hedging instruments at inception. The Company carries the derivatives at fair value and recognizes any changes in fair value in general and corporate administration expense.

(h) Fair Value Measurements

        Previously the Company adopted ASC Topic 820, Fair Value Measurements and Disclosures, for fair value measurements of its financial assets and financial liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. On January 1, 2009, the Company adopted ASC Topic 820 for fair value measurements of nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. ASC Topic 820 establishes a framework for measuring fair value and expands disclosures about fair value measurements including a fair value hierarchy based upon three levels of inputs that may be used to measure fair value. The following describes the three levels:

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

    Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, 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.

    Level 3—Model-based techniques that use at least one significant assumption not observable in the market.

        The fair value of all financial instruments is reported as disclosure only. The fair values disclosed in these financial statements represent management's best estimates of the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company's own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available in the circumstances.

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VFG Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007

(i) Revenue Recognition

        The Company leases space to tenants under operating lease agreements with varying terms. Rental revenue is recognized as earned. When scheduled rentals vary during the lease term, revenue is recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease. Accrued rental income is the aggregate difference between scheduled rent payments, which vary during the lease term, and rent revenue recognized on a straight-line basis over the lease term. Rental revenue is reported net of sales taxes collected from tenants, which are recorded as liabilities on the consolidated balance sheets.

        Operating expense reimbursements represent amounts from tenants for real estate taxes, common area maintenance charges and building operating expenses and are recognized as the respective costs are incurred in accordance with the lease agreements.

(j) Income Taxes

        The Company qualifies to be taxed as a partnership for U.S. federal income tax purposes. As a partnership the Company's income or loss is passed through to the members for inclusion in their separate income tax returns. When applicable, interest and penalties will be reflected as a component of income tax expense.

(k) Use of Estimates

        The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimate in the Company's financial statements relate to the allocation of the purchase price between the Company's acquired assets and assumed liabilities and provision for impairment losses.

(2)   Acquisition of Real Estate

        In June, August and September 2007, the Company acquired 17 operating properties from a third party. The acquisitions were accounted for as purchases and the results of operations are included in

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VFG Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007


the consolidated financial statements from the respective dates of acquisition. The following table represents the amount assigned to the major assets acquired and liabilities assumed or incurred:

Real estate

  $ 353,930,806  

Restricted cash

    2,217,972  

Intangible lease assets

    37,679,965  

Deposits and prepaid expenses

    759,958  
       
 

Total assets required

    394,588,701  
       

Mortgage note payable

    28,551,271  

Accounts payable and other liabilities

    4,043,759  

Below-market lease intangible liabilities

    10,827,392  
       
 

Total liabilities assumed

    43,422,422  
       
 

Net assets acquired

  $ 351,166,279  
       

(3) Discontinued Operations

        Upon acquisition, the Company identified the 150 West Main building (totaling approximately 226,000 square feet) as held-for-sale. During 2008, the Company sold its membership interest in 150 Manager LLC, which indirectly owned the 150 West Main building, to a third party and has no continuing involvement with the property. The sale of real estate is summarized in the following table:

Sale proceeds, net of closing costs of $666,290

  $ 13,233,701  
       

Real estate

    52,751,869  

Restricted cash

    1,259,333  

Receivables

    228,149  

Accrued rental income

    188,050  

Intangible lease assets

    6,057,850  

Deferred costs

    203,981  

Deposits and prepaid expenses

    138,979  

Mortgage note payable

    (46,948,014 )

Accrued interest payable

    (220,421 )

Accounts payable and other liabilities

    (58,035 )

Below-market lease intangible liabilities

    (703,775 )
       

    12,897,966  
       
 

Gain on sale of real estate

  $ 335,735  
       

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VFG Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007

        The following summarizes the amounts included in operating income from discontinued operations in the accompanying consolidated statements of operations for the year ended December 31, 2008 and the period from May 9, 2007 (Inception) through December 31, 2007:

 
  2008   2007  

Revenue

  $ 516,015     2,437,438  
           

Expenses:

             
 

Real estate operating expenses

    149,725     735,526  
 

Amortization

    59,389     296,953  
 

Interest expense

    254,834     1,331,384  
 

General and corporate administration

    10,682     51,388  
           

    474,630     2,415,251  
           
   

Operating income from discontinued operations

  $ 41,385     22,187  
           

(4) Restricted Cash

        Operating escrows are restricted to fund real estate taxes and insurance and are released by the lender upon approval of a disbursement request.

        Capital expenditures reserves represent funds restricted for building and tenant improvements and lease acquisition costs. These funds are released by the lender upon approval of a disbursement request. At December 31, 2009, the Company had approximately $1,972,000 of outstanding capital expenditure commitments.

(5) Intangible Lease Assets and Liabilities

        Intangible lease assets and liabilities consisted of the following at December 31, 2009 and 2008:

 
  2009  
 
  Gross
carrying
amount
  Accumulated
amortization
  Net
carrying
amount
 

Intangible lease assets:

                   
 

In-place leases

  $ 23,461,259     13,013,762     10,447,497  
 

Above-market leases

    3,775,396     1,849,988     1,925,408  
               

  $ 27,236,655     14,863,750     12,372,905  
               

Intangible lease liabilities:

                   
 

Below-market leases

  $ 7,257,126     4,763,434     2,493,692  
 

Tenant improvement reimbursements

    89,408     9,333     80,075  
               

  $ 7,346,534     4,772,767     2,573,767  
               

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Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007

 

 
  2008  
 
  Gross
carrying
amount
  Accumulated
amortization
  Net
carrying
amount
 

Intangible lease assets:

                   
 

In-place leases

  $ 25,507,009     8,529,751     16,977,258  
 

Above-market leases

    3,797,071     1,221,652     2,575,419  
               

  $ 29,304,080     9,751,403     19,552,677  
               

Intangible lease liabilities:

                   

Below-market leases

  $ 8,789,537     3,251,040     5,538,497  
               

        The weighted average amortization period and projected amortization for intangible lease assets and liabilities for the next five years are as follows:

 
  Weighted
average
life
(years)
  2010   2011   2012   2013   2014  

In-place leases

    4   $ 3,699,676     2,500,813     1,850,348     1,205,370     882,392  
                             

Above-market leases

    4     464,290     402,311     397,316     396,094     229,191  

Below-market leases

    2     (1,282,989 )   (411,796 )   (374,534 )   (197,640 )   (140,908 )

Tenant improvement reimbursements

    5     (15,855 )   (15,855 )   (15,855 )   (15,855 )   (11,646 )
                             

        $ (834,554 )   (25,340 )   6,927     182,599     76,637  
                             

(6) Deferred Costs

        Deferred costs consisted of the following at December 31, 2009 and 2008:

 
  2009  
 
  Gross
carrying
amount
  Accumulated
amortization
  Net
carrying
amount
 

Lease acquisition costs

  $ 6,320,019     1,108,544     5,211,475  

Deferred financing costs

    2,991,785     1,809,284     1,182,501  
               

  $ 9,311,804     2,917,828     6,393,976  
               

 

 
  2008  
 
  Gross
carrying
amount
  Accumulated
amortization
  Net
carrying
amount
 

Lease acquisition costs

  $ 3,104,782     323,294     2,781,488  

Deferred financing costs

    2,991,785     1,289,185     1,702,600  
               

  $ 6,096,567     1,612,479     4,484,088  
               

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VFG Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007

(7) Mortgage Notes Payable

        Mortgage notes payable consisted of the following at December 31, 2009 and 2008:

 
  2009   2008  

Mortgage note payable, interest only at LIBOR plus 1.75% (1.983% at December 31, 2009) payable monthly, principal due July 2009, an interest rate protection agreement had the effect of capping LIBOR at 6.0% until July 2009, secured by 245 Riverside, Overlook I and Overlook II

  $ 34,210,000     34,210,000  

Floating rate mortgage notes (Floating Rate Notes A and B), interest only at LIBOR plus 1.85% (2.083% at December 31, 2009) payable monthly, principal due July 2010, Company has options to renew under specified conditions for up to two additional years, interest rate protection agreements have the effect of capping LIBOR at 6.0%, secured by various properties

   
81,470,000
   
81,470,000
 

Mortgage note payable, interest at fixed rate of 5.52%, principal and interest of approximately $174,000 payable monthly, remaining balance due January 2013, secured by Parkwood Point

   
27,340,423
   
27,897,138
 

Fixed rate mortgage notes (Fixed Rate Notes), interest only at fixed rate of 6.08%, payable monthly until July 2012, then monthly principal and interest payments of approximately $713,000 begin, remaining balance due July 2017, prepayment subject to prepayment fees, secured by various properties

   
117,950,232
   
117,950,232
 
           

  $ 260,970,655     261,527,370  
           

        Future maturities of mortgage notes payable at December 31, 2009 are as follows:

2010 (see note 14)

  $ 116,268,236  

2011

    621,540  

2012

    1,240,793  

2013

    26,937,378  

2014

    1,554,963  

Thereafter

    114,347,745  
       

  $ 260,970,655  
       

        At December 31, 2009, the mortgage note payable with an outstanding balance of $34,210,000 that was due July 2009 was in default and interest only was being paid monthly at LIBOR plus 1.75%. When an event of default occurs, the loan agreement requires interest to be accrued at the default rate, which is the lesser of (i) the maximum rate permitted by applicable law, or (ii) 5% above the "interest rate" (LIBOR plus 1.75%), compounded monthly. Additional interest under the default rate of $831,493 has been accrued since the date of default and is included in accrued interest payable. The mortgage note is collateralized by three underlying properties (245 Riverside, Overlook I and Overlook II) whose aggregate asset carrying value at December 31, 2009 totaled approximately $27,000,000. The

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Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from
May 9, 2007 (Inception) through December 31, 2007


mortgage note is non-recourse to VFG Holdings LLC and there are no cross-collateral or cross-default arrangements between the mortgage note and other properties or mortgage notes held by the Company.

