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, 2016

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, 2016, there were approximately 9.2 million shares of Wrap Class common stock, approximately 2.2 million shares of Advisor Class common stock and approximately 721,000 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, 2016 and December 31, 2015	3
Condensed Consolidated Unaudited Statements of Operations for the three months ended March 31, 2016 and 2015	4
Condensed Consolidated Unaudited Statements of Comprehensive (Loss) Income for the three months ended March 31, 2016 and 2015	5
Condensed Consolidated Unaudited Statement of Stockholders’ Equity for the three months ended March 31, 2016	6
Condensed Consolidated Unaudited Statements of Cash Flows for the three months ended March 31, 2016 and 2015	7
Notes to Condensed Consolidated Unaudited Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures About Market Risk	28
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, 2016			December 31, 2015
ASSETS
Investment in real estate assets:
Land	$	52,168		$	49,785
Buildings and improvements	201,640			187,616
Intangible lease assets	34,162			32,880
Total real estate investments, at cost	287,970			270,281
Less: accumulated depreciation and amortization	(14,854		)	(12,698		)
Total real estate investments, net	273,116			257,583
Investment in marketable securities	5,276			5,237
Total real estate investments and marketable securities, net	278,392			262,820
Cash and cash equivalents	13,817			14,840
Restricted cash	213			118
Rents and tenant receivables, net	2,994			2,655
Prepaid expenses, property escrow deposits and other assets	274			250
Deferred costs, net	755			819
Total assets	$	296,445		$	281,502
LIABILITIES AND STOCKHOLDERS’ EQUITY
Credit facility and notes payable, net	$	107,804		$	117,730
Accounts payable and accrued expenses	1,950			2,122
Escrowed investor proceeds	145			50
Due to affiliates	1,841			2,006
Intangible lease liabilities, net	3,408			3,513
Distributions payable	927			788
Derivative liabilities, deferred rental income, and other liabilities	2,321			1,120
Total liabilities	118,396			127,329
Commitments and contingencies
Redeemable common stock	20,786			17,967
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, 1,932,527 and 1,371,763 shares issued and outstanding, respectively	19			14
I Shares common stock, $0.01 par value; 163,000,000 shares authorized, 663,136 and 657,624 shares issued and outstanding, respectively	7			7
W Shares common stock, $0.01 par value; 164,000,000 shares authorized, 8,782,488 and 7,825,063 shares issued and outstanding, respectively	88			78
Capital in excess of par value	170,809			146,431
Accumulated distributions in excess of earnings	(12,549		)	(9,949		)
Accumulated other comprehensive loss	(1,111		)	(375		)
Total stockholders’ equity	157,263			136,206
Total liabilities and stockholders’ equity	$	296,445		$	281,502

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

3

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,
	2016			2015
Revenues:
Rental income	$	5,284		$	4,487
Tenant reimbursement income	639			337
Interest income on marketable securities	31			3
Total revenues	5,954			4,827
Operating expenses:
General and administrative	1,071			435
Property operating	232			180
Real estate tax	493			209
Advisory fees and expenses	550			284
Acquisition-related	340			69
Depreciation and amortization	2,058			1,638
Total operating expenses	4,744			2,815
Operating income	1,210			2,012
Other income (expense):
Interest expense and other, net	(1,227		)	(886		)
Net (loss) income	$	(17	)	$	1,126
Weighted average number of common shares outstanding:
Basic and diluted	10,591,618			7,157,057
Net (loss) income per common share:
Basic and diluted	$	—		$	0.16
Distributions declared per common share	$	0.24		$	0.24

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 COMPREHENSIVE (LOSS) INCOME

(in thousands)

	Three Months Ended March 31,
	2016			2015
Net (loss) income	$	(17	)	$	1,126
Other comprehensive (loss) income:
Unrealized holding gain on marketable securities	113			5
Less: reclassification adjustment for loss included in income as other expense	3			—
Unrealized loss on interest rate swaps	(990		)	—
Amount of loss reclassified from other comprehensive income into income as interest expense	138			—
Total other comprehensive (loss) income	(736		)	5
Comprehensive (loss) income	$	(753	)	$	1,131

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 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 Loss			Total Stockholders’ Equity
	Number  of Shares		Par  Value		Number  of Shares	Par  Value		Number  of Shares		Par  Value
Balance, January 1, 2016	1,371,763		$	14	657,624	$	7	7,825,063		$	78		$	146,431		$	(9,949	)	$	(375	)	$	136,206
Issuance of common stock	574,316		5		5,512	—		1,152,777		12			31,917			—			—			31,934
Distributions to investors	—		—		—	—		—		—			—			(2,583		)	—			(2,583		)
Commissions, dealer manager and distribution fees	—		—		—	—		—		—			(678		)	—			—			(678		)
Other offering costs	—		—		—	—		—		—			(237		)	—			—			(237		)
Redemptions of common stock	(13,552	)	—		—	—		(195,352	)	(2		)	(3,805		)	—			—			(3,807		)
Changes in redeemable common stock	—		—		—	—		—		—			(2,819		)	—			—			(2,819		)
Comprehensive loss	—		—		—	—		—		—			—			(17		)	(736		)	(753		)
Balance, March 31, 2016	1,932,527		$	19	663,136	$	7	8,782,488		$	88		$	170,809		$	(12,549	)	$	(1,111	)	$	157,263

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 STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended March 31,
	2016			2015
Cash flows from operating activities:
Net (loss) income	$	(17	)	$	1,126
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization, net	2,051			1,685
Straight-line rental income	(207		)	(197		)
Amortization of deferred financing costs	138			96
Amortization on marketable securities	3			—
Loss on sale of marketable securities	3			—
Bad debt expense	1			2
Changes in assets and liabilities:
Rents and tenant receivables	(133		)	(165		)
Prepaid expenses and other assets	19			193
Accounts payable and accrued expenses	(172		)	(266		)
Deferred rental income and other liabilities	349			—
Due to affiliates	(219		)	(934		)
Net cash provided by operating activities	1,816			1,540
Cash flows from investing activities:
Investment in real estate assets and capital expenditures	(17,689		)	—
Investment in marketable securities	(81		)	(35		)
Proceeds from sale and maturities of marketable securities	152			20
Payment of property escrow deposits	(871		)	—
Refund of property escrow deposits	828			—
Change in restricted cash	(95		)	(10		)
Net cash used in investing activities	(17,756		)	(25		)
Cash flows from financing activities:
Proceeds from issuance of common stock	30,773			3,900
Offering costs on issuance of common stock	(861		)	(288		)
Redemptions of common stock	(3,807		)	(2,990		)
Distributions to investors	(1,283		)	(982		)
Proceeds from credit facility and notes payable	5,000			24,950
Repayments of credit facility	(15,000		)	(23,500		)
Proceeds from line of credit with affiliate	—			10,000
Repayments of line of credit with affiliate	—			(10,000		)
Deferred financing costs paid	—			(559		)
Change in escrowed investor proceeds liability	95			10
Net cash provided by financing activities	14,917			541
Net (decrease) increase in cash and cash equivalents	(1,023		)	2,056
Cash and cash equivalents, beginning of period	14,840			4,489
Cash and cash equivalents, end of period	$	13,817		$	6,545
Supplemental disclosures of non-cash investing and financing activities:
Accrued dealer manager fee, distribution fee, and other offering costs	$	531		$	225
Distributions declared and unpaid	$	927		$	596
Common stock issued through distribution reinvestment plan	$	1,161		$	742
Change in fair value of marketable securities	$	116		$	5
Change in fair value of interest rate swaps	$	(852	)	$	—
Supplemental cash flow disclosures:
Interest paid	$	1,039		$	748

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

7

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

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

March 31, 2016

NOTE 1 — ORGANIZATION AND BUSINESS

Cole Real Estate Income Strategy (Daily NAV), Inc. (the “Company”) is a Maryland corporation, incorporated on July 27, 2010, that qualified as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning in its taxable year ended December 31, 2012. 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 interests 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 VEREIT, Inc. (“VEREIT”), a widely-held public company whose shares of common stock are listed on the New York Stock Exchange (NYSE: VER). VEREIT indirectly owns and/or controls 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. 

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. As of March 31, 2016, the Company had issued approximately 13.4 million shares of common stock in the Offering for gross offering proceeds of $231.9 million before offering costs and selling commissions, dealer manager fees and distribution fees of $5.0 million.

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, 2016, the NAV per share for W Shares, A Shares and I Shares was $18.28, $18.19 and $18.37, 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, 2016, the Company owned 79 commercial properties located in 30 states, containing 2.0 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, 2016, the rentable space at these properties was 99.1% 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.

8

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

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2016

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying consolidated financial statements.

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 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, 2015, and related notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. 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.

Reclassifications

Certain amounts in the Company’s prior period condensed consolidated unaudited financial statements have been reclassified to conform to the current period presentation. The Company has chosen to break out the details of (i) real estate tax expenses from property operating expenses in the Company’s condensed consolidated unaudited statements of operations and (ii) straight-line rental income in the Company’s condensed consolidated unaudited statements of cash flows. The Company has also chosen to combine depreciation of $1.1 million and amortization of $546,000 for the three months ended March 31, 2015 into the line item depreciation and amortization in the condensed consolidated unaudited statements of operations. These reclassifications had no effect on previously reported totals or subtotals.

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 condensed consolidated unaudited financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Real Estate Investments

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

The Company considers the period of future benefit of each respective asset to determine the appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows:

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

Recoverability of Real Estate Assets

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to,

9

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

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2016

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 assets to their respective fair values and recognize an impairment loss. Generally, fair value will be determined using a discounted cash flow analysis and recent comparable sales transactions. No impairment indicators were identified and no impairment losses were recorded during the three months ended March 31, 2016 or 2015.

Assets Held for Sale

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. There were no assets identified as held for sale as of March 31, 2016 or December 31, 2015.

Allocation of Purchase Price of Real Estate Assets

Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and to identified intangible assets and liabilities, consisting of the value of above- 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 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 determination of the fair values of the real estate 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 materially 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, 2016, 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 loss.

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 judgments 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.

10

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

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2016

Restricted Cash

The Company had $213,000 and $118,000 in restricted cash as of March 31, 2016 and December 31, 2015, respectively. Included in restricted cash were escrowed investor proceeds of $145,000 and $50,000 for which shares of common stock had not been issued as of March 31, 2016 and December 31, 2015, respectively. Additionally, as of March 31, 2016 and December 31, 2015, the Company had $68,000 in lender cash management accounts. As part of certain debt agreements, rent from certain of the Company’s tenants is deposited directly into a lockbox account, from which funds in excess of the required minimum balance are disbursed on a weekly basis to the Company.

Cash Concentrations

As of March 31, 2016, the Company had cash on deposit, including restricted cash, at four financial institutions, two of which had Company deposits in excess of federally insured levels totaling $13.3 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.

Revenue Recognition

Certain properties have leases where minimum rental payments increase during the term of the lease. The Company records rental income for the full term of each lease on a straight-line basis. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Expected reimbursements from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursement income in the period when such costs are incurred.

The Company continually reviews receivables related to rent, including any unbilled straight-line rent, and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, the Company will record an increase in the allowance for uncollectible accounts or record a direct write-off of the receivable in the condensed consolidated unaudited statements of operations and comprehensive (loss) income. As of March 31, 2016, the Company had an allowance for uncollectible accounts of $1,000. No allowance for uncollectible accounts was recorded as of December 31, 2015.

Earnings per Share

We have three classes of common stock with nonforfeitable dividend rights that are determined based on a different NAV for each class. Accordingly, we utilize the two-class method to determine our earnings per share, which results in the same earnings per share for each of the classes. Diluted income (loss) per share considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the three months ended March 31, 2016 or 2015.

Recent Accounting Pronouncements

Accounting Standards Update (“ASU”) No. 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”) - The amendments in this update eliminate the requirement that an acquirer in a business combination retrospectively account for measurement-period adjustments. Measurement-period adjustments should be recognized during the period in which the adjustment amount is determined, including any earnings impact that the acquirer would have recorded in prior periods if the accounting was completed at the acquisition date. These provisions are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, with early adoption permitted. The Company has evaluated the effect of ASU 2015-16 and noted that there will not be a significant impact to the Company’s consolidated financial statements.

From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company is currently evaluating the effect that certain of these new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s consolidated financial statements:

ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) - The requirements were amended to remove inconsistencies in revenue requirements and to provide a more complete framework for addressing revenue issues across a broad range of industries and transaction types. The revised standard’s core principle is that a company should

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NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2016

recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised standard also clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract to a customer. These provisions are effective January 1, 2018, and are to be applied retrospectively, with early adoption permitted for periods beginning after December 15, 2016 and interim periods thereafter.

ASU No. 2016-01, Financial Instruments (Subtopic 825-10) - The amendments in this update require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). The amendments in this update also require an entity to present separately in other comprehensive (loss) income, the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments in this update require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the consolidated balance sheets or the accompanying notes to the financial statements. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

On February 25, 2016, the Financial Accounting Standards Board issued Accounting Standards Codification (“ASC”) 842 (“ASC 842”), Leases, which replaces the existing guidance in ASC 840, Leases. ASC 842 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use (“ROU”) asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the ROU asset and for operating leases the lessee would recognize a straight-line total lease expense. The provisions of ASC 842 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 and are required to be applied on a modified retrospective approach. Early adoption is permitted.

ASU No. 2016-05, Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (“ASU 2016-05”) - The amendments in this update clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require de-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. These provisions are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with early adoption permitted.

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 under current market conditions. 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.

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NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2016

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

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 $109.5 million as of March 31, 2016, which approximated the carrying value on that date. As of December 31, 2015 the fair value of the Company’s debt was $119.3 million compared to a carrying value on that date of $119.5 million. 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.

