425

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

Amendment No. 1

To

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 23, 2013 (October 21, 2013)

AMERICAN REALTY CAPITAL PROPERTIES, INC.

(Exact Name of Registrant as Specified in its Charter)

Maryland	001-35263	45-2482685
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

405 Park Avenue, 15^th Floor, New York, New York 10022

(Address, including zip code, of Principal Executive Offices)

(212) 415-6500

Registrant's telephone number, including area code:

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

x Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

On October 23, 2013, American Realty Capital Properties, Inc. (the “Company”) filed with the Securities and Exchange Commission (the “SEC”) a Current Report on Form 8-K (the “Initial Report”), in part for the purpose of announcing its entry into an Agreement and Plan of Merger (the “Merger Agreement”), dated October 22, 2013, with Cole Real Estate Investments, Inc., a Maryland corporation (the “Target”) or (“Cole”), and Clark Acquisition, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Merger Sub”). The Merger Agreement provides for the merger of the Target with and into Merger Sub (the “Merger”), with Merger Sub surviving as a wholly owned subsidiary of the Company. The board of directors of the Company has by unanimous vote approved the Merger Agreement and the other transactions contemplated by the Merger Agreement.

The purpose of this amended Current Report on Form 8-K/A (the “Amendment”) is (i) to provide certain information with respect to the Commitment Letter (as defined below) entered into between the Operating Partnership and Barclays Bank PLC, (ii) to provide certain information with respect to the Letter Agreements (as defined below) entered into between the Company and certain officers of Cole, (iii) to provide certain information with respect to employment agreements entered into between the Company and each of Nicholas S. Schorsch and Brian S. Block, (iv) to provide certain information with respect to the Company’s multi-year outperformance plan and (v) to provide certain Cole unaudited historical financial information as of June 30, 2013 and for the three and six months ended June 30, 2013 and certain audited historical financial information for the year ended December 31, 2012, to include pro forma information for properties acquired by the Company from June 30, 2013 to September 30, 2013, including the related financing thereon, to incorporate pro forma information for the probable merger with CapLease, Inc. and related parties, the probable merger with American Realty Capital Trust IV, Inc., the 120 properties acquired from Fortress Investment Group, LLC of which the acquisition of 79 properties is considered probable, the acquisition of 33 properties to be acquired from Inland American Real Estate Trust, Inc. of which the acquisition of 28 properties is considered probable, and to incorporate pro forma information for the Merger with Cole, which is considered to be probable.

Item 1.01. Into a Material Definitive Agreement.

Cole Letter Agreements

Concurrently with the execution of the Merger Agreement, Stephan Keller,  Cole’s Executive Vice President, Chief Financial Officer and Treasurer, Jeffrey Holland, Cole’s President and Chief Operating Officer, and Kirk McAllaster, Cole’s Executive Vice President and Chief Financial Officer of Non-Listed REITs, entered into letter agreements with the Company (collectively, the “Letter Agreements”), pursuant to which each of them has agreed, among other things, to certain arrangements in connection with the closing of the Merger and the payment of amounts to which they are entitled under the Agreement and Plan of Merger dated as of March 5, 2013, by and among Cole, CREInvestments, LLC, Cole Holdings Corporation (“Cole Holdings”) and Christopher H. Cole, pursuant to which Cole acquired Cole Holdings on April 5, 2013.  The Letter Agreements provide that a portion of the shares of Company Common Stock that will be issued to each of Messrs. Keller, Holland and McAllaster in connection with the closing of the Merger will be subject to certain restrictions on transfer, such shares to be released from such restrictions on a quarterly basis on the last day of each calendar quarter beginning with the first full calendar quarter following the consummation of the Merger through December 31, 2017. 

Copies of the Letter Agreements are attached hereto as Exhibit 99.4, Exhibit 99.5 and Exhibit 99.6, and are incorporated herein by reference. The foregoing descriptions of the Letter Agreements do not purport to be complete and are qualified in their entirety by reference to the full text of such agreements.

Barclays Commitment Letter

On October 22, 2013, and in connection with the entry into the Merger Agreement, the Operating Partnership entered into a commitment letter (the “Commitment Letter”) with Barclays Bank PLC (“Barclays”). The Commitment Letter provides for a commitment by Barclays to provide (i) up to $2.175 billion in senior secured term loans (the “Term Loan Facility”) and (ii) up to $575 million in senior unsecured bridge loans (the “Bridge Facility”). Additionally, it is contemplated that the Operating Partnership may issue senior unsecured notes (the “Notes”) in lieu of all or a portion of the loans under the Bridge Facility and, if the Operating Partnership chooses to borrow under the Bridge Facility, it may refinance all or a portion of the Bridge Facility at a later date with the proceeds of the Notes. To the extent that the Operating Partnership, the Target or any of their respective subsidiaries incurs or issues any other indebtedness after the date of the Commitment Letter and prior to the closing of the merger, subject to certain exceptions set forth in the Commitment Letter, the commitments of Barclays under the Commitment Letter will be reduced on a dollar-for-dollar basis. The proceeds from these borrowings or issuances will be used by the Company to pay a portion of the consideration to be paid in the merger, to refinance existing indebtedness of the Target and to pay related fees and expenses. The commitment of Barclays under the Commitment Letter is subject to certain conditions, including the absence of a Chicago Material Adverse Effect (as defined in the Commitment Letter), the negotiation of definitive documentation and other customary closing conditions.

The Operating Partnership will pay certain customary fees and expenses in connection with the Term Loan Facility, the Bridge Facility and the Notes. Barclays Capital Inc., an affiliate of Barclays, is providing certain advisory and other services to the Company in connection with the merger and the related financing.

The foregoing description of the Commitment Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the Commitment Letter.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Employment Agreements

On October 21, 2013, the Company entered into employment agreements with Nicholas S. Schorsch, its Chairman and Chief Executive Officer, and Brian S. Block, its Executive Vice President and Chief Financial Officer (the “Executives”), to be effective as of the effective date of the consummation of the Company’s restructuring into a self-managed real estate investment trust (the “Effective Date”). Messrs. Schorsch and Block are currently employed by the Company’s manager, ARC Properties Advisors, LLC. The employment agreements provide for initial nine year terms that will automatically renew for additional three-year periods unless either party provides 90 days’ notice of non-renewal prior to the end of the then current term. Under his employment agreement, Mr. Schorsch will serve as Executive Chairman and Chief Executive Officer of the Company. Under his employment agreement, Mr. Block will serve as Chief Financial Officer of the Company and will report to Mr. Schorsch.

Mr. Schorsch’s employment agreement provides for a base salary of $1,100,000 per year and Mr. Block’s employment agreement provides for a base salary of $500,000 per year. The base salaries will be reviewed at least once a year and will be increased annually, effective each January 1, by a minimum positive amount equal to the base salary as in effect on January 1 of the preceding year multiplied by the percentage increase in the Consumer Price Index for such year.

As of the Effective Date, Messrs. Schorsch and Block will receive retention awards of 2,000,000 and 804,506, respectively, restricted shares of the Company’s common stock. One-ninth of Mr. Schorsch’s retention award will vest on the Effective Date and an additional one-ninth will vest on each of the following eight anniversaries of such date. One-seventh of Mr. Block’s retention award will vest on the Effective Date and an additional one-seventh will vest on each of the following six anniversaries of such date.

In addition, Messrs. Schorsch and Block will be entitled to receive annual cash and equity incentive bonuses in amounts equal to a percentage of their base salaries determined based on the level of satisfaction of annual performance goals set by the Board as follows:

	Annual Cash Incentive Bonus (Percentage of Base Salary)			Annual Equity Incentive Bonus (Percentage of Base Salary)
	Threshold	Target	Maximum	Threshold	Target	Maximum
Schorsch	250%	350%	450%	350%	450%	550%
Block	150%	250%	350%	250%	350%	450%

Any annual cash or equity incentive bonus payment will be paid in the year following the year for which it was earned, but in no event later than April 1 of such following year. Any equity incentive award will be paid in the form of restricted shares, units of the Company’s operating partnership, ARC Properties Operating Partnership, L.P. (the “Operating Partnership”), LTIP units of the Operating Partnership or other similar instruments (“Equity Units”) and will vest ratably over three years, beginning on the January 1 following the date on which it is earned.

Messrs. Schorsch and Block will be entitled to annual vacation of ten and six weeks, respectively, for each full calendar year and will receive cash payments in lieu of any accrued but unused vacation time. In addition to Company sponsored employee benefit plans, for each Executive, the Company will (i) maintain, at its cost, supplemental renewable long-term disability insurance as agreed to by the Company and the Executive, (ii) pay for an annual medical examination for the Executive and (iii) pay or reimburse each Executive for miscellaneous costs incurred up to a maximum annual amount for tax and financial planning, as well as for miscellaneous travel and other expenses. The employment agreements provide that the Company will purchase whole life insurance policies on the lives of the Executives to be owned by the executives in the amount of $30 million for Mr. Schorsch and $7.5 million for Mr. Block. In addition, the Company will be entitled to purchase insurance on the lives of the Executives in the amounts of $15 million for Mr. Schorsch and $10 million for Mr. Block.

The employment agreements provide that in the event of the executive’s termination as result of his death or disability, or, subject to his execution and non-revocation of a release, without cause (as defined in the employment agreements) or, solely with respect to Mr. Schorsch, for good reason (as defined in his employment agreement), the executive (or his estate, as applicable) will be entitled to receive on the 60^th day following his separation from service a lump sum cash payment in an amount equal to the sum of the following amounts (the “Severance Payment”):

· any earned and unpaid base salary, annual cash and equity incentive bonuses, Equity Unit and expense reimbursements due and owing to the Executive for the period of employment preceding his termination date (including pay in lieu of accrued, but unused, vacation);

· the fair value of unvested Equity Units as of the termination date, consistent with the terms of the award;

· the annual cash incentive bonus and annual equity incentive bonus at the maximum performance level for the year in which the termination occurs, prorated for the portion of the year of termination that the Executive was employed prior to the effective date of termination;

· an amount equal to the sum of (i) the Executive’s then annual base salary and (ii) the sum of the annual cash incentive bonus and annual equity incentive bonus (assuming target level performance) and Equity Units multiplied by (x) the remaining years in the initial nine-year term of the employment agreement for the first six years of the initial term and (y) 2.99 for each of the remaining years in the initial term and each year of any renewal term.

In addition, upon any such termination without cause or for good reason, as applicable, the Executive will be allowed to continue to participate, at the Company’s cost, in any healthcare, dental, vision, and prescription drug plans in which the executive participated prior to termination for a period of two years following termination (the “Severance Period”), to the extent permitted or otherwise practicable under such plans. To the extent not permitted or otherwise practicable, the Company will take such actions as may be necessary to provide the executive with substantially comparable benefits (without additional cost to the executive). If the executive engages in regular employment after termination, then any benefits received by him which are similar in nature to any of the forgoing plans will relieve the Company of it obligation to provide such comparable benefit to the extent of benefits so received.

The employment agreements provide that if the Executive is terminated for cause or due to a voluntary termination by the Executive (without good reason in the case of Mr. Schorsch) the Executive will be entitled to receive pro rata annual cash and equity incentive bonuses the threshold level for the year of termination. In addition, the employment agreements provide that the Executive’s equity awards will vest upon certain terminations of his employment.

In the event of a change in control (as defined in the employment agreements), all of the Executive’s equity awards will become fully vested. If the Executive’s employment terminates within two years following a change in control for any reason other than for cause, death or disability, he will be entitled to receive, in a lump sum within 20 days of his termination, an amount equal to the greater of the Severance Payment and an amount equal to 2.99 multiplied by the sum of (i) the Executive’s average annual base salary for the three calendar year period immediately prior to the Executive’s date of termination and (ii) the average annual cash incentive bonus actually received by the Executive for the three full fiscal year periods that immediately preceded Executive’s date of termination, in each case annualized if the Executive has been employed for less than three years (the “Change of Control Severance Payment”). If the Executive has received the Severance Payment because of a termination within six months of a change of control, he will be entitled to an additional payment, in a lump sum within twenty days following the change in control, equal to the difference between (a) the Change of Control Severance Payment and (b) the Severance Payment.

In addition, the employment agreements provide for restrictions on use of confidential information, and for a period of 12 months following termination for any reason, restrictions on solicitation.

The foregoing descriptions of the employment agreement with Messrs. Schorsch and Block is only a summary and is qualified in its entirety by reference to the employment agreements, copies of which will be attached as exhibits to a subsequent report to be filed by the Company pursuant to the Securites Exchange Act of 1934, as amended (the “Exchange Act”).

Multi-Year Outperformance Plan

On October 21, 2013, the Company approved a multi-year outperformance plan (the “OPP”), to be effective as of the Effective Date. The OPP will be evidenced by individual agreements entered into between the Company and the participants selected by the Board (the “Participants”) that set forth the Participant’s participation percentage in the OPP (“OPP Agreements”). The Board has approved participation percentages of 42.5% and 10% for Messrs. Schorsch and Block, respectively.

Under the OPP Agreements, the Participants will be eligible to earn performance-based bonus awards equal to the Participant’s participation percentage of a pool that will be funded up to a maximum award opportunity (the “OPP Cap”) of $120 million, which is equal to approximately 5% of our equity market capitalization (“the Initial Market Cap”). Subject to the OPP Cap, the pool will equal an amount to be determined based on our achievement of total return to stockholders, including both share price appreciation and common stock distributions (“Total Return”), for a three-year performance period (the “Performance Period”); each 12 month period during the Performance Period (each an “Annual Period”) and the initial 24 month period of the Performance Period (the “Interim Period”), as follows:

	Performance Period	Annual Period	Interim Period
Absolute Component:  4% of any excess Total Return attained above an absolute hurdle measured from the beginning of such period:	21%	7%	14%
Relative Component:  4% of any excess Total Return attained above the median Total Return for the performance period of the Peer Group,* subject to a ratable sliding scale factor as follows based on achievement of cumulative Total Return measured from the beginning of such period:
100% will be earned if cumulative Total Return achieved is at least:	18%	6%	12%
50% will be earned if a cumulative Total Return achieved is:	0%	0%	0%
0% will be earned if cumulative Total Return achieved is less than:	0%	0%	0%
a percentage from 50% to 100% calculated by linear interpolation will be earned if cumulative Total Return achieved is if between:	0% - 18%	0% - 6%	0%- 12%

* The “Peer Group” is comprised of the following companies: EPR Properties; Getty Realty Corporation; Lexington Realty Trust; National Retail Properties, Inc.; Realty Income Corporation; and Spirit Realty Capital, Inc.

The OPP Agreements will provide for early calculation and vesting of the award in the event of certain terminations of the Participant’s employment or in the event of a change in control of the Company, in either case prior to the end of the Performance Period. The Participant’s will be entitled to receive a tax gross-up in the event that any amounts paid to the Participant under the OPP constitute “parachute payments” as defined in Section 280G of the Internal Revenue Code of 1986, as amended.

Any amounts earned under the OPP will be issued in the form of LTIP Units, which represent units of equity ownership in the Operating Partnership that are structured as a profits interest therein. Subject to the Participant’s continued service through each vesting date, 1/3 on each of the third, fourth and fifth anniversaries of the Effective Date. The Participant will be entitled to receive distributions of LTIP Units to the extent provided for in the limited partnership agreement of the Operating Partnership, as amended from time to time.

This summary description of the material terms of the general terms of the OPP is qualified in its entirety by the form of Multi-Year Outperformance Plan Agreement to be attached as an exhibit to a subsequent report to be filed by the Company pursuant to the Exchange Act.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

Attached as Exhibit 99.1 to this Amendment are Cole’s audited financial statements included in Cole’s Annual Report on Form 10-K for the year ended December 31, 2012 as filed with the SEC on March 29, 2013.

Attached as Exhibit 99.2 to this Amendment are Cole’s unaudited financial statements included in Cole’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 as filed with the SEC on August 5, 2013.

(b) Pro Forma Financial Information.

The unaudited pro forma consolidated financial statements of the Company, which include Cole, as of June 30, 2013 and for the periods ended June 30, 2013 and December 31, 2012, are filed as Exhibit 99.3 to this Amendment and are incorporated herein by reference.

d) Exhibits

Exhibit No.	Description
23	Consent of Deloitte & Touche LLP
99.1	Cole Real Estate Investments, Inc. Audited Financial Statements from its Annual Report on Form 10-K for the year ended December 31, 2012
99.2	Cole Real Estate Investments, Inc. Unaudited Financial Statements from its Quarterly Report on Form 10-Q for the quarter ended June 30, 2013
99.3	The Company’s Unaudited Pro Forma Consolidated Financials as of June 30, 2013 and for the six months ended June 30, 2013 and the year ended December 31, 2013
99.4	Letter Agreement, dated October 22, 2013, between Kirk McAllaster and American Realty Capital Properties, Inc.
99.5	Letter Agreement, dated October 22, 2013, between Stephan Keller and American Realty Capital Properties, Inc.
99.6	Letter Agreement, dated October 22, 2013, between Jeffrey Holland and American Realty Capital Properties, Inc.

SIGNATURES

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

	AMERICAN REALTY CAPITAL PROPERTIES, INC.
October 25, 2013	By:	/s/ Nicholas S. Schorsch
	Name:	Nicholas S. Schorsch
	Title:	Chief Executive Officer and
		Chairman of the Board of Directors

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements of American Realty Capital Properties, Inc. on Form S-3 (File No. 333-182971,File No. 333-182972, and File No. 333-187240), Form S-8 (File No. 333-176714) and Form S-4 (File No. 333-190056) of our report dated March 28, 2013, relating to the consolidated financial statements and financial statement schedules of Cole Real Estate Investments, Inc. (f/k/a Cole Credit Property Trust III, Inc.) for the year ended December 31, 2012, which are included in the Current Report on Form 8-K/A filed by American Realty Capital Properties, Inc. with the U.S. Securities and Exchange Commission on October 25, 2013.

/s/ Deloitte & Touche LLP

Phoenix, Arizona

October 25, 2013

EX-99.1

Exhibit 99.1

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements	Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2012 and 2011		F-3
Consolidated Statements of Operations for the Years Ended December 31, 2012, 2011 and 2010		F-4
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2012, 2011 and 2010		F-5
Consolidated Statements of Equity for the Years Ended December 31, 2012, 2011 and 2010		F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010		F-7
Notes to Consolidated Financial Statements		F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Cole Credit Property Trust III, Inc.