        On February 23, 2010, the Company executed a forbearance agreement with the lender. Under the terms of the agreement, the lender agreed to forbear, subject to certain conditions enumerated in the agreement, from commencement or further active pursuit of default-related remedies available to lender for collection of the note and enforcement of the loan documents arising from the continuing event of default. All accrued and unpaid interest, excluding additional interest due under the default rate as described above, was required to be paid by the Company prior to execution of the agreement. The Company executed and delivered warranty deeds conveying the properties to the lender and assignments of leases to the lender, to be held by lender until a Forbearance Termination Event, as defined, has occurred. At any time after the occurrence of a Forbearance Termination Event, the lender may, at its discretion, take possession and ownership of the properties. Until such time as Ownership Transfer Conditions, as defined, are satisfied, the warranty deeds and assignments will not be effective. The Company is required to diligently pursue the sale of the properties to third parties, under the direction of the lender. Any sales proceeds remaining after the payment in full of the entire outstanding debt, including all unpaid accrued interest, is paid to the Company. If the net proceeds from sales are not sufficient to satisfy the entire obligation to the lender and the lender has accepted such sales, the Company is released and discharged from any deficiency claim related to the amount of the debt not satisfied. Interest at LIBOR plus 1.75% is payable monthly, but the additional interest at the default rate will accrue and be payable when the entire debt is due. All unpaid amounts are due on or before May 10, 2010 (forbearance termination date); however, such due date may be extended at the lender's discretion (see note 14).

        Floating Rate Notes A and B (the Floating Rate Notes), due in July 2010, have outstanding balances of $42,800,000 and $38,670,000, respectively, at December 31, 2009 and 2008. Floating Rate Notes A and B provide the Company with the option of two additional one-year extensions provided certain criteria are met and the Company makes any required deposits to a debt service escrow account. Floating Rate Note A is collateralized by two properties (5660 New Northside Drive and 280 Interstate North) whose aggregate asset carrying value at December 31, 2009 totaled approximately $51,000,000. Floating Rate Note B is collateralized by three properties (Deerfield Point I, Deerfield Point II, and Windward Pointe 200) whose aggregate asset carrying value at December 31, 2009 totaled approximately $39,000,000.

        In July 2009, the Company exercised the initial one-year extension for both the Floating Rate Notes and paid a required debt service escrow deposit of $1,600,000. The Company's management intends to exercise a second one-year extension within the applicable time period window which would result in the maturity dates for the Floating Rate Notes being extended to July 2011. The Company's estimate for the additional debt service escrow deposit that will be required under the second extension is in the range of $0 to $930,000 (see note 14).

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Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from

May 9, 2007 (Inception) through December 31, 2007

        Floating Rate Notes A and B are non-recourse to VFG Holdings LLC. However, there are cross-collateral and cross-default arrangements between the Floating Rate Notes and the Fixed Rate Notes. Floating Rate Note A is currently cross-collateralized by one underlying Fixed Rate Note property (Southhall Center). Floating Rate Note B is cross-collateralized by three underlying Fixed Rate Note properties (Millennia Park One, 100 Windward Plaza, and 300 Windward Plaza). The Company could have elected to be released, during the initial term of the Floating Rate Notes, from the cross-collateral terms of the Floating Rate Notes by giving 30 days prior written notice to the lender and making a deposit to the debt service escrow account ($442,000 and $926,000 for Floating Rate Notes A and B, respectively). The Company did not exercise the initial release option. Provided there has not been an event of default under the terms of the Floating Rate Notes, the Company may elect to be released from the current cross-collateral terms, in their entirety, during the remaining extension periods by making a deposit to the debt service escrow account of approximately $221,000 and $463,000 for Floating Rate Notes A and B, respectively. In 2009, the Company partially exercised the cross-collateral release options relating to Southwood One and Beckrich One and Two, depositing approximately $43,430 and $63,750 into debt service escrow accounts for Floating Rate Notes A and B, respectively.

        If the Company is unable to exercise the option to extend the Floating Rate Notes through July 2011, additional capital contributions will be required of the Company's members. If the Company's members are unable or unwilling to provide the additional capital contributions, the underlying properties of Floating Rate Notes A and B and the unreleased properties underlying the Fixed Rate Notes may be foreclosed upon, which would significantly reduce the number of properties owned by the Company and materially impact its financial position and cash flows.

        On April 16, 2010, the Company executed the Amended and Restated Promissory Note Agreements with the lender for the mortgage note secured by Parkwood Point with an outstanding balance of $27,340,423 at December 31, 2009. At closing the members contributed an additional $4,000,000 in capital to the Company and transferred a) approximately $2,300,000 of existing lender held reserves, b) approximately $1,400,000 received from a tenant's early termination fee, and c) $22,500 in prepaid amounts to establish an approximate $7,300,000 in operating and capital expenditures reserve balances. The remaining funds were utilized to pay approximately $258,000 in closing costs and $109,000 in interest due for the month of April 2010. Under the terms of the agreements, the lender extended the maturity date from January 2013 to July 1, 2015. The agreements also split the remaining principal into a $19,000,000 (Note A) and a $5,000,000 (Note B) promissory note. Note A incurs interest at 5.50% payable monthly through May 1, 2011, interest at 6.75% payable monthly through May 1, 2012 and interest at 8.0% payable monthly through the maturity date. Note B does not accrue or incur interest. The principal balance on Note A and Note B is due in full on July 1, 2015. The notes continue to be collateralized by the Parkwood Point property whose asset carrying value at December 31, 2009 totaled approximately $27,000,000.

(a) Guarantees

        Certain individuals who have indirect ownership interests in Owner have also provided guarantees under each mortgage notes payable in the event of certain circumstances.

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Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from

May 9, 2007 (Inception) through December 31, 2007

(b) Covenants

        All of the Company's mortgage notes contain covenants that, among other things, restrict activities regarding cash reserve accounts, borrowings, liens, leasing, sale of property, and improvements.

(c) Derivative Instruments

        During 2008 and 2007, the Company was party to two interest rate cap agreements that effectively limited LIBOR to 6.00% on Floating Rate Notes A and B. Those agreements were renewed in July 2009 at a cost of $192,000. The renewed caps are effective through July 2011. The interest rate cap agreement that effectively limited LIBOR to 6% on the Company's $34,210,000 variable rate mortgage note payable expired in July 2009.

(8) Fair Value Measurements and Disclosures

(a) Derivative Financial Instruments

        The following table presents assets and liabilities that are measured at fair value on a recurring basis at December 31, 2009:

 
  Quoted prices
in active
markets for
identical assets
(Level 1)
  Significant
other
observable
inputs
(Level 2)
  Significant
unobservable
inputs
(Level 3)
  Gains
(Losses)
 

Derivative instruments—interest rate caps

  $     37,922         (154,078 )

        The fair value of the interest rate cap agreements is based on discounting the expected future cash flows using observable market based inputs, including interest rate curves and implied volatilities. The value was determined after considering the potential impact of collateralization and netting agreements, adjusted to reflect nonperformance risk of both the counterparty and the Company. No significant assets or liabilities were measured at fair value at December 31, 2008 and 2007.

(b) Impairment of Long-Lived Assets

        Long-lived assets held and used are comprised primarily of real estate. During the year ended December 31, 2009, the Company established provisions for impairment for real estate, held for investment, of $11,077,323. No impairment was recorded during 2008 or the period from May 9, 2007 (Inception) through December 31, 2007.

        The principal triggering event that led to the impairment provision during 2009 related to management's expectation that the long-lived assets will be sold significantly before the end of their previously estimated holding period. See note 1(c) for a discussion of the inputs used in determining the fair value of long-lived assets. The Company has determined that the inputs used to value its long-lived assets fall within Level 2 of the fair value hierarchy.

        The Company's assets measured at fair value on a nonrecurring basis are those assets for which the Company has recorded a provision for impairment during 2009. The assets measured at fair value on a nonrecurring basis are long-lived assets held and used and the Company determined the fair value of those assets was $24,210,413 at December 31, 2009.

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Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from

May 9, 2007 (Inception) through December 31, 2007

(c) Notes Payable

        For certain classes of the Company's financial instruments the carrying amounts approximate fair value due to their short-term nature. These instruments include cash and cash equivalents, operating escrows, capital expenditures reserves, receivables, accrued interest payable, and accounts payable and other liabilities.

        For other classes of the Company's financial instruments, the following table presents the carrying amounts and estimated fair values of the Company's financial instruments at December 31, 2009 and 2008.

 
  2009   2008  
 
  Carrying
amount
  Fair
value
  Carrying
amount
  Fair
value
 

Mortgage notes payable

  $ 260,970,655     229,845,000     261,527,370     247,583,000  

        The fair value of the mortgage notes payable is determined by discounting the future cash flows of each instrument at the Company's estimated borrowing rate that reflects, among other things, market interest rates and the Company's credit standing.

(9) Members' Equity

(a) Contributions

        During 2007, the Institutional Investor and Owner made initial capital contributions of $72,809,440 (80%) and $18,202,360 (20%), respectively, and additional capital contributions of $3,750,000 and $3,750,000, respectively. During 2009 the Institutional Investor and Owner made additional capital contributions of $1,300,000 and $1,300,000, respectively. The operating agreement provides for the members to provide additional capital contributions as needed.