Derivative instruments — The Company’s derivative instruments are comprised of interest rate swaps. All derivative instruments are carried at fair value and are valued using Level 2 inputs. The fair value of these instruments is determined using interest rate market pricing models. The Company includes the impact of credit valuation adjustments on derivative instruments measured at fair value.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. However, as of March 31, 2016, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Other financial instruments—The Company considers the carrying values of its cash and cash equivalents, restricted cash, tenant and other receivables, accounts payable and accrued expenses, other liabilities, due to affiliates and distributions payable to approximate their fair values because of the short period of time between their origination and their expected realization and based on their highly-liquid nature. Due to the short-term maturities of these instruments, Level 1 inputs are utilized to estimate the fair value of these financial instruments.

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, 2016, there have been no transfers of financial assets or liabilities between fair value hierarchy levels.

In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015 (in thousands):

	Balance as of			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	March 31, 2016			(Level 1)		(Level 2)			(Level 3)
Financial asset:
Marketable securities	$	5,276		$	5,276	$	—		$	—
Financial liabilities:
Interest rate swaps	$	(1,154	)	$	—	$	(1,154	)	$	—

	Balance as of			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	December 31, 2015			(Level 1)		(Level 2)			(Level 3)
Financial asset:
Marketable Securities	$	5,237		$	5,237	$	—		$	—
Financial liabilities:
Interest rate swaps	$	(302	)	$	—	$	(302	)	$	—

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

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2016

NOTE 4 — REAL ESTATE ACQUISITIONS

2016 Property Acquisitions

During the three months ended March 31, 2016, the Company acquired a 100% interest in two commercial properties for an aggregate purchase price of $17.7 million (the “2016 Acquisitions”). The Company purchased the 2016 Acquisitions with net proceeds from the Offering and available borrowings. The purchase price allocation for each of the Company’s acquisitions is preliminary and subject to change as it finalizes the allocation, which will be no later than 12 months from the acquisition date. The Company preliminarily allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed.

The following table summarizes the preliminary purchase price allocation for the properties purchased during the three months ended March 31, 2016 (in thousands):

	March 31, 2016
Land	$	2,383
Building and improvements	14,019
Acquired in-place leases (1)	1,281
Total purchase price	$	17,683

(1) The weighted average amortization period for acquired in-place leases is 11.2 years for acquisitions completed during the three months ended March 31, 2016.

The Company recorded revenue of $103,000 and net loss of $4,000 for the three months endedMarch 31, 2016 related to the 2016 Acquisitions. In addition, the Company recorded $340,000 of acquisition-related expenses for the three months endedMarch 31, 2016, which is included in acquisition-related expenses on the condensed consolidated unaudited statements of operations.

The following information summarizes selected financial information of the Company, as if all of the 2016 Acquisitions were completed on January 1, 2015 for each period presented below. The table below presents the Company’s estimated revenue and net income, on a pro forma basis, for the three months ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,
	2016		2015
Pro forma basis (unaudited)
Revenue	$	6,153	$	5,130
Net income	$	67	$	1,155

The unaudited pro forma information for the three months endedMarch 31, 2016 was adjusted to exclude acquisition-related expenses recorded during such periods related to the 2016 Acquisitions. Accordingly, these expenses were instead recognized in the pro forma information for the three months ended March 31, 2015. 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 2015, nor does it purport to represent the results of future operations.

2015 Property Acquisitions

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

Property Concentrations

As of March 31, 2016, one of the Company’s tenants accounted for 10% of the Company’s 2016 gross annualized rental revenues. No single geographic concentration accounted for greater than 10% of the Company’s 2016 gross annualized rental revenues. Tenants in the discount store, drugstore, manufacturing and home and garden industries accounted for 14%, 13%, 12%, and 10%, respectively, of the Company’s 2016 gross annualized rental revenues.

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

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2016

NOTE 5 — MARKETABLE SECURITIES

The Company owned marketable securities with an estimated fair value of $5.3 million and $5.2 million as of March 31, 2016 and December 31, 2015, respectively. The following is a summary of the Company’s available-for-sale securities as of March 31, 2016 (in thousands):

	Available-for-Sale Securities
	Amortized Cost Basis		Unrealized Gain		Fair Value
U.S. Treasury Bonds	$	1,349	$	14	$	1,363
U.S. Agency Bonds	1,111		1		1,112
Corporate Bonds	2,773		28		2,801
Total available-for-sale securities	$	5,233	$	43	$	5,276

The following table provides the activity for the marketable securities during the three months endedMarch 31, 2016 (in thousands):

	Amortized Cost Basis			Unrealized (Loss) Gain			Fair Value
Marketable securities as of January 1, 2016	$	5,310		$	(73	)	$	5,237
Face value of marketable securities acquired	80			—			80
Premiums and discounts on purchase of marketable securities, net of acquisition costs	1			—			1
Amortization on marketable securities	(3		)	—			(3		)
Sales and maturities of securities	(155		)	3			(152		)
Unrealized gain on marketable securities	—			113			113
Marketable securities as of March 31, 2016	$	5,233		$	43		$	5,276

During the three months endedMarch 31, 2016, the Company sold 13 marketable securities for aggregate proceeds of $152,000. Unrealized gains (losses) on marketable securities are recorded in other comprehensive (loss) income, with a portion of the amount subsequently reclassified into other expense on the statement of operations as securities are sold and gains (losses) are recognized. In addition, the Company recorded an unrealized gain of $113,000 on its investments, which is included in accumulated other comprehensive loss on the accompanying condensed consolidated unaudited statement of stockholders’ equity for the three months endedMarch 31, 2016 and the condensed consolidated unaudited balance sheet as of March 31, 2016.

The scheduled maturities of the Company’s marketable securities as of March 31, 2016 are as follows (in thousands):

	Available-for-Sale Securities
	Amortized Cost		Estimated Fair Value
Due within one year	$	477	$	477
Due after one year through five years	1,788		1,796
Due after five years through ten years	2,318		2,352
Due after ten years	650		651
Total	$	5,233	$	5,276

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.

In estimating other-than-temporary impairment losses, management considers a variety of factors, including (1) whether the Company has the intent to sell the impaired security, (2) whether the Company expects to hold the investment for a period of time sufficient to allow for anticipated recovery in fair value, and (3) whether the Company expects to recover the entire amortized cost basis of the security. The Company believes that none of the unrealized losses on investment securities are other-than-temporary as management expects the Company will fully recover the entire amortized cost basis of all securities. As of March 31, 2016, the Company had no other-than-temporary impairment losses.

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NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2016

NOTE 6 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, the Company uses certain types of derivative instruments for the purpose of managing or hedging its interest rate risk. The following table summarizes the terms of the Company’s executed interest rate swap agreements designated as hedging instruments as of March 31, 2016 and December 31, 2015 (in thousands):

Outstanding Notional Amount as of

Interest

Effective

Maturity

Fair Value of Liabilities as of

Balance Sheet Location

March 31, 2016

Rate (1)

Date

Date

March 31, 2016

December 31, 2015

Interest Rate Swaps

Deferred rental income, derivative liabilities and other liabilities

$

49,240

3.43% to 3.57%

6/30/15 to 12/1/15

9/12/19 to 12/1/20

$

(1,154

)

$

(302

)

(1) The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of March 31, 2016.

Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 3 to these condensed consolidated unaudited financial statements. The notional amount under the interest rate swap agreements is an indication of the extent of the Company’s involvement in each instrument, but does not represent exposure to credit, interest rate or market risks.

Accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. The Company designated the interest rate swaps as cash flow hedges in order to hedge the variability of the anticipated cash flows on its variable rate debt. The change in fair value of the effective portion of the derivative instruments that are designated as hedges is recorded in other comprehensive (loss) income, with a portion of the amount subsequently reclassified to interest expense as interest payments are made on the Company’s variable rate debt. For the three months endedMarch 31, 2016, the amount reclassified was $138,000.

Any ineffective portion of the change in fair value of the derivative instruments is recorded in interest expense. During the next 12 months, the Company estimates that an additional $481,000 will be reclassified from other comprehensive (loss) income as an increase to interest expense.

The Company has agreements with each of its derivative counterparties that contain provisions whereby, if the Company defaults on certain of its unsecured indebtedness, the Company could also be declared in default on its derivative obligations, resulting in an acceleration of payment. If the Company had breached any of these provisions, it could have been required to settle its obligations, under the agreements at an aggregate termination value, inclusive of interest payments, of $1.2 million, which includes accrued interest, at March 31, 2016. In addition, the Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company believes it mitigates its credit risk by entering into agreements with creditworthy counterparties. The Company records credit risk valuation adjustments on its interest rate swaps based on the credit quality of the Company and the respective counterparty. There were no termination events or events of default related to the interest rate swaps as of March 31, 2016.

NOTE 7 — CREDIT FACILITY AND NOTES PAYABLE

As of March 31, 2016, the Company had $107.8 million of debt outstanding, including net deferred financing costs, with weighted average years to maturity of 5.4 years and a weighted average interest rate of 3.69%. The following table summarizes the debt balances as of March 31, 2016 and December 31, 2015, and the debt activity for the three months ended March 31, 2016 (in thousands):

				During the Three Months Ended March 31, 2016
	Balance as of December 31, 2015				Debt Issuance, Net (1)		Repayments (1)			Accretion		Balance as of March 31, 2016
Credit facility	$	50,000			$	5,000	$	(15,000	)	$	—	$	40,000
Fixed rate debt	69,494				—		—			—		69,494
Total debt	119,494				5,000		(15,000		)	—		109,494
Deferred costs (2)	(1,764		)		—		—			74		(1,690		)
Total debt, net	$	117,730			$	5,000	$	(15,000	)	$	74	$	107,804

(1) Includes deferred financing costs incurred during the period.

(2) Deferred costs relate to mortgage notes payable and the term portion of the Credit Facility.

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

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2016

As of March 31, 2016, the Company had fixed rate debt outstanding of $69.5 million, including $9.2 million of variable rate debt that is fixed through interest rate swap agreements, which has the effect of fixing the variable interest rate per annum through the maturity of the variable rate debt. The fixed rate debt has interest rates ranging from 3.57% to 4.05% per annum and as of March 31, 2016, the fixed rate debt had a weighted average interest rate of 3.84%. The fixed rate debt outstanding matures on various dates from December 2020 to February 2025. The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the fixed rate debt outstanding was $114.9 million as of March 31, 2016. Each of the mortgage notes payable comprising the fixed rate debt is secured by the respective properties on which the debt was placed.

The Company has an amended and restated credit agreement (the “Amended Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent (“JPMorgan Chase”), that provides for borrowings up to $125.0 million, which is comprised of $85.0 million in revolving loans (the “Revolving Loans”), and a $40.0 million term loan (the “Term Loan”), collectively, the credit facility (the “Credit Facility”). The Term Loan matures on September 12, 2019 and the Revolving Loans mature on September 12, 2017; however, the Company may elect to extend the maturity date for the Revolving Loans to September 12, 2019, subject to satisfying certain conditions described in the Amended Credit Agreement.

The Credit Facility bears interest at rates dependent upon the type of loan specified by the Company and the overall leverage ratio. For a eurodollar rate loan, the interest rate will be equal to the one-month, two-month, three-month or six-month London Interbank Offered Rate (“LIBOR”) for the interest period, as elected by the Company, multiplied by the statutory reserve rate, as defined in the Amended Credit Agreement (the “Eurodollar Rate”), plus an interest rate spread ranging from 1.90% to 2.45%. For base rate committed loans, the interest rate will be equal to a rate ranging from 0.90% to 1.45%, depending on the Company’s leverage ratio as defined in the Amended Credit Agreement, plus 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 rate plus 1.0%. As of March 31, 2016, there were no amounts outstanding under the Revolving Loans, and the Term Loan outstanding totaled $40.0 million, which was subject to an interest rate swap agreement (the “Swapped Term Loan”). As of March 31, 2016, the all-in rate for the Swapped Term Loan was 3.43%. The Company had $85.0 million in unused capacity, subject to borrowing availability, as of March 31, 2016.

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. In particular, the Credit Agreement includes a requirement for the Company to maintain a minimum consolidated net worth greater than or equal to the sum of (i) $63.0 million plus (ii) 75% of the issuance of equity from the date of the Credit Agreement, a leverage ratio less than or equal to 60.0% and a fixed charge coverage ratio greater than 1.50. As of March 31, 2016, the Company believes it was in compliance with the covenants of the Amended Credit Agreement.

NOTE 8 — COMMITMENTS AND CONTINGENCIES

Litigation

In the ordinary course of business, the Company may become subject to litigation and claims. The Company is not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company is a party or of which the Company’s properties are the subject.

Purchase Commitments

As of March 31, 2016, the Company had entered into a purchase agreement with an unaffiliated third-party seller to acquire a 100% interest in one retail property, subject to meeting certain criteria, for an aggregate purchase price of $3.5 million, exclusive of closing costs. As of March 31, 2016, the Company had $43,000 of property escrow deposits held by escrow agents in connection with this future property acquisition. These deposits are included in the condensed consolidated unaudited balance sheets in prepaid expenses, property escrow deposits and other assets. As of March 31, 2016, none of these escrow deposits have been forfeited.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. In addition, the Company may own or acquire certain properties that are subject to environmental remediation. Generally, the seller of the property, the tenant of the property and/or another third party is responsible for environmental remediation costs related to a property. Additionally, in connection with the purchase of certain

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

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2016

properties, the respective sellers and/or tenants may agree to indemnify the Company against future remediation costs. The Company also carries environmental liability insurance on its properties that provides limited coverage for any remediation liability and/or pollution liability for third-party bodily injury and/or property damage claims for which the Company may be liable.  The Company is not aware of any environmental matters which it believes are reasonably likely to have a material effect on its results of operations, financial condition or liquidity.

NOTE 9 — 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, 2016, Cole Advisors or its affiliates had paid organization and offering expenses in excess of the 0.75% in connection with the Offering. These excess amounts were not included in the financial statements of the Company because such amounts 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 amounts may become payable to Cole Advisors.

The Company incurred 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,
	2016		2015
Offering:
Selling commissions	$	383	$	15
Selling commissions reallowed by CCC	$	383	$	15
Distribution fees	$	38	$	20
Distribution fees reallowed by CCC	$	33	$	19
Dealer manager fees	$	257	$	170
Dealer manager fees reallowed by CCC	$	28	$	25
Organization and offering expense reimbursement	$	237	$	35

As of March 31, 2016, $531,000 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 of the Company.