Phoenix, Arizona

We have audited the accompanying consolidated balance sheets of Cole Credit Property Trust III, Inc. and subsidiaries (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2012. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Cole Credit Property Trust III, Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

/s/ DELOITTE & TOUCHE LLP

Phoenix, Arizona

March 28, 2013

F-2

COLE CREDIT PROPERTY TRUST III, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	December 31, 2012			December 31, 2011
ASSETS
Investment in real estate assets:
Land	$	1,490,843		$	1,165,274
Buildings and improvements, less accumulated depreciation of $187,870 and $99,055, respectively	4,222,363			3,275,989
Acquired intangible lease assets, less accumulated amortization of $122,258 and $61,830, respectively	860,963			682,816
Total investment in real estate assets, net	6,574,169			5,124,079
Investment in notes receivable, net	90,358			64,683
Investment in marketable securities	51,103			41,750
Investment in marketable securities pledged as collateral	266,098			72,379
Investment in unconsolidated joint ventures	96,785			21,543
Total investment in real estate and related assets, net	7,078,513			5,324,434
Assets related to real estate held for sale, net	15,485			15,836
Cash and cash equivalents	192,504			216,353
Restricted cash	18,444			17,540
Rents and tenant receivables, less allowance for doubtful accounts of $337 and $202, respectively	79,760			60,712
Prepaid expenses and other assets	11,790			11,584
Deferred financing costs, less accumulated amortization of $23,105 and $11,305, respectively	57,229			51,109
Total assets	$	7,453,725		$	5,697,568
LIABILITIES AND EQUITY
Notes payable and other borrowings	$	3,292,048		$	2,373,984
Accounts payable and accrued expenses	42,756			33,815
Escrowed investor proceeds	—			1,930
Due to affiliates	4,525			4,847
Acquired below market lease intangibles, less accumulated amortization of $16,389 and $8,782, respectively	113,607			93,050
Distributions payable	26,399			20,858
Derivative liabilities, deferred rent and other liabilities	56,980			50,720
Total liabilities	3,536,315			2,579,204
Commitments and contingencies
Redeemable common stock	234,578			134,101
EQUITY:
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding	—			—
Common stock, $0.01 par value; 990,000,000 shares authorized, 479,547,099 and 385,236,590 shares issued and outstanding, respectively	4,795			3,852
Capital in excess of par value	4,068,015			3,322,924
Accumulated distributions in excess of earnings	(416,886		)	(319,031		)
Accumulated other comprehensive income (loss)	23,101			(24,757		)
Total stockholders’ equity	3,679,025			2,982,988
Noncontrolling interests	3,807			1,275
Total equity	3,682,832			2,984,263
Total liabilities and equity	$	7,453,725		$	5,697,568

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

F-3

COLE CREDIT PROPERTY TRUST III, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

	Year Ended December 31,
	2012			2011			2010
Revenues:
Rental and other property income	$	471,333		$	294,511		$	108,509
Tenant reimbursement income	44,541			21,564			6,101
Interest income on notes receivable	6,573			5,473			3,628
Interest income on marketable securities	20,495			2,432			—
Total revenue	542,942			323,980			118,238
Expenses:
General and administrative expenses	14,915			10,155			5,905
Property operating expenses	49,278			24,045			6,916
Property and asset management expenses	46,364			27,225			10,378
Acquisition related expenses	63,892			59,433			50,096
Depreciation	103,719			61,198			20,460
Amortization	55,890			33,057			12,007
Total operating expenses	334,058			215,113			105,762
Operating income	208,884			108,867			12,476
Other income (expense):
Equity in income (loss) of unconsolidated joint ventures	2,183			1,475			(206		)
Other income	4,446			344			1,277
Gain on sale of marketable securities	12,455			—			—
Interest expense	(140,113		)	(78,968		)	(22,969		)
Total other expense	(121,029		)	(77,149		)	(21,898		)
Income (loss) from continuing operations	87,855			31,718			(9,422		)
Discontinued operations
Income from discontinued operations	7,126			14,053			2,819
Gain on sale of real estate assets	108,457			—			—
Total income from discontinued operations	115,583			14,053			2,819
Net income (loss)	203,438			45,771			(6,603		)
Net income (loss) allocated to noncontrolling interests	100			475			(310		)
Net income (loss) attributable to the Company	$	203,338		$	45,296		$	(6,293	)
Weighted average number of common shares outstanding:
Basic and diluted	463,216,187			309,363,838			174,764,966
Income (loss) from continuing operations per common share:
Basic and diluted	$	0.19		$	0.10		$	(0.05	)
Total income from discontinued operations per common share:
Basic and diluted	$	0.25		$	0.05		$	0.02
Net income (loss) attributable to the Company per common share:
Basic and diluted	$	0.44		$	0.15		$	(0.04	)

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

F-4

COLE CREDIT PROPERTY TRUST III, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

	Year Ended December 31,
	2012			2011			2010
Net income (loss)	$	203,438		$	45,771		$	(6,603	)
Other comprehensive income (loss):
Unrealized gain on marketable securities	53,664			1,335			—
Reclassification of previous unrealized gain on marketable securities into net income	(8,852		)	—			—
Unrealized loss on interest rate swaps	(6,217		)	(18,904		)	(7,053		)
Reclassification of previous unrealized loss on interest rate swaps into net income	9,263			—			—
Total other comprehensive income (loss)	47,858			(17,569		)	(7,053		)
Total comprehensive income (loss)	251,296			28,202			(13,656		)
Comprehensive income (loss) attributable to noncontrolling interest	100			475			(310		)
Total comprehensive income (loss) attributable to the Company	$	251,196		$	27,727		$	(13,346	)

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

F-5

COLE CREDIT PROPERTY TRUST III, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except share amounts)

									Accumulated			Accumulated
	Common Stock					Capital in			Distributions			Other			Total			Non-
	Number of		Par			Excess			in Excess of			Comprehensive			Stockholders’			controlling			Total
	Shares		Value			of Par Value			Earnings			(Loss) Gain			Equity			Interests			Equity
Balance, January 1, 2010	98,002,392		$	980		$	865,617		$	(34,999	)	$	(135	)	$	831,463		$	—		$	831,463
Issuance of common stock	151,272,210		1,513			1,505,839			—			—			1,507,352			—			1,507,352
Contributions from noncontrolling interests	—		—			—			—			—			—			681			681
Distributions to investors	—		—			—			(121,748		)	—			(121,748		)	—			(121,748		)
Commissions on stock sales and related dealer manager fees	—		—			(127,753		)	—			—			(127,753		)	—			(127,753		)
Other offering costs	—		—			(14,013		)	—			—			(14,013		)	—			(14,013		)
Redemptions of common stock	(1,204,238	)	(12		)	(11,646		)	—			—			(11,658		)	—			(11,658		)
Changes in redeemable common stock	—		—			(53,516		)	—			—			(53,516		)	—			(53,516		)
Comprehensive loss	—		—			—			(6,293		)	(7,053		)	(13,346		)	(310		)	(13,656		)
Balance, December 31, 2010	248,070,364		2,481			2,164,528			(163,040		)	(7,188		)	1,996,781			371			1,997,152
Issuance of common stock	141,490,293		1,414			1,405,275			—			—			1,406,689			—			1,406,689
Contributions from noncontrolling interests	—		—			—			—			—			—			481			481
Distributions to noncontrolling interests	—		—			—			—			—			—			(52		)	(52		)
Distributions to investors	—		—			—			(201,287		)	—			(201,287		)	—			(201,287		)
Commissions on stock sales and related dealer manager fees	—		—			(114,550		)	—			—			(114,550		)	—			(114,550		)
Other offering costs	—		—			(21,572		)	—			—			(21,572		)	—			(21,572		)
Redemptions of common stock	(4,324,067	)	(43		)	(41,847		)	—			—			(41,890		)	—			(41,890		)
Changes in redeemable common stock	—		—			(68,203		)	—			—			(68,203		)	—			(68,203		)
Purchase of investment from noncontrolling interest	—		—			(707		)	—			—			(707		)	—			(707		)
Comprehensive income (loss)	—		—			—			45,296			(17,569		)	27,727			475			28,202
Balance, December 31, 2011	385,236,590		3,852			3,322,924			(319,031		)	(24,757		)	2,982,988			1,275			2,984,263
Issuance of common stock	101,309,317		1,013			1,000,935			—			—			1,001,948			—			1,001,948
Contributions from noncontrolling interests	—		—			—			—			—			—			2,938			2,938
Distributions to noncontrolling interests	—		—			—			—			—			—			(506		)	(506		)
Distributions to investors	—		—			—			(301,193		)	—			(301,193		)	—			(301,193		)
Commissions on stock sales and related dealer manager fees	—		—			(72,926		)	—			—			(72,926		)	—			(72,926		)
Other offering costs	—		—			(13,188		)	—			—			(13,188		)	—			(13,188		)
Redemptions of common stock	(6,998,808	)	(70		)	(68,532		)	—			—			(68,602		)	—			(68,602		)
Changes in redeemable common stock	—		—			(100,477		)	—			—			(100,477		)	—			(100,477		)
Purchase of investment from noncontrolling interest	—		—			(721		)	—			—			(721		)	—			(721		)
Comprehensive income	—		—			—			203,338			47,858			251,196			100			251,296
Balance, December 31, 2012	479,547,099		$	4,795		$	4,068,015		$	(416,886	)	$	23,101		$	3,679,025		$	3,807		$	3,682,832

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

F-6

COLE CREDIT PROPERTY TRUST III, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	2012			2011			2010
Cash flows from operating activities:
Net income (loss)	$	203,438		$	45,771		$	(6,603	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	110,533			70,823			25,720
Amortization of lease intangibles and deferred financing costs, net	74,869			46,253			16,478
Accretion of marketable securities and notes receivable, net	(4,280		)	(1,788		)	(642		)
Bad debt expense	309			213			97
Equity in (income) loss of unconsolidated joint ventures	(2,183		)	(1,475		)	206
Return on investment from unconsolidated joint ventures	2,183			1,475			946
Gain on sale and condemnation of real estate assets	(109,121		)	—			(34		)
Gain on sale of marketable securities	(12,455		)	—			—
Changes in assets and liabilities:
Rents and tenant receivables	(31,184		)	(36,421		)	(21,760		)
Prepaid expenses and other assets	(4,537		)	(3,766		)	(1,717		)
Accounts payable and accrued expenses	3,832			10,769			11,228
Deferred rent and other liabilities	10,310			10,535			11,643
Due to affiliates	750			3,292			230
Net cash provided by operating activities	242,464			145,681			35,792
Cash flows from investing activities:
Investment in real estate and related assets	(2,335,620		)	(2,342,527		)	(2,329,385		)
Return of investment and repayment of advance from unconsolidated joint ventures	22,748			1,148			—
Principal repayments from notes receivable	864			276			—
Proceeds from sale and condemnation of real estate assets	536,113			18			44
Proceeds from sale of marketable securities	63,422			—			—
Payment of property escrow deposits	(48,407		)	(43,050		)	(40,653		)
Refund of property escrow deposits	53,096			38,875			40,150
Change in restricted cash	(904		)	(5,417		)	(10,932		)
Net cash used in investing activities	(1,708,688		)	(2,350,677		)	(2,340,776		)
Cash flows from financing activities:
Proceeds from issuance of common stock	832,869			1,296,596			1,442,178
Offering costs on issuance of common stock	(87,195		)	(135,362		)	(141,935		)
Redemptions of common stock	(68,602		)	(41,890		)	(11,658		)
Distributions to investors	(126,573		)	(84,784		)	(47,439		)
Proceeds from notes payable and other borrowings	2,025,253			1,547,220			922,392
Repayment of notes payable and other borrowings	(1,107,062		)	(239,401		)	(1,136		)
Payment of loan deposits	(5,463		)	(6,704		)	(14,676		)
Refund of loan deposits	6,653			6,234			14,642
Payment on earnout liabilities	(7,429		)	—			—
Change in escrowed investor proceeds liability	(1,930		)	1,482			(673		)
Deferred financing costs paid	(20,578		)	(32,413		)	(26,167		)
Contributions from noncontrolling interests	2,938			481			681
Distributions to noncontrolling interests	(506		)	(52		)	—
Net cash provided by financing activities	1,442,375			2,311,407			2,136,209
Net (decrease) increase in cash and cash equivalents	(23,849		)	106,411			(168,775		)
Cash and cash equivalents, beginning of year	216,353			109,942			278,717
Cash and cash equivalents, end of year	$	192,504		$	216,353		$	109,942

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

F-7

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — ORGANIZATION AND BUSINESS

Cole Credit Property Trust III, Inc. (the “Company”) is a Maryland corporation that was formed on January 22, 2008, which has elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes. Substantially all of the Company’s business is conducted through Cole REIT III Operating Partnership, LP (“CCPT III OP”), a Delaware limited partnership. The Company is the sole general partner of, and owns a 99.99% partnership interest in, CCPT III OP. Cole REIT Advisors III, LLC (“CR III Advisors”), the advisor to the Company, is the sole limited partner and owner of an insignificant noncontrolling partnership interest of less than 0.01% of CCPT III OP.

As of December 31, 2012, the Company owned 1,014 properties, comprising 43.1 million rentable square feet of single and multi-tenant retail and commercial space located in 47 states, which include properties owned through consolidated joint venture arrangements. As of December 31, 2012, the rentable space at these properties was 99% leased. As of December 31, 2012, the Company also owned 29 commercial mortgage backed securities (“CMBS”) and three notes receivable. In addition, through unconsolidated joint venture arrangements, as of December 31, 2012, the Company had interests in 12 properties comprising 2.3 million rentable square feet of commercial and retail space.

The Company ceased offering shares of common stock in its initial primary offering (the “Initial Offering”) on October 1, 2010. At the completion of the Initial Offering, a total of approximately 217.5 million shares of common stock had been issued, including approximately 211.6 million shares issued in the primary offering and approximately 5.9 million shares issued pursuant to a distribution reinvestment plan (the “DRIP”). The remaining 32.5 million unsold shares in the Initial Offering were deregistered.

The Company ceased offering shares of its common stock pursuant to a follow-on offering of up to 275.0 million shares (the “Follow-on Offering”) on April 27, 2012. At the completion of the Follow-on Offering, a total of approximately 262.2 million shares of common stock had been issued, including approximately 242.9 million shares issued in the primary offering and approximately 19.3 million shares issued pursuant to the DRIP. The remaining 12.8 million unsold shares in the Follow-on Offering were deregistered.

In addition, the Company registered 75.0 million shares of common stock under the DRIP pursuant to a registration statement filed on Form S-3 (the “DRIP Offering” and collectively with the Initial Offering and Follow-on Offering, the “Offerings”), which was filed with the SEC on March 14, 2012 and automatically became effective with the SEC upon filing. The Company will continue to issue shares of common stock under the DRIP Offering until such time as the Company’s shares are listed on a national securities exchange or the DRIP Offering is otherwise terminated by the Company’s board of directors.

As of December 31, 2012, the Company had issued approximately 492.1 million shares of its common stock in the Offerings, including approximately 12.4 million shares issued in the DRIP Offering. The Company had aggregate gross proceeds from the Offerings of $4.9 billion (including shares sold pursuant to the Company’s DRIP) as of December 31, 2012, before share redemptions of $122.4 million and offering costs, selling commissions and dealer management fees of $463.2 million.

On March 5, 2013, the Company, Cole Holdings Corporation (“Holdings”), an Arizona corporation that is the parent company and indirect owner of the Company’s advisor and is wholly owned by Christopher H. Cole, the chairman of the board of directors, chief executive officer and president of the Company (the “Holdings Stockholder”), CREInvestments, LLC, a Maryland limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), and the Holdings Stockholder entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides for the merger of Holdings with and into Merger Sub (the “Merger”), with Merger Sub surviving and continuing its existence under the laws of the state of Maryland as a wholly owned subsidiary of the Company. Upon consummation of the Merger, the Company intends to list its shares of common stock on the New York Stock Exchange. Refer to Note 2 for further discussion regarding the Merger.

F-8

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 2 — MERGER AGREEMENT

A special committee of independent directors of the Company unanimously recommended the Merger and the board of directors of the Company (the “Board”) unanimously approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, the outstanding shares of common stock, par value $0.01 per share, of Holdings (“Holdings Common Stock”) will be converted into the right to receive upfront consideration from the Company of $20.0 million in cash, subject to adjustment, and 10,711,225 newly-issued shares of common stock of the Company (the “Upfront Stock Consideration”). The Merger Agreement also includes the following contingent amounts to be paid by the Company: (i) upon a listing of the Company’s common stock on the New York Stock Exchange (“NYSE”), 2,142,245 newly-issued shares of the Company’s common stock will be payable to the Holdings Stockholder (the “Listing Consideration”), and (ii) additional shares of the Company’s common stock are potentially payable in 2017 as an “earn-out” contingent upon the acquired business’ demonstrated financial success based on two criteria: (a) the acquired business generating Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) above a minimum threshold and (b) the Company’s stock performance relative to its peer group (the “Earnout Consideration”). The Upfront Stock Consideration and the Listing Consideration are subject to a three-year lockup with approximately one-third of the shares released each year. The stock consideration payable in 2017 is subject to a lockup until December 31, 2017. Additionally, pursuant to the terms of the Company’s advisory agreement with its current advisor, Holdings may receive an additional amount of the Company’s common stock based on the average closing price over a period of 30 consecutive trading days beginning 180 days after the Company’s shares of common stock are listed; however, Holdings has agreed, as part of the transaction, to a 25% reduction from the amount payable under the advisory agreement as a result of a listing of the Company’s common stock, if any. Other executives of Holdings would receive a portion of the consideration to be paid in connection with the Merger pursuant to certain bonus arrangements.

The Merger Agreement contains customary representations, warranties, covenants and agreements of Holdings, the Holdings Stockholder, the Company and Merger Sub. The consummation of the Merger is subject to various conditions for the benefit of the Company and Merger Sub, on the one hand, or Holdings and the Holdings Stockholder, on the other hand, or for all parties’ benefit, as applicable, including, among others, (i) the absence of any law or order prohibiting the consummation of the Merger, (ii) certain consents, approvals, permits and authorizations having been obtained, (iii) receipt of certain regulatory approvals, (iv) subject to the standards set forth in the Merger Agreement, the accuracy of the representations and warranties of each party thereto, (v) compliance by each party with its covenants and agreements under the Merger Agreement in all material respects, (vi) no event, change, effect, development, condition or occurrence that has had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Company or Holdings, (vii) the delivery of certain opinions of counsel related to the qualification of the Merger as a “reorganization” for tax purposes and the qualification of the Company as a real estate investment trust, and (viii) no pending litigation challenging the Merger which, if determined adversely to the Company, Holdings or the Holdings Stockholder, would be, or would be reasonably likely to be, material to (a) the combined business of the Company, Holdings and their subsidiaries and as a result of which the Company’s special committee of the Board has determined that the Merger and the other transactions contemplated by the Merger Agreement are no longer in the best interests of the Company’s stockholders or (b) the Holdings Stockholder and as a result of which the Holdings Stockholder has determined that the Merger and the other transactions contemplated by the Merger Agreement are no longer in the best interests of the Holdings Stockholder.

The Merger Agreement contains certain termination rights for both the Company and Holdings, including the right to terminate the Merger Agreement if the Merger is not consummated on or before June 30, 2013 and if the requisite regulatory approvals are not obtained. The Holdings Stockholder has also agreed, subject to certain limitations, to indemnify the Company with respect to certain representations and warranties regarding Holdings and other matters.

If the Merger is completed, the Company and the Holdings Stockholder will enter into a customary escrow agreement pursuant to which approximately one-third of the Upfront Stock Consideration will be escrowed, in part to satisfy the Holding Stockholder’s indemnity obligations. If listing occurs during the first year after closing, one-third of the Listing Consideration will be added to the escrowed shares, subject to the same escrow terms.

At the closing of the Merger, the Company would enter into a registration rights agreement pursuant to which the Company will agree to customary demand and piggyback registration rights with respect to the shares of the Company’s common stock issued pursuant to the Merger Agreement.

As of December 31, 2012, the Company had incurred $3.5 million for legal, consulting and other expenses related to the Merger, which is included in acquisition related expenses in the consolidated statements of operations. Subsequent to December 31, 2012, the Company has incurred $11.1 million of such Merger expenses.

F-9

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and consolidated joint venture arrangements in which the Company has controlling financial interests. The portions of the consolidated joint venture arrangements not owned by the Company were presented as noncontrolling interests as of and during the period consolidated. All intercompany balances and transactions have been eliminated in consolidation. Certain prior year balances have been reclassified in the consolidated balance sheets and statements of operations to conform with the current year presentation of real estate assets held for sale and discontinued operations.

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”).  A VIE is broadly defined as an entity where either (1) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance or (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support.  The Company consolidates any VIEs when it is determined to be the primary beneficiary of the VIE’s operations.

A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to 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, its form of ownership interest, its representation on the entity’s governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions and to replace the manager of and/or liquidate the entity.

The Company continually evaluates the need to consolidate joint ventures based on standards set forth in GAAP. In determining whether the Company has a controlling interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, power to make decisions and contractual and substantive participating rights of the partners/members as well as whether the entity is a VIE for which the Company is the primary beneficiary. As of December 31, 2012, the Company consolidated the accounts of three joint ventures (the “Consolidated Joint Ventures”), which held real estate assets with an aggregate book value of $55.0 million.

In addition, the Company evaluates its investments in marketable securities to determine if they represent variable interests in VIEs. As of December 31, 2012, the Company determined that investments in marketable securities are variable interests in VIEs, of which the Company is not the primary beneficiary because it does not have the ability to direct the activities of the VIEs that most significantly impact each entity’s economic performance. The Company’s maximum exposure to loss from these investments does not exceed their aggregate amortized cost basis of $271.1 million.

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

F-10

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Investment in and Valuation of Real Estate Assets

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

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

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

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 is 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 years endedDecember 31, 2012, 2011, and 2010.

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

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

F-11

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

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

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

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

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 impact the Company’s results of operations.

Discontinued Operations

Upon the disposal of a real estate asset or the determination of a real estate asset as being held for sale, the Company determines if the asset disposed of is considered a component of the Company. A component is comprised of operations and cash flows that can clearly be distinguished, operationally and for financial reporting purposes, from the rest of the Company. If the asset is considered a component of the Company, the results of operations and gains or losses on the sale of the component are required to be presented in discontinued operations if both of the following criteria are met: (1) the operations and cash flows of the asset have been (or will be) eliminated from the ongoing operations of the Company as a result of the disposal transaction and (2) the Company will not have any significant continuing involvement in the operations of the asset after the disposal transaction. Also, the prior period results of operations for the asset are reclassified and presented in discontinued operations in the prior consolidated statements of operations.

Sale of Real Estate Assets

Gains on the sale of real estate assets are generally recognized by the full accrual method when the following criteria are met: (1) the gain is determinable, that is, the collectability of the sales price is reasonably assured or the amount that will not be collectible can be estimated, and (2) the earnings process is virtually complete, that is, the Company is not obligated to perform significant activities after the sale to earn the gain.

F-12

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Investment in Notes Receivable

Notes receivable consist of loans acquired by the Company, which are secured by real estate properties. Notes receivable are recorded at stated principal amounts net of any discount or premium and deferred loan origination costs or fees. The related discounts or premiums are accreted or amortized over the life of the related note receivable. The Company defers certain loan origination and commitment fees and amortizes them as an adjustment of yield over the term of the related note receivable. The related accretion of discounts and/or amortization of premiums and origination costs are recorded in interest income on notes receivable. The Company evaluates the collectability of both interest and principal on each note receivable to determine whether it is collectible, primarily through the evaluation of credit quality indicators such as underlying collateral and payment history. A note receivable is considered to be impaired, when based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. If a note receivable is considered to be impaired, the amount of loss is calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the note receivable’s effective interest rate or to the value of the underlying collateral if the note receivable is collateral dependent. Interest income on performing notes receivable is accrued as earned. Interest income on impaired notes receivable is recognized on a cash basis. Evaluating notes receivable for potential impairment can require management to exercise significant judgments. No impairment losses or allowances were recorded related to notes receivable for the years ended December 31, 2012, 2011 and 2010.