(b) Distributions

        The operating agreement provides for the following distributions:

    Net Cash Flow

    Net cash flow, as defined, shall be distributed to the members in the following order of priority:

    First, to the members in proportion to and in payment of (i) their Default Capital Contribution Preferred Return, as defined (none for 2009, 2008, and 2007), and then (ii) their Default Capital Contribution, as defined (none for 2009, 2008, and 2007);

    Next, to the members in proportion to and to the extent of their unreturned balance in the Additional Capital Contribution Preferred Return, defined as, for each member, an amount calculated like interest that accrues on the average daily balances of such member's Additional Capital Contribution and Additional Capital Contribution Preferred Return at the rate of ten percent (10%) per annum (none for 2009 and 2008, and Owner—$61,806 and the Institutional Investor—$61,806 for 2007; at December 31, 2009, the remaining unpaid Additional Capital Contribution Preferred Return was Owner—$100,495 and the Institutional Investor—$100,495);

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Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from

May 9, 2007 (Inception) through December 31, 2007

      Next, to the members in proportion to and to the extent of their unreturned balance in the Additional Capital Contribution, as defined (none for 2009 and 2008, and Owner—$338,219 and the Institutional Investor—$338,219 for 2007; at December 31, 2009, the remaining unreturned Additional Capital Contribution was Owner—$1,300,000 and the Institutional Investor—$1,300,000);

      Next, to the members in proportion to and to the extent of their unreturned balance in the Project Capital Contribution Preferred Return, defined as, for each member, an amount calculated like interest that accrues on the average daily balance of such member's Project Capital Contribution and Project Capital Contribution Preferred Return at the rate of ten percent (10%) per annum (none for 2009, Owner—$156,400 and the Institutional Investor—$625,600 for 2008 and none for 2007; the unpaid Project Capital Contribution Preferred Return was Owner—$4,126,069 and $2,135,022 and the Institutional Investor—$16,504,277 and $8,540,087 at December 31, 2009 and 2008, respectively);

      Next, to the members in proportion to and to the extent of the unreturned balance in the Project Capital Contribution, as defined (none for 2009 and 2008; the unreturned balance in Project Capital Contribution was Owner—$17,099,795 and the Institutional Investor—$68,399,182 at December 31, 2009 and 2008, respectively); and

      Finally, to the members in accordance with their Residual Sharing Ratios (50% to each member), as defined (none for 2009, 2008 and 2007).

    Capital Proceeds

    Capital proceeds, as defined, shall be distributed to the members in the following order of priority:

    First, to the members in proportion to and in payment of (i) their Default Capital Contribution Preferred Return (none for 2009 and 2008) and then (ii) their Default Capital Contribution (none for 2009, 2008, and 2007);

    Next, to the members in proportion to and to the extent of their unreturned balance in the Additional Capital Contribution Preferred Return (none for 2009, Owner—$71,426 and the Institutional Investor—$71,426 for 2008 and none for 2007);

    Next, to the members in proportion to and to the extent of their unreturned balance in the Additional Capital Contribution (none for 2009, Owner—$3,411,781 and the Institutional Investor—$3,411,781 for 2008 and none for 2007);

    Next, to the members in proportion to and to the extent of their unreturned balance in the Project Capital Contribution Preferred Return for Project and other projects that have been sold (none for 2009, Owner—$461,416 and the Institutional Investor—$1,845,664 for 2008 and none for 2007);

    Next, to the members in proportion to and to the extent of their unreturned balance in the Project Capital Contribution for Project and other projects that have been sold (none for 2009, Owner—$1,102,489 and the Institutional Investor—$4,409,957 for 2008 and none for 2007);

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Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from

May 9, 2007 (Inception) through December 31, 2007

      Then, other than upon a liquidation and provided that the Portfolio Test, as defined, has been achieved, each Project, as defined, shall be treated separately and the Capital Proceeds allocable to such Project shall be distributed individually for each such Project to the members in accordance with their Residual Sharing Ratios, as defined (none for 2009, 2008, and 2007); or

      Upon a liquidation or to the extent that the Portfolio Test has not been achieved, then Capital Proceeds shall be aggregated and distributed:

      (i)
      Next, to the members in proportion to and to the extent of their Project Capital Contribution Preferred Return and Project Capital Contribution aggregated for all Projects (none for 2009, 2008, and 2007); and

      (ii)
      Finally, to the members in accordance with their Residual Sharing Ratios (none for 2009, 2008, and 2007).

(c) Allocation of Profits and Losses

        Profits and losses are allocated each year in a manner such that the members' equity balances at year end approximate the distributions that would be available to each member in the event of a hypothetical liquidation of the Company's net assets at book value to the members in accordance with the provisions of the operating agreement.

(10) Leases

        The Company leases office properties under non-cancelable operating lease agreements that expire at various dates through February 2021. The lease agreements typically provide for a specified monthly payment and some contain options to renew for additional periods. Certain leases provide for operating expense reimbursement of real estate taxes, common area maintenance charges, and building operating expenses.

        Future minimum rents (excluding operating expense reimbursements) as of December 31, 2009, by year and in the aggregate, under operating leases are as follows:

Year Ending December 31:

       

2010

  $ 30,937,399  

2011

    29,205,738  

2012

    25,134,558  

2013

    20,516,967  

2014

    13,300,515  

Thereafter

    12,805,328  
       

  $ 131,900,505  
       

(11) Income Taxes

        The Company has analyzed its various U.S. federal and state income tax filing positions and believes that no accruals for tax liabilities are required at December 31, 2009 and 2008. Therefore, no reserves for uncertain income tax positions have been recorded. During 2009 and 2008, there were no increases or decreases in unrecognized tax benefits for the current or prior years and no significant

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Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from

May 9, 2007 (Inception) through December 31, 2007


increases or decreases in unrecognized tax benefits are expected to occur within the next 12 months. The periods that remain open to examination under federal statute are 2007 through 2009.

(12) Related Party Transactions

        Eola Capital LLC (Eola), a related party through common ownership with Owner, provides managerial and other services to the Company in accordance with management agreements, which expire in 2012. These services include the promotion, operation, repair, and maintenance of the Company's premises. As compensation for these services, Eola receives reimbursements for certain expenditures made on behalf of the Company, a management fee of 3% of monthly gross receipts plus an additional 1% of monthly gross receipts when property revenue exceeds operating expenses, and a fee for construction supervision of tenant and building improvements, based on the cost of the improvements, as follows: 10% of the first $75,000, 7% of the amount between $75,000 and $100,000, and 5% of the amount over $100,000. The Company has also appointed Eola as leasing agent under leasing agreements, which expire in 2012. Under the leasing agreements, Eola receives commissions, based on gross rents payable, as follows: 4% on new leases and expansions, 2% on lease renewals and extensions, and 6% if a co-broker is being paid by Eola. Commissions are payable 50% on execution of the lease and 50% on occupancy by the tenant.

        The following summarizes approximate amounts incurred and paid to Eola for the years ended December 31, 2009 and 2008, and for the period from May 9, 2007 (Inception) through December 31, 2007, and approximate amounts payable to Eola at December 31, 2009 and 2008:

 
  2009  
 
  Incurred   Paid   Payable  

Expense reimbursements

  $ 2,002,000     1,996,000     13,000  

Management fees

    1,310,000     1,350,000     98,000  

Lease commissions

    1,825,000     1,809,000     16,000  

Fees for supervision of tenant and building improvements

    362,000     368,000      

 

 
  2008  
 
  Incurred   Paid   Payable  

Expense reimbursements

  $ 1,989,000     2,044,000     7,000  

Management fees

    1,357,000     1,362,000     138,000  

Lease commissions

    1,857,000     1,857,000      

Fees for supervision of tenant and building improvements

    329,000     351,000     6,000  

 

 
  2007  
 
  Incurred   Paid   Payable  

Expense reimbursements

  $ 1,405,000     1,343,000     62,000  

Management fees

    777,000     634,000     143,000  

Lease commissions

    734,000     734,000      

Fees for supervision of tenant and building improvements

    58,000     30,000     28,000  

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Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from

May 9, 2007 (Inception) through December 31, 2007

        Expense reimbursements and management fees are included in real estate operating expenses in the consolidated statements of operations. Lease commissions are included in deferred costs in the consolidated balance sheets. Fees for supervision of tenant and building improvements are included in tenant improvements and buildings and improvements, respectively, in the consolidated balance sheets. Amounts payable to Eola at December 31, 2009 and 2008 are included in accounts payable and other liabilities.

        The Company also provides office space for Eola's building management and other operations at no cost. This office space had an annual rental value of approximately $58,000, $74,000, and $100,000 in 2009, 2008, and 2007, respectively. In 2007, the Company paid an acquisition fee and expense reimbursements to Eola of approximately $1,887,500 and $34,000, respectively, and expense reimbursements of approximately $78,000 to the Institutional Investor in connection with the acquisitions (note 2). These amounts were a direct cost of the assets acquired and liabilities assumed and were capitalized as a component of the purchase price. Additionally, the Company paid approximately $3,925,000, $6,825,000 and $3,000,000 of deposit reimbursements to Eola, the Institutional Investor, and LB-VFG LLC (an affiliate of Owner), respectively.

        An affiliate of the Institutional Investor leases space from the Company. The lease expires in February 2014. Rental income recorded by the Company for this lease for the years ended December 31, 2009 and 2008 and the period from May 9, 2007 (Inception) through December 31, 2007, was $2,891,451, $2,828,561, and $1,473,472 respectively.

(13) Concentrations of Business and Credit Risk

        The Company leases office space to various commercial businesses in various cities in Florida, Georgia, and Virginia. The terms of the leases generally require basic rent payments at the beginning of each month. Based on the financial condition of a tenant, the tenant may be required to make a security deposit at the inception of the lease. Credit risk associated with the lease agreements is limited to the amounts of rents receivable from tenants, less any applicable security deposits. During 2009 and 2008, approximately 10% of the Company's rental revenue was attributable to one tenant. During 2007, no tenants individually represented 10% or more of the Company's rental revenue.

