REAL ESTATE INVESTMENTS

2016 Property Acquisitions

During the nine months ended September 30, 2016, the Company acquired 14 commercial properties for an aggregate purchase price of $197.0 million (the “2016 Acquisitions”).

The Company purchased the 2016 Acquisitions with net proceeds from the DRIP Offerings and available borrowings. The purchase price allocation for each of the Company’s acquisitions is preliminary and subject to change as the Company 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 acquisitions purchased during the nine months ended September 30, 2016 (in thousands):



	2016 Acquisitions
Land	$	45,741
Buildings, fixtures and improvements	134,375
Acquired in-place leases ⁽¹⁾	16,807
Acquired above-market leases ⁽²⁾	3,398
Intangible lease liabilities ⁽³⁾	(3,295		)
Total purchase price	$	197,026

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(1)	As of September 30, 2016, the weighted average amortization period for acquired in-place leases is 6.9 years for acquisitions completed during the nine months ended September 30, 2016.


(2)	As of September 30, 2016, the weighted average amortization period for acquired above-market leases is 5.0 years for acquisitions completed during the nine months ended September 30, 2016.


(3)	As of September 30, 2016, the weighted average amortization period for acquired intangible lease liabilities is 5.8 years for acquisitions completed during the nine months ended September 30, 2016.

The Company recorded revenue for the three and nine months ended September 30, 2016 of $3.4 million and $5.3 million, respectively, and a net loss for the three and nine months ended September 30, 2016 of $313,000 and $2.1 million, respectively, related to the 2016 Acquisitions.

The following information summarizes selected financial information of the Company as if all of the 2016 Acquisitions were completed on January 1, 2015 for each period presented below. The table below presents the Company’s estimated revenue and net income, on a pro forma basis, for the three and nine months ended September 30, 2016 and 2015 (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Pro forma basis:
Revenue	$	103,315	$	98,982	$	311,312	$	284,660
Net income	$	17,973	$	18,728	$	58,777	$	51,839

The pro forma information for the three and nine months ended September 30, 2016 was adjusted to exclude $1.4 million and $3.6 million, respectively, of acquisition-related expenses recorded during the three and nine months ended September 30, 2016. Accordingly, these costs were instead recognized in the pro forma information for the three and nine months ended September 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, and does not purport to represent the results of future operations.

Property Dispositions

During the nine months ended September 30, 2016, the Company disposed of three single-tenant properties and one multi-tenant property for an aggregate gross sales price of $26.6 million, resulting in proceeds of $25.9 million after closing costs and a gain of $2.1 million. No disposition fees were paid to CR IV Advisors or its affiliates in connection with the sale of the properties and the Company has no continuing involvement with these properties. The gain on sale of real estate is included in gain on disposition of real estate, net in the consolidated statements of operations for all periods presented. The Company did not dispose of any properties during the nine months ended September 30, 2015.

Impairment of a Property

The Company performs quarterly impairment review procedures, primarily through continuous monitoring of events and changes in circumstances that could indicate that the carrying value of certain of its real estate assets may not be recoverable. See Note 2 — Summary of Significant Accounting Policies for a discussion on the Company’s accounting policies regarding impairment of real estate assets.

During the nine months ended September 30, 2016, one property with a carrying value of $2.8 million was deemed to be impaired and its carrying value was reduced to an estimated fair value of $1.4 million, resulting in impairment charges of $1.4 million, which were recorded in the condensed consolidated unaudited statements of operations. See Note 3 — Fair Value Measurements for a further discussion on these impairment charges.

2015 Property Acquisitions

During the nine months ended September 30, 2015, the Company acquired 94 commercial properties, including properties held in the Consolidated Joint Venture, for an aggregate purchase price of $485.5 million (the “2015 Acquisitions”).

The Company purchased the 2015 Acquisitions with net proceeds from the Initial DRIP 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 acquisitions purchased during the nine months ended September 30, 2015 (in thousands):



	2015 Acquisitions
Land	$	111,696
Buildings, fixtures and improvements	326,155
Acquired in-place leases	52,006
Acquired above-market leases	6,657
Intangible lease liabilities	(10,800		)
Fair value adjustment of assumed notes payable	(253		)
Total purchase price	$	485,461

The Company recorded revenue for the three and nine months ended September 30, 2015 of $8.9 million and $17.3 million, respectively, and a net income (loss) for the three and nine months ended September 30, 2015 of $329,000 and $(6.2) million, respectively, related to the 2015 Acquisitions.

The following information summarizes selected financial information of the Company as if all of the 2015 Acquisitions were completed on January 1, 2014 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 ended September 30, 2015 and 2014 (in thousands):



	Three Months Ended September 30,					Nine Months Ended September 30,
	2015		2014			2015		2014
Pro forma basis:
Revenue	$	95,232	$	74,548		$	282,887	$	202,536
Net income (loss)	$	21,134	$	(3,561	)	$	66,265	$	(346	)

The pro forma information for the three and nine months ended September 30, 2015 was adjusted to exclude $2.5 million and $11.8 million, respectively, of acquisition-related expenses recorded during the three and nine months ended September 30, 2015. Accordingly, these costs were instead recognized in the pro forma information for the three and nine months ended September 30, 2014.

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 2014, and does not purport to represent the results of future operations.

Development Project

During the year ended December 31, 2014, the Company acquired one land parcel, upon which a 1.6 million square foot industrial property was expected to be constructed. The land was acquired for an aggregate amount of $23.9 million. As of September 30, 2015, the Company had a total investment in the development project of $90.7 million. During the year ended December 31, 2015, the Company substantially completed the development project and placed it in service.

Consolidated Joint Venture

As of September 30, 2016, the Company had an interest in a Consolidated Joint Venture that owns and manages nine medical office properties, with total assets of $54.2 million, which included $53.7 million of real estate assets, net of accumulated depreciation and amortization of $3.2 million, and total liabilities of $744,000. The Consolidated Joint Venture does not have any debt outstanding as of September 30, 2016. 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 partner’s (the “Consolidated Joint Venture Partner”) approval 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.

Unconsolidated Joint Venture

As discussed in Note 2 — Summary of Significant Accounting Policies, during the nine months ended September 30, 2016, the Company acquired the Unconsolidated Joint Venture Partner’s approximately 10% interest in the Unconsolidated Joint Venture. The Company has determined that this transaction qualified as a business combination to be accounted for under the acquisition method. Accordingly, the assets and liabilities of this transaction were recorded in the Company’s condensed consolidated unaudited balance sheets at its estimated fair value as of the acquisition date. The fair value of the assets acquired, liabilities assumed and equity interests were estimated using significant assumptions consistent with the Company’s policy concerning the allocation of the purchase price of real estate assets, including current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The results of this transaction are included in the Company’s condensed consolidated unaudited statements of operations beginning September 22, 2016.

The following table summarizes the transaction related to the business combination, including the preliminary amounts recognized for assets acquired and liabilities assumed, as indicated (in thousands):



	September 22, 2016
Carrying value of the Company’s equity interest before business combination ⁽¹⁾	$	18,952
Fair value of amounts recognized for assets acquired and liabilities assumed:
Land	4,685
Buildings, fixtures and improvements	11,615
Acquired in-place leases	1,340
Acquired above-market leases	1,168
Intangible lease liabilities	(618		)
Other assets and liabilities	110
Total net assets	18,300
Loss recognized on equity interest remeasured to fair value	$	(652	)

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(1) Includes $1.6 million of cash paid to the Unconsolidated Joint Venture Partner.