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 September 30, 2017

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ¨

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 November 9, 2017, there were approximately 15.4 million shares of Wrap Class common stock, approximately 8.3 million shares of Advisor Class common stock and approximately 1.2 million 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 Balance Sheets as of September 30, 2017 and December 31, 2016	3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016	4
Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and nine months ended September 30, 2017 and 2016.	5
Condensed Consolidated Statement of Changes in Equity for the nine months ended September 30, 2017	6
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	7
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	38
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3. Defaults Upon Senior Securities	40
Item 4. Mine Safety Disclosures	40
Item 5. Other Information	40
Item 6. Exhibits	41
Signature	42

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts) (Unaudited)

	September 30, 2017			December 31, 2016
ASSETS
Investment in real estate assets:
Land	$	125,588		$	86,858
Buildings and improvements	454,831			319,589
Intangible lease assets	87,978			52,965
Total real estate investments, at cost	668,397			459,412
Less: accumulated depreciation and amortization	(36,259		)	(22,638		)
Total real estate investments, net	632,138			436,774
Investment in marketable securities	5,387			5,563
Total real estate investments and marketable securities, net	637,525			442,337
Cash and cash equivalents	8,598			4,671
Restricted cash	501			600
Rents and tenant receivables, net	6,631			4,206
Prepaid expenses, derivative assets and other assets	951			684
Deferred costs, net	1,448			1,074
Total assets	$	655,654		$	453,572
LIABILITIES AND EQUITY
Notes payable and credit facility, net	$	258,651		$	159,143
Accrued expenses and accounts payable	3,378			2,798
Escrowed investor proceeds	—			75
Due to affiliates	18,798			14,786
Intangible lease liabilities, net	13,095			5,798
Distributions payable	1,903			1,444
Deferred rental income, derivative liabilities and other liabilities	2,100			1,442
Total liabilities	297,925			185,486
Commitments and contingencies
Redeemable common stock	43,183			32,076
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding	—			—
W Shares common stock, $0.01 par value; 164,000,000 shares authorized, 15,242,210 and 12,461,616 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively	153			125
A Shares common stock, $0.01 par value; 163,000,000 shares authorized, 7,743,545 and 4,449,352 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively	78			45
I Shares common stock, $0.01 par value; 163,000,000 shares authorized, 916,940 and 788,270 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively	9			8
Capital in excess of par value	352,643			259,817
Accumulated distributions in excess of earnings	(39,157		)	(24,399		)
Accumulated other comprehensive income (loss)	43			(372		)
Total stockholders’ equity	313,769			235,224
Non-controlling interests	777			786
Total equity	$	314,546		$	236,010
Total liabilities, redeemable common stock, and equity	$	655,654		$	453,572

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

3

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts) (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues:
Rental income	$	11,822		$	6,163		$	31,188		$	17,160
Tenant reimbursement income	1,391			697			3,118			1,936
Interest income on marketable securities	31			29			90			88
Total revenues	13,244			6,889			34,396			19,184
Operating expenses:
General and administrative	1,685			1,326			4,823			3,512
Property operating	561			239			1,244			683
Real estate tax	998			548			2,319			1,518
Advisory fees and expenses	1,128			725			3,063			1,911
Acquisition-related	333			705			1,629			1,748
Depreciation and amortization	5,174			2,390			13,259			6,674
Total operating expenses	9,879			5,933			26,337			16,046
Operating income	3,365			956			8,059			3,138
Other expense:
Interest expense and other, net	(3,289		)	(1,326		)	(7,536		)	(3,805		)
Net income (loss)	76			(370		)	523			(667		)
Net income allocated to noncontrolling interest	8			—			26			—
Net income (loss) attributable to the Company	$	68		$	(370	)	$	497		$	(667	)
Weighted average number of common shares outstanding:
Basic and diluted	23,045,184			14,200,887			20,854,620			12,342,600
Net income (loss) per common share:
Basic and diluted	$	—		$	(0.03	)	$	0.02		$	(0.05	)
Distributions declared per common share	$	0.25		$	0.25		$	0.73		$	0.73

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

4

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands) (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income (loss)	$	76		$	(370	)	$	523		$	(667	)
Other comprehensive income (loss)
Unrealized holding gain on marketable securities	14			10			66			184
Reclassification adjustment for (gain) loss included in income as other expense	(4		)	3			(4		)	(2		)
Unrealized gain (loss) on interest rate swaps	116			244			(75		)	(1,138		)
Amount of loss reclassified from other comprehensive income into income as interest expense	166			131			428			405
Total other comprehensive income (loss)	292			388			415			(551		)
Comprehensive income (loss)	368			18			938			(1,218		)
Comprehensive income allocated to noncontrolling interest	8			—			26			—
Comprehensive income (loss) attributable to the Company	$	360		$	18		$	912		$	(1,218	)

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

5

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

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands, except share amounts) (Unaudited)

	W Shares Common Stock					A Shares Common Stock					I Shares Common Stock				Capital in Excess of Par Value			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive (Loss) Income			Total Stockholders’ Equity			Non- Controlling Interests			Total Equity
	Number  of Shares		Par  Value			Number  of Shares		Par  Value			Number  of Shares		Par  Value
Balance, January 1, 2017	12,461,616		$	125		4,449,352		$	45		788,270		$	8	$	259,817		$	(24,399	)	$	(372	)	$	235,224		$	786		$	236,010
Issuance of common stock	4,045,992		40			3,480,749		35			126,160		1		140,145			—			—			140,221			—			140,221
Conversion of shares	(55,096	)	—			—		—			54,673		—		—			—			—			—			—			—
Distributions to investors	—		—			—		—			—		—		—			(15,255		)	—			(15,255		)	—			(15,255		)
Commissions, dealer manager and distribution fees	—		—			—		—			—		—		(9,034		)	—			—			(9,034		)	—			(9,034		)
Other offering costs	—		—			—		—			—		—		(1,035		)	—			—			(1,035		)	—			(1,035		)
Redemptions of common stock	(1,210,302	)	(12		)	(186,556	)	(2		)	(52,163	)	—		(26,143		)	—			—			(26,157		)	—			(26,157		)
Changes in redeemable common stock	—		—			—		—			—		—		(11,107		)	—			—			(11,107		)	—			(11,107		)
Distributions to non-controlling interests	—		—			—		—			—		—		—			—			—			—			(35		)	(35		)
Comprehensive income	—		—			—		—			—		—		—			497			415			912			26			938
Balance as of September 30, 2017	15,242,210		$	153		7,743,545		$	78		916,940		$	9	$	352,643		$	(39,157	)	$	43		$	313,769		$	777		$	314,546

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

6

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (Unaudited)

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities:
Net income (loss)	$	523		$	(667	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization, net	12,995			6,671
Straight-line rental income	(1,304		)	(707		)
Amortization of deferred financing costs	1,541			436
Amortization on marketable securities	10			12
Gain on sale of marketable securities	(4		)	(2		)
Ineffectiveness of interest rate swaps	(17		)	—
Write-off of deferred financing costs	97			—
Bad debt expense	1			15
Changes in assets and liabilities:
Rents and tenant receivables	(1,122		)	(256		)
Prepaid expenses and other assets	(307		)	(121		)
Accounts payable and accrued expenses	544			182
Deferred rental income and other liabilities	658			316
Due to affiliates	(268		)	196
Net cash provided by operating activities	13,347			6,075
Cash flows from investing activities:
Investment in real estate assets and capital expenditures	(201,054		)	(85,684		)
Investment in marketable securities	(1,173		)	(861		)
Proceeds from sale and maturities of marketable securities	1,405			603
Payment of property escrow deposits	(4,340		)	(3,046		)
Refund of property escrow deposits	4,750			1,811
Change in restricted cash	99			(688		)
Net cash used in investing activities	(200,313		)	(87,865		)
Cash flows from financing activities:
Proceeds from issuance of common stock	132,874			109,738
Offering costs on issuance of common stock	(5,789		)	(3,099		)
Redemptions of common stock	(26,157		)	(11,389		)
Distributions to investors	(7,449		)	(4,538		)
Proceeds from credit facility and notes payable	289,065			16,275
Repayments of credit facility	(188,000		)	(15,000		)
Payment of loan deposits	(125		)	—
Refund of loan deposits	125			—
Deferred financing costs paid	(3,541		)	(223		)
Change in escrowed investor proceeds liability	(75		)	231
Distributions to noncontrolling interests	(35		)	—
Net cash provided by financing activities	190,893			91,995
Net increase in cash and cash equivalents	3,927			10,205
Cash and cash equivalents, beginning of period	4,671			14,840
Cash and cash equivalents, end of period	$	8,598		$	25,045
Supplemental disclosures of non-cash investing and financing activities:
Change in accrued dealer manager fee, distribution fee, and other offering costs	$	6,798		$	5,655
Distributions to investors declared and unpaid	$	1,903		$	1,205
Common stock issued through distribution reinvestment plan	$	7,347		$	4,105
Change in fair value of marketable securities	$	62		$	182
Change in fair value of interest rate swaps	$	353		$	(733	)
Accrued capital expenditures	$	8		$	109
Accrued deferred financing costs	$	28		$	—
Supplemental cash flow disclosures:
Interest paid	$	5,436		$	3,180

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

7

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited)

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 with 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 a registration statement filed on Form S-11 (Registration No. 333-213271) on February 10, 2017 (the “Continuing Offering 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 September 30, 2017, the Company had issued approximately 28.0 million shares of common stock in the Offering for gross offering proceeds of $501.2 million before offering costs and selling commissions, and the current portion of dealer manager fees and distribution fees of $14.1 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 September 30, 2017, the NAV per share for W Shares, A Shares and I Shares was $18.13, $17.92 and $18.30, 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, (2) notes receivable and other investments secured by commercial real estate, including the origination of loans, and (3) U.S. government securities, agency securities, corporate debt and other investments for which there is reasonable liquidity. As of September 30, 2017, the Company owned 135 commercial properties, which includes properties owned through a consolidated joint venture arrangement (the “Consolidated Joint Venture”), located in 36 states, containing 4.1 million rentable square feet of commercial space, including the square feet of buildings which are on land subject to ground leases. As of September 30, 2017, the rentable square feet at these properties was 99.3% leased, including month-to-month agreements, if any.

The Company is structured as a perpetual-life, non-exchange traded REIT. This means that, subject to regulatory approval of its 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 FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies presented below is designed to assist in understanding the Company’s condensed 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 condensed consolidated financial statements.

Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission 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, 2016, and related notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The condensed consolidated 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 financial statements include the accounts of the Company and its wholly-owned subsidiaries and the Consolidated Joint Venture in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation.

The Company evaluates its relationships and investments to determine if it has variable interests. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns.  If the Company determines that it has a variable interest in an entity, it evaluates whether such interest is in a variable interest entity (“VIE”). VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one of the following characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity. The Company consolidates any VIEs when it is determined to be the primary beneficiary of the VIE’s operations.

For legal entities being evaluated for consolidation, the Company must first determine whether the interests that it holds and fees it receives qualify as variable interests in the entity. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns. The Company’s evaluation includes consideration of fees paid to the Company where the Company acts as a decision maker or service provider to the entity being evaluated. If the Company determines that it holds a variable interest in an entity, it evaluates whether that entity is a VIE.

A VIE must be consolidated by its primary beneficiary, which is generally defined as the party who has a controlling financial interest in the VIE. The Company qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant to the VIE. The Company consolidates any VIEs when the Company is determined to be the primary beneficiary of the VIE, and the difference between consolidating the VIE and accounting for it using the equity method could be material to the Company’s consolidated financial statements. The Company continually evaluates the need to consolidate any VIEs based on standards set forth in GAAP as described above.

As of September 30, 2017, the Company determined that it had a controlling interest in the Consolidated Joint Venture and therefore met the GAAP requirements for consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

9

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

Real Estate Investments

Real estate assets are stated at cost, less accumulated depreciation and amortization. Amounts capitalized to real estate assets consist of the costs of acquisition, including certain acquisition-related expenses, construction and any tenant improvements, major improvements and betterments that extend the useful life of the real estate assets and leasing costs. All repairs and maintenance costs are expensed as incurred. In April 2017, the Company early adopted Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company’s acquisitions qualify as asset acquisitions, and as such, certain acquisition-related expenses related to these asset acquisitions are capitalized. Prior to the adoption of ASU 2017-01, all acquisition-related expenses were expensed as incurred, and all of the Company’s acquisitions were accounted for as business combinations.

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
Site improvements	15 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 nine months endedSeptember 30, 2017 or 2016.

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 werenoassets identified as held for sale as ofSeptember 30, 2017orDecember 31, 2016.

Allocation of Purchase Price of Real Estate Assets

Upon the acquisition of real properties, the Company allocates the purchase price, including certain acquisition-related expenses after the adoption of ASU 2017-01, 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. 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.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

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 September 30, 2017, 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 other comprehensive income (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 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.

Noncontrolling Interest in Consolidated Joint Venture

On December 16, 2016, the Company completed the formation of the Consolidated Joint Venture. The Company determined it had a controlling interest in the Consolidated Joint Venture and, therefore, met the GAAP requirements for consolidation. The Company recorded net income of $26,000 and paid distributions of $35,000 related to the noncontrolling interest during the nine months endedSeptember 30, 2017. The Company recorded the noncontrolling interest of $777,000 and $786,000 as of September 30, 2017 and December 31, 2016, on the condensed consolidated balance sheets.

Restricted Cash

The Company had $501,000 and $600,000 in restricted cash as of September 30, 2017 and December 31, 2016, respectively. Included in restricted cash as of September 30, 2017 and December 31, 2016 was $500,000 held by a lender in an escrow account for a certain property in accordance with the associated loan agreement. Additionally, 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. As of September 30, 2017 and December 31, 2016, the Company had $1,000 and $25,000, respectively, held in a lockbox account. In addition, restricted cash included $75,000 of escrowed investor proceeds for which shares of common stock had not been issued as of December 31, 2016. There were no such proceeds as of September 30, 2017.

Dealer Manager and Distribution Fees

The Company pays CCC dealer manager and distribution fees, which are calculated on a daily basis in the amount of 1/365th of the amount indicated in the table below for each class of common stock:

	Dealer Manager Fee		Distribution Fee
W Shares	0.55	%	—
A Shares	0.55	%	0.50	%
I Shares	0.25	%	—

The dealer manager and distribution fees are paid monthly in arrears. An estimated liability for future dealer manager and distribution fees payable to CCC is recognized at the time each share is sold and included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value. The Company recognized a liability for future dealer manager and distribution fees payable to CCC of $17.3 million and $12.5 million, as of September 30, 2017 and December 31, 2016, respectively.

11

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

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 earned and collectability is reasonably assured. 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 straight-line rent, and current and future operating expense reimbursements from tenants 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 uncertain, the Company will record an increase in the allowance for uncollectible accounts. As of September 30, 2017 and December 31, 2016, the Company had an allowance for uncollectible accounts of $1,000 and $2,000, respectively.

Earnings (Loss) and Distributions Per Share

The Company has three classes of common stock with nonforfeitable dividend rights that are determined based on a different NAV for each class. Accordingly, the Company utilizes the two-class method to determine its earnings per share, which results in the same earnings per share when rounded to one cent for each of the classes. Under the two-class method, earnings per class of common stock are computed by dividing the sum of the distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares for each class of common stock for the respective period. Diluted income per share, when applicable, considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the three and nine months ended September 30, 2017 or 2016. Distributions per share is calculated based on the authorized daily distribution rate.

Recent Accounting Pronouncements

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. Except as otherwise stated below, 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 condensed consolidated financial statements:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition, Accounting Standards Codification (“ASC”) (Topic 605) and will require an entity to recognize revenue in a way that depicts 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. For public business entities, the guidance should be applied to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company plans to use the modified retrospective approach to adopt ASU 2014-09. In accordance with the Company’s plan for the adoption of ASU 2014-09, the Company’s implementation team has identified the Company’s revenue streams, performed an in-depth review of the Company’s revenue contracts and identified the related performance obligations, and is evaluating the impact on the Company’s consolidated financial statements and internal accounting processes and controls. Once ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which, as discussed below, sets forth principles for the recognition, measurement, presentation and disclosure of leases, goes into effect, ASU 2014-09 may apply to non-lease components in the lease agreements.

In February 2016, the FASB issued ASU 2016-02, which will require that a lessee recognize assets and liabilities on the balance sheet for all leases with a lease term of more than 12 months, with the result being the recognition of a right of use asset and a lease liability and the disclosure of key information about the entity’s leasing arrangements. The lessor accounting model under ASU 2016-02 is similar to current guidance; however it limits the capitalization of initial direct leasing costs, such as internally generated costs. ASU 2016-02 retains a distinction between finance leases (i.e., capital leases under current GAAP) and operating leases. The classification criteria for distinguishing between finance leases and operating leases will be substantially similar to the classification criteria for distinguishing between capital leases and operating leases under current GAAP. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. A modified retrospective approach is required for existing leases that have not expired upon adoption and provides for certain practical expedients. The Company’s implementation team

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

has developed an inventory of all leases and is identifying any non-lease components in the lease agreements and is evaluating the impact to the Company and its consolidated financial statements. Upon the adoption of ASU 2016-02, the Company will record certain expenses paid directly by a tenant that protect the Company’s interests in its properties, such as insurance and real estate taxes, and the related operating expense reimbursement revenue, with no impact on net income. Based upon a preliminary analysis, the Company does not expect the accounting for leases pursuant to which the Company is the lessor to materially change as a result of the adoption of ASU 2016-02.

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 consolidated financial statements. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 is intended to improve financial reporting requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current GAAP. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which is intended to address diversity in practice related to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted, and requires retrospective adoption unless it is impracticable to apply, in which case it is to be applied prospectively as of the earliest date practicable. The Company plans to adopt ASU 2016-15 during the fourth quarter of fiscal year 2017 and has determined that this standard is relevant to its presentation of debt prepayment and debt extinguishment costs and contingent consideration payments made after a business combination.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which provides guidance on the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. In accordance with ASU 2016-18, restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flows. The amendments of ASU 2016-18 are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company plans to adopt ASU 2016-18 during the fourth quarter of 2017 and apply the standard retrospectively for all periods presented. The Company does not expect it will have a material impact on its consolidated financial statements.

In February 2017, the FASB issued ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”), which clarifies the following: (1) nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty; (2) an entity should allocate consideration to each distinct asset by applying the guidance in Topic 606 on allocating the transaction price to performance obligations; and (3) entities are required to derecognize a distinct nonfinancial asset or distinct in substance nonfinancial asset in a partial sale transaction when it (a) does not have (or ceases to have) a controlling financial interest in the legal entity that holds the asset in accordance with Subtopic 810 and (b) transfers control of the asset in accordance with Topic 606. The adoption of this standard may result in higher gains on the sale of partial real estate interests, including contributions of nonfinancial assets to a joint venture or other noncontrolling investee, due to recognizing the full gain when the derecognition criteria are met and recording the retained noncontrolling interest at its fair value. ASU 2017-05 is effective for annual periods, and interim periods therein, beginning after December 15, 2017. Early adoption is permitted.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The targeted amendments in this ASU help simplify certain aspects of hedge accounting and result in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. This ASU applies to the Company’s interest rate swaps designated as cash flow hedges. Upon adoption of this ASU, all changes in the fair value of highly effective cash flow hedges will be recorded in accumulated other comprehensive income rather than recognized directly in earnings. Under current U.S. GAAP, the ineffective portion of the change in fair value of cash flow hedges is recognized directly in earnings. This eliminates the requirement to separately measure and disclose ineffectiveness for qualifying cash flow hedges. ASU 2017-12 is effective for public entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The ASU is required to be adopted using a modified retrospective approach with early adoption permitted. The Company plans to adopt ASU 2017-12 during the first quarter of fiscal year 2018 and does not expect that it will have a material impact on its consolidated financial statements.

NOTE 3 — FAIR VALUE MEASUREMENTS

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

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date 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:

Notes payable and line of credit — 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. Current and prior period liabilities’ carrying and fair values exclude net deferred financing costs. These financial instruments are valued using Level 2 inputs. As of September 30, 2017, the estimated fair value of the Company’s debt was $261.5 million, compared to the carrying value of $262.2 million. The estimated fair value and the carrying value of the Company’s debt was $161.2 million as of December 31, 2016.

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. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the respective counterparties.