        The Company's cash and cash equivalents and certain amounts of restricted cash are maintained in national financial institutions. The Company has exposure to credit risk to the extent that its cash and cash equivalents and restricted cash exceed amounts covered by federal deposit insurance. At December 31, 2009 and 2008, substantially all cash and cash equivalents and restricted cash were uninsured. In management's opinion, the capitalization and operating history of the financial institutions are such that the likelihood of material loss is remote.

(14) Subsequent Events

        On July 9, 2010, the Company completed its exercise of the second one-year extension of the Floating Rate Notes, which resulted in the maturity date being extended to July 9, 2011. No additional deposit to the debt service escrow account was required in securing the extension.

        On July 22, 2010, the Company exercised its option to release Millennia Park One from the cross-collateral arrangement under Floating Rate Note B by making a deposit of $155,607 to the debt service escrow account.

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VFG Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

Years Ended December 31, 2009 and 2008 and the Period from

May 9, 2007 (Inception) through December 31, 2007

        On August 27, 2010, certain individuals affiliated with Eola paid a deposit of $200,000 to the lender to extend the existing forbearance on the $34,210,000 mortgage note payable to October 1, 2010. These individuals then paid an additional extension deposit of $300,000 on September 30, 2010 which further extends the termination date to December 31, 2010. The lender has agreed to cancel the mortgage note and permit a transfer of the three underlying properties by the Company to Eola Property Trust in exchange for a payment of $27,500,000, which transaction is expected to close concurrently with the closing of the initial public offering of the common shares of beneficial interest of Eola Property Trust.

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Independent Auditors' Report

Trustee
Eola Property Trust:

        We have audited the accompanying combined statements of revenue and certain expenses of Eola Portfolio (the Properties) for the years ended December 31, 2009, 2008, and 2007. These combined financial statements are the responsibility of the Properties' management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Properties' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        The accompanying combined statements of revenue and certain expenses were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the registration statement on Form S-11 of Eola Property Trust, as described in note 2 to the combined financial statements. They are not intended to be complete presentations of the Properties' revenue and expenses.

        In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined revenue and certain expenses of Eola Portfolio, as described in note 2 to the combined financial statements, for the years ended December 31, 2009, 2008, and 2007, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

September 30, 2010
Jacksonville, Florida
Certified Public Accountants

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Eola Portfolio

 
  Six Months
Ended
June 30,
2010
  Year Ended December 31,  
Combined statements of Revenue and Certain Expenses
(in thousands)
  2009   2008   2007  
 
  (unaudited)
   
   
   
 

Revenue:

                         
 

Rental and related revenue

  $ 16,990     33,476     32,675     24,551  
 

Tenant recoveries

    1,373     2,511     2,684     2,104  
                   

Total Revenue:

    18,363     35,987     35,359     26,655  

Certain expenses:

                         
 

Cost of rental operations

    8,291     16,223     16,018     11,490  
 

Interest expense

    5,101     10,808     11,863     8,989  
 

Real estate taxes

    1,849     3,039     3,164     1,953  
                   
   

Total certain expenses:

    15,241     30,070     31,045     22,432  
                   

Revenue in excess of certain expenses

  $ 3,122     5,917     4,314     4,223  
                   

See accompanying notes to combined statements of revenue and certain expenses.

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Eola Portfolio

Notes to Combined Statements of Revenue and Certain Expenses

(1) Organization and Description of Business

        The accompanying combined statements of revenue and certain expenses include the operations of Eola Portfolio (the "Properties") which are anticipated to be acquired by Eola Property Trust, L.P. (the "Partnership") from various affiliated parties (the "Sellers") through the combination of cash payments, the issuance of common shares of Eola Property Trust and the assumption of existing indebtedness.

        The Partnership entered into agreements with the Sellers to purchase the Properties in connection with the proposed initial public offering of Eola Property Trust. The purchase of the Properties is expected to occur upon the consummation of the offering.

        The Properties are as follows:

Property (date acquired)
  Location
245 Riverside (June 2007)   Jacksonville, FL
Independent Square (May 2005)   Jacksonville, FL
International Plaza Four (October 2009)   Tampa, FL
Cypress Center I and II, Cypress Center III and Cypress West (January 2006)   Tampa, FL
Overlook I and Overlook II (June 2007)   Richmond, VA
Maitland Forum (November 2007)   Orlando, FL
Maitland Park Center (November 2007)   Orlando, FL

        The accompanying combined statements of revenue and certain expenses include revenue and certain expenses beginning on the acquisition of the Properties.

(2) Summary of Significant Accounting Policies

(a) Basis of Presentation

        The accompanying combined statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual combined results of operations of the Properties for the six month period ended June 30, 2010 and for the years ended December 31, 2009, 2008, and 2007, due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Properties:

    depreciation and amortization; and

    other costs not directly related to the proposed future operations of the Properties.

        The Properties have been combined on the basis of being under common management by Eola Capital LLC for all periods presented. There are no intercompany accounts to be eliminated.

(b) Revenue Recognition

        Rental revenue includes rents that each tenant pays in accordance with the terms of its respective lease reported on a straight-line basis over the non-cancelable term of the respective leases. Rental revenue is reported net of any sales taxes collected from tenants. Tenant recoveries includes operating expense reimbursements from tenants for real estate taxes, common area maintenance charges, and building operating expenses.

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Eola Portfolio

Notes to Combined Statements of Revenue and Certain Expenses

(c) Certain Expenses

        Certain expenses include repairs, maintenance, utilities, insurance, management fees, and other costs. Repairs and maintenance expense are charged to operations as incurred.

(d) Derivative Instruments

        Certain of the properties utilize interest rate swaps or collars to manage the impact of interest rate changes under variable rate mortgage notes payable and report these derivative instruments at fair value. The derivative instruments were not entered into for trading or speculative purposes and were not designated as hedges at inception. The change in fair value, together with periodic cash settlements, of the derivative instruments are reflected as interest expense in the combined statements of revenue and certain expenses.

(e) Accounting Estimates

        The preparation of the combined statements of revenue and certain expenses requires management to use estimates and assumptions that affect the reported amounts of revenue and certain expenses during the reporting period. It is at least reasonably possible that these estimates could change in the near term.

(f) Unaudited Interim Financial Information

        The combined statement of revenue and certain expenses for the six months ended June 30, 2010 is unaudited. Such financial statement reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim period presented. All such adjustments are of a normal recurring nature.

(3) Rental Revenue

        The Properties lease office space under non-cancelable operating lease agreements that expire at various dates. The lease agreements typically provide for a specified monthly payment and some contain options to renew for additional periods. Certain leases provide for operating expense reimbursement of real estate taxes, common area maintenance charges, and building operating expenses.

        At December 31, 2009, future minimum rents (excluding operating expense reimbursements) under non-cancelable operating leases are as follows (in thousands):

2010

  $ 28,545  

2011

    25,803  

2012

    19,324  

2013

    15,702  

2014

    13,566  

Thereafter

    37,403  
       

Total

  $ 140,343  
       

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Eola Portfolio

Notes to Combined Statements of Revenue and Certain Expenses

(4) Debt

        At June 30, 2010 (unaudited) and December 31, 2009, the debt obligations of Eola Portfolio were as follows (dollars in thousands):

 
  Principal
Outstanding
at 6/30/10
  Principal
Outstanding
at 12/31/09
  Stated
Interest Rate
  Interest
Rate at
6/30/10
  Interest
Rate at
12/31/09
  Maturity
Date
  Amortization
 
  (unaudited)
   
   
  (unaudited)
   
   
   

Third party variable rate debt obligations

                                     
 

245 Riverside, Overlook I and Overlook II(1)

  $ 34,210     34,210     LIBOR + 1.75 %   2.10 %   1.98 % July 2009   Interest only
 

Maitland Forum(2)

    26,694     27,159     LIBOR + 1.80 %   2.15 %   2.03 % January 2012   Interest only
 

Maitland Park Center(2)

    10,533     10,670     LIBOR + 1.80 %   2.15 %   2.03 % January 2012   Interest only
 

International Plaza Four(3)

    14,252     13,039     LIBOR + 4.00 %   4.35 %   4.23 % October 2012   Interest only

Third party fixed rate debt obligations:

                                     
 

Cypress Center, I and II, Cypress Center III and Cypress West(4)

        32,400     5.75 %   n/a     5.75 % January 2011   Interest only
 

Independent Square

    85,000     85,000     5.93 %   5.93 %   5.93 % April 2016   Interest only
 

CBD Parking Garage (Independent Square)

                                     
   

Note A

    1,698     1,721     7.63 %   7.63 %   7.63 % September 2013   Principal and interest
   

Note B

    848     865     6.00 %   6.00 %   6.00 % September 2013   Principal and interest
   

Note C

    429     434     7.00 %   7.00 %   7.00 % September 2013   Principal and interest

Related party fixed rate debt obligations:

                                     
 

Cypress Center I and II, Cypress Center III and Cypress West—Utah

    1,885     1,693     7.92 %   7.92 %   7.92 % October 2011   Interest only

        The related party debt is payable to Utah State Retirement Investment Fund, one of the investors in the selling entities for the Properties.

(1)
An interest rate protection agreement had the effect of capping LIBOR at 6.0% until July 2009. In July 2009, this mortgage note payable went into default and interest only was paid monthly at LIBOR plus 1.75% (with additional default interest accruing at 5.0% per annum). On February 23, 2010, the company executed a forbearance agreement with the lender that was to terminate on May 10, 2010. On August 27, 2010, certain individuals affiliated with Eola paid a deposit of $200,000 to the lender to extend the existing forbearance on the $34,210,000 mortgage note payable to October 1, 2010. Further these individuals then paid an additional extension deposit of $300,000 on September 30, 2010 which extends the termination date to December 31, 2010.

