10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________

Form 10-Q

_________________________________________

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

For the quarterly period ended March 31, 2015

OR

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

For the transition period from             to             

Commission file number 000-55187

__________________________________________

COLE REAL ESTATE INCOME STRATEGY

(DAILY NAV), INC.

(Exact name of registrant as specified in its charter)

__________________________________________

Maryland	27-3147801
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
2325 East Camelback Road, Suite 1100 Phoenix, Arizona 85016	(602) 778-8700
(Address of principal executive offices; zip code)	(Registrant’s telephone number, including area code)

Not Applicable

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

________________________________________________________________________

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

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

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.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if smaller reporting company)	Smaller reporting company	¨

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

As of May 11, 2015, there were approximately 6.2 million shares of Wrap Class common stock, approximately 927,559 shares of Advisor Class common stock and approximately 405,321 shares of Institutional Class common stock, par value $0.01 each, of Cole Real Estate Income Strategy (Daily NAV), Inc. outstanding.

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

INDEX

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Unaudited Balance Sheets as of March 31, 2015 and December 31, 2014	3
Condensed Consolidated Unaudited Statements of Operations for the three months ended March 31, 2015 and 2014	5
Condensed Consolidated Unaudited Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014	6
Condensed Consolidated Unaudited Statement of Stockholders’ Equity for the three months ended March 31, 2015	7
Condensed Consolidated Unaudited Statements of Cash Flows for the three months ended March 31, 2015 and 2014	8
Notes to Condensed Consolidated Unaudited Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	29
Item 4. Controls and Procedures	29
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	30
Item 1A. Risk Factors	30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3. Defaults Upon Senior Securities	31
Item 4. Mine Safety Disclosures	31
Item 5. Other Information	31
Item 6. Exhibits	31
Signature	32

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS

(in thousands, except share and per share amounts)

	March 31, 2015			December 31, 2014
ASSETS
Investment in real estate assets:
Land	$	39,543		$	46,455
Buildings and improvements, less accumulated depreciation of $5,477 and $4,459, respectively	150,861			152,197
Acquired intangible lease assets, less accumulated amortization of $3,077 and $2,521, respectively	26,034			26,853
Total investment in real estate assets, net	216,438			225,505
Investment in marketable securities	510			490
Total investment in real estate assets and marketable securities, net	216,948			225,995
Cash and cash equivalents	6,545			4,489
Restricted cash	35			25
Rents and tenant receivables, less allowance for doubtful accounts of $2 and $0, respectively	1,627			1,267
Prepaid expenses and other assets	171			364
Deferred financing costs, less accumulated amortization of $1,312 and $1,216, respectively	2,259			1,796
Assets held for sale	7,327			—
Total assets	$	234,912		$	233,936
LIABILITIES AND STOCKHOLDERS’ EQUITY
Line of credit and notes payable	$	121,754		$	120,304
Accounts payable and accrued expenses	922			1,188
Escrowed investor proceeds	35			25
Due to affiliates	834			1,816
Acquired below market lease intangibles, less accumulated amortization of $329 and $279, respectively	2,003			2,058
Distributions payable	596			595
Deferred rental income and other liabilities	585			585
Total liabilities	126,729			126,571
Commitments and contingencies
Redeemable common stock	13,120			12,545
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding	—			—
A Shares common stock, $0.01 par value; 163,000,000 shares authorized, 898,585 and 897,376 shares issued and outstanding, respectively	9			9
I Shares common stock, $0.01 par value; 163,000,000 shares authorized, 260,017 and 256,525 shares issued and outstanding, respectively	3			3
W Shares common stock, $0.01 par value; 164,000,000 shares authorized, 6,096,400 and 6,012,043 shares issued and outstanding, respectively	61			60
Capital in excess of par value	105,120			104,284
Accumulated distributions in excess of earnings	(10,138		)	(9,539		)
Accumulated other comprehensive income	8			3
Total stockholders’ equity	95,063			94,820
Total liabilities and stockholders’ equity	$	234,912		$	233,936

3

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

4

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

	Three Months Ended March 31,
	2015		2014
Revenues:
Rental and other property income	$	4,487	$	2,162
Tenant reimbursement income	337		189
Interest income on marketable securities	3		1
Total revenue	4,827		2,352
Expenses:
General and administrative expenses	435		236
Property operating expenses	389		222
Advisory expenses	284		174
Acquisition related expenses	69		198
Depreciation	1,092		521
Amortization	546		263
Total operating expenses	2,815		1,614
Operating income	2,012		738
Other expense:
Interest and other expense, net	886		457
Net income	$	1,126	$	281
Weighted average number of common shares outstanding:
Basic and diluted	7,157,057		4,467,058
Net income per common share:
Basic and diluted	$	0.16	$	0.06
Distributions declared per common share	$	0.24	$	0.23

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

5

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended March 31,
	2015		2014
Net income	$	1,126	$	281
Other comprehensive income:
Unrealized gain on marketable securities	5		2
Total other comprehensive income	5		2
Comprehensive income	$	1,131	$	283

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

6

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

CONDENSED CONSOLIDATED UNAUDITED STATEMENT OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

	A Shares Common Stock				I Shares Common Stock			W Shares Common Stock					Capital in Excess of Par Value			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Number  of Shares		Par  Value		Number  of Shares	Par  Value		Number  of Shares		Par  Value
Balance, January 1, 2015	897,376		$	9	256,525	$	3	6,012,043		$	60		$	104,284		$	(9,539	)	$	3	$	94,820
Issuance of common stock	28,107		—		3,492	—		225,306		2			4,640			—			—		4,642
Distributions to investors	—		—		—	—		—		—			—			(1,725		)	—		(1,725		)
Commissions on stock sales and related distribution and dealer manager fees	—		—		—	—		—		—			(205		)	—			—		(205		)
Other offering costs	—		—		—	—		—		—			(35		)	—			—		(35		)
Redemptions of common stock	(26,898	)	—		—	—		(140,949	)	(1		)	(2,989		)	—			—		(2,990		)
Changes in redeemable common stock	—		—		—	—		—		—			(575		)	—			—		(575		)
Comprehensive income	—		—		—	—		—		—			—			1,126			5		1,131
Balance as of March 31, 2015	898,585		$	9	260,017	$	3	6,096,400		$	61		$	105,120		$	(10,138	)	$	8	$	95,063

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

7

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended March 31,
	2015			2014
Cash flows from operating activities:
Net income	$	1,126		$	281
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	1,092			521
Amortization of intangible lease assets and below market lease intangibles, net	593			250
Amortization of deferred financing costs	96			162
Amortization on marketable securities, net	—			1
Bad debt expense	2			—
Changes in assets and liabilities:
Rents and tenant receivables	(362		)	(81		)
Prepaid expenses and other assets	193			3
Accounts payable and accrued expenses	(266		)	43
Deferred rental income and other liabilities	—			(41		)
Due to affiliates	(934		)	(524		)
Net cash provided by operating activities	1,540			615
Cash flows from investing activities:
Investment in real estate and related assets	—			(14,032		)
Investment in marketable securities	(35		)	(114		)
Proceeds from sale of marketable securities	20			91
Change in restricted cash	(10		)	(144		)
Net cash used in investing activities	(25		)	(14,199		)
Cash flows from financing activities:
Proceeds from issuance of common stock	3,900			11,383
Offering costs on issuance of common stock	(288		)	(232		)
Redemptions of common stock	(2,990		)	(502		)
Distributions to investors	(982		)	(585		)
Proceeds from line of credit and note payable	24,950			8,500
Proceeds from line of credit with affiliate	10,000			—
Repayments of line of credit	(23,500		)	(9,500		)
Repayments of line of credit with affiliate	(10,000		)	—
Deferred financing costs paid	(559		)	(158		)
Change in escrowed investor proceeds liability	10			144
Net cash provided by financing activities	541			9,050
Net increase (decrease) in cash and cash equivalents	2,056			(4,534		)
Cash and cash equivalents, beginning of period	4,489			5,370
Cash and cash equivalents, end of period	$	6,545		$	836
Supplemental disclosures of non-cash investing and financing activities:
Accrued dealer manager fee and other offering costs	$	225		$	192
Distributions declared and unpaid	$	596		$	386
Common stock issued through distribution reinvestment plan	$	742		$	377
Unrealized gain on marketable securities	$	5		$	2
Supplemental cash flow disclosures:
Interest paid	$	748		$	295

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

8

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

March 31, 2015

NOTE 1 — ORGANIZATION AND BUSINESS

Cole Real Estate Income Strategy (Daily NAV), Inc. (the “Company”) is a Maryland corporation that was formed on July 27, 2010, which has elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes. Substantially all of the Company’s business is conducted through Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP (“Cole OP”), a Delaware limited partnership. The Company is the sole general partner of, and owns, directly or indirectly, 100% of the partnership interest in, Cole OP. The Company is externally managed by Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC, a Delaware limited liability company (“Cole Advisors”), an affiliate of the Company’s sponsor, Cole Capital^®, which is a trade name used to refer to a group of affiliated entities directly or indirectly controlled by American Realty Capital Properties, Inc. (“ARCP”), a self-managed publicly traded REIT, organized as a Maryland corporation, listed on The NASDAQ Global Select Market. On February 7, 2014, ARCP acquired Cole Real Estate Investments, Inc. (“Cole”), which, prior to its acquisition, indirectly owned and/or controlled the Company’s external advisor, Cole Advisors, the Company’s dealer manager, Cole Capital Corporation (“CCC”), the Company’s property manager, CREI Advisors, LLC (“CREI Advisors”), and Cole Capital. As a result of ARCP’s acquisition of Cole, ARCP indirectly owns and/or controls Cole Advisors, CCC, CREI Advisors and Cole Capital.

On December 6, 2011, pursuant to a registration statement filed on Form S-11 (Registration No. 333-169535) (the “Initial Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”), the Company commenced its initial public offering on a “best efforts” basis of $4.0 billion in shares of common stock. On August 26, 2013, pursuant to a registration statement filed on Form S-11 (Registration No. 333-186656) (the “Multi-Class Registration Statement”) under the Securities Act, the Company designated the existing shares of the Company’s common stock that were sold prior to such date to be Wrap Class shares (“W Shares”) of common stock and registered two new classes of the Company’s common stock, Advisor Class shares (“A Shares”) and Institutional Class shares (“I Shares”). Pursuant to the Multi-Class Registration Statement, the Company is offering up to $4.0 billion in shares of common stock of the three classes (the “Offering”), consisting of $3.5 billion in shares in the Company’s primary offering (the “Primary Offering”) and $500.0 million in shares pursuant to a distribution reinvestment plan (the “DRIP”). The Company is offering to sell any combination of W Shares, A Shares and I Shares with a dollar value up to the maximum offering amount.

The per share purchase price for each class of common stock varies from day-to-day and, on each business day, is equal to, for each class of common stock, the Company’s net asset value (“NAV”) for such class, divided by the number of shares of that class outstanding as of the close of business on such day, plus, for A Shares sold in the Primary Offering, applicable selling commissions. The Company’s NAV per share is calculated daily as of the close of business by an independent fund accountant using a process that reflects (1) estimated values of each of the Company’s commercial real estate assets, related liabilities and notes receivable secured by real estate provided periodically by the Company’s independent valuation expert in individual appraisal reports, (2) daily updates in the price of liquid assets for which third party market quotes are available, (3) accruals of daily distributions and (4) estimates of daily accruals, on a net basis, of operating revenues, expenses, debt service costs and fees. As of March 31, 2015, the NAV per share for W Shares, A Shares and I Shares was $18.08, $18.07 and $18.15, respectively. The Company’s NAV is not audited or reviewed by its independent registered public accounting firm.

The Company intends to use substantially all of the net proceeds from the Offering to acquire and operate a diversified portfolio primarily consisting of (1) necessity retail, office and industrial properties that are leased to creditworthy tenants under long-term net leases and are strategically located throughout the United States and U.S. protectorates, (2) notes receivable secured by commercial real estate, including the origination of loans, and (3) cash, cash equivalents, other short-term investments and traded real estate-related securities. As of March 31, 2015, the Company owned 75 commercial properties located in 26 states, containing 1.8 million rentable square feet of commercial space, including the square feet of buildings which are on land subject to ground leases. As of March 31, 2015, these properties were 99.6% leased.

The Company is structured as a perpetual-life, non-exchange traded REIT. This means that, subject to regulatory approval of our filing for additional offerings, the Company will be selling shares of common stock on a continuous basis and for an indefinite period of time to the extent permissible under applicable law. The Company will endeavor to take all reasonable actions to avoid interruptions in the continuous offering of shares of common stock. The Company reserves the right to terminate the Offering at any time.

9

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2015

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The condensed consolidated unaudited financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, the statements for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of full year results. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2014, and related notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The condensed consolidated unaudited financial statements should also be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q.

The condensed consolidated unaudited financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investment in and Valuation of Real Estate and Related Assets

Real estate and related assets are stated at cost, less accumulated depreciation and amortization. Amounts capitalized to real estate and related assets consist of the cost of acquisition, excluding acquisition related expenses, construction and any tenant improvements, major improvements and betterments that extend the useful life of the real estate and related assets and leasing costs. All repairs and maintenance are expensed as incurred.

The Company is required to make subjective assessments as to the useful lives of its depreciable assets. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life of the assets. Real estate and related assets, other than land, are depreciated or amortized on a straight-line basis. The estimated useful lives of the Company’s real estate and related assets by class are generally as follows:

Buildings	40 years
Tenant improvements	Lesser of useful life or lease term
Intangible lease assets	Lease term

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate and related assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to, bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, rental concessions and other factors, a significant decrease in a property’s revenues due to lease terminations, vacancies, co-tenancy clauses, reduced lease rates or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate and related assets to their respective fair values and recognize an impairment loss. Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions. As of March 31, 2015, the Company noted potential impairment indicators at a property with an aggregate carrying value of $1.1 million due to a fire loss at the property. However, based on insurance coverage and the expectation of continued rental income from the tenant, the Company’s estimate of undiscounted cash flows indicated that such carrying amount was expected to be recovered as of March 31, 2015, and as such no impairment loss was recorded. Nonetheless, it is reasonably possible that the estimate of undiscounted cash flows may change in the near term, which may result in the need to record an impairment loss to reduce such asset to fair value. Any such impairment losses

10

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2015

will affect the Company’s assets and stockholders’ equity, operating and net income. The evaluation of properties for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions. No impairment indicators were identified and no impairment losses were recorded during the three months ended March 31, 2014.

When developing estimates of expected future cash flows, the Company makes certain assumptions regarding future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, terminal capitalization and discount rates, the expected number of months it takes to re-lease the property, required tenant improvements and the number of years the property will be held for investment. The use of alternative assumptions in estimating expected future cash flows could result in a different determination of the property’s expected future cash flows and a different conclusion regarding the existence of an impairment, the extent of such loss, if any, as well as the fair value of the real estate and related assets.

When a real estate asset is identified by the Company as held for sale, the Company will cease depreciation and amortization of the assets related to the property and estimate the fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount would be recorded to reflect the estimated fair value of the property, net of selling costs. During the three months endedMarch 31, 2015, the Company identified one multi-tenant property as held for sale, which was sold subsequent to March 31, 2015, as discussed in Note 10 to these condensed consolidated unaudited financial statements. No assets were identified as held for sale as of December 31, 2014.

Allocation of Purchase Price of Real Estate and Related Assets

Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and identified intangible assets and liabilities, consisting of the value of above market and below market leases and the value of in-place leases, based in each case on their respective fair values. Acquisition related expenses are expensed as incurred. The Company utilizes independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and buildings). The Company obtains an independent appraisal for each real property acquisition. The information in the appraisal, along with any additional information available to the Company’s management, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by the Company’s management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information.

The fair values of above market and below market lease intangibles are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (1) the contractual amounts to be paid pursuant to the in-place leases and (2) an estimate of fair market lease rates for the corresponding in-place leases, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease including any bargain renewal periods, with respect to a below market lease. The above market and below market lease intangibles are capitalized as intangible lease assets or liabilities, respectively. Above market leases are amortized as a reduction to rental income over the remaining terms of the respective leases. Below market leases are amortized as an increase to rental income over the remaining terms of the respective leases, including any bargain renewal periods. In considering whether or not the Company expects a tenant to execute a bargain renewal option, the Company evaluates economic factors and certain qualitative factors at the time of acquisition, such as the financial strength of the tenant, remaining lease term, the tenant mix of the leased property, the Company’s relationship with the tenant and the availability of competing tenant space. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above market or below market lease intangibles relating to that lease would be recorded as an adjustment to rental income.

The fair values of in-place leases include estimates of direct costs associated with obtaining a new tenant and opportunity costs associated with lost rental and other property income which are avoided by acquiring a property with an in-place lease. Direct costs associated with obtaining a new tenant include commissions and other direct costs, and are estimated in part by utilizing information obtained from independent appraisals and management’s consideration of current market costs to execute a similar lease. The intangible values of opportunity costs, which are calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease, are capitalized as intangible lease assets and are amortized to expense over the remaining term of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.

11

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2015

The Company may acquire certain properties subject to contingent consideration arrangements that may obligate the Company to pay additional consideration to the seller based on the outcome of future events. Additionally, the Company may acquire certain properties for which it funds certain contingent consideration amounts into an escrow account pending the outcome of certain future events. The outcome may result in the release of all or a portion of the escrow funds to the Company or the seller or a combination thereof. Contingent consideration arrangements will be based on a predetermined formula and have set time periods regarding the obligation to make future payments, including funds released to the seller from escrow accounts, or the right to receive escrowed funds as set forth in the respective purchase and sale agreement. Contingent consideration arrangements, including amounts funded through an escrow account, will be recorded upon acquisition of the respective property at their estimated fair value, and any changes to the estimated fair value, subsequent to acquisition, will be reflected in the accompanying condensed consolidated unaudited statements of operations. The determination of the amount of contingent consideration arrangements is based on the probability of several possible outcomes as identified by management.

The Company will estimate the fair value of assumed mortgage notes payable based upon indications of current market pricing for similar types of debt financing with similar maturities. Assumed mortgage notes payable will initially be recorded at their estimated fair value as of the assumption date, and any difference between such estimated fair value and the mortgage note’s outstanding principal balance will be amortized to interest expense over the term of the respective mortgage note payable.

The determination of the fair values of the real estate and related assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could impact the Company’s results of operations.

Investment in Marketable Securities

Investment in marketable securities consists primarily of the Company’s investment in corporate and government debt securities. The Company determines the appropriate classification for debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. As of March 31, 2015, the Company classified its investments as available-for-sale as the Company is not actively trading the securities; however, the Company may sell them prior to their maturity. These investments are carried at their estimated fair value with unrealized gains and losses reported in accumulated other comprehensive income.

The Company monitors its available-for-sale securities for impairments. A loss is recognized when the Company determines that a decline in the estimated fair value of a security below its amortized cost is other-than-temporary. The Company considers many factors in determining whether the impairment of a security is deemed to be other-than-temporary, including, but not limited to, the length of time the security has had a decline in estimated fair value below its amortized cost, the amount of the unrealized loss, the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value, recent events specific to the issuer or industry, external credit ratings and recent changes in such ratings. The analysis of determining whether the impairment of a security is deemed to be other-than-temporary requires significant judgment and assumptions. The use of alternative judgments and assumptions could result in a different conclusion.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method and is recorded in the accompanying condensed consolidated unaudited statements of operations in interest and other expense, net. Upon the sale of a security, the realized net gain or loss is computed on the specific identification method.

Restricted Cash and Escrows

Included in restricted cash were escrowed investor proceeds for which shares of common stock had not been issued as of March 31, 2015 and December 31, 2014.