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 September 30, 2017 and December 31, 2016, the Company has assessed the overall significanceof 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.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

Other financial instruments—The Company considers the carrying values of its cash and cash equivalents, restricted cash, tenant 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 as well as 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, upon disposition of the financial assets and liabilities. As of September 30, 2017 and December 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 September 30, 2017 and December 31, 2016 (in thousands):

	Balance as of			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	September 30, 2017			(Level 1)		(Level 2)			(Level 3)
Financial asset:
Interest rate swaps	$	398		$	—	$	398		$	—
Marketable securities	5,387			5,387		—			—
Total financial assets	$	5,785		$	5,387	$	398		$	—
Financial liabilities:
Interest rate swaps	$	(371	)	$	—	$	(371	)	$	—

	Balance as of			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	December 31, 2016			(Level 1)		(Level 2)			(Level 3)
Financial asset:
Interest rate swaps	$	28		$	—	$	28		$	—
Marketable securities	5,563			5,563		—			—
Total financial assets	$	5,591		$	5,563	$	28		$	—
Financial liabilities:
Interest rate swaps	$	(371	)	$	—	$	(371	)	$	—

NOTE 4 — REAL ESTATE INVESTMENTS

2017 Property Acquisitions

During the nine months ended September 30, 2017, the Company acquired a 100% interest in 27 commercial properties, of which 15 were determined to be asset acquisitions and 12 were acquired prior to the adoption of ASU 2017-01 in April 2017 and thus were accounted for as business combinations for an aggregate purchase price of $200.6 million (the “2017 Acquisitions”). The Company funded the 2017 Acquisitions with net proceeds from the Offering and available borrowings.

The following table summarizes the consideration transferred for the properties purchased during the nine months ended September 30, 2017 (in thousands):

	2017 Acquisitions
Investments in real estate:
Purchase price of asset acquisitions	$	148,145
Purchase price of business combinations	52,457
Total purchase price of real estate investments acquired (1)	$	200,602

______________________

(1) The weighted average amortization period for the 2017 Acquisitions is 11.8 years for acquired in-place leases and other intangibles, 15.7 years for acquired above-market leases and 11.3 years for acquired intangible lease liabilities.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

During the nine months ended September 30, 2017, the Company acquired a 100% interest in 15 commercial properties for an aggregate purchase price of $148.1 million (the “2017 Asset Acquisitions”), which includes $1.2 million of external acquisition-related expenses that were capitalized in accordance with ASU 2017-01. Prior to the adoption of ASU 2017-01, costs related to property acquisitions were expensed as incurred. The following table summarizes the purchase price allocation for the 2017 Asset Acquisitions purchased during the nine months ended September 30, 2017 (in thousands):

	2017 Asset Acquisitions
Land	$	24,499
Building and improvements	112,520
Acquired in-place leases and other intangibles	16,350
Acquired above-market leases	1,522
Intangible lease liabilities	(6,746		)
Total purchase price	$	148,145

During the nine months ended September 30, 2017, the Company acquired a 100% interest in 12 commercial properties for an aggregate purchase price of $52.5 million which were accounted for as business combinations (the “2017 Business Combination Acquisitions”). The purchase price allocation for each of the Company’s 2017 Business Combination Acquisitions is preliminary and subject to change as it finalizes the allocation, which the Company expects will be prior to the end of the current fiscal year. 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 2017 Business Combination Acquisitions purchased during the nine months ended September 30, 2017 (in thousands):

	2017 Business Combination Acquisitions
Land	$	14,232
Building and improvements	22,292
Acquired in-place leases and other intangibles	15,911
Acquired above-market leases	1,423
Intangible lease liabilities	(1,401		)
Total purchase price	$	52,457

The Company recorded revenue of $892,000 and $2.5 million, respectively, and net incomeof$254,000 and $383,000, respectively, for the three and nine months endedSeptember 30, 2017, related to the 2017 Business Combination Acquisitions. In addition, the Company recorded $426,000 of acquisition-related expenses for the nine months endedSeptember 30, 2017, which is included in acquisition-related expenses on the condensed consolidated statements of operations.

The following table summarizes selected financial information of the Company as if all of the 2017 Business Combination Acquisitions were completed on January 1, 2016 for each period presented below. The table below presents the Company’s estimated revenue and net income (loss), on a pro forma basis, for the three and nine months endedSeptember 30, 2017 and 2016, respectively (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017		2016
Pro forma basis:
Revenue	$	13,244	$	7,779		$	34,613	$	21,854
Net income (loss)	$	66	$	(397	)	$	873	$	(1,175	)

The unaudited pro forma information for the nine months endedSeptember 30, 2017 was adjusted to exclude $426,000 of acquisition-related expenses recorded during such periods related to the 2017 Business Combination Acquisitions. Accordingly, these expenses were instead recognized in the pro forma information for the nine months endedSeptember 30, 2016. 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 2016, nor does it purport to represent the results of future operations.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

2016 Property Acquisitions

During the nine months ended September 30, 2016, the Company acquired a 100% interest in 19 commercial properties for an aggregate purchase price of $85.7 million (the “2016 Acquisitions”). The 2016 Acquisitions were accounted for as business combinations. The Company funded the 2016 Acquisitions with net proceeds from the Offering and available borrowings. The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed.

The following table summarizes the purchase price allocation for the 2016 Acquisitions (in thousands):

	2016 Acquisitions
Land	$	12,862
Building and improvements	65,333
Acquired in-place leases and other intangibles (1)	6,965
Acquired above-market leases (2)	973
Intangible lease liabilities (3)	(469		)
Total purchase price	$	85,664

______________________

(1) The weighted average amortization period for acquired in-place leases and other intangibles was 13.9 years for the 2016 Acquisitions.

(2) The weighted average amortization period for acquired above-market leases was 13.9 years for the 2016 Acquisitions.

(3) The weighted average amortization period for acquired intangible lease liabilities was 14.2 years for the 2016 Acquisitions.

The Company recorded revenue of $1.1 million and $1.8 million, respectively, and net income of $459,000 and $518,000, respectively, for the three and nine months endedSeptember 30, 2016, related to the 2016 Acquisitions. In addition, the Company recorded $205,000 and $535,000 of acquisition-related expenses for the three and nine months endedSeptember 30, 2016, respectively, which is included in acquisition-related expenses on the condensed consolidated statements of operations.

The following information summarizes selected financial information of the Company as if all of the2016 Acquisitionswere completed on January 1,2015for each period presented below. The table below presents the Company’s estimated revenue andnet (loss) income, on a pro forma basis, for thethree and ninemonths endedSeptember 30, 2016and2015, respectively(in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2016			2015		2016		2015
Pro forma basis
Revenue	$	7,358		$	6,347	$	22,177	$	18,944
Net (loss) income	$	(351	)	$	1,421	$	250	$	8,462

The unaudited pro forma information for the three and nine months endedSeptember 30, 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 and nine months endedSeptember 30, 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.

Consolidated Joint Venture

As of September 30, 2017, the Company had an interest in a Consolidated Joint Venture that owns and manages two properties, with total assets of $7.8 million, which included $7.7 million of real estate assets, net of accumulated depreciation and amortization of $181,000, and total liabilities of $209,000. The Consolidated Joint Venturedoes not have any debt outstanding asof September 30, 2017. The Company has the ability to control operating and financial policies of the Consolidated Joint Venture. There are restrictions on the use of these assets as the Company would generally be required to obtain the approval of the partner (the “Consolidated Joint Venture Partner”) in accordance with the joint venture agreement for any major transactions. The Company and the Consolidated Joint Venture Partner are subject to the provisions of the joint venture agreement, which includes provisions for when additional contributions may be required to fund certain cash shortfalls.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

NOTE 5 — INTANGIBLE LEASE ASSETS

Intangible lease assets of the Company consisted of the following as of September 30, 2017 and December 31, 2016 (in thousands, except weighted average life):

	September 30, 2017		December 31, 2016
In-place leases and other intangibles, net of accumulated amortization of $11,451 and $6,942, respectively (with a weighted average life remaining of 10.5 and 12.0 years, respectively)
	$	66,965	$	39,353
Acquired above-market leases, net of accumulated amortization of $1,434 and $927, respectively
(with a weighted average life remaining of 12.5 and 12.3 years, respectively)	8,128		5,743
	$	75,093	$	45,096

Amortization of the above-market leases is recorded as a reduction to rental revenue, and amortization expense for the in-place leases and other intangibles is included in depreciation and amortization in the accompanying condensed consolidated statements of operations. The following table summarizes the amortization expense related to the intangible lease assets for the three and nine months endedSeptember 30, 2017 and September 30, 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
In-place lease and other intangible amortization	$	1,892	$	740	$	4,680	$	2,109
Above-market lease amortization	$	222	$	110	$	559	$	289

As of September 30, 2017, the estimated amortization expense relating to the intangible lease assets for each of the five succeeding fiscal years is as follows (in thousands):

	Amortization Expense
	In-Place Leases and Other Intangibles		Above-Market Leases
Remainder of 2017	$	1,574	$	183
2018	$	7,038	$	759
2019	$	6,978	$	746
2020	$	6,775	$	740
2021	$	6,595	$	740

NOTE 6 — MARKETABLE SECURITIES

The Company owned marketable securities with an estimated fair value of $5.4 million and $5.6 million as of September 30, 2017 and December 31, 2016, respectively. The following is a summary of the Company’s available-for-sale securities as of September 30, 2017 (in thousands):

	Available-for-sale securities
	Amortized Cost Basis		Unrealized (Loss) Gain			Fair Value
U.S. Treasury Bonds	$	1,842	$	(8	)	$	1,834
U.S. Agency Bonds	547		—			547
Corporate Bonds	2,965		41			3,006
Total available-for-sale securities	$	5,354	$	33		$	5,387

18

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

The following table provides the activity for the marketable securities during the nine months endedSeptember 30, 2017 (in thousands):

	Amortized Cost Basis			Unrealized (Loss) Gain			Fair Value
Marketable securities as of January 1, 2017	$	5,592		$	(29	)	$	5,563
Face value of marketable securities acquired	1,156			—			1,156
Premiums and discounts on purchase of marketable securities, net of acquisition costs	17			—			17
Amortization on marketable securities	(10		)	—			(10		)
Sales and maturities of securities	(1,401		)	(4		)	(1,405		)
Unrealized gain on marketable securities	—			66			66
Marketable securities as of September 30, 2017	$	5,354		$	33		$	5,387

During the nine months endedSeptember 30, 2017, the Company sold 56 marketable securities for aggregate proceeds of $1.4 million. Unrealized gains (losses) on marketable securities are recorded in other comprehensive income (loss), with a portion of the amount subsequently reclassified into other expense, net on the accompanying condensed consolidated statements of operations as securities are sold and gains (losses) are recognized. In addition, the Company recorded an unrealized gain of $66,000 on its investments, which is included in accumulated other comprehensive (loss) income on the accompanying condensed consolidated statement of changes in equity for the nine months endedSeptember 30, 2017 and the condensed consolidated balance sheet as of September 30, 2017.

The scheduled maturities of the Company’s marketable securities as of September 30, 2017 are as follows (in thousands):

	Available-for-sale securities
	Amortized Cost		Estimated Fair Value
Due within one year	$	730	$	730
Due after one year through five years	2,328		2,339
Due after five years through ten years	2,216		2,238
Due after ten years	80		80
Total	$	5,354	$	5,387

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 September 30, 2017, the Company hadnoother-than-temporary impairment losses.

19

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

NOTE 7 — 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. During the nine months endedSeptember 30, 2017, the Company entered into five interest rate swap agreements. The following table summarizes the terms of the Company’s executed interest rate swap agreements designated as hedging instruments as of September 30, 2017 and December 31, 2016 (dollar amounts in thousands):

Outstanding Notional Amount as of

Interest

Effective

Maturity

Fair Value of Assets and (Liabilities) as of

Balance Sheet Location

September 30, 2017

Rate (1)

Date

Date

September 30, 2017

December 31, 2016

Interest Rate Swaps

Prepaid expenses, derivative assets and other assets

$

137,540

3.23% to 4.04%

6/30/2015 to 9/29/2017

9/12/2019 to 7/1/2022

$

398

$

28

Interest Rate Swaps

Deferred rental income, derivative liabilities and other liabilities

$

53,165

3.56% to 4.17%

12/16/2016 to 7/26/2017

1/1/2022 to 8/1/2022

$

(371

)

$

(371

)

______________________

(1) The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of September 30, 2017.

Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 3 —Fair Value Measurements. 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 income (loss), 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 and nine months endedSeptember 30, 2017, the amounts reclassified were $166,000 and $428,000, respectively. The amounts reclassified for the three and nine months endedSeptember 30, 2016, were $131,000 and $405,000, respectively. During the next 12 months, the Company estimates that an additional $588,000 will be reclassified from other comprehensive income (loss) as an increase to interest expense.

Any ineffective portion of the change in fair value of the derivative instruments is recorded in interest expense. During thenine months endedSeptember 30, 2017, $17,000 of the change in the fair value of the interest rate swaps was considered ineffective.There were no portions of the change in the fair value of the interest rate swaps that were considered ineffective during the three months endedSeptember 30, 2017 and 2016 and the nine months endedSeptember 30, 2016.

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 $417,000, which includes accrued interest, at September 30, 2017. 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 September 30, 2017.

20

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

NOTE 8 — NOTES PAYABLE AND CREDIT FACILITY

As of September 30, 2017, the Company had $258.7 million of debt outstanding, including net deferred financing costs, with weighted average years to maturity of 4.8 years and a weighted average interest rate of 3.65%. The weighted average years to maturity is computed using the scheduled repayment date as specified in each loan agreement where applicable. The weighted average interest rate is computed using the interest rate in effect until the scheduled repayment date. Should a loan not be repaid by its scheduled repayment date, the applicable interest rate will increase as specified in the respective loan agreement until the extended maturity date. The following table summarizes the debt balances as of September 30, 2017 and December 31, 2016, and the debt activity for the nine months ended September 30, 2017 (in thousands):

				During the Nine Months Ended September 30, 2017
	Balance as of December 31, 2016				Debt Issuance, Net (1)			Repayments and Modifications				Accretion and (Amortization)			Balance as of September 30, 2017
Credit facility	$	64,000			$	236,500		$	(188,000	)		$	—		$	112,500
Fixed rate debt	97,169				52,565			—				—			149,734
Total debt	161,169				289,065			(188,000		)		—			262,234
Deferred costs (2)	(2,026		)		(1,463		)	97			(3)	(191		)	(3,583		)
Total debt, net	$	159,143			$	287,602		$	(187,903	)		$	(191	)	$	258,651

______________________

(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.

(3) Represents deferred financing costs of the term portion of the credit facility written off during the period resulting from the Second Amended and Restated Credit Agreement, as defined below.

As of September 30, 2017, the Company had fixed rate debt outstanding of $149.7 million, including $78.2 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 date of the variable rate debt. The fixed rate debt has interest rates ranging from 3.37% to 4.17% per annum and as of September 30, 2017, the fixed rate debt had a weighted average interest rate of 3.87%. 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 $266.1 million as of September 30, 2017. Each of the mortgage notes payable comprising the fixed rate debt is secured by the respective properties on which the debt was placed.

During the three months ended September 30, 2017, the Company entered into a second amended and restated credit agreement (the “Second Amended Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent (“JPMorgan Chase”), that provides for borrowings up to $425.0 million, which is comprised of up to $212.5 million in unsecured revolving loans (the “Revolving Loans”) and up to $212.5 million in unsecured term loans (the “Term Loans”) (collectively, with the Revolving Loans the “Credit Facility”). The Term Loans mature on September 6, 2022 and the Revolving Loans mature onSeptember 6, 2021; however, the Company may elect to extend the maturity date for the Revolving Loans for up to two six-month periods, but no later thanSeptember 6, 2022, subject to satisfying certain conditions contained in the Second Amended Credit Agreement.

Depending upon the type of loan specified and overall leverage ratio, the Credit Facility bears interest at (i) the one-month, two-month, three-month or six-month London Interbank Offered Rate (“LIBOR”) multiplied by the statutory reserve rate (the “Eurodollar Rate”) plus an interest rate spread ranging from 1.70% to 2.20% for Revolving Loans and 1.60% to 2.10% for Term Loans; or (ii) a base rate ranging from 0.70% to 1.20% for Revolving Loans and 0.60% to 1.10% for Term Loans, plus the greater of: (a) JPMorgan Chase’s Prime Rate (as defined in the Second Amended Credit Agreement); (b) the Federal Funds Effective Rate (as defined in the Second Amended Credit Agreement) plus 0.50%; or (c) the one-month LIBOR multiplied by the statutory reserve rate plus 1.0%. As of September 30, 2017, no amounts were outstanding under the Revolving Loans. As of September 30, 2017, the Term Loans outstanding totaled $112.5 million, which is subject to interest rate swap agreements (the “Swapped Term Loans”). The interest rate swap agreements have the effect of fixing the Eurodollar Rate per annum of the Swapped Term Loans. As of September 30, 2017, the weighted average all-in rate for the Swapped Term Loans was 3.35%. The Company had $312.5 million in unused capacity, subject to borrowing availability.

The Second Amended Credit Agreement contains provisions with respect to covenants, events of default and remedies customary for facilities of this nature. In particular, the Second Amended Credit Agreement requires the Company to maintain a minimum consolidated net worth greater than or equal to the sum of (i) $367.1 million plus (ii) 75% of the equity issued (iii)

21

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

minus the aggregate amount of any redemptions or similar transaction from the date of the Second Amended Credit Agreement, a leverage ratio less than or equal to 60%, a fixed charge coverage ratio equal to or greater than 1.50, an unsecured debt to unencumbered asset value ratio equal to or less than 60%, an unsecured debt service coverage ratio greater than 1.75, a secured debt ratio equal to or less than 40%, and the amount of secured debt that is recourse debt at no greater than 15% of total asset value. As of September 30, 2017, the Company believes it was in compliance with the financial covenants of the Amended Credit Agreement, as well as the financial covenants under the Company’s various fixed and variable rate debt agreements.

Maturities

The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt subsequent to September 30, 2017 (in thousands):

	Principal Repayments
Remainder of 2017	$	—
2018	—
2019	—
2020	9,240
2021	31,717
Thereafter	221,277
Total	$	262,234

NOTE 9 — INTANGIBLE LEASE LIABILITIES

Intangible lease liabilities of the Company consisted of the following as of September 30, 2017 and December 31, 2016

(in thousands, except weighted average life):

	September 30, 2017		December 31, 2016
Acquired below-market liabilities, net of accumulated amortization of $1,724 and $929, respectively (with a weighted average life remaining of 11.4 and 11.9 years, respectively)
	$	13,095	$	5,798

Amortization of below-market leases is recorded as an increase to rental revenue in the accompanying condensed consolidated statements of operations. The following table summarizes the amortization of below-market leases related to the intangible lease liabilities for the three and nine months endedSeptember 30, 2017 and September 30, 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Amortization of below-market leases	$	345	$	108	$	849	$	318

As of September 30, 2017, the estimated amortization of the intangible lease liabilities for each of the five succeeding fiscal years is as follows (in thousands):

	Amortization of
	Below-Market Leases
Remainder of 2017	$	297
2018	$	1,403
2019	$	1,391
2020	$	1,365
2021	$	1,123

22

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

NOTE 10 — 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.

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.

NOTE 11 — 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.

Selling commissions, dealer manager and distribution fees

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. The Company has been advised that CCC intends to reallow 100% of the selling commissions on A Shares to participating broker-dealers.

(2) The dealer manager and distribution fees will be calculated on a daily basis 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.

Other organization and offering expenses

All other 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 September 30, 2017, 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.

23

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

Advisory fees and expenses

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.

Operating expenses

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.

Acquisition expenses

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.

Performance Fee

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 did not reach the 6% Return during the nine months ended September 30, 2017.

24

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

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 September 30,				Nine Months Ended September 30,
Offering:	2017		2016		2017		2016
Selling commissions	$	759	$	666	$	2,236	$	1,470
Distribution fee (1)	$	163	$	67	$	402	$	155
Dealer manager fees (1)	$	565	$	349	$	1,514	$	901
Organization and offering expense reimbursement	$	353	$	330	$	1,035	$	843
Acquisition expense reimbursement	$	316	$	430	$	1,161	$	1,087
Advisory fee	$	1,128	$	725	$	3,063	$	1,911
Operating expense reimbursement	$	647	$	478	$	2,226	$	1,227
Performance fee	$	—	$	—	$	—	$	—

______________________

(1) Amounts are calculated for the respective period in accordance with the dealer manager agreement and exclude the estimated liability for the future dealer manager and distribution fees payable to CCC, which are included in due to affiliates in the condensed consolidated balance sheets, with a corresponding decrease to capital in excess of par value, as described in Note 2 — Summary of Significant Accounting Policies.

Due to Affiliates

As of September 30, 2017 and December 31, 2016, $18.8 million and $14.8 million, respectively, was due to Cole Advisors or its affiliates primarily related to the estimated liability for current and future dealer manager and distribution fees, advisory fees, the reimbursement of organization and offering expenses, and acquisition expenses, which were included in amounts due to affiliates on the condensed consolidated balance sheets.