(2)
Effective January 31, 2008, the Company entered into an interest rate collar agreement that effectively limits the LIBOR rate on the mortgage note payable to 4.00% and sets a corresponding LIBOR floor of 2.20%.

In April 2010, a modification of the mortgage note payable was obtained from the lender and the maturity date was extended to January 31, 2012. The modification required a principal reduction payment (Maitland Forum of $359 and Maitland Park Center of $141) at closing of the loan modification, as well as an extension fee (approximately $138 for Maitland Forum and $54 for Maitland Park Center), 50% paid at closing and the remainder will be paid in November 2010. Under the terms of the modification, interest at LIBOR plus 1.80% until November 2010 and at LIBOR plus 3.5% thereafter, is due monthly.

(3)
Initial funding of $12,743 had a swap agreement that effectively limits the LIBOR rate on the mortgage note payable to 6.1555% for 36 months. Future funding will be LIBOR + 4.00%.

(4)
Extinguished for a cash payment to lender of $22,500 in March 2010. A gain on the extinguishment has been excluded from the combined statement of revenue and certain expenses for the six months ended June 30, 2010 (unaudited).

(5) Derivative Instruments

        The following table presents information relating to derivative instruments (in thousands):

 
   
  Year Ended December 31,  
 
  Six Months
Ended
June 30, 2010
 
 
  2009   2008   2007  
 
  (unaudited)
   
   
   
 

Settlement gains (losses)

  $ 262     (751 )   20     (108 )

Unrealized gains (losses)

    79     111     (913 )   14  
                   

Total gains (losses)

  $ 341     (640 )   (893 )   (94 )
                   

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Eola Portfolio

Notes to Combined Statements of Revenue and Certain Expenses

(6) Other Related Party Transactions

        Eola Capital LLC ("Eola"), a related party through common ownership with the Properties, provides managerial and other services to the Properties in accordance with management agreements, which expire at various dates. These services include the promotion, operation, repair, and maintenance of the Properties' premises. Eola receives reimbursements for certain expenditures made on behalf of the Properties and a management fee based on monthly gross receipts. The following summarizes approximate amounts paid to Eola (in thousands):

 
   
  Year Ended December 31,  
 
  Six Months
Ended
June 30, 2010
 
 
  2009   2008   2007  
 
  (unaudited)
   
   
   
 

Management fees

  $ 711     1,299     1,370     928  

Expense reimbursements

    1,982     3,458     3,380     2,586  

(7) Concentration of Credit Risk

        The Properties had no tenants that represented 10% of the total combined revenue in 2009, 2008, 2007 and the unaudited six month period ended June 30, 2010.

(8) Commitments and Contingencies

        The Sellers are not subject to any material litigation nor to management's knowledge is any material litigation currently threatened against the Sellers other than routine litigation, claims, and administrative proceedings arising in the ordinary course of business. Management believes that such routine litigation, claims, and administrative proceedings will not have a material adverse impact on the Sellers' combined financial position or combined results of operations.

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Independent Auditors' Report

Trustee
Eola Property Trust:

        We have audited the accompanying combined statements of revenue and certain expenses of ACP Southeast Portfolio (the Properties) for the years ended December 31, 2009, 2008, and 2007. These combined financial statements are the responsibility of the Properties' management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Properties' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        The accompanying combined statements of revenue and certain expenses were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the registration statement on Form S-11 of Eola Property Trust, as described in note 2 to the combined financial statements. They are not intended to be complete presentations of the Properties' revenue and expenses.

        In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined revenue and certain expenses of ACP Southeast Portfolio, as described in note 2 to the combined financial statements, for the years ended December 31, 2009, 2008, and 2007, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

September 30, 2010
Jacksonville, Florida
Certified Public Accountants

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ACP Southeast Portfolio

 
  Six Months
Ended
June 30,
2010
  Year Ended December 31,  
Combined statements of Revenue and Certain Expenses
(in thousands)
  2009   2008   2007  
 
  (unaudited)
   
   
   
 

Revenue:

                         
 

Rental and related revenue

  $ 37,048     78,451     74,949     70,107  
 

Tenant recoveries

    2,358     7,698     7,729     8,849  
                   

Total Revenue:

  $ 39,406     86,149     82,678     78,956  

Certain expenses:

                         
 

Cost of rental operations

    16,531     34,981     35,802     32,808  
 

Interest expense

    15,368     30,380     30,474     28,593  
 

Real estate taxes

    4,162     7,933     7,636     10,402  
                   
   

Total certain expenses:

    36,061     73,294     73,912     71,803  
                   

Revenue in excess of certain expenses

  $ 3,345     12,855     8,766     7,153  
                   

See accompanying notes to combined statements of revenue and certain expenses.

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ACP Southeast Portfolio

Notes to Combined Statements of Revenue and Certain Expenses

(1)   Organization and Description of Business

        The accompanying combined statements of revenue and certain expenses include the operations of ACP Southeast Portfolio (the "Properties") which are anticipated to be acquired by Eola Property Trust, L.P. (the "Partnership") from various affiliated parties (the "Sellers") through the combination of cash payments, the issuance of Partnership units, the issuance of common shares of Eola Property Trust and the assumption of existing indebtedness.

        The Partnership entered into agreements with the Sellers to purchase the Properties in connection with the proposed initial public offering of Eola Property Trust. The purchase of the Properties is expected to occur upon the consummation of the offering.

        The Properties are as follows:

Property (date acquired)
  Location  
Peachtree Center (seven buildings, three garages) (November 2006)     Atlanta, GA  
The Cornerstone Building at Peachtree Center (March 2008)     Atlanta, GA  
Ten 10th Street (Millennium) (December 2006)     Atlanta, GA  
Two Ravinia Drive (December 2005)     Atlanta, GA  
Primera V (December 2006)     Orlando, FL  
Bank of America Center (November 2006)     Orlando, FL  
2400 Maitland Center, Interlachen Corporate Center and 500 Winderley Place
    (September 2007)
    Orlando, FL  
Westshore Corporate Center (April 2005)     Tampa, FL  

        The accompanying combined statements of revenue and certain expenses include revenue and certain expenses beginning on the acquisition date of the Properties.

(2)   Summary of Significant Accounting Policies

(a) Basis of Presentation

        The accompanying combined statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual combined results of operations of the Properties for the six month period ended June 30, 2010 and for the years ended December 31, 2009, 2008, and 2007, due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property:

    depreciation and amortization; and

    other costs not directly related to the proposed future operations of the Properties.

        The Properties have been combined on the basis of being under common management. There are no intercompany accounts to be eliminated.

(b) Revenue Recognition

        Rental revenue includes rents that each tenant pays in accordance with the terms of its respective lease reported on a straight-line basis over the non-cancelable term of the respective leases. Rental revenue is reported net of sales taxes collected from tenants. Tenant recoveries includes operating

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ACP Southeast Portfolio

Notes to Combined Statements of Revenue and Certain Expenses


expense reimbursements from tenants for real estate taxes, common area maintenance charges, and building operating expenses.

(c) Certain Expenses

        Certain expenses include repairs, maintenance, utilities, insurance, management fees, and other costs. Repairs and maintenance expense are charged to operations as incurred.

(d) Accounting Estimates

        The preparation of the combined statements of revenue and certain expenses requires management to use estimates and assumptions that affect the reported amounts of revenue and certain expenses during the reporting period. It is at least reasonably possible that these estimates could change in the near term.

(e) Unaudited Interim Financial Information

        The combined statement of revenue and certain expenses for the six months ended June 30, 2010 is unaudited. Such financial statement reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim period presented. All such adjustments are of a normal recurring nature.

(3)   Rental Revenue

        The Properties lease office space under non-cancelable operating lease agreements that expire at various dates. The lease agreements typically provide for a specified monthly payment and some contain options to renew for additional periods. Certain leases provide for operating expense reimbursement of real estate taxes, common area maintenance charges, and building operating expenses.

        In 2009, $7,559,000 was recorded in rental and related revenue per a lease termination agreement executed in April, 2009.

        At December 31, 2009, future minimum rents (excluding operating expense reimbursements) under non-cancelable operating leases are as follows (in thousands):

2010

  $ 64,579  

2011

    63,389  

2012

    55,552  

2013

    44,917  

2014

    35,975  

Thereafter

    140,518  
       

Total

  $ 404,930  
       

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ACP Southeast Portfolio

Notes to Combined Statements of Revenue and Certain Expenses

(4)   Debt

        At June 30, 2010 (unaudited) and December 31, 2009, the debt obligations of ACP Southeast Portfolio were as follows (dollars in thousands):

 
  Principal
Outstanding
at 6/30/10
  Principal
Outstanding
at 12/31/09
  Stated
Fixed
Interest Rate
  Maturity Date   Amortization
 
  (unaudited)
   
   
   
   

Third party fixed rate debt obligations:

                         
 

Peachtree Center

  $ 207,600     207,600     6.04 % July 2012   Interest only
 

The Cornerstone Building

    8,849     8,910     6.00 % April 2018   Principal and interest
 

Ten 10th Street (Millennium)

    80,950     80,977     6.38 % January 2016   Principal and interest
 

Ten 10th Street (Millennium)

    7,622     7,690     6.38 % January 2016   Principal and interest
   

Mezzanine Loan

                         
 

Primera V

    26,000     26,000     6.15 % October 2016   Interest only
 

Westshore Corporate Center

    14,987     15,000     5.79 % May 2015   Principal and interest

Related party fixed rate debt obligations:

                         
 

2400 Maitland Center, Interlachen Corporate Center and 500 Winderley Place

    28,815     27,770     6.87 % September 2012   Interest only
 

Bank of America Center

    74,500     74,500     5.88 % December 2011   Interest only
 

Two Ravinia Drive

    51,600     51,600     5.68 % December 2010   Interest only

        The related party debt is payable to Utah State Retirement Investment Fund, one of the investors in the selling entities for the Properties. Effective September 1, 2010, Peachtree's loan was modified, and the maturity date was extended to June 30, 2015. The borrower deposited $15,000 into the general TI/LC reserve.