Investment in Marketable Securities

Investments in marketable securities consist of investments in CMBS, including those pledged as collateral. The Company classifies its investments as available-for-sale because although the Company does not actively trade these securities, the Company may sell them prior to their maturity. These investments are carried at estimated fair value with unrealized gains and losses reported in accumulated other comprehensive income (loss). The Company uses estimated non-binding quoted market prices from the trading desks of financial institutions that are dealers in such securities, where available, for similar CMBS tranches that actively participate in the CMBS market and industry benchmarks, such as Trepp’s CMBS Analytics, where applicable. Market conditions, such as interest rates, liquidity, trading activity and credit spreads may cause significant variability to the received quotes. If the Company is unable to obtain quotes or if the Company believes the quotes received are inaccurate, the Company would estimate fair value using internal models that primarily consider Trepp’s CMBS Analytics, expected cash flows, known and expected defaults and rating agency reports. Changes in market conditions could result in a significant increase or decrease in the recorded amount of the securities. Significant judgment is involved in valuations and different judgments and assumptions used in management’s valuation could result in alternative valuations. If there are significant disruptions to the financial markets, the Company’s estimates of fair value may have significant volatility. Upon the sale of a security, the realized net gain or loss is computed on a specific identification basis.

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.

Accretion of discounts on the CMBS is recognized based on the effective yield method and is recorded in the accompanying consolidated statements of operations in interest income on marketable securities. The effective yield on these CMBS is based on the projected cash flows from each security, which are estimated based on the Company’s observation of current information and events and include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. The Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models, and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, and prepayments of principal. Therefore actual maturities of the securities may be shorter than stated contractual maturities.

F-13

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturities when purchased of three months or less to be cash equivalents. The Company considers investments in highly liquid money market accounts to be cash equivalents.

Restricted Cash and Escrows

Included in restricted cash was $14.0 million and $15.2 million as of December 31, 2012 and 2011, respectively, held by lenders in escrow accounts for tenant and capital improvements, leasing commissions, repairs and maintenance and other lender reserves for certain properties, in accordance with the respective lender’s loan agreement. Also included in restricted cash was $4.4 million and $387,000 held by lenders in a lockbox account, as of December 31, 2012 and 2011, respectively. As part of certain debt agreements, rents from certain encumbered properties are deposited directly into a lockbox account, from which the monthly debt service payment is disbursed to the lender and the excess is disbursed to the Company. In addition, the Company had escrowed investor proceeds for which shares of common stock had not been issued of $1.9 million in restricted cash as of December 31, 2011. There were no escrowed investor proceeds included in restricted cash as December 31, 2012.

Investment in Unconsolidated Joint Ventures

Investment in unconsolidated joint ventures as of December 31, 2012 consisted of the Company’s interest in seven joint ventures that owned 12 multi-tenant properties (the “Unconsolidated Joint Ventures”). The Company accounts for the Unconsolidated Joint Ventures using the equity method of accounting as the Company has the ability to exercise significant influence, but not control, over operating and financial policies of these investments. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the joint venture’s earnings and distributions. The Company is required to determine whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of its investment in the joint venture. If an event or change in circumstance has occurred, the Company is required to evaluate the joint venture for potential impairment and determine if the carrying amount of its investment exceeds its fair value. An impairment charge is recorded when an impairment is deemed to be other-than-temporary. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until the carrying amount is fully recovered. The evaluation of an investment in a joint venture for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions.  The use of different judgments and assumptions could result in different conclusions. No impairment indicators were identified and no impairment losses were recorded related to the Unconsolidated Joint Ventures for the years endedDecember 31, 2012, 2011 or 2010.

Rents and Tenant Receivables

Rents and tenant receivables primarily includes amounts to be collected in future periods related to the recognition of rental income on a straight-line basis over the lease term and cost recoveries due from tenants. The Company makes estimates of the uncollectability of its accounts receivable related to base rents, expense reimbursements and other revenues. The Company analyzes accounts receivable and historical bad debt levels, customer creditworthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, tenants in bankruptcy, if any, are analyzed and estimates are made in connection with the expected recovery of pre-petition and post-petition claims. The Company’s reported net income or loss is directly affected by management’s estimate of the collectability of accounts receivable. The Company records allowances for those balances that the Company deems to be uncollectible, including any amounts relating to straight-line rent receivables.

Prepaid Expenses

Prepaid expenses include expenses paid as of the balance sheet date that relate to future periods and will be expensed or reclassified to another account during the period to which the costs relate. Any amounts with no future economic benefit are charged to earnings when identified.

F-14

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Derivative Instruments and Hedging Activities

The Company accounts for its derivative instruments, including certain derivative instruments embedded in other contracts, at fair value. Accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative instrument and the designation of the derivative instrument. The change in fair value of the effective portion of the derivative instrument that is designated as a hedge is recorded as other comprehensive income (loss). The changes in fair value for derivative instruments that are not designated as a hedge or that do not meet the hedge accounting criteria are recorded as a gain or loss to operations.

Deferred Financing Costs

Deferred financing costs are capitalized and amortized on a straight-line basis over the term of the related financing arrangement, which approximates the effective interest method. If a note payable is prepaid, any unamortized deferred financing costs related to the note payable would be expensed. Amortization of deferred financing costs, including any write-offs, was $14.1 million, $8.4 million and $2.7 million for the years ended December 31, 2012, 2011 and 2010, respectively, and was recorded in interest expense in the consolidated statements of operations.

Revenue Recognition

Certain properties have leases where minimum rental payments increase during the term of the lease. The Company records rental income for the full term of each lease on a straight-line basis. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of determining 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.

Income Taxes

The Company qualified and elected to be taxed as a REIT for federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. The Company generally is not subject to federal corporate income tax to the extent it distributes its taxable income to its stockholders, and so long as it, among other things, distributes at least 90% of its annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains). REITs are subject to a number of other organizational and operational requirements. Even if the Company maintains its qualification for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.

Concentration of Credit Risk

As of December 31, 2012, the Company had cash on deposit, including restricted cash, in 12 financial institutions, eight of which had deposits in excess of federally insured levels, totaling $93.0 million; however, the Company has not experienced any losses in such accounts. The Company limits significant cash investments to accounts held by financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk on its cash deposits.

No single tenant accounted for greater than 10% of the Company’s 2012 gross annualized rental revenues. Tenants in the restaurant industry comprised 10% of the Company’s 2012 gross annualized rental revenues. Additionally, the Company has certain geographic concentrations in its property holdings. In particular, as of December 31, 2012, 190 of the Company’s properties were located in Texas accounting for 17% of its 2012 gross annualized rental revenues.

Offering and Related Costs

CR III Advisors funds all of the organization and offering costs on the Company’s behalf and is reimbursed for such costs up to 1.5% of gross proceeds from the Offerings, excluding selling commissions and the dealer-manager fee. During the years ended December 31, 2012, 2011 and 2010, the Company recorded $13.2 million, $21.6 million and $14.0 million, respectively, of organization and offering expense reimbursements for services provided by, and costs incurred by, CR III Advisors. The offering costs, which include items such as legal and accounting fees, marketing, personnel and promotional printing costs, are recorded as a reduction of capital in excess of par value along with sales commissions and dealer manager fees of 7% and 2%, respectively. Organization costs are expensed when incurred.

F-15

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Due to Affiliates

Certain affiliates of the Company’s advisor received, and will continue to receive fees, reimbursements, and compensation in connection with services provided relating to the acquisition, management, financing, leasing and sale of the assets of the Company.

Stockholders’ Equity

As of December 31, 2012 and 2011, the Company was authorized to issue 990.0 million shares of common stock and 10.0 million shares of preferred stock. All shares of such stock have a par value of $0.01 per share. The Company’s board of directors may amend the charter to authorize the issuance of additional shares of capital stock without obtaining stockholder approval.

Redeemable Common Stock

The Company has adopted a share redemption program that permits its stockholders to sell their shares, which is limited to redemptions that can be funded with cumulative net proceeds from the Company’s DRIP and subject to other limitations discussed in Note 17 to these consolidated financial statements. The Company records amounts that are redeemable under the share redemption program as redeemable common stock outside of permanent equity in its consolidated balance sheets. Changes in the amount of redeemable stock from period to period are recorded as an adjustment to capital in excess of par value.

Earnings (Loss) Per Share

Earnings per share are calculated based on the weighted average number of common shares outstanding during each period presented. Diluted income per share considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the years ended December 31, 2012, 2011 and 2010.

Reportable Segments

The Company’s operating segment consists of commercial properties, which include activities related to investing in real estate including retail, office and distribution properties and other real estate related assets. The commercial properties are geographically diversified throughout the United States and have similar economic characteristics. The Company evaluates operating performance on an overall portfolio level; therefore, the Company’s properties are one reportable segment.

Interest

Interest is charged to interest expense as it accrues, unless the interest relates to loans on properties under development, in which case it is capitalized. During the years ended December 31, 2012, 2011 and 2010, the Company capitalized $299,000, $48,000, and $26,000 respectively, of interest costs relating to the development projects as discussed in Note 5 to these consolidated financial statements.

Distributions Payable and Distribution Policy

In order to maintain its status as a REIT, the Company is required to, among other things, make distributions each taxable year equal to at least 90% of its taxable income, computed without regard to the dividends paid deduction and excluding net capital gains. To the extent funds are available, the Company intends to pay regular distributions to stockholders. Distributions are paid to stockholders of record as of the applicable record dates.

The Company’s board of directors authorized a daily distribution, based on 366 days in the calendar year, of $0.001776144 per share (which equates to 6.50% on an annualized basis calculated at the current rate, assuming a $10.00 per share purchase price) for stockholders of record as of the close of business on each day of the periods commencing on January 1, 2012 and ending on December 31, 2012. As of December 31, 2012, the Company had distributions payable of $26.4 million.

F-16

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Repurchase Agreements

In certain circumstances the Company may obtain financing through a repurchase agreement. The Company evaluates the initial transfer of a financial instrument and the related repurchase agreement for sale accounting treatment. In instances where the Company maintains effective control over the transferred securities, the Company accounts for the transaction as a secured borrowing, and accordingly, both the securities and related repurchase agreement payable are recorded separately in the consolidated balance sheets. In instances where the Company does not maintain effective control over the transferred securities, the Company accounts for the transaction as a sale of securities for proceeds consisting of cash and a forward purchase contract.

Recent Accounting Pronouncements

In May 2011, the U.S. Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2011-04, Fair Value Measurements and Disclosures (Topic 820): Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRS, (“ASU 2011-04”), which converges guidance between GAAP and International Financial Reporting Standards to provide a uniform framework of fair value measurements and requires additional disclosures including quantifiable information about measurements to changes in unobservable inputs for Level 3 fair value measurements. ASU 2011-04 became effective for the Company on January 1, 2012. The adoption of ASU 2011-04 did not have a material impact on the Company’s consolidated financial statements.

In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income, which requires the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The Company elected to present two separate but consecutive statements herein.

NOTE 4 — FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

Cash and cash equivalents and restricted cash – The Company considers the carrying values of these financial assets to approximate fair value because of the short period of time between their origination and their expected realization.

Notes receivable – The fair value is estimated by discounting the expected cash flows on the notes at rates at which management believes similar loans would be made as of December 31, 2012 and 2011. The estimated fair value of these notes was $97.3 million and $69.0 million as of December 31, 2012 and 2011, respectively, as compared to the carrying value of $90.4 million and $64.7 million as of December 31, 2012 and 2011, respectively. The fair value of the Company’s notes receivable is estimated using Level 2 inputs.

F-17

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Notes payable and other borrowings – The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of December 31, 2012 and 2011. The estimated fair value of the notes payable and other borrowings was $3.4 billion and $2.4 billion as of December 31, 2012 and 2011, respectively, as compared to the carrying value of $3.3 billion and $2.4 billion as of December 31, 2012 and 2011, respectively. The fair value of the Company’s notes payable and other borrowings is estimated using Level 2 inputs.

Marketable securities – The Company’s marketable securities are carried at fair value and are valued using Level 3 inputs. The Company used estimated non-binding quoted market prices from the trading desks of financial institutions that are dealers in such securities for similar CMBS tranches that actively participate in the CMBS market and industry benchmarks, such as Trepp’s CMBS Analytics. As of December 31, 2012 and 2011, no marketable securities were valued using internal models.

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

Earnout Agreements – The Company has acquired certain properties subject to earnout provisions obligating the Company to pay additional consideration to the seller contingent on the future leasing and occupancy of vacant space at each property. Earnout payments are based on a predetermined formula and have set time periods regarding the obligation to make the payment as set forth in the respective purchase and sale agreement. If, at the end of the respective time period, certain space has not been leased and occupied, the Company will have no further obligation under the applicable earnout provision. The earnouts are carried at fair value and are valued using Level 3 inputs, including estimated timing and probability of leasing the vacant space, as there is no public market for this item and thus Level 1 and Level 2 inputs are unavailable for an item of this nature. Earnouts are recorded upon acquisition of the related property at their estimated fair value, and any changes to the estimated fair value are reflected in the statements of operations. The estimated fair value of these agreements totaled $5.3 million and $5.5 million as of December 31, 2012 and 2011, respectively, and is included in the accompanying consolidated balance sheets in other liabilities. During the year ended December 31, 2012, the Company recorded additional earnout liabilities with an aggregate estimated fair value of $6.5 million upon purchase of certain properties. In addition, during the year ended December 31, 2012, the Company increased the fair value of the outstanding earnout agreements by $789,000, which is recorded in the accompanying consolidated statements of operations in acquisition related expenses. During the year ended December 31, 2012, the obligations under certain earnout provisions were satisfied and the Company paid $7.4 million to the seller.

Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, on disposition of the financial assets and liabilities.As of December 31, 2012, there have been no transfers of financial assets or liabilities between levels.

In accordance with the fair value hierarchy described above, the following table shows 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 December 31, 2012 and 2011 (in thousands):

F-18

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

	Balance as of December 31, 2012			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Marketable securities	$	317,201		$	—	$	—		$	317,201
Liabilities:
Interest rate swaps	$	(23,046	)	$	—	$	(23,046	)	$	—
Earnout agreements	(5,339		)	—		—			(5,339		)
Total liabilities	$	(28,385	)	$	—	$	(23,046	)	$	(5,339	)
	Balance as of December 31, 2011			Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable  Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Marketable securities	$	114,129		$	—	$	—		$	114,129
Liabilities:
Interest rate swaps	$	(26,092	)	$	—	$	(26,092	)	$	—
Earnout agreements	(5,519		)	—		—			(5,519		)
Total liabilities	$	(31,611	)	$	—	$	(26,092	)	$	(5,519	)

The following table shows a reconciliation of the change in fair value of the Company’s marketable securities with significant unobservable inputs (Level 3) for the years ended December 31, 2012 and 2011 (in thousands):

		Year Ended December 31,
		2012			2011
Balance at beginning of year		$	114,129		$	—
Total gains or losses
	Reclassification of previous unrealized gain on marketable securities into net income	(8,852		)	—
	Unrealized gain included in other comprehensive income (loss), net	53,664			1,335
Purchases, issuances, settlements, sales and accretion
	Purchases	205,986			112,032
	Issuances	—			—
	Sales	(50,967		)	—
	Accretion included in earnings, net	3,241			762
Balance at end of year		$	317,201		$	114,129

F-19

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 5 — REAL ESTATE ACQUISITIONS

2012 Property Acquisitions

During the year ended December 31, 2012, the Company acquired interests in 349 commercial properties for an aggregate purchase price of $2.0 billion (the “2012 Acquisitions”). The Company purchased the 2012 Acquisitions with net proceeds from the Follow-on Offering, the DRIP Offering, borrowings and the sale of properties and other investments. The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation (in thousands):

	December 31, 2012
Land	$	412,674
Building and improvements	1,330,874
Acquired in-place leases	252,186
Acquired above market leases	38,260
Acquired below market leases	(39,054		)
Total purchase price	$	1,994,940

The Company recorded revenue for the year ended December 31, 2012 of $81.4 million, respectively, and a net loss for the year ended December 31, 2012 of $25.7 million, respectively, related to the 2012 Acquisitions. The Company expensed $60.4 million of property related acquisition costs for the year ended December 31, 2012.

The following information summarizes selected financial information of the Company, as if all of the 2012 Acquisitions were completed on January 1, 2011 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, 2012 and 2011, respectively (in thousands):

	Year Ended December 31,
	2012		2011
Pro forma basis (unaudited):
Revenue	$	661,650	$	531,356
Net income	$	296,683	$	45,793

The unaudited pro forma information for the year ended December 31, 2012 was adjusted to exclude $60.4 million of property related acquisition costs recorded during the year ended December 31, 2012. These costs were recognized in the unaudited pro forma information for the year ended December 31, 2011. 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 2011, nor does it purport to represent the results of future operations.

2012 Investments in Development Projects

During the year ended December 31, 2012, the Company acquired a completed development project for an aggregate purchase price of $7.7 million through the repayment of a construction loan facility and the purchase of the joint venture partner’s noncontrolling interest. The Company also completed the construction of a single tenant office building. Total costs for the construction of the building were $12.2 million. The development of these projects was initiated in 2011, and therefore, these properties are not included in the 2012 Acquisitions.

2012 Investments in Unconsolidated Joint Ventures

During the year endedDecember 31, 2012, the Company acquired financial interests in two unconsolidated joint venture arrangements for an aggregate investment of $46.5 million. In addition, the Company acquired a $27.7 million financial interest in one of the Consolidated Joint Ventures during the year ended December 31, 2012, whose only assets are interests in three of the Unconsolidated Joint Ventures.

F-20

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In connection with the acquired interests in the unconsolidated joint venture arrangements discussed above, one of the Unconsolidated Joint Ventures borrowed $17.6 million (the “Advance Note”) from one of the Consolidated Joint Ventures and fully repaid the Advance Note during the year endedDecember 31, 2012. The Advance Note had a variable interest rate equal to the one-month LIBOR plus 225 basis points. During the year endedDecember 31, 2012, the Company recorded $107,000 of interest income on the Advance Note. No financing coordination fees were incurred in connection with the Advance Note.

2011 Property Acquisitions

During the year endedDecember 31, 2011, the Company acquired interests in 244 commercial properties, including the properties held in two of the Consolidated Joint Ventures, for an aggregate purchase price of $2.2 billion (the “2011 Acquisitions”). The Company purchased the 2011 Acquisitions with net proceeds from the Offerings and through the issuance or assumption of mortgage notes and credit facility borrowings. The Company allocated the purchase price of the 2011 Acquisitions to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation (in thousands):

	December 31, 2011
Land	$	448,728
Building and improvements	1,491,347
Acquired in-place leases	244,776
Acquired above market leases	69,823
Acquired below market leases	(32,402		)
Fair value adjustment of assumed notes payable	438
Total purchase price	$	2,222,710

The Company recorded revenue for the year endedDecember 31, 2011 of $84.6 million, respectively, and a net loss for the year endedDecember 31, 2011 of $16.5 million, respectively, related to the 2011 Acquisitions. The Company expensed $59.4 million of acquisition costs for the year ended December 31, 2011.

The following information summarizes selected financial information of the Company, as if all of the 2011 Acquisitions were completed on January 1, 2010 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, 2011 and 2010, respectively (in thousands):

	Year Ended December 31,
	2011		2010
Pro forma basis (unaudited):
Revenue	$	474,975	$	336,716
Net income	$	159,743	$	34,158

The unaudited pro forma information for the year ended December 31, 2011 was adjusted to exclude $59.4 million of acquisition costs recorded during the year ended December 31, 2011. These costs were recognized in the unaudited pro forma information for the year ended December 31, 2010. 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 2010, nor does it purport to represent the results of future operations.

2011 Investments in Development Projects

During the year endedDecember 31, 2011, the Company acquired a completed development project for an aggregate purchase price of $5.9 million through the repayment of a construction loan facility and the purchase of the joint venture partner’s noncontrolling interest. The development of this project was initiated in 2010, and therefore, this property purchase is not included in the 2011 Acquisitions.

F-21

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In addition, the Company and one of the Consolidated Joint Ventures acquired three land parcels for development of two office facilities and a single tenant commercial property. As of December 31, 2011, the aggregate construction costs incurred of $12.3 million are included in the accompanying December 31, 2011 consolidated balance sheet in building and improvements. The land acquired for an aggregate amount of $9.3 million is included in land, and the aggregate construction facility borrowings of $4.6 million are included in notes payable and other borrowings in the accompanying December 31, 2011 consolidated balance sheet. As discussed above, the Company completed two of the three projects during the year ended December 31, 2012.

2011 Investments in Unconsolidated Joint Ventures

During the year endedDecember 31, 2011, the Company acquired an interest in an unconsolidated joint venture arrangement for $7.7 million.