Concentration of Credit Risk

As of March 31, 2015, the Company had cash on deposit, including restricted cash, at four financial institutions, in one of which the Company had deposits in excess of federally insured levels, totaling $6.2 million; however, the Company has not experienced any losses in such accounts. The Company limits significant cash deposits to accounts held by financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk on its cash deposits.

12

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2015

As of March 31, 2015, no single tenant accounted for greater than 10% of the Company’s 2015 gross annualized rental revenues. Tenants in the discount store, manufacturing, drugstore and grocery industries accounted for 15%13%, 10% and 10%, respectively, of the Company’s 2015 gross annualized rental revenues. Additionally, the Company has certain geographic concentrations in its property holdings. In particular, as of March 31, 2015, eight of the Company’s properties were located in Texas, accounting for 17% of the Company’s 2015 gross annualized rental revenues.

Offering and Related Costs

Cole Advisors funds all of the organization and offering costs associated with the sale of the Company’s common stock (excluding selling commissions, the distribution fee and the dealer manager fee) and is reimbursed for such costs up to 0.75% of gross proceeds from the Offering, excluding selling commissions charged on A Shares sold in the Primary Offering. As of March 31, 2015, Cole Advisors or its affiliates had paid organization and offering costs in excess of 0.75% in connection with the Offering. These excess costs were not included in the financial statements of the Company because such costs were not a liability of the Company as they exceeded 0.75% of gross proceeds from the Offering. As the Company raises additional proceeds from the Offering, these excess costs may become payable to Cole Advisors.

Redeemable Common Stock

The Company has adopted a share redemption program that permits its stockholders to redeem their shares, subject to certain limitations. The Company records amounts that are redeemable under the share redemption program as redeemable common stock outside of permanent equity on its condensed consolidated unaudited balance sheets. Redeemable common stock is recorded at the greater of the carrying amount or redemption value each reporting period. Changes in the value from period to period are recorded as an adjustment to capital in excess of par value.

As of March 31, 2015 and December 31, 2014, the quarterly redemption capacity was equal to 10% of the Company’s NAV, and this amount was recorded as redeemable common stock on the condensed consolidated unaudited balance sheet for a total of $13.1 million and $12.5 million, respectively.

Recent Accounting Pronouncements

In May 2014, the U.S. Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers, including real estate sales, in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted. The Company is currently evaluating the impact of the new standard, but does not believe it will have a material impact, when effective, on the Company’s condensed consolidated unaudited financial statements.

In February 2015, FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”), which eliminates the deferral of Financial Accounting Standard 167, modifies the evaluation of whether limited partnerships and similar legal entities are variable or voting interest entities, eliminates the presumption that the general partner should consolidate a limited partnership, modifies the consolidation analysis for reporting entities that are involved with variable interest entities, particularly those that have fee arrangements and related party relationships, and provides a scope exception for reporting entities with interests in legal entities that operate as registered money market funds. These changes will require re-evaluation of the consolidation conclusion for certain entities and will require the Company to revise its analysis regarding the consolidation or deconsolidation of such entities. ASU 2015-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, with early adoption permitted.  Companies may elect to apply the amendments in ASU 2015-02 using a modified retrospective approach or by applying the amendments retrospectively. The Company is currently evaluating the impact of the new standard on its financial statements.

In April 2015, FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentationof Debt Issuance Costs (“ASU 2015-03”). The update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than presenting the deferred charge as an asset. The previous requirement to recognize debt issuance costs as deferred charges conflicts with the guidance in FASB Concepts Statement No. 6, “Elements of Financial Statements,” which states that debt issuance costs are similar to debt discounts and effectively reduce the proceeds of borrowing, thereby increasing the effective interest rate. FASB Concepts Statement No. 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. After the update is adopted, debt disclosures would include the face amount of the debt liability and the effective

13

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2015

interest rate. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and is to be applied retrospectively, with early adoption permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

NOTE 3 — FAIR VALUE MEASUREMENTS

GAAP defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. GAAP emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows:

Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).

Level 3 – Unobservable inputs, which are only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability.

The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities:

Cash and cash equivalents – The Company considers the carrying amounts of these financial assets to approximate fair value because of the short period of time between their origination and their expected realization. These financial assets are considered Level 1.

Line of credit and notes payable – The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of the measurement date. The estimated fair value of the Company’s debt was $121.8 million and $120.3 million as of March 31, 2015 and December 31, 2014, respectively, which approximated the carrying value on such dates. The fair value of the Company’s debt is estimated using Level 2 inputs.

Marketable securities – The Company’s marketable securities are carried at fair value and are valued using Level 1 inputs. The estimated fair value of the Company’s marketable securities are based on quoted market prices that are readily and regularly available in an active market.

Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, on disposition of the financial assets and liabilities. As of March 31, 2015, there have been no transfers of financial assets or liabilities between fair value hierarchy levels.

NOTE 4 — REAL ESTATE ACQUISITIONS

2015 Property Acquisitions

During the three months ended March 31, 2015, the Company did not acquire any commercial properties.

14

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2015

2014 Property Acquisitions

During the three months ended March 31, 2014, the Company acquired a 100% interest in eight commercial properties for an aggregate purchase price of $14.0 million (the “2014 Acquisitions”). The Company purchased the 2014 Acquisitions with net proceeds from the Offering combined with proceeds from borrowings. The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation (in thousands):

	March 31, 2014
Land	$	2,874
Building and improvements	9,509
Acquired in-place leases	1,395
Acquired above market leases	444
Acquired below market leases	(190		)
Total purchase price	$	14,032

The Company recorded revenue of $122,000 and a net loss of $112,000 for the three months ended March 31, 2014 related to the 2014 Acquisitions. In addition, the Company recorded $198,000 of acquisition related expenses for the three months ended March 31, 2014.

The following information summarizes selected financial information of the Company, as if all of the 2014 Acquisitions were completed on January 1, 2013 for each period presented below. The table below presents the Company’s estimated revenue and net income (loss), on a pro forma basis, for the three months ended March 31, 2014 and 2013, respectively (in thousands):

	Three Months Ended March 31,
	2014		2013
Pro forma basis:
Revenue	$	2,496	$	1,046
Net income (loss)	$	461	$	(116	)

The pro forma information for the three months ended March 31, 2014 was adjusted to exclude acquisition costs related to the 2014 Acquisitions. These costs were recognized in the pro forma information for the three months endedMarch 31, 2013. The pro forma information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of periods presented, nor does it purport to represent the results of future operations.

NOTE 5 — MARKETABLE SECURITIES

The Company owned marketable securities with an estimated fair value of $510,000 and $490,000 as of March 31, 2015 and December 31, 2014, respectively. The following is a summary of the Company’s available-for-sale securities as of March 31, 2015 (in thousands):

	Available-for-Sale Securities
	Amortized Cost Basis		Unrealized Gain		Fair Value
U.S. Treasury Bonds	$	179	$	5	$	184
U.S. Agency Bonds	85		—		85
Corporate Bonds	238		3		241
Total available-for-sale securities	$	502	$	8	$	510

15

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2015

The following table provides the activity for the marketable securities during the three months endedMarch 31, 2015 (in thousands):

	Amortized Cost Basis			Unrealized Gain		Fair Value
Marketable securities as of December 31, 2014	$	487		$	3	$	490
Face value of marketable securities acquired	35			—		35
Amortization on marketable securities	—			—		—
Sales of securities	(20		)	—		(20		)
Increase in fair value of marketable securities	—			5		5
Marketable securities as of March 31, 2015	$	502		$	8	$	510

During the three months endedMarch 31, 2015, the Company sold three marketable securities for aggregate proceeds of $20,000, which approximated their carrying value. In addition, the Company recorded an unrealized gain of $5,000 on its investments, which is included in accumulated other comprehensive income on the accompanying condensed consolidated unaudited statement of stockholders’ equity for the three months endedMarch 31, 2015 and the condensed consolidated unaudited balance sheet as of March 31, 2015.

The scheduled maturities of the Company’s marketable securities as of March 31, 2015 are as follows (in thousands):

	Available-for-Sale Securities
	Amortized Cost		Estimated Fair Value
Due within one year	$	75	$	75
Due after one year through five years	205		206
Due after five years through ten years	206		213
Due after ten years	16		16
Total	$	502	$	510

Actual maturities of marketable securities can differ from contractual maturities because borrowers on certain debt securities may have the right to prepay their respective debt obligations at any time. In addition, factors such as prepayments and interest rates may affect the yields on such securities.

NOTE 6 — LINES OF CREDIT AND NOTES PAYABLE

As of March 31, 2015, the Company had $121.8 million of debt outstanding, with weighted average years to maturity of 4.2 years and a weighted average interest rate of 2.79%. The following table summarizes the debt activity for the three months ended March 31, 2015 and the debt balances as of March 31, 2015 and December 31, 2014 (in thousands):

			During the Three Months Ended March 31, 2015
	Balance as of December 31, 2014			Debt Issuance		Repayments			Balance as of March 31, 2015
Line of credit	$	100,000		$	8,000	$	(23,500	)	$	84,500
Fixed rate debt	20,304			16,950		—			37,254
Line of credit with affiliate	—			$	10,000	$	(10,000	)	$	—
Total	$	120,304		$	34,950	$	(33,500	)	$	121,754

As of March 31, 2015, the fixed rate debt outstanding of $37.3 million has interest rates ranging from 3.82% to 4.05% per annum. The debt outstanding matures on various dates from October 2021 to February 2025. The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the fixed rate debt outstanding was $59.2 million as of March 31, 2015. Each of the mortgage notes payable comprising the fixed rate debt is secured by the respective properties on which the debt was placed.

Included in the fixed rate debt is a $17.0 million mortgage note payable which the Company entered into with Silverpeak Real Estate Finance LLC during the three months ended March 31, 2015 (the “Silverpeak Loan”). The Silverpeak Loan has a

16

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2015

fixed interest rate of 4.05% per annum with interest payments due monthly. The principal amount is due on February 6, 2025, the maturity date. The Silverpeak Loan is collateralized by 12 single-tenant commercial properties, which were purchased for an aggregate purchase price of $25.5 million.

On September 12, 2014, the Company entered into an amended and restated credit agreement (the “Amended Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent, (“JPMorgan Chase”), U.S. Bank National Association and other lending institutions that may become parties to the Amended Credit Agreement. The agreement allows the Company to borrow up to $75.0 million in revolving loans (the “Revolving Loans”), and includes a $25.0 million term loan (the “Term Loan”), with the maximum amount outstanding not to exceed the borrowing base (the “Borrowing Base”), calculated as 65% of the aggregate value allocated to each qualified property comprising eligible collateral (collectively, the “Qualified Properties”) during the period from March 31, 2015 through September 11, 2015 and 60% of the Qualified Properties during the period from September 12, 2015 to September 12, 2017. As of March 31, 2015, the Company had $84.5 million of debt outstanding and $15.5 million available for borrowing under its secured revolving line of credit, as amended (the “Line of Credit”). The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the Line of Credit was $160.6 million as of March 31, 2015. As of March 31, 2015, the Line of Credit had a weighted average interest rate of 2.28%. The Line of Credit matures on September 12, 2017; however, the Company may elect to extend the maturity dates of such loans to September 12, 2019, subject to satisfying certain conditions described in the Amended Credit Agreement.

The Revolving Loans and Term Loan bear interest at rates dependent upon the type of loan specified by the Company. For a eurodollar rate loan the interest rate will be equal to the one-month, two-month, three-month or six-month LIBOR for the interest period, as elected by the Company, multiplied by the Statutory Reserve Rate (as defined in the Amended Credit Agreement), plus the applicable rate (the “Eurodollar Applicable Rate”). The Eurodollar Applicable Rate is based upon the Company’s overall leverage ratio, generally defined in the Amended Credit Agreement as the total consolidated outstanding indebtedness of the Company divided by the total consolidated asset value of the Company (as defined in the Amended Credit Agreement) (the “Leverage Ratio”), and ranges from 1.90% at a Leverage Ratio of 50.0% or less to 2.45% at a Leverage Ratio greater than 60.0%. For base rate committed loans, the interest rate will be a per annum amount equal to the greatest of: (a) JPMorgan Chase’s Prime Rate; (b) the Federal Funds Effective Rate (as defined in the Amended Credit Agreement) plus 0.50%; and (c) one-month LIBOR multiplied by the Statutory Reserve plus 1.0% plus the applicable rate (the “Base Rate Applicable Rate”). The Base Rate Applicable Rate is based upon the Leverage Ratio, and ranges from 0.90% at a Leverage Ratio of 50.0% or less to 1.45% at a Leverage Ratio greater than 60.0%. As of March 31, 2015, amounts outstanding on the Line of Credit accrued interest at an annual rate of 2.09%.

The Amended Credit Agreement contains customary representations, warranties, borrowing conditions and affirmative, negative and financial covenants, including minimum net worth, debt service coverage and leverage ratio requirements and dividend payout and REIT status requirements. The Amended Credit Agreement also includes usual and customary events of default and remedies for facilities of this nature. Based on the Company’s analysis and review of its results of operations and financial condition, as of March 31, 2015, the Company believes it was in compliance with the covenants of the Amended Credit Agreement.

On December 16, 2014, the Company entered into a $20.0 million unsecured revolving line of credit with Series C, LLC, an affiliate of the Company’s advisor (the “Series C Line of Credit”). The Series C Line of Credit bears interest at a rate per annum equal to the one-month LIBOR plus 2.45% with accrued interest payable monthly in arrears and principal due upon maturity on December 15, 2015. In the event the Series C Line of Credit is not paid off on the maturity date, the loan includes default provisions. The Series C Line of Credit has been approved by a majority of the Company’s board of directors (including a majority of the independent directors) not otherwise interested in the transaction as fair, competitive and commercially reasonable and no less favorable to the Company than a comparable loan between unaffiliated parties under the same circumstances. As of March 31, 2015, the Company had no amounts outstanding on the Series C Line of Credit and $20.0 million available for borrowing.

NOTE 7 — COMMITMENTS AND CONTINGENCIES

Litigation

In the ordinary course of business, the Company may become subject to litigation or claims. The Company is not aware of any pending legal proceedings of which the outcome is reasonably possible to have a material effect on its results of operations, financial condition or liquidity.

17

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2015

Environmental Matters

In connection with the ownership and operation of real estate, the Company potentially may be liable for costs and damages related to environmental matters. The Company owns certain properties that are subject to environmental remediation. In each case, the seller of the property, the tenant of the property and/or another third party has been identified as the responsible party for environmental remediation costs related to the respective property. Additionally, in connection with the purchase of certain of the properties, the respective sellers and/or tenants have indemnified the Company against future remediation costs. In addition, the Company carries environmental liability insurance on its properties that provides limited coverage for remediation liability and pollution liability for third-party bodily injury and property damage claims. Accordingly, the Company does not believe that it is reasonably possible that the environmental matters identified at such properties will have a material effect on its results of operations, financial condition or liquidity, nor is it aware of any environmental matters at other properties which it believes are reasonably possible to have a material effect on its results of operations, financial condition or liquidity.

NOTE 8 — RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS

The Company has incurred, and will continue to incur, commissions, fees and expenses payable to Cole Advisors and certain of its affiliates in connection with the Offering, and the acquisition, management and performance of the Company’s assets.

Offering

In connection with the Offering, CCC, the Company’s dealer manager, will receive selling commissions, an asset-based dealer manager fee and/or an asset-based distribution fee, as summarized in the table below for each class of common stock:

	Selling Commission (1)	Dealer Manager Fee (2)		Distribution Fee (2)
W Shares	—	0.55	%	—
A Shares	up to 3.75%	0.55	%	0.50	%
I Shares	—	0.25	%	—

(1) The selling commission is based on the offering price for A Shares. The selling commission expressed as a percentage of NAV per A Share, rather than the offering price, is up to 3.90%, subject to rounding and the effect of volume discounts the Company is offering on certain purchases of $150,001 or more of A Shares. Selling commissions are deducted directly from the offering price for A Shares and paid to CCC. CCC reallows 100% of the selling commissions on A Shares to participating broker-dealers.

(2) The dealer manager and distribution fees accrue daily in an amount equal to 1/365th of the percentage of NAV per W Share, A Share or I Share, as applicable, for such day on a continuous basis. CCC, in its sole discretion, may reallow a portion of the dealer manager fee and distribution fee to participating broker-dealers.

All organization and offering expenses associated with the sale of the Company’s common stock (excluding selling commissions, the distribution fee and the dealer manager fee) are paid for by Cole Advisors or its affiliates and can be reimbursed by the Company up to 0.75% of the aggregate gross offering proceeds, excluding selling commissions charged on A Shares sold in the Primary Offering. As of March 31, 2015, Cole Advisors or its affiliates had paid organization and offering costs in excess of the 0.75% in connection with the Offering. These excess costs were not included in the financial statements of the Company because such costs were not a liability of the Company as they exceeded 0.75% of gross proceeds from the Offering. As the Company raises additional proceeds from the Offering, these excess costs may become payable to Cole Advisors.

18

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2015

The Company recorded commissions, fees and expense reimbursements as shown in the table below for services provided by Cole Advisors and its affiliates related to the services described above during the periods indicated (in thousands):

	Three Months Ended March 31,
	2015		2014
Offering:
Selling commissions	$	15	$	25
Selling commissions reallowed by CCC	$	15	$	25
Distribution fees	$	20	$	1
Distribution fees reallowed by CCC	$	19	$	—
Dealer manager fees	$	170	$	100
Dealer manager fees reallowed by CCC	$	25	$	2
Organization and offering expense reimbursement	$	35	$	88

As of March 31, 2015, $225,000 had been incurred, but not yet paid, for services provided by Cole Advisors or its affiliates in connection with the offering stage of the Offering and was a liability to the Company.

Acquisitions, Operations and Performance

The Company pays Cole Advisors an asset-based advisory fee that is payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 0.90% of the Company’s NAV for each class of common stock, for each day.

The Company will reimburse Cole Advisors for the operating expenses it paid or incurred in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse for any amount by which its operating expenses (including the advisory fee) at the end of the four preceding fiscal quarters exceeds the greater of (1) 2% of average invested assets; or (2) 25% of net income, other than any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of assets for that period.

In addition, the Company will reimburse Cole Advisors for all out-of-pocket expenses incurred in connection with the acquisition of the Company’s investments. While most of the acquisition expenses are expected to be paid to third parties, a portion of the out-of-pocket acquisition expenses may be reimbursed to Cole Advisors or its affiliates. Acquisition expenses, together with any acquisition fees paid to third parties for a particular real estate-related asset, will in no event exceed 6% of the gross purchase price of such asset.

Cole Advisors implemented an expense cap for the three months ended December 31, 2013, which has been continued for the three months ended March 31, 2015 and will be continued for the three months ending June 30, 2015, whereby Cole Advisors will fund all general and administrative expenses of the Company that are in excess of an amount calculated by multiplying the average NAV for the respective three month period by an annualized rate of 1.25% (the “Excess G&A”). General and administrative expenses, as presented in these condensed consolidated unaudited financial statements, include, but are not limited to, legal fees, audit fees, board of directors costs, professional fees, escrow and trustee fees, insurance, state franchise and income taxes and fees for unused amounts on the Line of Credit. At Cole Advisors’ discretion, it may fund the Excess G&A through reimbursement to the Company or payment to third parties on behalf of the Company, but in no event will the Company be liable to Cole Advisors in future periods for such amounts paid or reimbursed. During the three months ended March 31, 2015, the Company incurred $66,000 of Excess G&A which, was reimbursed by Cole Advisors subsequent to March 31, 2015. will be reimbursed by Cole Advisors.