NOTE 12 — ECONOMIC DEPENDENCY

Under various agreements, the Company has engaged and may in the future 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 13 — OPERATING LEASES

The Company’s real estate assets are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2017, the leases had a weighted-average remaining term of 10.5 years. Certain leases include provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other negotiated terms and conditions. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. As of September 30, 2017, the future minimum rental income from the Company’s investment in real estate assets under non-cancelable operating leases, assuming no exercise of renewal options for the succeeding five fiscal years and thereafter, was as follows (in thousands):

	Future Minimum Rental Income
Remainder of 2017	$	11,418
2018	45,825
2019	45,992
2020	45,877
2021	45,788
Thereafter	309,873
Total	$	504,773

25

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2017 (Unaudited) – (Continued)

NOTE 14 — SUBSEQUENT EVENTS

The following events occurred subsequent to September 30, 2017.

Sale of Cole Capital

On November 13, 2017 the parent of the Company’s sponsor entered into a purchase and sale agreement to sell its ownership interest in the Company’s sponsor. The completion of this sale is subject to the receipt of regulatory approvals and other customary closing conditions and is expected to occur at the end of the fourth quarter of 2017 or during the first quarter of 2018.

26

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

The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. We make statements in this section that are forward-looking statements within the meaning of the federal securities laws. Certain risks may cause our actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a complete discussion of such risk factors, see Item 1A — Risk Factors of this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Capitalized terms used herein, but not otherwise defined, shall have the meaning ascribed to those terms in “Part I — Financial Information” of this Quarterly Report on Form 10-Q, including the notes to the condensed consolidated financial statements contained therein. The terms “we,” “us,” “our” and the “Company” refer to Cole Real Estate Income Strategy (Daily NAV), Inc.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” (within the meaning of the federal securities laws, Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that reflect our expectations and projections about our future results, performance, prospects and opportunities. We have attempted to identify these forward-looking statements by the use of words such as “may,” “will,” “seek,” “expects,” “anticipates,” “believes,” “targets,” “intends,” “should,” “estimates,” “could,” “continue,” “assume,” “projects,” “plans” or similar expressions. These forward-looking statements are based on information currently available to us and are subject to a number of known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among other things, those discussed below. 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. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or new information, future events or otherwise, except as may be required to satisfy our obligations under federal securities law. The forward-looking statements should be read in light of the risk factors identified in Item 1A. Risk Factors of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2016.

The following are some, but not all, of the assumptions, risks, uncertainties and other factors that could cause our actual results to differ materially from those presented in our forward-looking statements:

• We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all.

• We are subject to risks associated with tenant, geographic and industry concentrations with respect to our properties.

• Our properties, intangible assets and other assets may be subject to impairment charges.

• We could be subject to unexpected costs or unexpected liabilities that may arise from potential dispositions of properties.

• We are subject to competition in the acquisition and disposition of properties and in the leasing of our properties and we may be unable to acquire, dispose of, or lease properties on advantageous terms.

• We could be subject to risks associated with bankruptcies or insolvencies of tenants or from tenant defaults generally.

• We have substantial indebtedness, which may affect our ability to pay distributions, and expose us to interest rate fluctuation risk and the risk of default under our debt obligations.

• We may be affected by the incurrence of additional secured or unsecured debt.

• We may not be able to maintain profitability.

• We may not generate cash flows sufficient to pay our distributions to stockholders or meet our debt service obligations.

• We may be affected by risks resulting from losses in excess of insured limits.

• We may fail to remain qualified as a REIT for U.S. federal income tax purposes.

• Our sponsor may be unable to fully reestablish the financial network which previously supported Cole Capital sponsored REITs and/or regain the prior level of transaction and capital raising volume achieved by the Cole REITs.

• We are subject to risks that may affect capital raising volume as a result of increased regulatory changes.

• Our advisor has the right to terminate the advisory agreement upon 60 days’ written notice without cause or penalty.

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Definitions

We use certain defined terms throughout this Quarterly Report on Form 10-Q that have the following meanings:

The phrase “annualized rental income” refers to the straight line rental revenue under our leases on operating properties owned as of the respective reporting date, which includes the effect of rent escalations and any tenant concessions, such as free rent, and excludes any bad debt allowances and any contingent rent, such as percentage rent. Management uses annualized rental income as a basis for tenant, industry and geographic concentrations and other metrics within the portfolio. Annualized rental income is not indicative of future performance.

Under a “net lease,” the tenant occupying the leased property (usually as a single tenant) does so in much the same manner as if the tenant were the owner of the property. There are various forms of net leases, most typically classified as triple net or double net. Triple net leases typically require the tenant to pay all expenses associated with the property (e.g., real estate taxes, insurance, maintenance and repairs). Double net leases typically require that the tenant pay all operating expenses associated with the property (e.g., real estate taxes, insurance and maintenance), but excludes some or all major repairs (e.g., roof, structure and parking lot). Accordingly, the owner receives the rent “net” of these expenses, rendering the cash flow associated with the lease predictable for the term of the lease. Under a net lease, the tenant generally agrees to lease the property for a significant term and agrees that it will either have no ability or only limited ability to terminate the lease or abate rent prior to the expiration of the term of the lease as a result of real estate driven events such as casualty, condemnation or failure by the landlord to fulfill its obligations under the lease.

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, (2) notes receivable and other investments secured by commercial real estate, including the origination of loans, and (3) U.S. government securities, agency securities, corporate debt and other investments for which there is reasonable liquidity. 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.

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

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

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% of our total revenue for the three months endedSeptember 30, 2017 and 2016, respectively, and 91% and 89% for the nine months endedSeptember 30, 2017 and 2016, respectively. As 99.3% of our rentable square feet was under lease as of September 30, 2017 with a weighted average remaining lease term of 10.5 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 each 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.

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Operating Highlights and Key Performance Indicators

2017 Activity

• Acquired 27 commercial properties for an aggregate purchase price of $200.6 million.

• Issued approximately 7.7 million shares of common stock in the Offering for gross offering proceeds of $140.2 million before organization and offering costs, selling commissions, and the current portion of dealer manager fees and distribution fees of $5.2 million.

• Total debt increased by $101.0 million, from $161.2 million to $262.2 million.

Portfolio Information

As of September 30, 2017, we owned 135 properties located in 36 states, comprising 4.1 million rentable square feet, which includes the rentable square feet of buildings on land subject to ground leases. As of September 30, 2017,no single tenant accounted for greater than 10% of our 2017 annualized rental income. As of September 30, 2017, we had certain geographic concentrations in our property holdings. In particular, as of September 30, 2017, 15 of our properties were located in Ohio and six of our properties were located in Illinois, accounting for 11% and 10%, respectively, of our 2017 annualized rental income. In addition, we had tenants in the discount store industry, which accounted for 13% of our 2017 annualized rental income. 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 September 30, 2017, and 2016:

	As of September 30,
	2017		2016
Number of properties	135		96
Rentable square feet (in thousands) (1)	4,061		2,644
Percentage of rentable square feet leased	99.3	%	99.2	%
Percentage of investment-grade tenants (2)	43.8	%	46.6	%

______________________

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

(2) Investment-grade tenants are those with a credit rating of BBB- or higher by Standard & Poor’s Financial Services LLC (“Standard & Poor’s”) or a credit rating of Baa3 or higher by Moody’s Investor Service, Inc. (“Moody’s”). The ratings may reflect those assigned by Standard & Poor’s or Moody’s to the lease guarantor or the parent company, as applicable.

The following table summarizes our consolidated real estate investment activity during the three and nine months ended September 30, 2017 and 2016:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Properties acquired	2		6		27		19
Purchase price of acquired properties (in thousands)	$	33,534	$	44,033	$	200,602	$	85,664
Rentable square feet of acquired properties (in thousands) (1)	169		390		921		718

______________________

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

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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 and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,					2017 vs 2016 Increase (Decrease)			Nine Months Ended September 30,					2017 vs 2016 Increase (Decrease)
	2017		2016						2017		2016
Total revenues	$	13,244	$	6,889		$	6,355		$	34,396	$	19,184		$	15,212
General and administrative expenses	$	1,685	$	1,326		$	359		$	4,823	$	3,512		$	1,311
Property operating expenses	$	561	$	239		$	322		$	1,244	$	683		$	561
Real estate tax expenses	$	998	$	548		$	450		$	2,319	$	1,518		$	801
Advisory fees and expenses	$	1,128	$	725		$	403		$	3,063	$	1,911		$	1,152
Acquisition-related expenses	$	333	$	705		$	(372	)	$	1,629	$	1,748		$	(119	)
Depreciation and amortization	$	5,174	$	2,390		$	2,784		$	13,259	$	6,674		$	6,585
Operating income	$	3,365	$	956		$	2,409		$	8,059	$	3,138		$	4,921
Interest expense and other, net	$	3,289	$	1,326		$	1,963		$	7,536	$	3,805		$	3,731
Net income (loss) attributable to the Company	$	68	$	(370	)	$	438		$	497	$	(667	)	$	1,164

Revenues

Our revenues consist primarily of rental and other property income from net leased commercial properties. We also incur certain operating expenses that are 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.

The increase in revenue of $6.4 million and $15.2 million during the three and nine months endedSeptember 30, 2017, respectively, as compared to the same periods in 2016, was primarily due to the acquisition of 39 rental income-producing properties subsequent to September 30, 2016. Rental and other property income from net leased commercial properties accounted for 89% of our total revenues for the three months endedSeptember 30, 2017 and 2016, respectively, and 91% and 89% of our total revenues for the nine months endedSeptember 30, 2017 and 2016, respectively. We also incurred certain operating expenses subject to reimbursement by our tenants, which resulted in $1.4 million and $3.1 million in tenant reimbursement income during the three and nine months endedSeptember 30, 2017, respectively, compared to $697,000 and $1.9 million during the same periods in 2016.

General and Administrative Expenses

The primary general and administrative expense items are advisory reimbursements, accounting and legal fees, professional fees, escrow and trustee fees, unused fees on the Credit Facility and state franchise and income taxes.

The increase in general and administrative expenses of $359,000 and $1.3 million during the three and nine months endedSeptember 30, 2017, respectively, as compared to the same periods in 2016 was primarily due to an increase in operating expense reimbursements to our advisor during the three and nine months endedSeptember 30, 2017, primarily as a result of the acquisition of 39 additional rental income-producing properties subsequent to September 30, 2016.

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 tenants for reimbursable property operating expenses in accordance with the respective lease agreements.

The increase in property operating expenses of $322,000 and $561,000 during the three and nine months endedSeptember 30, 2017, respectively, as compared to the same periods in 2016, was primarily due to the acquisition of 39 additional rental income-producing properties subsequent to September 30, 2016, as well as recognizing a full period of property operating expenses on six and 19 properties acquired during the three and nine months endedSeptember 30, 2016, respectively.

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Real Estate Tax Expenses

The increase in real estate tax expenses of $450,000 and $801,000 during the three and nine months endedSeptember 30, 2017, respectively, as compared to the same periods in 2016, was primarily due to real estate taxes incurred on 39 additional properties acquired subsequent to September 30, 2016, as well as recognizing a full period of real estate taxes on six and 19 properties acquired during the three and nine months endedSeptember 30, 2016, respectively.

Advisory Fees and Expenses

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

The increase in advisory fees and expenses of $403,000 and $1.2 million during the three and nine months endedSeptember 30, 2017, as compared to the same periods in 2016, was primarily due to an increase in the total NAV for all share classes, which increased $151.2 million subsequent to September 30, 2016.

Acquisition-Related Expenses

In April 2017, we early adopted ASU 2017-01, which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. As of April 2017, our acquisitions qualify as asset acquisitions, and as such, certain acquisition costs related to these asset acquisitions are capitalized. Prior to the adoption of ASU 2017-01 in April 2017, costs related to property acquisitions were expensed as incurred.

The decrease in acquisition-related expenses of $372,000 during the three months endedSeptember 30, 2017, as compared to the same period in 2016, was primarily due to the early adoption of ASU No. 2017-01, and as such certain acquisition costs related to asset acquisitions were capitalized during the three months endedSeptember 30, 2017. During the three months endedSeptember 30, 2016, acquisition-related costs related to future property acquisitions were expensed as incurred.

The decrease in acquisition-related expenses of $119,000 during the nine months endedSeptember 30, 2017, as compared to the same period in 2016, was primarily due to the acquisition of 12 commercial properties prior to the adoption of ASU No. 2017-01 for an aggregate purchase price of $52.5 million, compared to the purchase of 19 commercial properties for an aggregate purchase price of $85.7 million during the nine months endedSeptember 30, 2016.

Depreciation and Amortization

The increase in depreciation and amortization of $2.8 million and $6.6 million during the three and nine months endedSeptember 30, 2017, respectively, as compared to the same periods in 2016, was primarily due to the acquisition of 39 additional rental income-producing properties subsequent to September 30, 2016, as well as recognizing a full period of depreciation and amortization on six and 19 properties acquired during the three and nine months endedSeptember 30, 2016, respectively.

Interest Expense and Other, Net

The increase in interest expense and other, net of $2.0 million and $3.7 million during the three and nine months endedSeptember 30, 2017, respectively, as compared to the same periods in 2016 was primarily due to an increase in our average outstanding debt balance of $260.6 million and $222.3 million for the three and nine months endedSeptember 30, 2017 as compared to $120.8 million and $115.1 million for the three and nine months endedSeptember 30, 2016.

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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 our 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 July 1, 2016. As shown in the table below, contract rental revenue on the 90 same store properties for the three months endedSeptember 30, 2017increased0.6%, compared to the three months endedSeptember 30, 2016. The same store properties were 98.8% and 99.2% occupied as of September 30, 2017 and 2016, respectively. The following table shows the contract rental revenue from properties owned for both of the entire three months endedSeptember 30, 2017 and 2016, along with a reconciliation to rental income, calculated in accordance with GAAP (dollar amounts in thousands):

	Number of Properties	Three Months Ended September 30,					Increase/(Decrease)
Contract Rental Revenue		2017		2016			$ Change		% Change
Rental income — as reported		$	11,822	$	6,163		$	5,659	92	%
Less: Amortization (1)		115		(10		)	125		(1,250	)%
Less: Straight line rental income		499		266			233		88	%
Total Contract Rental Revenue		11,208		5,907			5,301		90	%
Less: “Non-same store” properties	45	5,570		304			5,266		1,732	%
“Same store” properties	90	$	5,638	$	5,603		$	35	0.6	%

______________________

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

“Non-same store,” as reflected in the table below, includes properties acquired on or after January 1, 2016. As shown in the table below, contract rental revenue on the 77 same store properties for the nine months endedSeptember 30, 2017increased0.1%, compared to the nine months endedSeptember 30, 2016. The same store properties were 98.6% and 99.0% occupied as of September 30, 2017 and 2016, respectively. The following table shows the contract rental revenue from properties owned for both of the entire nine months endedSeptember 30, 2017 and 2016, along with a reconciliation to rental income, calculated in accordance with GAAP (dollar amounts in thousands):

	Number of Properties	Nine Months Ended September 30,				Increase/(Decrease)
Contract Rental Revenue		2017		2016		$ Change		% Change
Rental income — as reported		$	31,188	$	17,160	$	14,028	82	%
Less: Amortization (1)		264		3		261		8,700	%
Less: Straight line rental income		1,304		708		596		84	%
Total Contract Rental Revenue		29,620		16,449		13,171		80	%
Less: “Non-same store” properties	58	14,815		1,655		13,160		795	%
“Same store” properties	77	$	14,805	$	14,794	$	11	0.1	%

______________________

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

Distributions

Our board of directors authorized a daily distribution, based on 365 days in the calendar year, of $0.002678083 per share for stockholders of record as of the close of business on each day of the period commencing on January 1, 2017 and ending on March 31, 2018. 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 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.

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During the nine months endedSeptember 30, 2017 and 2016, we paid distributions of $14.8 million and $8.6 million, respectively, including $7.3 million and $4.1 million, respectively, through the issuance of shares pursuant to the DRIP. Net cash provided by operating activities for the nine months endedSeptember 30, 2017 and 2016 was $13.3 million and $6.1 million, respectively, and reflected a reduction for real estate acquisition-related expenses incurred of $1.6 million and $1.7 million, respectively, in accordance with GAAP. Prior to the adoption of ASU 2017-01 in April 2017, we treated our real estate acquisition-related fees and expenses as funded by proceeds from the Offering, including proceeds from the DRIP. Therefore, for consistency, proceeds from the issuance of common stock used as a source of distributions for the nine months endedSeptember 30, 2017 and 2016 includes the amount by which real estate acquisition-related fees and expenses have reduced net cash flows from operating activities of $849,000 and $1.7 million, respectively. The distributions paid during the nine months endedSeptember 30, 2017, including shares issued pursuant to the DRIP, were funded by cash flows from operating activities of $13.3 million, or 90%, and proceeds from the Offering of $1.5 million, or 10%. Our distributions for the nine months endedSeptember 30, 2016 were funded by cash flows from operating activities, including cash flows from operating activities from prior periods of $7.8 million, or 90% and proceeds from the Offering of $867,000, or 10%.

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 nine months endedSeptember 30, 2017, we received redemption requests for, and redeemed, a total of approximately 1.4 million shares of our common stock for $26.2 million, comprised of approximately 1.2 million W Shares, 187,000 A Shares and 52,000 I Shares of our common stock for $21.9 million, $3.3 million and $950,000, respectively. FromOctober 1, 2017throughNovember 9, 2017, we redeemed approximately410,000shares for$7.4 million.

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

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 and for general corporate uses. The source of our operating cash flows is primarily the rental income received from current and future leased properties. As of September 30, 2017, we had raised $501.2 million of gross proceeds from the Offering before organization and offering costs, selling commissions, and the current portion of dealer manager fees and distribution fees of $14.1 million. Refer to Item 1A - Risk Factors in our annual report on Form 10-K for the year ended December 31, 2016, for risks related to our ability to raise capital in the near term.

Our Credit Facility with JPMorgan Chase Bank, N.A. as administrative agent, provides for borrowings up to $425.0 million, which is comprised of up to $212.5 million in revolving loans and up to $212.5 million in term loans. As of September 30, 2017, we had $312.5 million in unused capacity, subject to borrowing availability. As of September 30, 2017, we had cash and cash equivalents of $8.6 million and investments in marketable securities of $5.4 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 determines that we should 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

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determinations, our 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 acquisitions, 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 sources. We believe that the resources stated above will be sufficient to satisfy our operating requirements for the foreseeable future, and we do not anticipate a need to raise funds from sources other than those described above within the next 12 months.

Long-term Liquidity and Capital Resources

On a long-term basis, our principal demands for funds are 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 Credit Facility 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 Credit Facility 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, repayments of outstanding debt or distributions to our stockholders.

Contractual Obligations

As of September 30, 2017, we had $258.7 million of debt outstanding, with a weighted average interest rate of 3.65%. See Note 8 — Notes Payable and Credit Facility to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for a description of certain terms of the debt. Our contractual obligations as of September 30, 2017 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)	$	112,500	$	—	$	—	$	112,500	$	—
Interest payments – credit facility (3)	18,596		3,769		7,548		7,279		—
Principal payments – fixed debt rate	149,734		—		—		132,784		16,950
Interest payments – fixed debt rate (3)	27,879		5,850		11,713		8,678		1,638
Total	$	308,709	$	9,619	$	19,261	$	261,241	$	18,588

______________________

(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) The table does not include the impact of any extension. We may elect to extend the maturity of the Revolving Loans to no later than September 6, 2022, subject to satisfying certain conditions contained in the Second Amended Credit Agreement or refinance the debt or enter into new financing arrangements.

(3) As of September 30, 2017, we had $78.2 million of variable rate mortgage notes and $112.5 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.

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-

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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. Fair market value is based on the estimated market value of our real estate assets as of September 30, 2017 used to determine our estimated per share NAV. 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 September 30, 2017, our ratio of debt to the cost (before deducting depreciation or other non-cash reserves) of our gross assets was 40.1%, and our ratio of debt to the fair market value of our gross assets was 38.5%.

Our management reviews net debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage, and we therefore believe that the presentation of net debt provides useful information to investors. Net debt is a non-GAAP measure used to show our outstanding principal debt balance, excluding certain GAAP adjustments, such as financing and issuance costs and related accumulated amortization, less all cash and cash equivalents. As of September 30, 2017, our net debt leverage ratio, which is the ratio of net debt to total gross real estate assets net of gross intangible lease liabilities, was 38.8%. The following table provides a reconciliation of the notes payable and credit facility, net balance, as reported on our condensed consolidated balance sheet, to net debt as of September 30, 2017 (in thousands):

	Balance as of September 30, 2017
Notes payable and credit facility, net	$	258,651
Deferred costs, net (1)	3,583
Less: Cash and cash equivalents	(8,598		)
Net debt	$	253,636
Gross real estate assets, net (2)	$	653,578
Net debt leverage ratio	38.8		%

______________________

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

(2) Net of gross intangible lease liabilities.

