REAL ESTATE INVESTMENTS

2016 Property Acquisitions and Unconsolidated Joint Venture

During the year ended December 31, 2016, the Company acquired 15 commercial properties for an aggregate purchase price of $216.7 million (the “2016 Acquisitions”). The Company purchased the 2016 Acquisitions with net proceeds from the DRIP Offerings 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 year ended December 31, 2016 (in thousands):



	December 31, 2016
Land	$	48,317
Buildings, fixtures and improvements	149,859
Acquired in-place leases ⁽¹⁾	18,100
Acquired above-market leases ⁽²⁾	3,764
Intangible lease liabilities ⁽³⁾	(3,388		)
Total purchase price	$	216,652

____________________________________


(1)	The weighted average amortization period for acquired in-place leases is 7.6 years for the 2016 Acquisitions.


(2)	The weighted average amortization period for acquired above-market leases is 6.0 years for the 2016 Acquisitions.


(3)	The weighted average amortization period for acquired intangible lease liabilities is 6.4 years for the 2016 Acquisitions.

As discussed in Note 2 — Summary of Significant Accounting Policies, during the year ended December 31, 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 consolidated balance sheets at their 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 consolidated statements of operations beginning September 22, 2016.

The following table summarizes the transaction related to the business combination, including the 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	4,535
Buildings, fixtures and improvements	11,826
Acquired in-place leases	1,296
Acquired above-market leases	1,130
Intangible lease liabilities	(597		)
Other assets and liabilities	115
Total net assets	18,305
Loss recognized on equity interest remeasured to fair value	$	(647	)

____________________________________

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

The Company recorded revenue for the year ended December 31, 2016 of $10.7 million and a net loss for the year ended December 31, 2016 of $1.4 million related to the 2016 Acquisitions, as well as the acquisition of the Unconsolidated Joint Venture Partner’s approximately 10% interest in the Unconsolidated Joint Venture.

The following information summarizes selected financial information of the Company as if all of the 2016 Acquisitions, as well as the acquisition of the Unconsolidated Joint Venture Partner’s approximately 10% interest in the Unconsolidated Joint Venture, 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 years ended December 31, 2016 and 2015 (in thousands):



	Year Ended December 31,
	2016		2015
Pro forma basis (unaudited):
Revenue	$	418,798	$	389,780
Net income	$	74,052	$	64,662

The unaudited pro forma information for the year ended December 31, 2016 was adjusted to exclude $4.2 million of acquisition-related fees and expenses recorded during the year ended December 31, 2016. Accordingly, these costs were instead recognized in the unaudited pro forma information for the year ended December 31, 2015.

The unaudited 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.

2016 Dispositions

During the year ended December 31, 2016, the Company disposed of four retail properties and one anchored shopping center for an aggregate gross sales price of $31.6 million, resulting in proceeds of $30.8 million after closing costs and a gain of $2.9 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 (loss) on disposition of real estate, net in the consolidated statements of operations for all periods presented.

Impairment of Properties

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 year ended December 31, 2016, three properties with a carrying value of $11.4 million were deemed to be impaired and their carrying values were reduced to an estimated fair value of $4.7 million, resulting in impairment charges of $6.7 million, which were recorded in the consolidated statement of operations. See Note 3 — Fair Value Measurements for a further discussion on these impairment charges.

2015 Property Acquisitions

During the year ended December 31, 2015, the Company acquired 111 commercial properties, including properties held in the Consolidated Joint Venture, for an aggregate purchase price of $615.8 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 year ended December 31, 2015 (in thousands):



	December 31, 2015
Land	$	138,536
Buildings, fixtures and improvements	393,918
Acquired in-place leases ⁽¹⁾	83,043
Acquired above-market leases ⁽²⁾	6,485
Intangible lease liabilities ⁽³⁾	(5,883		)
Fair value adjustment of assumed note payable	(253		)
Total purchase price	$	615,846

____________________________________


(1)	The weighted average amortization period for acquired in-place leases was 13.0 years for the 2015 Acquisitions.


(2)	The weighted average amortization period for acquired above-market leases was 11.3 years for the 2015 Acquisitions.


(3)	The weighted average amortization period for acquired intangible lease liabilities was 9.5 years for the 2015 Acquisitions.