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

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2016

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 reimburses 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 reimburses 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 had an expense cap in place for the three months ended December 31, 2013, through the three months ending December 31, 2015, whereby Cole Advisors funded all general and administrative expenses of the Company that were 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”). 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. Beginning January 1, 2016, Cole Advisors no longer funded Excess G&A.

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.

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

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS - (Continued)

March 31, 2016

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,
	2016		2015
Acquisitions, Operations and Performance:
Acquisition expense reimbursement	$	280	$	25
Advisory fee	$	550	$	284
Operating expense reimbursement	$	347	$	—
Performance fee	$	—	$	—

Of the amounts shown above, $1.3 million had been incurred, but not yet paid, for services provided by Cole Advisors or its affiliates in connection with the acquisitions and operations activities during the three months ended March 31, 2016. Cole Advisors did not waive its rights to receive operating expense reimbursements or permanently waive its rights to any expense reimbursements for the three months ended March 31, 2016. Cole Advisors waived its right to receive operating expense reimbursements for the three months ended March 31, 2015; accordingly, the Company did not reimburse Cole Advisors for any such expenses during those periods. 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, 2016, $1.8 million was due to Cole Advisors or its affiliates primarily related to advisory, dealer manager and distribution fees, the reimbursement of organization and offering expenses, and acquisition expenses which were included in due to affiliates on the condensed consolidated unaudited balance sheet. As of December 31, 2015, $2.0 million was due to Cole Advisors and its affiliates related to performance fees, advisory, dealer manager and distribution fees, organization and offering expenses, which were included in amounts due to affiliates on the condensed consolidated unaudited balance sheet.

NOTE 10 — ECONOMIC DEPENDENCY

Under various agreements, the Company has engaged or will engage Cole Advisors or 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 or 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.

NOTE 11 — SUBSEQUENT EVENTS

Investment in Real Estate Assets

Subsequent to March 31, 2016, the Company acquired a 100% interest in six real estate properties for an aggregate purchase price of $9.9 million. The acquisitions were funded with net proceeds from the Offering. The Company has not completed its initial purchase price allocations with respect to these properties and therefore cannot provide similar disclosures to those included in Note 4 in these condensed consolidated unaudited financial statements for these properties.

Status of the Offering

As of May 11, 2016, the Company had received $250.4 million in gross offering proceeds through the issuance of approximately 14.4 million shares of its common stock in the Offering (including shares issued pursuant to the DRIP).

Share Redemptions

Subsequent to March 31, 2016 and through May 11, 2016, the Company redeemed approximately 227,000 shares for $4.1 million.

Credit Facility

As of May 11, 2016, the Company had $40.0 million outstanding under the Credit Facility and $85.0 million in unused capacity, subject to borrowing availability.

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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, 2015. 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 of 1933, as amended (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,” “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;

• our ability to make property sector allocations of our properties consistent with our present expectations;

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

• changes to accounting principles generally accepted in the United States of America (“GAAP”); and

• our sponsor’s ability to fully reestablish the financial network which previously supported us.

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. 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, 2015.

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.

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VEREIT indirectly owns and/or controls Cole Advisors, our dealer manager, CCC, our property manager, CREI Advisors, and our sponsor, Cole Capital. 

Our operating results and cash flows are primarily influenced by rental income from our commercial properties and interest expense on our property indebtedness and acquisition and operating expenses. Rental and other property income accounted for 89% and 93% of our total revenue for the three months ended March 31, 2016 and 2015, respectively. As 99.1% of our rentable square feet was under lease as of March 31, 2016 with a weighted average remaining lease term of 10.7 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. In addition, as of March 31, 2016, the net debt leverage ratio of our consolidated real estate assets, which is the ratio of debt, less cash and cash equivalents, to total gross real estate assets net of gross intangible lease liabilities, was 33.7%.

Portfolio Information

As of March 31, 2016, we owned 79 properties located in 30 states, comprising 2.0 million rentable square feet of commercial space, which includes the rentable square feet of buildings on land subject to ground leases. Our results of operations are influenced by the timing of acquisitions and the operating performance of our real estate investments. The following table shows the property statistics of our real estate assets as of March 31, 2016, and 2015:

	As of March 31,
	2016		2015
Number of properties	79		75
Approximate rentable square feet (1)	2.0 million		1.8 million
Percentage of rentable square feet leased	99.1	%	99.6	%

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

The following table summarizes our consolidated real estate investment activity during the three months ended March 31, 2016 and 2015:

	Three Months Ended March 31,
	2016			2015
Properties acquired	2			—
Approximate purchase price of acquired properties	$	17.7	million	$	—
Approximate rentable square feet	112,000			—

Same Store Properties

We review our stabilized operating results, measured by contract rental revenue, from properties that we owned for the entirety of both the current and prior year reporting periods, referred to as “same store” properties. Contract rental revenue is a supplemental non-GAAP financial measure of real estate companies’ operating performance. Contract rental revenue is considered by management to be a helpful supplemental performance measure, as it provides a consistent method for the comparison of the Company’s properties. In determining the same store property pool, we include all properties that were owned for the entirety of both the current and prior reporting periods, except for properties during the current or prior year that were under development or redevelopment. “Non-same store,” as reflected in the table below, includes properties acquired on or after January 1, 2015.

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As shown in the table below, contract rental revenue on the 70 same store properties for the three months ended March 31, 2016 increased 0.6% compared to the three months ended March 31, 2015. The same store properties were 100% occupied as of both March 31, 2016 and 2015. The following table shows the contract rental revenue from properties owned for both of the entire three months ended March 31, 2016 and 2015, along with a reconciliation to rental income, calculated in accordance with GAAP (dollar amounts in thousands):

	Number of Properties	Three Months Ended March 31,					Increase (Decrease)
Contract rental revenue		2016		2015			$ Change			% Change
“Same store” properties	70	$	3,998	$	3,975		$	23		0.6	%
“Non-same store” properties	9	1,072		—			1,072			100.0	%
Disposed properties (1)		—		363			(363		)	(100.0	)%
Total contract rental revenue	79	5,070		4,338			732			16.9	%
Straight-line rental income		207		197			10			5.1	%
Amortization (2)		7		(48		)	55			(114.6	)%
Rental income - as reported		$	5,284	$	4,487		$	797		17.8	%

(1) The Company disposed of five properties during the year ended December 31, 2015.

(2) Includes amortization of above- and below-market lease intangibles and deferred lease incentives.

Results of Operations

Our results of operations are influenced by the timing of acquisitions and the operating performance of our real estate investments. The following table provides summary information about our results of operations for the three months ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,					2016 vs 2015 Increase (Decrease)
	2016			2015
Total revenues	$	5,954		$	4,827	$	1,127
General and administrative expenses	$	1,071		$	435	$	636
Property operating expenses	$	232		$	180	$	52
Real estate tax expenses	$	493		$	209	$	284
Advisory fees and expenses	$	550		$	284	$	266
Acquisition-related expenses	$	340		$	69	$	271
Depreciation and amortization	$	2,058		$	1,638	$	420
Operating income	$	1,210		$	2,012	$	(802	)
Interest expense and other, net	$	1,227		$	886	$	341
Net (loss) income	$	(17	)	$	1,126	$	(1,143	)

Revenue

Our revenue consists primarily of rental and other property income from net leased commercial properties. We also pay certain operating expenses subject to reimbursement by our tenants, which results in tenant reimbursement income. Additionally, our portfolio includes liquid assets in the form of marketable securities. These investments can result in revenue in the form of interest income.

2016 vs 2015 — Revenue increased$1.1 million to $6.0 million for the three months ended March 31, 2016, compared to $4.8 million for the three months ended March 31, 2015. Rental and other property income from net leased commercial properties accounted for 89% and 93% of our total revenues during the three months March 31, 2016 and 2015, respectively. The increase was primarily due to the acquisition of nine rental income-producing properties subsequent to March 31, 2015, and owning 77 properties for the entire period ended March 31, 2016. Tenant reimbursement income during the three months ended March 31, 2016 was $639,000, compared to $337,000 during the three months ended March 31, 2015. Interest income on marketable securities increased $28,000 to $31,000 for the three months ended March 31, 2016, due to an increase in the average outstanding investment in marketable securities of $4.8 million.

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General and Administrative Expenses

The primary general and administrative expense items are advisory fees, professional, accounting and legal fees, escrow and trustee fees, unused line of credit fees and state franchise and income taxes.

2016 vs 2015 — General and administrative expenses increased$636,000 to $1.1 million for the three months ended March 31, 2016, compared to $435,000 for the three months ended March 31, 2015. The increase was primarily due to an increase in advisory, unused line of credit fees, other professional fees, audit and escrow and trustee fees. During the three months ended March 31, 2015, we incurred $66,000 of Excess G&A, which was reimbursed by our advisor subsequent to March 31, 2015. Beginning January 1, 2016, Cole Advisors no longer funded Excess G&A.

Property Operating Expenses

Property operating expenses such as property repairs, maintenance and property related insurance include both reimbursable and non-reimbursable property expenses. We are reimbursed by the tenant for reimbursable property operating expenses in accordance with the respective lease agreements.

2016 vs 2015 — Property operating expenses increased$52,000 to $232,000 for the three months ended March 31, 2016, compared to $180,000 for the three months ended March 31, 2015. The increase was primarily due to the acquisition of nine properties subsequent to March 31, 2015 and owning 77 properties for the entire period ended March 31, 2016.

Real Estate Tax Expenses

2016 vs 2015 — Real estate tax expenses increased$284,000 to $493,000 for the three months ended March 31, 2016, compared to $209,000 for the three months ended March 31, 2015. The increase was primarily due to higher property tax assessments at several of our properties subsequent to March 31, 2015.

Advisory Fees and Expenses

The advisory fees and expenses that we pay to our advisor are based upon our NAV.

2016 vs 2015 — Advisory fees and expenses increased$266,000 to $550,000 for the three months ended March 31, 2016, compared to $284,000 for the three months ended March 31, 2015. The increase was due to an increase in our NAV for each share class. The NAV per share for W Shares, A Shares and I Shares increased $0.20, $0.12 and $0.22, respectively during the three months ended March 31, 2016.

Acquisition-Related Expenses

2016 vs 2015 — Acquisition-related expenses increased$271,000 to $340,000 for the three months ended March 31, 2016, compared to $69,000 for the three months ended March 31, 2015. The change was primarily due to the purchase of two commercial properties for an aggregate purchase price of $17.7 million during the three months ended March 31, 2016, compared to no acquisitions during the three months ended March 31, 2015.

Depreciation and Amortization

2016 vs 2015 — Depreciation and amortization expenses increased$420,000 to $2.1 million for the three months ended March 31, 2016, compared to $1.6 million for the three months ended March 31, 2015. The increase was primarily due to the acquisition of nine properties subsequent to March 31, 2015 and owning 77 properties for the entire period ended March 31, 2016.

Interest Expense and Other, Net

2016 vs 2015 — Interest and other expense, net, increased$341,000 to $1.2 million for the three months ended March 31, 2016, compared to $886,000 for the three months ended March 31, 2015. The increase was primarily due to an increase in the weighted average interest rate on our outstanding debt from 2.79% as of March 31, 2015 to 3.69% as of March 31, 2016.

Distributions

Our board of directors authorized a daily distribution, based on 366 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, 2016 and ending on September 30, 2016. 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 all classes. As a result, from day to day, the per share daily distribution for each outstanding class of common stock

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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, 2016 and 2015, we paid distributions of $2.4 million and $1.7 million, respectively, including $1.2 million and $742,000, respectively, through the issuance of shares pursuant to the DRIP. The distributions paid during the three months ended March 31, 2016 were fully covered by cash flows from operating activities, including cash flows in excess of distributions from the prior year. The distributions paid during the three months ended March 31, 2015 were fully covered by cash flows from operating activities.

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, an individual stockholder limit. During the three months endedMarch 31, 2016, we received redemption requests for, and redeemed, a total of approximately 209,000 shares of our common stock for $3.8 million, comprised of approximately 195,000 W Shares and 14,000 A Shares of our common stock for $3.6 million and $246,000, respectively. From March 31, 2016 through May 11, 2016, the Company redeemed approximately 227,000 shares for $4.1 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. 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 and 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 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. The sources of our operating cash flows primarily are driven by the rental income received from current and future leased properties. As of March 31, 2016, we had raised $231.9 million of gross proceeds from the Offering before offering costs, selling commissions, dealer manager fees and distribution fees of $5.0 million. Refer to Item 1A - Risk Factors in our annual report on Form 10-K for risks related to our ability to raise capital in the near term.

We have an amended and restated credit agreement (the “Amended Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent (“JPMorgan Chase”), that provides for borrowings up to $125.0 million, which is comprised of $85.0 million in revolving loans (the “Revolving Loans”) and a $40.0 million term loan (the “Term Loan”), collectively, the credit facility (the “Credit Facility”). As of March 31, 2016, we had $85.0 million in unused capacity, subject to borrowing availability. As of March 31, 2016, we had cash and cash equivalents of $13.8 million.

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, lines 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 lines of credit, the amount available under the lines 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

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advisor will consider our receipt of proceeds from sales of additional shares, our cash flow from operations, available borrowing capacity under lines 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 or other borrowings.

The Term Loan matures on September 12, 2019 and the Revolving Loans mature on September 12, 2017; however, we may elect to extend the maturity date for the Revolving Loans to September 12, 2019, subject to satisfying certain conditions described in the Amended Credit Agreement. As a result, we believe that the resources identified 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 Line of Credit 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.

Contractual Obligations

As of March 31, 2016, we had $109.5 million of debt outstanding, with a weighted average interest rate of 3.69%. See Note 7 - Credit Facility and Notes Payable to our condensed consolidated unaudited financial statements in this Quarterly Report on Form 10-Q for a description of certain terms of our debt.