(5)   Other Related Party Transactions

        Under management agreements with ACP Realty Services, LLC ("Realty"), which were assigned to Eola Capital Asset Mgt LLC, a wholly-owned subsidiary of Eola Capital LLC, effective September 16, 2009 (both are related parties through common ownership with the Properties, and collectively referred to as the Agent), the Agent provides managerial and other services to the Properties. The agreements expire at various dates. These services include the promotion, operation, repair, and maintenance of the Properties' premises. The Agent receives reimbursements for certain expenditures made on behalf of the Properties and management fees based on monthly gross receipts. The following summarizes approximate amounts paid to the Agent (in thousands):

 
   
  Year Ended December 31,  
 
  Six Months
Ended
June 30, 2010
 
 
  2009   2008   2007  
 
  (unaudited)
   
   
   
 

Management fees

  $ 1,026     2,156     2,187     2,070  

Expense reimbursements

    2,343     4,694     4,550     3,779  

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ACP Southeast Portfolio

Notes to Combined Statements of Revenue and Certain Expenses

(6) Concentration of Credit Risk

        The Properties had no tenants that represented 10% of the total combined revenue in 2009, 2008, 2007 and the unaudited six month period ended June 30, 2010.

(7) Commitments and Contingencies

        The Sellers are not subject to any material litigation nor to management's knowledge is any material litigation currently threatened against the Sellers other than routine litigation, claims, and administrative proceedings arising in the ordinary course of business. Management believes that such routine litigation, claims, and administrative proceedings will not have a material adverse impact on the Sellers' combined financial position or combined results of operations.

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Independent Auditors' Report

Trustee
Eola Property Trust:

        We have audited the accompanying combined statements of revenue and certain expenses of ACP Mid-Atlantic Portfolio (the Properties) for the years ended December 31, 2009, 2008, and 2007. These combined financial statements are the responsibility of the Properties' management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Properties' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        The accompanying combined statements of revenue and certain expenses were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the registration statement on Form S-11 of Eola Property Trust, as described in note 2 to the combined financial statements. They are not intended to be complete presentations of the Properties' revenue and expenses.

        In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined revenue and certain expenses of ACP Mid-Atlantic Portfolio, as described in note 2 to the combined financial statements, for the years ended December 31, 2009, 2008, and 2007, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

September 30, 2010
Los Angeles, California

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ACP Mid-Atlantic Portfolio

 
  Six Months
Ended
June 30,
2010
  Year Ended December 31,  
Combined Statements of Revenue and Certain Expenses
(in thousands)
  2009   2008   2007  
 
  (unaudited)
   
   
   
 

Revenue:

                         
 

Rental and related revenue

  $ 19,795     41,518     38,483     30,613  
 

Tenant recoveries

    1,153     3,039     3,292     2,375  
                   

Total Revenue:

  $ 20,948     44,557     41,775     32,988  

Certain expenses:

                         
 

Cost of rental operations

    9,137     15,386     15,458     12,076  
 

Interest expense

    9,129     18,155     17,362     14,128  
 

Real estate taxes

    2,416     4,795     4,782     3,814  
                   
   

Total certain expenses:

    20,682     38,336     37,602     30,018  
                   

Revenue in excess of certain expenses

  $ 266     6,221     4,173     2,970  
                   

See accompanying notes to combined statements of revenue and certain expenses.

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ACP Mid-Atlantic Portfolio

Notes to Combined Statements of Revenue and Certain Expenses

(1) Organization and Description of Business

        The accompanying combined statements of revenue and certain expenses include the operations of ACP Mid-Atlantic Portfolio (the "Properties") which are anticipated to be acquired by Eola Property Trust, L.P. (the "Partnership") from various affiliated parties (the "Sellers") through the issuance of common shares of Eola Property Trust and the assumption of existing indebtedness.

        The Partnership entered into agreements with the Sellers to purchase the Properties in connection with the proposed initial public offering of Eola Property Trust. The purchase of the Properties is expected to occur upon the consummation of the offering.

        The Properties are as follows:

Property (date acquired)
  Location

Two Liberty Place (February 2007)

  Philadelphia, PA

Irvington One, Irvington Two and Irvington Three (April 2006) and Irvington Four (July 2007)

  Washington, D.C.

        The accompanying combined statements of revenue and certain expenses include revenue and certain expenses beginning on the acquisition date of the Properties.

(2) Summary of Significant Accounting Policies

(a) Basis of Presentation

        The accompanying combined statements of revenue and certain expenses have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and, accordingly, are not representative of the actual combined results of operations of the Properties for the six months ended June 30, 2010 and for the years ended December 31, 2009, 2008, and 2007, due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Properties:

    depreciation and amortization; and

    other costs not directly related to the proposed future operations of the Properties.

        The Properties have been combined on the basis of being under common management. There are no intercompany accounts to be eliminated.

(b) Revenue Recognition

        Rental revenue includes rents that each tenant pays in accordance with the terms of its respective lease reported on a straight-line basis over the non-cancelable term of the respective lease. Rental revenue is reported net of any sales taxes collected from tenants. Tenant recoveries include operating expense reimbursements from tenants for real estate taxes, common area maintenance charges, and building operating expenses.

(c) Certain Expenses

        Certain expenses include repairs, maintenance, utilities, insurance, management fees, and other costs. Repairs and maintenance expense are charged to operations as incurred.

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ACP Mid-Atlantic Portfolio

Notes to Combined Statements of Revenue and Certain Expenses

(d) Accounting Estimates

        The preparation of the combined statements of revenue and certain expenses requires management to use estimates and assumptions that affect the reported amounts of revenue and certain expenses during the reporting period. It is at least reasonably possible that these estimates could change in the near term.

(e) Unaudited Interim Financial Information

        The combined statement of revenue and certain expenses for the six months ended June 30, 2010 is unaudited. Such financial statement reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim period presented. All such adjustments are of a normal recurring nature.

(3) Rental Revenue

        The Properties lease office space under non-cancelable operating lease agreements that expire at various dates. The lease agreements typically provide for a specified monthly payment and some contain options to renew for additional periods. Certain leases provide for operating expense reimbursement of real estate taxes, common area maintenance charges, and building operating expenses.

        At December 31, 2009, future minimum rents (excluding operating expense reimbursements) under non-cancelable operating leases are as follows (in thousands):

2010

  $ 36,958  

2011

    38,061  

2012

    38,379  

2013

    38,965  

2014

    38,664  

Thereafter

    114,546  
       

Total

  $ 305,573  
       

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ACP Mid-Atlantic Portfolio

Notes to Combined Statements of Revenue and Certain Expenses

(4) Debt

        At June 30, 2010 (unaudited) and December 31, 2009, the debt obligations of ACP Mid-Atlantic Portfolio were as follows (amounts in thousands):

 
  Principal
Outstanding
at June 30,
2010
  Outstanding
at December 31,
2009
  Fixed
Interest Rate
  Maturity Date   Amortization
 
  (unaudited)
   
   
   
   

Third party fixed rate debt obligations:

                         

Two Liberty Place

  $ 72,076     72,076     5.41 % March 2012   Interest only

Related party fixed rate debt obligations:

                         

Two Liberty Place Mezzanine

    52,600     52,600     5.94 % February 2012   Interest only

Irvington One, Irvington Two and Irvington Three

    133,704     133,704     5.98 % April 2016   Interest only

Irvington Four

    53,189     53,189     6.09 % July 2012   Interest only

        The related party debt is payable to Utah State Retirement Investment Fund, one of the investors in the selling entities for the Properties.

(5) Other Related Party Transactions

        A company, affiliated by common ownership with the Properties, provides managerial and other services to the Properties in accordance with management agreements, which expire at various dates. These services include the promotion, operation, repair, and maintenance of the Properties' premises. The affiliated company receives reimbursements for certain expenditures made on behalf of the Properties and a management fee based on monthly gross receipts. The following summarizes approximate amounts paid to the affiliated company (in thousands):

 
   
  Year Ended December 31,  
 
  Six Months
Ended
June 30, 2010
 
 
  2009   2008   2007  
 
  (unaudited)
   
   
   
 

Management fees

  $ 472     986     578     878  

Expense reimbursements

    570     1,088     1,035     710  

(6) Concentration of Credit Risk

        CIGNA Corp. accounts for more than 10% of the combined Properties' rental and related revenue. Rental and related revenue for this tenant totaled $5,848,000 (unaudited), $11,614,000, $11,370,000 and $9,442,000 for the six months ended June 30, 2010 (unaudited) and the years ended December 31, 2009, 2008 and 2007, respectively.

(7) Commitments and Contingencies

        The Sellers are not subject to any material litigation nor to management's knowledge is any material litigation currently threatened against the Sellers other than routine litigation, claims, and administrative proceedings arising in the ordinary course of business. Management believes that such routine litigation, claims, and administrative proceedings will not have a material adverse impact on the Sellers' combined financial position or combined results of operations.

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GRAPHIC

INDEPENDENT AUDITOR'S REPORT

To the Members of
1110 Vermont Renaissance Associates, LLC

        We have audited the accompanying statement of revenue and certain expenses for the year ended December 31, 2009. This statement is the responsibility of the Property's management. Our responsibility is to express an opinion on this statement based on our audit.

        We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

        The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with rules and regulations of the U.S. Securities and Exchange Commission, as described in Note 1 to the statement of revenue and certain expenses. The presentation is not intended to be a complete presentation of the Property's revenue and expenses.