Cash Flow Analysis

Operating Activities. Net cash provided by operating activities was $13.3 million for the nine months endedSeptember 30, 2017, compared to $6.1 million for the nine months endedSeptember 30, 2016. The increase was primarily due to the acquisition of 39 additional rental income-producing properties subsequent to September 30, 2016, resulting in net income before non-cash adjustments for depreciation, amortization of intangibles and amortization of deferred financing costs increasing to $8.6 million, and a net decrease in working capital accounts of $812,000, offset by an increase in straight-line rental income of $597,000. 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$112.4 million to $200.3 million for the nine months endedSeptember 30, 2017, compared to net cash used in investing activities of $87.9 million for the nine months endedSeptember 30, 2016. The increase was primarily due to the acquisition of 27 commercial properties during the nine months endedSeptember 30, 2017 compared to the acquisition of 19 commercial properties during the nine months endedSeptember 30, 2016.

Financing Activities. Net cash provided by financing activities increased$98.9 million to $190.9 million for the nine months endedSeptember 30, 2017, compared to net cash provided by financing activities of $92.0 million for the nine months endedSeptember 30, 2016. The increase was primarily due to an increase in net proceeds from the issuance of common stock of $20.4 million, and an increase in net proceeds from borrowing facilities and notes payable of $99.8 million, offset by an increase in redemptions of common stock of $14.8 million, an increase in distributions to investors of $2.9 million, an increase in deferred financing costs paid of $3.3 million and a decrease in escrowed investor proceeds of $306,000.

35

Election as a REIT

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 financial statements. We are subject to certain state and local taxes related to the operations of properties in certain locations, which, if applicable, have been provided for in our accompanying condensed consolidated financial statements.

Critical Accounting Policies and Estimates

Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires 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 audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016. We consider our critical accounting policies to be the following:

• Recoverability of Real Estate Assets;

• Consolidation of Equity Investment; and

• Allocation of Purchase Price of Real Estate Assets.

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, 2016. 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, 2016 and related notes thereto.

Related-Party Transactions and Agreements

We have entered into agreements with Cole Advisors and its affiliates, whereby we agree to pay certain fees, or reimburse certain expenses of, Cole Advisors or its affiliates, primarily advisory and performance fees and expenses, organization and offering costs, sales commissions, dealer manager fees and expenses, distribution fees and reimbursement of certain acquisition and operating costs. See Note 11 — Related-Party Transactions and Agreements to our condensed consolidated 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., Cole Office & Industrial REIT (CCIT II), Inc., Cole Office & Industrial REIT (CCIT III), Inc., and/or other real estate offerings in registration, all of which are, or intend to be public, non-listed 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

36

partner, officer, director, key personnel and/or advisor for VEREIT or another real estate program sponsored by Cole Capital, including other real estate offerings in registration, 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, 2016.

Off-Balance Sheet Arrangements

As of September 30, 2017 and December 31, 2016, 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

Market Risk

The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from interest rate risk relating to variable rate borrowings. To meet our short and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to manage our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We donot intend to hold or issue these derivative contracts for trading or speculative purposes. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.

Interest Rate Risk

As of September 30, 2017, we had no variable rate debt outstanding. As of September 30, 2017, we had eightinterest rate swap agreements outstanding, which mature on various dates from September 2019 to August 2022with an aggregate notional amount of $190.7 million and an aggregate net fair value asset of $27,000. The fair value of these interest rate swap agreements is dependent upon existing market interest rates and swap spreads. As of September 30, 2017, an increase of 50 basis points in interest rates would result in a derivative asset of $3.4 million, representing a $3.3 million net change to the fair value of the net derivative asset. A decrease of 50 basis points would result in a derivative liability of $3.4 million, representing a $3.4 million decrease to the fair value of the net derivative asset.

As the information presented above includes only those exposures that existed as of September 30, 2017, it does not consider exposures or positions arising after that date. The information presented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.

These amounts were determined by considering the impact of hypothetical interest rate changes on our borrowing costs and assume no other changes in our capital structure.

Credit Risk

Concentrations of credit risk arise when a number of tenants are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to us, to be similarly affected by changes in economic conditions. We are subject to tenant, geographic and industry concentrations. Any downturn of the economic conditions in one or more of these tenants, states or industries could result in a material reduction of our cash flows or material losses to us.

The factors considered in determining the credit risk of our tenants include, but are not limited to: payment history; credit status and change in status (credit ratings for public companies are used as a primary metric); change in tenant space needs (i.e., expansion/downsize); tenant financial performance; economic conditions in a specific geographic region; and industry specific credit considerations. We believe that the credit risk of our portfolio is reduced by the high quality of our existing tenant base, reviews of prospective tenants’ risk profiles prior to lease execution and consistent monitoring of our portfolio to identify potential problem tenants and mitigation options.

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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 September 30, 2017 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 September 30, 2017, 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 September 30, 2017 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

Except as set forth below,there have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year endedDecember 31, 2016.

We have paid, and may continue to pay, some of our distributions from sources other than cash flows from operations, including borrowings, proceeds from asset sales or the sale of securities in the Offerings or future offerings, which may reduce the amount of capital we ultimately invest in real estate and may negatively impact the value of our stockholders’ investment in our common stock.

To the extent that cash flow from operations has been or is insufficient to fully cover our distributions to our stockholders, we have paid, and may continue to pay, some of our distributions from sources other than cash flow from operations. Such sources may include borrowings, proceeds from asset sales or the sale of our securities in the Offerings or future offerings. We have no limits on the amounts we may pay from sources other than cash flow from operations. The payment of distributions from sources other than cash provided by operating activities mayreduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds, and may cause investors to experience dilution. This may negatively impact the value of our stockholders’ investment in our common stock.

During the nine months endedSeptember 30, 2017 and 2016, we paid distributions of $14.8 million and $8.6 million, respectively, including $7.3 million and $4.1 million, respectively, through the issuance of shares pursuant to the DRIP. Net cash provided by operating activities for the nine months endedSeptember 30, 2017 and 2016 was $13.3 million and $6.1 million, respectively, and reflected a reduction for real estate acquisition-related expenses incurred of $1.6 million and $1.7 million, respectively, in accordance with GAAP. Prior to the adoption of ASU 2017-01 in April 2017, we treated our real estate acquisition-related fees and expenses as funded by proceeds from the Offering, including proceeds from the DRIP. Therefore, for consistency, proceeds from the issuance of common stock used as a source of distributions for the nine months endedSeptember 30, 2017 and 2016 includes the amount by which real estate acquisition-related fees and expenses have reduced net cash flows from operating activities of $849,000 and $1.7 million, respectively. The distributions paid during the nine months endedSeptember 30, 2017, including shares issued pursuant to the DRIP, were funded by cash flows from operating activities of $13.3 million, or 90%, and proceeds from the Offering of $1.5 million, or 10%. Our distributions for the nine months endedSeptember 30, 2016 were funded by cash flows from operating activities, including cash flows from operating activities from prior periods of $7.8 million, or 90% and proceeds from the Offering of $867,000, or 10%.

During the year ended December 31, 2016, we paid distributions of $12.5 million, including $6.0 million through the issuance of shares pursuant to the DRIP. Net cash provided by operating activities for the year ended December 31, 2016 was $8.3 million and reflected a reduction for real estate acquisition-related expenses incurred of $3.3 million. The distributions paid during the year ended December 31, 2016, including shares issued pursuant to the DRIP, were covered by cash flows from operating activities, including cash flows from operating activities from prior periods of $10.0 million or 80% and proceeds from the Offering of $2.5 million or 20%.

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. On August 26, 2013, the Multi-Class Registration Statement was declared effective under the Securities Act; we designated the existing shares of our common stock that were sold prior to such date to be W Shares and registered two new classes of our common stock, A Shares and I Shares. On February 10, 2017, the Continuing Offering Registration Statement was declared effective under the Securities Act; we are offering up to $4.0 billion in shares of common stock of the three classes, covering up to $3.5 billion in shares in the Primary Offering and up to $500.0 million in shares pursuant to the DRIP. We are offering to sell any combination of W Shares, A Shares and I Shares with a dollar value up to the maximum offering amount. Additionally, as of September 30, 2017, we were authorized to issue 10.0 million shares of preferred stock, but had noneissued or outstanding.

As of September 30, 2017, we had issued approximately 28.0 million shares in the Offering for gross proceeds of $501.2 million, out of which we have paid $10.4 million in selling commissions and the current portion of distribution fees and dealer manager fees, and $3.7 million in organization and offering costs. With the net offering proceeds of $487.1 million and the borrowings from our credit facility, we have acquired $668.7 million in real estate assets and incurred $8.5 million of acquisition-related expenses.

39

As ofNovember 9, 2017, 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	18,619,592		8,438,242		1,155,226		28,213,060
Proceeds	$	327,364	$	156,856	$	20,774	$	504,994
Distribution Reinvestment Plan
Shares	857,871		275,293		68,692		1,201,856
Proceeds	$	15,395	$	4,946	$	1,243	$	21,584

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. As of September 30, 2017, we received total redemption requests for, and redeemed approximately 3.7 million W Shares, 358,000 A Shares and 52,000 I Shares of our common stock for $66.5 million, $6.4 million and $950,000, respectively. During the three months ended September 30, 2017, 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
July 1, 2017 - July 31, 2017
W Shares	125,693	$	18.09	125,693	(1)
A Shares	25,378	$	17.90	25,378	(1)
I Shares	—	$	—	—	(1)
August 1, 2017 - August 31, 2017
W Shares	242,054	$	18.10	242,054	(1)
A Shares	50,296	$	17.74	50,296	(1)
I Shares	—	$	—	—	(1)
September 1, 2017 - September 30, 2017
W Shares	212,860	$	18.05	212,860	(1)
A Shares	45,253	$	17.88	45,253	(1)
I Shares	—	$	—	—	(1)
Total	701,534			701,534

____________________________________

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

Unregistered Sales of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 (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	Articles of Amendment to the Articles of Amendment and Restatement of Cole Real Estate Income Strategy (Daily NAV), Inc. dated August 2, 2017. (Incorporated by reference to the Company’s Post-effective Amendment No. 3 to Exhibit 3.4 to the Company’s Form S-11 (File No. 333-213271), filed on August 2, 2017).
3.3	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).
3.4	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).
4.3	Form of Initial Subscription Agreement (Incorporated by reference to Appendix B to Supplement No. 13 to the Company’s Prospectus filed pursuant to Rule 424(b)(3) (File No. 333-169535), filed November 8, 2017).
4.4	Form of Additional Subscription Agreement (Incorporated by reference to Appendix C to Supplement No.13 to the Company’s Prospectus filed pursuant to Rule 424(b)(3) (File No. 333-169535), filed November 8, 2017).
10.1	Second Amended and Restated Credit Agreement, dated September 6, 2017, by and among Cole Real Estate Income Strategy (Daily NAV) Operating Partnership, LP and JPMorgan Chase Bank, N.A. as administrative agent, and other lending institutions (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 333-169535), filed September 12, 2017).
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.

**

In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

41

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/ Nathan D. DeBacker
Name:	Nathan D. DeBacker
Title:	Chief Financial Officer and Treasurer (Principal Financial Officer)

Date: November 13, 2017

42

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:	November 13, 2017	/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, Nathan D. DeBacker, 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:	November 13, 2017	/s/ NATHAN D. DEBACKER
		Name:	Nathan D. DeBacker
		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 September 30, 2017 (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/ NATHAN D. DEBACKER
		Name:	Nathan D. DeBacker
Date:	November 13, 2017	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 September 30, 2017 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.

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	Sep. 30, 2017	Nov. 09, 2017
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	Sep. 30, 2017
Amendment Flag	false
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
W Shares Common Stock
Entity Information
Entity Common Stock, Shares Outstanding		15,400
A Shares Common Stock
Entity Information
Entity Common Stock, Shares Outstanding		8,300
I Shares Common Stock
Entity Information
Entity Common Stock, Shares Outstanding		1,200

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Investment in real estate assets:
Land	$ 125,588	$ 86,858
Buildings and improvements	454,831	319,589
Intangible lease assets	87,978	52,965
Total real estate investments, at cost	668,397	459,412
Less: accumulated depreciation and amortization	(36,259)	(22,638)
Total real estate investments, net	632,138	436,774
Investment in marketable securities	5,387	5,563
Total real estate investments and marketable securities, net	637,525	442,337
Cash and cash equivalents	8,598	4,671
Restricted cash	501	600
Rents and tenant receivables, net	6,631	4,206
Prepaid expenses, derivative assets and other assets	951	684
Deferred costs, net	1,448	1,074
Total assets	655,654	453,572
LIABILITIES AND EQUITY
Notes payable and credit facility, net	258,651	159,143
Accrued expenses and accounts payable	3,378	2,798
Escrowed investor proceeds	0	75
Due to affiliates	18,798	14,786
Intangible lease liabilities, net	13,095	5,798
Distributions payable	1,903	1,444
Deferred rental income, derivative liabilities and other liabilities	2,100	1,442
Total liabilities	297,925	185,486
Commitments and contingencies
Redeemable common stock	43,183	32,076
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	352,643	259,817
Accumulated distributions in excess of earnings	(39,157)	(24,399)
Accumulated other comprehensive income (loss)	43	(372)
Total stockholders’ equity	313,769	235,224
Non-controlling interests	777	786
Total equity	314,546	236,010
Total liabilities, redeemable common stock, and equity	655,654	453,572
W Shares Common Stock
STOCKHOLDERS’ EQUITY
Common stock	153	125
A Shares Common Stock
STOCKHOLDERS’ EQUITY
Common stock	78	45
I Shares Common Stock
STOCKHOLDERS’ EQUITY
Common stock	$ 9	$ 8

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Condensed Consolidated Unaudited Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
W Shares Common Stock
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	164,000,000	164,000,000
Common stock, shares issued (in shares)	15,242,210	12,461,616
Common stock, shares outstanding (in shares)	15,242,210	12,461,616
A Shares Common Stock
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	163,000,000	163,000,000
Common stock, shares issued (in shares)	7,743,545	4,449,352
Common stock, shares outstanding (in shares)	7,743,545	4,449,352
I Shares Common Stock
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	163,000,000	163,000,000
Common stock, shares issued (in shares)	916,940	788,270
Common stock, shares outstanding (in shares)	916,940	788,270

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Condensed Consolidated Statement of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenues:
Rental income	$ 11,822	$ 6,163	$ 31,188	$ 17,160
Tenant reimbursement income	1,391	697	3,118	1,936
Interest income on marketable securities	31	29	90	88
Total revenues	13,244	6,889	34,396	19,184
Operating expenses:
General and administrative	1,685	1,326	4,823	3,512
Property operating	561	239	1,244	683
Real estate tax	998	548	2,319	1,518
Advisory fees and expenses	1,128	725	3,063	1,911
Acquisition-related	333	705	1,629	1,748
Depreciation and amortization	5,174	2,390	13,259	6,674
Total operating expenses	9,879	5,933	26,337	16,046
Operating income	3,365	956	8,059	3,138
Other expense:
Interest expense and other, net	(3,289)	(1,326)	(7,536)	(3,805)
Net income (loss)	76	(370)	523	(667)
Net income allocated to noncontrolling interest	8	0	26	0
Net income (loss) attributable to the Company	$ 68	$ (370)	$ 497	$ (667)
Weighted average number of common shares outstanding:
Basic and diluted (in shares)	23,045,184	14,200,887	20,854,620	12,342,600
Net income (loss) per common share:
Basic and diluted (in dollars per share)	$ 0.00	$ (0.03)	$ 0.02	$ (0.05)
Distributions declared per common share (in dollars per share)	$ 0.25	$ 0.25	$ 0.73	$ 0.73

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Condensed Consolidated Statement of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 76	$ (370)	$ 523	$ (667)
Other comprehensive income (loss)
Unrealized holding gain on marketable securities	14	10	66	184
Reclassification adjustment for (gain) loss included in income as other expense	(4)	3	(4)	(2)
Unrealized gain (loss) on interest rate swaps	116	244	(75)	(1,138)
Amount of loss reclassified from other comprehensive income into income as interest expense	166	131	428	405
Total other comprehensive income (loss)	292	388	415	(551)
Comprehensive income (loss)	368	18	938	(1,218)
Comprehensive income allocated to noncontrolling interest	8	0	26	0
Comprehensive income (loss) attributable to the Company	$ 360	$ 18	$ 912	$ (1,218)

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Condensed Consolidated Statement of Changes In Equity (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($) $ in Thousands	Total	W Shares Common Stock	A Shares Common Stock	I Shares Common Stock	Common Stock W Shares Common Stock	Common Stock A Shares Common Stock	Common Stock I Shares Common Stock	Capital in Excess of Par Value	Accumulated Distributions in Excess of Earnings	Accumulated Other Comprehensive (Loss) Income	Total Stockholders’ Equity	Non- Controlling Interests
Balance, shares (in shares) at Dec. 31, 2016		12,461,616	4,449,352	788,270	12,461,616	4,449,352	788,270
Balance at Dec. 31, 2016	$ 236,010				$ 125	$ 45	$ 8	$ 259,817	$ (24,399)	$ (372)	$ 235,224	$ 786
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock (in shares)					4,045,992	3,480,749	126,160
Issuance of common stock	140,221				$ 40	$ 35	$ 1	140,145			140,221
Conversion of shares (in shares)					(55,096)		54,673
Distributions to investors	(15,255)								(15,255)		(15,255)
Commissions, dealer manager and distribution fees	(9,034)							(9,034)			(9,034)
Other offering costs	(1,035)							(1,035)			(1,035)
Redemptions of common stock, shares (in shares)					(1,210,302)	(186,556)	(52,163)
Redemptions of common stock	(26,157)				$ (12)	$ (2)		(26,143)			(26,157)
Changes in redeemable common stock	(11,107)							(11,107)			(11,107)
Distributions to non-controlling interests	(35)											(35)
Comprehensive income	938								497	415	912	26
Balance, shares (in shares) at Sep. 30, 2017		15,242,210	7,743,545	916,940	15,242,210	7,743,545	916,940
Balance at Sep. 30, 2017	$ 314,546				$ 153	$ 78	$ 9	$ 352,643	$ (39,157)	$ 43	$ 313,769	$ 777

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Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities:
Net income (loss)	$ 523	$ (667)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization, net	12,995	6,671
Straight-line rental income	(1,304)	(707)
Amortization of deferred financing costs	1,541	436
Amortization on marketable securities	10	12
Gain on sale of marketable securities	(4)	(2)
Ineffectiveness of interest rate swaps	(17)	0
Write-off of deferred financing costs	97	0
Bad debt expense	1	15
Changes in assets and liabilities:
Rents and tenant receivables	(1,122)	(256)
Prepaid expenses and other assets	(307)	(121)
Accounts payable and accrued expenses	544	182
Deferred rental income and other liabilities	658	316
Due to affiliates	(268)	196
Net cash provided by operating activities	13,347	6,075
Cash flows from investing activities:
Investment in real estate assets and capital expenditures	(201,054)	(85,684)
Investment in marketable securities	(1,173)	(861)
Proceeds from sale and maturities of marketable securities	1,405	603
Payment of property escrow deposits	(4,340)	(3,046)
Refund of property escrow deposits	4,750	1,811
Change in restricted cash	99	(688)
Net cash used in investing activities	(200,313)	(87,865)
Cash flows from financing activities:
Proceeds from issuance of common stock	132,874	109,738
Offering costs on issuance of common stock	(5,789)	(3,099)
Redemptions of common stock	(26,157)	(11,389)
Distributions to investors	(7,449)	(4,538)
Proceeds from credit facility and notes payable	289,065	16,275
Repayments of credit facility	(188,000)	(15,000)
Payment of loan deposits	(125)	0
Refund of loan deposits	125	0
Deferred financing costs paid	(3,541)	(223)
Change in escrowed investor proceeds liability	(75)	231
Distributions to noncontrolling interests	(35)	0
Net cash provided by financing activities	190,893	91,995
Net increase in cash and cash equivalents	3,927	10,205
Cash and cash equivalents, beginning of period	4,671	14,840
Cash and cash equivalents, end of period	8,598	25,045
Supplemental disclosures of non-cash investing and financing activities:
Change in accrued dealer manager fee, distribution fee, and other offering costs	6,798	5,655
Distributions to investors declared and unpaid	1,903	1,205
Common stock issued through distribution reinvestment plan	7,347	4,105
Change in fair value of marketable securities	62	182
Change in fair value of interest rate swaps	353	(733)
Accrued capital expenditures	8	109
Accrued deferred financing costs	28	0
Supplemental cash flow disclosures:
Interest paid	$ 5,436	$ 3,180

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Organization and Business

9 Months Ended

Sep. 30, 2017

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 with 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 a registration statement filed on Form S-11 (Registration No. 333-213271) on February 10, 2017 (the “Continuing Offering 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 September 30, 2017, the Company had issued approximately 28.0 million shares of common stock in the Offering for gross offering proceeds of $501.2 million before offering costs and selling commissions, and the current portion of dealer manager fees and distribution fees of $14.1 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 September 30, 2017, the NAV per share for W Shares, A Shares and I Shares was $18.13, $17.92 and $18.30, 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, (2) notes receivable and other investments secured by commercial real estate, including the origination of loans, and (3) U.S. government securities, agency securities, corporate debt and other investments for which there is reasonable liquidity. As of September 30, 2017, the Company owned 135 commercial properties, which includes properties owned through a consolidated joint venture arrangement (the “Consolidated Joint Venture”), located in 36 states, containing 4.1 million rentable square feet of commercial space, including the square feet of buildings which are on land subject to ground leases. As of September 30, 2017, the rentable square feet at these properties was 99.3% leased, including month-to-month agreements, if any.