Our contractual obligations as of March 31, 2016 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 - credit facility (2)	$	40,000	$	—	$	—	$	40,000	$	—
Interest payments - credit facility (3)	5,075		1,372		2,744		959		—
Principal payments - fixed debt rate	69,494		—		—		9,240		60,254
Interest payments - fixed debt rate	17,596		2,693		5,385		5,280		4,238
Total	$	132,165	$	4,065	$	8,129	$	55,479	$	64,492

(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 Revolving Loans to September 12, 2019, subject to satisfying certain conditions described in the Amended Credit Agreement.

(3) As of March 31, 2016, we had $9.2 million of variable rate mortgage notes and $40.0 million of variable rate debt on the Credit Facility effectively fixed through the use of interest rate swap agreements. We used the effective interest rates fixed under our swap agreements to calculate the debt payment obligations in future periods.

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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. In addition to this limitation in our charter, 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; provided however, that a majority of our board of directors (including a majority of the independent directors) has determined that, as a general policy, borrowing in excess of 60% of the greater of cost (before deducting depreciation and other non-cash reserves) or fair market value of our gross assets is justified and in the best interest of us and our stockholders during our capital raising stage. The independent directors believe such borrowing levels are justified as higher debt levels during the offering stage may enable us to acquire properties earlier than we might otherwise be able to acquire them if we were to adhere to the 60% debt limitation, which could yield returns that are accretive to the portfolio. In addition, as we are in the offering stage, more equity could be raised in the future to reduce the debt levels. As of March 31, 2016, our ratio of debt to total gross real estate assets net of gross intangible lease liabilities was 38.6% (33.7% including adjustment to debt for cash and cash equivalents).

As of March 31, 2016, we had entered into a purchase agreement with an unaffiliated third-party seller to acquire a 100% interest in one retail property, subject to meeting certain criteria, for an aggregate purchase price of $3.5 million, exclusive of closing costs. As of March 31, 2016, we had $43,000 of property escrow deposits held by escrow agents in connection with this future property acquisition. These deposits are included in the condensed consolidated unaudited balance sheets in prepaid expenses, property escrow deposits and other assets in this Quarterly Report on Form 10-Q. As of March 31, 2016, none of these escrow deposits have been forfeited.

Cash Flow Analysis

Operating Activities. Net cash provided by operating activities was $1.8 million for the three months endedMarch 31, 2016, compared to $1.5 million for the three months endedMarch 31, 2015. The increase was primarily due to an increase in our working capital balances of $1.0 million, offset by a decrease 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 $771,000. See “— Results of Operations” for a more complete discussion of the factors impacting our operating performance.

Investing Activities. Net cash used in investing activities increased$17.7 million to $17.8 million for the three months endedMarch 31, 2016, compared to net cash used by investing activities of $25,000 for the three months endedMarch 31, 2015. The increase was primarily due to the acquisition of two commercial properties during the three months endedMarch 31, 2016. We did not acquire any properties during the three months endedMarch 31, 2015.

Financing Activities. Net cash provided by financing activities increased$14.4 million to $14.9 million for the three months endedMarch 31, 2016, compared to net cash provided by financing activities of $541,000 for the three months endedMarch 31, 2015. The increase was primarily due to an increase in net proceeds from the issuance of common stock of $26.3 million, offset by an increase in redemptions of common stock of $817,000, and an increase in net repayments on borrowing facilities and notes payable of $11.5 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 Cole Holdings Corporation (“CHC”), an affiliate of our sponsor, we were a qualified subchapter S subsidiary of CHC, and therefore were disregarded as an entity separate from CHC 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 (computed without regard to the dividends paid deduction and excluding certain non-cash items and net capital gains).

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 have been provided for in our accompanying condensed consolidated unaudited financial statements.

27

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 us 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. Management believes that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition. We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes. However, actual results may differ from these estimates and assumptions. If our 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 believe the following critical accounting policies govern the significant judgments and estimates used in the preparation of our financial statements, which should be read in conjunction with the more complete discussion of our accounting policies and procedures included in Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2015. We consider our critical accounting policies to be the following:

• Recoverability of Real Estate Assets;

• Allocation of Purchase Price of Real Estate Assets; and

• Derivative Instruments and Hedging Activities.

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, 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 period ended December 31, 2015 and related notes thereto.

Related-Party Transactions and Agreements

We have entered into agreements with Cole Advisors and its affiliates whereby we will pay certain fees to, or reimburse certain expenses of, 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 9 to our condensed consolidated unaudited financial statements in this Quarterly Report on Form 10-Q for a further explanation of the various related-party transactions, agreements and fees.

Conflicts of Interest

Affiliates of Cole Advisors act as an advisor to, and certain of our executive officers and one of our directors act as executive officers and/or directors of Cole Credit Property Trust IV, Inc., Cole Credit Property Trust V, Inc., and/or Cole Office & Industrial REIT (CCIT II), Inc., all of which are REITs offered, distributed and/or managed by affiliates of Cole Advisors. As such, there are conflicts of interest where Cole Advisors or its affiliates, while serving in the capacity as sponsor, general partner, officer, director, key personnel and/or advisor for VEREIT or another real estate program sponsored by Cole Capital, may be in conflict with us in connection with providing services to other real estate related programs related to property acquisitions, property dispositions, and property management among others. The compensation arrangements between affiliates of Cole Advisors and VEREIT and these other real estate programs sponsored by Cole Capital could influence the advice to us. See Part I, Item 1. Business — Conflicts of Interest in our Annual Report on Form 10-K for the year ended December 31, 2015.

Off-Balance Sheet Arrangements

As of March 31, 2016 and December 31, 2015, 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. 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

28

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. From time to time, we may enter into interest rate hedge contracts in order to mitigate our interest rate risk with respect to various debt instruments.

As of March 31, 2016, we had no variable rate debt outstanding.

As of March 31, 2016, we had two interest rate swap agreements outstanding, which mature on September 12, 2019 and December 1, 2020, with an aggregate notional amount of $49.2 million and an aggregate net fair value liability of $1.2 million. The fair value of these interest rate swap agreements is dependent upon existing market interest rates and swap spreads. As of March 31, 2016, an increase of 50 basis points in interest rates would result in a derivative liability of $280,000, representing an $874,000 net change. A decrease of 50 basis points would result in a derivative liability of $2.0 million, representing an $888,000 increase to the fair value of the net derivative liability.

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 provide reasonable assurance 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 no controls and procedures, no matter how well designed and operated, can provide absolute assurance of achieving the desired control objectives.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of March 31, 2016 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, 2016, were effective at a 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, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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, 2015.

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

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, 2016, we were authorized to issue 10.0 million shares of preferred stock, but none were issued or outstanding.

As of March 31, 2016, we had issued approximately 13.4 million shares in the Offering for gross proceeds of $231.9 million, out of which we have incurred $3.3 million in dealer manager fees, selling commissions and distribution fees and $1.7 million in organization and offering costs. With the net offering proceeds of $226.9 million and the borrowings from the credit facility, we acquired $299.5 million in real estate assets and incurred $3.5 million of acquisition-related expenses.

As of May 11, 2016, 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	10,967,209		2,265,448		685,737		13,918,394
Proceeds	$	188,307	$	40,131	$	12,188	$	240,626
Distribution Reinvestment Plan
Shares	376,733		58,589		35,025		470,347
Proceeds	$	6,654	$	1,049	$	626	$	8,329

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.

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During the three months ended March 31, 2016, 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, 2016
W Shares	127,297	$	18.24	127,297	(1)
A Shares	1,383	$	18.16	1,383	(1)
February 1 - February 29, 2016
W Shares	32,970	$	18.18	32,970	(1)
A Shares	6,498	$	18.13	6,498	(1)
March 1 - March 31, 2016
W Shares	35,085	$	18.26	35,085	(1)
A Shares	5,672	$	18.15	5,672	(1)
Total	208,905			208,905	(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.

Unregistered Sales of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

No events occurred during the three months ended March 31, 2016 that would require a response to this item.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On May 1, 2016, Simon J. Misselbrook, the Company’s chief financial officer and treasurer and chief financial officer and treasurer of our advisor, notified the Company of his resignation, effective May 30, 2016, to pursue another professional opportunity.  

On May 13, 2016, the Company’s board of directors appointed Michael J. Bartolotta to serve as its interim chief financial officer and treasurer commencing on May 30, 2016, assuming a successor has not been named at that time, to serve until such time as a successor is named. Mr. Bartolotta, age 59, has served as the executive vice president and chief financial officer of VEREIT since October 2015, and will continue to serve in that role. Mr. Bartolotta also has been appointed to serve as the interim chief financial officer and treasurer of Cole Office & Industrial REIT (CCIT II), Inc., Cole Credit Property Trust IV, Inc. and Cole Credit Property Trust V, Inc. commencing on May 30, 2016, assuming a successor has not been named at that time, to serve until such time as a successor is named. Mr. Bartolotta previously served as executive vice president and chief financial officer of Cushman & Wakefield Inc. (“Cushman”), a global leader in commercial real estate services, from February 2012 until September 2015. Mr. Bartolotta also served on Cushman’s board of directors and served as chairman of the audit committee from March 2007 until he assumed his position as executive vice president and chief financial officer of Cushman in February 2012. Before becoming Cushman’s chief financial officer, Mr. Bartolotta served as vice president and chief financial officer for EXOR, Inc., the U.S. arm of EXOR S.p.A., from 1991 to February 2012. Mr. Bartolotta has a Bachelor of Science degree in Accounting from New York University and is a Certified Public Accountant in New York.

Mr. Bartolotta did not enter into an employment agreement with us in connection with his appointment as the Company’s interim chief financial officer and treasurer, and the appointment of Mr. Bartolotta as the Company’s interim chief financial officer and treasurer was not made pursuant to any arrangement or understanding between Mr. Bartolotta and any other person. Mr. Bartolotta has not had any direct or indirect material interests in any transaction with the Company or to which the Company is a party or in any currently proposed transaction with the Company or to which the Company is a party. Mr. Bartolotta does have an employment agreement with VEREIT, dated as of October 5, 2015, relating to his position as executive vice president and chief financial officer of that company.

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, 2016

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, 2016 (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).
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, Glenn J. Rufrano, 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, 2016	/s/ GLENN J. RUFRANO
		Name:	Glenn J. Rufrano
		Title:	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, 2016	/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, 2016 (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/ GLENN J. RUFRANO
		Name:	Glenn J. Rufrano
		Title:	Chief Executive Officer and President (Principal Executive Officer)
		/s/ SIMON J. MISSELBROOK
		Name:	Simon J. Misselbrook
Date:	May 13, 2016	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, 2016 pursuant to 18 U.S.C. § 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, except to the extent the Company specifically incorporates this certification by reference.

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

Document and Entity Information - shares shares in Thousands	3 Months Ended
	Mar. 31, 2016	May. 11, 2016
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, 2016
Amendment Flag	false
Document Fiscal Year Focus	2016
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		9,200
Advisor Class common stock
Entity Information
Entity Common Stock, Shares Outstanding		2,200
Institutional Class common stock
Entity Information
Entity Common Stock, Shares Outstanding		721

XML

Condensed Consolidated Unaudited Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Investment in real estate assets:
Land	$ 52,168	$ 49,785
Buildings and improvements	201,640	187,616
Intangible lease assets	34,162	32,880
Total real estate investments, at cost	287,970	270,281
Less: accumulated depreciation and amortization	(14,854)	(12,698)
Total real estate investments, net	273,116	257,583
Investment in marketable securities	5,276	5,237
Total real estate investments and marketable securities, net	278,392	262,820
Cash and cash equivalents	13,817	14,840
Restricted cash	213	118
Rents and tenant receivables, net	2,994	2,655
Prepaid expenses, property escrow deposits and other assets	274	250
Deferred costs, net	755	819
Total assets	296,445	281,502
LIABILITIES AND STOCKHOLDERS’ EQUITY
Credit facility and notes payable, net	107,804	117,730
Accounts payable and accrued expenses	1,950	2,122
Escrowed investor proceeds	145	50
Due to affiliates	1,841	2,006
Intangible lease liabilities, net	3,408	3,513
Distributions payable	927	788
Derivative liabilities, deferred rental income, and other liabilities	2,321	1,120
Total liabilities	$ 118,396	$ 127,329
Commitments and contingencies
Redeemable common stock	$ 20,786	$ 17,967
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	170,809	146,431
Accumulated distributions in excess of earnings	(12,549)	(9,949)
Accumulated other comprehensive loss	(1,111)	(375)
Total stockholders’ equity	157,263	136,206
Total liabilities and stockholders’ equity	296,445	281,502
A Shares common stock, $0.01 par value; 163,000,000 shares authorized, 1,932,527 and 1,371,763 shares issued and outstanding, respectively
STOCKHOLDERS’ EQUITY
Common stock	19	14
I Shares common stock, $0.01 par value; 163,000,000 shares authorized, 663,136 and 657,624 shares issued and outstanding, respectively
STOCKHOLDERS’ EQUITY
Common stock	7	7
W Shares common stock, $0.01 par value; 164,000,000 shares authorized, 8,782,488 and 7,825,063 shares issued and outstanding, respectively
STOCKHOLDERS’ EQUITY
Common stock	$ 88	$ 78

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Condensed Consolidated Unaudited Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
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 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	1,932,527	1,371,763
Common stock, shares outstanding	1,932,527	1,371,763
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	663,136	657,624
Common stock, shares outstanding	663,136	657,624
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	8,782,488	7,825,063
Common stock, shares outstanding	8,782,488	7,825,063

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Condensed Consolidated Unaudited Statement of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues:
Rental income	$ 5,284	$ 4,487
Tenant reimbursement income	639	337
Interest income on marketable securities	31	3
Total revenues	5,954	4,827
Operating expenses:
General and administrative	1,071	435
Property operating	232	180
Real estate tax	493	209
Advisory fees and expenses	550	284
Acquisition-related	340	69
Depreciation and amortization	2,058	1,638
Total operating expenses	4,744	2,815
Operating income	1,210	2,012
Other income (expense):
Interest expense and other, net	(1,227)	(886)
Net (loss) income	$ (17)	$ 1,126
Weighted average number of common shares outstanding:
Basic and diluted (shares)	10,591,618	7,157,057
Net (loss) income per common share:
Basic and diluted (usd per share)	$ 0.00	$ 0.16
Distributions declared per common share (usd per share)	$ 0.24	$ 0.24