        In our opinion, the statement of revenue and certain expenses referred to above presents fairly, in all material respects, the revenue and certain expenses, described in Note 1, of 1110 Vermont Renaissance Associates, LLC for the year ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

        The statements of revenue and certain expenses for the six months ended June 30, 2010 and 2009 are presented for purposes of additional analysis. We express no opinion on this statement, such information has not been subjected to the auditing procedures applied in the audit of the statement of revenue and certain expenses for the year ended December 31, 2009.

/s/ RAFFA, P.C.

Rockville, Maryland
October 5, 2010

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1110 VERMONT RENAISSANCE ASSOCIATES, LLC

Statements of Revenue and Certain Expenses

For the Six Months Ended June 30, 2010 and 2009 and Year Ended December 31, 2009

 
  Six Months
Ended June 30,
2010
(Unaudited)
  Six Months
Ended June 30,
2009
(Unaudited)
  Year Ended
December 31,
2009
 
 
  (Dollars in thousands)
 

REVENUE

                   
 

Rental and related revenue

  $ 5,654   $ 5,459   $ 10,997  
 

Straight-line rent adjustment

    359     279     559  
 

Tennant recoveries

    495     376     746  
 

Parking and other miscellaneous revenue

    442     320     641  
 

Interest income

             
               

    6,950     6,434     12,943  
               

CERTAIN OPERATING EXPENSES

                   
 

Cost of rental operations

    1,278     1,172     2,691  
 

Interest expense

    3,620     3,227     7,878  
 

Real estate taxes

    1,155     1,178     2,305  
               
   

Total Certain Operating Expenses

    6,053     5,577     12,874  
               

REVENUE IN EXCESS OF CERTAIN EXPENSES

  $ 897   $ 857   $ 69  
               

See accompanying notes to statements of revenue and certain expenses.

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1110 VERMONT RENAISSANCE ASSOCIATES, LLC

Notes to Statements of Revenue and Certain Expenses

For the Six Months Ended June 30, 2010 (Unaudited) and 2009 (Unaudited)
And the Year Ended December 31, 2009

1. Organization and Summary of Significant Accounting Policies

Basis of Accounting and Presentation

        The accompanying statements of revenue and certain expenses includes the revenue and certain expenses related to the operations of the property known as 1110 Vermont Renaissance Associates, LLC (the Property). The Property is located at 1110 Vermont Avenue, NW, Washington, D.C.

        For the period presented in the accompanying statement of revenue and certain expenses, the property was owned by 1110 Vermont Renaissance Associates, LLC.

        The accompanying statements of revenue and certain expenses has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the U.S. Securities and Exchange Commission. Accordingly, the accompanying statement of revenue and certain expenses is not representative of the actual results of operations of the Property for the year ended December 31, 2009 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the property:

    Depreciation and amortization

    U.S. federal and state income taxes

    Other costs not directly related to the proposed future operations of the Property

        Management is not aware of any material factors relating to the Property, other than those already described above, that would cause the financial information not to be necessarily indicative of future operating results.

Revenue Recognition

        Rental revenue includes rents that each tenant pays in accordance with the terms of its respective lease recognized on a straight-line basis over the non-cancelable term of the lease.

Use of Estimates

        The preparation of the statement of revenue and certain expenses in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Unaudited Interim Information

        The statements of revenue and certain expenses for the six months ended June 30, 2010 and 2009 are unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of the results of this interim period. All such adjustments are of a normal recurring nature.

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1110 VERMONT RENAISSANCE ASSOCIATES, LLC

Notes to Statements of Revenue and Certain Expenses

For the Six Months Ended June 30, 2010 (Unaudited) and 2009 (Unaudited)
And the Year Ended December 31, 2009

2. Rental Property Leases and Major Tenant

        The Property is the lessor of office and commercial retail space under various non-cancellable operating leases. The leases provide for minimum rentals plus escalations based upon increases in real estate taxes and operating expenses. The Property recognizes income from the pass-through of increases in real estate taxes and operating costs when the tenants are billed for such amounts. The following is a schedule of the future minimum lease payments to be received under the non-cancelable operating leases:

Year Ending December 31,
  Amount  

2010

  $ 11,342,357  

2011

    11,610,194  

2012

    10,563,439  

2013

    10,165,730  

2014

    10,409,161  

Thereafter

    40,052,378  
       
 

Total

  $ 94,143,259  
       

        Approximately 72,660 rentable square feet of commercial office space, representing 30% of the Company's total rentable square feet, is leased to one tenant. The lease expires on November 31, 2018.

3. Related Party Transactions

        The Property paid Perseus Stillman, LLC for property management services. For the six months ended June 30, 2010 and 2009 and year ended December 31, 2009, payments under this agreement totaled $130,835, $130,069 and $249,053, respectively, which were included in property operating and maintenance expenses in the statement of revenue and certain expenses.

4. Subsequent Events

        The Property has evaluated events related to the property for recognition and disclosure through October 5, 2010, which is the date the Statements of Revenue and Certain Expenses were available to be issued and determined there are not other transactions or matters to record or disclose.

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[Graphics/Artwork]


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        Until                                     , 2010 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

                        Shares

Eola Property Trust

Common Shares



PROSPECTUS
                        , 2010



BofA Merrill Lynch

Barclays Capital

Wells Fargo Securities


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Part II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 31.    Other Expenses of Issuance and Distribution.

        The following table itemizes the expenses incurred by us in connection with the issuance and distribution of the securities being registered hereunder. All amounts shown are estimates except for the SEC registration fee and the Financial Industry Regulatory Authority, Inc., or FINRA, filing fee.

SEC registration fee

  $ 48,128  

FINRA filing fee

    68,000  

NYSE listing fee

      *

Printing and engraving fees

      *

Legal fees and expenses (including Blue Sky fees)

      *

Accounting fees and expenses

      *

Transfer agent and registrar fees

      *

Miscellaneous expenses

      *
       

Total

  $   *
       

*
To be completed by amendment.

Item 32.    Sales to Special Parties.

        None.

Item 33.    Recent Sales of Unregistered Securities.

        On July 7, 2010, we issued an aggregate of 1,000 common shares to James R. Heistand in exchange for an aggregate of $1,000 in cash in connection with our initial capitalization. Such issuance was exempt from the registration requirements of the Securities Act of 1933, as amended, or the Securities Act, pursuant to Section 4(2) thereof.

        In connection with our formation transactions, an aggregate of                        common shares and                        OP units with an aggregate value of $             million will be issued to certain persons transferring interests and other assets to us in consideration of the transfer of such interests and assets. All such persons had a substantive, pre-existing relationship with us and made irrevocable elections to receive such securities in our formation transactions prior to the filing of this registration statement with the SEC. All of such persons are "accredited investors" as defined under Regulation D of the Securities Act. The issuance of such shares and OP units will be effected in reliance upon exemptions from registration provided by Section 4(2) of the Securities Act and pursuant to Rule 506 of Regulation D of the Securities Act.

Item 34.    Indemnification of Trustees and Officers.

        The Maryland statute governing real estate investment trusts formed under the laws of that state, or the Maryland REIT law, permits a Maryland real estate investment trust to include in its declaration of trust a provision limiting the liability of its trustees and officers to the trust and its shareholders for money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty established by a final judgment as being material to the cause of action. Our declaration of trust contains such a provision that eliminates such liability to the maximum extent permitted by Maryland law.

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        The Maryland REIT law permits a Maryland real estate investment trust to indemnify and advance expenses to its trustees, officers, employees and agents to the same extent as permitted by the Maryland General Corporation Code, or MGCL, for directors and officers of a Maryland corporation. The MGCL permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or are threatened to be made a party by reason of their service in those or other capacities unless it is established that:

    the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty;

    the director or officer actually received an improper personal benefit in money, property or services; or

    in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

        However, under the MGCL, a Maryland corporation may not indemnify a director or officer for an adverse judgment in a suit by or in the right of the corporation or if the director or officer was adjudged liable on the basis that personal benefit was improperly received, unless in either case a court orders indemnification and then only for expenses.

        In addition, the MGCL permits a corporation to advance reasonable expenses to a director or officer upon the corporation's receipt of:

    a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and

    a written undertaking by the director or on the director's behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the trustee did not meet the standard of conduct.

        Our declaration of trust and bylaws obligate us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to:

    any present or former trustee or officer (including any individual who, at our request, serves or has served as a director, officer, partner, trustee, employee or agent of another real estate investment trust, corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise) against any claim or liability to which he or she may become subject by reason of service in such capacity; and

    any present or former trustee or officer who has been successful in the defense of a proceeding to which he or she was made a party by reason of service in such capacity.

        Our declaration of trust and bylaws also permit us, with the approval of our board of trustees, to indemnify and advance expenses to any person who served a predecessor of ours in any of the capacities described above and to any employee or agent of our company or a predecessor of our company.

        In addition, upon completion of this offering, we intend to enter into indemnification agreements with each of our trustees and executive officers that provide for indemnification to the maximum extent permitted by Maryland law.

        Insofar as the foregoing provisions permit indemnification of trustees, officers or persons controlling us for liability arising under the Securities Act, we have been informed that in the opinion

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of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Item 35.    Treatment of Proceeds from Shares Being Registered.

        None of the proceeds from this offering will be credited to an account other than the appropriate capital share account.

Item 36.    Financial Statements and Exhibits.

    (a)
    Financial Statements. See page F-1 for an index to the financial statements included in registration statement.