The Company is structured as a perpetual-life, non-exchange traded REIT. This means that, subject to regulatory approval of its 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

9 Months Ended

Sep. 30, 2017

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 condensed 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 condensed consolidated financial statements.

Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission 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, 2016, and related notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The condensed consolidated 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 financial statements include the accounts of the Company and its wholly-owned subsidiaries and the Consolidated Joint Venture in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation.

The Company evaluates its relationships and investments to determine if it has variable interests. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns.  If the Company determines that it has a variable interest in an entity, it evaluates whether such interest is in a variable interest entity (“VIE”). VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one of the following characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity. The Company consolidates any VIEs when it is determined to be the primary beneficiary of the VIE’s operations.

For legal entities being evaluated for consolidation, the Company must first determine whether the interests that it holds and fees it receives qualify as variable interests in the entity. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns. The Company’s evaluation includes consideration of fees paid to the Company where the Company acts as a decision maker or service provider to the entity being evaluated. If the Company determines that it holds a variable interest in an entity, it evaluates whether that entity is a VIE.

A VIE must be consolidated by its primary beneficiary, which is generally defined as the party who has a controlling financial interest in the VIE. The Company qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant to the VIE. The Company consolidates any VIEs when the Company is determined to be the primary beneficiary of the VIE, and the difference between consolidating the VIE and accounting for it using the equity method could be material to the Company’s consolidated financial statements. The Company continually evaluates the need to consolidate any VIEs based on standards set forth in GAAP as described above.

As of September 30, 2017, the Company determined that it had a controlling interest in the Consolidated Joint Venture and therefore met the GAAP requirements for consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated 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 costs of acquisition, including certain acquisition-related expenses, construction and any tenant improvements, major improvements and betterments that extend the useful life of the real estate assets and leasing costs. All repairs and maintenance costs are expensed as incurred. In April 2017, the Company early adopted Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company’s acquisitions qualify as asset acquisitions, and as such, certain acquisition-related expenses related to these asset acquisitions are capitalized. Prior to the adoption of ASU 2017-01, all acquisition-related expenses were expensed as incurred, and all of the Company’s acquisitions were accounted for as business combinations.

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
Site improvements	15 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 nine months endedSeptember 30, 2017 or 2016.

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 werenoassets identified as held for sale as ofSeptember 30, 2017orDecember 31, 2016.

Allocation of Purchase Price of Real Estate Assets

Upon the acquisition of real properties, the Company allocates the purchase price, including certain acquisition-related expenses after the adoption of ASU 2017-01, 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. 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 September 30, 2017, 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 other comprehensive income (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 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.

Noncontrolling Interest in Consolidated Joint Venture

On December 16, 2016, the Company completed the formation of the Consolidated Joint Venture. The Company determined it had a controlling interest in the Consolidated Joint Venture and, therefore, met the GAAP requirements for consolidation. The Company recorded net income of $26,000 and paid distributions of $35,000 related to the noncontrolling interest during the nine months endedSeptember 30, 2017. The Company recorded the noncontrolling interest of $777,000 and $786,000 as of September 30, 2017 and December 31, 2016, on the condensed consolidated balance sheets.

Restricted Cash

The Company had $501,000 and $600,000 in restricted cash as of September 30, 2017 and December 31, 2016, respectively. Included in restricted cash as of September 30, 2017 and December 31, 2016 was $500,000 held by a lender in an escrow account for a certain property in accordance with the associated loan agreement. Additionally, 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. As of September 30, 2017 and December 31, 2016, the Company had $1,000 and $25,000, respectively, held in a lockbox account. In addition, restricted cash included $75,000 of escrowed investor proceeds for which shares of common stock had not been issued as of December 31, 2016. There were no such proceeds as of September 30, 2017.

Dealer Manager and Distribution Fees

The Company pays CCC dealer manager and distribution fees, which are calculated on a daily basis in the amount of 1/365th of the amount indicated in the table below for each class of common stock:

	Dealer Manager Fee		Distribution Fee
W Shares	0.55	%	—
A Shares	0.55	%	0.50	%
I Shares	0.25	%	—

The dealer manager and distribution fees are paid monthly in arrears. An estimated liability for future dealer manager and distribution fees payable to CCC is recognized at the time each share is sold and included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value. The Company recognized a liability for future dealer manager and distribution fees payable to CCC of $17.3 million and $12.5 million, as of September 30, 2017 and December 31, 2016, respectively.

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 earned and collectability is reasonably assured. 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 straight-line rent, and current and future operating expense reimbursements from tenants 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 uncertain, the Company will record an increase in the allowance for uncollectible accounts. As of September 30, 2017 and December 31, 2016, the Company had an allowance for uncollectible accounts of $1,000 and $2,000, respectively.

Earnings (Loss) and Distributions Per Share

The Company has three classes of common stock with nonforfeitable dividend rights that are determined based on a different NAV for each class. Accordingly, the Company utilizes the two-class method to determine its earnings per share, which results in the same earnings per share when rounded to one cent for each of the classes. Under the two-class method, earnings per class of common stock are computed by dividing the sum of the distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares for each class of common stock for the respective period. Diluted income per share, when applicable, considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the three and nine months ended September 30, 2017 or 2016. Distributions per share is calculated based on the authorized daily distribution rate.

Recent Accounting Pronouncements

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. Except as otherwise stated below, 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 condensed consolidated financial statements:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition, Accounting Standards Codification (“ASC”) (Topic 605) and will require an entity to recognize revenue in a way that depicts 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. For public business entities, the guidance should be applied to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company plans to use the modified retrospective approach to adopt ASU 2014-09. In accordance with the Company’s plan for the adoption of ASU 2014-09, the Company’s implementation team has identified the Company’s revenue streams, performed an in-depth review of the Company’s revenue contracts and identified the related performance obligations, and is evaluating the impact on the Company’s consolidated financial statements and internal accounting processes and controls. Once ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which, as discussed below, sets forth principles for the recognition, measurement, presentation and disclosure of leases, goes into effect, ASU 2014-09 may apply to non-lease components in the lease agreements.

In February 2016, the FASB issued ASU 2016-02, which will require that a lessee recognize assets and liabilities on the balance sheet for all leases with a lease term of more than 12 months, with the result being the recognition of a right of use asset and a lease liability and the disclosure of key information about the entity’s leasing arrangements. The lessor accounting model under ASU 2016-02 is similar to current guidance; however it limits the capitalization of initial direct leasing costs, such as internally generated costs. ASU 2016-02 retains a distinction between finance leases (i.e., capital leases under current GAAP) and operating leases. The classification criteria for distinguishing between finance leases and operating leases will be substantially similar to the classification criteria for distinguishing between capital leases and operating leases under current GAAP. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. A modified retrospective approach is required for existing leases that have not expired upon adoption and provides for certain practical expedients. The Company’s implementation team has developed an inventory of all leases and is identifying any non-lease components in the lease agreements and is evaluating the impact to the Company and its consolidated financial statements. Upon the adoption of ASU 2016-02, the Company will record certain expenses paid directly by a tenant that protect the Company’s interests in its properties, such as insurance and real estate taxes, and the related operating expense reimbursement revenue, with no impact on net income. Based upon a preliminary analysis, the Company does not expect the accounting for leases pursuant to which the Company is the lessor to materially change as a result of the adoption of ASU 2016-02.

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 consolidated financial statements. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 is intended to improve financial reporting requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current GAAP. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which is intended to address diversity in practice related to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted, and requires retrospective adoption unless it is impracticable to apply, in which case it is to be applied prospectively as of the earliest date practicable. The Company plans to adopt ASU 2016-15 during the fourth quarter of fiscal year 2017 and has determined that this standard is relevant to its presentation of debt prepayment and debt extinguishment costs and contingent consideration payments made after a business combination.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which provides guidance on the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. In accordance with ASU 2016-18, restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flows. The amendments of ASU 2016-18 are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company plans to adopt ASU 2016-18 during the fourth quarter of 2017 and apply the standard retrospectively for all periods presented. The Company does not expect it will have a material impact on its consolidated financial statements.

In February 2017, the FASB issued ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”), which clarifies the following: (1) nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty; (2) an entity should allocate consideration to each distinct asset by applying the guidance in Topic 606 on allocating the transaction price to performance obligations; and (3) entities are required to derecognize a distinct nonfinancial asset or distinct in substance nonfinancial asset in a partial sale transaction when it (a) does not have (or ceases to have) a controlling financial interest in the legal entity that holds the asset in accordance with Subtopic 810 and (b) transfers control of the asset in accordance with Topic 606. The adoption of this standard may result in higher gains on the sale of partial real estate interests, including contributions of nonfinancial assets to a joint venture or other noncontrolling investee, due to recognizing the full gain when the derecognition criteria are met and recording the retained noncontrolling interest at its fair value. ASU 2017-05 is effective for annual periods, and interim periods therein, beginning after December 15, 2017. Early adoption is permitted.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The targeted amendments in this ASU help simplify certain aspects of hedge accounting and result in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. This ASU applies to the Company’s interest rate swaps designated as cash flow hedges. Upon adoption of this ASU, all changes in the fair value of highly effective cash flow hedges will be recorded in accumulated other comprehensive income rather than recognized directly in earnings. Under current U.S. GAAP, the ineffective portion of the change in fair value of cash flow hedges is recognized directly in earnings. This eliminates the requirement to separately measure and disclose ineffectiveness for qualifying cash flow hedges. ASU 2017-12 is effective for public entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The ASU is required to be adopted using a modified retrospective approach with early adoption permitted. The Company plans to adopt ASU 2017-12 during the first quarter of fiscal year 2018 and does not expect that it will have a material impact on its consolidated financial statements.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2017

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:

Notes payable and line of credit — 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. Current and prior period liabilities’ carrying and fair values exclude net deferred financing costs. These financial instruments are valued using Level 2 inputs. As of September 30, 2017, the estimated fair value of the Company’s debt was $261.5 million, compared to the carrying value of $262.2 million. The estimated fair value and the carrying value of the Company’s debt was $161.2 million as of December 31, 2016.

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. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the respective counterparties.

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 September 30, 2017 and December 31, 2016, the Company has assessed the overall significanceof 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 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 as well as 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, upon disposition of the financial assets and liabilities. As of September 30, 2017 and December 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 September 30, 2017 and December 31, 2016 (in thousands):

	Balance as of			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	September 30, 2017			(Level 1)		(Level 2)			(Level 3)
Financial asset:
Interest rate swaps	$	398		$	—	$	398		$	—
Marketable securities	5,387			5,387		—			—
Total financial assets	$	5,785		$	5,387	$	398		$	—
Financial liabilities:
Interest rate swaps	$	(371	)	$	—	$	(371	)	$	—

	Balance as of			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	December 31, 2016			(Level 1)		(Level 2)			(Level 3)
Financial asset:
Interest rate swaps	$	28		$	—	$	28		$	—
Marketable securities	5,563			5,563		—			—
Total financial assets	$	5,591		$	5,563	$	28		$	—
Financial liabilities:
Interest rate swaps	$	(371	)	$	—	$	(371	)	$	—

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Real Estate Investments

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

REAL ESTATE INVESTMENTS

REAL ESTATE INVESTMENTS

2017 Property Acquisitions

During the nine months ended September 30, 2017, the Company acquired a 100% interest in 27 commercial properties, of which 15 were determined to be asset acquisitions and 12 were acquired prior to the adoption of ASU 2017-01 in April 2017 and thus were accounted for as business combinations for an aggregate purchase price of $200.6 million (the “2017 Acquisitions”). The Company funded the 2017 Acquisitions with net proceeds from the Offering and available borrowings.

The following table summarizes the consideration transferred for the properties purchased during the nine months ended September 30, 2017 (in thousands):

	2017 Acquisitions
Investments in real estate:
Purchase price of asset acquisitions	$	148,145
Purchase price of business combinations	52,457
Total purchase price of real estate investments acquired (1)	$	200,602

______________________

(1) The weighted average amortization period for the 2017 Acquisitions is 11.8 years for acquired in-place leases and other intangibles, 15.7 years for acquired above-market leases and 11.3 years for acquired intangible lease liabilities.

During the nine months ended September 30, 2017, the Company acquired a 100% interest in 15 commercial properties for an aggregate purchase price of $148.1 million (the “2017 Asset Acquisitions”), which includes $1.2 million of external acquisition-related expenses that were capitalized in accordance with ASU 2017-01. Prior to the adoption of ASU 2017-01, costs related to property acquisitions were expensed as incurred. The following table summarizes the purchase price allocation for the 2017 Asset Acquisitions purchased during the nine months ended September 30, 2017 (in thousands):

	2017 Asset Acquisitions
Land	$	24,499
Building and improvements	112,520
Acquired in-place leases and other intangibles	16,350
Acquired above-market leases	1,522
Intangible lease liabilities	(6,746		)
Total purchase price	$	148,145

During the nine months ended September 30, 2017, the Company acquired a 100% interest in 12 commercial properties for an aggregate purchase price of $52.5 million which were accounted for as business combinations (the “2017 Business Combination Acquisitions”). The purchase price allocation for each of the Company’s 2017 Business Combination Acquisitions is preliminary and subject to change as it finalizes the allocation, which the Company expects will be prior to the end of the current fiscal year. 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 2017 Business Combination Acquisitions purchased during the nine months ended September 30, 2017 (in thousands):

	2017 Business Combination Acquisitions
Land	$	14,232
Building and improvements	22,292
Acquired in-place leases and other intangibles	15,911
Acquired above-market leases	1,423
Intangible lease liabilities	(1,401		)
Total purchase price	$	52,457

The Company recorded revenue of $892,000 and $2.5 million, respectively, and net incomeof$254,000 and $383,000, respectively, for the three and nine months endedSeptember 30, 2017, related to the 2017 Business Combination Acquisitions. In addition, the Company recorded $426,000 of acquisition-related expenses for the nine months endedSeptember 30, 2017, which is included in acquisition-related expenses on the condensed consolidated statements of operations.

The following table summarizes selected financial information of the Company as if all of the 2017 Business Combination Acquisitions were completed on January 1, 2016 for each period presented below. The table below presents the Company’s estimated revenue and net income (loss), on a pro forma basis, for the three and nine months endedSeptember 30, 2017 and 2016, respectively (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017		2016
Pro forma basis:
Revenue	$	13,244	$	7,779		$	34,613	$	21,854
Net income (loss)	$	66	$	(397	)	$	873	$	(1,175	)

The unaudited pro forma information for the nine months endedSeptember 30, 2017 was adjusted to exclude $426,000 of acquisition-related expenses recorded during such periods related to the 2017 Business Combination Acquisitions. Accordingly, these expenses were instead recognized in the pro forma information for the nine months endedSeptember 30, 2016. 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 2016, nor does it purport to represent the results of future operations.

2016 Property Acquisitions

During the nine months ended September 30, 2016, the Company acquired a 100% interest in 19 commercial properties for an aggregate purchase price of $85.7 million (the “2016 Acquisitions”). The 2016 Acquisitions were accounted for as business combinations. The Company funded the 2016 Acquisitions with net proceeds from the Offering and available borrowings. The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed.

The following table summarizes the purchase price allocation for the 2016 Acquisitions (in thousands):

	2016 Acquisitions
Land	$	12,862
Building and improvements	65,333
Acquired in-place leases and other intangibles (1)	6,965
Acquired above-market leases (2)	973
Intangible lease liabilities (3)	(469		)
Total purchase price	$	85,664

______________________

(1) The weighted average amortization period for acquired in-place leases and other intangibles was 13.9 years for the 2016 Acquisitions.

(2) The weighted average amortization period for acquired above-market leases was 13.9 years for the 2016 Acquisitions.

(3) The weighted average amortization period for acquired intangible lease liabilities was 14.2 years for the 2016 Acquisitions.

The Company recorded revenue of $1.1 million and $1.8 million, respectively, and net income of $459,000 and $518,000, respectively, for the three and nine months endedSeptember 30, 2016, related to the 2016 Acquisitions. In addition, the Company recorded $205,000 and $535,000 of acquisition-related expenses for the three and nine months endedSeptember 30, 2016, respectively, which is included in acquisition-related expenses on the condensed consolidated statements of operations.

The following information summarizes selected financial information of the Company as if all of the2016 Acquisitionswere completed on January 1,2015for each period presented below. The table below presents the Company’s estimated revenue andnet (loss) income, on a pro forma basis, for thethree and ninemonths endedSeptember 30, 2016and2015, respectively(in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2016			2015		2016		2015
Pro forma basis
Revenue	$	7,358		$	6,347	$	22,177	$	18,944
Net (loss) income	$	(351	)	$	1,421	$	250	$	8,462

The unaudited pro forma information for the three and nine months endedSeptember 30, 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 and nine months endedSeptember 30, 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.

Consolidated Joint Venture

As of September 30, 2017, the Company had an interest in a Consolidated Joint Venture that owns and manages two properties, with total assets of $7.8 million, which included $7.7 million of real estate assets, net of accumulated depreciation and amortization of $181,000, and total liabilities of $209,000. The Consolidated Joint Venturedoes not have any debt outstanding asof September 30, 2017. The Company has the ability to control operating and financial policies of the Consolidated Joint Venture. There are restrictions on the use of these assets as the Company would generally be required to obtain the approval of the partner (the “Consolidated Joint Venture Partner”) in accordance with the joint venture agreement for any major transactions. The Company and the Consolidated Joint Venture Partner are subject to the provisions of the joint venture agreement, which includes provisions for when additional contributions may be required to fund certain cash shortfalls.

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Intangible Lease Assets

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE LEASE ASSETS

INTANGIBLE LEASE ASSETS

Intangible lease assets of the Company consisted of the following as of September 30, 2017 and December 31, 2016 (in thousands, except weighted average life):

	September 30, 2017		December 31, 2016
In-place leases and other intangibles, net of accumulated amortization of $11,451 and $6,942, respectively (with a weighted average life remaining of 10.5 and 12.0 years, respectively)
	$	66,965	$	39,353
Acquired above-market leases, net of accumulated amortization of $1,434 and $927, respectively
(with a weighted average life remaining of 12.5 and 12.3 years, respectively)	8,128		5,743
	$	75,093	$	45,096

Amortization of the above-market leases is recorded as a reduction to rental revenue, and amortization expense for the in-place leases and other intangibles is included in depreciation and amortization in the accompanying condensed consolidated statements of operations. The following table summarizes the amortization expense related to the intangible lease assets for the three and nine months endedSeptember 30, 2017 and September 30, 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
In-place lease and other intangible amortization	$	1,892	$	740	$	4,680	$	2,109
Above-market lease amortization	$	222	$	110	$	559	$	289

As of September 30, 2017, the estimated amortization expense relating to the intangible lease assets for each of the five succeeding fiscal years is as follows (in thousands):

	Amortization Expense
	In-Place Leases and Other Intangibles		Above-Market Leases
Remainder of 2017	$	1,574	$	183
2018	$	7,038	$	759
2019	$	6,978	$	746
2020	$	6,775	$	740
2021	$	6,595	$	740

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Marketable Securities

9 Months Ended

Sep. 30, 2017

Investments, Debt and Equity Securities [Abstract]

MARKETABLE SECURITIES

MARKETABLE SECURITIES

The Company owned marketable securities with an estimated fair value of $5.4 million and $5.6 million as of September 30, 2017 and December 31, 2016, respectively. The following is a summary of the Company’s available-for-sale securities as of September 30, 2017 (in thousands):

	Available-for-sale securities
	Amortized Cost Basis		Unrealized (Loss) Gain			Fair Value
U.S. Treasury Bonds	$	1,842	$	(8	)	$	1,834
U.S. Agency Bonds	547		—			547
Corporate Bonds	2,965		41			3,006
Total available-for-sale securities	$	5,354	$	33		$	5,387

The following table provides the activity for the marketable securities during the nine months endedSeptember 30, 2017 (in thousands):

	Amortized Cost Basis			Unrealized (Loss) Gain			Fair Value
Marketable securities as of January 1, 2017	$	5,592		$	(29	)	$	5,563
Face value of marketable securities acquired	1,156			—			1,156
Premiums and discounts on purchase of marketable securities, net of acquisition costs	17			—			17
Amortization on marketable securities	(10		)	—			(10		)
Sales and maturities of securities	(1,401		)	(4		)	(1,405		)
Unrealized gain on marketable securities	—			66			66
Marketable securities as of September 30, 2017	$	5,354		$	33		$	5,387

During the nine months endedSeptember 30, 2017, the Company sold 56 marketable securities for aggregate proceeds of $1.4 million. Unrealized gains (losses) on marketable securities are recorded in other comprehensive income (loss), with a portion of the amount subsequently reclassified into other expense, net on the accompanying condensed consolidated statements of operations as securities are sold and gains (losses) are recognized. In addition, the Company recorded an unrealized gain of $66,000 on its investments, which is included in accumulated other comprehensive (loss) income on the accompanying condensed consolidated statement of changes in equity for the nine months endedSeptember 30, 2017 and the condensed consolidated balance sheet as of September 30, 2017.