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Condensed Consolidated Unaudited Statement of Comprehensive (Loss) Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (17)	$ 1,126
Other comprehensive (loss) income:
Unrealized holding gain on marketable securities	113	5
Less: reclassification adjustment for loss included in income as other expense	3	0
Unrealized loss on interest rate swaps	(990)	0
Amount of loss reclassified from other comprehensive income into income as interest expense	138	0
Total other comprehensive (loss) income	(736)	5
Comprehensive (loss) income	$ (753)	$ 1,131

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Condensed Consolidated Unaudited Statement of Stockholders' Equity - 3 months ended Mar. 31, 2016 - USD ($) $ in Thousands	Total	Common Class A	Common Class I	Common Class W	Common Stock Common Class A	Common Stock Common Class I	Common Stock Common Class W	Capital in Excess of Par Value	Accumulated Distributions in Excess of Earnings	Accumulated Other Comprehensive Loss
Balance, shares at Dec. 31, 2015		1,371,763	657,624	7,825,063	1,371,763	657,624	7,825,063
Balance at Dec. 31, 2015	$ 136,206				$ 14	$ 7	$ 78	$ 146,431	$ (9,949)	$ (375)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock, shares					574,316	5,512	1,152,777
Issuance of common stock	31,934				$ 5	$ 0	$ 12	31,917
Distributions to investors	(2,583)								(2,583)
Commissions, dealer manager and distribution fees	(678)							(678)
Other offering costs	(237)							(237)
Redemptions of common stock, shares					(13,552)		(195,352)
Redemptions of common stock	(3,807)				$ 0		$ (2)	(3,805)
Changes in redeemable common stock	(2,819)							(2,819)
Comprehensive loss	(753)								(17)	(736)
Balance, shares at Mar. 31, 2016		1,932,527	663,136	8,782,488	1,932,527	663,136	8,782,488
Balance at Mar. 31, 2016	$ 157,263				$ 19	$ 7	$ 88	$ 170,809	$ (12,549)	$ (1,111)

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Condensed Consolidated Unaudited Statement of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net (loss) income	$ (17)	$ 1,126
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization, net	2,051	1,685
Straight-line rental income	(207)	(197)
Amortization of deferred financing costs	138	96
Amortization on marketable securities	3	0
Loss on sale of marketable securities	3	0
Bad debt expense	1	2
Changes in assets and liabilities:
Rents and tenant receivables	(133)	(165)
Prepaid expenses and other assets	19	193
Accounts payable and accrued expenses	(172)	(266)
Deferred rental income and other liabilities	349	0
Due to affiliates	(219)	(934)
Net cash provided by operating activities	1,816	1,540
Cash flows from investing activities:
Investment in real estate assets and capital expenditures	(17,689)	0
Investment in marketable securities	(81)	(35)
Proceeds from sale and maturities of marketable securities	152	20
Payment of property escrow deposits	(871)	0
Refund of property escrow deposits	828	0
Change in restricted cash	(95)	(10)
Net cash used in investing activities	(17,756)	(25)
Cash flows from financing activities:
Proceeds from issuance of common stock	30,773	3,900
Offering costs on issuance of common stock	(861)	(288)
Redemptions of common stock	(3,807)	(2,990)
Distributions to investors	(1,283)	(982)
Proceeds from credit facility and notes payable	5,000	24,950
Repayments of credit facility	(15,000)	(23,500)
Proceeds from line of credit with affiliate	0	10,000
Repayments of line of credit with affiliate	0	(10,000)
Deferred financing costs paid	0	(559)
Change in escrowed investor proceeds liability	95	10
Net cash provided by financing activities	14,917	541
Net (decrease) increase in cash and cash equivalents	(1,023)	2,056
Cash and cash equivalents, beginning of period	14,840	4,489
Cash and cash equivalents, end of period	13,817	6,545
Supplemental disclosures of non-cash investing and financing activities:
Accrued dealer manager fee, distribution fee, and other offering costs	531	225
Distributions declared and unpaid	927	596
Common stock issued through distribution reinvestment plan	1,161	742
Change in fair value of marketable securities	116	5
Change in fair value of interest rate swaps	(852)	0
Supplemental cash flow disclosures:
Interest paid	$ 1,039	$ 748

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Organization and Business

3 Months Ended

Mar. 31, 2016

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, incorporated on July 27, 2010, that qualified as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning in its taxable year ended December 31, 2012. 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 interests 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 VEREIT, Inc. (“VEREIT”), a widely-held public company whose shares of common stock are listed on the New York Stock Exchange (NYSE: VER). VEREIT indirectly owns and/or controls 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. 

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. As of March 31, 2016, the Company had issued approximately 13.4 million shares of common stock in the Offering for gross offering proceeds of $231.9 million before offering costs and selling commissions, dealer manager fees and distribution fees of $5.0 million.

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, 2016, the NAV per share for W Shares, A Shares and I Shares was $18.28, $18.19 and $18.37, 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, 2016, the Company owned 79 commercial properties located in 30 states, containing 2.0 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, 2016, the rentable space at these properties was 99.1% 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.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying consolidated financial statements.

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 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, 2015, and related notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. 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.

Reclassifications

Certain amounts in the Company’s prior period condensed consolidated unaudited financial statements have been reclassified to conform to the current period presentation. The Company has chosen to break out the details of (i) real estate tax expenses from property operating expenses in the Company’s condensed consolidated unaudited statements of operations and (ii) straight-line rental income in the Company’s condensed consolidated unaudited statements of cash flows. The Company has also chosen to combine depreciation of $1.1 million and amortization of $546,000 for the three months ended March 31, 2015 into the line item depreciation and amortization in the condensed consolidated unaudited statements of operations. These reclassifications had no effect on previously reported totals or subtotals.

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 condensed consolidated unaudited financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Real Estate Investments

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

The Company considers the period of future benefit of each respective asset to determine the appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows:

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

Recoverability of Real Estate Assets

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate 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 assets to their respective fair values and recognize an impairment loss. Generally, fair value will be determined using a discounted cash flow analysis and recent comparable sales transactions. No impairment indicators were identified and no impairment losses were recorded during the three months ended March 31, 2016 or 2015.

Assets Held for Sale

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. There were no assets identified as held for sale as of March 31, 2016 or December 31, 2015.

Allocation of Purchase Price of Real Estate Assets

Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and to identified intangible assets and liabilities, consisting of the value of above- 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 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 determination of the fair values of the real estate 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 materially 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, 2016, 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 loss.

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 judgments 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

The Company had $213,000 and $118,000 in restricted cash as of March 31, 2016 and December 31, 2015, respectively. Included in restricted cash were escrowed investor proceeds of $145,000 and $50,000 for which shares of common stock had not been issued as of March 31, 2016 and December 31, 2015, respectively. Additionally, as of March 31, 2016 and December 31, 2015, the Company had $68,000 in lender cash management accounts. As part of certain debt agreements, rent from certain of the Company’s tenants is deposited directly into a lockbox account, from which funds in excess of the required minimum balance are disbursed on a weekly basis to the Company.

Cash Concentrations

As of March 31, 2016, the Company had cash on deposit, including restricted cash, at four financial institutions, two of which had Company deposits in excess of federally insured levels totaling $13.3 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.

Revenue Recognition

Certain properties have leases where minimum rental payments increase during the term of the lease. The Company records rental income for the full term of each lease on a straight-line basis. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Expected reimbursements from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursement income in the period when such costs are incurred.

The Company continually reviews receivables related to rent, including any unbilled straight-line rent, and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, the Company will record an increase in the allowance for uncollectible accounts or record a direct write-off of the receivable in the condensed consolidated unaudited statements of operations and comprehensive (loss) income. As of March 31, 2016, the Company had an allowance for uncollectible accounts of $1,000. No allowance for uncollectible accounts was recorded as of December 31, 2015.

Earnings per Share

We have three classes of common stock with nonforfeitable dividend rights that are determined based on a different NAV for each class. Accordingly, we utilize the two-class method to determine our earnings per share, which results in the same earnings per share for each of the classes. Diluted income (loss) per share considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the three months ended March 31, 2016 or 2015.

Recent Accounting Pronouncements

Accounting Standards Update (“ASU”) No. 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”) - The amendments in this update eliminate the requirement that an acquirer in a business combination retrospectively account for measurement-period adjustments. Measurement-period adjustments should be recognized during the period in which the adjustment amount is determined, including any earnings impact that the acquirer would have recorded in prior periods if the accounting was completed at the acquisition date. These provisions are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, with early adoption permitted. The Company has evaluated the effect of ASU 2015-16 and noted that there will not be a significant impact to the Company’s consolidated financial statements.

From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company is currently evaluating the effect that certain of these new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s consolidated financial statements:

ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) - The requirements were amended to remove inconsistencies in revenue requirements and to provide a more complete framework for addressing revenue issues across a broad range of industries and transaction types. The revised standard’s core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised standard also clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract to a customer. These provisions are effective January 1, 2018, and are to be applied retrospectively, with early adoption permitted for periods beginning after December 15, 2016 and interim periods thereafter.

ASU No. 2016-01, Financial Instruments (Subtopic 825-10) - The amendments in this update require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). The amendments in this update also require an entity to present separately in other comprehensive (loss) income, the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments in this update require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the consolidated balance sheets or the accompanying notes to the financial statements. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

On February 25, 2016, the Financial Accounting Standards Board issued Accounting Standards Codification (“ASC”) 842 (“ASC 842”), Leases, which replaces the existing guidance in ASC 840, Leases. ASC 842 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use (“ROU”) asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the ROU asset and for operating leases the lessee would recognize a straight-line total lease expense. The provisions of ASC 842 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 and are required to be applied on a modified retrospective approach. Early adoption is permitted.

ASU No. 2016-05, Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (“ASU 2016-05”) - The amendments in this update clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require de-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. These provisions are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with early adoption permitted.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2016

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 under current market conditions. 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:

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 $109.5 million as of March 31, 2016, which approximated the carrying value on that date. As of December 31, 2015 the fair value of the Company’s debt was $119.3 million compared to a carrying value on that date of $119.5 million. 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.

Derivative instruments — The Company’s derivative instruments are comprised of interest rate swaps. All derivative instruments are carried at fair value and are valued using Level 2 inputs. The fair value of these instruments is determined using interest rate market pricing models. The Company includes the impact of credit valuation adjustments on derivative instruments measured at fair value.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. However, as of March 31, 2016, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Other financial instruments—The Company considers the carrying values of its cash and cash equivalents, restricted cash, tenant and other receivables, accounts payable and accrued expenses, other liabilities, due to affiliates and distributions payable to approximate their fair values because of the short period of time between their origination and their expected realization and based on their highly-liquid nature. Due to the short-term maturities of these instruments, Level 1 inputs are utilized to estimate the fair value of these financial instruments.

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, 2016, there have been no transfers of financial assets or liabilities between fair value hierarchy levels.

In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015 (in thousands):

	Balance as of			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	March 31, 2016			(Level 1)		(Level 2)			(Level 3)
Financial asset:
Marketable securities	$	5,276		$	5,276	$	—		$	—
Financial liabilities:
Interest rate swaps	$	(1,154	)	$	—	$	(1,154	)	$	—

	Balance as of			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	December 31, 2015			(Level 1)		(Level 2)			(Level 3)
Financial asset:
Marketable Securities	$	5,237		$	5,237	$	—		$	—
Financial liabilities:
Interest rate swaps	$	(302	)	$	—	$	(302	)	$	—

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Real Estate Acquisitions

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

REAL ESTATE ACQUISITIONS

REAL ESTATE ACQUISITIONS

2016 Property Acquisitions

During the three months ended March 31, 2016, the Company acquired a 100% interest in two commercial properties for an aggregate purchase price of $17.7 million (the “2016 Acquisitions”). The Company purchased the 2016 Acquisitions with net proceeds from the Offering and available borrowings. The purchase price allocation for each of the Company’s acquisitions is preliminary and subject to change as it finalizes the allocation, which will be no later than 12 months from the acquisition date. The Company preliminarily allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed.

The following table summarizes the preliminary purchase price allocation for the properties purchased during the three months ended March 31, 2016 (in thousands):

	March 31, 2016
Land	$	2,383
Building and improvements	14,019
Acquired in-place leases (1)	1,281
Total purchase price	$	17,683

(1) The weighted average amortization period for acquired in-place leases is 11.2 years for acquisitions completed during the three months ended March 31, 2016.

The Company recorded revenue of $103,000 and net loss of $4,000 for the three months endedMarch 31, 2016 related to the 2016 Acquisitions. In addition, the Company recorded $340,000 of acquisition-related expenses for the three months endedMarch 31, 2016, which is included in acquisition-related expenses on the condensed consolidated unaudited statements of operations.

The following information summarizes selected financial information of the Company, as if all of the 2016 Acquisitions were completed on January 1, 2015 for each period presented below. The table below presents the Company’s estimated revenue and net income, on a pro forma basis, for the three months ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,
	2016		2015
Pro forma basis (unaudited)
Revenue	$	6,153	$	5,130
Net income	$	67	$	1,155

The unaudited pro forma information for the three months endedMarch 31, 2016 was adjusted to exclude acquisition-related expenses recorded during such periods related to the 2016 Acquisitions. Accordingly, these expenses were instead recognized in the pro forma information for the three months ended March 31, 2015. 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 2015, nor does it purport to represent the results of future operations.

2015 Property Acquisitions

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

Property Concentrations

As of March 31, 2016, one of the Company’s tenants accounted for 10% of the Company’s 2016 gross annualized rental revenues. No single geographic concentration accounted for greater than 10% of the Company’s 2016 gross annualized rental revenues. Tenants in the discount store, drugstore, manufacturing and home and garden industries accounted for 14%, 13%, 12%, and 10%, respectively, of the Company’s 2016 gross annualized rental revenues.