NOTE 6 — ACQUIRED INTANGIBLE LEASE ASSETS

Acquired intangible lease assets consisted of the following (in thousands):

		As of December 31,
		2012		2011
Acquired in-place leases, net of accumulated amortization of $101,392 and $50,715,
	respectively (with a weighted average life of 12.7 and 15.3 years, respectively)	$	710,469	$	543,663
Acquired above market leases, net of accumulated amortization of $20,866 and $11,115,
	respectively (with a weighted average life of 13.2 and 15.9 years, respectively)	150,494		139,153
		$	860,963	$	682,816

Amortization expense related to the acquired in-place lease assets for the years ended December 31, 2012, 2011 and 2010 was $55.9 million, $33.1 million and $12.0 million, respectively. Amortization expense related to the acquired above market lease assets for the years ended December 31, 2012, 2011 and 2010 was $11.6 million, $6.9 million and $2.1 million, respectively.

Estimated amortization expense of the intangible lease assets, excluding the intangible lease assets related to the Held for Sale Properties (as defined below), as of December 31, 2012 for each of the five succeeding fiscal years is as follows:

	Amortization
Year Ending December 31,	Leases In-Place		Above Market Leases
2013	$	64,896	$	13,723
2014	$	62,474	$	13,283
2015	$	61,208	$	13,063
2016	$	58,201	$	12,476
2017	$	56,076	$	12,028

NOTE 7 — INVESTMENT IN NOTES RECEIVABLE

During the year endedDecember 31, 2012, the Company acquired a $25.0 million junior mezzanine loan (the “Mezzanine Loan”), secured by equity interests in a joint venture which owns 15 shopping centers. The Mezzanine Loan has an interest rate of LIBOR plus 9.0% with a LIBOR floor of 0.50% and matures in July 2015 with two one-year extension options. As of December 31, 2012, investment in notes receivable included $25.4 million related to the Mezzanine Loan, which consisted of the outstanding face amount of the loan of $25.0 million, $500,000 of acquisition costs and accumulated amortization of acquisition costs of $65,000. The acquisition costs are amortized over the term of the loan using the effective interest rate method. Interest only payments are due each month. There were no amounts past due as of December 31, 2012.

In addition, as of December 31, 2012, the Company owned two mortgage notes receivable, each of which is secured by an office building (collectively the “Mortgage Notes”). As of December 31, 2012 and 2011, investment in notes receivable included $64.9 million and $64.7 million, respectively, related to the Mortgage Notes. As of December 31, 2012, the Mortgage Notes balance consisted of the outstanding face amount of the notes of $72.9 million, a $12.0 million discount, $1.3 million of acquisition costs and net accumulated accretion of discounts and amortization of acquisition costs of $2.8 million. As of

F-22

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

December 31, 2011, the Mortgage Notes balance consisted of the outstanding face amount of the notes of $73.7 million, a $12.0 million discount, $1.3 million of acquisition costs and net accumulated accretion of discounts and amortization of acquisition costs of $1.7 million. The discount is accreted and acquisition costs are amortized over the terms of each respective Mortgage Note using the effective interest rate method. The Mortgage Notes have a fixed interest rate of 5.93% per annum and mature on October 1, 2018. Interest and principal payments are due each month until October 1, 2018. There were no amounts past due as of December 31, 2012.

The Company evaluates the collectability of both interest and principal on each note receivable to determine whether it is collectible, primarily through the evaluation of credit quality indicators, such as underlying collateral and payment history. No impairment losses were recorded related to notes receivable for the years endedDecember 31, 2012, 2011 or 2010. In addition, no allowances for uncollectability were recorded related to notes receivable as of December 31, 2012 or 2011.

NOTE 8 — INVESTMENT IN MARKETABLE SECURITIES

During the year ended December 31, 2012, the Company sold six CMBS and half of the Company’s investment in two CMBS for aggregate proceeds of $63.4 million and realized a gain on the sale of $12.5 million, of which $8.9 million had previously been recorded in other comprehensive income (loss). As of December 31, 2012, the Company owned 29 CMBS, with an estimated aggregate fair value of $317.2 million. As of December 31, 2011, the Company owned 11 CMBS, with an estimated aggregate fair value of $114.1 million.

As of December 31, 2012, certain of these securities were pledged as collateral under repurchase agreements (the “Repurchase Agreements”), as discussed in Note 11 to these consolidated financial statements. The following table provides the activity for the CMBS during the year ended December 31, 2012 (in thousands):

	Amortized Cost Basis			Unrealized Gain			Fair Value
Marketable securities as of December 31, 2011	$	112,794		$	1,335		$	114,129
Face value of marketable securities acquired	320,020			—			320,020
Discounts on purchase of marketable securities, net of acquisition costs	(114,034		)	—			(114,034		)
Net accretion on marketable securities	3,241			—			3,241
Increase in fair value of marketable securities	—			53,664			53,664
Decrease due to sale of marketable securities	(50,967		)	(8,852		)	(59,819		)
Marketable securities as of December 31, 2012	$	271,054		$	46,147		$	317,201

The following table shows the fair value and gross unrealized gains and losses of the Company’s CMBS as of December 31, 2012 (in thousands) and the length of time the CMBS has been in the unrealized gain or continuous loss position:

	Less than 12 months							12 Months or More						Total
Description of Securities	Fair Value		Unrealized Gains		Unrealized (Losses)			Fair Value		Unrealized Gains		Unrealized (Losses)		Fair Value		Unrealized Gains		Unrealized (Losses)
CMBS	$	317,201	$	48,192	$	(2,045	)	$	—	$	—	$	—	$	317,201	$	48,192	$	(2,045	)

As of December 31, 2012, the unrealized losses of $2.0 million were deemed to be a temporary impairment based upon the following: (1) the Company having no intent to sell these securities, (2) it is more likely than not that the Company will not be required to sell the securities before recovery and (3) the Company’s expectation to recover the entire amortized cost basis of these securities. The Company determined that the unrealized losses of $2.0 million resulted from volatility in interest rates and credit spreads and other qualitative factors relating to macro-credit conditions in the mortgage market. Additionally, as of December 31, 2012, the Company had determined that the subordinate CMBS tranches below the Company’s CMBS investment adequately protected the Company’s ability to recover its investment and that the Company’s estimates of anticipated future cash flows from the CMBS investment had not been adversely impacted by any deterioration in the creditworthiness of the specific CMBS issuers.

F-23

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The scheduled maturity of the Company’s CMBS as of December 31, 2012 is as follows (in thousands):

	Amortized Cost		Estimated Fair Value
Due within one year	$	—	$	—
Due after one year through five years	—		—
Due after five years through ten years	260,412		307,396
Due after ten years	10,642		9,805
	$	271,054	$	317,201

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

NOTE 9 — DISCONTINUED OPERATIONS

During the year ended December 31, 2012, the Company disposed of 26 single-tenant properties and two multi-tenant properties for an aggregate gross sales price of $573.8 million (the “2012 Property Dispositions”). As of the respective closing dates of the 2012 Property Dispositions, the major class of assets and liabilities of these properties included net total investment in real estate assets of $450.2 million, straight-line rent receivables of $12.7 million, notes payable of $180.3 million, which includes $24.3 million assumed by the buyer, and net below market lease liabilities of $9.0 million. The Company has no continuing involvement with the 2012 Property Dispositions. The Company also classified two properties as held for sale as of December 31, 2012 (the “Held for Sale Properties”). The results of operations for the 2012 Property Dispositions and the Held for Sale Properties (collectively, the “Discontinued Operations Properties”) have been presented as discontinued operations on the Company’s consolidated statements of operations for all periods presented.

The following table summarizes the operating income from discontinued operations of the Discontinued Operations Properties for the years ended December 31, 2012, 2011 and 2010 (in thousands):

	Year Ended December 31,
	2012		2011		2010
Total revenue	$	34,308	$	42,322	$	25,318
Total expenses	27,182		28,269		22,499
Income from discontinued operations	7,126		14,053		2,819
Gain on sale of real estate assets	108,457		—		—
Total income from discontinued operations	$	115,583	$	14,053	$	2,819

The following table presents the major classes of assets and liabilities of the Held for Sale Properties as of December 31, 2012 and 2011 (in thousands):

	Year Ended December 31,
	2012		2011
Investment in real estate assets, net	$	15,376	$	15,759
Straight-line rent receivables	109		77
Assets related to real estate held for sale, net	$	15,485	$	15,836
Liabilities related to real estate assets held for sale (1)	$	322	$	347

________________

(1) Liabilities related to real estate assets held for sale includes net below market lease liabilities and prepaid rent and are included in derivative liabilities, deferred rent and other liabilities in the Company’s consolidated balance sheets for all periods presented.

F-24

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 10 — 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 risks. The following table summarizes the terms of the Company’s executed swap agreements designated as hedging instruments (in thousands):

Outstanding Notional

Fair Value of Liabilities

Balance Sheet

Amount as of

Interest

Effective

Maturity

December 31,

December 31,

Location

December 31, 2012

Rates (1)

Dates

Dates

2012

2011

Interest Rate Swaps

Derivative liabilities, deferred rent and other liabilities

$

744,250

3.15% to 6.83%

12/18/2009 to 12/14/2012

6/27/2014 to 4/1/2021

$

(23,046

)

$

(26,092

)

_______________

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

Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 4 to these consolidated financial statements. The notional amount under the 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, to hedge the variability of the anticipated cash flows on its variable rate notes payable. The change in fair value of the effective portion of the derivative instruments that are designated as hedges is recorded in other comprehensive income or loss. The ineffective portion of the change in fair value of the derivative instruments is recorded in interest expense.

The following table summarizes the gains and losses on the Company’s derivative instruments and hedging activities for the years ended December 31, 2012, 2011 and 2010 (in thousands):

	Amount of Loss Recognized in Other Comprehensive Income (Loss)									Amount of Loss Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest Expense (1)
	Year Ended December 31,									Year Ended December 31,
Derivatives in Cash Flow Hedging Relationships	2012			2011			2010			2012		2011		2010
Interest Rate Swaps	$	(6,217	)	$	(18,904	)	$	(7,053	)	$	9,263	$	—	$	—

_______________

(1) During the year ended December 31, 2012, an interest rate swap was designated as ineffective and the unrealized loss was reclassified from accumulated other comprehensive income (loss) into interest expense as it related to one of the 2012 Property Dispositions and the Company terminated the swap when the property was sold.

The Company has agreements with each of its derivative counterparties that contain a provision whereby if the Company defaults on certain of its unsecured indebtedness, then the Company could also be declared in default on its derivative obligations resulting in an acceleration of payment. 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 credit-worthy counterparties. The Company records credit risk valuation adjustments on its interest rate swaps based on the respective credit quality of the Company and the counterparty. As of both December 31, 2012 and 2011, there were no events of default related to the interest rate swaps. As of December 31, 2011, there were no termination events related to the interest rate swaps.

F-25

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 11 — NOTES PAYABLE AND OTHER BORROWINGS

As of December 31, 2012, the Company and the Consolidated Joint Ventures had $3.3 billion of debt outstanding, with a weighted average years to maturity of 5.3 years and weighted average interest rate of 4.38%. The following table summarizes the debt activity during the year ended and balances as of December 31, 2012 (in thousands):

			During the Year Ended December 31, 2012
	Balance as of December 31, 2011		Debt Issuance and Assumptions		Repayments			Other (1)			Balance as of December 31, 2012
Fixed rate debt	$	1,560,068	$	898,906	$	(226,556	)	$	79,123		$	2,311,541
Variable rate debt	132,143		31,799		—			(79,000		)	84,942
Construction facilities	4,614		28,364		(5,220		)	—			27,758
Credit facility	647,750		1,010,000		(890,000		)	—			767,750
Repurchase agreements	29,409		80,184		(9,536		)	—			100,057
Total(2)	$	2,373,984	$	2,049,253	$	(1,131,312	)	$	123		$	3,292,048

________________

(1) Represents fair value adjustment of assumed mortgage notes payable, net of amortization, of $123,000. In addition, $79.0 million of variable rate debt outstanding as of December 31, 2012 was effectively fixed through the use of an interest rate swap with an effective date of June 29, 2012.

(2) The table above does not include loan amounts associated with certain unconsolidated joint venture arrangements of $195.8 million, of which $10.2 million is recourse to CCPT III OP. These loans mature on various dates ranging from October 2015 to July 2021.

As of December 31, 2012, the fixed rate debt includes $465.5 million of variable rate debt subject to interest rate swap agreements which had the effect of fixing the variable interest rates per annum through the maturity date of the loan. In addition, the fixed rate debt includes mortgage notes assumed with an aggregate face amount of $40.7 million and an aggregate fair value of $39.4 million at the date of assumption. The fixed rate debt has interest rates ranging from 2.75% to 6.83% per annum. The variable rate debt has variable interest rates ranging from LIBOR plus 225 basis points to 325 basis points per annum. In addition, the construction facilities have interest rates ranging from LIBOR plus 235 basis points to 250 basis points per annum, with certain debt containing LIBOR floors. The debt outstanding matures on various dates from February 2013 through January 2023. The aggregate balance of gross real estate and related assets, net of gross intangible lease liabilities, securing the fixed and variable rate debt outstanding was $4.8 billion as of December 31, 2012. Each of the mortgage notes payable is secured by the respective properties on which the debt was placed.

As of December 31, 2012, the Company had $89.8 million available for borrowing under a senior unsecured credit facility (the “Credit Facility”) based on the underlying collateral pool of $1.4 billion. The Credit Facility provides borrowings up to $857.5 million, which includes a $278.75 million term loan (the “Term Loan”) and up to $578.75 million in revolving loans (the “Revolving Loans”). The Credit Facility may be increased to a maximum of $950.0 million. Depending upon the type of loan specified and overall leverage ratio, the Revolving Loans bear interest at either LIBOR plus an interest rate spread ranging from 2.25% to 3.00% or a base rate plus an interest rate spread ranging from 1.25% to 2.00%. The base rate is greater of (1) LIBOR plus 1.00%, (2) Bank of America N.A.’s Prime Rate or (3) the Federal Funds Rate plus 0.50%. During the year ended December 31, 2011, the Company executed two swap agreements associated with the Term Loan, which had the effect of fixing the variable interest rates per annum through the maturity date of the respective loan at 3.45% and 3.15%, respectively. The Revolving Loans and Term Loan had a combined weighted average interest rate of 3.37% as of December 31, 2012.

The Repurchase Agreements have interest rates ranging from LIBOR plus 120 basis points to 175 basis points and mature on various dates from January 2013 through March 2013. Upon maturity, the Company may elect to renew the Repurchase Agreements for a period of 90 days until the CMBS mature. The CMBS have a weighted average remaining term of 9.5 years. Under the Repurchase Agreements, the lender retains the right to mark the underlying collateral to fair value. A reduction in the value of the pledged assets would require the Company to provide additional collateral to fund margin calls. As of December 31, 2012, the securities held as collateral had a fair value of $266.1 million and an amortized cost of $224.9 million. There was no cash collateral held by the counterparty as of December 31, 2012. The Repurchase Agreements are being accounted for as secured borrowings because the Company maintains effective control of the financed assets. The Repurchase Agreements are non-recourse to the Company and CCPT III OP.

F-26

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Credit Facility and certain notes payable contain customary affirmative, negative and financial covenants, representations, warranties and borrowing conditions. These agreements also include usual and customary events of default and remedies for facilities of this nature. Based on the Company’s analysis and review of its results of operations and financial condition, the Company believes it was in compliance with the covenants of the Credit Facility and such notes payable as of December 31, 2012.

The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt as of December 31, 2012 for each of the five succeeding fiscal years and the period thereafter:

Year Ending December 31,	Principal Repayments(1)(2)
2013	$	164,330
2014	651,232
2015	337,704
2016	169,274
2017	190,666
Thereafter	1,779,782
Total	$	3,292,988

________________

(1) Assumes the Company accepts the interest rates that one lender may reset on September 1, 2013 and February 1, 2015, respectively, related to mortgage notes payable of $30.0 million and $32.0 million, respectively.

(2) Principal payment amounts reflect actual payments based on the face amount of notes payable secured by the Company’s wholly-owned properties and Consolidated Joint Ventures. As of December 31, 2012, the fair value adjustment, net of amortization, of mortgage notes assumed was $940,000.

NOTE 12 — ACQUIRED BELOW MARKET LEASE INTANGIBLES

Acquired below market lease intangibles consisted of the following (in thousands):

		As of December 31,
		2012		2011
Acquired below market leases, net of accumulated amortization of $16,389 and $8,782,
	respectively (with a weighted average life of 10.6 and 14.1 years, respectively)	$	113,607	$	93,050

The increase in rental and other property income resulting from the amortization of the intangible lease liability for the years ended December 31, 2012, 2011 and 2010 was $9.0 million, $5.1 million and $2.1 million, respectively.

Estimated amortization of the intangible lease liability, excluding the below market lease intangibles related to the Held for Sale Properties, as of December 31, 2012 for each of the five succeeding fiscal years is as follows (in thousands):

Year Ending December 31,	Amortization of Below Market Leases
2013	$	10,363
2014	$	10,106
2015	$	9,859
2016	$	9,537
2017	$	8,894

F-27

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 13 — SUPPLEMENTAL CASH FLOW DISCLOSURES

Supplemental cash flow disclosures for the years endedDecember 31, 2012, 2011 and 2010 are as follows (in thousands):

	Year Ended December 31,
	2012			2011			2010
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
Distributions declared and unpaid	$	26,399		$	20,858		$	14,448
Fair value of mortgage notes assumed in real estate acquisitions at date of assumption	$	24,000		$	4,863		$	10,577
Common stock issued through distribution reinvestment plan	$	169,079		$	110,093		$	65,174
Net unrealized loss on interest rate swaps	$	(6,217	)	$	(18,904	)	$	(7,035	)
Unrealized gain on marketable securities	$	53,664		$	1,335		$	—
Earnout liabilities recorded upon property acquisitions	$	6,460		$	5,519		$	—
Accrued expenditures	$	10,667		$	2,864		$	1,743
Notes payable assumed by buyer in real estate disposition	$	24,250		$	—		$	—
Supplemental Cash Flow Disclosures:
Interest paid, net of capitalized interest of $299, $48 and $26, respectively	$	121,211		$	75,945		$	20,627

NOTE 14— COMMITMENTS AND CONTINGENCIES

Litigation

In the ordinary course of business, the Company may become subject to litigation or claims. As of December 31, 2012, the Company was not aware of any pending legal proceedings of which the outcome is reasonably possible to have a material effect on its results of operations, financial condition or liquidity.

Purchase Commitments

As of December 31, 2012, the Company owned one land parcel, upon which an office building is being developed. Based on budgeted construction costs, the cost to complete the facility is estimated to be $45.8 million. The construction is being funded by a construction loan facility totaling $33.8 million. As of December 31, 2012, the Company had incurred $40.2 million in construction costs and $19.9 million was outstanding under the construction facility. Additionally, the Company had properties subject to earnout provisions obligating it to pay additional consideration to the seller contingent on the future leasing and occupancy of vacant space at the properties, as discussed in Note 4 to these consolidated financial statements.

Environmental Matters

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

F-28

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 15 — RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS

The Company has incurred commissions, fees and expenses payable to CR III Advisors or its affiliates in connection with the Offerings, and has incurred and will continue to incur commissions, fees and expenses in connection with the acquisition, management and sale of the assets of the Company.

Offerings

In connection with the Initial Offering and Follow-on Offering, Cole Capital Corporation (“Cole Capital”), the Company’s dealer manager, which is affiliated with our advisor, received a selling commission of up to 7% of gross offering proceeds, before reallowance of commissions earned by participating broker-dealers. Cole Capital reallowed 100% of selling commissions earned to participating broker-dealers. In addition, Cole Capital received 2% of gross offering proceeds, before reallowance to participating broker-dealers, as a dealer manager fee in connection with the Initial Offering and Follow-on Offering. Cole Capital, in its sole discretion, reallowed a portion of its dealer manager fee to such participating broker-dealers as a marketing and due diligence expense reimbursement, based on factors such as the volume of shares sold by such participating broker-dealers and the amount of marketing support provided by such participating broker-dealers. No selling commissions or dealer manager fees were paid to Cole Capital or any other broker-dealers with respect to shares sold under the Company’s DRIP.

All other organization and offering expenses associated with the sale of the Company’s common stock (excluding selling commissions and the dealer manager fee) were paid by CR III Advisors or its affiliates and were reimbursed by the Company up to 1.5% of aggregate gross offering proceeds. A portion of the other organization and offering expenses may be underwriting compensation.

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

	Year Ended December 31,
	2012		2011		2010
Offering:
Selling commissions	$	56,264	$	88,660	$	98,980
Selling commissions reallowed by Cole Capital	$	56,264	$	88,660	$	98,980
Dealer manager fee	$	16,662	$	25,890	$	28,773
Dealer manager fee reallowed by Cole Capital	$	8,446	$	13,089	$	14,485
Other organization and offering expenses	$	13,188	$	21,572	$	14,013

Acquisitions and Operations

CR III Advisors or its affiliates also receive acquisition and advisory fees of up to 2% of the contract purchase price of each asset for the acquisition, development or construction of properties and will be reimbursed for acquisition expenses incurred in the process of acquiring properties, so long as the total acquisition fees and expenses relating to the transaction does not exceed 6% of the contract purchase price.

The Company paid, and expects to continue to pay, CR III Advisors a monthly asset management fee of 0.0417%, which is one-twelfth of 0.5%, of the Company’s average invested assets for that month (the “Asset Management Fee”). The Company will reimburse costs and expenses incurred by CR III Advisors in providing asset management services.