As compensation for services provided pursuant to the advisory agreement, the Company will also pay Cole Advisors a performance-based fee calculated based on the Company’s annual total return to stockholders for each class of common stock (defined below), payable annually in arrears. The performance fee will be calculated such that for any calendar year in which the total return per share for a particular class exceeds 6% (the “6% Return”), Cole Advisors will receive 25% of the excess total return on such class above the 6% Return allocable to that class, but in no event will the Company pay Cole Advisors more than 10% of the aggregate total return, for that class, for such year. However, in the event the NAV per share of the Company’s W Shares, A Shares and I Shares decreases below the base NAV for the respective share class ($15.00, $16.72 and  $16.82 for the W Shares, A Shares and I Shares, respectively) (the “Base NAV”), the performance-based fee for a respective class will not be calculated on any increase in NAV up to the Base NAV for the respective share class. In addition, the performance fee will not be paid with respect to any calendar year in which the NAV per share as of the last business day of the

19

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2015

calendar year (the “Ending NAV”) for the respective share class is less than the Base NAV of that class. The Base NAV of any share class is subject to downward adjustment in the event that the Company’s board of directors, including a majority of the independent directors, determines that such an adjustment is necessary to provide an appropriate incentive to Cole Advisors to perform in a manner that seeks to maximize stockholder value and is in the best interests of the Company’s stockholders. In the event of any stock dividend, stock split, recapitalization or similar change in the Company’s capital structure, the Base NAV for the respective share class shall be ratably adjusted to reflect the effect of any such event.

The total return to stockholders is defined, for each class of the Company’s common stock, as the change in NAV per share plus distributions per share for such class. The NAV per share for a class calculated on the last trading day of a calendar year shall be the amount against which changes in NAV per share for such class are measured during the subsequent calendar year. Therefore, for each class of the Company’s common stock, payment of the performance-based component of the advisory fee (1) is contingent upon the Company’s actual annual total return exceeding the 6% Return and the Ending NAV per share for the respective share class being greater than the Base NAV of that class, (2) will vary in amount based on the Company’s actual performance, (3) cannot cause the Company’s total return as a percentage of stockholders’ invested capital for the year to be reduced below 6% and (4) is payable to Cole Advisors if the Company’s total return exceeds the 6% Return in a particular calendar year, even if the total return to stockholders (or any particular stockholder) on a cumulative basis over any longer or shorter period has been less than 6% per annum. Cole Advisors will not be obligated to return any portion of advisory fees paid based on the Company’s subsequent performance.

The Company recorded fees and expense reimbursements as shown in the table below for services provided by Cole Advisors or its affiliates related to the services described above during the periods indicated (in thousands):

	Three Months Ended March 31,
	2015		2014
Acquisitions, Operations and Performance:
Acquisition expense reimbursement	$	25	$	—
Advisory fee	$	284	$	174
Operating expense reimbursement	$	—	$	—
Performance fee	$	—	$	—

As of March 31, 2015, $594,000 had been incurred, but not yet paid, for services provided by Cole Advisors or its affiliates in connection with the acquisitions and operations stage and was a liability to the Company. Cole Advisors waived its right to receive acquisition expense reimbursements for the three months ended March 31, 2014; accordingly, the Company did not reimburse Cole Advisors for any acquisition expenses during these periods. Additionally, Cole Advisors waived its right to receive operating expense reimbursements for the three months ended March 31, 2015 and 2014; accordingly, the Company did not reimburse Cole Advisors for any such expenses during the three months ended March 31, 2015 and 2014. During the three months ended March 31, 2015, Cole Advisors permanently waived its rights to expense reimbursements totaling approximately $258,000, and thus the Company is not responsible for this amount.

Due to Affiliates

As of March 31, 2015, $834,000 was due to Cole Advisors and its affiliates related to advisory, distribution and dealer manager fees and the reimbursement of organization, offering and acquisition expenses as well as platform fees, which were included in amounts due to affiliates on the condensed consolidated unaudited balance sheet. As of December 31, 2014, $1.8 million was due to Cole Advisors and its affiliates related to performance fees, advisory, distribution and dealer manager fees, the reimbursement of organization and offering expenses, and escrow deposits that were paid on the Company’s behalf in connection with the acquisition of the Company’s properties, which were included in amounts due to affiliates on the condensed consolidated unaudited balance sheet.

NOTE 9 — ECONOMIC DEPENDENCY

Under various agreements, the Company has engaged or will engage Cole Advisors and its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, the sale of shares of the Company’s common stock available for issuance, as well as other administrative responsibilities for the Company including accounting services and investor relations. As a result of these relationships, the Company is dependent upon Cole Advisors and its affiliates. In the

20

COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2015

event that these companies are unable to provide the Company with these services, the Company would be required to find alternative providers of these services.

NOTE 10 — SUBSEQUENT EVENTS

Investment in Real Estate Assets

Subsequent to March 31, 2015, the Company did not acquire any real estate properties.

Status of the Offering

As of May 11, 2015, the Company had received $147.6 million in gross offering proceeds through the issuance of approximately 8.8 million shares of its common stock in the Offering (including shares issued pursuant to the DRIP).

Share Redemptions

Subsequent to March 31, 2015 through May 11, 2015, the Company redeemed approximately 58,500 shares for $1.1 million.

Line of Credit

As of May 11, 2015, the Company had $70.0 million outstanding under the Line of Credit and $40.8 million available for borrowing under the Line of Credit and the Series C Line of Credit.

Cap on General and Administrative Expenses

As discussed in Note 8 to these condensed consolidated unaudited financial statements, Cole Advisors stated that it will continue the existing expense cap for the three months ending June 30, 2015, whereby Cole Advisors will fund all Excess G&A of the Company for such periods.

Property Dispositions

Subsequent to March 31, 2015, as a part of the Company's active portfolio management, the Company sold one multi-tenant and two single-tenant properties, for an aggregate gross sale price of $15.9 million resulting in net cash proceeds of $15.5 million, of which $10.6 million was used to pay down the Company’s line of credit. As of March 31, 2015, one multi-tenant property was classified as held for sale, as discussed in Note 2 to these condensed consolidated unaudited financial statements. The two single-tenant properties did not meet the held for sale criteria as of March 31, 2015.

Available-for-Sale Securities

Subsequent to March 31, 2015, we allocated $5.0 million for additional investment in the marketable securities portfolio, managed by our independent fund accountant.

21

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated unaudited financial statements, the notes thereto and the other unaudited financial data included in this Quarterly Report on Form 10-Q. The following discussion should also be read in conjunction with our audited consolidated financial statements and the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2014. The terms “we,” “us,” “our” and the “Company” refer to Cole Real Estate Income Strategy (Daily NAV), Inc. and unless otherwise defined herein, capitalized terms used herein shall have the same meanings as set forth in our condensed consolidated unaudited financial statements and the notes thereto.

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q of Cole Real Estate Income Strategy (Daily NAV), Inc., other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable by law. Such statements include, in particular, statements about our plans, strategies and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or other similar words.

Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

• changes in economic conditions generally and the real estate and securities markets specifically;

• the effect of financial leverage, including changes in interest rates, availability of credit, loss of flexibility due to negative and affirmative covenants, refinancing risk at maturity and generally the increased risk of loss if our investments fail to perform as expected;

• our ability to raise a substantial amount of capital in the near term;

• our ability to access sources of liquidity when we have the need to fund redemptions of common stock in excess of the proceeds from the sales of shares of our common stock in our continuous offering and the consequential risk that we may not have the resources to satisfy redemption requests;

• our ability to effectively deploy the proceeds raised in our public offering;

• legislative or regulatory changes (including changes to the laws governing the taxation of REITs); and

• changes to GAAP.

Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We caution readers not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date this Quarterly Report on Form 10-Q is filed with the SEC. We make no representation or warranty (express or implied) about the accuracy of any such forward-looking statements contained in this Quarterly Report on Form 10-Q. Additionally, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. The forward-looking statements should be read in light of the risk factors identified in “Item 1A – Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2014.

22

Overview

We were formed on July 27, 2010 to acquire and operate a diversified portfolio of (1) necessity retail, office and industrial properties that are leased to creditworthy tenants under long-term net leases, and are strategically located throughout the United States and U.S. protectorates, (2) notes receivable secured by commercial real estate, including the origination of loans, and (3) cash, cash equivalents, other short-term investments and traded real estate securities. We commenced our principal operations on December 7, 2011, when we issued the initial $10.0 million in shares of our common stock in the Offering and acquired our first real estate property. We have no paid employees and are externally advised and managed by Cole Advisors, our advisor. We elected to be taxed, and currently qualify, as a REIT for federal income tax purposes.

On February 7, 2014, ARCP acquired Cole, which, prior to its acquisition, indirectly owned and/or controlled our external advisor, Cole Advisors, our dealer manager, CCC, our property manager, CREI Advisors, and our sponsor, Cole Capital. As a result of ARCP’s acquisition of Cole, ARCP indirectly owns and/or controls Cole Advisors, CCC, CREI Advisors and Cole Capital.

As of March 31, 2015, we owned 75 properties located in 26 states, comprised of 1.8 million rentable square feet of commercial space, including the square footage of buildings which are on land subject to ground leases. Our operating results and cash flows are primarily influenced by rental income from our commercial properties, interest expense on our property indebtedness and acquisition and operating expenses. Rental and other property income accounted for 93% and 92%, respectively, of our total revenue for the three months ended March 31, 2015 and 2014. As 99.6% of our rentable square feet was under lease as of March 31, 2015 with a weighted average remaining lease term of 11.7 years, we believe our exposure to changes in commercial rental rates on our portfolio is substantially mitigated, except for vacancies caused by tenant bankruptcies or other factors. Cole Advisors regularly monitors the creditworthiness of our tenants by reviewing the tenant’s financial results, credit rating agency reports, when available, on the tenant or guarantor, the operating history of the property with such tenant, the tenant’s market share and track record within its industry segment the general health and outlook of the tenant’s industry segment, and other information for changes and possible trends. If our advisor identifies significant changes or trends that may adversely affect the creditworthiness of a tenant, it will gather a more in-depth knowledge of the tenant’s financial condition and, if necessary, attempt to mitigate the tenant credit risk by evaluating the possible sale of the property or identifying a possible replacement tenant should the current tenant fail to perform on the lease.

As of March 31, 2015, the debt leverage ratio of our consolidated real estate assets, which is the ratio of debt to total gross real estate and related assets, net of gross intangible lease liabilities, was 53%. As we acquire additional commercial real estate, we will be subject to changes in real estate prices and changes in interest rates on any current variable rate debt, refinancings or new indebtedness used to acquire the properties. We may manage our risk of changes in real estate prices on future property acquisitions, when applicable, by entering into purchase agreements and loan commitments simultaneously, or through loan assumption, so that our operating yield is determinable at the time we enter into a purchase agreement, by contracting with developers for future delivery of properties or by entering into sale-leaseback transactions. We manage our interest rate risk by monitoring the interest rate environment in connection with our future property acquisitions, when applicable, or upcoming debt maturities to determine the appropriate financing or refinancing terms, which may include fixed rate loans, variable rate loans or interest rate hedges. If we are unable to acquire suitable properties or obtain suitable financing terms for future acquisitions or refinancing, our results of operations may be adversely affected.

Results of Operations

Our results of operations are influenced by the timing of acquisitions and the operating performance of our real estate investments. Due to the volume of acquisitions between March 31, 2014 and March 31, 2015, a discussion of same store sales is not considered meaningful and as such is not included in the results of operations. The following table shows the property statistics of our consolidated real estate assets as of March 31, 2015 and 2014:

	As of March 31,
	2015		2014
Number of properties	75		40
Approximate rentable square feet (1)	1.8 million		775	,000
Percentage of rentable square feet leased	99.6	%	99.8%

(1) Includes square feet of the buildings on land that are subject to ground leases.

23

The following table summarizes our consolidated real estate investment activity during the three months ended March 31, 2015 and 2014:

	Three Months Ended March 31,
	2015		2014
Properties acquired	—		8
Approximate purchase price of acquired properties	$	—	$	14.0	million
Approximate rentable square feet	—		55,000

As shown in the tables above, we owned 75 commercial properties as of March 31, 2015, compared to 40 commercial properties as of March 31, 2014. Accordingly, our results of operations for the three months ended March 31, 2015, compared to the three months ended March 31, 2014, reflect significant increases in most categories.

Three Months EndedMarch 31, 2015 Compared to the Three Months EndedMarch 31, 2014

Revenue. Revenue increased$2.4 million to $4.8 million for the three months endedMarch 31, 2015, compared to $2.4 million for the three months endedMarch 31, 2014. Of this amount, rental and other property income increased$2.3 million to $4.5 million for the three months endedMarch 31, 2015, compared to $2.2 million for the three months endedMarch 31, 2014. The increase was primarily due to the acquisition of 35 properties subsequent to March 31, 2014. We also recorded tenant reimbursement income of $337,000 related to certain operating expenses paid by us subject to reimbursement by tenants during the three months endedMarch 31, 2015, compared to $189,000 during the three months endedMarch 31, 2014.

General and Administrative Expenses. General and administrative expenses increased $199,000 to $435,000 for the three months endedMarch 31, 2015, compared to $236,000 for the three months endedMarch 31, 2014, due to increased legal fees, other professional fees, state taxes and board of director fees. The primary general and administrative expense items are professional fees, board of directors costs, state franchise and income taxes, escrow and trustee fees, fees for unused amounts on the Line of Credit, and other licenses and fees. During the three months endedMarch 31, 2015, we incurred $66,000 of Excess G&A, which was reimbursed by our advisor subsequent to March 31, 2015.

Property Operating Expenses. Property operating expenses increased$167,000 to $389,000 for the three months endedMarch 31, 2015, compared to $222,000 for the three months endedMarch 31, 2014. The increase was primarily due to the acquisition activity subsequent to March 31, 2014. The primary property operating expense items are property taxes, repairs and maintenance and property insurance.

Advisory Expenses. Advisory expenses increased$110,000 to $284,000 for the three months endedMarch 31, 2015, compared to $174,000 for the three months endedMarch 31, 2014, as we recorded advisory fees earned by our advisor pursuant to our advisory agreement due to an increase in our NAV, which was primarily a result of the issuance of common stock subsequent to March 31, 2014.

Acquisition Related Expenses. Acquisition related expenses decreased$129,000 to $69,000 for the three months endedMarch 31, 2015, compared to $198,000 for the three months endedMarch 31, 2014. The decrease was primarily due to no property acquisitions during the three months endedMarch 31, 2015, compared to acquisition related expenses incurred in connection with the purchase of eight commercial properties for an aggregate purchase price of $14.0 million during the three months endedMarch 31, 2014.

Depreciation and Amortization Expenses. Depreciation and amortization expenses increased$854,000 to $1.6 million for the three months ended March 31, 2015, compared to $784,000 for the three months ended March 31, 2014. The increase was primarily related to depreciation and amortization on 35 properties acquired subsequent to March 31, 2014.

Interest and Other Expense, Net. Interest and other expense, net increased$429,000 to $886,000 for the three months ended March 31, 2015, compared to $457,000 for the three months endedMarch 31, 2014, primarily due to an increase of $77.6 million in our average outstanding debt balance for the three months endedMarch 31, 2015 compared to the three months endedMarch 31, 2014.

Distributions

Our board of directors authorized a daily distribution, based on 365 days in the calendar year, of $0.002678083 per share for stockholders of record as of the close of business on each day of the period commencing on January 1, 2015 and ending on June 30, 2015. The daily distribution amount for each class of outstanding common stock is adjusted based on the relative NAV of the various classes each day so that, from day to day, distributions constitute a uniform percentage of the NAV per share of

24

all classes. As a result, from day to day, the per share daily distribution for each outstanding class of common stock may be higher or lower than the daily distribution amount authorized by our board of directors based on the relative NAV of each class of common stock on that day.

During the three months endedMarch 31, 2015 and 2014, we paid distributions of $1.7 million and $962,000, respectively, including $742,000 and $377,000, respectively, through the issuance of shares pursuant to the DRIP. Our distributions for the three months endedMarch 31, 2015 were fully funded by cash flows from operations, including cash flow in excess of distributions from the prior year, of $1.7 million, or 100%. Our distributions for the three months endedMarch 31, 2014 were funded by cash flows from operations, including cash flow in excess of distributions from the prior year, of $615,000, or 64%, and offering proceeds of $347,000, or 36%. Net cash flows for the three months endedMarch 31, 2015 and 2014 reflect a reduction of $69,000 and $198,000, respectively, for real estate acquisition related expenses incurred and expensed. We treat our real estate acquisition expenses as funded by proceeds from the Offering of our shares. Therefore, for consistency, proceeds from the issuance of common stock have been reported as a source of distributions to the extent that acquisition expenses have reduced net cash flows from operating activities in the current and prior periods.

Share Redemptions

We have adopted a share redemption plan to provide limited liquidity whereby, on a daily basis, stockholders may request that we redeem all or any portion of their shares. Our share redemption plan provides that, on each business day, stockholders may request that we redeem all or any portion of their shares, subject to a minimum redemption amount and certain short-term trading fees. The redemption price per share for each class on any business day will be our NAV per share for such class for that day, calculated by the independent fund accountant in accordance with our valuation policies.

Our share redemption plan includes certain redemption limits, including a quarterly limit and, in some cases, a stockholder by stockholder limit. During the three months endedMarch 31, 2015, we received redemption requests for, and redeemed a total of approximately 168,000 shares of our common stock for $3.0 million, comprised of approximately 141,000 W Shares and 27,000 A Shares of our common stock for $2.5 million and $474,000, respectively. From March 31, 2015 through May 11, 2015, the Company redeemed approximately 58,500 shares for $1.1 million.

We intend to fund share redemptions with available cash, proceeds from our liquid investments and proceeds from sales of additional shares. We may, after taking the interests of our Company as a whole and the interests of our remaining stockholders into consideration, use proceeds from any available sources at our disposal to satisfy redemption requests, including, but not limited to, proceeds from sales of additional shares, excess cash flow from operations, sales of our liquid investments, incurrence of indebtedness and, if necessary, proceeds from the disposition of real estate properties or real estate-related assets. In an effort to have adequate cash available to support our share redemption plan, Cole Advisors may determine to reserve borrowing capacity under the Line of Credit. Cole Advisors could then elect to borrow against the Line of Credit in part to redeem shares presented for redemption during periods when we do not have sufficient proceeds from the sale of shares in the Offering to fund all redemption requests.

Liquidity and Capital Resources

General

Our principal demands for funds will be for real estate and real estate related investments, for the payment of acquisition related expenses, operating expenses, distributions and redemptions to stockholders and principal and interest on any current and any future indebtedness. Generally, cash needs for items other than acquisitions and acquisition related expenses will be generated from operations of our current and future investments. We expect to meet cash needs for acquisitions from the net proceeds of the Offering and from debt financings. The sources of our operating cash flows will primarily be driven by the rental income received from current and future leased properties. We expect to continue to raise capital through the Offering and to utilize such funds and future proceeds from secured or unsecured financing to complete future property acquisitions. Refer to Item 1A - Risk Factors for potential impacts to our ability to raise capital in the near term.

Our investment guidelines provide that we will target the following aggregate allocation to relatively liquid investments, such as U.S. government securities, agency securities, corporate debt, publicly traded debt and equity real estate-related securities, cash, cash equivalents and other short-term investments and, in Cole Advisors’ discretion, a line of credit (collectively, the “Liquid Assets”): (1) 10% of our NAV up to $1.0 billion; and (2) 5% of our NAV in excess of $1.0 billion. To the extent that Cole Advisors elects to maintain borrowing capacity under a line of credit, the amount available under the line of credit will be included in calculating the Liquid Assets under these guidelines. These are guidelines, and our stockholders should not expect that we will, at all times, hold liquid assets at or above the target levels or that all liquid assets will be available to satisfy redemption requests as we receive them. We anticipate that both our overall allocation to liquid assets as a percentage of our NAV and our allocation to different types of liquid assets will vary. In making these determinations, our

25

advisor will consider our receipt of proceeds from sales of additional shares, our cash flow from operations, available borrowing capacity under a line of credit, if any, or from additional mortgages on our real estate, our receipt of proceeds from sales of assets and the anticipated use of cash to fund redemptions, as well as the availability and pricing of different investments. The amount of the Liquid Assets is determined by our advisor, in its sole discretion, but is subject to review by our independent directors on a quarterly basis.