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Marketable Securities

3 Months Ended

Mar. 31, 2016

Investments, Debt and Equity Securities [Abstract]

MARKETABLE SECURITIES

MARKETABLE SECURITIES

The Company owned marketable securities with an estimated fair value of $5.3 million and $5.2 million as of March 31, 2016 and December 31, 2015, respectively. The following is a summary of the Company’s available-for-sale securities as of March 31, 2016 (in thousands):

	Available-for-Sale Securities
	Amortized Cost Basis		Unrealized Gain		Fair Value
U.S. Treasury Bonds	$	1,349	$	14	$	1,363
U.S. Agency Bonds	1,111		1		1,112
Corporate Bonds	2,773		28		2,801
Total available-for-sale securities	$	5,233	$	43	$	5,276

The following table provides the activity for the marketable securities during the three months endedMarch 31, 2016 (in thousands):

	Amortized Cost Basis			Unrealized (Loss) Gain			Fair Value
Marketable securities as of January 1, 2016	$	5,310		$	(73	)	$	5,237
Face value of marketable securities acquired	80			—			80
Premiums and discounts on purchase of marketable securities, net of acquisition costs	1			—			1
Amortization on marketable securities	(3		)	—			(3		)
Sales and maturities of securities	(155		)	3			(152		)
Unrealized gain on marketable securities	—			113			113
Marketable securities as of March 31, 2016	$	5,233		$	43		$	5,276

During the three months endedMarch 31, 2016, the Company sold 13 marketable securities for aggregate proceeds of $152,000. Unrealized gains (losses) on marketable securities are recorded in other comprehensive (loss) income, with a portion of the amount subsequently reclassified into other expense on the statement of operations as securities are sold and gains (losses) are recognized. In addition, the Company recorded an unrealized gain of $113,000 on its investments, which is included in accumulated other comprehensive loss on the accompanying condensed consolidated unaudited statement of stockholders’ equity for the three months endedMarch 31, 2016 and the condensed consolidated unaudited balance sheet as of March 31, 2016.

The scheduled maturities of the Company’s marketable securities as of March 31, 2016 are as follows (in thousands):

	Available-for-Sale Securities
	Amortized Cost		Estimated Fair Value
Due within one year	$	477	$	477
Due after one year through five years	1,788		1,796
Due after five years through ten years	2,318		2,352
Due after ten years	650		651
Total	$	5,233	$	5,276

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.

In estimating other-than-temporary impairment losses, management considers a variety of factors, including (1) whether the Company has the intent to sell the impaired security, (2) whether the Company expects to hold the investment for a period of time sufficient to allow for anticipated recovery in fair value, and (3) whether the Company expects to recover the entire amortized cost basis of the security. The Company believes that none of the unrealized losses on investment securities are other-than-temporary as management expects the Company will fully recover the entire amortized cost basis of all securities. As of March 31, 2016, the Company had no other-than-temporary impairment losses.

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Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, the Company uses certain types of derivative instruments for the purpose of managing or hedging its interest rate risk. The following table summarizes the terms of the Company’s executed interest rate swap agreements designated as hedging instruments as of March 31, 2016 and December 31, 2015 (in thousands):

Outstanding Notional Amount as of

Interest

Effective

Maturity

Fair Value of Liabilities as of

Balance Sheet Location

March 31, 2016

Rate (1)

Date

Date

March 31, 2016

December 31, 2015

Interest Rate Swaps

Deferred rental income, derivative liabilities and other liabilities

$

49,240

3.43% to 3.57%

6/30/15 to 12/1/15

9/12/19 to 12/1/20

$

(1,154

)

$

(302

)

(1) The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of March 31, 2016.

Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 3 to these condensed consolidated unaudited financial statements. The notional amount under the interest rate swap agreements is an indication of the extent of the Company’s involvement in each instrument, but does not represent exposure to credit, interest rate or market risks.

Accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. The Company designated the interest rate swaps as cash flow hedges in order to hedge the variability of the anticipated cash flows on its variable rate debt. The change in fair value of the effective portion of the derivative instruments that are designated as hedges is recorded in other comprehensive (loss) income, with a portion of the amount subsequently reclassified to interest expense as interest payments are made on the Company’s variable rate debt. For the three months endedMarch 31, 2016, the amount reclassified was $138,000.

Any ineffective portion of the change in fair value of the derivative instruments is recorded in interest expense. During the next 12 months, the Company estimates that an additional $481,000 will be reclassified from other comprehensive (loss) income as an increase to interest expense.

The Company has agreements with each of its derivative counterparties that contain provisions whereby, if the Company defaults on certain of its unsecured indebtedness, the Company could also be declared in default on its derivative obligations, resulting in an acceleration of payment. If the Company had breached any of these provisions, it could have been required to settle its obligations, under the agreements at an aggregate termination value, inclusive of interest payments, of $1.2 million, which includes accrued interest, at March 31, 2016. In addition, the Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company believes it mitigates its credit risk by entering into agreements with creditworthy counterparties. The Company records credit risk valuation adjustments on its interest rate swaps based on the credit quality of the Company and the respective counterparty. There were no termination events or events of default related to the interest rate swaps as of March 31, 2016.

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Credit Facility and Notes Payable

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Credit Facility and Notes Payable

CREDIT FACILITY AND NOTES PAYABLE

As of March 31, 2016, the Company had $107.8 million of debt outstanding, including net deferred financing costs, with weighted average years to maturity of 5.4 years and a weighted average interest rate of 3.69%. The following table summarizes the debt balances as of March 31, 2016 and December 31, 2015, and the debt activity for the three months ended March 31, 2016 (in thousands):

				During the Three Months Ended March 31, 2016
	Balance as of December 31, 2015				Debt Issuance, Net (1)		Repayments (1)			Accretion		Balance as of March 31, 2016
Credit facility	$	50,000			$	5,000	$	(15,000	)	$	—	$	40,000
Fixed rate debt	69,494				—		—			—		69,494
Total debt	119,494				5,000		(15,000		)	—		109,494
Deferred costs (2)	(1,764		)		—		—			74		(1,690		)
Total debt, net	$	117,730			$	5,000	$	(15,000	)	$	74	$	107,804

(1) Includes deferred financing costs incurred during the period.

(2) Deferred costs relate to mortgage notes payable and the term portion of the Credit Facility.

As of March 31, 2016, the Company had fixed rate debt outstanding of $69.5 million, including $9.2 million of variable rate debt that is fixed through interest rate swap agreements, which has the effect of fixing the variable interest rate per annum through the maturity of the variable rate debt. The fixed rate debt has interest rates ranging from 3.57% to 4.05% per annum and as of March 31, 2016, the fixed rate debt had a weighted average interest rate of 3.84%. The fixed rate debt outstanding matures on various dates from December 2020 to February 2025. The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the fixed rate debt outstanding was $114.9 million as of March 31, 2016. Each of the mortgage notes payable comprising the fixed rate debt is secured by the respective properties on which the debt was placed.

The Company has an amended and restated credit agreement (the “Amended Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent (“JPMorgan Chase”), that provides for borrowings up to $125.0 million, which is comprised of $85.0 million in revolving loans (the “Revolving Loans”), and a $40.0 million term loan (the “Term Loan”), collectively, the credit facility (the “Credit Facility”). The Term Loan matures on September 12, 2019 and the Revolving Loans mature on September 12, 2017; however, the Company may elect to extend the maturity date for the Revolving Loans to September 12, 2019, subject to satisfying certain conditions described in the Amended Credit Agreement.

The Credit Facility bears interest at rates dependent upon the type of loan specified by the Company and the overall leverage ratio. For a eurodollar rate loan, the interest rate will be equal to the one-month, two-month, three-month or six-month London Interbank Offered Rate (“LIBOR”) for the interest period, as elected by the Company, multiplied by the statutory reserve rate, as defined in the Amended Credit Agreement (the “Eurodollar Rate”), plus an interest rate spread ranging from 1.90% to 2.45%. For base rate committed loans, the interest rate will be equal to a rate ranging from 0.90% to 1.45%, depending on the Company’s leverage ratio as defined in the Amended Credit Agreement, plus 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 rate plus 1.0%. As of March 31, 2016, there were no amounts outstanding under the Revolving Loans, and the Term Loan outstanding totaled $40.0 million, which was subject to an interest rate swap agreement (the “Swapped Term Loan”). As of March 31, 2016, the all-in rate for the Swapped Term Loan was 3.43%. The Company had $85.0 million in unused capacity, subject to borrowing availability, as of March 31, 2016.

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. In particular, the Credit Agreement includes a requirement for the Company to maintain a minimum consolidated net worth greater than or equal to the sum of (i) $63.0 million plus (ii) 75% of the issuance of equity from the date of the Credit Agreement, a leverage ratio less than or equal to 60.0% and a fixed charge coverage ratio greater than 1.50. As of March 31, 2016, the Company believes it was in compliance with the covenants of the Amended Credit Agreement.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

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 and claims. The Company is not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company is a party or of which the Company’s properties are the subject.

Purchase Commitments

As of March 31, 2016, the Company had entered into a purchase agreement with an unaffiliated third-party seller to acquire a 100% interest in one retail property, subject to meeting certain criteria, for an aggregate purchase price of $3.5 million, exclusive of closing costs. As of March 31, 2016, the Company had $43,000 of property escrow deposits held by escrow agents in connection with this future property acquisition. These deposits are included in the condensed consolidated unaudited balance sheets in prepaid expenses, property escrow deposits and other assets. As of March 31, 2016, none of these escrow deposits have been forfeited.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. In addition, the Company may own or acquire certain properties that are subject to environmental remediation. Generally, the seller of the property, the tenant of the property and/or another third party is responsible for environmental remediation costs related to a property. Additionally, in connection with the purchase of certain properties, the respective sellers and/or tenants may agree to indemnify the Company against future remediation costs. The Company also carries environmental liability insurance on its properties that provides limited coverage for any remediation liability and/or pollution liability for third-party bodily injury and/or property damage claims for which the Company may be liable.  The Company is not aware of any environmental matters which it believes are reasonably likely to have a material effect on its results of operations, financial condition or liquidity.

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Related-Party Transactions and Arrangements

3 Months Ended

Mar. 31, 2016

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, 2016, Cole Advisors or its affiliates had paid organization and offering expenses in excess of the 0.75% in connection with the Offering. These excess amounts were not included in the financial statements of the Company because such amounts 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 amounts may become payable to Cole Advisors.

The Company incurred 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,
	2016		2015
Offering:
Selling commissions	$	383	$	15
Selling commissions reallowed by CCC	$	383	$	15
Distribution fees	$	38	$	20
Distribution fees reallowed by CCC	$	33	$	19
Dealer manager fees	$	257	$	170
Dealer manager fees reallowed by CCC	$	28	$	25
Organization and offering expense reimbursement	$	237	$	35

As of March 31, 2016, $531,000 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 of 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 reimburses 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 reimburses 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 had an expense cap in place for the three months ended December 31, 2013, through the three months ending December 31, 2015, whereby Cole Advisors funded all general and administrative expenses of the Company that were 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”). 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. Beginning January 1, 2016, Cole Advisors no longer funded Excess G&A.

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,
	2016		2015
Acquisitions, Operations and Performance:
Acquisition expense reimbursement	$	280	$	25
Advisory fee	$	550	$	284
Operating expense reimbursement	$	347	$	—
Performance fee	$	—	$	—

Of the amounts shown above, $1.3 million had been incurred, but not yet paid, for services provided by Cole Advisors or its affiliates in connection with the acquisitions and operations activities during the three months ended March 31, 2016. Cole Advisors did not waive its rights to receive operating expense reimbursements or permanently waive its rights to any expense reimbursements for the three months ended March 31, 2016. Cole Advisors waived its right to receive operating expense reimbursements for the three months ended March 31, 2015; accordingly, the Company did not reimburse Cole Advisors for any such expenses during those periods. 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, 2016, $1.8 million was due to Cole Advisors or its affiliates primarily related to advisory, dealer manager and distribution fees, the reimbursement of organization and offering expenses, and acquisition expenses which were included in due to affiliates on the condensed consolidated unaudited balance sheet. As of December 31, 2015, $2.0 million was due to Cole Advisors and its affiliates related to performance fees, advisory, dealer manager and distribution fees, organization and offering expenses, which were included in amounts due to affiliates on the condensed consolidated unaudited balance sheet.

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Economic Dependency

3 Months Ended

Mar. 31, 2016

Economic Dependency [Abstract]

ECONOMIC DEPENDENCY

ECONOMIC DEPENDENCY

Under various agreements, the Company has engaged or will engage Cole Advisors or 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 or 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.

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Subsequent Events

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

Investment in Real Estate Assets

Subsequent to March 31, 2016, the Company acquired a 100% interest in six real estate properties for an aggregate purchase price of $9.9 million. The acquisitions were funded with net proceeds from the Offering. The Company has not completed its initial purchase price allocations with respect to these properties and therefore cannot provide similar disclosures to those included in Note 4 in these condensed consolidated unaudited financial statements for these properties.

Status of the Offering

As of May 11, 2016, the Company had received $250.4 million in gross offering proceeds through the issuance of approximately 14.4 million shares of its common stock in the Offering (including shares issued pursuant to the DRIP).

Share Redemptions

Subsequent to March 31, 2016 and through May 11, 2016, the Company redeemed approximately 227,000 shares for $4.1 million.

Credit Facility

As of May 11, 2016, the Company had $40.0 million outstanding under the Credit Facility and $85.0 million in unused capacity, subject to borrowing availability.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

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 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, 2015, and related notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. 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.

Reclassifications

Reclassifications

Certain amounts in the Company’s prior period condensed consolidated unaudited financial statements have been reclassified to conform to the current period presentation. The Company has chosen to break out the details of (i) real estate tax expenses from property operating expenses in the Company’s condensed consolidated unaudited statements of operations and (ii) straight-line rental income in the Company’s condensed consolidated unaudited statements of cash flows. The Company has also chosen to combine depreciation of $1.1 million and amortization of $546,000 for the three months ended March 31, 2015 into the line item depreciation and amortization in the condensed consolidated unaudited statements of operations.