The Company paid, and expects to continue to pay, Cole Realty Advisors, Inc. (“Cole Realty Advisors”), its property manager, which is affiliated with our advisor, fees for the management and leasing of the Company’s properties. Property management fees are up to 2% of gross revenue for single-tenant properties and 4% of gross revenue for multi-tenant properties and leasing commissions will be at prevailing market rates; provided however, that the aggregate of all property management and leasing fees paid to affiliates of our advisor plus all payments to third parties will not exceed the amount that other nonaffiliated management and leasing companies generally charge for similar services in the same geographic location. Cole Realty Advisors may subcontract its duties for a fee that may be less than the fee provided for in the property management agreement. The Company reimburses Cole Realty Advisors’ costs of managing and leasing the properties.

F-29

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company reimburses CR III Advisors for all expenses it paid or incurred in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse CR III Advisors for any amount by which its operating expenses (including the Asset Management 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, unless the Company’s independent directors find that a higher level of expense is justified for that year based on unusual and non-recurring factors. The Company will not reimburse CR III Advisors for personnel costs in connection with services for which CR III Advisors receives acquisition fees and real estate commissions.

If CR III Advisors, or its affiliates, provides substantial services, as determined by the independent directors, in connection with the origination or refinancing of any debt financing obtained by the Company that is used to acquire properties or to make other permitted investments, or that is assumed, directly or indirectly, in connection with the acquisition of properties, the Company will pay CR III Advisors or its affiliates a financing coordination fee equal to 1% of the amount available and/or outstanding under such financing; provided however, that CR III Advisors or its affiliates shall not be entitled to a financing coordination fee in connection with the refinancing of any loan secured by any particular property that was previously subject to a refinancing in which CR III Advisors or its affiliates received such a fee. Financing coordination fees payable from loan proceeds from permanent financing will be paid to CR III Advisors or its affiliates as the Company acquires and/or assumes such permanent financing. With respect to any revolving line of credit, no financing coordination fees will be paid on loan proceeds from any line of credit unless all net offering proceeds received as of the date proceeds from the line of credit are drawn for the purpose of acquiring assets have been invested. In addition, with respect to any revolving line of credit, CR III Advisors or its affiliates will receive financing coordination fees only in connection with amounts being drawn for the first time and not upon any re-drawing of amounts that had been repaid by the Company.

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

	Year Ended December 31,
	2012		2011		2010
Acquisitions and Operations:
Acquisition fees and expenses	$	50,615	$	49,888	$	48,802
Asset management fees and expenses	$	32,416	$	20,317	$	8,187
Property management and leasing fees and expenses	$	14,876	$	9,437	$	3,811
Operating expenses	$	3,193	$	2,324	$	1,642
Financing coordination fees	$	11,078	$	14,920	$	9,512

Liquidation/Listing

If CR III Advisors, or its affiliates, provides a substantial amount of services, as determined by the Company’s independent directors, in connection with the sale of one or more properties, the Company will pay CR III Advisors or its affiliates up to one-half of the brokerage commission paid, but in no event to exceed an amount equal to 3% of the sales price of each property sold. In no event will the combined real estate commission paid to CR III Advisors, its affiliates and unaffiliated third parties exceed 6% of the contract sales price. In addition, after investors have received a return of their net capital contributions and an 8% cumulative, non-compounded annual return, then CR III Advisors is entitled to receive 15% of the remaining net sale proceeds.

Upon listing of the Company’s common stock on a national securities exchange, a fee equal to 15% of the amount by which the market value of the Company’s outstanding stock plus all distributions paid by the Company prior to listing, exceeds the sum of the total amount of capital raised from investors and the amount of cash flow necessary to generate an 8% cumulative, non-compounded annual return to investors will be paid to CR III Advisors (the “Subordinated Incentive Listing Fee”). However, Holdings has agreed, as part of the Merger, to a 25% reduction from the amount payable under the advisory agreement as a result of a listing of the Company’s common stock.

F-30

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Upon termination of the advisory agreement with CR III Advisors, other than termination by the Company because of a material breach of the advisory agreement by CR III Advisors, a performance fee of 15% of the amount, if any, by which the appraised asset value at the time of such termination plus total distributions paid to stockholders through the termination date exceeds the aggregate capital contribution contributed by investors less distributions from sale proceeds plus payment to investors of an 8% annual, cumulative, non-compounded return on capital. No subordinated performance fee will be paid to the extent that the Company has already paid or become obligated to pay CR III Advisors a subordinated participation in net sale proceeds or the Subordinated Incentive Listing Fee.

During the years endedDecember 31, 2012 and 2011, no commissions or fees were incurred for services provided by CR III Advisors and its affiliates related to the services described above.

Due to Affiliates

As of December 31, 2012, $4.5 million had been incurred primarily for services relating to the management of the Company’s properties by CR III Advisors and its affiliates, but had not yet been reimbursed by the Company and were included in due to affiliates on the consolidated balance sheets. As of December 31, 2011, $4.8 million had been incurred primarily for other organization and offering, operating and acquisition expenses, by CR III Advisors and its affiliates, but had not yet been reimbursed by the Company and were included in due to affiliates on the consolidated balance sheets.

Transactions

On March 5, 2012, we entered in the Merger Agreement. See Note 2 for a further explanation of the Merger.

NOTE 16 — ECONOMIC DEPENDENCY

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

NOTE 17 — STOCKHOLDERS’ EQUITY

Distribution Reinvestment Plan

Pursuant to the DRIP, the Company allows stockholders of its common stock to elect to have the distributions the stockholders receive reinvested in additional shares of the Company’s common stock. The purchase price per share under the amended and restated DRIP will be $9.50 per share until the Company’s board of directors determines a reasonable estimate of the value of the Company’s shares. Thereafter, the purchase price per share under the Company’s DRIP will be the most recently disclosed per share value as determined in accordance with the Company’s valuation policy. No sales commissions or dealer manager fees will be paid on shares sold under the DRIP. The Company’s board of directors may terminate or amend the DRIP at the Company’s discretion at any time upon 10 days prior written notice to the stockholders. During the years endedDecember 31, 2012 and 2011, approximately 17.8 million shares and approximately 11.6 million shares were purchased under the DRIP for $169.1 million and $110.1 million, respectively, which were recorded as redeemable common stock on the consolidated balance sheets, net of redemptions paid of $68.6 million and $41.9 million, respectively. The Company will continue to issue shares of common stock under the DRIP Offering until such time as the Company’s shares are listed on a national securities exchange or the DRIP Offering is otherwise terminated by the Company’s board of directors.

F-31

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Share Redemption Program

The Company’s share redemption program permits its stockholders to sell their shares back to the Company after they have held them for at least one year, subject to the significant conditions and limitations described below.

There are several restrictions on a stockholder’s ability to sell their shares to the Company under the program. The stockholders generally have to hold their shares for one year in order to participate in the program; however, the Company may waive the one year holding period in the event of the death or bankruptcy of a stockholder. In addition, the Company will limit the number of shares redeemed pursuant to the Company’s share redemption program as follows: (1) the redemptions are limited to 5% of the weighted average number of shares outstanding during the trailing twelve months prior to the end of the fiscal quarter for which redemptions are being paid (the “Trailing Twelve-month Cap”) (provided, however, that while shares subject to a redemption requested upon death of a stockholder will be included in calculating the maximum number of shares that may be redeemed, such shares will not be subject to the Trailing Twelve-month Cap); and (2) funding for the redemption of shares will be limited to the net proceeds the Company receives from the sale of shares under the DRIP. In an effort to accommodate redemption requests throughout the calendar year, the Company limits quarterly redemptions to approximately 1.25% of the weighted average number of shares outstanding during the trailing twelve-month period ending on the last day of the fiscal quarter, and funding for redemptions for each quarter generally will be limited to the net proceeds the Company receives from the sale of shares in the respective quarter under the DRIP (provided, however, that while shares subject to a redemption requested upon the death of a stockholder will be included in calculating the maximum number of shares that may be redeemed, such shares will not be subject to the quarterly percentage caps); however, the Company’s board of directors may waive these quarterly limitations in its sole discretion, subject to the Trailing Twelve-month Cap. During the term of the Offering and until such time as the Company’s board of directors determines a reasonable estimate of the value of the Company’s shares, the redemption price per share (other than for shares purchased pursuant to the DRIP) will depend on the length of time the stockholder has held such shares as follows: after one year from the purchase date—95% of the amount the stockholder paid for each share; after two years from the purchase date—97.5% of the amount the stockholder paid for each share; after three years from the purchase date—100% of the amount the stockholder paid for each share. During this time period, the redemption price for shares purchased pursuant to the DRIP will be the amount paid for such shares.

Upon receipt of a request for redemption, the Company may conduct a Uniform Commercial Code search to ensure that no liens are held against the shares. The Company’s share redemption program provides that repurchases will be made no later than the end of the month following the end of each fiscal quarter. If the Company cannot purchase all shares presented for redemption in any fiscal quarter, it will give priority to the redemption of deceased stockholders’ shares. The Company next will give priority to requests for full redemption of accounts with a balance of 250 shares or less at the time the Company receives the request, in order to reduce the expense of maintaining small accounts. Thereafter, the Company will honor the remaining redemption requests on a pro rata basis. The Company’s board of directors may amend, suspend or terminate the share redemption program at any time upon 30 days prior written notice to the stockholders. During the years ended December 31, 2012 and 2011, the Company redeemed approximately 7.0 million and approximately 4.3 million shares under the share redemption program for $68.6 million and $41.9 million, respectively.

NOTE 18 — INCOME TAXES

For federal income tax purposes, distributions to stockholders are characterized as ordinary dividends, capital gain distributions, or nontaxable distributions. Nontaxable distributions will reduce U.S. stockholders’ basis (but not below zero) in their shares. The following table shows the character of distributions the Company paid on a percentage basis during the years ended December 31, 2012, 2011 and 2010.

	Year Ended December 31,
Character of Distributions (unaudited):	2012		2011		2010
Ordinary dividends	52	%	61	%	55	%
Capital gain distributions	15	%	—	%	—	%
Nontaxable distributions	33	%	39	%	45	%
Total	100	%	100	%	100	%

As of December 31, 2012, the tax basis carrying value of the Company’s land and depreciable real estate assets was $6.7 billion. During the years ended December 31, 2012, 2011 and 2010, the Company incurred state and local income and franchise taxes of $1.8 million, $1.3 million and $780,000, respectively, which were recorded in general and administrative expenses on the consolidated statements of operations.

F-32

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

NOTE 19 — OPERATING LEASES

The Company’s properties are leased to tenants under operating leases for which the terms and expirations vary. The leases frequently have provisions to extend the lease agreement and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. As of December 31, 2012, the weighted average remaining lease term, including the Consolidated Joint Ventures’ leases, was 12.7 years.

The future minimum rental income from the Company’s investment in real estate assets under non-cancelable operating leases, excluding the operating leases related to the Held for Sale Properties, as of December 31, 2012 is as follows (in thousands):

Year Ending December 31,	Amount
2013	$	560,733
2014	554,263
2015	549,491
2016	535,888
2017	523,321
Thereafter	4,411,626
Total	$	7,135,322

NOTE 20 — QUARTERLY RESULTS (UNAUDITED)

Presented below is a summary of the unaudited quarterly financial information for the years ended December 31, 2012 and 2011 (in thousands, except for per share amounts). In the opinion of management, the information for the interim periods presented includes all adjustments which are of a normal and recurring nature, necessary to present a fair presentation of the results for each period. In addition, the Company has adjusted the information for discontinued operations.

	2012
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Revenues	$	114,175	$	132,591	$	143,529	$	152,647
Operating income	$	41,205	$	49,216	$	59,768	$	58,695
Net income	$	35,950	$	23,090	$	18,570	$	125,828	(2)
Net income attributable to the Company	$	35,937	$	23,223	$	18,567	$	125,611	(2)
Basic and diluted net income per common share (1)	$	0.08	$	0.05	$	0.04	$	0.27
Basic and diluted net income attributable to the Company per common share (1)	$	0.08	$	0.05	$	0.04	$	0.27
Distributions declared per common share	$	0.16	$	0.16	$	0.16	$	0.16

________________

(1) Based on the weighted average number of shares outstanding as of December 31, 2012.

(2) Net income for the fourth quarter of 2012 includes a gain on sale of marketable securities of $12.5 million and a gain on sale of real estate of $108.5 million.

F-33

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

	2011
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Revenues	$	61,312	$	70,944	$	86,912	$	104,812
Operating income	$	23,750	$	23,724	$	19,560	$	41,833
Net income	$	14,548	$	10,491	$	1,282	$	19,450
Net income attributable to the Company	$	14,260	$	10,480	$	1,271	$	19,285
Basic and diluted net income per common share (1)	$	0.05	$	0.03	$	0.00	$	0.07
Basic and diluted net income attributable to the Company per common share (1)	$	0.05	$	0.03	$	0.00	$	0.07
Distributions declared per common share	$	0.16	$	0.16	$	0.16	$	0.17

________________

(1) Based on the weighted average number of shares outstanding as of December 31, 2011.

NOTE 21 — SUBSEQUENT EVENTS

Issuance of Shares of Common Stock in the DRIP Offering

The Company continues to issue shares of common stock under the DRIP Offering. As of March 26, 2013, the Company had issued, approximately 17.0 million shares pursuant to the DRIP Offering, resulting in gross proceeds to the Company of $161.8 million.

Redemption of Shares of Common Stock

Subsequent to December 31, 2012, the Company redeemed approximately 2.8 million shares for $27.8 million at an average price per share of $9.80.

Entry into the Merger Agreement

Subsequent to December 31, 2012, the Company entered into the Merger Agreement, as discussed in Note 2 to these consolidated financial statements.

Entry into Employment Agreements with Key Personnel

Subsequent to December 31, 2012, we, along with CCPT III OP, entered into employment agreements with each of Christopher H. Cole and Marc T. Nemer, to become effective as of the date of consummation of the Merger. The amounts to be paid pursuant to the employment agreements are for future services to be rendered to the Company and are not part of the Merger consideration. Under Mr. Cole’s employment agreement, upon the consummation of the Merger, Mr. Cole, the current chairman of the Board and chief executive officer and president of the Company, will serve as executive chairman of the Board, reporting to the Board, and will no longer serve as the chief executive officer and president of the Company. Under Mr. Nemer’s employment agreement, upon the consummation of the Merger, Mr. Nemer, a current director of the Company, will continue to be a director and will assume the positions of chief executive officer and president of the Company. The employment agreements provide the executives with compensation for their services rendered after the consummation of the Merger and provide incentives to reward outstanding future performance. The term of each employment agreement ends on December 31, 2016 and will be automatically renewed for annual terms thereafter unless earlier terminated by the Company or the executive.

F-34

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Legal Proceedings

In connection with the Merger, on March 20, 2013, a putative class action and derivative lawsuit was filed in the Circuit Court for Baltimore City, Maryland against and purportedly on behalf of the Company captioned Strub, et al. v. Cole Holdings Corporation, et al. (“Strub”). The complaint names as defendants Holdings; CR III Advisors; Merger Sub; Cole Capital Advisors, Inc., Equity Fund Advisors, Inc. (an affiliate of Holdings), Cole Capital, and Cole Realty Advisors, Inc. (together, “Cole Holding Entities”); each of the directors of the Company; and the Company. Strub alleges that the defendants breached their fiduciary duties and duties of loyalty, candor and due care by causing the Company to enter into the Merger Agreement, failing to implement appropriate measures to ensure that the Company’s relationship with CR III Advisors did not become a vehicle for wrongful self-dealing, failing to consider and explore strategic alternatives to the Merger, failing to seek stockholder approval for the Merger, and by engaging in self-interested and otherwise conflicted actions. It also alleges that the Merger Sub and Cole Holdings Entities aided and abetted those breaches of fiduciary duty, and that Messrs. Cole and Nemer will be unjustly enriched by and following the Merger. Strub seeks a declaration that the conduct of the defendants is a breach of fiduciary duty or aiding and abetting such breaches and that the Merger Agreement is null and void; an order requiring stockholder approval of any acquisition of CR III Advisors or any Cole Holdings Entities; awarding damages and restitution, and disgorgement by each director; an award of plaintiffs’ reasonable attorneys’ fees, expert fees, interest, and cost of suit, and other relief. On March 28, 2013, Strub sought an injunction against the Merger closing until stockholder approval is obtained. The defendants intend to oppose that application.

In addition, on March 25, 2013, a putative class action lawsuit was filed in the Circuit Court for Baltimore City, Maryland captioned Rodgers v. Cole Credit Property Trust III, et al. (“Rodgers”). This complaint names as defendants the Company; Cole REIT III Operating Partnership, LP (“CCPT III OP”); CR III Advisors; Merger Sub; and each of the Company’s directors. Rodgers alleges that the Company’s directors breached their fiduciary duties by entering into the Merger Agreement, failing to provide transparency and a stockholder vote, structuring the transaction to prevent other potential buyers from buying the Company, and failing to disclose to stockholders a third party’s interest in acquiring the Company. It also alleges that CR III Advisors breached its fiduciary duty by ignoring and failing to disclose a third party offer; and that the Company, CCPT III OP, Merger Sub, and the directors aided and abetted the alleged breach of fiduciary duty by CR III Advisors. Rodgers seeks a declaration that the defendants have committed a gross abuse of trust and have breached and/or aided and abetted breach of fiduciary duties; that the Merger is therefore unlawful and unenforceable, and that the Merger and any related agreements should be rescinded and invalidated; declaring that the Merger and Merger Agreement should be rescinded and parties restored to their original position; imposing a constructive trust in favor of the plaintiff and class on any benefits, property or value improperly received by, traceable to, or in possession of defendants as a result of wrongful conduct; enjoining defendants from consummating the Merger until the Company has a process to obtain a merger agreement providing best possible terms to stockholders; rescinding the Merger to the extent implemented or granting rescissory damages; directing the directors to account to plaintiff and class for damages as a result of their wrongdoing; awarding compensatory damages and interest; awarding costs, including reasonable attorneys’ and experts’ fees; and granting further equitable relief that is deemed just and proper.

The outcome of these matters cannot be predicted at this time and no provisions for losses, if any, have been recorded in the accompanying consolidated financial statements.

Unsolicited Proposal

On March 19, 2013, the Company’s board of directors received an unsolicited proposal from American Realty Capital Properties, Inc. (“ARCP”) to acquire the Company for a combination of cash and shares of ARCP common stock. The special committee of the Company’s board of directors, which consists of all of the independent directors of the Company (the “Special Committee”), reviewed the unsolicited proposal from ARCP and determined that the proposed sale to ARCP would not be in the best interests of the Company and its stockholders. Further, the Special Committee affirmed its commitment to the Merger.

On March 27, 2013, the Company’s board of directors received a revised unsolicited proposal from ARCP to acquire the Company after the Merger, for a combination of cash and shares of ARCP common stock. The Special Committee is currently reviewing the revised proposal from ARCP.

F-35

COLE CREDIT PROPERTY TRUST III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Investment in Real Estate and Related Assets

Subsequent to December 31, 2012, the Company acquired a 100% interest in nine commercial real estate properties for an aggregate purchase price of $25.3 million. The acquisitions were funded with net proceeds from the DRIP Offering and the sale of properties and other investments. The Company has not completed its initial purchase price allocations with respect to these properties and therefore cannot provide similar disclosures to those included in Note 5 to these consolidated financial statements for these properties.

Property Dispositions

Subsequent to December 31, 2012, the Company sold the Held for Sale Properties discussed in Note 9 to these consolidated financial statements for an aggregate sales price of $21.3 million, exclusive of closing costs. In addition, the Company sold eight additional properties for an aggregate sales price of $34.0 million, exclusive of closing costs. The purchase price of each property sold subsequent to December 31, 2012 was greater than the respective book value of each property. As of December 31, 2012 the potential buyers of these eight properties either had not been identified or there had not been a binding purchase and sale agreement entered into for the sale of these properties. Therefore, the Company believes that the sale of these properties was not considered to be probable, as such, the requirements under GAAP to treat the properties as held for sale were not met as of December 31, 2012.

Notes Payable and Other Borrowings

Subsequent to December 31, 2012, the Company entered into a loan agreement for $74.3 million secured by a commercial property with a purchase price of $135.0 million. In addition, the Company repaid $13.2 million of debt outstanding and $160.0 million under the Credit Facility. As of March 26, 2013, the Company had $23.1 million outstanding under the construction facilities and $607.8 million outstanding under the Credit Facility.