Short-term Liquidity and Capital Resources

On a short-term basis, our principal demands for funds will be for operating expenses, distributions and redemptions to stockholders and interest on our outstanding debt. We expect to meet our short-term liquidity requirements through available cash, cash provided by property operations, proceeds from the Offering and borrowings from the Line of Credit, Series C Line of Credit or other borrowings. As of March 31, 2015, the Borrowing Base under the Line of Credit was $100.0 million and we had $15.5 million available for borrowing. In addition, as of March 31, 2015, we had $20.0 million available for borrowing on our Series C Line of Credit. As of May 11, 2015, we had $70.0 million outstanding under the Line of Credit and $40.8 million available for borrowing on the Line of Credit and the Series C Line of Credit. We believe that the resources stated above will be sufficient to satisfy our operating requirements for the foreseeable future, and we do not anticipate a need to raise funds from sources other than those described above within the next 12 months.

The Line of Credit has a scheduled maturity of September 12, 2017; however, we may elect to extend the maturity date for a period of 24 months upon the satisfaction of certain conditions in the Credit Agreement. The Series C Line of Credit has a scheduled maturity of December 15, 2015; however, no amounts were outstanding as of May 11, 2015. As a result, we believe that the resources stated above will be sufficient to satisfy our short-term operating requirements, and we do not anticipate a need to raise funds from sources other than those described above within the next 12 months.

Long-term Liquidity and Capital Resources

On a long-term basis, our principal demands for funds will be for property and other asset acquisitions and the payment of tenant improvements, operating expenses, including debt service payments on any outstanding indebtedness, and distributions and redemptions to our stockholders. We expect to meet our long-term liquidity requirements through proceeds from the Offering, secured or unsecured financings from banks and other lenders, any available capacity on the Line of Credit by the addition of properties to the Borrowing Base, proceeds from the sale of marketable securities and net cash flows provided by operations.

We expect that substantially all net cash flows from operations will be used to pay distributions to our stockholders after certain capital expenditures, including tenant improvements and leasing commissions, are paid; however, we may use other sources to fund distributions, as necessary, including proceeds from the Offering, borrowings on the Amended Credit Facility or the Series C Loan and/or future borrowings on our unencumbered assets. To the extent that cash flows from operations are lower due to fewer properties being acquired or lower than expected returns on the properties, distributions paid to our

stockholders may be lower. We expect that substantially all net cash flows from the Offering or debt financings will be used to fund acquisitions, certain capital expenditures identified at acquisition, repayments of outstanding debt or distributions to our stockholders.

As of March 31, 2015, we had received and accepted subscriptions for approximately 8.5 million shares of common stock for gross proceeds of $141.8 million. As of March 31, 2015, we had redeemed approximately 1.2 million W Shares and 27,500 A Shares of common stock for $21.1 million and $484,000, respectively. No requests for I Share redemptions were received during the three months ended March 31, 2015. No valid redemption requests received during the three months endedMarch 31, 2015 went unfulfilled.

As of March 31, 2015, we had $121.8 million of debt outstanding and $15.5 million of available borrowings on the Line of Credit and Series C Loan. See Note 6 to our condensed consolidated unaudited financial statements in this Quarterly Report on

26

Form 10-Q for certain terms of our debt. Our contractual obligations as of March 31, 2015 were as follows (in thousands):

	Payments due by period (1)
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Principal payments - line of credit (2)	$	84,500	$	—	$	84,500	$	—	$	—
Interest payments - line of credit (3)	4,390		1,793		2,597		—		—
Principal payments - fixed debt rate	37,254		—		—		—		37,254
Interest payments - fixed debt rate	11,974		1,486		2,965		2,969		4,554
Total	$	138,118	$	3,279	$	90,062	$	2,969	$	41,808

(1) The table does not include amounts due to our advisor or its affiliates pursuant to our advisory agreement because such amounts are not fixed and determinable.

(2) Does not include the impact of any extension. We may elect to extend the maturity of the Line of Credit for a period of 24 months upon the satisfaction of certain conditions in the Credit Agreement.

(3) Payment obligations for the amount outstanding under the Line of Credit were calculated based on an interest rate of 2.09% in effect as of March 31, 2015.

Our charter prohibits us from incurring debt that would cause our borrowings to exceed 75% of our gross assets, valued at the aggregate cost (before depreciation and other non-cash reserves), unless approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report. Our board of directors has adopted a policy to further limit our borrowings to 60% of the greater of cost (before depreciation or other non-cash reserves) or fair market value of our gross assets, unless the excess borrowing is approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report. During the initial period of the Offering, our board of directors, including a majority of our independent directors, approved borrowings exceeding this limit because we were and are in the process of raising sufficient equity capital to acquire our portfolio. After we have acquired a substantial portfolio, our advisor will target a leverage of 50% of the greater of cost (before deducting depreciation or other non-cash reserves) or fair market value of our gross assets. As of March 31, 2015, our ratio of debt to total gross real estate assets, net of gross intangible lease liabilities, was 53%.

Cash Flow Analysis

Operating Activities. Net cash provided by operating activities was $1.5 million for the three months endedMarch 31, 2015, compared to $615,000 for the three months endedMarch 31, 2014. The increase was primarily due to an increase in net income before non-cash adjustments for depreciation, amortization of intangibles, amortization of deferred financing costs and amortization of discounts on marketable securities of $1.7 million, offset by a decrease in our working capital balances of $769,000. See “— Results of Operations” for a more complete discussion of the factors impacting our operating performance.

Investing Activities. Net cash used in investing activities decreased$14.2 million to $25,000 for the three months endedMarch 31, 2015, compared to $14.2 million for the three months endedMarch 31, 2014. The decrease was due to the lack of acquisitions of commercial properties during three months endedMarch 31, 2015, compared to the acquisition of eight commercial properties during the three months endedMarch 31, 2014.

Financing Activities. Net cash provided by financing activities decreased$8.5 million to $541,000 for the three months endedMarch 31, 2015, compared to $9.1 million for the three months endedMarch 31, 2014. The decrease was primarily due to a decrease in net proceeds from the issuance of common stock of $7.5 million and an increase in redemptions of common stock of $2.5 million.

Election as a REIT

From the date of our formation and until the day following the date on which we issued shares to stockholders other than our initial stockholder, we were a qualified subchapter S subsidiary of our initial stockholder, and therefore were disregarded as an entity separate from our initial stockholder for U.S. federal income tax purposes. We have elected to be taxed, and currently qualify, as a REIT under the Internal Revenue Code of 1986, as amended. To maintain our qualification as a REIT, we must continue to meet certain requirements relating to our organization, sources of income, nature of assets, distributions of income to our stockholders and recordkeeping. As a REIT, we generally are not subject to federal income tax on taxable income that we distribute to our stockholders so long as we distribute at least 90% of our annual taxable income (determined without regard to the deduction for dividends paid and excluding certain non-cash items and net capital gains).

27

If we fail to maintain our qualification as a REIT for any reason in a taxable year and applicable relief provisions do not apply, we will be subject to tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates. We will not be able to deduct distributions paid to our stockholders in any year in which we fail to maintain our qualification as a REIT. We also will be disqualified for the four taxable years following the year during which qualification was lost unless we are entitled to relief under specific statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe that we are organized and operate in such a manner as to maintain our qualification as a REIT for federal income tax purposes. No provision for federal income taxes has been made in our accompanying condensed consolidated unaudited financial statements. We are subject to certain state and local taxes related to the operations of properties in certain locations, which, if applicable, have been provided for in our accompanying condensed consolidated unaudited financial statements.

Critical Accounting Policies and Estimates

Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If management’s judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses. We consider our critical accounting policies to be the following:

• Investment in and Valuation of Real Estate and Related Assets;

• Allocation of Purchase Price of Real Estate and Related Assets;

• Revenue Recognition; and

• Income Taxes.

A complete description of such policies and our considerations is contained in our Annual Report on Form 10-K for the year ended December 31, 2014 and our critical accounting policies have not changed during the three months endedMarch 31, 2015. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2014, and related notes thereto.

Commitments and Contingencies

We may be subject to certain commitments and contingencies with regard to certain transactions. Refer to Note 7 to our condensed consolidated unaudited financial statements in this Quarterly Report on Form 10-Q for further explanations.

Related-Party Transactions and Agreements

We have entered into agreements with Cole Advisors and its affiliates whereby we agree to pay certain fees to, or reimburse certain expenses paid by, Cole Advisors or its affiliates, primarily advisory and performance fees and expenses, organization and offering costs, selling commissions, dealer manager fees and expenses, distribution fees and reimbursement of certain acquisition and operating costs. See Note 8 to our condensed consolidated unaudited financial statements in this Quarterly Report on Form 10-Q for a discussion of the various related-party transactions, agreements and fees.

Subsequent Events

Certain events occurred subsequent to March 31, 2015 through the filing date of this Quarterly Report on Form 10-Q. Refer to Note 10 to our condensed consolidated unaudited financial statements in this Quarterly Report on Form 10-Q for further explanation.

Recent Accounting Pronouncements

Refer to Note 2 to our condensed consolidated unaudited financial statements in this Quarterly Report on Form 10-Q for further explanation. There have been no accounting pronouncements issued, but not yet applied by us, that we expect to have a significant impact on our financial statements.

28

Off-Balance Sheet Arrangements

As of March 31, 2015 and December 31, 2014, we had no material off-balance sheet arrangements that had or are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In connection with the acquisition of our properties, we have obtained variable rate debt financing, and are therefore exposed to changes in LIBOR. As of March 31, 2015, we had $84.5 million of variable rate debt outstanding on the Line of Credit, and a change of 50 basis points in interest rates would result in a change in interest expense of $423,000 per annum. In the future, our objectives in managing interest rate risks will be to limit the impact of interest rate changes on operations and cash flows, and to lower overall borrowing costs. To achieve these objectives, we expect to borrow primarily at interest rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates. In addition, we expect that we may enter into derivative financial instruments such as interest rate swaps, interest rate caps and rate lock arrangements in order to mitigate our interest rate risk. To the extent we enter into such arrangements, we will be exposed to credit and market risks including, but not limited to, the failure of any counterparty to perform under the terms of the derivative contract or the adverse effect on the value of the financial instrument resulting from a change in interest rates. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of March 31, 2015 was conducted under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures, as of March 31, 2015, were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

No change occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended March 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

29

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business we may become subject to litigation or claims. We are not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or to which our properties are the subject.

Item 1A. Risk Factors

There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2014.

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

On August 11, 2010, we sold 20,000 shares of common stock at $10.00 per share to our initial stockholder, for a total amount of $200,000. We issued these shares in a private transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) under the Securities Act. On September 20, 2011, our board of directors authorized a reverse stock split providing for the combination of each three shares of our common stock issued and outstanding into two shares of our common stock, resulting in 13,333 shares of common stock issued to our initial stockholder subsequent to the reverse stock split. Following ARCP’s acquisition of Cole, ARCP’s operating partnership, as the successor to our initial stockholder, continues to own 13,333 shares of our common stock.

On December 6, 2011, the Initial Registration Statement for our public offering of up to $4.0 billion in shares of common stock was declared effective under the Securities Act. The Initial Registration Statement covered up to $3.5 billion in shares in a primary offering and up to $500.0 million in shares pursuant to the DRIP. On December 7, 2011, we satisfied the conditions of our escrow agreement and accepted the initial subscription for 666,667 W Shares of our common stock in the offering under the Initial Registration Statement, at a price of $15.00 per share, resulting in gross proceeds of $10.0 million. Additionally, as of March 31, 2015, we were authorized to issue 10.0 million shares of preferred stock, but had none issued or outstanding.

As of March 31, 2015, we had issued approximately 8.5 million shares in the Offering for gross proceeds of $141.8 million, out of which we have incurred $1.6 million in dealer manager fees, selling commissions and distribution fees and $1.1 million in organization and offering costs. With the net offering proceeds of $139.7 million and the borrowings from the Line of Credit and note payable, we acquired $230.0 million in real estate and related assets and incurred $2.6 million of acquisition related expenses. The Company did not make any sales of unregistered securities during the three months ended March 31, 2015.

As of May 11, 2015, we have sold the following common shares and raised the following proceeds in connection with the Offering (dollar amounts in thousands):

	W Shares		A Shares		I Shares		Total
Primary Offering
Shares	7,254,118		934,552		388,856		8,577,526
Proceeds	$	120,688	$	15,962	$	6,764	$	143,414
Distribution Reinvestment Plan
Shares	205,076		22,477		16,465		244,018
Proceeds	$	3,528	$	393	$	287	$	4,208

We have adopted a share redemption plan to provide limited liquidity whereby, on a daily basis, stockholders may request that we redeem all or any portion of their shares. The redemption price per share for each class on any business day is equal to our NAV per share for such class for that day, calculated by the independent fund accountant after the close of business on the redemption request day, without giving effect to any share purchases or redemptions to be effected on such day. Subject to limited exceptions, stockholders who redeem their shares of our common stock within the first 365 days from the date of purchase are subject to a short-term trading fee of 2% of the aggregate NAV per share of the shares of common stock received. In each calendar quarter, net redemptions are limited under our share redemption plan to 5% of our total NAV as of the end of the immediately preceding quarter, plus any unused percentage carried over to the next quarter, but the maximum carryover percentage may never exceed 15% in the aggregate, and net redemptions in any quarter may never exceed 10% of the prior quarter’s NAV.

30

The provisions of the share redemption program in no way limit our ability to repurchase shares from stockholders by any other legally available means for any reason that our board of directors, in its discretion, deems to be in our best interest. During the three months ended March 31, 2015, we redeemed shares as follows:

Period	Total Number of Shares Redeemed	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 - January 31, 2015
W Shares	24,048	$	17.53	24,048	(1)
A Shares	3,374	$	17.16	3,374	(1)
February 1 - February 28, 2015
W Shares	69,437	$	17.83	69,437	(1)
A Shares	7,998	$	17.67	7,998	(1)
March 1 - March 31, 2015
W Shares	47,464	$	18.04	47,464	(1)
A Shares	15,526	$	17.72	15,526	(1)
Total	167,847			167,847	(1)

(1) A description of the maximum number of shares that may be purchased under our share redemption program, the date our share redemption program was announced (in the Initial Registration Statement and the Multi-Class Registration Statement) and the amount of shares approved under our share redemption program is included in the narrative preceding this table.

Item 3. Defaults Upon Senior Securities

No events occurred during the three months ended March 31, 2015 that would require a response to this item.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

No events occurred during the three months ended March 31, 2015 that would require a response to this item.

Item 6. Exhibits

The exhibits listed on the Exhibit Index (following the signature section of this Quarterly Report on Form 10-Q) are included herewith, or incorporated herein by reference.

31

SIGNATURE

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

Cole Real Estate Income Strategy (Daily NAV), Inc. (Registrant)
By:	/s/ Simon J. Misselbrook
Name:	Simon J. Misselbrook
Title:	Chief Financial Officer and Treasurer (Principal Financial Officer)

Date: May 13, 2015

32

EXHIBIT INDEX

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015 (and are numbered in accordance with Item 601 of Regulation S-K).

Exhibit No.	Description
3.1	Second Articles of Amendment and Restatement of Cole Real Estate Income Strategy (Daily NAV), Inc., dated as of August 26, 2013 (Incorporated by reference to the Company’s Form 8-K (File No. 333-169535), filed on August 26, 2013).
3.2	Bylaws of Cole Real Estate Income Strategy (Daily NAV), Inc. effective September 28, 2011 (Incorporated by reference to Exhibit 3.2 to the Company’s pre-effective amendment No. 4 to Form S-11 (File No. 333-169535), filed on November 3, 2011).
3.3	First Amendment of Bylaws effective June 14, 2012 (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K (File No. 333-169535), filed on June 19, 2012).
4.1	Amended and Restated Distribution Reinvestment Plan (Incorporated by reference to Appendix E to the Company’s prospectus filed pursuant to Rule 424(b)(3) (File No. 333-186656), filed on August 26, 2013).
4.2	Multiple Class Plan of Cole Real Estate Income Strategy (Daily NAV), Inc., dated as of August 26, 2013 (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K (File No. 333-169535), filed on August 26, 2013).
10.1*	Loan Agreement, dated February 6, 2015, by and between Cole FD Tatum NM, LLC, ARCP WG St. Louis MO, LLC, ARCP FD Hampton AR, LLC, ARCP NB Conyers GA, LLC, ARCP PM McAllen TX, LLC, ARCP FD Darby MT, LLC, ARCP BK Midwest City OK, LLC, ARCP ID Streetsboro OH, LLC, ARCP TC Dectur AL, LLC, ARCP AZ Vandalia OH, LLC, ARCP DG Topeka (43rd) KS, LLC, and ARCP DG Stacy MN, LLC and Silverpeak Real Estate Finance, LLC.
31.1*	Certifications of the Principal Executive Officer of the Company pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certifications of the Principal Financial Officer of the Company pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certifications of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

33

EX-31.1

Exhibit 31.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael T. Ezzell, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cole Real Estate Income Strategy (Daily NAV), Inc.;

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

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

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

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

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

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

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

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

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

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

Date:	May 13, 2015	/s/ MICHAEL T. EZZELL
		Name:	Michael T. Ezzell
		Title:	Chairman, Chief Executive Officer and President
			(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Simon J. Misselbrook, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cole Real Estate Income Strategy (Daily NAV), Inc.;

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

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

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

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

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

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

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

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

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

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

Date:	May 13, 2015	/s/ SIMON J. MISSELBROOK
		Name:	Simon J. Misselbrook
		Title:	Chief Financial Officer and Treasurer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C 1350)

Each of the undersigned officers of Cole Real Estate Income Strategy (Daily NAV), Inc. (the “Company”) hereby certifies, for purposes of Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

		/s/ MICHAEL T. EZZELL
		Name:	Michael T. Ezzell
		Title:	Chairman, Chief Executive Officer and President (Principal Executive Officer)
		/s/ SIMON J. MISSELBROOK
		Name:	Simon J. Misselbrook
Date:	May 13, 2015	Title:	Chief Financial Officer and Treasurer (Principal Financial Officer)

The foregoing certification is being furnished with the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2015 pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Valuation of real estate and related assets
Document Fiscal Year Focus	2015
Quarterly redemption capacity	10.00%	10.00%
Temporary Equity, Carrying Amount, Attributable to Parent	$ 13,120,000	$ 12,545,000
Document Period End Date	Mar. 31, 2015
Maximum | Advisors | Organization and offering expense reimbursement
Valuation of real estate and related assets
Organization and offering expense	0.75%
Building
Valuation of real estate and related assets
Acquired real estate asset, useful life	40 years
Fire Loss Property [Member]
Valuation of real estate and related assets
Value of property with potential impairment indicators	$ 1,100,000.000000000

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The condensed consolidated unaudited financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, the statements for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of full year results. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2014, and related notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The condensed consolidated unaudited financial statements should also be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q.

The condensed consolidated unaudited financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investment in and Valuation of Real Estate and Related Assets

Real estate and related assets are stated at cost, less accumulated depreciation and amortization. Amounts capitalized to real estate and related assets consist of the cost of acquisition, excluding acquisition related expenses, construction and any tenant improvements, major improvements and betterments that extend the useful life of the real estate and related assets and leasing costs. All repairs and maintenance are expensed as incurred.