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 condensed consolidated unaudited financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investment in and recoverability of real estate assets

Real Estate Investments

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

The Company considers the period of future benefit of each respective asset to determine the appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows:

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

Recoverability of Real Estate Assets

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate 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 assets to their respective fair values and recognize an impairment loss. Generally, fair value will be determined using a discounted cash flow analysis and recent comparable sales transactions. No impairment indicators were identified and no impairment losses were recorded during the three months ended March 31, 2016 or 2015.

Assets Held for Sale

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.

Allocation of purchase price of real estate assets

Allocation of Purchase Price of Real Estate Assets

Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and to identified intangible assets and liabilities, consisting of the value of above- 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 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 determination of the fair values of the real estate 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 materially 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, 2016, 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 loss.

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 judgments 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 cash concentrations

Restricted Cash

The Company had $213,000 and $118,000 in restricted cash as of March 31, 2016 and December 31, 2015, respectively. Included in restricted cash were escrowed investor proceeds of $145,000 and $50,000 for which shares of common stock had not been issued as of March 31, 2016 and December 31, 2015, respectively. Additionally, as of March 31, 2016 and December 31, 2015, the Company had $68,000 in lender cash management accounts. As part of certain debt agreements, rent from certain of the Company’s tenants is deposited directly into a lockbox account, from which funds in excess of the required minimum balance are disbursed on a weekly basis to the Company.

Cash Concentrations

As of March 31, 2016, the Company had cash on deposit, including restricted cash, at four financial institutions, two of which had Company deposits in excess of federally insured levels totaling $13.3 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.

Revenue recognition

Revenue Recognition

Certain properties have leases where minimum rental payments increase during the term of the lease. The Company records rental income for the full term of each lease on a straight-line basis. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Expected reimbursements from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursement income in the period when such costs are incurred.

The Company continually reviews receivables related to rent, including any unbilled straight-line rent, and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, the Company will record an increase in the allowance for uncollectible accounts or record a direct write-off of the receivable in the condensed consolidated unaudited statements of operations and comprehensive (loss) income. As of March 31, 2016, the Company had an allowance for uncollectible accounts of $1,000. No allowance for uncollectible accounts was recorded as of December 31, 2015.

Earnings per share

Earnings per Share

We have three classes of common stock with nonforfeitable dividend rights that are determined based on a different NAV for each class. Accordingly, we utilize the two-class method to determine our earnings per share, which results in the same earnings per share for each of the classes.

Recent accounting pronouncements

Recent Accounting Pronouncements

Accounting Standards Update (“ASU”) No. 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”) - The amendments in this update eliminate the requirement that an acquirer in a business combination retrospectively account for measurement-period adjustments. Measurement-period adjustments should be recognized during the period in which the adjustment amount is determined, including any earnings impact that the acquirer would have recorded in prior periods if the accounting was completed at the acquisition date. These provisions are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, with early adoption permitted. The Company has evaluated the effect of ASU 2015-16 and noted that there will not be a significant impact to the Company’s consolidated financial statements.

From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company is currently evaluating the effect that certain of these new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s consolidated financial statements:

ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) - The requirements were amended to remove inconsistencies in revenue requirements and to provide a more complete framework for addressing revenue issues across a broad range of industries and transaction types. The revised standard’s core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised standard also clarifies that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract to a customer. These provisions are effective January 1, 2018, and are to be applied retrospectively, with early adoption permitted for periods beginning after December 15, 2016 and interim periods thereafter.

ASU No. 2016-01, Financial Instruments (Subtopic 825-10) - The amendments in this update require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). The amendments in this update also require an entity to present separately in other comprehensive (loss) income, the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments in this update require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the consolidated balance sheets or the accompanying notes to the financial statements. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

On February 25, 2016, the Financial Accounting Standards Board issued Accounting Standards Codification (“ASC”) 842 (“ASC 842”), Leases, which replaces the existing guidance in ASC 840, Leases. ASC 842 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use (“ROU”) asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the ROU asset and for operating leases the lessee would recognize a straight-line total lease expense. The provisions of ASC 842 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 and are required to be applied on a modified retrospective approach. Early adoption is permitted.

ASU No. 2016-05, Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (“ASU 2016-05”) - The amendments in this update clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require de-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. These provisions are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with early adoption permitted.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Investment in and valuation of real estate and related assets

The estimated useful lives of the Company’s real estate assets by class are generally as follows:

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

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Schedule of Fair Value of Company's Financial Assets and Liabilities

In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015 (in thousands):

	Balance as of			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	March 31, 2016			(Level 1)		(Level 2)			(Level 3)
Financial asset:
Marketable securities	$	5,276		$	5,276	$	—		$	—
Financial liabilities:
Interest rate swaps	$	(1,154	)	$	—	$	(1,154	)	$	—

	Balance as of			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	December 31, 2015			(Level 1)		(Level 2)			(Level 3)
Financial asset:
Marketable Securities	$	5,237		$	5,237	$	—		$	—
Financial liabilities:
Interest rate swaps	$	(302	)	$	—	$	(302	)	$	—

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Real Estate Acquisitions (Tables)

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Schedule of purchase price allocation

The following table summarizes the preliminary purchase price allocation for the properties purchased during the three months ended March 31, 2016 (in thousands):

	March 31, 2016
Land	$	2,383
Building and improvements	14,019
Acquired in-place leases (1)	1,281
Total purchase price	$	17,683

(1) The weighted average amortization period for acquired in-place leases is 11.2 years for acquisitions completed during the three months ended March 31, 2016.

Business acquisition, pro forma information

The following information summarizes selected financial information of the Company, as if all of the 2016 Acquisitions were completed on January 1, 2015 for each period presented below. The table below presents the Company’s estimated revenue and net income, on a pro forma basis, for the three months ended March 31, 2016 and 2015 (in thousands):

	Three Months Ended March 31,
	2016		2015
Pro forma basis (unaudited)
Revenue	$	6,153	$	5,130
Net income	$	67	$	1,155

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Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016 (in thousands):

	Available-for-Sale Securities
	Amortized Cost Basis		Unrealized Gain		Fair Value
U.S. Treasury Bonds	$	1,349	$	14	$	1,363
U.S. Agency Bonds	1,111		1		1,112
Corporate Bonds	2,773		28		2,801
Total available-for-sale securities	$	5,233	$	43	$	5,276

Schedule of available-for-sale securities reconciliation

The following table provides the activity for the marketable securities during the three months endedMarch 31, 2016 (in thousands):

	Amortized Cost Basis			Unrealized (Loss) Gain			Fair Value
Marketable securities as of January 1, 2016	$	5,310		$	(73	)	$	5,237
Face value of marketable securities acquired	80			—			80
Premiums and discounts on purchase of marketable securities, net of acquisition costs	1			—			1
Amortization on marketable securities	(3		)	—			(3		)
Sales and maturities of securities	(155		)	3			(152		)
Unrealized gain on marketable securities	—			113			113
Marketable securities as of March 31, 2016	$	5,233		$	43		$	5,276

Investments classified by contractual maturity date

The scheduled maturities of the Company’s marketable securities as of March 31, 2016 are as follows (in thousands):

	Available-for-Sale Securities
	Amortized Cost		Estimated Fair Value
Due within one year	$	477	$	477
Due after one year through five years	1,788		1,796
Due after five years through ten years	2,318		2,352
Due after ten years	650		651
Total	$	5,233	$	5,276

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Derivative Instruments and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of derivative instruments

The following table summarizes the terms of the Company’s executed interest rate swap agreements designated as hedging instruments as of March 31, 2016 and December 31, 2015 (in thousands):

Outstanding Notional Amount as of

Interest

Effective

Maturity

Fair Value of Liabilities as of

Balance Sheet Location

March 31, 2016

Rate (1)

Date

Date

March 31, 2016

December 31, 2015

Interest Rate Swaps

Deferred rental income, derivative liabilities and other liabilities

$

49,240

3.43% to 3.57%

6/30/15 to 12/1/15

9/12/19 to 12/1/20

$

(1,154

)

$

(302

)

(1) The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of March 31, 2016.

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Credit Facility and Notes Payable (Tables)

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Summary of Debt Activity

The following table summarizes the debt balances as of March 31, 2016 and December 31, 2015, and the debt activity for the three months ended March 31, 2016 (in thousands):

				During the Three Months Ended March 31, 2016
	Balance as of December 31, 2015				Debt Issuance, Net (1)		Repayments (1)			Accretion		Balance as of March 31, 2016
Credit facility	$	50,000			$	5,000	$	(15,000	)	$	—	$	40,000
Fixed rate debt	69,494				—		—			—		69,494
Total debt	119,494				5,000		(15,000		)	—		109,494
Deferred costs (2)	(1,764		)		—		—			74		(1,690		)
Total debt, net	$	117,730			$	5,000	$	(15,000	)	$	74	$	107,804

(1) Includes deferred financing costs incurred during the period.

(2) Deferred costs relate to mortgage notes payable and the term portion of the Credit Facility.

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Related-Party Transactions and Arrangements (Tables)

3 Months Ended

Mar. 31, 2016

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,
	2016		2015
Acquisitions, Operations and Performance:
Acquisition expense reimbursement	$	280	$	25
Advisory fee	$	550	$	284
Operating expense reimbursement	$	347	$	—
Performance fee	$	—	$	—

The Company incurred 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,
	2016		2015
Offering:
Selling commissions	$	383	$	15
Selling commissions reallowed by CCC	$	383	$	15
Distribution fees	$	38	$	20
Distribution fees reallowed by CCC	$	33	$	19
Dealer manager fees	$	257	$	170
Dealer manager fees reallowed by CCC	$	28	$	25
Organization and offering expense reimbursement	$	237	$	35

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.

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Organization and Business (Details) $ / shares in Units, ft² in Millions	3 Months Ended
	Mar. 31, 2016 USD ($) ft² class_of_stock states property $ / shares shares	Dec. 31, 2015 shares	Aug. 26, 2013 USD ($) class_of_stock	Dec. 06, 2011 USD ($)
Organization and business
Issuance of common stock	$ 31,934,000
Number of states in which entity owns properties | states	30
Percentage of rentable space leased (in square feet)	99.10%
Consolidated properties
Organization and business
Number of owned properties | property	79
Rentable square feet (in square feet) | ft²	2.0
Common Class W
Organization and business
Common stock, shares outstanding | shares	8,782,488	7,825,063
Share price (in dollars per share) | $ / shares	$ 18.28
Common Class A
Organization and business
Common stock, shares outstanding | shares	1,932,527	1,371,763
Share price (in dollars per share) | $ / shares	$ 18.19
Common Class I
Organization and business
Common stock, shares outstanding | shares	663,136	657,624
Share price (in dollars per share) | $ / shares	$ 18.37
IPO
Organization and business
Common stock, value authorized				$ 4,000,000,000
Classes of common stock, additions | class_of_stock			2
Multi-class offering
Organization and business
Common stock, value authorized			$ 4,000,000,000
Classes of common stock | class_of_stock	3		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%
Common Stock | Common Class W
Organization and business
Common stock, shares outstanding | shares	8,782,488	7,825,063
Issuance of common stock	$ 12,000
Common Stock | Common Class A
Organization and business
Common stock, shares outstanding | shares	1,932,527	1,371,763
Issuance of common stock	$ 5,000
Common Stock | Common Class I
Organization and business
Common stock, shares outstanding | shares	663,136	657,624
Issuance of common stock	$ 0
Common Stock | IPO
Organization and business
Common stock, shares outstanding | shares	13,400,000
Issuance of common stock	$ 231,900,000
Organization and offering costs, selling commissions and dealer manager fees	$ 5,000,000

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Summary of Significant Accounting Policies (Details)	3 Months Ended
	Mar. 31, 2016 USD ($) single_tenant_property class_of_stock	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($) single_tenant_property	Aug. 26, 2013 class_of_stock
Valuation of real estate and related assets
Depreciation		$ 1,100,000
Amortization		546,000
Impairment	$ 0	$ 0
Number of real estate properties held for sale | single_tenant_property	0		0
Restricted cash	$ 213,000		$ 118,000
Escrowed investor proceeds	145,000		50,000
Allowance for doubtful accounts receivable	$ 1,000		0
Building
Valuation of real estate and related assets
Acquired real estate asset, useful life (years)	40 years
Lender Cash Management Accounts
Valuation of real estate and related assets
Restricted cash	$ 68,000		$ 68,000
Multi-class offering
Valuation of real estate and related assets
Classes of common stock | class_of_stock	3			3

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Summary of Significant Accounting Policies - Concentration of credit risk (Details) $ in Millions	3 Months Ended
	Mar. 31, 2016 USD ($) financial_institutions
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	2
Credit concentration risk | Demand deposits
Concentration Risk
Concentration risk, credit risk, financial instrument, maximum exposure | $	$ 13.3

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Fair Value Measurements (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Marketable securities	$ 5,276	$ 5,237
Carrying amount
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Line of credit	109,500	119,500
Fair value, inputs, level 2 | Fair value
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Line of credit	109,500	119,300
Recurring
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Marketable securities	5,276	5,237
Recurring | Fair Value, Inputs, level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Marketable securities	5,276	5,237
Recurring | Fair value, inputs, level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Marketable securities	0	0
Recurring | Fair Value, Inputs, level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Marketable securities	0	0
Recurring | Interest Rate Swap
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Derivative Liability	(1,154)	(302)
Recurring | Interest Rate Swap | Fair Value, Inputs, level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Derivative Liability	0	0
Recurring | Interest Rate Swap | Fair value, inputs, level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Derivative Liability	(1,154)	(302)
Recurring | Interest Rate Swap | Fair Value, Inputs, level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Derivative Liability	$ 0	$ 0