F-36

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

											Gross Amount at
											Which Carried
				Initial Costs to Company				Total			At December 31,		Accumulated
						Buildings &		Adjustment			2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis			(b) (c)		(d) (e)		Acquired	Constructed
Real Estate Held for Investment the Company has Invested in Under Operating Leases
Aaron Rents
	Auburndale, FL	$	2,647	$	1,224	$	3,478	$	1,273		$	5,975	$	307	3/31/2010	2009
	Battle Creek, MI	407		228		485		—			713		49		6/18/2009	1956
	Benton Harbor, MI	401		261		385		—			646		39		6/30/2009	1973
	Bloomsburg, PA	400		152		770		—			922		66		3/31/2010	2009
	Bowling Green, OH	564		154		805		—			959		66		3/31/2010	2009
	Charlotte, NC	579		279		714		—			993		54		3/31/2010	1994
	Chattanooga, TN	490		587		384		—			971		37		6/18/2009	1989
	Columbia, SC	556		549		473		—			1,022		46		6/18/2009	1977
	Copperas Cove, TX	668		304		964		—			1,268		90		6/30/2009	2007
	El Dorado, AR	356		208		456		—			664		43		6/30/2009	2000
	Haltom City, TX	752		258		1,185		—			1,443		107		6/30/2009	2008
	Humble, TX	663		430		734		—			1,164		69		5/29/2009	2008
	Indianapolis, IN	436		170		654		—			824		64		5/29/2009	1998
	Kennett, MO	319		165		406		—			571		31		3/31/2010	1999
	Kent, OH	614		356		1,138		—			1,494		116		3/31/2010	1999
	Killeen , TX	1,558		608		2,241		—			2,849		213		6/18/2009	1981
	Kingsville, TX	599		369		770		—			1,139		56		3/31/2010	2009
	Lafayette, IN	550		249		735		—			984		54		3/31/2010	1990
	Livingston, TX	645		131		1,052		—			1,183		96		6/18/2009	2008
	Magnolia, MS	1,473		209		2,393		—			2,602		208		3/31/2010	2000
	Mansura, LA	254		54		417		(10		)	461		39		6/18/2009	2000
	Marion, SC	319		82		484		—			566		35		3/31/2010	1998
	Meadville, PA	512		168		841		—			1,009		91		5/29/2009	1994
	Mexia, TX	490		114		813		—			927		76		5/29/2009	2007
	Minden, LA	645		252		831		—			1,083		78		5/29/2009	2008
	Mission, TX	549		347		694		—			1,041		51		3/31/2010	2009
	North Olmsted, OH	449		151		535		—			686		46		3/31/2010	1960
	Odessa, TX	356		67		567		—			634		53		5/29/2009	2006
	Oneonta, AL	614		218		792		—			1,010		66		3/31/2010	2008
	Oxford , AL	356		263		389		—			652		37		5/29/2009	1989
	Pasadena, TX	659		377		787		—			1,164		72		6/18/2009	2009
	Pensacola, FL	347		263		423		—			686		43		6/30/2009	1979
	Port Lavaca, TX	534		128		894		—			1,022		81		6/30/2009	2007
	Redford, MI	434		215		477		—			692		42		3/31/2010	1972
	Richmond, VA	774		419		1,032		—			1,451		94		6/30/2009	1988
	Shawnee, OK	588		428		634		—			1,062		60		5/29/2009	2008
	Springdale, AR	624		500		655		—			1,155		50		3/31/2010	2009
	Statesboro, GA	579		311		734		—			1,045		67		6/18/2009	2008
	Texas City, TX	895		294		1,311		—			1,605		115		8/31/2009	1991
	Valley, AL	409		139		569		—			708		48		3/31/2010	2009
Academy Sports
	Austin, TX	5,044		3,699		4,930		—			8,629		305		8/26/2010	1988
	Bossier City, LA	3,806		1,920		5,410		—			7,330		495		6/19/2009	2008
	Fort Worth, TX	3,414		1,871		4,117		—			5,988		377		6/19/2009	2009
	Killeen, TX	3,320		1,227		4,716		—			5,943		340		4/29/2010	2009
	Laredo, TX	3,961		2,133		4,839		—			6,972		440		6/19/2009	2008
	Montgomery, AL	(f)		1,290		5,644		—			6,934		526		6/19/2009	2009
Advanced Auto
	Appleton, WI	(f)		393		904		—			1,297		55		9/30/2010	2007
	Bedford, IN	760		71		1,056		—			1,127		55		1/4/2011	2007
	Bethel, OH	730		276		889		—			1,165		58		12/22/2010	2008

S-1

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

										Gross Amount at
										Which Carried
				Initial Costs to Company				Total		At December 31,		Accumulated
						Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Advanced Auto (continued)
	Bonita Springs, FL	$	1,561	$	1,094	$	1,134	$	—	$	2,228	$	69	9/22/2010	2007
	Brownstown, MI	(f)		771		924		—		1,695		33		9/23/2011	2008
	Candler, NC	—		343		1,007		—		1,350		8		9/28/2012	2012
	Canton, OH	660		343		870		—		1,213		65		3/31/2010	2007
	Charlotte, NC	(f)		395		749		—		1,144		32		5/12/2011	2001
	Crestwood, KY	1,030		374		1,015		—		1,389		55		12/22/2010	2009
	Dayton, OH	—		605		918		—		1,523		15		6/21/2012	2007
	Deer Park, TX	739		219		1,131		—		1,350		87		12/16/2009	2008
	Delaware, OH	730		467		906		—		1,373		72		3/31/2010	2008
	Florence, KY	—		599		966		—		1,565		16		6/21/2012	2008
	Frankfort, KY	(f)		660		786		—		1,446		13		5/15/2012	2007
	Franklin, IN	738		384		918		—		1,302		57		8/12/2010	2010
	Georgetown, KY	—		511		892		—		1,403		15		5/15/2012	2007
	Grand Rapids, MI	657		344		656		—		1,000		42		8/12/2010	2008
	Hillview, KY	740		302		889		—		1,191		48		12/22/2010	2009
	Holland, OH	668		126		1,050		—		1,176		77		3/31/2010	2008
	Houston (Aldine), TX	690		190		1,072		—		1,262		83		12/16/2009	2006
	Houston (Imperial), TX	623		139		995		—		1,134		77		12/16/2009	2008
	Houston (Wallisville), TX	757		140		1,245		—		1,385		96		12/16/2009	2008
	Howell, MI	830		639		833		—		1,472		47		12/20/2010	2008
	Humble, TX	757		292		1,086		—		1,378		84		12/16/2009	2007
	Huntsville, TX	619		134		1,046		—		1,180		81		12/16/2009	2008
	Janesville, WI	939		277		1,209		—		1,486		73		9/30/2010	2007
	Kingwood, TX	743		183		1,183		—		1,366		91		12/16/2009	2009
	Lehigh Acres, FL	1,425		582		1,441		—		2,023		77		12/21/2010	2008
	Lubbock, TX	579		88		1,012		—		1,100		78		12/16/2009	2008
	Massillon, OH	(f)		270		1,210		—		1,480		50		6/21/2011	2007
	Milwaukee, WI	(f)		507		1,107		—		1,614		45		6/10/2011	2008
	Mishawaka, IN	—		510		1,009		—		1,519		14		6/21/2012	2007
	Monroe, MI	(f)		599		846		—		1,445		36		6/21/2011	2007
	Richmond, IN	—		365		1,379		—		1,744		21		6/21/2012	2006
	Rock Hill, SC	(f)		345		589		—		934		24		5/12/2011	1995
	Romulus, MI	(f)		537		1,021		—		1,558		37		9/23/2011	2007
	Salem, OH	660		254		869		—		1,123		47		12/20/2010	2009
	Sapulpa, OK	704		360		893		—		1,253		54		8/3/2010	2007
	South Lyon, MI	(f)		569		898		—		1,467		38		6/21/2011	2008
	Spring, TX	—		409		1,143		—		1,552		17		6/21/2012	2007
	Sylvania, OH	639		115		983		—		1,098		70		4/28/2010	2009
	Twinsburg, OH	639		355		770		—		1,125		57		3/31/2010	2008
	Vermillion, OH	(f)		270		722		—		992		30		6/21/2011	2006
	Washington Township, MI	(f)		779		1,012		—		1,791		36		9/23/2011	2008
	Webster, TX	757		293		1,089		—		1,382		84		12/16/2009	2008
AGCO Corporation
	Duluth, GA	8,600		2,785		12,570		9		15,364		427		12/21/2011	1998
Albertson’s
	Abilene, TX	3,981		1,085		4,871		—		5,956		276		10/26/2010	2010
	Albuquerque (Academy), NM	4,500		2,257		5,204		—		7,461		353		10/26/2010	1997
	Albuquerque (Lomas), NM	4,410		2,960		4,409		—		7,369		314		10/26/2010	2003
	Alexandria, LA	4,110		1,428		5,066		—		6,494		287		10/26/2010	2000
	Arlington, TX	4,206		984		5,732		—		6,716		325		10/26/2010	2002

S-2

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

										Gross Amount at
										Which Carried
				Initial Costs to Company				Total		At December 31,		Accumulated
						Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Albertson’s (continued)
	Baton Rouge (Airline), LA	$	5,425	$	2,200	$	6,003	$	—	$	8,203	$	340	10/26/2010	2004
	Baton Rouge (College), LA	3,931		1,733		4,615		—		6,348		262		10/26/2010	2002
	Baton Rouge (George), LA	4,731		2,023		5,273		—		7,296		300		10/26/2010	2003
	Bossier City, LA	3,599		2,006		4,000		—		6,006		228		10/26/2010	2000
	Clovis, NM	3,927		757		3,625		—		4,382		252		10/26/2010	2010
	Denver, CO	3,840		1,858		5,253		—		7,111		296		10/26/2010	2002
	Durango, CO	3,770		4,549		2,276		—		6,825		131		10/26/2010	1993
	El Paso, TX	4,438		1,341		4,206		—		5,547		238		10/26/2010	2009
	Farmington, NM	2,566		1,237		3,136		—		4,373		233		10/26/2010	2002
	Fort Collins, CO	4,328		1,362		6,186		—		7,548		348		10/26/2010	2009
	Fort Worth (Beach), TX	4,740		2,097		5,299		—		7,396		299		10/26/2010	2009
	Fort Worth (Clifford), TX	3,149		1,187		4,089		—		5,276		232		10/26/2010	2002
	Fort Worth (Oakmont), TX	3,553		1,859		4,200		—		6,059		239		10/26/2010	2000
	Fort Worth (Sycamore), TX	3,840		962		5,174		—		6,136		293		10/26/2010	2010
	Lafayette, LA	5,380		1,676		6,442		—		8,118		365		10/26/2010	2002
	Lake Havasu City, AZ	3,552		1,037		5,361		—		6,398		311		10/26/2010	2003
	Las Cruces, NM	(f)		1,567		5,581		—		7,148		323		1/28/2011	1997
	Los Lunas, NM	4,083		1,236		4,976		—		6,212		333		10/26/2010	2003
	Mesa, AZ	3,034		1,739		3,748		—		5,487		228		9/29/2010	1997
	Midland, TX	5,640		1,470		5,129		—		6,599		293		10/26/2010	2000
	Odessa, TX	5,080		1,201		4,425		—		5,626		253		10/26/2010	2008
	Phoenix, AZ	3,500		2,241		4,086		—		6,327		249		9/29/2010	1998
	Scottsdale, AZ	5,672		2,932		7,046		—		9,978		407		10/26/2010	2002
	Silver City, NM	3,560		647		3,987		—		4,634		267		10/26/2010	1995
	Tucson (Grant), AZ	2,721		1,464		3,456		—		4,920		203		10/26/2010	1994
	Tucson (Silverbell), AZ	5,430		2,649		7,001		—		9,650		419		9/29/2010	2000
	Weatherford, TX	3,934		1,686		4,836		—		6,522		274		10/26/2010	2001
	Yuma, AZ	4,395		1,320		6,597		—		7,917		379		10/26/2010	2004
Amazon
	Charleston, TN	38,500		2,265		44,536		—		46,801		846		4/30/2012	2011
	Chattanooga, TN	40,800		1,768		46,969		—		48,737		893		4/30/2012	2011
	West Columbia, SC	41,900		3,062		47,338		—		50,400		900		4/30/2012	2012
Applebee’s
	Adrian, MI	(f)		312		1,537		—		1,849		87		10/13/2010	1995
	Bartlett, TN	(f)		674		874		—		1,548		50		10/13/2010	1990
	Chambersburg, PA	(f)		709		983		—		1,692		56		10/13/2010	1995
	Elizabeth City, NC	(f)		392		1,282		—		1,674		91		3/31/2010	1997
	Farmington, MO	(f)		360		1,483		—		1,843		105		3/31/2010	1999
	Horn Lake, MS	(f)		646		813		—		1,459		46		10/13/2010	1994
	Joplin, MO	(f)		578		1,290		—		1,868		92		3/31/2010	1994
	Kalamazoo, MI	(f)		562		1,288		—		1,850		73		10/13/2010	1994
	Lufkin, TX	(f)		617		1,106		—		1,723		63		10/13/2010	1998
	Madisonville, KY	(f)		521		1,166		—		1,687		83		3/31/2010	1997
	Marion, IL	(f)		429		1,165		—		1,594		83		3/31/2010	1998
	Memphis, TN	(f)		779		1,112		—		1,891		79		3/31/2010	1999
	Norton, VA	(f)		530		928		—		1,458		52		10/13/2010	2006
	Owatonna, MN	(f)		590		1,439		—		2,029		82		10/13/2010	1996
	Rolla, MO	(f)		569		1,370		—		1,939		97		3/31/2010	1997
	Swansea, IL	(f)		559		1,036		—		1,595		59		10/13/2010	1998

S-3

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

										Gross Amount at
										Which Carried
			Initial Costs to Company				Total			At December 31,		Accumulated
					Buildings &		Adjustment			2012		Depreciation		Date	Date
Description (a)		Encumbrances	Land		Improvements		to Basis			(b) (c)		(d) (e)		Acquired	Constructed
Applebee’s (continued)
	Tyler, TX	$ (f)	$	852	$	1,418	$	—		$	2,270	$	81	10/13/2010	1993
	Vincennes, IN	(f)	383		1,248		—			1,631		89		3/31/2010	1995
	West Memphis, AR	(f)	518		829		—			1,347		47		10/13/2010	2006
	Wytheville, VA	(f)	419		959		—			1,378		55		10/13/2010	1997
Apollo Group
	Phoenix, AZ	79,000	13,270		123,533		—			136,803		5,779		3/24/2011	2008
AT&T
	Dallas, TX	17,350	887		24,073		—			24,960		2,234		5/28/2010	2001
Atascocita Commons
	Humble, TX	28,250	13,051		39,287		(7		)	52,331		2,663		6/29/2010	2008
Autozone
	Blanchester, OH	535	160		755		—			915		57		6/9/2010	2008
	Hamilton, OH	814	610		760		—			1,370		58		6/9/2010	2008
	Hartville, OH	614	111		951		—			1,062		68		7/14/2010	2007
	Hernando, MS	—	111		712		—			823		10		6/11/2012	2003
	Mount Orab, OH	679	306		833		—			1,139		62		6/9/2010	2009
	Nashville, TN	861	441		979		—			1,420		66		6/9/2010	2009
	Pearl River, LA	719	193		1,046		—			1,239		68		6/30/2010	2007
	Rapid City, SD	571	365		839		—			1,204		58		6/30/2010	2008
	Trenton, OH	504	288		598		—			886		45		6/9/2010	2008
Banner Life
	Urbana, MD	19,600	3,730		29,863		—			33,593		1,364		6/2/2011	2011
Belleview Plaza
	Pensacola, FL	4,145	1,033		6,039		237			7,309		183		12/13/2011	2009
Benihana
	Alpharetta, GA	—	625		1,033		—			1,658		10		8/21/2012	2003
	Anchorage, AK	—	1,399		1,921		—			3,320		19		8/21/2012	1998
	Dallas, TX	—	3,049		661		—			3,710		7		8/21/2012	1975
	Farmington Hills, MI	—	1,413		2,699		—			4,112		27		8/21/2012	2012
	Maple Grove, MN	—	1,279		2,419		—			3,698		23		8/21/2012	2006
	North Bay Village, FL	—	2,763		1,015		—			3,778		10		8/21/2012	1972
	Schaumburg, IL	—	1,876		1,275		—			3,151		15		8/21/2012	1992
	Stuart, FL	—	2,059		1,227		—			3,286		12		8/21/2012	1976
	Wheeling, IL	—	776		805		—			1,581		9		8/21/2012	2001
Best Buy
	Bourbannais, IL	(f)	1,181		3,809		—			4,990		380		8/31/2009	1991
	Coral Springs, FL	3,400	2,654		2,959		—			5,613		278		8/31/2009	1993
	Indianapolis, IN	(f)	808		3,468		—			4,276		139		7/20/2011	2009
	Kenosha, WI	(f)	1,470		4,518		—			5,988		176		7/12/2011	2008
	Lakewood , CO	—	2,318		4,603		—			6,921		422		8/31/2009	1990
	Marquette, MI	(f)	561		3,732		(2		)	4,291		210		2/16/2011	2010
	Montgomery, AL	3,148	986		4,116		—			5,102		285		7/6/2010	2003
	Norton Shores, MI	(f)	1,323		3,489		—			4,812		166		3/30/2011	2001
	Pineville, NC	5,296	1,611		6,003		—			7,614		339		12/28/2010	2003
	Richmond, IN	(f)	359		3,644		—			4,003		138		7/27/2011	2011
	Southaven, MS	(f)	1,258		2,901		—			4,159		108		9/26/2011	2007
Big O Tires
	Phoenix, AZ	782	554		731		—			1,285		42		10/20/2010	2010
Bi-Lo Grocery
	Greenwood, SC	(f)	189		3,288		—			3,477		144		5/3/2011	1999
	Mt. Pleasant, SC	(f)	2,374		5,441		—			7,815		234		5/3/2011	2003

S-4

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

									Gross Amount at
									Which Carried
			Initial Costs to Company				Total		At December 31,		Accumulated
					Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances	Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
BJ’s Wholesale Club
	Auburn, ME	(f)	$	4,419	$	8,603	$	—	$	13,022	$	397	9/30/2011	1995
	Boynton Beach, FL	(f)	6,320		9,164		—		15,484		320		9/30/2011	2001
	California (Lexington Park), MD	(f)	5,347		10,404		—		15,751		352		9/30/2011	2003
	Deptford, NJ	11,004	1,764		13,244		—		15,008		476		9/30/2011	1995
	Greenfield, MA	8,416	2,796		9,060		—		11,856		390		9/30/2011	1997
	Jacksonville, FL	(f)	4,840		13,342		—		18,182		468		9/30/2011	2003
	Lancaster, PA	13,621	3,586		14,934		—		18,520		536		9/30/2011	1986
	Leominster, MA	(f)	5,227		13,147		—		18,374		572		9/30/2011	1993
	Pembroke Pines, FL	8,446	5,162		7,122		—		12,284		251		9/30/2011	1997
	Portsmouth, NH	(f)	6,980		13,264		—		20,244		613		9/30/2011	1993
	Westminster, MD	13,978	5,712		13,238		—		18,950		484		9/30/2011	2001
	Uxbridge (DC), MA	12,645	2,778		24,514		—		27,292		937		9/30/2011	2006
Bonefish
	Gainesville, VA	(f)	1,234		1,491		—		2,725		30		3/14/2012	2004
	Independence, OH	(f)	932		1,865		—		2,797		38		3/14/2012	2006
	Lakeland, FL	(f)	767		1,484		—		2,251		30		3/14/2012	2003
Breakfast Pointe
	Panama Beach City, FL	8,050	2,938		11,444		104		14,486		669		11/18/2010	2009
California Pizza Kitchen
	Alpharetta, GA	(f)	1,322		2,224		—		3,546		85		7/7/2011	1994
	Atlanta, GA	(f)	1,691		1,658		—		3,349		63		7/7/2011	1993
	Grapevine, TX	(f)	1,271		1,742		—		3,013		66		7/7/2011	1994
	Schaumburg, IL	(f)	1,283		2,175		—		3,458		82		7/7/2011	1995
	Scottsdale, AZ	(f)	1,555		1,529		—		3,084		58		7/7/2011	1994
Camp Creek Marketplace
	East Point, GA	42,000	5,907		63,695		463		70,065		3,005		5/13/2011	2003
Caremark Towers
	Glenview, IL	25,155	3,357		32,822		170		36,349		1,324		11/3/2011	1980
Cargill
	Blair, NE	2,515	263		4,160		—		4,423		321		3/17/2010	2009
Carmax
	Austin, TX	9,900	3,268		15,016		—		18,284		899		8/25/2010	2004
	Henderson, NV	(f)	3,092		12,994		—		16,086		473		9/21/2011	2002
Carraba’s
	Bowie, MD	(f)	1,664		1,673		—		3,337		34		3/14/2012	2003
	Brooklyn, OH	(f)	1,002		1,686		—		2,688		34		3/14/2012	2002
	Columbia, SC	(f)	1,257		1,482		—		2,739		30		3/14/2012	2000
	Duluth, GA	(f)	1,290		1,884		—		3,174		38		3/14/2012	2004
	Johnson City, TN	(f)	1,292		1,782		—		3,074		36		3/14/2012	2003
	Louisville, CO	(f)	797		1,218		—		2,015		25		3/14/2012	2000
	Scottsdale, AZ	(f)	953		1,002		—		1,955		20		3/14/2012	2000
	Tampa, FL	(f)	1,795		1,366		—		3,161		28		3/14/2012	1994
	Washington Township, OH	(f)	881		1,529		—		2,410		31		3/14/2012	2001
Century Town Center
	Vero Beach, FL	8,130	4,142		8,549		309		13,000		399		6/9/2011	2008
Children’s Courtyard
	Grand Prairie, TX	(f)	225		727		—		952		38		12/15/2010	1999
Childtime Childcare
	Bedford, OH	(f)	77		549		—		626		30		12/15/2010	1979
	Modesto (Floyd), CA	(f)	265		685		—		950		41		12/15/2010	1988
	Oklahoma City (Rockwell), OK	(f)	56		562		—		618		30		12/15/2010	1986