The scheduled maturities of the Company’s marketable securities as of September 30, 2017 are as follows (in thousands):

	Available-for-sale securities
	Amortized Cost		Estimated Fair Value
Due within one year	$	730	$	730
Due after one year through five years	2,328		2,339
Due after five years through ten years	2,216		2,238
Due after ten years	80		80
Total	$	5,354	$	5,387

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 September 30, 2017, the Company hadnoother-than-temporary impairment losses.

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Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2017

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. During the nine months endedSeptember 30, 2017, the Company entered into five interest rate swap agreements. The following table summarizes the terms of the Company’s executed interest rate swap agreements designated as hedging instruments as of September 30, 2017 and December 31, 2016 (dollar amounts in thousands):

Outstanding Notional Amount as of

Interest

Effective

Maturity

Fair Value of Assets and (Liabilities) as of

Balance Sheet Location

September 30, 2017

Rate (1)

Date

Date

September 30, 2017

December 31, 2016

Interest Rate Swaps

Prepaid expenses, derivative assets and other assets

$

137,540

3.23% to 4.04%

6/30/2015 to 9/29/2017

9/12/2019 to 7/1/2022

$

398

$

28

Interest Rate Swaps

Deferred rental income, derivative liabilities and other liabilities

$

53,165

3.56% to 4.17%

12/16/2016 to 7/26/2017

1/1/2022 to 8/1/2022

$

(371

)

$

(371

)

______________________

(1) The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of September 30, 2017.

Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 3 —Fair Value Measurements. 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 income (loss), 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 and nine months endedSeptember 30, 2017, the amounts reclassified were $166,000 and $428,000, respectively. The amounts reclassified for the three and nine months endedSeptember 30, 2016, were $131,000 and $405,000, respectively. During the next 12 months, the Company estimates that an additional $588,000 will be reclassified from other comprehensive income (loss) as an increase to interest expense.

Any ineffective portion of the change in fair value of the derivative instruments is recorded in interest expense. During thenine months endedSeptember 30, 2017, $17,000 of the change in the fair value of the interest rate swaps was considered ineffective.There were no portions of the change in the fair value of the interest rate swaps that were considered ineffective during the three months endedSeptember 30, 2017 and 2016 and the nine months endedSeptember 30, 2016.

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 $417,000, which includes accrued interest, at September 30, 2017. 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 September 30, 2017.

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Notes Payable and Credit Facility

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

NOTES PAYABLE AND CREDIT FACILITY

NOTES PAYABLE AND CREDIT FACILITY

As of September 30, 2017, the Company had $258.7 million of debt outstanding, including net deferred financing costs, with weighted average years to maturity of 4.8 years and a weighted average interest rate of 3.65%. The weighted average years to maturity is computed using the scheduled repayment date as specified in each loan agreement where applicable. The weighted average interest rate is computed using the interest rate in effect until the scheduled repayment date. Should a loan not be repaid by its scheduled repayment date, the applicable interest rate will increase as specified in the respective loan agreement until the extended maturity date. The following table summarizes the debt balances as of September 30, 2017 and December 31, 2016, and the debt activity for the nine months ended September 30, 2017 (in thousands):

				During the Nine Months Ended September 30, 2017
	Balance as of December 31, 2016				Debt Issuance, Net (1)			Repayments and Modifications				Accretion and (Amortization)			Balance as of September 30, 2017
Credit facility	$	64,000			$	236,500		$	(188,000	)		$	—		$	112,500
Fixed rate debt	97,169				52,565			—				—			149,734
Total debt	161,169				289,065			(188,000		)		—			262,234
Deferred costs (2)	(2,026		)		(1,463		)	97			(3)	(191		)	(3,583		)
Total debt, net	$	159,143			$	287,602		$	(187,903	)		$	(191	)	$	258,651

______________________

(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.

(3) Represents deferred financing costs of the term portion of the credit facility written off during the period resulting from the Second Amended and Restated Credit Agreement, as defined below.

As of September 30, 2017, the Company had fixed rate debt outstanding of $149.7 million, including $78.2 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 date of the variable rate debt. The fixed rate debt has interest rates ranging from 3.37% to 4.17% per annum and as of September 30, 2017, the fixed rate debt had a weighted average interest rate of 3.87%. 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 $266.1 million as of September 30, 2017. Each of the mortgage notes payable comprising the fixed rate debt is secured by the respective properties on which the debt was placed.

During the three months ended September 30, 2017, the Company entered into a second amended and restated credit agreement (the “Second Amended Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent (“JPMorgan Chase”), that provides for borrowings up to $425.0 million, which is comprised of up to $212.5 million in unsecured revolving loans (the “Revolving Loans”) and up to $212.5 million in unsecured term loans (the “Term Loans”) (collectively, with the Revolving Loans the “Credit Facility”). The Term Loans mature on September 6, 2022 and the Revolving Loans mature onSeptember 6, 2021; however, the Company may elect to extend the maturity date for the Revolving Loans for up to two six-month periods, but no later thanSeptember 6, 2022, subject to satisfying certain conditions contained in the Second Amended Credit Agreement.

Depending upon the type of loan specified and overall leverage ratio, the Credit Facility bears interest at (i) the one-month, two-month, three-month or six-month London Interbank Offered Rate (“LIBOR”) multiplied by the statutory reserve rate (the “Eurodollar Rate”) plus an interest rate spread ranging from 1.70% to 2.20% for Revolving Loans and 1.60% to 2.10% for Term Loans; or (ii) a base rate ranging from 0.70% to 1.20% for Revolving Loans and 0.60% to 1.10% for Term Loans, plus the greater of: (a) JPMorgan Chase’s Prime Rate (as defined in the Second Amended Credit Agreement); (b) the Federal Funds Effective Rate (as defined in the Second Amended Credit Agreement) plus 0.50%; or (c) the one-month LIBOR multiplied by the statutory reserve rate plus 1.0%. As of September 30, 2017, no amounts were outstanding under the Revolving Loans. As of September 30, 2017, the Term Loans outstanding totaled $112.5 million, which is subject to interest rate swap agreements (the “Swapped Term Loans”). The interest rate swap agreements have the effect of fixing the Eurodollar Rate per annum of the Swapped Term Loans. As of September 30, 2017, the weighted average all-in rate for the Swapped Term Loans was 3.35%. The Company had $312.5 million in unused capacity, subject to borrowing availability.

The Second Amended Credit Agreement contains provisions with respect to covenants, events of default and remedies customary for facilities of this nature. In particular, the Second Amended Credit Agreement requires the Company to maintain a minimum consolidated net worth greater than or equal to the sum of (i) $367.1 million plus (ii) 75% of the equity issued (iii) minus the aggregate amount of any redemptions or similar transaction from the date of the Second Amended Credit Agreement, a leverage ratio less than or equal to 60%, a fixed charge coverage ratio equal to or greater than 1.50, an unsecured debt to unencumbered asset value ratio equal to or less than 60%, an unsecured debt service coverage ratio greater than 1.75, a secured debt ratio equal to or less than 40%, and the amount of secured debt that is recourse debt at no greater than 15% of total asset value. As of September 30, 2017, the Company believes it was in compliance with the financial covenants of the Amended Credit Agreement, as well as the financial covenants under the Company’s various fixed and variable rate debt agreements.

Maturities

The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt subsequent to September 30, 2017 (in thousands):

	Principal Repayments
Remainder of 2017	$	—
2018	—
2019	—
2020	9,240
2021	31,717
Thereafter	221,277
Total	$	262,234

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Intangible Lease Liabilities

9 Months Ended

Sep. 30, 2017

Other Liabilities Disclosure [Abstract]

INTANGIBLE LEASE LIABILITIES

INTANGIBLE LEASE LIABILITIES

Intangible lease liabilities of the Company consisted of the following as of September 30, 2017 and December 31, 2016

(in thousands, except weighted average life):

	September 30, 2017		December 31, 2016
Acquired below-market liabilities, net of accumulated amortization of $1,724 and $929, respectively (with a weighted average life remaining of 11.4 and 11.9 years, respectively)
	$	13,095	$	5,798

Amortization of below-market leases is recorded as an increase to rental revenue in the accompanying condensed consolidated statements of operations. The following table summarizes the amortization of below-market leases related to the intangible lease liabilities for the three and nine months endedSeptember 30, 2017 and September 30, 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Amortization of below-market leases	$	345	$	108	$	849	$	318

As of September 30, 2017, the estimated amortization of the intangible lease liabilities for each of the five succeeding fiscal years is as follows (in thousands):

	Amortization of
	Below-Market Leases
Remainder of 2017	$	297
2018	$	1,403
2019	$	1,391
2020	$	1,365
2021	$	1,123

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

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.

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

9 Months Ended

Sep. 30, 2017

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.

Selling commissions, dealer manager and distribution fees

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. The Company has been advised that CCC intends to reallow 100% of the selling commissions on A Shares to participating broker-dealers.

(2) The dealer manager and distribution fees will be calculated on a daily basis 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.

Other organization and offering expenses

All other 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 September 30, 2017, 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.

Advisory fees and expenses

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.

Operating expenses

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.

Acquisition expenses

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.

Performance Fee

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 did not reach the 6% Return during the nine months ended September 30, 2017.

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 September 30,				Nine Months Ended September 30,
Offering:	2017		2016		2017		2016
Selling commissions	$	759	$	666	$	2,236	$	1,470
Distribution fee (1)	$	163	$	67	$	402	$	155
Dealer manager fees (1)	$	565	$	349	$	1,514	$	901
Organization and offering expense reimbursement	$	353	$	330	$	1,035	$	843
Acquisition expense reimbursement	$	316	$	430	$	1,161	$	1,087
Advisory fee	$	1,128	$	725	$	3,063	$	1,911
Operating expense reimbursement	$	647	$	478	$	2,226	$	1,227
Performance fee	$	—	$	—	$	—	$	—

______________________

(1) Amounts are calculated for the respective period in accordance with the dealer manager agreement and exclude the estimated liability for the future dealer manager and distribution fees payable to CCC, which are included in due to affiliates in the condensed consolidated balance sheets, with a corresponding decrease to capital in excess of par value, as described in Note 2 — Summary of Significant Accounting Policies.

Due to Affiliates

As of September 30, 2017 and December 31, 2016, $18.8 million and $14.8 million, respectively, was due to Cole Advisors or its affiliates primarily related to the estimated liability for current and future dealer manager and distribution fees, advisory fees, the reimbursement of organization and offering expenses, and acquisition expenses, which were included in amounts due to affiliates on the condensed consolidated balance sheets.

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Economic Dependency

9 Months Ended

Sep. 30, 2017

Economic Dependency [Abstract]

ECONOMIC DEPENDENCY

ECONOMIC DEPENDENCY

Under various agreements, the Company has engaged and may in the future 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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Operating Leases

9 Months Ended

Sep. 30, 2017

Leases [Abstract]

Operating Leases

OPERATING LEASES

The Company’s real estate assets are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2017, the leases had a weighted-average remaining term of 10.5 years. Certain leases include provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other negotiated terms and conditions. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. As of September 30, 2017, the future minimum rental income from the Company’s investment in real estate assets under non-cancelable operating leases, assuming no exercise of renewal options for the succeeding five fiscal years and thereafter, was as follows (in thousands):

	Future Minimum Rental Income
Remainder of 2017	$	11,418
2018	45,825
2019	45,992
2020	45,877
2021	45,788
Thereafter	309,873
Total	$	504,773

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

The following events occurred subsequent to September 30, 2017.

Sale of Cole Capital

On November 13, 2017 the parent of the Company’s sponsor entered into a purchase and sale agreement to sell its ownership interest in the Company’s sponsor. The completion of this sale is subject to the receipt of regulatory approvals and other customary closing conditions and is expected to occur at the end of the fourth quarter of 2017 or during the first quarter of 2018.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of presentation

The condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission 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, 2016, and related notes thereto set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The condensed consolidated 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 financial statements include the accounts of the Company and its wholly-owned subsidiaries and the Consolidated Joint Venture in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation.

Variable interest entity

On December 16, 2016, the Company completed the formation of the Consolidated Joint Venture. The Company determined it had a controlling interest in the Consolidated Joint Venture and, therefore, met the GAAP requirements for consolidation.

The Company evaluates its relationships and investments to determine if it has variable interests. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns.  If the Company determines that it has a variable interest in an entity, it evaluates whether such interest is in a variable interest entity (“VIE”). VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one of the following characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity. The Company consolidates any VIEs when it is determined to be the primary beneficiary of the VIE’s operations.

For legal entities being evaluated for consolidation, the Company must first determine whether the interests that it holds and fees it receives qualify as variable interests in the entity. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns. The Company’s evaluation includes consideration of fees paid to the Company where the Company acts as a decision maker or service provider to the entity being evaluated. If the Company determines that it holds a variable interest in an entity, it evaluates whether that entity is a VIE.

A VIE must be consolidated by its primary beneficiary, which is generally defined as the party who has a controlling financial interest in the VIE. The Company qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant to the VIE. The Company consolidates any VIEs when the Company is determined to be the primary beneficiary of the VIE, and the difference between consolidating the VIE and accounting for it using the equity method could be material to the Company’s consolidated financial statements. The Company continually evaluates the need to consolidate any VIEs based on standards set forth in GAAP as described above.

As of September 30, 2017, the Company determined that it had a controlling interest in the Consolidated Joint Venture and therefore met the GAAP requirements for consolidation.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Real Estate Investments, Recoverability of Real Estate Assets, and Assets Held for Sale

Real estate assets are stated at cost, less accumulated depreciation and amortization. Amounts capitalized to real estate assets consist of the costs of acquisition, including certain acquisition-related expenses, construction and any tenant improvements, major improvements and betterments that extend the useful life of the real estate assets and leasing costs. All repairs and maintenance costs are expensed as incurred. In April 2017, the Company early adopted Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company’s acquisitions qualify as asset acquisitions, and as such, certain acquisition-related expenses related to these asset acquisitions are capitalized. Prior to the adoption of ASU 2017-01, all acquisition-related expenses were expensed as incurred, and all of the Company’s acquisitions were accounted for as business combinations.

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
Site improvements	15 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 nine months endedSeptember 30, 2017 or 2016.

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

Upon the acquisition of real properties, the Company allocates the purchase price, including certain acquisition-related expenses after the adoption of ASU 2017-01, 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. 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 September 30, 2017, 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 other comprehensive income (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 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 $501,000 and $600,000 in restricted cash as of September 30, 2017 and December 31, 2016, respectively. Included in restricted cash as of September 30, 2017 and December 31, 2016 was $500,000 held by a lender in an escrow account for a certain property in accordance with the associated loan agreement. Additionally, 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. As of September 30, 2017 and December 31, 2016, the Company had $1,000 and $25,000, respectively, held in a lockbox account. In addition, restricted cash included $75,000 of escrowed investor proceeds for which shares of common stock had not been issued as of December 31, 2016. There were no such proceeds as of September 30, 2017.

Dealer manager and distribution fees

The Company pays CCC dealer manager and distribution fees, which are calculated on a daily basis in the amount of 1/365th of the amount indicated in the table below for each class of common stock:

	Dealer Manager Fee		Distribution Fee
W Shares	0.55	%	—
A Shares	0.55	%	0.50	%
I Shares	0.25	%	—

The dealer manager and distribution fees are paid monthly in arrears. An estimated liability for future dealer manager and distribution fees payable to CCC is recognized at the time each share is sold and included in due to affiliates in the condensed consolidated balance sheets with a corresponding decrease to capital in excess of par value.

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 earned and collectability is reasonably assured. 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 straight-line rent, and current and future operating expense reimbursements from tenants 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 uncertain, the Company will record an increase in the allowance for uncollectible accounts.

Earnings (loss) and distributions per share

The Company has three classes of common stock with nonforfeitable dividend rights that are determined based on a different NAV for each class. Accordingly, the Company utilizes the two-class method to determine its earnings per share, which results in the same earnings per share when rounded to one cent for each of the classes. Under the two-class method, earnings per class of common stock are computed by dividing the sum of the distributed earnings to common stockholders and undistributed earnings allocated to common stockholders by the weighted average number of shares for each class of common stock for the respective period. Diluted income per share, when applicable, considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the three and nine months ended September 30, 2017 or 2016. Distributions per share is calculated based on the authorized daily distribution rate.

Recent accounting pronouncements

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. Except as otherwise stated below, 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 condensed consolidated financial statements:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition, Accounting Standards Codification (“ASC”) (Topic 605) and will require an entity to recognize revenue in a way that depicts 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. For public business entities, the guidance should be applied to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company plans to use the modified retrospective approach to adopt ASU 2014-09. In accordance with the Company’s plan for the adoption of ASU 2014-09, the Company’s implementation team has identified the Company’s revenue streams, performed an in-depth review of the Company’s revenue contracts and identified the related performance obligations, and is evaluating the impact on the Company’s consolidated financial statements and internal accounting processes and controls. Once ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which, as discussed below, sets forth principles for the recognition, measurement, presentation and disclosure of leases, goes into effect, ASU 2014-09 may apply to non-lease components in the lease agreements.

In February 2016, the FASB issued ASU 2016-02, which will require that a lessee recognize assets and liabilities on the balance sheet for all leases with a lease term of more than 12 months, with the result being the recognition of a right of use asset and a lease liability and the disclosure of key information about the entity’s leasing arrangements. The lessor accounting model under ASU 2016-02 is similar to current guidance; however it limits the capitalization of initial direct leasing costs, such as internally generated costs. ASU 2016-02 retains a distinction between finance leases (i.e., capital leases under current GAAP) and operating leases. The classification criteria for distinguishing between finance leases and operating leases will be substantially similar to the classification criteria for distinguishing between capital leases and operating leases under current GAAP. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. A modified retrospective approach is required for existing leases that have not expired upon adoption and provides for certain practical expedients. The Company’s implementation team has developed an inventory of all leases and is identifying any non-lease components in the lease agreements and is evaluating the impact to the Company and its consolidated financial statements. Upon the adoption of ASU 2016-02, the Company will record certain expenses paid directly by a tenant that protect the Company’s interests in its properties, such as insurance and real estate taxes, and the related operating expense reimbursement revenue, with no impact on net income. Based upon a preliminary analysis, the Company does not expect the accounting for leases pursuant to which the Company is the lessor to materially change as a result of the adoption of ASU 2016-02.

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 consolidated financial statements. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 is intended to improve financial reporting requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current GAAP. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which is intended to address diversity in practice related to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted, and requires retrospective adoption unless it is impracticable to apply, in which case it is to be applied prospectively as of the earliest date practicable. The Company plans to adopt ASU 2016-15 during the fourth quarter of fiscal year 2017 and has determined that this standard is relevant to its presentation of debt prepayment and debt extinguishment costs and contingent consideration payments made after a business combination.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which provides guidance on the presentation of restricted cash and restricted cash equivalents in the statement of cash flows. In accordance with ASU 2016-18, restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flows. The amendments of ASU 2016-18 are effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company plans to adopt ASU 2016-18 during the fourth quarter of 2017 and apply the standard retrospectively for all periods presented. The Company does not expect it will have a material impact on its consolidated financial statements.

In February 2017, the FASB issued ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”), which clarifies the following: (1) nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty; (2) an entity should allocate consideration to each distinct asset by applying the guidance in Topic 606 on allocating the transaction price to performance obligations; and (3) entities are required to derecognize a distinct nonfinancial asset or distinct in substance nonfinancial asset in a partial sale transaction when it (a) does not have (or ceases to have) a controlling financial interest in the legal entity that holds the asset in accordance with Subtopic 810 and (b) transfers control of the asset in accordance with Topic 606. The adoption of this standard may result in higher gains on the sale of partial real estate interests, including contributions of nonfinancial assets to a joint venture or other noncontrolling investee, due to recognizing the full gain when the derecognition criteria are met and recording the retained noncontrolling interest at its fair value. ASU 2017-05 is effective for annual periods, and interim periods therein, beginning after December 15, 2017. Early adoption is permitted.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The targeted amendments in this ASU help simplify certain aspects of hedge accounting and result in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. This ASU applies to the Company’s interest rate swaps designated as cash flow hedges. Upon adoption of this ASU, all changes in the fair value of highly effective cash flow hedges will be recorded in accumulated other comprehensive income rather than recognized directly in earnings. Under current U.S. GAAP, the ineffective portion of the change in fair value of cash flow hedges is recognized directly in earnings. This eliminates the requirement to separately measure and disclose ineffectiveness for qualifying cash flow hedges. ASU 2017-12 is effective for public entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The ASU is required to be adopted using a modified retrospective approach with early adoption permitted. The Company plans to adopt ASU 2017-12 during the first quarter of fiscal year 2018 and does not expect that it will have a material impact on its consolidated financial statements.