The Company recorded revenue for the year ended December 31, 2015 of $28.4 million and a net loss for the year ended December 31, 2015 of $6.3 million 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, on a pro forma basis, for the years ended December 31, 2015 and 2014 (in thousands):



	Year Ended December 31,
	2015		2014
Pro forma basis (unaudited):
Revenue	$	387,921	$	305,141
Net income	$	79,888	$	8,267

The unaudited pro forma information for the year ended December 31, 2015 was adjusted to exclude $15.5 million of acquisition-related fees and expenses recorded during the year ended December 31, 2015. Accordingly, these costs were instead recognized in the unaudited pro forma information for the year ended December 31, 2014.

The unaudited 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, nor does it 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, acquired for an aggregate amount of $23.9 million, was excluded from the 2014 Acquisitions. During the year ended December 31, 2015, the Company substantially completed the development project and placed it in service. As of December 31, 2015, the Company had a total investment of $102.8 million.

2015 Land Disposition

During the year ended December 31, 2015, the Company sold one undeveloped land parcel for a gross sales price of $1.1 million, resulting in net cash proceeds of $1.0 million to the Company and a loss of $108,000.

Impairment of a Property

During the year ended December 31, 2015, a property with a carrying value of $2.7 million was deemed to be impaired and its carrying value was reduced to its estimated fair value of $1.3 million, resulting in impairment charges of $1.4 million, which were recorded in the consolidated statement of operations. See Note 3 — Fair Value Measurements for a further discussion on these impairment charges.

2014 Property Acquisitions

During the year ended December 31, 2014, the Company acquired 422 commercial properties, including properties held in the Consolidated Joint Venture, for an aggregate purchase price of $1.7 billion (the “2014 Acquisitions”). The Company purchased the 2014 Acquisitions with net proceeds from the Offering, 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 year ended December 31, 2014 (in thousands):



	December 31, 2014
Land	$	437,206
Buildings, fixtures and improvements	1,152,148
Acquired in-place leases ⁽¹⁾	154,972
Acquired above-market leases ⁽²⁾	23,430
Intangible lease liabilities ⁽³⁾	(24,620		)
Fair value adjustment of assumed note payable	(765		)
Total purchase price	$	1,742,371

____________________________________


(1)	The weighted average amortization period for acquired in-place leases was 12.6 years for the 2014 Acquisitions.


(2)	The weighted average amortization period for acquired above-market leases was 11.0 years for the 2014 Acquisitions.


(3)	The weighted average amortization period for acquired intangible lease liabilities was 7.6 years for the 2014 Acquisitions.

The Company recorded revenue for the year ended December 31, 2014 of $61.2 million and a net loss for the year ended December 31, 2014 of $25.7 million related to the 2014 Acquisitions.

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



	Year Ended December 31,
	2014		2013
Pro forma basis (unaudited):
Revenue	$	332,860	$	245,969
Net income (loss)	$	131,001	$	(53,805	)

The unaudited pro forma information for the year ended December 31, 2014 was adjusted to exclude $51.8 million of acquisition-related fees and expenses recorded during the year ended December 31, 2014. Accordingly, these costs were instead recognized in the unaudited pro forma information for the year ended December 31, 2013.

The unaudited 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 2013, nor does it purport to represent the results of future operations.

2014 Land Disposition

During the year ended December 31, 2014, the Company sold one undeveloped land parcel for a gross sales price of $1.9 million, resulting in net cash proceeds of $1.8 million to the Company and a loss of $157,000.

Escrowed Funds for Acquisition of Real Estate Investments

In anticipation of closing on two properties, the Company funded $70.3 million to an escrow account on September 30, 2014, which was returned when both of the properties closed and the title was transferred during the quarter ended December 31, 2014. As of December 31, 2014, there were no amounts included in escrowed funds for acquisition of real estate investments on the accompanying consolidated balance sheets.

Consolidated Joint Venture

As of December 31, 2016, the Company had an interest in a Consolidated Joint Venture that owns and manages nine properties, with total assets of $53.8 million, which included $53.3 million of real estate assets, net of accumulated depreciation and amortization of $3.6 million, and total liabilities of $739,000. The Consolidated Joint Venture does not have any debt outstanding as of December 31, 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.