S-5

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

									Gross Amount at
									Which Carried
			Initial Costs to Company				Total		At December 31,		Accumulated
					Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances	Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Childtime Childcare (continued)
	Oklahoma City (Western), OK	$ (f)	$	77	$	561	$	—	$	638	$	30	12/15/2010	1985
Chili’s
	Flanders, NJ	1,508	624		1,472		—		2,096		95		6/30/2010	2003
Cigna
	Phoenix, AZ	—	5,359		15,568		—		20,927		20		12/19/2012	2012
	Plano, TX	31,400	7,782		38,237		—		46,019		3,402		2/24/2010	2009
Cleveland Town Center
	Cleveland, TN	—	1,623		14,831		—		16,454		455		12/20/2011	2008
CompUSA
	Arlington, TX	1,770	1,215		1,426		65		2,706		116		10/18/2010	1992
ConAgra Foods
	Milton, PA	16,245	3,404		22,867		209		26,480		947		6/14/2011	1991
Cost Plus
	La Quinta, CA	—	1,073		3,590		—		4,663		4		12/31/2012	2007
Cracker Barrel
	Abilene, TX	—	1,110		1,666		—		2,776		185		6/30/2009	2005
	Bristol, VA	—	578		1,643		—		2,221		182		6/30/2009	2006
	Columbus, GA	—	1,002		1,535		—		2,537		168		7/15/2009	2003
	Fort Mill, SC	—	969		1,615		—		2,584		178		6/30/2009	2006
	Greensboro, NC	—	1,127		1,473		—		2,600		164		6/30/2009	2005
	Piedmont, SC	—	1,218		1,672		—		2,890		185		6/30/2009	2005
	Rocky Mount, SC	—	920		1,433		—		2,353		161		6/30/2009	2006
	San Antonio, TX	—	1,129		1,687		—		2,816		186		6/30/2009	2005
	Sherman, TX	—	1,217		1,579		—		2,796		172		6/30/2009	2007
	Waynesboro, VA	—	1,072		1,608		—		2,680		177		6/30/2009	2004
Crossroads Marketplace
	Warner Robbins, GA	(f)	2,128		8,517		20		10,665		264		12/20/2011	2008
CSAA
	Oklahoma City, OK	(f)	2,861		23,059		—		25,920		1,631		11/15/2010	2009
CVS
	Anderson, SC	1,166	618		1,231		—		1,849		23		4/26/2012	1998
	Athens, GA	(f)	1,907		3,234		—		5,141		170		12/14/2010	2009
	Auburndale, FL	1,565	1,152		1,641		—		2,793		89		11/1/2010	1999
	Bellevue, OH	1,011	175		1,777		—		1,952		51		11/4/2011	1998
	Boca Raton, FL	2,625	—		2,862		—		2,862		150		12/14/2010	2009
	Brownsville, TX	(f)	1,156		3,114		—		4,270		165		12/14/2010	2009
	Cayce, SC	(f)	1,639		2,548		—		4,187		134		12/14/2010	2009
	Charlotte, NC	(f)	1,147		1,660		—		2,807		74		4/26/2011	2008
	Cherry Hill, NJ	(f)	6,236		—		—		6,236		—		10/13/2011	(g)
	Chicago (W. 103rd St), IL	(f)	980		5,670		—		6,650		185		9/16/2011	2009
	City of Industry, CA	2,500	—		3,270		—		3,270		171		12/14/2010	2009
	Dolton, IL	(f)	528		4,484		—		5,012		175		7/8/2011	2008
	Dover, DE	2,046	3,678		—		—		3,678		—		1/7/2011	(g)
	Eden, NC	—	830		1,277		—		2,107		24		4/26/2012	1998
	Edinburg, TX	2,003	1,133		2,327		—		3,460		202		8/13/2009	2008
	Edison, NJ	(f)	3,159		—		—		3,159		—		4/13/2011	(g)
	Evansville, IN	1,850	355		2,255		—		2,610		85		7/11/2011	2000
	Fredericksburg, VA	—	1,936		3,737		—		5,673		371		1/6/2009	2008
	Ft. Myers, FL	3,025	2,412		2,586		—		4,998		168		6/18/2010	2009
	Gainesville, TX	2,215	432		2,350		—		2,782		135		12/23/2010	2003
	Greenville, SC	1,840	1,206		1,531		—		2,737		28		4/26/2012	1998

S-6

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

											Gross Amount at
											Which Carried
				Initial Costs to Company				Total			At December 31,		Accumulated
						Buildings &		Adjustment			2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis			(b) (c)		(d) (e)		Acquired	Constructed
CVS (continued)
	Gulf Breeze, FL	$	1,079	$	1,843	$	—	$	—		$	1,843	$	—	10/12/2010	(g)
	Jacksonville, FL	3,715		2,552		3,441		—			5,993		180		12/14/2010	2009
	Kernersville, NC	—		905		1,209		—			2,114		22		4/26/2012	1998
	Lake Havasu City, AZ	(f)		1,438		3,780		—			5,218		126		9/16/2011	2008
	Lake Wales, FL	1,625		1,173		1,715		—			2,888		92		11/1/2010	1999
	Lawrence, KS	2,908		1,080		3,491		—			4,571		186		12/14/2010	2009
	Lawrenceville, GA	2,940		2,387		2,117		—			4,504		91		7/8/2011	2008
	Lawrenceville, NJ	5,170		3,531		4,387		—			7,918		230		12/14/2010	2009
	Liberty, MO	—		1,506		2,508		—			4,014		219		8/13/2009	2009
	Lynchburg, VA	1,748		723		2,122		—			2,845		134		10/12/2010	1999
	Madison, NC	1,587		269		1,654		—			1,923		31		4/26/2012	1998
	Madison Heights, VA	1,592		863		1,726		—			2,589		110		10/22/2010	1997
	Meridianville, AL	1,990		1,021		2,454		—			3,475		189		12/30/2009	2008
	Mineola, NY	2,280		—		3,166		—			3,166		166		12/14/2010	2008
	Minneapolis, MN	(f)		260		4,447		—			4,707		250		12/14/2010	2009
	Mishawaka, IN	2,258		422		3,469		(8		)	3,883		201		9/8/2010	2006
	Moonville, SC	1,163		757		1,024		—			1,781		19		4/26/2012	1998
	Naples, FL	2,675		—		2,943		—			2,943		154		12/14/2010	2009
	New Port Richey, FL	1,670		1,032		2,271		—			3,303		161		3/26/2010	2004
	Noblesville, IN	—		1,084		2,684		—			3,768		233		8/13/2009	2009
	Oak Forest, IL	—		1,235		2,731		—			3,966		236		8/13/2009	2009
	Oklahoma City, OK	—		752		1,228		—			1,980		17		6/4/2012	1996
	Phoenix, AZ	(f)		2,051		4,087		—			6,138		136		9/16/2011	2008
	Ringgold, GA	1,948		961		2,418		—			3,379		159		8/31/2010	2007
	Sherman, TX	(f)		935		2,646		—			3,581		105		6/10/2011	1999
	Southaven (Goodman), MS	4,270		1,489		3,503		—			4,992		184		12/14/2010	2009
	Southaven, MS	2,700		1,885		2,836		—			4,721		248		7/31/2009	2009
	Sparks, NV	2,711		2,100		2,829		—			4,929		242		8/13/2009	2009
	St. Augustine, FL	(f)		1,283		3,364		—			4,647		147		4/26/2011	2008
	The Village, OK	3,425		1,039		2,472		—			3,511		127		12/14/2010	2009
	Titusville, PA	(f)		849		1,499		—			2,348		43		11/4/2011	1998
	Warren, OH	(f)		329		1,191		—			1,520		36		11/4/2011	1998
	Weaverville, NC	3,098		1,559		3,365		—			4,924		199		9/30/2010	2009
CVS/Huntington Bank
	Northville, MI	(f)		3,695		—		—			3,695		—		8/17/2011	(g)
Dahl’s Supermarket
	Des Moines (Beaver), IA	(f)		373		2,825		—			3,198		128		6/15/2011	1985
	Des Moines (Ingersoll), IA	(f)		1,968		7,786		—			9,754		318		6/15/2011	2011
	Des Moines (Fleur), IA	(f)		453		1,685		—			2,138		77		6/15/2011	2002
	Johnston, IA	(f)		1,948		5,548		—			7,496		231		6/15/2011	2000
Davita Dialysis
	Augusta, GA	(f)		99		1,433		1			1,533		61		7/22/2011	2000
	Casselberry, FL	(f)		313		1,556		1			1,870		50		12/9/2011	2007
	Douglasville, GA	(f)		97		1,467		(1		)	1,563		62		7/22/2011	2001
	Ft. Wayne, IN	(f)		252		2,305		—			2,557		52		2/16/2012	2008
	Grand Rapids, MI	(f)		123		1,372		—			1,495		79		4/19/2011	1997
	Lawrenceville, NJ	(f)		518		2,217		—			2,735		48		3/23/2012	2009
	Sanford, FL	(f)		426		2,015		—			2,441		66		12/19/2011	2005
	Willow Grove, PA	(f)		273		2,575		—			2,848		92		10/28/2011	2010
Dell Perot
	Lincoln, NE	(f)		1,607		17,059		—			18,666		1,173		11/15/2010	2009

S-7

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

										Gross Amount at
										Which Carried
				Initial Costs to Company				Total		At December 31,		Accumulated
						Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Del Monte Plaza
	Reno, NV	$	9,953	$	3,429	$	12,252	$	49	$	15,730	$	365	11/2/2011	2011
Denver West Plaza
	Lakewood , CO	(f)		2,369		9,847		—		12,216		410		7/22/2011	2002
Dick’s Sporting Goods
	Charleston, SC	(f)		3,060		3,809		—		6,869		190		8/31/2011	2005
	Fort Gratiot, MI	3,411		699		4,826		—		5,525		86		6/29/2012	2010
	Jackson, TN	(f)		1,433		3,988		—		5,421		302		2/25/2011	2007
Diamond Crossing
	Anchorage, AK	7,980		5,753		8,769		—		14,522		312		9/27/2011	2007
Dollar General
	Cade, LA	—		178		945		—		1,123		1		12/18/2012	2012
	Grambling, LA	—		509		718		—		1,227		2		11/30/2012	2012
	Lake Charles, LA	—		351		716		—		1,067		2		11/30/2012	2012
	Lakeland, FL	—		342		1,621		—		1,963		2		12/18/2012	2012
	Lowell, OH	—		142		970		—		1,112		3		11/30/2012	2012
	Lyerly, GA	—		230		781		—		1,011		3		11/30/2012	2012
	Orange, TX	—		300		886		—		1,186		3		11/30/2012	2012
	Phenix City, AL	—		255		721		—		976		3		11/30/2012	2012
	Ponca City, OK	—		177		971		—		1,148		1		12/20/2012	2012
	Tahlequah, OK	—		121		946		—		1,067		1		12/20/2012	2012
	Vidor, TX	—		197		804		—		1,001		3		11/30/2012	2012
	Wagoner, OK	—		23		954		—		977		1		12/20/2012	2012
Eastland Center
	West Covina, CA	90,000		41,559		102,941		242		144,742		1,879		5/14/2012	1998
Encana Oil & Gas
	Plano, TX	66,000		2,623		101,829		—		104,452		355		11/27/2012	2012
Emdeon
	Nashville, TN	4,700		556		8,015		—		8,571		283		9/29/2011	2010
Evans Exchange
	Evans, GA	6,730		2,761		7,996		—		10,757		517		6/10/2010	(g)
Experian
	Schaumburg, IL	18,900		4,359		20,834		—		25,193		1,911		4/30/2010	1999
Fairlane Green
	Allen Park, MI	24,000		14,975		27,109		165		42,249		855		2/22/2012	2005
Falcon Valley
	Lenexa, KS	6,375		1,946		8,992		—		10,938		506		12/23/2010	2008
Family Dollar
	Abbeville, LA	740		128		898		—		1,026		18		4/30/2012	2005
	Alamogordo, NM	524		154		732		—		886		14		4/30/2012	2001
	Alexandria, LA	458		136		548		—		684		11		4/30/2012	2005
	Altha, FL	(f)		132		699		—		831		14		4/30/2012	2011
	Apopka, FL	1,127		626		954		—		1,580		18		4/30/2012	2011
	Avondale, AZ	974		566		1,014		—		1,580		19		4/30/2012	2002
	Baton Rouge, LA	(f)		399		637		—		1,036		13		4/30/2012	2003
	Battle Mountain, NV	(f)		162		1,230		—		1,392		24		4/30/2012	2009
	Beaumont (College), TX	(f)		226		733		—		959		14		4/30/2012	2003
	Beaumont (Highway 105), TX	654		229		700		—		929		14		4/30/2012	2003
	Beaumont (Washington), TX	(f)		331		959		—		1,290		19		4/30/2012	2003
	Beaver, UT	646		108		663		—		771		13		4/30/2012	2007
	Berkeley, MO	969		263		1,045		—		1,308		20		4/30/2012	2003
	Bethel, OH	852		275		974		—		1,249		13		7/11/2012	2005

S-8

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

									Gross Amount at
									Which Carried
			Initial Costs to Company				Total		At December 31,		Accumulated
					Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances	Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Family Dollar (continued)
	Brazoria, TX	$ (f)	$	251	$	800	$	—	$	1,051	$	16	4/30/2012	2002
	Bristol, FL	631	227		684		—		911		13		4/30/2012	2011
	Bristol, VA	608	174		676		—		850		13		4/30/2012	1978
	Brooklyn, MI	(f)	113		590		—		703		11		4/30/2012	2002
	Burton, MI	866	132		842		—		974		16		4/30/2012	2003
	Canton, OH	460	91		581		—		672		13		4/30/2012	2004
	Casa Grande, AZ	(f)	92		716		—		808		14		4/30/2012	2003
	Cleveland , OH	1,079	53		1,380		—		1,433		19		7/11/2012	2003
	Cleveland (Pearl), OH	1,370	278		1,437		—		1,715		32		4/30/2012	1994
	Clovis, NM	657	95		889		—		984		17		4/30/2012	2004
	Cockrell Hill, TX	970	579		807		—		1,386		16		4/30/2012	2002
	Converse, TX	409	144		501		—		645		12		4/30/2012	2003
	Coolidge, AZ	603	106		832		—		938		16		4/30/2012	2000
	Dacano, CO	757	180		878		—		1,058		17		4/30/2012	2003
	Dallas, TX	627	270		676		—		946		13		4/30/2012	2004
	Deland, FL	1,057	548		1,014		—		1,562		19		4/30/2012	2011
	Deltona (1401), FL	686	196		879		—		1,075		17		4/30/2012	2004
	Deltona (2901), FL	1,042	277		1,048		—		1,325		20		4/30/2012	2011
	Des Moines, IA	822	363		840		—		1,203		15		4/30/2012	2003
	Dickinson, TX	681	163		811		—		974		16		4/30/2012	2010
	El Dorado, AR	663	78		861		—		939		18		4/30/2012	2002
	Farmerville, LA	722	146		704		—		850		14		4/30/2012	2003
	Fort Dodge, IA	408	107		499		—		606		9		4/30/2012	2002
	Fort Lupton, CO	916	197		1,061		—		1,258		21		4/30/2012	2003
	Fort Meade, FL	417	214		555		—		769		11		4/30/2012	2000
	Fort Mohave, AZ	(f)	266		627		—		893		13		4/30/2012	2001
	Fort Myers, FL	973	254		995		—		1,249		20		4/30/2012	2002
	Gainesville, FL	1,002	505		903		—		1,408		17		4/30/2012	2011
	Gallup, NM	(f)	207		1,252		—		1,459		24		4/30/2012	2007
	Green Bay, WI	(f)	312		916		—		1,228		18		4/30/2012	2011
	Greenville, MS	(f)	138		782		—		920		15		4/30/2012	2011
	Guadalupe, AZ	(f)	339		657		—		996		13		4/30/2012	2004
	Gulfport, MS	(f)	375		1,045		—		1,420		20		4/30/2012	2007
	Hernandez, NM	1,152	124		1,174		—		1,298		22		4/30/2012	2008
	Homedale, ID	973	64		804		—		868		16		4/30/2012	2006
	Hot Springs, AR	(f)	266		772		—		1,038		15		4/30/2012	2011
	Houston (Freeway), TX	920	969		416		—		1,385		8		4/30/2012	1981
	Houston (Jester), TX	(f)	106		631		—		737		12		4/30/2012	2002
	Houston (Kuykendahl), TX	(f)	593		1,016		—		1,609		20		4/30/2012	2009
	Houston (Mount), TX	(f)	150		893		—		1,043		17		4/30/2012	2002
	Houston (Veterans), TX	911	358		883		—		1,241		17		4/30/2012	2002
	Houston, TX	886	244		962		—		1,206		19		4/30/2012	2002
	Hudson, MI	833	86		858		—		944		16		4/30/2012	2005
	Indianapolis, IN	613	275		620		—		895		12		4/30/2012	2003
	Jacksonville (Lem Turner), FL	1,028	605		866		—		1,471		17		4/30/2012	2008
	Jacksonville (Moncrief), FL	789	333		812		—		1,145		16		4/30/2012	2011
	Jacksonville, AR	571	135		701		—		836		15		4/30/2012	2002
	Jemison, AL	757	145		923		—		1,068		18		4/30/2012	2011
	Kansas City (Blue Ridge), MO	683	280		749		—		1,029		14		4/30/2012	2003

S-9

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

										Gross Amount at
										Which Carried
				Initial Costs to Company				Total		At December 31,		Accumulated
						Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Family Dollar (continued)
	Kansas City (Meyer), MO	$	970	$	218	$	1,155	$	—	$	1,373	$	22	4/30/2012	2004
	Kansas City (Prospect), MO	1,211		200		1,497		—		1,697		29		4/30/2012	2004
	Kansas City (State), KS	982		247		1,127		—		1,374		22		4/30/2012	2002
	Kentwood, LA	683		144		693		—		837		14		4/30/2012	2003
	Kentwood, MI	739		307		699		—		1,006		13		4/30/2012	2001
	Kingston, OK	(f)		25		571		—		596		11		4/30/2012	2000
	Kissimmee, FL	970		679		804		—		1,483		15		4/30/2012	2011
	Lake City, FL	622		174		785		—		959		15		4/30/2012	2011
	Lakeland, FL	732		370		697		—		1,067		14		4/30/2012	2003
	Las Vegas, NV	876		321		954		—		1,275		18		4/30/2012	2005
	Leander, TX	557		314		503		—		817		13		4/30/2012	2004
	Little Rock, AR	467		99		600		—		699		12		4/30/2012	2002
	Loveland, OH	798		250		905		—		1,155		8		9/24/2012	2002
	Lufkin, TX	1,153		231		1,323		—		1,554		26		4/30/2012	2004
	Lynn, MA	1,222		824		980		—		1,804		19		4/30/2012	2003
	Macon, GA	673		226		781		—		1,007		15		4/30/2012	2011
	Marshall, TX	(f)		91		610		—		701		12		4/30/2012	2001
	McAllen, TX	857		247		774		—		1,021		15		4/30/2012	2004
	Memphis (Austin), TN	(f)		295		859		—		1,154		17		4/30/2012	2004
	Memphis (Lamar), TN	638		199		722		—		921		14		4/30/2012	2003
	Memphis (Millbranch), TN	1,251		438		1,294		—		1,732		25		4/30/2012	2005
	Memphis (Neely), TN	973		391		967		—		1,358		19		4/30/2012	2003
	Mexia, TX	(f)		64		515		—		579		10		4/30/2012	2000
	Middletown, OH	660		200		790		—		990		16		4/30/2012	2001
	Milton, FL	644		229		695		—		924		14		4/30/2012	2010
	Milwaukee, WI	970		253		1,067		—		1,320		21		4/30/2012	2003
	Mohave Valley, AZ	(f)		256		364		—		620		8		4/30/2012	2003
	Montgomery, AL	959		506		864		—		1,370		17		4/30/2012	2010
	New Orleans, LA	1,146		683		915		—		1,598		18		4/30/2012	2005
	Newaygo, MI	689		244		616		—		860		11		4/30/2012	2002
	Noonday, TX	625		120		810		—		930		16		4/30/2012	2004
	Ocala (28th St.), FL	(f)		236		942		—		1,178		18		4/30/2012	2006
	Ocala (Maricamp), FL	968		348		1,017		—		1,365		19		4/30/2012	2011
	Okeechobee, FL	894		395		956		—		1,351		18		4/30/2012	2011
	Ormond Beach, FL	(f)		733		872		—		1,605		17		4/30/2012	2011
	Palestine, TX	671		160		757		—		917		15		4/30/2012	2000
	Pembroke Park, FL	1,141		668		930		—		1,598		18		4/30/2012	2006
	Penn Yan, NY	525		286		501		—		787		10		4/30/2012	2003
	Pensacola, FL	559		131		652		—		783		13		4/30/2012	2003
	Petersburg, VA	948		250		924		—		1,174		18		4/30/2012	2003
	Pharr, TX	969		287		628		—		915		13		4/30/2012	2002
	Phoenix (McDowell), AZ	1,040		525		1,039		—		1,564		20		4/30/2012	2003
	Phoenix (Southern), AZ	(f)		1,063		899		—		1,962		17		4/30/2012	2003
	Plant City (Baker), FL	1,173		650		1,007		—		1,657		19		4/30/2012	2005
	Plant City (Gordon), FL	(f)		356		935		—		1,291		18		4/30/2012	2004
	Pontiac, MI	962		250		829		—		1,079		16		4/30/2012	2003
	Port Arthur, TX	1,044		271		1,090		—		1,361		21		4/30/2012	2005
	Princeton, IN	526		346		446		—		792		9		4/30/2012	2000
	Raymondville, TX	542		120		609		—		729		12		4/30/2012	2002