The Company is required to make subjective assessments as to the useful lives of its depreciable assets. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life of the assets. Real estate and related assets, other than land, are depreciated or amortized on a straight-line basis. The estimated useful lives of the Company’s real estate and related assets by class are generally as follows:

Buildings	40 years
Tenant improvements	Lesser of useful life or lease term
Intangible lease assets	Lease term

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate and related assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to, bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, rental concessions and other factors, a significant decrease in a property’s revenues due to lease terminations, vacancies, co-tenancy clauses, reduced lease rates or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate and related assets to their respective fair values and recognize an impairment loss. Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions. As of March 31, 2015, the Company noted potential impairment indicators at a property with an aggregate carrying value of $1.1 million due to a fire loss at the property. However, based on insurance coverage and the expectation of continued rental income from the tenant, the Company’s estimate of undiscounted cash flows indicated that such carrying amount was expected to be recovered as of March 31, 2015, and as such no impairment loss was recorded. Nonetheless, it is reasonably possible that the estimate of undiscounted cash flows may change in the near term, which may result in the need to record an impairment loss to reduce such asset to fair value. Any such impairment losses will affect the Company’s assets and stockholders’ equity, operating and net income. The evaluation of properties for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions. No impairment indicators were identified and no impairment losses were recorded during the three months ended March 31, 2014.

When developing estimates of expected future cash flows, the Company makes certain assumptions regarding future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, terminal capitalization and discount rates, the expected number of months it takes to re-lease the property, required tenant improvements and the number of years the property will be held for investment. The use of alternative assumptions in estimating expected future cash flows could result in a different determination of the property’s expected future cash flows and a different conclusion regarding the existence of an impairment, the extent of such loss, if any, as well as the fair value of the real estate and related assets.

When a real estate asset is identified by the Company as held for sale, the Company will cease depreciation and amortization of the assets related to the property and estimate the fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount would be recorded to reflect the estimated fair value of the property, net of selling costs. During the three months endedMarch 31, 2015, the Company identified one multi-tenant property as held for sale, which was sold subsequent to March 31, 2015, as discussed in Note 10 to these condensed consolidated unaudited financial statements. No assets were identified as held for sale as of December 31, 2014.

Allocation of Purchase Price of Real Estate and Related Assets

Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and identified intangible assets and liabilities, consisting of the value of above market and below market leases and the value of in-place leases, based in each case on their respective fair values. Acquisition related expenses are expensed as incurred. The Company utilizes independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and buildings). The Company obtains an independent appraisal for each real property acquisition. The information in the appraisal, along with any additional information available to the Company’s management, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by the Company’s management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information.

The fair values of above market and below market lease intangibles are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (1) the contractual amounts to be paid pursuant to the in-place leases and (2) an estimate of fair market lease rates for the corresponding in-place leases, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease including any bargain renewal periods, with respect to a below market lease. The above market and below market lease intangibles are capitalized as intangible lease assets or liabilities, respectively. Above market leases are amortized as a reduction to rental income over the remaining terms of the respective leases. Below market leases are amortized as an increase to rental income over the remaining terms of the respective leases, including any bargain renewal periods. In considering whether or not the Company expects a tenant to execute a bargain renewal option, the Company evaluates economic factors and certain qualitative factors at the time of acquisition, such as the financial strength of the tenant, remaining lease term, the tenant mix of the leased property, the Company’s relationship with the tenant and the availability of competing tenant space. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above market or below market lease intangibles relating to that lease would be recorded as an adjustment to rental income.

The fair values of in-place leases include estimates of direct costs associated with obtaining a new tenant and opportunity costs associated with lost rental and other property income which are avoided by acquiring a property with an in-place lease. Direct costs associated with obtaining a new tenant include commissions and other direct costs, and are estimated in part by utilizing information obtained from independent appraisals and management’s consideration of current market costs to execute a similar lease. The intangible values of opportunity costs, which are calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease, are capitalized as intangible lease assets and are amortized to expense over the remaining term of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.

The Company may acquire certain properties subject to contingent consideration arrangements that may obligate the Company to pay additional consideration to the seller based on the outcome of future events. Additionally, the Company may acquire certain properties for which it funds certain contingent consideration amounts into an escrow account pending the outcome of certain future events. The outcome may result in the release of all or a portion of the escrow funds to the Company or the seller or a combination thereof. Contingent consideration arrangements will be based on a predetermined formula and have set time periods regarding the obligation to make future payments, including funds released to the seller from escrow accounts, or the right to receive escrowed funds as set forth in the respective purchase and sale agreement. Contingent consideration arrangements, including amounts funded through an escrow account, will be recorded upon acquisition of the respective property at their estimated fair value, and any changes to the estimated fair value, subsequent to acquisition, will be reflected in the accompanying condensed consolidated unaudited statements of operations. The determination of the amount of contingent consideration arrangements is based on the probability of several possible outcomes as identified by management.

The Company will estimate the fair value of assumed mortgage notes payable based upon indications of current market pricing for similar types of debt financing with similar maturities. Assumed mortgage notes payable will initially be recorded at their estimated fair value as of the assumption date, and any difference between such estimated fair value and the mortgage note’s outstanding principal balance will be amortized to interest expense over the term of the respective mortgage note payable.

The determination of the fair values of the real estate and related assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could impact the Company’s results of operations.

Investment in Marketable Securities

Investment in marketable securities consists primarily of the Company’s investment in corporate and government debt securities. The Company determines the appropriate classification for debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. As of March 31, 2015, the Company classified its investments as available-for-sale as the Company is not actively trading the securities; however, the Company may sell them prior to their maturity. These investments are carried at their estimated fair value with unrealized gains and losses reported in accumulated other comprehensive income.

The Company monitors its available-for-sale securities for impairments. A loss is recognized when the Company determines that a decline in the estimated fair value of a security below its amortized cost is other-than-temporary. The Company considers many factors in determining whether the impairment of a security is deemed to be other-than-temporary, including, but not limited to, the length of time the security has had a decline in estimated fair value below its amortized cost, the amount of the unrealized loss, the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value, recent events specific to the issuer or industry, external credit ratings and recent changes in such ratings. The analysis of determining whether the impairment of a security is deemed to be other-than-temporary requires significant judgment and assumptions. The use of alternative judgments and assumptions could result in a different conclusion.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method and is recorded in the accompanying condensed consolidated unaudited statements of operations in interest and other expense, net. Upon the sale of a security, the realized net gain or loss is computed on the specific identification method.

Restricted Cash and Escrows

Included in restricted cash were escrowed investor proceeds for which shares of common stock had not been issued as of March 31, 2015 and December 31, 2014.

Concentration of Credit Risk

As of March 31, 2015, the Company had cash on deposit, including restricted cash, at four financial institutions, in one of which the Company had deposits in excess of federally insured levels, totaling $6.2 million; however, the Company has not experienced any losses in such accounts. The Company limits significant cash deposits to accounts held by financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk on its cash deposits.

As of March 31, 2015, no single tenant accounted for greater than 10% of the Company’s 2015 gross annualized rental revenues. Tenants in the discount store, manufacturing, drugstore and grocery industries accounted for 15%13%, 10% and 10%, respectively, of the Company’s 2015 gross annualized rental revenues. Additionally, the Company has certain geographic concentrations in its property holdings. In particular, as of March 31, 2015, eight of the Company’s properties were located in Texas, accounting for 17% of the Company’s 2015 gross annualized rental revenues.

Offering and Related Costs

Cole Advisors funds all of the organization and offering costs associated with the sale of the Company’s common stock (excluding selling commissions, the distribution fee and the dealer manager fee) and is reimbursed for such costs up to 0.75% of gross proceeds from the Offering, excluding selling commissions charged on A Shares sold in the Primary Offering. As of March 31, 2015, Cole Advisors or its affiliates had paid organization and offering costs in excess of 0.75% in connection with the Offering. These excess costs were not included in the financial statements of the Company because such costs were not a liability of the Company as they exceeded 0.75% of gross proceeds from the Offering. As the Company raises additional proceeds from the Offering, these excess costs may become payable to Cole Advisors.

Redeemable Common Stock

The Company has adopted a share redemption program that permits its stockholders to redeem their shares, subject to certain limitations. The Company records amounts that are redeemable under the share redemption program as redeemable common stock outside of permanent equity on its condensed consolidated unaudited balance sheets. Redeemable common stock is recorded at the greater of the carrying amount or redemption value each reporting period. Changes in the value from period to period are recorded as an adjustment to capital in excess of par value.

As of March 31, 2015 and December 31, 2014, the quarterly redemption capacity was equal to 10% of the Company’s NAV, and this amount was recorded as redeemable common stock on the condensed consolidated unaudited balance sheet for a total of $13.1 million and $12.5 million, respectively.

Recent Accounting Pronouncements

In May 2014, the U.S. Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers, including real estate sales, in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted. The Company is currently evaluating the impact of the new standard, but does not believe it will have a material impact, when effective, on the Company’s condensed consolidated unaudited financial statements.

In February 2015, FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”), which eliminates the deferral of Financial Accounting Standard 167, modifies the evaluation of whether limited partnerships and similar legal entities are variable or voting interest entities, eliminates the presumption that the general partner should consolidate a limited partnership, modifies the consolidation analysis for reporting entities that are involved with variable interest entities, particularly those that have fee arrangements and related party relationships, and provides a scope exception for reporting entities with interests in legal entities that operate as registered money market funds. These changes will require re-evaluation of the consolidation conclusion for certain entities and will require the Company to revise its analysis regarding the consolidation or deconsolidation of such entities. ASU 2015-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, with early adoption permitted.  Companies may elect to apply the amendments in ASU 2015-02 using a modified retrospective approach or by applying the amendments retrospectively. The Company is currently evaluating the impact of the new standard on its financial statements.

In April 2015, FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentationof Debt Issuance Costs (“ASU 2015-03”). The update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than presenting the deferred charge as an asset. The previous requirement to recognize debt issuance costs as deferred charges conflicts with the guidance in FASB Concepts Statement No. 6, “Elements of Financial Statements,” which states that debt issuance costs are similar to debt discounts and effectively reduce the proceeds of borrowing, thereby increasing the effective interest rate. FASB Concepts Statement No. 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. After the update is adopted, debt disclosures would include the face amount of the debt liability and the effective interest rate. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and is to be applied retrospectively, with early adoption permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

XML

Marketable Securities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015 Security	Mar. 31, 2014	Dec. 31, 2014
Schedule of Available-for-sale Securities
Investment in marketable securities	$ 510		$ 490
Amortized cost	502
Unrealized Gain	8
Fair value	510
Amortized Cost Basis Rollforward
Marketable securities as of March 31, 2015	502
Unrealized Gain Rollforward
Marketable securities as of December 31, 2014	3
Sales of securities	0
Increase in fair value of marketable securities	5
Marketable securities as of March 31, 2015	8
Fair Value Rollforward
Increase in fair value of marketable securities	5
Marketable securities as of March 31, 2015	510
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Due within one year	75
Due after one year through five years	205
Due after five years through ten years	206
Due after ten years	16
Total	502
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Due within one year	75
Due after one year through five years	206
Due after five years through ten years	213
Due after ten years	16
Total	510
Available-for-sale Securities, Other Disclosure Items [Abstract]
Number of Securities Sold	3
Proceeds from sale of marketable securities	20	91
Unrealized gain on investments	5
Amortized Cost Basis
Schedule of Available-for-sale Securities
Amortized cost	502
Amortized Cost Basis Rollforward
Marketable securities as of December 31, 2014	487
Face value of marketable securities acquired	35
Amortization on marketable securities	0
Sales of securities	(20)
Marketable securities as of March 31, 2015	502
Fair Value Rollforward
Face value of marketable securities acquired	35
Amortization on marketable securities	0
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Total	502
Fair Value
Schedule of Available-for-sale Securities
Fair value	510
Amortized Cost Basis Rollforward
Face value of marketable securities acquired	35
Amortization on marketable securities	0
Unrealized Gain Rollforward
Increase in fair value of marketable securities	5
Fair Value Rollforward
Marketable securities as of December 31, 2014	490
Face value of marketable securities acquired	35
Amortization on marketable securities	0
Sales of securities	(20)
Increase in fair value of marketable securities	5
Marketable securities as of March 31, 2015	510
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	510
U.S. Treasury Bonds
Schedule of Available-for-sale Securities
Amortized cost	179
Unrealized Gain	5
Fair value	184
Amortized Cost Basis Rollforward
Marketable securities as of March 31, 2015	179
Unrealized Gain Rollforward
Marketable securities as of March 31, 2015	5
Fair Value Rollforward
Marketable securities as of March 31, 2015	184
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Total	179
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	184
U.S. Agency Bonds
Schedule of Available-for-sale Securities
Amortized cost	85
Unrealized Gain	0
Fair value	85
Amortized Cost Basis Rollforward
Marketable securities as of March 31, 2015	85
Unrealized Gain Rollforward
Marketable securities as of March 31, 2015	0
Fair Value Rollforward
Marketable securities as of March 31, 2015	85
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Total	85
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	85
Corporate Bonds
Schedule of Available-for-sale Securities
Amortized cost	238
Unrealized Gain	3
Fair value	241
Amortized Cost Basis Rollforward
Marketable securities as of March 31, 2015	238
Unrealized Gain Rollforward
Marketable securities as of March 31, 2015	3
Fair Value Rollforward
Marketable securities as of March 31, 2015	241
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Total	238
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Total	$ 241

XML

Real Estate Acquisitions (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2013
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Acquisition related expenses	$ 69,000	$ 198,000
2014 Acquisitions
Business Acquisition
Business acquisition, percentage of voting interests acquired		100.00%
Number of real estate acquisitions (in number of properties)		8
Total purchase price		14,000,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Land		2,874,000
Building and improvements		9,509,000
Total purchase price		14,032,000
Revenue of acquiree since acquisition date		122,000
Net income (loss) of acquiree since acquisition date		(112,000)
Acquisition related expenses		198,000
Pro forma basis
Revenue		2,496,000	1,046,000
Net income (loss)		461,000	(116,000)
2014 Acquisitions | Acquired in-place leases
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Acquired in-place leases and acquired above market leases		1,395,000
2014 Acquisitions | Acquired above market leases
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Acquired in-place leases and acquired above market leases		444,000
2014 Acquisitions | Acquired below market leases
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Acquired below market leases		$ (190,000)

XML

Line of Credit and Note Payable (Details) (USD $)	3 Months Ended	0 Months Ended
	Mar. 31, 2015	Feb. 06, 2015	Dec. 16, 2014	Dec. 31, 2014
Debt Instrument
Debt outstanding	$ 121,754,000
Weighted average interest rate	2.79%
Weighted average years to maturity	4 years 1 month 27 days
Debt Outstanding [Roll Forward]
Balance as of December 31, 2014	120,304,000
Debt Issuance	34,950,000
Repayments	(33,500,000)
Balance as of March 31, 2015	121,754,000
Debt security, amount, aggregate gross real estate assets net of gross intangible lease liabilities	160,600,000
Line of credit and notes payable	121,754,000			120,304,000
Line of Credit
Debt Outstanding [Roll Forward]
Debt instrument, interest rate, stated percentage	2.09%
Line of credit facilities, borrowing base Calculation, percentage applied to the value of qualified properties	65.00%
Line of credit and notes payable	84,500,000
Line of Credit | Revolving Credit Facility
Debt Instrument
Weighted average interest rate	2.28%
Debt Outstanding [Roll Forward]
Line of credit facility, maximum borrowing capacity	75,000,000
Line of credit, remaining borrowing capacity	15,500,000
JPMorgan Chase, Revolving Credit Facility | Line of Credit | Revolving Credit Facility
Debt Instrument
Debt outstanding	84,500,000
Debt Outstanding [Roll Forward]
Balance as of December 31, 2014	100,000,000
Debt Issuance	8,000,000
Repayments	(23,500,000)
Balance as of March 31, 2015	84,500,000
JPMorgan Chase, Revolving Credit Facility | Unsecured Debt | Term Loan
Debt Outstanding [Roll Forward]
Line of credit facility, maximum borrowing capacity	25,000,000
Fixed Rate Debt | Loans Payable
Debt Instrument
Debt outstanding	37,254,000
Debt Outstanding [Roll Forward]
Balance as of December 31, 2014	20,304,000
Debt Issuance	16,950,000
Repayments	0
Balance as of March 31, 2015	37,254,000
Debt security, amount, aggregate gross real estate assets net of gross intangible lease liabilities	59,200,000
Silverpeak Loan [Member] | Loans Payable
Debt Outstanding [Roll Forward]
Long-term debt		17,000,000.0
Number of properties held as collateral		12
Amended Credit Facility | Line of Credit
Debt Outstanding [Roll Forward]
Line of credit facilities, borrowing base Calculation, percentage applied to the value of qualified properties	60.00%
Affiliated Line of Credit, Series C, LLC Loan [Member] | Line of Credit | Revolving Credit Facility
Debt Instrument
Debt outstanding	0
Debt Outstanding [Roll Forward]
Balance as of December 31, 2014	0
Debt Issuance	10,000,000
Repayments	(10,000,000)
Balance as of March 31, 2015	0
Leverage Ratio Less than or Equal to Fifty Percent | Secured Revolving Credit Facility, Base Rate | Line of Credit | Revolving Credit Facility
Debt Outstanding [Roll Forward]
Debt instrument, interest rate, stated percentage	0.90%
Leverage ratio	50.00%
Leverage Ratio Less than or Equal to Fifty Percent | Secured Revolving Credit Facility, Eurodollar Rate | Line of Credit | Revolving Credit Facility
Debt Outstanding [Roll Forward]
Debt instrument, interest rate, stated percentage	1.90%
Leverage ratio	50.00%
Leverage Ratio Greater than Sixty-Five Percent | Secured Revolving Credit Facility, Base Rate | Line of Credit | Revolving Credit Facility
Debt Outstanding [Roll Forward]
Debt instrument, interest rate, stated percentage	1.45%
Leverage ratio	60.00%
Leverage Ratio Greater than Sixty-Five Percent | Secured Revolving Credit Facility, Eurodollar Rate | Line of Credit | Revolving Credit Facility
Debt Outstanding [Roll Forward]
Debt instrument, interest rate, stated percentage	2.45%
Leverage ratio	60.00%
Federal Funds Effective Rate | Secured Revolving Credit Facility | Line of Credit | Revolving Credit Facility
Debt Outstanding [Roll Forward]
Basis spread on variable rate	0.50%
Statutory Reserve Rate | Secured Revolving Credit Facility | Line of Credit | Revolving Credit Facility
Debt Outstanding [Roll Forward]
Basis spread on variable rate	1.00%
Commercial Real Estate | Silverpeak Loan [Member] | Loans Payable
Debt Outstanding [Roll Forward]
Debt instrument, interest rate, stated percentage	0.00%
Total purchase price		25,500,000
Series C, Llc [Member] | Affiliate of Company Advisor [Member] | Unsecured Debt | Revolving Credit Facility
Debt Instrument
Line of credit, amount outstanding	0
Debt Outstanding [Roll Forward]
Line of credit facility, maximum borrowing capacity			20,000,000.0
Line of credit, remaining borrowing capacity	$ 20,000,000
Series C, Llc [Member] | Affiliate of Company Advisor [Member] | London Interbank Offered Rate (LIBOR) [Member] | Unsecured Debt | Revolving Credit Facility
Debt Outstanding [Roll Forward]
Basis spread on variable rate			2.45%
Minimum | Fixed Rate Debt | Loans Payable
Debt Outstanding [Roll Forward]
Debt instrument, interest rate, stated percentage	3.82%
Maximum | Fixed Rate Debt | Loans Payable
Debt Outstanding [Roll Forward]
Debt instrument, interest rate, stated percentage	4.05%