    (b)
    Exhibits. The following exhibits are filed as part of, this registration statement:

Exhibit
Number
  Exhibit Description
  1.1 * Form of Underwriting Agreement

 

2.1

*

Agreement and Plan of Merger by and between Eola Office Partners LLC and Eola Property Trust, dated as of October 5, 2010

 

2.2

*

Agreement and Plan of Merger by and among Eola Capital LLC, Eola Property Trust, L.P., Eola Mergersub LLC and Eola Property Trust, dated as of October 5, 2010

 

2.3

*

Contribution Agreement by and among Eola Property Trust, L.P., Eola Property Trust and the persons listed on the signature page thereto, dated as of October 5, 2010

 

2.4

*

Contribution Agreement by and among Utah State Retirement Investment Fund, Eola Property Trust, L.P. and Eola Property Trust, dated as of August 6, 2010

 

2.5

*

Contribution Agreement by and among 1010 Street Atlanta LLP, Primera V L.P., Tampa Properties, L.P., Peachtree Center L.L.L.P., Cornerstone Atlanta LP, Eola Property Trust, L.P. and Eola Property Trust, dated as of August 9, 2010

 

2.6

*

Sale, Purchase, and Escrow Agreement between 1110 Vermont Renaissance Associates, LLC, Eola Acquisition LLC, and Fidelity National Title Insurance Company, dated as of April 15, 2010

 

3.1

*

Form of Articles of Amendment and Restatement of Declaration of Trust of Eola Property Trust

 

3.2

*

Form of Amended and Restated Bylaws of Eola Property Trust

 

4.1

*

Specimen Common Share Certificate of Eola Property Trust

 

4.2

*

Form of Registration Rights Agreement by and among Eola Property Trust and the persons listed on Schedule A thereto

 

5.1

*

Opinion of Hogan Lovells US LLP regarding the validity of the securities being registered

 

8.1

*

Opinion of Hogan Lovells US LLP regarding certain tax matters

 

10.1

*

Form of Amended and Restated Agreement of Limited Partnership of Eola Property Trust, L.P.

 

10.2

*

Form of Eola Property Trust 2010 Equity Incentive Plan

 

10.3

*

Form of Stock Option Agreement

 

10.4

*

Form of Restricted Stock Agreement

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Exhibit
Number
  Exhibit Description
  10.5 * Form of Restricted Stock Units Agreement

 

10.6

*

Form of Indemnification Agreement between Eola Property Trust and its trustees and officers

 

10.7

*

Form of Employment Agreement by and between Eola Property Trust and James R. Heistand

 

10.8

*

Form of Employment Agreement by and between Eola Property Trust and Rodolfo Prio Touzet

 

10.9

*

Form of Employment Agreement by and between Eola Property Trust and Henry F. Pratt, III

 

10.10

*

Form of Employment Agreement by and between Eola Property Trust and David O'Reilly

 

10.11

*

Representation and Warranty Indemnification Agreement by and among Eola Property Trust, Eola Property Trust, L.P., James R. Heistand, Rodolfo Prio Touzet, Troy M. Cox, David O'Reilly, Henry F. Pratt, III and Scott Francis, dated as of October 5, 2010

 

10.12

*

Representation and Warranty Indemnification Agreement by and among Eola Property Trust, Eola Property Trust, L.P., James R. Heistand, Rodolfo Prio Touzet, Troy M. Cox, Henry F. Pratt, III and Scott Francis, dated as of October 5, 2010

 

16.1

 

Letter of KPMG LLP regarding change in certifying accountants

 

21.1

*

List of Subsidiaries of Eola Property Trust

 

23.1

 

Consent of Ernst & Young LLP

 

23.2

 

Consent of KPMG LLP

 

23.3

 

Consent of KPMG LLP

 

23.4

 

Consent of KPMG LLP

 

23.5

 

Consent of RAFFA, P.C.

 

23.6

*

Consent of Hogan Lovells US LLP (included in Exhibit 5.1)

 

23.7

*

Consent of Hogan Lovells US LLP (included in Exhibit 8.1)

 

23.8

 

Consent of Rosen Consulting Group

 

24.1

 

Power of Attorney (included on signature page)

 

99.1

*

Rosen Consulting Group Market Study

*
To be filed by amendment.

Item 37.    Undertakings.

        (a)   The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

        (b)   Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a

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director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue.

        (c)   The undersigned registrant hereby further undertakes that:

            (1)   For purposes of determining any liability under the Securities Act of 1933, as amended, the information omitted from the form of prospectus filed as part of this registration statement in reliance under Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or Rule 497(h) under the Securities Act of 1933, as amended, shall be deemed to be part of this registration statement as of the time it was declared effective.

            (2)   For the purpose of determining any liability under the Securities Act of 1933, as amended, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-11 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Orlando, State of Florida, on October 6, 2010.

 

By:

 

/s/ JAMES R. HEISTAND


      James R. Heistand

      Executive Chairman


POWER OF ATTORNEY

        Each person whose signature appears below hereby constitutes and appoints James R. Heistand and Rudy Prio Touzet, and each of them, as his attorney-in-fact and agent, with full power of substitution and resubstitution for him in any and all capacities, to sign any or all amendments or post-effective amendments to this registration statement, or any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with exhibits thereto and other documents in connection therewith or in connection with the registration of the common shares under the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission, granting unto such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that such attorney-in-fact and agent or his substitutes may do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signatures
 
Title
 
Date

 

 

 

 

 
/s/ JAMES R. HEISTAND

James R. Heistand
  Executive Chairman   October 6, 2010

/s/ RUDY PRIO TOUZET

Rudy Prio Touzet

 

President, Chief Executive Officer and Trustee

 

October 6, 2010

/s/ HENRY F. PRATT, III

Henry F. Pratt, III

 

Chief Operating Officer

 

October 6, 2010

/s/ DAVID O'REILLY

David O'Reilly

 

Chief Financial Officer (principal financial officer)

 

October 6, 2010

/s/ SCOTT FRANCIS

Scott Francis

 

Chief Accounting Officer (principal accounting officer)

 

October 6, 2010

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Exhibit List

Exhibit
Number
  Exhibit Description
  1.1 * Form of Underwriting Agreement

 

2.1

*

Agreement and Plan of Merger by and between Eola Office Partners LLC and Eola Property Trust, dated as of October 5, 2010

 

2.2

*

Agreement and Plan of Merger by and among Eola Capital LLC, Eola Property Trust, L.P., Eola Mergersub LLC and Eola Property Trust, dated as of October 5, 2010

 

2.3

*

Contribution Agreement by and among Eola Property Trust, L.P., Eola Property Trust and the persons listed on the signature page thereto, dated as of October 5, 2010

 

2.4

*

Contribution Agreement by and among Utah State Retirement Investment Fund, Eola Property Trust, L.P. and Eola Property Trust, dated as of August 6, 2010

 

2.5

*

Contribution Agreement by and among 1010 Street Atlanta LLP, Primera V L.P., Tampa Properties, L.P., Peachtree Center L.L.L.P., Cornerstone Atlanta LP, Eola Property Trust, L.P. and Eola Property Trust, dated as of August 9, 2010

 

2.6

*

Sale, Purchase, and Escrow Agreement between 1110 Vermont Renaissance Associates, LLC, Eola Acquisition LLC, and Fidelity National Title Insurance Company, dated as of April 15, 2010

 

3.1

*

Form of Articles of Amendment and Restatement of Declaration of Trust of Eola Property Trust

 

3.2

*

Form of Amended and Restated Bylaws of Eola Property Trust

 

4.1

*

Specimen Common Share Certificate of Eola Property Trust

 

4.2

*

Form of Registration Rights Agreement by and among Eola Property Trust and the persons listed on Schedule A thereto

 

5.1

*

Opinion of Hogan Lovells US LLP regarding the validity of the securities being registered

 

8.1

*

Opinion of Hogan Lovells US LLP regarding certain tax matters

 

10.1

*

Form of Amended and Restated Agreement of Limited Partnership of Eola Property Trust, L.P.

 

10.2

*

Form of Eola Property Trust 2010 Equity Incentive Plan

 

10.3

*

Form of Stock Option Agreement

 

10.4

*

Form of Restricted Stock Agreement

 

10.5

*

Form of Restricted Stock Units Agreement

 

10.6

*

Form of Indemnification Agreement between Eola Property Trust and its trustees and officers

 

10.7

*

Form of Employment Agreement by and between Eola Property Trust and James R. Heistand

 

10.8

*

Form of Employment Agreement by and between Eola Property Trust and Rodolfo Prio Touzet

 

10.9

*

Form of Employment Agreement by and between Eola Property Trust and Henry F. Pratt, III

 

10.10

*

Form of Employment Agreement by and between Eola Property Trust and David O'Reilly

II-7


Table of Contents

Exhibit
Number
  Exhibit Description
  10.11 * Representation and Warranty Indemnification Agreement by and among Eola Property Trust, Eola Property Trust, L.P., James R. Heistand, Rodolfo Prio Touzet, Troy M. Cox, David O'Reilly, Henry F. Pratt, III and Scott Francis, dated as of October 5, 2010

 

10.12

*

Representation and Warranty Indemnification Agreement by and among Eola Property Trust, Eola Property Trust, L.P., James R. Heistand, Rodolfo Prio Touzet, Troy M. Cox, Henry F. Pratt, III and Scott Francis, dated as of October 5, 2010

 

16.1

 

Letter of KPMG LLP regarding change in certifying accountants

 

21.1

*

List of Subsidiaries of Eola Property Trust

 

23.1

 

Consent of Ernst & Young LLP

 

23.2

 

Consent of KPMG LLP

 

23.3

 

Consent of KPMG LLP

 

23.4

 

Consent of KPMG LLP

 

23.5

 

Consent of RAFFA, P.C.

 

23.6

*

Consent of Hogan Lovells US LLP (included in Exhibit 5.1)

 

23.7

*

Consent of Hogan Lovells US LLP (included in Exhibit 8.1)

 

23.8

 

Consent of Rosen Consulting Group

 

24.1

 

Power of Attorney (included on signature page)

 

99.1

*

Rosen Consulting Group Market Study

*
To be filed by amendment.

II-8