Fair value measurements

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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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2017

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
Site improvements	15 years
Tenant improvements	Lesser of useful life or lease term
Intangible lease assets	Lease term

Dealer manager and distribution fee calculations

The Company pays CCC dealer manager and distribution fees, which are calculated on a daily basis in the amount of 1/365th of the amount indicated in the table below for each class of common stock:

	Dealer Manager Fee		Distribution Fee
W Shares	0.55	%	—
A Shares	0.55	%	0.50	%
I Shares	0.25	%	—

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

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 September 30, 2017 and December 31, 2016 (in thousands):

	Balance as of			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	September 30, 2017			(Level 1)		(Level 2)			(Level 3)
Financial asset:
Interest rate swaps	$	398		$	—	$	398		$	—
Marketable securities	5,387			5,387		—			—
Total financial assets	$	5,785		$	5,387	$	398		$	—
Financial liabilities:
Interest rate swaps	$	(371	)	$	—	$	(371	)	$	—

	Balance as of			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	December 31, 2016			(Level 1)		(Level 2)			(Level 3)
Financial asset:
Interest rate swaps	$	28		$	—	$	28		$	—
Marketable securities	5,563			5,563		—			—
Total financial assets	$	5,591		$	5,563	$	28		$	—
Financial liabilities:
Interest rate swaps	$	(371	)	$	—	$	(371	)	$	—

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Real Estate Investments (Tables)

9 Months Ended

Sep. 30, 2017

Business Combinations [Abstract]

Business combination, separately recognized transactions

The following table summarizes the consideration transferred for the properties purchased during the nine months ended September 30, 2017 (in thousands):

	2017 Acquisitions
Investments in real estate:
Purchase price of asset acquisitions	$	148,145
Purchase price of business combinations	52,457
Total purchase price of real estate investments acquired (1)	$	200,602

______________________

(1) The weighted average amortization period for the 2017 Acquisitions is 11.8 years for acquired in-place leases and other intangibles, 15.7 years for acquired above-market leases and 11.3 years for acquired intangible lease liabilities.

Schedule of asset acquisitions

The following table summarizes the purchase price allocation for the 2017 Asset Acquisitions purchased during the nine months ended September 30, 2017 (in thousands):

	2017 Asset Acquisitions
Land	$	24,499
Building and improvements	112,520
Acquired in-place leases and other intangibles	16,350
Acquired above-market leases	1,522
Intangible lease liabilities	(6,746		)
Total purchase price	$	148,145

Schedule of purchase price allocation

The following table summarizes the preliminary purchase price allocation for the 2017 Business Combination Acquisitions purchased during the nine months ended September 30, 2017 (in thousands):

	2017 Business Combination Acquisitions
Land	$	14,232
Building and improvements	22,292
Acquired in-place leases and other intangibles	15,911
Acquired above-market leases	1,423
Intangible lease liabilities	(1,401		)
Total purchase price	$	52,457

The following table summarizes the purchase price allocation for the 2016 Acquisitions (in thousands):

	2016 Acquisitions
Land	$	12,862
Building and improvements	65,333
Acquired in-place leases and other intangibles (1)	6,965
Acquired above-market leases (2)	973
Intangible lease liabilities (3)	(469		)
Total purchase price	$	85,664

______________________

(1) The weighted average amortization period for acquired in-place leases and other intangibles was 13.9 years for the 2016 Acquisitions.

(2) The weighted average amortization period for acquired above-market leases was 13.9 years for the 2016 Acquisitions.

(3) The weighted average amortization period for acquired intangible lease liabilities was 14.2 years for the 2016 Acquisitions.

Business acquisition, pro forma information

The table below presents the Company’s estimated revenue andnet (loss) income, on a pro forma basis, for thethree and ninemonths endedSeptember 30, 2016and2015, respectively(in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2016			2015		2016		2015
Pro forma basis
Revenue	$	7,358		$	6,347	$	22,177	$	18,944
Net (loss) income	$	(351	)	$	1,421	$	250	$	8,462

The table below presents the Company’s estimated revenue and net income (loss), on a pro forma basis, for the three and nine months endedSeptember 30, 2017 and 2016, respectively (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017		2016
Pro forma basis:
Revenue	$	13,244	$	7,779		$	34,613	$	21,854
Net income (loss)	$	66	$	(397	)	$	873	$	(1,175	)

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Intangible Lease Assets (Tables)

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of finite-lived intangible assets

Intangible lease assets of the Company consisted of the following as of September 30, 2017 and December 31, 2016 (in thousands, except weighted average life):

	September 30, 2017		December 31, 2016
In-place leases and other intangibles, net of accumulated amortization of $11,451 and $6,942, respectively (with a weighted average life remaining of 10.5 and 12.0 years, respectively)
	$	66,965	$	39,353
Acquired above-market leases, net of accumulated amortization of $1,434 and $927, respectively
(with a weighted average life remaining of 12.5 and 12.3 years, respectively)	8,128		5,743
	$	75,093	$	45,096

Schedule of finite-lived intangible assets amortization expense

The following table summarizes the amortization expense related to the intangible lease assets for the three and nine months endedSeptember 30, 2017 and September 30, 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
In-place lease and other intangible amortization	$	1,892	$	740	$	4,680	$	2,109
Above-market lease amortization	$	222	$	110	$	559	$	289

Schedule of finite-lived intangible assets, future amortization expense

As of September 30, 2017, the estimated amortization expense relating to the intangible lease assets for each of the five succeeding fiscal years is as follows (in thousands):

	Amortization Expense
	In-Place Leases and Other Intangibles		Above-Market Leases
Remainder of 2017	$	1,574	$	183
2018	$	7,038	$	759
2019	$	6,978	$	746
2020	$	6,775	$	740
2021	$	6,595	$	740

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Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2017

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 September 30, 2017 (in thousands):

	Available-for-sale securities
	Amortized Cost Basis		Unrealized (Loss) Gain			Fair Value
U.S. Treasury Bonds	$	1,842	$	(8	)	$	1,834
U.S. Agency Bonds	547		—			547
Corporate Bonds	2,965		41			3,006
Total available-for-sale securities	$	5,354	$	33		$	5,387

Schedule of available-for-sale securities reconciliation

The following table provides the activity for the marketable securities during the nine months endedSeptember 30, 2017 (in thousands):

	Amortized Cost Basis			Unrealized (Loss) Gain			Fair Value
Marketable securities as of January 1, 2017	$	5,592		$	(29	)	$	5,563
Face value of marketable securities acquired	1,156			—			1,156
Premiums and discounts on purchase of marketable securities, net of acquisition costs	17			—			17
Amortization on marketable securities	(10		)	—			(10		)
Sales and maturities of securities	(1,401		)	(4		)	(1,405		)
Unrealized gain on marketable securities	—			66			66
Marketable securities as of September 30, 2017	$	5,354		$	33		$	5,387

Investments classified by contractual maturity date

The scheduled maturities of the Company’s marketable securities as of September 30, 2017 are as follows (in thousands):

	Available-for-sale securities
	Amortized Cost		Estimated Fair Value
Due within one year	$	730	$	730
Due after one year through five years	2,328		2,339
Due after five years through ten years	2,216		2,238
Due after ten years	80		80
Total	$	5,354	$	5,387

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Derivative Instruments and Hedging Activities (Tables)

9 Months Ended

Sep. 30, 2017

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 September 30, 2017 and December 31, 2016 (dollar amounts in thousands):

Outstanding Notional Amount as of

Interest

Effective

Maturity

Fair Value of Assets and (Liabilities) as of

Balance Sheet Location

September 30, 2017

Rate (1)

Date

Date

September 30, 2017

December 31, 2016

Interest Rate Swaps

Prepaid expenses, derivative assets and other assets

$

137,540

3.23% to 4.04%

6/30/2015 to 9/29/2017

9/12/2019 to 7/1/2022

$

398

$

28

Interest Rate Swaps

Deferred rental income, derivative liabilities and other liabilities

$

53,165

3.56% to 4.17%

12/16/2016 to 7/26/2017

1/1/2022 to 8/1/2022

$

(371

)

$

(371

)

______________________

(1) The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of September 30, 2017.

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Notes Payable and Credit Facility (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Summary of Debt Activity

The following table summarizes the debt balances as of September 30, 2017 and December 31, 2016, and the debt activity for the nine months ended September 30, 2017 (in thousands):

				During the Nine Months Ended September 30, 2017
	Balance as of December 31, 2016				Debt Issuance, Net (1)			Repayments and Modifications				Accretion and (Amortization)			Balance as of September 30, 2017
Credit facility	$	64,000			$	236,500		$	(188,000	)		$	—		$	112,500
Fixed rate debt	97,169				52,565			—				—			149,734
Total debt	161,169				289,065			(188,000		)		—			262,234
Deferred costs (2)	(2,026		)		(1,463		)	97			(3)	(191		)	(3,583		)
Total debt, net	$	159,143			$	287,602		$	(187,903	)		$	(191	)	$	258,651

______________________

(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.

(3) Represents deferred financing costs of the term portion of the credit facility written off during the period resulting from the Second Amended and Restated Credit Agreement, as defined below.

Schedule of Maturities of Long-term Debt

The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt subsequent to September 30, 2017 (in thousands):

	Principal Repayments
Remainder of 2017	$	—
2018	—
2019	—
2020	9,240
2021	31,717
Thereafter	221,277
Total	$	262,234

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Intangible Lease Liabilities (Tables)

9 Months Ended

Sep. 30, 2017

Other Liabilities Disclosure [Abstract]

Schedule of finite-lived intangible liabilities

Intangible lease liabilities of the Company consisted of the following as of September 30, 2017 and December 31, 2016

(in thousands, except weighted average life):

	September 30, 2017		December 31, 2016
Acquired below-market liabilities, net of accumulated amortization of $1,724 and $929, respectively (with a weighted average life remaining of 11.4 and 11.9 years, respectively)
	$	13,095	$	5,798

Schedule of amortization expense of below market lease

The following table summarizes the amortization of below-market leases related to the intangible lease liabilities for the three and nine months endedSeptember 30, 2017 and September 30, 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Amortization of below-market leases	$	345	$	108	$	849	$	318

Schedule of finite-lived intangible liabilities, future amortization expense

As of September 30, 2017, the estimated amortization of the intangible lease liabilities for each of the five succeeding fiscal years is as follows (in thousands):

	Amortization of
	Below-Market Leases
Remainder of 2017	$	297
2018	$	1,403
2019	$	1,391
2020	$	1,365
2021	$	1,123

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Related-Party Transactions and Arrangements (Tables)

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

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. The Company has been advised that CCC intends to reallow 100% of the selling commissions on A Shares to participating broker-dealers.

(2) The dealer manager and distribution fees will be calculated on a daily basis 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.

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 September 30,				Nine Months Ended September 30,
Offering:	2017		2016		2017		2016
Selling commissions	$	759	$	666	$	2,236	$	1,470
Distribution fee (1)	$	163	$	67	$	402	$	155
Dealer manager fees (1)	$	565	$	349	$	1,514	$	901
Organization and offering expense reimbursement	$	353	$	330	$	1,035	$	843
Acquisition expense reimbursement	$	316	$	430	$	1,161	$	1,087
Advisory fee	$	1,128	$	725	$	3,063	$	1,911
Operating expense reimbursement	$	647	$	478	$	2,226	$	1,227
Performance fee	$	—	$	—	$	—	$	—

______________________

(1) Amounts are calculated for the respective period in accordance with the dealer manager agreement and exclude the estimated liability for the future dealer manager and distribution fees payable to CCC, which are included in due to affiliates in the condensed consolidated balance sheets, with a corresponding decrease to capital in excess of par value, as described in Note 2 — Summary of Significant Accounting Policies.

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Operating Leases (Tables)

9 Months Ended

Sep. 30, 2017

Leases [Abstract]

Schedule of future minimum rental payments for operating leases

As of September 30, 2017, the future minimum rental income from the Company’s investment in real estate assets under non-cancelable operating leases, assuming no exercise of renewal options for the succeeding five fiscal years and thereafter, was as follows (in thousands):

	Future Minimum Rental Income
Remainder of 2017	$	11,418
2018	45,825
2019	45,992
2020	45,877
2021	45,788
Thereafter	309,873
Total	$	504,773

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Organization and Business (Shares Offerings) (Details)	9 Months Ended
	Sep. 30, 2017 USD ($) class_of_stock $ / shares shares	Dec. 31, 2016 shares	Aug. 26, 2013 USD ($) class_of_stock	Dec. 06, 2011 USD ($)
Organization and business
Issuance of common stock	$ 140,221,000
W Shares Common Stock
Organization and business
Common stock, shares outstanding (in shares) | shares	15,242,210	12,461,616
Net asset value per share (in dollars per share) | $ / shares	$ 18.13
A Shares Common Stock
Organization and business
Common stock, shares outstanding (in shares) | shares	7,743,545	4,449,352
Net asset value per share (in dollars per share) | $ / shares	$ 17.92
I Shares Common Stock
Organization and business
Common stock, shares outstanding (in shares) | shares	916,940	788,270
Net asset value per share (in dollars per share) | $ / shares	$ 18.30
Common Stock | W Shares Common Stock
Organization and business
Common stock, shares outstanding (in shares) | shares	15,242,210	12,461,616
Issuance of common stock	$ 40,000
Common Stock | A Shares Common Stock
Organization and business
Common stock, shares outstanding (in shares) | shares	7,743,545	4,449,352
Issuance of common stock	$ 35,000
Common Stock | I Shares Common Stock
Organization and business
Common stock, shares outstanding (in shares) | shares	916,940	788,270
Issuance of common stock	$ 1,000
IPO
Organization and business
Common stock, value authorized				$ 4,000,000,000
Classes of common stock, additions | class_of_stock			2
IPO | Common Stock
Organization and business
Common stock, shares outstanding (in shares) | shares	28,000,000
Issuance of common stock	$ 501,200,000
Offering costs, selling commissions and dealer manager fees	$ 14,100,000
Multi-class offering
Organization and business
Common stock, value authorized			$ 4,000,000,000
Classes of common stock | class_of_stock	3		3
Primary Offering
Organization and business
Common stock, value authorized			$ 3,500,000,000
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%

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Organization and Business (Real Estate) (Details) ft² in Millions	Sep. 30, 2017 ft² states property
Real Estate Properties [Line Items]
Number of states in which entity owns properties | states	36
Percentage of rentable space leased	99.30%
Consolidated properties
Real Estate Properties [Line Items]
Number of owned properties | property	135
Rentable square feet (in square feet) | ft²	4.1

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Summary of Significant Accounting Policies (Real Estate) (Details) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Real Estate Properties [Line Items]
Impairment	$ 0	$ 0
Real estate held for sale	$ 0		$ 0
Building
Real Estate Properties [Line Items]
Acquired real estate asset, useful life (years)	40 years
Site Improvements
Real Estate Properties [Line Items]
Acquired real estate asset, useful life (years)	15 years

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Summary of Significant Accounting Policies (Noncontrolling Interest in Consolidated Joint Venture) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Variable Interest Entity [Line Items]
Net income allocated to noncontrolling interest	$ 8	$ 0	$ 26	$ 0
Payments to noncontrolling interests			35
Stockholders' equity, including portion attributable to noncontrolling interest	314,546		314,546		$ 236,010
Non- Controlling Interests
Variable Interest Entity [Line Items]
Stockholders' equity, including portion attributable to noncontrolling interest	$ 777		$ 777		$ 786

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Summary of Significant Accounting Policies (Restricted Cash) (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Restricted Cash and Cash Equivalents
Restricted cash	$ 501,000	$ 600,000
Held by lender in escrow
Restricted Cash and Cash Equivalents
Restricted cash	500,000	500,000
Lockbox Accounts
Restricted Cash and Cash Equivalents
Restricted cash	1,000	25,000
Escrowed investor proceeds
Restricted Cash and Cash Equivalents
Restricted cash	$ 0	$ 75,000

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Summary of Significant Accounting Policies (Dealer Manager and Distribution Fees) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Related Party Transaction
Due to affiliates	$ 18,798	$ 14,786
Dealer manager
Related Party Transaction
Due to affiliates	$ 17,300	$ 12,500
Dealer Manager Fee | Dealer manager | W Shares Common Stock
Related Party Transaction
Daily asset based related party fee percent	0.55%
Dealer Manager Fee | Dealer manager | A Shares Common Stock
Related Party Transaction
Daily asset based related party fee percent	0.55%
Dealer Manager Fee | Dealer manager | I Shares Common Stock
Related Party Transaction
Daily asset based related party fee percent	0.25%
Distribution Fee | Dealer manager | W Shares Common Stock
Related Party Transaction
Daily asset based related party fee percent	0.00%
Distribution Fee | Dealer manager | A Shares Common Stock
Related Party Transaction
Daily asset based related party fee percent	0.50%
Distribution Fee | Dealer manager | I Shares Common Stock
Related Party Transaction
Daily asset based related party fee percent	0.00%

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Summary of Significant Accounting Policies (Other) (Details) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017 USD ($) class_of_stock shares	Sep. 30, 2016 shares	Sep. 30, 2017 USD ($) class_of_stock shares	Sep. 30, 2016 shares	Dec. 31, 2015	Dec. 31, 2016 USD ($)	Aug. 26, 2013 class_of_stock
Revenue Recognition
Allowance for doubtful accounts receivable | $	$ 1		$ 1			$ 2
Earnings (Loss) Per Share
Weighted average number diluted shares outstanding adjustment (in shares) | shares	0	0	0	0
Stock repurchase program, number of shares authorized to be repurchased, carryover percentage quarterly net asset value limitation					10.00%
Multi-class offering
Earnings (Loss) Per Share
Classes of common stock | class_of_stock	3		3				3

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Fair Value Measurements (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Assets, Fair Value Disclosure [Abstract]
Marketable securities	$ 5,387	$ 5,563
Carrying value
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Debt outstanding	262,200	161,200
Fair value, inputs, level 2 | Fair value
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Debt outstanding	261,500	161,200
Recurring
Assets, Fair Value Disclosure [Abstract]
Marketable securities	5,387	5,563
Total assets	5,785	5,591
Recurring | Fair Value, Inputs, level 1
Assets, Fair Value Disclosure [Abstract]
Marketable securities	5,387	5,563
Total assets	5,387	5,563
Recurring | Fair value, inputs, level 2
Assets, Fair Value Disclosure [Abstract]
Marketable securities	0	0
Total assets	398	28
Recurring | Fair Value, Inputs, level 3
Assets, Fair Value Disclosure [Abstract]
Marketable securities	0	0
Total assets	0	0
Recurring | Interest rate swaps
Assets, Fair Value Disclosure [Abstract]
Derivative asset	398	28
Financial liabilities:
Interest rate swaps	(371)	(371)
Recurring | Interest rate swaps | Fair Value, Inputs, level 1
Assets, Fair Value Disclosure [Abstract]
Derivative asset	0	0
Financial liabilities:
Interest rate swaps	0	0
Recurring | Interest rate swaps | Fair value, inputs, level 2
Assets, Fair Value Disclosure [Abstract]
Derivative asset	398	28
Financial liabilities:
Interest rate swaps	(371)	(371)
Recurring | Interest rate swaps | Fair Value, Inputs, level 3
Assets, Fair Value Disclosure [Abstract]
Derivative asset	0	0
Financial liabilities:
Interest rate swaps	$ 0	$ 0

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Real Estate Investments (2017 Asset and Business Acquisitions Narrative) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($) property	Sep. 30, 2016 property
Business Combinations [Abstract]
Interest in businesses and assets acquired during the period	100.00%
Number of properties acquired through business combinations and asset acquisitions in the period	27
Number of properties acquired through asset acquisitions	15
Number of properties acquired through business combinations (in number of properties)	12	19
Total payments to acquire properties through asset acquisition and business combinations | $	$ 200,602