XML

Related-Party Transactions and Arrangements (Details) (USD $)	3 Months Ended
	Mar. 31, 2015		Mar. 31, 2014	Dec. 31, 2014
Related Party Transaction
Due to Affiliate	$ 834,000			$ 1,816,000
Common Class W
Related Party Transaction
Share price, base net asset value	$ 15.00
Common Class A
Related Party Transaction
Share price, base net asset value	$ 16.72
Common Class I
Related Party Transaction
Share price, base net asset value	$ 16.82
Advisors
Related Party Transaction
Excess general and administrative expense, annualized rate limitation	1.25%
Due to affiliates	834,000			1,800,000
Advisors | Minimum
Related Party Transaction
Operating expense reimbursement percent of average invested assets	2.00%
Operating expense reimbursement percent of net income	25.00%
Selling commissions | Dealer manager | Common Class W
Related Party Transaction
Daily asset based related party fee percent	0.00%	[1]
Selling commissions | Dealer manager | Common Class A
Related Party Transaction
Daily asset based related party fee percent	3.75%	[1]
Common stock, share purchase volume discount	150,001
Selling commissions | Dealer manager | Common Class I
Related Party Transaction
Daily asset based related party fee percent	0.00%	[1]
Selling commissions | Dealer manager | Maximum | Common Class A
Related Party Transaction
Daily asset based related party fee percent	3.90%
Selling commissions | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	15,000		25,000
Selling commissions reallowed by CCC | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	15,000		25,000
Selling commissions reallowed by CCC | Advisors | Common Class A
Related Party Transaction
Daily asset based related party fee reallowed to third party percent	100.00%
Distribution fees | Dealer manager | Common Class W
Related Party Transaction
Daily asset based related party fee percent	0.00%	[2]
Distribution fees | Dealer manager | Common Class A
Related Party Transaction
Daily asset based related party fee percent	0.50%	[2]
Distribution fees | Dealer manager | Common Class I
Related Party Transaction
Daily asset based related party fee percent	0.00%	[2]
Distribution fees | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	20,000		1,000
Distribution fees reallowed by CCC | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	19,000		0
Dealer manager fees | Dealer manager | Common Class W
Related Party Transaction
Daily asset based related party fee percent	0.55%	[2]
Dealer manager fees | Dealer manager | Common Class A
Related Party Transaction
Daily asset based related party fee percent	0.55%	[2]
Dealer manager fees | Dealer manager | Common Class I
Related Party Transaction
Daily asset based related party fee percent	0.25%	[2]
Dealer manager fees | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	170,000		100,000
Dealer manager fees reallowed by CCC | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	25,000		2,000
Organization and offering expense reimbursement | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	35,000		88,000
Organization and offering expense reimbursement | Advisors | Maximum
Related Party Transaction
Organization and offering expense	0.75%
Commissions, Fees and Expense Reimbursements | Advisors
Related Party Transaction
Due to Affiliate	225,000
Acquisition and advisory fees and expenses | Advisors
Related Party Transaction
Daily asset based related party fee percent	0.90%
Related party transaction, expenses from transactions with related party	25,000		0
Acquisition and advisory fees and expenses | Advisors | Maximum
Related Party Transaction
Acquisition and advisory fee	6.00%
Excess general and administrative expenses to be reimbursed | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	66,000
Advisory fees | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	284,000		174,000
Operating expense reimbursement | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	0		0
Performance fee | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	0		0
Performance fee, percent applied to total return on stockholders' capital between 6 percent and 10 percent	25.00%
Performance fee | Advisors | Maximum
Related Party Transaction
Total return threshold to receive performance fee	10.00%
Performance fee | Advisors | Minimum
Related Party Transaction
Total return threshold to receive performance fee	6.00%
Fees and Expense Reimbursements | Advisors
Related Party Transaction
Due to Affiliate	594,000
Waived Fees and Expense Reimbursements | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	$ 258,000

[1] The selling commission is based on the offering price for A Shares. The selling commission expressed as a percentage of NAV per A Share, rather than the offering price, is up to 3.90%, subject to rounding and the effect of volume discounts the Company is offering on certain purchases of $150,001 or more of A Shares. Selling commissions are deducted directly from the offering price for A Shares and paid to CCC. CCC reallows 100% of the selling commissions on A Shares to participating broker-dealers.

[2] The dealer manager and distribution fees accrue daily in an amount equal to 1/365th of the percentage of NAV per W Share, A Share or I Share, as applicable, for such day on a continuous basis. CCC, in its sole discretion, may reallow a portion of the dealer manager fee and distribution fee to participating broker-dealers.

XML

Organization and Business

3 Months Ended

Mar. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND BUSINESS

ORGANIZATION AND BUSINESS

Cole Real Estate Income Strategy (Daily NAV), Inc. (the “Company”) is a Maryland corporation that was formed on July 27, 2010, which has elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes. Substantially all of the Company’s business is conducted through Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP (“Cole OP”), a Delaware limited partnership. The Company is the sole general partner of, and owns, directly or indirectly, 100% of the partnership interest in, Cole OP. The Company is externally managed by Cole Real Estate Income Strategy (Daily NAV) Advisors, LLC, a Delaware limited liability company (“Cole Advisors”), an affiliate of the Company’s sponsor, Cole Capital^®, which is a trade name used to refer to a group of affiliated entities directly or indirectly controlled by American Realty Capital Properties, Inc. (“ARCP”), a self-managed publicly traded REIT, organized as a Maryland corporation, listed on The NASDAQ Global Select Market. On February 7, 2014, ARCP acquired Cole Real Estate Investments, Inc. (“Cole”), which, prior to its acquisition, indirectly owned and/or controlled the Company’s external advisor, Cole Advisors, the Company’s dealer manager, Cole Capital Corporation (“CCC”), the Company’s property manager, CREI Advisors, LLC (“CREI Advisors”), and Cole Capital. As a result of ARCP’s acquisition of Cole, ARCP indirectly owns and/or controls Cole Advisors, CCC, CREI Advisors and Cole Capital.

On December 6, 2011, pursuant to a registration statement filed on Form S-11 (Registration No. 333-169535) (the “Initial Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”), the Company commenced its initial public offering on a “best efforts” basis of $4.0 billion in shares of common stock. On August 26, 2013, pursuant to a registration statement filed on Form S-11 (Registration No. 333-186656) (the “Multi-Class Registration Statement”) under the Securities Act, the Company designated the existing shares of the Company’s common stock that were sold prior to such date to be Wrap Class shares (“W Shares”) of common stock and registered two new classes of the Company’s common stock, Advisor Class shares (“A Shares”) and Institutional Class shares (“I Shares”). Pursuant to the Multi-Class Registration Statement, the Company is offering up to $4.0 billion in shares of common stock of the three classes (the “Offering”), consisting of $3.5 billion in shares in the Company’s primary offering (the “Primary Offering”) and $500.0 million in shares pursuant to a distribution reinvestment plan (the “DRIP”). The Company is offering to sell any combination of W Shares, A Shares and I Shares with a dollar value up to the maximum offering amount.

The per share purchase price for each class of common stock varies from day-to-day and, on each business day, is equal to, for each class of common stock, the Company’s net asset value (“NAV”) for such class, divided by the number of shares of that class outstanding as of the close of business on such day, plus, for A Shares sold in the Primary Offering, applicable selling commissions. The Company’s NAV per share is calculated daily as of the close of business by an independent fund accountant using a process that reflects (1) estimated values of each of the Company’s commercial real estate assets, related liabilities and notes receivable secured by real estate provided periodically by the Company’s independent valuation expert in individual appraisal reports, (2) daily updates in the price of liquid assets for which third party market quotes are available, (3) accruals of daily distributions and (4) estimates of daily accruals, on a net basis, of operating revenues, expenses, debt service costs and fees. As of March 31, 2015, the NAV per share for W Shares, A Shares and I Shares was $18.08, $18.07 and $18.15, respectively. The Company’s NAV is not audited or reviewed by its independent registered public accounting firm.

The Company intends to use substantially all of the net proceeds from the Offering to acquire and operate a diversified portfolio primarily consisting of (1) necessity retail, office and industrial properties that are leased to creditworthy tenants under long-term net leases and are strategically located throughout the United States and U.S. protectorates, (2) notes receivable secured by commercial real estate, including the origination of loans, and (3) cash, cash equivalents, other short-term investments and traded real estate-related securities. As of March 31, 2015, the Company owned 75 commercial properties located in 26 states, containing 1.8 million rentable square feet of commercial space, including the square feet of buildings which are on land subject to ground leases. As of March 31, 2015, these properties were 99.6% leased.

The Company is structured as a perpetual-life, non-exchange traded REIT. This means that, subject to regulatory approval of our filing for additional offerings, the Company will be selling shares of common stock on a continuous basis and for an indefinite period of time to the extent permissible under applicable law. The Company will endeavor to take all reasonable actions to avoid interruptions in the continuous offering of shares of common stock. The Company reserves the right to terminate the Offering at any time.

XML

Subsequent Events (Details) (USD $)	3 Months Ended		0 Months Ended	1 Months Ended
	Mar. 31, 2015 multi-tenant_property	Mar. 31, 2014	May 11, 2015	May 11, 2015	May 13, 2015 multi-tenant_property single_tenant_property
Subsequent Event
Issuance of common stock	$ 4,642,000
Number Of Real Estate Properties, Held for Sale	1
Investment in marketable securities	(35,000)	(114,000)
Subsequent event
Subsequent Event
Issuance of common stock			147,600,000
Issuance of common stock, shares			8,800,000
Redemption of stock (in shares)				59,000
Value of stock redeemed (in usd)				1,100,000
Number of multi tenant properties sold					1
Number of single tenant properties sold					2
Gross sale price of real estate					15,900,000
Cash proceeds from sale of real estate					15,500,000
Investment in marketable securities					(5,000,000)
Subsequent event | Line of Credit
Subsequent Event
Line of credit, amount outstanding			70,000,000	70,000,000
Line of credit, remaining borrowing capacity			40,800,000	40,800,000
Pay-down of the Company's line of credit					$ 10,600,000

XML

Condensed Consolidated Unaudited Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Investment in real estate assets:
Land	$ 39,543	$ 46,455
Buildings and improvements, less accumulated depreciation of $5,477 and $4,459, respectively	150,861	152,197
Acquired intangible lease assets, less accumulated amortization of $3,077 and $2,521, respectively	26,034	26,853
Total investment in real estate assets, net	216,438	225,505
Investment in marketable securities	510	490
Total investment in real estate assets and marketable securities, net	216,948	225,995
Cash and cash equivalents	6,545	4,489
Restricted cash	35	25
Rents and tenant receivables, less allowance for doubtful accounts of $2 and $0, respectively	1,627	1,267
Prepaid expenses and other assets	171	364
Deferred financing costs, less accumulated amortization of $1,312 and $1,216, respectively	2,259	1,796
Assets held for sale	7,327	0
Total assets	234,912	233,936
LIABILITIES AND STOCKHOLDERS’ EQUITY
Line of credit and notes payable	121,754	120,304
Accounts payable and accrued expenses	922	1,188
Escrowed investor proceeds	35	25
Due to affiliates	834	1,816
Acquired below market lease intangibles, less accumulated amortization of $329 and $279, respectively	2,003	2,058
Distributions payable	596	595
Deferred rental income and other liabilities	585	585
Total liabilities	126,729	126,571
Commitments and contingencies
Redeemable common stock	13,120	12,545
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding	0	0
Capital in excess of par value	105,120	104,284
Accumulated distributions in excess of earnings	(10,138)	(9,539)
Accumulated other comprehensive income	8	3
Total stockholders’ equity	95,063	94,820
Total liabilities and stockholders’ equity	234,912	233,936
A Shares common stock, $0.01 par value; 163,000,000 shares authorized, 898,585 and 897,376 shares issued and outstanding, respectively
STOCKHOLDERS’ EQUITY
Common stock	9	9
I Shares common stock, $0.01 par value; 163,000,000 shares authorized, 260,017 and 256,525 shares issued and outstanding, respectively
STOCKHOLDERS’ EQUITY
Common stock	3	3
W Shares common stock, $0.01 par value; 164,000,000 shares authorized, 6,096,400 and 6,012,043 shares issued and outstanding, respectively
STOCKHOLDERS’ EQUITY
Common stock	$ 61	$ 60

XML

Condensed Consolidated Unaudited Statement of Stockholders' Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total USD ($)	Common Class A	Common Class I	Common Class W	Common Stock Common Class A USD ($)	Common Stock Common Class I USD ($)	Common Stock Common Class W USD ($)	Capital in Excess of Par Value USD ($)	Accumulated Distributions in Excess of Earnings USD ($)	Accumulated Other Comprehensive Income USD ($)
Balance at Dec. 31, 2014	$ 94,820				$ 9	$ 3	$ 60	$ 104,284	$ (9,539)	$ 3
Balance, shares at Dec. 31, 2014		897,376	256,525	6,012,043	897,376	256,525	6,012,043
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock, shares					28,107	3,492	225,306
Issuance of common stock	4,642						2	4,640
Distributions to investors	(1,725)								(1,725)
Commissions on stock sales and related distribution and dealer manager fees	(205)							(205)
Other offering costs	(35)							(35)
Redemptions of common stock, shares					(26,898)		(140,949)
Redemptions of common stock	(2,990)						(1)	(2,989)
Changes in redeemable common stock	(575)							(575)
Comprehensive income	1,131								1,126	5
Balance at Mar. 31, 2015	$ 95,063				$ 9	$ 3	$ 61	$ 105,120	$ (10,138)	$ 8
Balance, shares at Mar. 31, 2015		898,585	260,017	6,096,400	898,585	260,017	6,096,400

XML

Line of Credit and Note Payable (Tables)

3 Months Ended

Mar. 31, 2015

Debt Disclosure [Abstract]

Summary of Debt Activity

The following table summarizes the debt activity for the three months ended March 31, 2015 and the debt balances as of March 31, 2015 and December 31, 2014 (in thousands):

			During the Three Months Ended March 31, 2015
	Balance as of December 31, 2014			Debt Issuance		Repayments			Balance as of March 31, 2015
Line of credit	$	100,000		$	8,000	$	(23,500	)	$	84,500
Fixed rate debt	20,304			16,950		—			37,254
Line of credit with affiliate	—			$	10,000	$	(10,000	)	$	—
Total	$	120,304		$	34,950	$	(33,500	)	$	121,754

XML

Organization and Business (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Aug. 26, 2013 class_of_stock	Dec. 06, 2011
Organization and business
Number of states in which entity owns properties (in number of states)	26
Percentage of rentable space leased (in square feet)	99.60%
Consolidated properties
Organization and business
Number of owned properties (in number of properties)	75
Rentable square feet (in square feet)	1,800,000
Common Class W
Organization and business
Share price (in dollars per share)	18.08
Common Class A
Organization and business
Share price (in dollars per share)	18.07
Common Class I
Organization and business
Share price (in dollars per share)	18.15
IPO
Organization and business
Common stock, value authorized			$ 4,000,000,000
Classes of common stock, additions		2
Multi-class offering
Organization and business
Common stock, value authorized		4,000,000,000
Classes of common stock		3
Multi-class offering | Primary offering
Organization and business
Common stock, value authorized		3,500,000,000
Multi-class offering | Distribution reinvestment plan
Organization and business
Common stock, value authorized		500,000,000
Cole OP
Organization and business
General partner partnership interest percentage	100.00%

XML

Condensed Consolidated Unaudited Statement of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net income	$ 1,126	$ 281
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	1,092	521
Amortization of intangible lease assets and below market lease intangibles, net	593	250
Amortization of deferred financing costs	96	162
Amortization on marketable securities, net	0	1
Bad debt expense	2	0
Changes in assets and liabilities:
Rents and tenant receivables	(362)	(81)
Prepaid expenses and other assets	193	3
Accounts payable and accrued expenses	(266)	43
Deferred rental income and other liabilities	0	(41)
Due to affiliates	(934)	(524)
Net cash provided by operating activities	1,540	615
Cash flows from investing activities:
Investment in real estate and related assets	0	(14,032)
Investment in marketable securities	(35)	(114)
Proceeds from sale of marketable securities	20	91
Change in restricted cash	(10)	(144)
Net cash used in investing activities	(25)	(14,199)
Cash flows from financing activities:
Proceeds from issuance of common stock	3,900	11,383
Offering costs on issuance of common stock	(288)	(232)
Redemptions of common stock	(2,990)	(502)
Distributions to investors	(982)	(585)
Proceeds from line of credit and note payable	24,950	8,500
Proceeds from line of credit with affiliate	10,000	0
Repayments of line of credit	(23,500)	(9,500)
Repayments of line of credit with affiliate	(10,000)	0
Deferred financing costs paid	(559)	(158)
Change in escrowed investor proceeds liability	10	144
Net cash provided by financing activities	541	9,050
Net increase (decrease) in cash and cash equivalents	2,056	(4,534)
Cash and cash equivalents, beginning of period	4,489	5,370
Cash and cash equivalents, end of period	6,545	836
Supplemental disclosures of non-cash investing and financing activities:
Accrued dealer manager fee and other offering costs	225	192
Distributions declared and unpaid	596	386
Common stock issued through distribution reinvestment plan	742	377
Unrealized gain on marketable securities	5	2
Supplemental cash flow disclosures:
Interest paid	$ 748	$ 295

XML

Condensed Consolidated Unaudited Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Buildings and improvements, less accumulated depreciation of $5,477 and $4,459, respectively	$ 5,477	$ 4,459
Acquired intangible lease assets, less accumulated amortization of $3,077 and $2,521, respectively	3,077	2,521
Deferred financing costs, less accumulated amortization of $1,312 and $1,216, respectively	1,312	1,216
Rents and tenant receivables, less allowance for doubtful accounts of $2 and $0, respectively	2	0
Acquired below market lease intangibles, less accumulated amortization of $329 and $279, respectively	$ 329	$ 279
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common Class W
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	164,000,000	164,000,000
Common stock, shares issued	6,096,400	6,012,043
Common stock, shares outstanding	6,096,400	6,012,043
Common Class A
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	163,000,000	163,000,000
Common stock, shares issued	898,585	897,376
Common stock, shares outstanding	898,585	897,376
Common Class I
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	163,000,000	163,000,000
Common stock, shares issued	260,017	256,525
Common stock, shares outstanding	260,017	256,525

XML

Subsequent Events

3 Months Ended

Mar. 31, 2015

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

Investment in Real Estate Assets

Subsequent to March 31, 2015, the Company did not acquire any real estate properties.

Status of the Offering

As of May 11, 2015, the Company had received $147.6 million in gross offering proceeds through the issuance of approximately 8.8 million shares of its common stock in the Offering (including shares issued pursuant to the DRIP).

Share Redemptions

Subsequent to March 31, 2015 through May 11, 2015, the Company redeemed approximately 58,500 shares for $1.1 million.

Line of Credit

As of May 11, 2015, the Company had $70.0 million outstanding under the Line of Credit and $40.8 million available for borrowing under the Line of Credit and the Series C Line of Credit.

Cap on General and Administrative Expenses

As discussed in Note 8 to these condensed consolidated unaudited financial statements, Cole Advisors stated that it will continue the existing expense cap for the three months ending June 30, 2015, whereby Cole Advisors will fund all Excess G&A of the Company for such periods.

Property Dispositions

Subsequent to March 31, 2015, as a part of the Company's active portfolio management, the Company sold one multi-tenant and two single-tenant properties, for an aggregate gross sale price of $15.9 million resulting in net cash proceeds of $15.5 million, of which $10.6 million was used to pay down the Company’s line of credit. As of March 31, 2015, one multi-tenant property was classified as held for sale, as discussed in Note 2 to these condensed consolidated unaudited financial statements. The two single-tenant properties did not meet the held for sale criteria as of March 31, 2015.

Available-for-Sale Securities

Subsequent to March 31, 2015, we allocated $5.0 million for additional investment in the marketable securities portfolio, managed by our independent fund accountant.