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Real Estate Acquisitions (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) property	Mar. 31, 2015 USD ($) property
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Acquisition-related	$ 340	$ 69
2016 Acquisitions
Business Acquisition
Business acquisition, percentage of voting interests acquired	100.00%
Number of real estate acquisitions (in number of properties) | property	2
Total purchase price	$ 17,700
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Land	2,383
Building and improvements	14,019
Total purchase price	17,683
Revenue of acquiree since acquisition date	103
Net loss of acquiree since acquisition date	4
Acquisition-related	340
Pro forma basis
Revenue	6,153	5,130
Net income (loss)	67	$ 1,155
2016 Acquisitions | Acquired in-place leases
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Acquired in-place leases	$ 1,281
Weighted average amortization period (years)	11 years 2 months 12 days
2015 Acquisitions
Business Acquisition
Number of real estate acquisitions (in number of properties) | property		0

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Real Estate Acquisitions - Property Concentrations (Details) - Gross annualized rental revenues by industry	3 Months Ended
	Mar. 31, 2016 tenant
Concentration Risk
Number of tenants	1
Concentration risk, percentage	10.00%
Discount store industry | Customer concentration risk
Concentration Risk
Concentration risk, percentage	14.00%
Drugstore industry | Customer concentration risk
Concentration Risk
Concentration risk, percentage	13.00%
Manufacturing industry | Customer concentration risk
Concentration Risk
Concentration risk, percentage	12.00%
Home and Garden industry | Customer concentration risk
Concentration Risk
Concentration risk, percentage	10.00%

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Marketable Securities (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) security	Mar. 31, 2015 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Schedule of Available-for-sale Securities
Investment in marketable securities			$ 5,276	$ 5,237
Amortized cost basis	$ 5,310		5,233	5,310
Unrealized Gain	(73)		43	(73)
Fair Value	5,237		5,276	5,237
Amortized Cost Basis Rollforward
Marketable securities as of January 1, 2016	5,310
Face value of marketable securities acquired	80
Premiums and discounts on purchase of marketable securities, net of acquisition costs	1
Amortization on marketable securities	(3)
Sales and maturities of securities	(155)
Marketable securities as of March 31, 2016	5,233
Unrealized (Loss) Gain Rollforward
Marketable securities as of January 1, 2016	(73)
Sales and maturities of securities	3
Unrealized gain on marketable securities	113
Marketable securities as of March 31, 2016	43
Fair Value Rollforward
Marketable securities as of January 1, 2016	5,237
Face value of marketable securities acquired	80
Premiums and discounts on purchase of marketable securities, net of acquisition costs	1
Amortization on marketable securities	(3)
Sales and maturities of securities	(152)
Unrealized gain on marketable securities	113
Marketable securities as of March 31, 2016	5,276
Amortized Cost
Due within one year			477
Due after one year through five years			1,788
Due after five years through ten years			2,318
Due after ten years			650
Total	5,310		5,233	5,310
Estimated Fair Value
Due within one year			477
Due after one year through five years			1,796
Due after five years through ten years			2,352
Due after ten years			651
Total	$ 5,237		5,276	$ 5,237
Available-for-sale Securities, Other Disclosure Items [Abstract]
Number of Securities Sold | security	13
Proceeds from sale and maturities of marketable securities	$ 152	$ 20
Unrealized gain on investments	113
U.S. Treasury Bonds
Schedule of Available-for-sale Securities
Amortized cost basis	1,349		1,349
Unrealized Gain	14		14
Fair Value	1,363		1,363
Amortized Cost Basis Rollforward
Marketable securities as of March 31, 2016	1,349
Unrealized (Loss) Gain Rollforward
Marketable securities as of March 31, 2016	14
Fair Value Rollforward
Marketable securities as of March 31, 2016	1,363
Amortized Cost
Total	1,349		1,349
Estimated Fair Value
Total	1,363		1,363
U.S. Agency Bonds
Schedule of Available-for-sale Securities
Amortized cost basis	1,111		1,111
Unrealized Gain	1		1
Fair Value	1,112		1,112
Amortized Cost Basis Rollforward
Marketable securities as of March 31, 2016	1,111
Unrealized (Loss) Gain Rollforward
Marketable securities as of March 31, 2016	1
Fair Value Rollforward
Marketable securities as of March 31, 2016	1,112
Amortized Cost
Total	1,111		1,111
Estimated Fair Value
Total	1,112		1,112
Corporate Bonds
Schedule of Available-for-sale Securities
Amortized cost basis	2,773		2,773
Unrealized Gain	28		28
Fair Value	2,801		2,801
Amortized Cost Basis Rollforward
Marketable securities as of March 31, 2016	2,773
Unrealized (Loss) Gain Rollforward
Marketable securities as of March 31, 2016	28
Fair Value Rollforward
Marketable securities as of March 31, 2016	2,801
Amortized Cost
Total	2,773		2,773
Estimated Fair Value
Total	$ 2,801		$ 2,801

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Derivative Instruments and Hedging Activities (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Derivatives, Fair Value [Line Items]
Amount of loss reclassified from other comprehensive income into income as interest expense	$ 138,000	$ 0
Cash Flow Hedging | Interest Rate Swap
Derivatives, Fair Value [Line Items]
Interest rate cash flow hedge gain (loss) to be reclassified during next twelve months	481,000
Derivative liability, event of default, termination amount	1,200,000
Cash Flow Hedging | Interest Rate Swap | Derivative Liabilities, Deferred Rent and Other Liabilities
Derivatives, Fair Value [Line Items]
Outstanding notional amount	49,240,000
Fair value of liabilities	$ (1,154,000)		$ (302,000)
Minimum | Cash Flow Hedging | Interest Rate Swap | Derivative Liabilities, Deferred Rent and Other Liabilities
Derivatives, Fair Value [Line Items]
Interest rate (percentage)	3.43%
Maximum | Cash Flow Hedging | Interest Rate Swap | Derivative Liabilities, Deferred Rent and Other Liabilities
Derivatives, Fair Value [Line Items]
Interest rate (percentage)	3.57%

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Credit Facility and Notes Payable - Narrative (Details)	3 Months Ended
	Mar. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Debt Instrument [Line Items]
Long-term debt, including net deferred financing costs	$ 107,804,000	$ 117,730,000
Weighted average years to maturity	5 years 4 months 16 days
Weighted average interest rate (percentage)	3.69%
Debt outstanding	$ 109,494,000	119,494,000
Credit facility and notes payable, net	107,804,000	117,730,000
Line of Credit
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	125,000,000
Credit facility and notes payable, net	40,000,000
Line of credit facility, covenant, minimum consolidated net worth	$ 63,000,000
Line of credit facility, covenant, minimum consolidated net worth, percentage of equity issuance	75.00%
Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 85,000,000
JPMorgan Chase, Revolving Credit Facility | Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Debt outstanding	40,000,000	50,000,000
JPMorgan Chase, Revolving Credit Facility | Unsecured Debt | Term Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 40,000,000
Fixed Rate Debt | Loans Payable
Debt Instrument [Line Items]
Weighted average interest rate (percentage)	3.84%
Debt outstanding	$ 69,494,000	$ 69,494,000
Debt security, amount, aggregate gross real estate assets net of gross intangible lease liabilities	114,900,000
Fixed rate debt, variable rate debt fixed through the use of interest rate swaps [Member] | Loans Payable
Debt Instrument [Line Items]
Debt outstanding	9,200,000
JPMorgan Chase, Credit Facility | Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit, remaining borrowing capacity	$ 85,000,000
Federal Funds Effective Rate | Secured Revolving Credit Facility | Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Basis spread on variable rate (percentage)	0.50%
Statutory Reserve Rate | Secured Revolving Credit Facility | Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Basis spread on variable rate (percentage)	1.00%
Minimum | Line of Credit
Debt Instrument [Line Items]
Debt instrument, covenant, fixed charge coverage ratio	1.50
Minimum | Fixed Rate Debt | Loans Payable
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	3.57%
Minimum | Secured Revolving Credit Facility, Eurodollar Rate | Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Basis spread on variable rate (percentage)	1.90%
Minimum | Secured Revolving Credit Facility, Base Rate | Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Basis spread on variable rate (percentage)	0.90%
Maximum | Line of Credit
Debt Instrument [Line Items]
Line of credit facility, covenant, leverage ratio	60.00%
Maximum | Fixed Rate Debt | Loans Payable
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	4.05%
Maximum | Secured Revolving Credit Facility, Eurodollar Rate | Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Basis spread on variable rate (percentage)	2.45%
Maximum | Secured Revolving Credit Facility, Base Rate | Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Basis spread on variable rate (percentage)	1.45%
Interest Rate Swap | Cash Flow Hedging | 2015 Swapped Term Loan | Unsecured Debt | Term Loan
Debt Instrument [Line Items]
Interest rate at period end (percentage)	3.43%

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Credit Facility and Notes Payable - Schedule of Debt (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Debt [Roll Forward]
Long-term debt, gross, beginning balance	$ 119,494
Deferred costs, beginning of period	(1,764)
Total debt, net, beginning of period	117,730
Debt issuances, net	5,000
Debt issuances, net	0
Proceeds from debt, net of issuance costs	5,000
Repayments	(15,000)
Accretion	74
Amortization of deferred financing costs	74
Long-term debt, gross, ending balance	109,494
Deferred costs, end of period	(1,690)
Total debt, net, ending of period	107,804
Loans Payable | Fixed Rate Debt
Debt [Roll Forward]
Long-term debt, gross, beginning balance	69,494
Debt issuances, net	0
Repayments	0
Long-term debt, gross, ending balance	69,494
Revolving Credit Facility | Line of Credit | JPMorgan Chase, Revolving Credit Facility
Debt [Roll Forward]
Long-term debt, gross, beginning balance	50,000
Debt issuances, net	5,000
Repayments	(15,000)
Long-term debt, gross, ending balance	$ 40,000

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Commitments and Contingencies (Details) - Unaffiliated third party sellers $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) property
Business Acquisition
Business acquisition, percentage of voting interests acquired	100.00%
Number of real estate acquisitions (in number of properties) | property	1
Total purchase price	$ 3,500
Escrow deposit	$ 43

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Related-Party Transactions and Arrangements (Details) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Related Party Transaction
Due to Affiliate	$ 1,841,000		$ 2,006,000
Common Class W
Related Party Transaction
Share price, base net asset value (in dollars per share)	$ 15.00
Common Class A
Related Party Transaction
Share price, base net asset value (in dollars per share)	16.72
Common Class I
Related Party Transaction
Share price, base net asset value (in dollars per share)	$ 16.82
Advisors
Related Party Transaction
Annualized rate, excess general and administrative expense		1.25%
Due to affiliates	$ 1,800,000		$ 2,000,000
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 (up to 3.75% for common class A shares)	0.00%
Selling commissions | Dealer manager | Common Class A
Related Party Transaction
Daily asset based related party fee percent (up to 3.75% for common class A shares)	3.75%
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 (up to 3.75% for common class A shares)	0.00%
Selling commissions | Dealer manager | Maximum | Common Class A
Related Party Transaction
Daily asset based related party fee percent (up to 3.75% for common class A shares)	3.90%
Selling commissions | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	$ 383,000	$ 15,000
Selling commissions reallowed by CCC | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	$ 383,000	15,000
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 (up to 3.75% for common class A shares)	0.00%
Distribution fees | Dealer manager | Common Class A
Related Party Transaction
Daily asset based related party fee percent (up to 3.75% for common class A shares)	0.50%
Distribution fees | Dealer manager | Common Class I
Related Party Transaction
Daily asset based related party fee percent (up to 3.75% for common class A shares)	0.00%
Distribution fees | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	$ 38,000	20,000
Distribution fees reallowed by CCC | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	$ 33,000	19,000
Dealer manager fees | Dealer manager | Common Class W
Related Party Transaction
Daily asset based related party fee percent (up to 3.75% for common class A shares)	0.55%
Dealer manager fees | Dealer manager | Common Class A
Related Party Transaction
Daily asset based related party fee percent (up to 3.75% for common class A shares)	0.55%
Dealer manager fees | Dealer manager | Common Class I
Related Party Transaction
Daily asset based related party fee percent (up to 3.75% for common class A shares)	0.25%
Dealer manager fees | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	$ 257,000	170,000
Dealer manager fees reallowed by CCC | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	28,000	25,000
Organization and offering expense reimbursement | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	$ 237,000	35,000
Organization and offering expense reimbursement | Advisors | Maximum
Related Party Transaction
Organization and offering expense limit (percent)	0.75%
Commissions, Fees and Expense Reimbursements | Advisors
Related Party Transaction
Due to Affiliate	$ 531,000
Acquisition expense reimbursement | Advisors
Related Party Transaction
Daily asset based related party fee percent (up to 3.75% for common class A shares)	0.90%
Related party transaction, expenses from transactions with related party	$ 280,000	25,000
Acquisition expense reimbursement | Advisors | Maximum
Related Party Transaction
Acquisition and advisory fee (percent)	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 fee | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	$ 550,000	284,000
Operating expense reimbursement | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party	347,000	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 (percent)	10.00%
Performance fee | Advisors | Minimum
Related Party Transaction
Total return threshold to receive performance fee (percent)	6.00%
Fees and Expense Reimbursements | Advisors
Related Party Transaction
Due to Affiliate	$ 1,300,000
Waived Fees and Expense Reimbursements | Advisors
Related Party Transaction
Related party transaction, expenses from transactions with related party		$ 258,000

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Subsequent Events (Details) shares in Thousands, $ in Thousands		1 Months Ended		3 Months Ended
	May. 11, 2016 USD ($) shares	May. 13, 2016 USD ($) property	May. 11, 2016 USD ($) shares	Mar. 31, 2016 USD ($)
Subsequent Event
Issuance of common stock				$ 31,934
Subsequent event
Subsequent Event
Issuance of common stock	$ 250,400
Issuance of common stock, shares | shares	14,400
Redemption of stock (in shares) | shares			227
Value of stock redeemed (in usd)			$ 4,100
Subsequent event | Line of Credit
Subsequent Event
Line of credit, amount outstanding	$ 40,000		40,000
Line of credit, remaining borrowing capacity	$ 85,000		$ 85,000
Acquisitions, Subsequent Period | Subsequent event
Subsequent Event
Business acquisition, percentage of voting interests acquired		100.00%
Number of real estate acquisitions (in number of properties) | property		6
Total purchase price		$ 9,900