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Real Estate Investments (2017 Property Acquisitions) (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Investments in real estate:
Purchase price of asset acquisitions	$ 148,145
Purchase price of business combinations	52,457	$ 85,700
Total purchase price of real estate investments acquired	$ 200,602
Below market lease, weighted average useful life	11 years 4 months 24 days		11 years 10 months 24 days
Acquired in-place leases and other intangibles
Investments in real estate:
Weighted average amortization period (years)	11 years 9 months 18 days	13 years 10 months 24 days
Acquired above-market leases
Investments in real estate:
Weighted average amortization period (years)	15 years 8 months 12 days	13 years 10 months 24 days
Intangible lease liabilities
Investments in real estate:
Below market lease, weighted average useful life	11 years 3 months 18 days	14 years 2 months 12 days

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Real Estate Investments (2017 Asset Acquisitions Narrative) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($) property	Dec. 31, 2016 USD ($)
Business Acquisition
Percent of assets acquired	100.00%
Number of properties acquired through asset acquisitions | property	15
Total purchase price	$ 668,397	$ 459,412
External acquisition-related capitalized expenses	1,200
Wholly Owned Properties
Business Acquisition
Total purchase price	$ 148,145

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Real Estate Investments (2017 Assets and Liabilities Acquired Through Asset Acquisition) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Real Estate [Line Items]
Land	$ 125,588	$ 86,858
Buildings and improvements	454,831	319,589
Intangible lease assets	87,978	52,965
Total real estate investments, at cost	668,397	$ 459,412
Intangible lease liabilities
Real Estate [Line Items]
Intangible lease liabilities	(1,401)		$ (469)
Wholly Owned Properties
Real Estate [Line Items]
Land	24,499
Buildings and improvements	112,520
Total real estate investments, at cost	148,145
Wholly Owned Properties | Acquired in-place leases and other intangibles
Real Estate [Line Items]
Intangible lease assets	16,350
Wholly Owned Properties | Acquired above-market leases
Real Estate [Line Items]
Intangible lease assets	1,522
Wholly Owned Properties | Intangible lease liabilities
Real Estate [Line Items]
Intangible lease liabilities	$ (6,746)

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Real Estate Investments (Business Combination Narrative) (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) property	Sep. 30, 2016 USD ($) property
Business Acquisition
Business acquisition, percentage of voting interests acquired	100.00%	100.00%	100.00%	100.00%
Number of real estate acquisitions (in number of properties) | property			12	19
Total purchase price			$ 52,457	$ 85,700
Revenue of acquiree since acquisition date	$ 892	$ 1,100	2,500	1,800
Net income (loss) of acquiree	254	459	383	518
Acquisition-related expenses	$ 333	705	1,629	1,748
2017 Acquisitions
Business Acquisition
Acquisition-related expenses			$ 426
2016 Acquisitions
Business Acquisition
Acquisition-related expenses		$ 205		$ 535

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Real Estate Investments (Schedule of Business Combination Purchase Price allocation) (Details) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Land	$ 14,232	$ 12,862
Building and improvements	22,292	65,333
Total purchase price	$ 52,457	85,664
Below market lease, weighted average useful life	11 years 4 months 24 days		11 years 10 months 24 days
Acquired in-place leases and other intangibles
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Intangible assets other than goodwill, acquired	$ 15,911	$ 6,965
Weighted average amortization period (years)	11 years 9 months 18 days	13 years 10 months 24 days
Acquired above-market leases
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Intangible assets other than goodwill, acquired	$ 1,423	$ 973
Weighted average amortization period (years)	15 years 8 months 12 days	13 years 10 months 24 days
Intangible lease liabilities
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract]
Intangible lease liabilities	$ (1,401)	$ (469)
Below market lease, weighted average useful life	11 years 3 months 18 days	14 years 2 months 12 days

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Real Estate Investments (Business Acquisition, Pro Forma Information) (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2015
2017 Acquisitions
Pro forma basis
Revenue	$ 13,244	$ 7,779		$ 34,613	$ 21,854
Net income (loss)	$ 66	(397)		$ 873	(1,175)
2016 Acquisitions
Pro forma basis
Revenue		7,358	$ 6,347		22,177	$ 18,944
Net income (loss)		$ (351)	$ 1,421		$ 250	$ 8,462

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Real Estate Investments Consolidated Joint Venture (Details) $ in Thousands	Sep. 30, 2017 USD ($) property	Dec. 31, 2016 USD ($)
Business Acquisition
Assets	$ 655,654	$ 453,572
Total real estate investments, net	632,138	436,774
Liabilities	297,925	$ 185,486
Consolidated joint venture
Business Acquisition
Assets	7,800
Total real estate investments, net	7,700
Accumulated depreciation, depletion and amortization, property, plant, and equipment	181
Liabilities	$ 209
Consolidated properties
Business Acquisition
Number of owned properties | property	135
Consolidated properties | Consolidated joint venture
Business Acquisition
Number of owned properties | property	2

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Intangible Lease Assets (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Intangible leased assets	$ 75,093	$ 45,096
Acquired in-place leases and other intangibles
Finite-Lived Intangible Assets [Line Items]
Intangible leased assets	66,965	39,353
Accumulated amortization	$ 11,451	$ 6,942
Useful life	10 years 6 months	12 years
Acquired above-market leases
Finite-Lived Intangible Assets [Line Items]
Intangible leased assets	$ 8,128	$ 5,743
Accumulated amortization	$ 1,434	$ 927
Useful life	12 years 6 months	12 years 3 months 18 days

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Intangible Lease Assets (Schedule of finite-lived intangible assets amortization expense) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Acquired in-place leases and other intangibles
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 1,892	$ 740	$ 4,680	$ 2,109
Acquired above-market leases
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 222	$ 110	$ 559	$ 289

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Intangible Lease Assets (Estimated Amortization of Intangible lease assets) (Details) $ in Thousands	Sep. 30, 2017 USD ($)
Acquired in-place leases and other intangibles
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Remainder of 2017	$ 1,574
2018	7,038
2019	6,978
2020	6,775
2021	6,595
Acquired above-market leases
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Remainder of 2017	183
2018	759
2019	746
2020	740
2021	$ 740

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Marketable Securities (Narrative) (Details)	9 Months Ended
	Sep. 30, 2017 USD ($) security	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
Available-for-sale Securities, Other Disclosure Items [Abstract]
Marketable securities	$ 5,387,000		$ 5,563,000
Number of securities sold | security	56
Proceeds from sale and maturities of marketable securities	$ 1,405,000	$ 603,000
Unrealized gain on marketable securities	66,000
Other than temporary impairment losses, investments, available-for-sale securities	$ 0

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Marketable Securities (Schedule of available-for-sale securities) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost Basis	$ 5,354	$ 5,592
Unrealized (Loss) Gain	33	(29)
Fair Value	5,387	$ 5,563
U.S. Treasury Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost Basis	1,842
Unrealized (Loss) Gain	(8)
Fair Value	1,834
U.S. Agency Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost Basis	547
Unrealized (Loss) Gain	0
Fair Value	547
Corporate Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost Basis	2,965
Unrealized (Loss) Gain	41
Fair Value	$ 3,006

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Marketable Securities (Schedule of available-for-sale securities reconciliation) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Amortized Cost Basis Rollforward
Marketable securities as of January 1, 2017	$ 5,592
Face value of marketable securities acquired	1,156
Premiums and discounts on purchase of marketable securities, net of acquisition costs	17
Amortization on marketable securities	(10)
Sales and maturities of securities	(1,401)
Marketable securities as of September 30, 2017	5,354
Unrealized Loss(Gain) Rollforward
Marketable securities as of January 1, 2017	(29)
Sales and maturities of securities	(4)
Unrealized gain on marketable securities	66
Marketable securities as of September 30, 2017	33
Fair Value Rollforward
Marketable securities as of January 1, 2017	5,563
Face value of marketable securities acquired	1,156
Premiums and discounts on purchase of marketable securities, net of acquisition costs	17
Amortization on marketable securities	(10)
Sales and maturities of securities	(1,405)
Unrealized gain on marketable securities	66
Marketable securities as of September 30, 2017	$ 5,387

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Marketable Securities (Schedule of Maturities) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Amortized Cost
Due within one year	$ 730
Due after one year through five years	2,328
Due after five years through ten years	2,216
Due after ten years	80
Total	5,354
Estimated Fair Value
Due within one year	730
Due after one year through five years	2,339
Due after five years through ten years	2,238
Due after ten years	80
Total	$ 5,387	$ 5,563

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Derivative Instruments and Hedging Activities (Narrative) (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) swap_agreement	Sep. 30, 2016 USD ($)
Derivatives, Fair Value [Line Items]
Amount of loss reclassified from other comprehensive income into income as interest expense	$ 166,000	$ 131,000	$ 428,000	$ 405,000
Portion of change in fair value of derivative considered ineffective	0	$ 0	$ 17,000	$ 0
Interest rate swaps
Derivatives, Fair Value [Line Items]
Derivative liability, number of instruments entered into | swap_agreement			5
Cash Flow Hedging | Interest rate swaps
Derivatives, Fair Value [Line Items]
Interest rate cash flow hedge gain (loss) to be reclassified during next twelve months	588,000		$ 588,000
Derivative liability, event of default, termination amount	$ 417,000		$ 417,000

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Derivative Instruments and Hedging Activities (Schedule of derivative instruments) (Details) - Cash Flow Hedging - Interest rate swaps - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Prepaid expenses, derivative assets and other assets
Derivatives, Fair Value [Line Items]
Outstanding notional amount	$ 137,540
Fair value of assets	398	$ 28
Deferred rental income, derivative liabilities and other liabilities
Derivatives, Fair Value [Line Items]
Outstanding notional amount	53,165
Fair value of liabilities	$ (371)	$ (371)
Minimum | Prepaid expenses, derivative assets and other assets
Derivatives, Fair Value [Line Items]
Interest rate (percentage)	3.23%
Minimum | Deferred rental income, derivative liabilities and other liabilities
Derivatives, Fair Value [Line Items]
Interest rate (percentage)	3.56%
Maximum | Prepaid expenses, derivative assets and other assets
Derivatives, Fair Value [Line Items]
Interest rate (percentage)	4.04%
Maximum | Deferred rental income, derivative liabilities and other liabilities
Derivatives, Fair Value [Line Items]
Interest rate (percentage)	4.17%

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Notes Payable and Credit Facility (Fixed Rate Debt) (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Long-term debt, including net deferred financing costs	$ 258,651	$ 159,143
Weighted average years to maturity	4 years 9 months 26 days
Weighted average interest rate (percentage)	3.65%
Debt outstanding	$ 262,234	161,169
Fixed rate debt
Debt Instrument [Line Items]
Weighted average interest rate (percentage)	3.87%
Debt outstanding	$ 149,734	$ 97,169
Debt security, amount, aggregate gross real estate assets net of gross intangible lease liabilities	$ 266,100
Minimum | Fixed rate debt
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	3.37%
Maximum | Fixed rate debt
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	4.165%
Interest rate swaps | Variable Rate Debt
Debt Instrument [Line Items]
Debt outstanding	$ 78,200

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Notes Payable and Credit Facility (Schedule of Debt) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Debt [Roll Forward]
Long-term debt, gross, beginning balance	$ 161,169
Deferred costs, beginning of period	(2,026)
Total debt, net, beginning of period	159,143
Debt issuances, gross	289,065
Debt issuances, net	(1,463)
Proceeds from debt, net of issuance costs	287,602
Repayments and Modifications	(188,000)
Repayments and Modifications, Deferred costs	97
Repayments and modifications, total debt, net	(187,903)
Accretion and (Amortization)	(191)
Amortization of deferred financing costs	(191)
Long-term debt, gross, ending balance	262,234
Deferred costs, end of period	(3,583)
Total debt, net, ending of period	258,651
Credit facility
Debt [Roll Forward]
Long-term debt, gross, beginning balance	64,000
Debt issuances, gross	236,500
Repayments and Modifications	(188,000)
Long-term debt, gross, ending balance	112,500
Fixed rate debt
Debt [Roll Forward]
Long-term debt, gross, beginning balance	97,169
Debt issuances, gross	52,565
Repayments and Modifications	0
Long-term debt, gross, ending balance	$ 149,734

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Notes Payable and Credit Facility (Amended Credit Agreement) (Details)	9 Months Ended
	Sep. 30, 2017 USD ($)	Dec. 31, 2016 USD ($)
Debt Instrument [Line Items]
Notes payable and credit facility, net	$ 258,651,000	$ 159,143,000
Weighted average interest rate (percentage)	3.65%
Line of Credit | JPMorgan Chase Bank, N.A.
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 425,000,000
Line of credit, remaining borrowing capacity	312,500,000
Line of credit facility, covenant, minimum consolidated net worth	$ 367,145,340
Line of credit facility, covenant, minimum consolidated net worth, percentage of equity issuance	75.00%
Debt instrument, covenant, secured leverage ratio, maximum	40.00%
Debt instrument, covenant, secured recourse debt coverage ratio, maximum	15.00%
Line of Credit | JPMorgan Chase Bank, N.A. | Federal Funds Effective Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percentage)	0.50%
Line of Credit | JPMorgan Chase Bank, N.A. | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate (percentage)	1.00%
Line of Credit | JPMorgan Chase Bank, N.A. | Minimum
Debt Instrument [Line Items]
Line of credit facility, covenant, leverage ratio	175.00%
Debt instrument, covenant, fixed charge coverage ratio	1.5
Line of Credit | JPMorgan Chase Bank, N.A. | Minimum | Statutory Reserve Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percentage)	1.60%
Line of Credit | JPMorgan Chase Bank, N.A. | Maximum
Debt Instrument [Line Items]
Line of credit facility, covenant, leverage ratio	60.00%
Line of Credit | Revolving Credit Facility | JPMorgan Chase Bank, N.A.
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 212,500,000
Notes payable and credit facility, net	$ 0
Line of Credit | Revolving Credit Facility | JPMorgan Chase Bank, N.A. | Minimum
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	0.70%
Line of Credit | Revolving Credit Facility | JPMorgan Chase Bank, N.A. | Minimum | Statutory Reserve Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percentage)	1.70%
Line of Credit | Revolving Credit Facility | JPMorgan Chase Bank, N.A. | Maximum
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	1.20%
Line of Credit | Revolving Credit Facility | JPMorgan Chase Bank, N.A. | Maximum | Statutory Reserve Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percentage)	2.20%
Line of Credit | Term Loan | JPMorgan Chase Bank, N.A.
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 212,500,000
Notes payable and credit facility, net	$ 112,500,000
Line of Credit | Term Loan | JPMorgan Chase Bank, N.A. | Minimum
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	0.60%
Line of Credit | Term Loan | JPMorgan Chase Bank, N.A. | Maximum
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage	1.10%
Line of Credit | Term Loan | JPMorgan Chase Bank, N.A. | Maximum | Statutory Reserve Rate
Debt Instrument [Line Items]
Basis spread on variable rate (percentage)	2.10%
Line of Credit | Term Loan | JPMorgan Chase Bank, N.A. | Interest rate swaps | Cash Flow Hedging
Debt Instrument [Line Items]
Interest rate at period end (percentage)	3.35%

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Notes Payable and Credit Facility (Schedule Of Aggregate Principal Repayments) (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Remainder of 2017	$ 0
2018	0
2019	0
2020	9,240
2021	31,717
Thereafter	221,277
Total	$ 262,234	$ 161,169

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Intangible Lease Liabilities (Schedule of lease liabilities) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Other Liabilities Disclosure [Abstract]
Below market leases net of amortization	$ 13,095	$ 5,798
Below market lease, accumulated amortization	$ 1,724	$ 929
Below market lease, weighted average useful life	11 years 4 months 24 days	11 years 10 months 24 days

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Intangible Lease Liabilities (Schedule of amortization expense of below market lease) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Other Liabilities Disclosure [Abstract]
Amortization of below market lease	$ 345	$ 108	$ 849	$ 318

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Intangible Lease Liabilities (Schedule of future amortization expense) (Details) $ in Thousands	Sep. 30, 2017 USD ($)
Below Market Lease, Amortization Income, Maturity Schedule [Abstract]
Remainder of 2017	$ 297
2018	1,403
2019	1,391
2020	1,365
2021	$ 1,123

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Related-Party Transactions and Arrangements (Selling commissions, dealer manager and distribution fees) (Details)	Sep. 30, 2017 USD ($)
W Shares Common Stock | Dealer manager | Selling commissions
Related Party Transaction
Daily asset based related party fee percent	0.00%
W Shares Common Stock | Dealer manager | Dealer Manager Fee
Related Party Transaction
Daily asset based related party fee percent	0.55%
W Shares Common Stock | Dealer manager | Distribution Fee
Related Party Transaction
Daily asset based related party fee percent	0.00%
A Shares Common Stock | Dealer manager | Selling commissions
Related Party Transaction
Daily asset based related party fee percent	3.75%
Common stock, share purchase volume discount	$ 150,001
A Shares Common Stock | Dealer manager | Dealer Manager Fee
Related Party Transaction
Daily asset based related party fee percent	0.55%
A Shares Common Stock | Dealer manager | Distribution Fee
Related Party Transaction
Daily asset based related party fee percent	0.50%
A Shares Common Stock | Advisors | Selling commissions reallowed by CCC
Related Party Transaction
Daily asset based related party fee reallowed to third party percent	100.00%
I Shares Common Stock | Dealer manager | Selling commissions
Related Party Transaction
Daily asset based related party fee percent	0.00%
I Shares Common Stock | Dealer manager | Dealer Manager Fee
Related Party Transaction
Daily asset based related party fee percent	0.25%
I Shares Common Stock | Dealer manager | Distribution Fee
Related Party Transaction
Daily asset based related party fee percent	0.00%
Maximum | A Shares Common Stock | Dealer manager | Selling commissions
Related Party Transaction
Daily asset based related party fee percent	3.90%

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Related-Party Transactions and Arrangements (Other organization and offering expenses and Advisory fees and expenses) (Details) - Advisors	9 Months Ended
	Sep. 30, 2017
Advisory fees and expenses
Related Party Transaction
Distribution and stockholder servicing fee, percentage of net asset value, daily accrual rate	0.00025%
Maximum | Organization and offering expense reimbursement
Related Party Transaction
Organization and offering expense limit (percent)	0.75%

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Related-Party Transactions and Arrangements (Operating expenses, Expense Cap and Acquisition expenses) (Details) - Advisors	Sep. 30, 2017
Minimum | Operating expenses
Related Party Transaction
Operating expense reimbursement percent of average invested assets	2.00%
Operating expense reimbursement percent of net income	25.00%
Maximum | Acquisition expense reimbursement
Related Party Transaction
Acquisition and advisory fee (percent)	6.00%

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Related-Party Transactions and Arrangements (Performance Fee) (Details)	Sep. 30, 2017 $ / shares
Advisors | Performance fee
Related Party Transaction
Performance fee, percent applied to total return on stockholders' capital between 6 percent and 10 percent	25.00%
Minimum | Advisors | Performance fee
Related Party Transaction
Total return threshold to receive performance fee (percent)	6.00%
Maximum | Advisors | Performance fee
Related Party Transaction
Total return threshold to receive performance fee (percent)	10.00%
W Shares Common Stock
Related Party Transaction
Share price, base net asset value (in dollars per share)	$ 15.00
A Shares Common Stock
Related Party Transaction
Share price, base net asset value (in dollars per share)	16.72
I Shares Common Stock
Related Party Transaction
Share price, base net asset value (in dollars per share)	$ 16.82

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Related-Party Transactions and Arrangements (Schedule of Related Party Transaction) (Details) - Advisors - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Selling commissions
Related Party Transaction
Related party transaction, expenses from transactions with related party	$ 759	$ 666	$ 2,236	$ 1,470
Distribution Fee
Related Party Transaction
Related party transaction, expenses from transactions with related party	163	67	402	155
Dealer Manager Fee
Related Party Transaction
Related party transaction, expenses from transactions with related party	565	349	1,514	901
Organization and offering expense reimbursement
Related Party Transaction
Related party transaction, expenses from transactions with related party	353	330	1,035	843
Acquisition expense reimbursement
Related Party Transaction
Related party transaction, expenses from transactions with related party	316	430	1,161	1,087
Advisory fee
Related Party Transaction
Related party transaction, expenses from transactions with related party	1,128	725	3,063	1,911
Operating expense reimbursement
Related Party Transaction
Related party transaction, expenses from transactions with related party	647	478	2,226	1,227
Performance fee
Related Party Transaction
Related party transaction, expenses from transactions with related party	$ 0	$ 0	$ 0	$ 0

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Related-Party Transactions and Arrangements (Due to Affiliates) (Details) - USD ($) $ in Millions	Sep. 30, 2017	Dec. 31, 2016
Advisors
Related Party Transaction
Due to Cole advisor	$ 18.8	$ 14.8

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Operating Leases (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Leases [Abstract]
Operating lease, weighted average remaining lease term	10 years 6 months
Operating Leases, Future Minimum Payments Receivable [Abstract]
Remainder of 2017	$ 11,418
2018	45,825
2019	45,992
2020	45,877
2021	45,788
Thereafter	309,873
Total	$ 504,773