XML

Document and Entity Information In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	May 11, 2015
Entity Information
Entity Registrant Name	COLE REAL ESTATE INCOME STRATEGY (DAILY NAV), INC.
Entity Central Index Key	0001498542
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Wrap Class common stock
Entity Information
Entity Common Stock, Shares Outstanding		6,200
Advisor Class common stock
Entity Information
Entity Common Stock, Shares Outstanding		928
Institutional Class common stock
Entity Information
Entity Common Stock, Shares Outstanding		405

XML

Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Basis of presentation

The condensed consolidated unaudited financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, the statements for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of full year results. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2014, and related notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The condensed consolidated unaudited financial statements should also be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q.

Principles of consolidation

The condensed consolidated unaudited financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investment in and valuation of real estate and related assets

Investment in and Valuation of Real Estate and Related Assets

Real estate and related assets are stated at cost, less accumulated depreciation and amortization. Amounts capitalized to real estate and related assets consist of the cost of acquisition, excluding acquisition related expenses, construction and any tenant improvements, major improvements and betterments that extend the useful life of the real estate and related assets and leasing costs. All repairs and maintenance are expensed as incurred.

The Company is required to make subjective assessments as to the useful lives of its depreciable assets. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life of the assets. Real estate and related assets, other than land, are depreciated or amortized on a straight-line basis. The estimated useful lives of the Company’s real estate and related assets by class are generally as follows:

Buildings	40 years
Tenant improvements	Lesser of useful life or lease term
Intangible lease assets	Lease term

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate and related assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to, bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, rental concessions and other factors, a significant decrease in a property’s revenues due to lease terminations, vacancies, co-tenancy clauses, reduced lease rates or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate and related assets to their respective fair values and recognize an impairment loss. Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions. As of March 31, 2015, the Company noted potential impairment indicators at a property with an aggregate carrying value of $1.1 million due to a fire loss at the property. However, based on insurance coverage and the expectation of continued rental income from the tenant, the Company’s estimate of undiscounted cash flows indicated that such carrying amount was expected to be recovered as of March 31, 2015, and as such no impairment loss was recorded. Nonetheless, it is reasonably possible that the estimate of undiscounted cash flows may change in the near term, which may result in the need to record an impairment loss to reduce such asset to fair value. Any such impairment losses will affect the Company’s assets and stockholders’ equity, operating and net income. The evaluation of properties for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions. The use of different judgments and assumptions could result in different conclusions. No impairment indicators were identified and no impairment losses were recorded during the three months ended March 31, 2014.

When developing estimates of expected future cash flows, the Company makes certain assumptions regarding future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, terminal capitalization and discount rates, the expected number of months it takes to re-lease the property, required tenant improvements and the number of years the property will be held for investment. The use of alternative assumptions in estimating expected future cash flows could result in a different determination of the property’s expected future cash flows and a different conclusion regarding the existence of an impairment, the extent of such loss, if any, as well as the fair value of the real estate and related assets.

When a real estate asset is identified by the Company as held for sale, the Company will cease depreciation and amortization of the assets related to the property and estimate the fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount would be recorded to reflect the estimated fair value of the property, net of selling costs. During the three months endedMarch 31, 2015, the Company identified one multi-tenant property as held for sale, which was sold subsequent to March 31, 2015, as discussed in Note 10 to these condensed consolidated unaudited financial statements. No assets were identified as held for sale as of December 31, 2014.

Allocation of purchase price of real estate and related assets

Allocation of Purchase Price of Real Estate and Related Assets

Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and identified intangible assets and liabilities, consisting of the value of above market and below market leases and the value of in-place leases, based in each case on their respective fair values. Acquisition related expenses are expensed as incurred. The Company utilizes independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and buildings). The Company obtains an independent appraisal for each real property acquisition. The information in the appraisal, along with any additional information available to the Company’s management, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by the Company’s management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information.

The fair values of above market and below market lease intangibles are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (1) the contractual amounts to be paid pursuant to the in-place leases and (2) an estimate of fair market lease rates for the corresponding in-place leases, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease including any bargain renewal periods, with respect to a below market lease. The above market and below market lease intangibles are capitalized as intangible lease assets or liabilities, respectively. Above market leases are amortized as a reduction to rental income over the remaining terms of the respective leases. Below market leases are amortized as an increase to rental income over the remaining terms of the respective leases, including any bargain renewal periods. In considering whether or not the Company expects a tenant to execute a bargain renewal option, the Company evaluates economic factors and certain qualitative factors at the time of acquisition, such as the financial strength of the tenant, remaining lease term, the tenant mix of the leased property, the Company’s relationship with the tenant and the availability of competing tenant space. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above market or below market lease intangibles relating to that lease would be recorded as an adjustment to rental income.

The fair values of in-place leases include estimates of direct costs associated with obtaining a new tenant and opportunity costs associated with lost rental and other property income which are avoided by acquiring a property with an in-place lease. Direct costs associated with obtaining a new tenant include commissions and other direct costs, and are estimated in part by utilizing information obtained from independent appraisals and management’s consideration of current market costs to execute a similar lease. The intangible values of opportunity costs, which are calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease, are capitalized as intangible lease assets and are amortized to expense over the remaining term of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.

The Company may acquire certain properties subject to contingent consideration arrangements that may obligate the Company to pay additional consideration to the seller based on the outcome of future events. Additionally, the Company may acquire certain properties for which it funds certain contingent consideration amounts into an escrow account pending the outcome of certain future events. The outcome may result in the release of all or a portion of the escrow funds to the Company or the seller or a combination thereof. Contingent consideration arrangements will be based on a predetermined formula and have set time periods regarding the obligation to make future payments, including funds released to the seller from escrow accounts, or the right to receive escrowed funds as set forth in the respective purchase and sale agreement. Contingent consideration arrangements, including amounts funded through an escrow account, will be recorded upon acquisition of the respective property at their estimated fair value, and any changes to the estimated fair value, subsequent to acquisition, will be reflected in the accompanying condensed consolidated unaudited statements of operations. The determination of the amount of contingent consideration arrangements is based on the probability of several possible outcomes as identified by management.

The Company will estimate the fair value of assumed mortgage notes payable based upon indications of current market pricing for similar types of debt financing with similar maturities. Assumed mortgage notes payable will initially be recorded at their estimated fair value as of the assumption date, and any difference between such estimated fair value and the mortgage note’s outstanding principal balance will be amortized to interest expense over the term of the respective mortgage note payable.

The determination of the fair values of the real estate and related assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could impact the Company’s results of operations.

Investment in marketable securities

Investment in Marketable Securities

Investment in marketable securities consists primarily of the Company’s investment in corporate and government debt securities. The Company determines the appropriate classification for debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. As of March 31, 2015, the Company classified its investments as available-for-sale as the Company is not actively trading the securities; however, the Company may sell them prior to their maturity. These investments are carried at their estimated fair value with unrealized gains and losses reported in accumulated other comprehensive income.

The Company monitors its available-for-sale securities for impairments. A loss is recognized when the Company determines that a decline in the estimated fair value of a security below its amortized cost is other-than-temporary. The Company considers many factors in determining whether the impairment of a security is deemed to be other-than-temporary, including, but not limited to, the length of time the security has had a decline in estimated fair value below its amortized cost, the amount of the unrealized loss, the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value, recent events specific to the issuer or industry, external credit ratings and recent changes in such ratings. The analysis of determining whether the impairment of a security is deemed to be other-than-temporary requires significant judgment and assumptions. The use of alternative judgments and assumptions could result in a different conclusion.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method and is recorded in the accompanying condensed consolidated unaudited statements of operations in interest and other expense, net. Upon the sale of a security, the realized net gain or loss is computed on the specific identification method.

Restricted cash and escrows

Restricted Cash and Escrows

Included in restricted cash were escrowed investor proceeds for which shares of common stock had not been issued as of March 31, 2015 and December 31, 2014.

Concentration of credit risk

Concentration of Credit Risk

As of March 31, 2015, the Company had cash on deposit, including restricted cash, at four financial institutions, in one of which the Company had deposits in excess of federally insured levels, totaling $6.2 million; however, the Company has not experienced any losses in such accounts. The Company limits significant cash deposits to accounts held by financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk on its cash deposits.

As of March 31, 2015, no single tenant accounted for greater than 10% of the Company’s 2015 gross annualized rental revenues. Tenants in the discount store, manufacturing, drugstore and grocery industries accounted for 15%13%, 10% and 10%, respectively, of the Company’s 2015 gross annualized rental revenues. Additionally, the Company has certain geographic concentrations in its property holdings. In particular, as of March 31, 2015, eight of the Company’s properties were located in Texas, accounting for 17% of the Company’s 2015 gross annualized rental revenues.

Offering and related costs

Offering and Related Costs

Cole Advisors funds all of the organization and offering costs associated with the sale of the Company’s common stock (excluding selling commissions, the distribution fee and the dealer manager fee) and is reimbursed for such costs up to 0.75% of gross proceeds from the Offering, excluding selling commissions charged on A Shares sold in the Primary Offering. As of March 31, 2015, Cole Advisors or its affiliates had paid organization and offering costs in excess of 0.75% in connection with the Offering. These excess costs were not included in the financial statements of the Company because such costs were not a liability of the Company as they exceeded 0.75% of gross proceeds from the Offering. As the Company raises additional proceeds from the Offering, these excess costs may become payable to Cole Advisors.

Redeemable common stock

Redeemable Common Stock

The Company has adopted a share redemption program that permits its stockholders to redeem their shares, subject to certain limitations. The Company records amounts that are redeemable under the share redemption program as redeemable common stock outside of permanent equity on its condensed consolidated unaudited balance sheets. Redeemable common stock is recorded at the greater of the carrying amount or redemption value each reporting period. Changes in the value from period to period are recorded as an adjustment to capital in excess of par value.

As of March 31, 2015 and December 31, 2014, the quarterly redemption capacity was equal to 10% of the Company’s NAV, and this amount was recorded as redeemable common stock on the condensed consolidated unaudited balance sheet for a total of $13.1 million and $12.5 million, respectively.

Recent accounting pronouncements

Recent Accounting Pronouncements

In May 2014, the U.S. Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers, including real estate sales, in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted. The Company is currently evaluating the impact of the new standard, but does not believe it will have a material impact, when effective, on the Company’s condensed consolidated unaudited financial statements.

In February 2015, FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”), which eliminates the deferral of Financial Accounting Standard 167, modifies the evaluation of whether limited partnerships and similar legal entities are variable or voting interest entities, eliminates the presumption that the general partner should consolidate a limited partnership, modifies the consolidation analysis for reporting entities that are involved with variable interest entities, particularly those that have fee arrangements and related party relationships, and provides a scope exception for reporting entities with interests in legal entities that operate as registered money market funds. These changes will require re-evaluation of the consolidation conclusion for certain entities and will require the Company to revise its analysis regarding the consolidation or deconsolidation of such entities. ASU 2015-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, with early adoption permitted.  Companies may elect to apply the amendments in ASU 2015-02 using a modified retrospective approach or by applying the amendments retrospectively. The Company is currently evaluating the impact of the new standard on its financial statements.

In April 2015, FASB issued ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentationof Debt Issuance Costs (“ASU 2015-03”). The update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than presenting the deferred charge as an asset. The previous requirement to recognize debt issuance costs as deferred charges conflicts with the guidance in FASB Concepts Statement No. 6, “Elements of Financial Statements,” which states that debt issuance costs are similar to debt discounts and effectively reduce the proceeds of borrowing, thereby increasing the effective interest rate. FASB Concepts Statement No. 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. After the update is adopted, debt disclosures would include the face amount of the debt liability and the effective interest rate. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and is to be applied retrospectively, with early adoption permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

XML

Condensed Consolidated Unaudited Statement of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Revenues:
Rental and other property income	$ 4,487	$ 2,162
Tenant reimbursement income	337	189
Interest income on marketable securities	3	1
Total revenue	4,827	2,352
Expenses:
General and administrative expenses	435	236
Property operating expenses	389	222
Advisory expenses	284	174
Acquisition related expenses	69	198
Depreciation	1,092	521
Amortization	546	263
Total operating expenses	2,815	1,614
Operating income	2,012	738
Other expense:
Interest and other expense, net	886	457
Net income	$ 1,126	$ 281
Weighted average number of common shares outstanding:
Basic and diluted (shares)	7,157,057	4,467,058
Net income per common share:
Basic and diluted (usd per share)	$ 0.16	$ 0.06
Distributions declared per common share (usd per share)	$ 0.24	$ 0.23

XML

Marketable Securities

3 Months Ended

Mar. 31, 2015

Investments, Debt and Equity Securities [Abstract]

MARKETABLE SECURITIES

MARKETABLE SECURITIES

The Company owned marketable securities with an estimated fair value of $510,000 and $490,000 as of March 31, 2015 and December 31, 2014, respectively. The following is a summary of the Company’s available-for-sale securities as of March 31, 2015 (in thousands):

	Available-for-Sale Securities
	Amortized Cost Basis		Unrealized Gain		Fair Value
U.S. Treasury Bonds	$	179	$	5	$	184
U.S. Agency Bonds	85		—		85
Corporate Bonds	238		3		241
Total available-for-sale securities	$	502	$	8	$	510

The following table provides the activity for the marketable securities during the three months endedMarch 31, 2015 (in thousands):

	Amortized Cost Basis			Unrealized Gain		Fair Value
Marketable securities as of December 31, 2014	$	487		$	3	$	490
Face value of marketable securities acquired	35			—		35
Amortization on marketable securities	—			—		—
Sales of securities	(20		)	—		(20		)
Increase in fair value of marketable securities	—			5		5
Marketable securities as of March 31, 2015	$	502		$	8	$	510

During the three months endedMarch 31, 2015, the Company sold three marketable securities for aggregate proceeds of $20,000, which approximated their carrying value. In addition, the Company recorded an unrealized gain of $5,000 on its investments, which is included in accumulated other comprehensive income on the accompanying condensed consolidated unaudited statement of stockholders’ equity for the three months endedMarch 31, 2015 and the condensed consolidated unaudited balance sheet as of March 31, 2015.

The scheduled maturities of the Company’s marketable securities as of March 31, 2015 are as follows (in thousands):

	Available-for-Sale Securities
	Amortized Cost		Estimated Fair Value
Due within one year	$	75	$	75
Due after one year through five years	205		206
Due after five years through ten years	206		213
Due after ten years	16		16
Total	$	502	$	510

Actual maturities of marketable securities can differ from contractual maturities because borrowers on certain debt securities may have the right to prepay their respective debt obligations at any time. In addition, factors such as prepayments and interest rates may affect the yields on such securities.

XML

Real Estate Acquisitions

3 Months Ended

Mar. 31, 2015

Real Estate [Abstract]

REAL ESTATE ACQUISITIONS

REAL ESTATE ACQUISITIONS

2015 Property Acquisitions

During the three months ended March 31, 2015, the Company did not acquire any commercial properties.

2014 Property Acquisitions

During the three months ended March 31, 2014, the Company acquired a 100% interest in eight commercial properties for an aggregate purchase price of $14.0 million (the “2014 Acquisitions”). The Company purchased the 2014 Acquisitions with net proceeds from the Offering combined with proceeds from borrowings. The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation (in thousands):

	March 31, 2014
Land	$	2,874
Building and improvements	9,509
Acquired in-place leases	1,395
Acquired above market leases	444
Acquired below market leases	(190		)
Total purchase price	$	14,032

The Company recorded revenue of $122,000 and a net loss of $112,000 for the three months ended March 31, 2014 related to the 2014 Acquisitions. In addition, the Company recorded $198,000 of acquisition related expenses for the three months ended March 31, 2014.

The following information summarizes selected financial information of the Company, as if all of the 2014 Acquisitions were completed on January 1, 2013 for each period presented below. The table below presents the Company’s estimated revenue and net income (loss), on a pro forma basis, for the three months ended March 31, 2014 and 2013, respectively (in thousands):

	Three Months Ended March 31,
	2014		2013
Pro forma basis:
Revenue	$	2,496	$	1,046
Net income (loss)	$	461	$	(116	)

The pro forma information for the three months ended March 31, 2014 was adjusted to exclude acquisition costs related to the 2014 Acquisitions. These costs were recognized in the pro forma information for the three months endedMarch 31, 2013. The pro forma information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of periods presented, nor does it purport to represent the results of future operations.

XML

Related-Party Transactions and Arrangements (Tables)

3 Months Ended

Mar. 31, 2015

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

The Company recorded fees and expense reimbursements as shown in the table below for services provided by Cole Advisors or its affiliates related to the services described above during the periods indicated (in thousands):

	Three Months Ended March 31,
	2015		2014
Acquisitions, Operations and Performance:
Acquisition expense reimbursement	$	25	$	—
Advisory fee	$	284	$	174
Operating expense reimbursement	$	—	$	—
Performance fee	$	—	$	—

The Company recorded commissions, fees and expense reimbursements as shown in the table below for services provided by Cole Advisors and its affiliates related to the services described above during the periods indicated (in thousands):

	Three Months Ended March 31,
	2015		2014
Offering:
Selling commissions	$	15	$	25
Selling commissions reallowed by CCC	$	15	$	25
Distribution fees	$	20	$	1
Distribution fees reallowed by CCC	$	19	$	—
Dealer manager fees	$	170	$	100
Dealer manager fees reallowed by CCC	$	25	$	2
Organization and offering expense reimbursement	$	35	$	88

In connection with the Offering, CCC, the Company’s dealer manager, will receive selling commissions, an asset-based dealer manager fee and/or an asset-based distribution fee, as summarized in the table below for each class of common stock:

	Selling Commission (1)	Dealer Manager Fee (2)		Distribution Fee (2)
W Shares	—	0.55	%	—
A Shares	up to 3.75%	0.55	%	0.50	%
I Shares	—	0.25	%	—

(1) The selling commission is based on the offering price for A Shares. The selling commission expressed as a percentage of NAV per A Share, rather than the offering price, is up to 3.90%, subject to rounding and the effect of volume discounts the Company is offering on certain purchases of $150,001 or more of A Shares. Selling commissions are deducted directly from the offering price for A Shares and paid to CCC. CCC reallows 100% of the selling commissions on A Shares to participating broker-dealers.

(2) The dealer manager and distribution fees accrue daily in an amount equal to 1/365th of the percentage of NAV per W Share, A Share or I Share, as applicable, for such day on a continuous basis. CCC, in its sole discretion, may reallow a portion of the dealer manager fee and distribution fee to participating broker-dealers.

XML

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Investment in and valuation of real estate and related assets

Real estate and related assets, other than land, are depreciated or amortized on a straight-line basis. The estimated useful lives of the Company’s real estate and related assets by class are generally as follows:

Buildings	40 years
Tenant improvements	Lesser of useful life or lease term
Intangible lease assets	Lease term

XML

Related-Party Transactions and Arrangements

3 Months Ended

Mar. 31, 2015

Related Party Transactions [Abstract]

RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS

RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS

The Company has incurred, and will continue to incur, commissions, fees and expenses payable to Cole Advisors and certain of its affiliates in connection with the Offering, and the acquisition, management and performance of the Company’s assets.

Offering

In connection with the Offering, CCC, the Company’s dealer manager, will receive selling commissions, an asset-based dealer manager fee and/or an asset-based distribution fee, as summarized in the table below for each class of common stock:

	Selling Commission (1)	Dealer Manager Fee (2)		Distribution Fee (2)
W Shares	—	0.55	%	—
A Shares	up to 3.75%	0.55	%	0.50	%
I Shares	—	0.25	%	—

(1) The selling commission is based on the offering price for A Shares. The selling commission expressed as a percentage of NAV per A Share, rather than the offering price, is up to 3.90%, subject to rounding and the effect of volume discounts the Company is offering on certain purchases of $150,001 or more of A Shares. Selling commissions are deducted directly from the offering price for A Shares and paid to CCC. CCC reallows 100% of the selling commissions on A Shares to participating broker-dealers.

(2) The dealer manager and distribution fees accrue daily in an amount equal to 1/365th of the percentage of NAV per W Share, A Share or I Share, as applicable, for such day on a continuous basis. CCC, in its sole discretion, may reallow a portion of the dealer manager fee and distribution fee to participating broker-dealers.

All organization and offering expenses associated with the sale of the Company’s common stock (excluding selling commissions, the distribution fee and the dealer manager fee) are paid for by Cole Advisors or its affiliates and can be reimbursed by the Company up to 0.75% of the aggregate gross offering proceeds, excluding selling commissions charged on A Shares sold in the Primary Offering. As of March 31, 2015, Cole Advisors or its affiliates had paid organization and offering costs in excess of the 0.75% in connection with the Offering. These excess costs were not included in the financial statements of the Company because such costs were not a liability of the Company as they exceeded 0.75% of gross proceeds from the Offering. As the Company raises additional proceeds from the Offering, these excess costs may become payable to Cole Advisors.

The Company recorded commissions, fees and expense reimbursements as shown in the table below for services provided by Cole Advisors and its affiliates related to the services described above during the periods indicated (in thousands):

	Three Months Ended March 31,
	2015		2014
Offering:
Selling commissions	$	15	$	25
Selling commissions reallowed by CCC	$	15	$	25
Distribution fees	$	20	$	1
Distribution fees reallowed by CCC	$	19	$	—
Dealer manager fees	$	170	$	100
Dealer manager fees reallowed by CCC	$	25	$	2
Organization and offering expense reimbursement	$	35	$	88

As of March 31, 2015, $225,000 had been incurred, but not yet paid, for services provided by Cole Advisors or its affiliates in connection with the offering stage of the Offering and was a liability to the Company.

Acquisitions, Operations and Performance

The Company pays Cole Advisors an asset-based advisory fee that is payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365th of 0.90% of the Company’s NAV for each class of common stock, for each day.

The Company will reimburse Cole Advisors for the operating expenses it paid or incurred in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse for any amount by which its operating expenses (including the advisory fee) at the end of the four preceding fiscal quarters exceeds the greater of (1) 2% of average invested assets; or (2) 25% of net income, other than any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of assets for that period.

In addition, the Company will reimburse Cole Advisors for all out-of-pocket expenses incurred in connection with the acquisition of the Company’s investments. While most of the acquisition expenses are expected to be paid to third parties, a portion of the out-of-pocket acquisition expenses may be reimbursed to Cole Advisors or its affiliates. Acquisition expenses, together with any acquisition fees paid to third parties for a particular real estate-related asset, will in no event exceed 6% of the gross purchase price of such asset.

Cole Advisors implemented an expense cap for the three months ended December 31, 2013, which has been continued for the three months ended March 31, 2015 and will be continued for the three months ending June 30, 2015, whereby Cole Advisors will fund all general and administrative expenses of the Company that are in excess of an amount calculated by multiplying the average NAV for the respective three month period by an annualized rate of 1.25% (the “Excess G&A”). General and administrative expenses, as presented in these condensed consolidated unaudited financial statements, include, but are not limited to, legal fees, audit fees, board of directors costs, professional fees, escrow and trustee fees, insurance, state franchise and income taxes and fees for unused amounts on the Line of Credit. At Cole Advisors’ discretion, it may fund the Excess G&A through reimbursement to the Company or payment to third parties on behalf of the Company, but in no event will the Company be liable to Cole Advisors in future periods for such amounts paid or reimbursed. During the three months ended March 31, 2015, the Company incurred $66,000 of Excess G&A which, was reimbursed by Cole Advisors subsequent to March 31, 2015. will be reimbursed by Cole Advisors.

As compensation for services provided pursuant to the advisory agreement, the Company will also pay Cole Advisors a performance-based fee calculated based on the Company’s annual total return to stockholders for each class of common stock (defined below), payable annually in arrears. The performance fee will be calculated such that for any calendar year in which the total return per share for a particular class exceeds 6% (the “6% Return”), Cole Advisors will receive 25% of the excess total return on such class above the 6% Return allocable to that class, but in no event will the Company pay Cole Advisors more than 10% of the aggregate total return, for that class, for such year. However, in the event the NAV per share of the Company’s W Shares, A Shares and I Shares decreases below the base NAV for the respective share class ($15.00, $16.72 and  $16.82 for the W Shares, A Shares and I Shares, respectively) (the “Base NAV”), the performance-based fee for a respective class will not be calculated on any increase in NAV up to the Base NAV for the respective share class. In addition, the performance fee will not be paid with respect to any calendar year in which the NAV per share as of the last business day of the calendar year (the “Ending NAV”) for the respective share class is less than the Base NAV of that class. The Base NAV of any share class is subject to downward adjustment in the event that the Company’s board of directors, including a majority of the independent directors, determines that such an adjustment is necessary to provide an appropriate incentive to Cole Advisors to perform in a manner that seeks to maximize stockholder value and is in the best interests of the Company’s stockholders. In the event of any stock dividend, stock split, recapitalization or similar change in the Company’s capital structure, the Base NAV for the respective share class shall be ratably adjusted to reflect the effect of any such event.

The total return to stockholders is defined, for each class of the Company’s common stock, as the change in NAV per share plus distributions per share for such class. The NAV per share for a class calculated on the last trading day of a calendar year shall be the amount against which changes in NAV per share for such class are measured during the subsequent calendar year. Therefore, for each class of the Company’s common stock, payment of the performance-based component of the advisory fee (1) is contingent upon the Company’s actual annual total return exceeding the 6% Return and the Ending NAV per share for the respective share class being greater than the Base NAV of that class, (2) will vary in amount based on the Company’s actual performance, (3) cannot cause the Company’s total return as a percentage of stockholders’ invested capital for the year to be reduced below 6% and (4) is payable to Cole Advisors if the Company’s total return exceeds the 6% Return in a particular calendar year, even if the total return to stockholders (or any particular stockholder) on a cumulative basis over any longer or shorter period has been less than 6% per annum. Cole Advisors will not be obligated to return any portion of advisory fees paid based on the Company’s subsequent performance.

The Company recorded fees and expense reimbursements as shown in the table below for services provided by Cole Advisors or its affiliates related to the services described above during the periods indicated (in thousands):

	Three Months Ended March 31,
	2015		2014
Acquisitions, Operations and Performance:
Acquisition expense reimbursement	$	25	$	—
Advisory fee	$	284	$	174
Operating expense reimbursement	$	—	$	—
Performance fee	$	—	$	—

As of March 31, 2015, $594,000 had been incurred, but not yet paid, for services provided by Cole Advisors or its affiliates in connection with the acquisitions and operations stage and was a liability to the Company. Cole Advisors waived its right to receive acquisition expense reimbursements for the three months ended March 31, 2014; accordingly, the Company did not reimburse Cole Advisors for any acquisition expenses during these periods. Additionally, Cole Advisors waived its right to receive operating expense reimbursements for the three months ended March 31, 2015 and 2014; accordingly, the Company did not reimburse Cole Advisors for any such expenses during the three months ended March 31, 2015 and 2014. During the three months ended March 31, 2015, Cole Advisors permanently waived its rights to expense reimbursements totaling approximately $258,000, and thus the Company is not responsible for this amount.

Due to Affiliates

As of March 31, 2015, $834,000 was due to Cole Advisors and its affiliates related to advisory, distribution and dealer manager fees and the reimbursement of organization, offering and acquisition expenses as well as platform fees, which were included in amounts due to affiliates on the condensed consolidated unaudited balance sheet. As of December 31, 2014, $1.8 million was due to Cole Advisors and its affiliates related to performance fees, advisory, distribution and dealer manager fees, the reimbursement of organization and offering expenses, and escrow deposits that were paid on the Company’s behalf in connection with the acquisition of the Company’s properties, which were included in amounts due to affiliates on the condensed consolidated unaudited balance sheet.

XML

Line of Credit and Note Payable

3 Months Ended

Mar. 31, 2015

Debt Disclosure [Abstract]

LINE OF CREDIT AND NOTE PAYABLE

LINES OF CREDIT AND NOTES PAYABLE

As of March 31, 2015, the Company had $121.8 million of debt outstanding, with weighted average years to maturity of 4.2 years and a weighted average interest rate of 2.79%. The following table summarizes the debt activity for the three months ended March 31, 2015 and the debt balances as of March 31, 2015 and December 31, 2014 (in thousands):

			During the Three Months Ended March 31, 2015
	Balance as of December 31, 2014			Debt Issuance		Repayments			Balance as of March 31, 2015
Line of credit	$	100,000		$	8,000	$	(23,500	)	$	84,500
Fixed rate debt	20,304			16,950		—			37,254
Line of credit with affiliate	—			$	10,000	$	(10,000	)	$	—
Total	$	120,304		$	34,950	$	(33,500	)	$	121,754

As of March 31, 2015, the fixed rate debt outstanding of $37.3 million has interest rates ranging from 3.82% to 4.05% per annum. The debt outstanding matures on various dates from October 2021 to February 2025. The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the fixed rate debt outstanding was $59.2 million as of March 31, 2015. Each of the mortgage notes payable comprising the fixed rate debt is secured by the respective properties on which the debt was placed.

Included in the fixed rate debt is a $17.0 million mortgage note payable which the Company entered into with Silverpeak Real Estate Finance LLC during the three months ended March 31, 2015 (the “Silverpeak Loan”). The Silverpeak Loan has a fixed interest rate of 4.05% per annum with interest payments due monthly. The principal amount is due on February 6, 2025, the maturity date. The Silverpeak Loan is collateralized by 12 single-tenant commercial properties, which were purchased for an aggregate purchase price of $25.5 million.

On September 12, 2014, the Company entered into an amended and restated credit agreement (the “Amended Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent, (“JPMorgan Chase”), U.S. Bank National Association and other lending institutions that may become parties to the Amended Credit Agreement. The agreement allows the Company to borrow up to $75.0 million in revolving loans (the “Revolving Loans”), and includes a $25.0 million term loan (the “Term Loan”), with the maximum amount outstanding not to exceed the borrowing base (the “Borrowing Base”), calculated as 65% of the aggregate value allocated to each qualified property comprising eligible collateral (collectively, the “Qualified Properties”) during the period from March 31, 2015 through September 11, 2015 and 60% of the Qualified Properties during the period from September 12, 2015 to September 12, 2017. As of March 31, 2015, the Company had $84.5 million of debt outstanding and $15.5 million available for borrowing under its secured revolving line of credit, as amended (the “Line of Credit”). The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the Line of Credit was $160.6 million as of March 31, 2015. As of March 31, 2015, the Line of Credit had a weighted average interest rate of 2.28%. The Line of Credit matures on September 12, 2017; however, the Company may elect to extend the maturity dates of such loans to September 12, 2019, subject to satisfying certain conditions described in the Amended Credit Agreement.

The Revolving Loans and Term Loan bear interest at rates dependent upon the type of loan specified by the Company. For a eurodollar rate loan the interest rate will be equal to the one-month, two-month, three-month or six-month LIBOR for the interest period, as elected by the Company, multiplied by the Statutory Reserve Rate (as defined in the Amended Credit Agreement), plus the applicable rate (the “Eurodollar Applicable Rate”). The Eurodollar Applicable Rate is based upon the Company’s overall leverage ratio, generally defined in the Amended Credit Agreement as the total consolidated outstanding indebtedness of the Company divided by the total consolidated asset value of the Company (as defined in the Amended Credit Agreement) (the “Leverage Ratio”), and ranges from 1.90% at a Leverage Ratio of 50.0% or less to 2.45% at a Leverage Ratio greater than 60.0%. For base rate committed loans, the interest rate will be a per annum amount equal to the greatest of: (a) JPMorgan Chase’s Prime Rate; (b) the Federal Funds Effective Rate (as defined in the Amended Credit Agreement) plus 0.50%; and (c) one-month LIBOR multiplied by the Statutory Reserve plus 1.0% plus the applicable rate (the “Base Rate Applicable Rate”). The Base Rate Applicable Rate is based upon the Leverage Ratio, and ranges from 0.90% at a Leverage Ratio of 50.0% or less to 1.45% at a Leverage Ratio greater than 60.0%. As of March 31, 2015, amounts outstanding on the Line of Credit accrued interest at an annual rate of 2.09%.

The Amended Credit Agreement contains customary representations, warranties, borrowing conditions and affirmative, negative and financial covenants, including minimum net worth, debt service coverage and leverage ratio requirements and dividend payout and REIT status requirements. The Amended Credit Agreement also includes usual and customary events of default and remedies for facilities of this nature. Based on the Company’s analysis and review of its results of operations and financial condition, as of March 31, 2015, the Company believes it was in compliance with the covenants of the Amended Credit Agreement.

On December 16, 2014, the Company entered into a $20.0 million unsecured revolving line of credit with Series C, LLC, an affiliate of the Company’s advisor (the “Series C Line of Credit”). The Series C Line of Credit bears interest at a rate per annum equal to the one-month LIBOR plus 2.45% with accrued interest payable monthly in arrears and principal due upon maturity on December 15, 2015. In the event the Series C Line of Credit is not paid off on the maturity date, the loan includes default provisions. The Series C Line of Credit has been approved by a majority of the Company’s board of directors (including a majority of the independent directors) not otherwise interested in the transaction as fair, competitive and commercially reasonable and no less favorable to the Company than a comparable loan between unaffiliated parties under the same circumstances. As of March 31, 2015, the Company had no amounts outstanding on the Series C Line of Credit and $20.0 million available for borrowing.

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Litigation

In the ordinary course of business, the Company may become subject to litigation or claims. The Company is not aware of any pending legal proceedings of which the outcome is reasonably possible to have a material effect on its results of operations, financial condition or liquidity.

Environmental Matters

In connection with the ownership and operation of real estate, the Company potentially may be liable for costs and damages related to environmental matters. The Company owns certain properties that are subject to environmental remediation. In each case, the seller of the property, the tenant of the property and/or another third party has been identified as the responsible party for environmental remediation costs related to the respective property. Additionally, in connection with the purchase of certain of the properties, the respective sellers and/or tenants have indemnified the Company against future remediation costs. In addition, the Company carries environmental liability insurance on its properties that provides limited coverage for remediation liability and pollution liability for third-party bodily injury and property damage claims. Accordingly, the Company does not believe that it is reasonably possible that the environmental matters identified at such properties will have a material effect on its results of operations, financial condition or liquidity, nor is it aware of any environmental matters at other properties which it believes are reasonably possible to have a material effect on its results of operations, financial condition or liquidity.

XML

Economic Dependency

3 Months Ended

Mar. 31, 2015

Economic Dependency [Abstract]

ECONOMIC DEPENDENCY

ECONOMIC DEPENDENCY

Under various agreements, the Company has engaged or will engage Cole Advisors and its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, the sale of shares of the Company’s common stock available for issuance, as well as other administrative responsibilities for the Company including accounting services and investor relations. As a result of these relationships, the Company is dependent upon Cole Advisors and its affiliates. In the event that these companies are unable to provide the Company with these services, the Company would be required to find alternative providers of these services.

XML

Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Available-for-sale securities

The following is a summary of the Company’s available-for-sale securities as of March 31, 2015 (in thousands):

	Available-for-Sale Securities
	Amortized Cost Basis		Unrealized Gain		Fair Value
U.S. Treasury Bonds	$	179	$	5	$	184
U.S. Agency Bonds	85		—		85
Corporate Bonds	238		3		241
Total available-for-sale securities	$	502	$	8	$	510

Schedule of available-for-sale securities reconciliation

The following table provides the activity for the marketable securities during the three months endedMarch 31, 2015 (in thousands):

	Amortized Cost Basis			Unrealized Gain		Fair Value
Marketable securities as of December 31, 2014	$	487		$	3	$	490
Face value of marketable securities acquired	35			—		35
Amortization on marketable securities	—			—		—
Sales of securities	(20		)	—		(20		)
Increase in fair value of marketable securities	—			5		5
Marketable securities as of March 31, 2015	$	502		$	8	$	510

Investments classified by contractual maturity date

The scheduled maturities of the Company’s marketable securities as of March 31, 2015 are as follows (in thousands):

	Available-for-Sale Securities
	Amortized Cost		Estimated Fair Value
Due within one year	$	75	$	75
Due after one year through five years	205		206
Due after five years through ten years	206		213
Due after ten years	16		16
Total	$	502	$	510

XML

Summary of Significant Accounting Policies - Concentration of credit risk (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015
Concentration Risk
Cash on deposit, number of financial institutions	4
Cash on deposit, number of financial institutions which had deposits in excess of current federally insured limits	1
Texas
Concentration Risk
Number of owned properties (in number of properties)	8
Gross annualized rental revenues by industry
Concentration Risk
Concentration risk, percentage	10.00%
Credit concentration risk | Demand deposits
Concentration Risk
Concentration risk, credit risk, financial instrument, maximum exposure	6.2
Credit concentration risk | Gross annualized rental revenues by industry | Texas
Concentration Risk
Concentration risk, percentage	17.00%
Customer concentration risk | Gross annualized rental revenues by industry
Concentration Risk
Number of tenants	0
Customer concentration risk | Gross annualized rental revenues by industry | Discount store industry
Concentration Risk
Concentration risk, percentage	15.00%
Customer concentration risk | Gross annualized rental revenues by industry | Manufacturing Industry [Member]
Concentration Risk
Concentration risk, percentage	13.00%
Customer concentration risk | Gross annualized rental revenues by industry | Drugstore industry
Concentration Risk
Concentration risk, percentage	10.00%
Customer concentration risk | Gross annualized rental revenues by industry | Grocery store industry
Concentration Risk
Concentration risk, percentage	10.00%

XML

Condensed Consolidated Unaudited Statement of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Condensed Consolidated Unaudited Statement of Comprehensive Income [Abstract]
Net income	$ 1,126	$ 281
Other comprehensive income:
Unrealized gain on marketable securities	5	2
Total other comprehensive income	5	2
Comprehensive income	$ 1,131	$ 283

XML

Fair Value Measurements

3 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

GAAP defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. GAAP emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows:

Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).

Level 3 – Unobservable inputs, which are only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability.

The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities:

Cash and cash equivalents – The Company considers the carrying amounts of these financial assets to approximate fair value because of the short period of time between their origination and their expected realization. These financial assets are considered Level 1.

Line of credit and notes payable – The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of the measurement date. The estimated fair value of the Company’s debt was $121.8 million and $120.3 million as of March 31, 2015 and December 31, 2014, respectively, which approximated the carrying value on such dates. The fair value of the Company’s debt is estimated using Level 2 inputs.

Marketable securities – The Company’s marketable securities are carried at fair value and are valued using Level 1 inputs. The estimated fair value of the Company’s marketable securities are based on quoted market prices that are readily and regularly available in an active market.

Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, on disposition of the financial assets and liabilities. As of March 31, 2015, there have been no transfers of financial assets or liabilities between fair value hierarchy levels.

XML

Fair Value Measurements (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Carrying amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Line of credit, fair value	$ 121.8	$ 120.3
Fair value, inputs, level 2 | Fair value
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Line of credit, fair value	$ 121.8	$ 120.3

XML

Real Estate Acquisitions (Tables)

3 Months Ended

Mar. 31, 2015

Real Estate [Abstract]

Schedule of purchase price allocation

The following table summarizes the purchase price allocation (in thousands):

	March 31, 2014
Land	$	2,874
Building and improvements	9,509
Acquired in-place leases	1,395
Acquired above market leases	444
Acquired below market leases	(190		)
Total purchase price	$	14,032

Business acquisition, pro forma information

The table below presents the Company’s estimated revenue and net income (loss), on a pro forma basis, for the three months ended March 31, 2014 and 2013, respectively (in thousands):

	Three Months Ended March 31,
	2014		2013
Pro forma basis:
Revenue	$	2,496	$	1,046
Net income (loss)	$	461	$	(116	)