S-10

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

									Gross Amount at
									Which Carried
			Initial Costs to Company				Total		At December 31,		Accumulated
					Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances	Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Family Dollar (continued)
	Rio Grande, TX	$ (f)	$	201	$	852	$	—	$	1,053	$	17	4/30/2012	2003
	Robstown, TX	550	59		759		—		818		19		4/30/2012	2003
	Roswell, NM	766	128		928		—		1,056		18		4/30/2012	2004
	Royse City, TX	972	530		802		—		1,332		16		4/30/2012	2002
	Saginaw, MI	(f)	161		936		—		1,097		18		4/30/2012	2003
	San Angelo, TX	891	283		952		—		1,235		22		4/30/2012	2011
	San Antonio (Culebra), TX	864	396		851		—		1,247		20		4/30/2012	2004
	San Antonio (Cupples), TX	1,143	226		1,373		—		1,599		34		4/30/2012	2004
	San Antonio (Foster), TX	506	190		572		—		762		14		4/30/2012	2004
	San Antonio (Marbach), TX	598	260		632		—		892		15		4/30/2012	2004
	San Antonio (Valley Hi), TX	800	295		826		—		1,121		20		4/30/2012	2002
	San Antonio (Zarzamora), TX	728	286		812		—		1,098		20		4/30/2012	2004
	San Benito, TX	598	147		610		—		757		12		4/30/2012	2004
	San Diego, TX	602	62		651		—		713		13		4/30/2012	2004
	Seymour, IN	(f)	222		736		—		958		14		4/30/2012	2000
	Shreveport, LA	892	228		784		—		1,012		15		4/30/2012	2005
	St. Louis (Ferry), MO	(f)	343		989		—		1,332		19		4/30/2012	2003
	St. Louis, MO	972	258		1,053		—		1,311		20		4/30/2012	2003
	St. Peter, MN	409	105		559		—		664		13		4/30/2012	1960
	St. Petersburg (34th), FL	1,093	802		833		—		1,635		16		4/30/2012	2011
	Tallahassee, FL	(f)	674		748		—		1,422		15		4/30/2012	2011
	Tampa (22nd St.), FL	1,005	584		912		—		1,496		18		4/30/2012	2008
	Tampa (MLK), FL	1,168	886		869		—		1,755		17		4/30/2012	2011
	Terre Haute, IN	394	90		542		—		632		10		4/30/2012	2011
	Topeka, KS	(f)	265		1,243		—		1,508		24		4/30/2012	2004
	Tyler, TX	416	107		509		—		616		10		4/30/2012	2003
	Victoria, TX	(f)	399		164		—		563		3		4/30/2012	2003
	Waco, TX	440	128		504		—		632		12		4/30/2012	2001
Family Fare Supermarket
	Battle Creek, MI	(f)	1,400		5,754		—		7,154		292		1/31/2011	2010
FedEx
	Beekmantown, NY	2,614	299		3,403		—		3,702		238		4/23/2010	2008
	Bossier City, LA	(f)	197		4,139		—		4,336		267		11/1/2010	2009
	Dublin, VA	(f)	159		2,765		—		2,924		163		10/21/2010	2008
	Effingham, IL	7,040	1,321		11,137		—		12,458		859		12/29/2009	2008
	Lafayette, IN	2,230	513		3,356		—		3,869		230		4/27/2010	2008
	McComb, MS	(f)	569		2,396		—		2,965		109		5/5/2011	2008
	Northwood, OH	2,410	457		3,944		—		4,401		250		8/17/2010	1998
Fire Mountain Restaurant
	Bossier City, LA	—	1,045		1,537		—		2,582		70		4/29/2011	2004
	Cullman, AL	—	865		1,185		—		2,050		56		4/29/2011	1996
	Horn Lake, MS	—	846		1,270		—		2,116		60		4/29/2011	1995
Fleming’s Steakhouse
	Englewood, CO	(f)	1,278		2,256		—		3,534		46		3/14/2012	2004
Folsum Gateway II
	Folsum, CA	21,600	7,293		23,038		1,407		31,738		1,288		12/15/2010	2008
Food Lion
	Moyock, NC	(f)	937		2,389		—		3,326		116		7/21/2011	1999

S-11

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

										Gross Amount at
										Which Carried
				Initial Costs to Company				Total		At December 31,		Accumulated
						Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Garden Ridge
	Stockbridge, GA	$	—	$	1,647	$	5,651	$	—	$	7,298	$	7	12/17/2012	1998
Giant Eagle
	Lancaster, OH	7,800		2,283		11,700		—		13,983		657		10/29/2010	2008
	Lewis Center, OH	10,843		2,345		15,440		—		17,785		510		10/5/2011	2000
	Gahanna, OH	—		4,530		15,261		—		19,791		16		12/20/2012	2002
Glen’s Market
	Manistee, MI	(f)		387		4,230		—		4,617		192		5/19/2011	2009
Glynn Isles Market
	Brunswick, GA	(f)		2,578		31,677		—		34,255		1,155		9/29/2011	2007
Golden Corral
	Akron, OH	1,166		531		1,384		—		1,915		27		5/16/2012	2003
	Bakersfield, CA	—		2,011		1,990		—		4,001		44		3/21/2012	2011
	Canton, OH	1,280		538		1,560		—		2,098		30		5/16/2012	2002
	Cincinnati, OH	1,242		632		1,377		—		2,009		24		5/16/2012	1999
	Clarksville, IN	1,589		734		1,815		—		2,549		31		5/16/2012	2002
	Cleveland, OH	1,437		828		1,460		—		2,288		28		5/16/2012	2004
	Dayton (Kingsridge), OH	(f)		416		1,028		—		1,444		18		5/16/2012	2000
	Dayton (Miller), OH	1,638		712		1,859		—		2,571		32		5/16/2012	2002
	Dayton, OH	(f)		580		1,097		—		1,677		20		5/16/2012	2000
	Elyria, OH	1,160		1,057		879		—		1,936		19		5/16/2012	2004
	Fairfield, OH	889		612		770		—		1,382		14		5/16/2012	1999
	Grove City, OH	1,171		1,331		625		—		1,956		15		5/16/2012	2007
	Independence, MO	(f)		1,046		2,074		—		3,120		73		9/28/2011	2010
	Louisville, KY	—		816		951		—		1,767		17		5/16/2012	2001
	Monroeville, PA	(f)		1,330		489		—		1,819		12		5/16/2012	1982
	Northfield, OH	(f)		906		340		—		1,246		11		5/16/2012	2004
	Ontario, OH	1,339		477		1,784		—		2,261		33		5/16/2012	2004
	Richmond, IN	—		505		715		—		1,220		13		5/16/2012	2002
	San Angelo, TX	—		503		1,427		—		1,930		30		3/21/2012	2012
	Spring, TX	—		2,567		1,385		—		3,952		28		4/5/2012	2011
	Springfield, OH	689		501		606		—		1,107		12		5/16/2012	2000
	Toledo, OH	—		744		2,056		—		2,800		38		5/16/2012	2004
Gold’s Gym
	Broken Arrow, OK	—		753		5,481		—		6,234		69		8/15/2012	2009
Goodyear
	Columbia, SC	—		524		1,768		8		2,300		29		5/23/2012	2010
	Corpus Christi, TX	(f)		666		1,214		—		1,880		23		4/27/2012	2008
	Cumming (Old Atlanta), GA	1,664		1,006		1,240		—		2,246		20		5/23/2012	2010
	Cumming, GA	1,614		387		2,068		—		2,455		33		5/23/2012	2010
Greenway Commons
	Houston, TX	33,000		35,421		28,002		5		63,428		638		3/23/2012	2008
Hanes Distribution
	Rural Hall, NC	18,100		1,487		26,580		—		28,067		1,488		1/10/2011	1992
Harris Teeter
	Durham, NC	1,700		2,852		—		—		2,852		—		7/31/2009	(g)
HealthNow
	Buffalo, NY	42,500		1,699		69,587		150		71,436		4,047		12/16/2010	2007
HH Gregg Appliances
	Chesterfield, MO	—		1,188		3,445		—		4,633		35		9/18/2012	2012
	Joliet, IL	(f)		1,221		1,173		—		2,394		39		2/17/2012	2011
	Merrillville, IN	(f)		319		3,617		112		4,048		100		2/17/2012	2011

S-12

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

										Gross Amount at
										Which Carried
				Initial Costs to Company				Total		At December 31,		Accumulated
						Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
HH Gregg Appliances (continued)
	North Charleston, SC	$	2,700	$	1,665	$	3,369	$	—	$	5,034	$	338	7/2/2009	2000
	North Fayette, PA	(f)		1,561		1,941		—		3,502		69		10/14/2011	1999
Highlands Ranch
	Highland Ranch, CO	3,475		2,017		3,713		—		5,730		153		8/16/2011	2007
Hillside Town Centre
	Chicago, IL	—		7,677		16,199		—		23,876		168		9/28/2012	2009
Hobby Lobby
	Concord , NC	(f)		1,425		3,703		—		5,128		135		12/12/2011	2004
	Avon, IL	(f)		1,810		3,355		—		5,165		143		6/17/2011	2007
	Logan, UT	(f)		1,379		2,804		—		4,183		106		10/20/2011	2008
Hobby Lobby Center
	Greenville, SC	(f)		2,173		3,858		—		6,031		165		7/22/2011	2003
Home Depot
	Evans, GA	5,551		5,561		—		—		5,561		—		6/11/2010	(g)
	Kennesaw, GA	7,884		1,640		1,321		8,179		11,140		191		11/4/2011
	Las Vegas , NV	(f)		7,167		—		—		7,167		—		4/15/2009	(g)
	Odessa, TX	(f)		4,704		—		—		4,704		—		4/15/2009	(g)
	San Diego, CA	6,350		10,288		—		—		10,288		—		4/15/2009	(g)
	Slidell, LA	1,996		3,631		—		—		3,631		—		7/28/2010	(g)
	Tolleson, AZ	17,050		3,461		22,327		—		25,788		1,390		7/30/2010	2009
	Tucson, AZ	6,025		6,125		—		—		6,125		—		10/21/2009	(g)
	Winchester, VA	14,900		1,724		20,703		196		22,623		1,720		10/21/2009	2008
Igloo
	Katy, TX	20,300		4,117		32,552		—		36,669		2,172		5/21/2010	2004
Indian Lakes Crossing
	Virginia Beach, VA	7,178		7,010		6,172		—		13,182		158		1/31/2012	2008
Irving Oil
	Belfast, ME	(f)		267		606		—		873		17		12/29/2011	1997
	Bethel, ME	(f)		104		354		—		458		10		12/29/2011	1990
	Boothbay Harbor, ME	(f)		399		403		—		802		11		12/29/2011	1993
	Caribou, ME	(f)		130		375		—		505		11		12/29/2011	1990
	Conway, NH	(f)		198		371		—		569		10		12/29/2011	2004
	Dover, NH	(f)		416		477		—		893		13		12/29/2011	1988
	Fort Kent, ME	(f)		220		405		—		625		11		12/29/2011	1988
	Kennebunk, ME	(f)		313		659		—		972		19		12/29/2011	2002
	Lincoln, ME	(f)		240		379		—		619		11		12/29/2011	1985
	Orono, ME	(f)		195		240		—		435		7		12/29/2011	1984
	Rochester, NH	(f)		344		476		—		820		14		12/29/2011	1970
	Rutland, VT	(f)		178		214		—		392		6		12/29/2011	1984
	Saco, ME	(f)		286		527		—		813		15		12/29/2011	1995
	Skowhegan, ME	(f)		368		510		—		878		14		12/29/2011	1988
	West Dummerston, VT	(f)		99		344		—		443		10		12/29/2011	1993
	Westminster, VT	(f)		64		402		—		466		12		12/29/2011	1990
Jo-Ann’s
	Shakopee, MN	—		787		1,527		—		2,314		13		9/1/2012	2012
Kingman Gateway
	Kingman, AZ	—		1,418		3,085		—		4,503		129		8/16/2011	2009
Kirkland’s
	Wilimington, NC	—		911		795		—		1,706		1		12/21/2012	2012
Kohl’s
	Brownsville, TX	(f)		6,247		—		—		6,247		—		8/16/2011	(g)
	Burnsville, MN	—		3,830		5,854		—		9,684		594		1/9/2009	1991

S-13

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

											Gross Amount at
											Which Carried
				Initial Costs to Company				Total			At December 31,		Accumulated
						Buildings &		Adjustment			2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis			(b) (c)		(d) (e)		Acquired	Constructed
Kohl’s (continued)
	Columbia, SC	$	6,275	$	1,484	$	9,462	$	—		$	10,946	$	734	12/7/2009	2007
	Fort Dodge, IA	(f)		1,246		2,922		—			4,168		82		12/14/2011	2011
	McAllen, TX	3,591		1,094		5,565		—			6,659		402		3/26/2010	2005
	Monroe, MI	5,146		880		4,044		—			4,924		163		6/30/2011	2006
	Monrovia, CA	6,500		5,441		5,505		—			10,946		519		7/30/2009	1982
	Onalaska, WI	3,550		1,541		5,148		—			6,689		298		12/13/2010	1992
	Palm Coast, FL	(f)		10,900		—		—			10,900		—		3/10/2011	(g)
	Rancho Cordova, CA	(f)		2,848		4,100		—			6,948		426		7/30/2009	1982
	Rice Lake, WI	(f)		1,249		3,927		—			5,176		160		5/5/2011	2011
	Saginaw, MI	(f)		1,062		5,941		—			7,003		272		3/10/2011	2011
	Salina, KS	(f)		636		4,653		—			5,289		261		10/29/2010	2008
	Spartanburg , SC	—		3,046		5,713		—			8,759		8		12/6/2012	2006
	Tavares, FL	4,400		7,926		—		—			7,926		—		6/30/2009	(g)
Kohl’s Academy
	Hixson, TN	—		1,297		8,935		—			10,232		30		11/13/2012	2011
Kohl’s Plaza
	Napa, CA	(f)		1,573		15,630		(42		)	17,161		569		8/23/2011	1983
Kum & Go
	Sloan, IA	(f)		336		1,839		—			2,175		133		4/23/2010	2008
	Story City, IA	(f)		216		1,395		—			1,611		113		2/25/2010	2006
	Tipton, IA	(f)		289		1,848		—			2,137		126		5/28/2010	2008
	West Branch, IA	(f)		132		808		—			940		66		2/25/2010	1997
Kyle Marketplace
	Kyle, TX	24,750		5,954		36,810		71			42,835		1,036		12/30/2011	2007
L.A. Fitness
	Avondale, AZ	(f)		1,730		5,750		—			7,480		214		8/31/2011	2006
	Broadview, IL	(f)		2,202		6,671		—			8,873		286		5/18/2011	2010
	Carmel, IN	3,645		1,392		5,435		—			6,827		537		6/30/2009	2008
	Dallas, TX	4,712		1,824		6,656		—			8,480		437		8/17/2010	2008
	Denton, TX	3,960		1,635		5,082		—			6,717		396		3/31/2010	2009
	Duncanville, TX	(f)		429		5,843		—			6,272		204		9/26/2011	2007
	Easton, PA	(f)		765		6,622		—			7,387		133		4/27/2012	1979
	Glendale, AZ	3,193		1,920		3,214		—			5,134		303		10/30/2009	2005
	Highland, CA	4,700		1,255		6,777		—			8,032		533		2/4/2010	2009
	Indianapolis, IN	(f)		2,029		4,184		—			6,213		200		3/31/2011	2009
	Marana, CA	—		1,098		5,410		—			6,508		39		9/13/2012	2011
	Oakdale, MN	4,749		1,667		5,674		—			7,341		343		9/30/2010	2009
	Oswego, IL	(f)		1,958		6,280		—			8,238		132		3/23/2012	2008
	Spring, TX	—		1,372		5,011		—			6,383		403		11/20/2009	2006
Lakeshore Crossing
	Gainesville, GA	4,400		2,314		5,802		191			8,307		362		9/15/2010	1994
Lowe’s
	Burlington, IA	(f)		1,134		5,677		—			6,811		107		4/27/2012	1996
	Columbia, SC	(f)		9,565		—		—			9,565		—		2/10/2011	(g)
	Denver, CO	—		12,634		—		—			12,634		—		2/2/2011	(g)
	Kansas City, MO	4,250		4,323		—		—			4,323		—		11/20/2009	(g)
	Las Vegas , NV	5,765		9,096		—		—			9,096		—		3/31/2009	(g)
	Miamisburg, OH	6,375		2,155		6,320		—			8,475		262		9/9/2011	1994
	Sanford, ME	4,672		8,482		—		—			8,482		—		6/28/2010	(g)
	Ticonderoga, NY	4,345		7,344		—		—			7,344		—		8/31/2010	(g)
Macaroni Grill
	Flanders, NJ	915		477		1,125		—			1,602		72		6/30/2010	2003

S-14

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

											Gross Amount at
											Which Carried
				Initial Costs to Company				Total			At December 31,		Accumulated
						Buildings &		Adjustment			2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis			(b) (c)		(d) (e)		Acquired	Constructed
Macaroni Grill (continued)
	Mt. Laurel, NJ	$	713	$	791	$	1,612	$	—		$	2,403	$	104	6/30/2010	2004
	West Windsor, NJ	1,043		515		932		—			1,447		60		6/30/2010	1998
Mattress Firm
	Fairview Heights, IL	—		140		703		—			843		9		7/23/2012	1977
	Melbourne, FL	—		361		768		—			1,129		5		10/5/2012	2011
MedAssets
	Plano, TX	19,873		6,589		6,052		27,511			40,152		—		11/22/2011	(g)
Merrill Lynch
	Hopewell Township, NJ	—		15,073		88,852		—			103,925		137		12/12/2012	2001
Michael’s
	Lafayette, LA	(f)		1,345		2,570		—			3,915		70		3/9/2012	2011
Midtowne Park
	Anderson, SC	16,645		5,765		18,119		—			23,884		506		12/20/2011	2008
MotoMart
	Saint Charles, MO	(f)		990		1,609		—			2,599		34		3/30/2012	2009
Mueller Regional Retail District
	Austin, TX	34,300		9,918		45,299		354			55,571		3,813		12/18/2009	2008
National Tire & Battery
	Nashville, TN	799		372		1,138		—			1,510		82		4/21/2010	2010
Nature Coast Commons
	Spring Hill, FL	21,850		6,114		19,094		536			25,744		956		6/21/2011	2009
Northern Tool & Equipment
	Ocala, FL	1,650		1,167		1,796		—			2,963		143		5/20/2010	2009
North Point Shopping Center
	Cape Coral, FL	(f)		1,244		8,152		(69		)	9,327		389		4/13/2011	2008
Office Depot
	Alvin, TX	(f)		567		1,916		—			2,483		105		11/4/2011	2009
	Corsicana, TX	(f)		613		1,566		—			2,179		72		4/29/2011	2007
	Houston, TX	(f)		1,667		1,856		—			3,523		82		4/29/2011	2009
	Mobile, AL	(f)		553		1,708		—			2,261		91		4/29/2011	2008
Old Country Buffet
	Coon Rapids, MN	—		1,291		1,229		—			2,520		56		4/29/2011	2003
On the Border
	Alpharetta, GA	1,329		1,240		1,406		—			2,646		91		6/30/2010	1997
	Auburn Hills, MI	1,283		859		1,976		—			2,835		128		6/30/2010	1999
	Buford, GA	1,236		1,140		1,277		—			2,417		82		6/30/2010	2001
	Burleson, TX	1,439		980		1,791		—			2,771		116		6/30/2010	2000
	College Station, TX	1,376		1,242		1,402		—			2,644		91		6/30/2010	1997
	Columbus, OH	1,925		1,245		1,410		—			2,655		91		6/30/2010	1997
	Concord Mills, NC	1,363		1,296		1,350		—			2,646		87		6/30/2010	2000
	Denton, TX	1,317		1,028		1,480		—			2,508		96		6/30/2010	2002
	DeSoto, TX	1,482		838		1,915		—			2,753		125		6/30/2010	1983
	Fort Worth, TX	1,575		1,188		1,857		—			3,045		120		6/30/2010	1999
	Garland, TX	1,020		690		1,311		—			2,001		84		6/30/2010	2007
	Kansas City, MO	1,454		904		1,403		—			2,307		90		6/30/2010	1997
	Lee’s Summit, MO	1,200		845		1,331		—			2,176		86		6/30/2010	2002
	Lubbock, TX	1,376		743		1,996		—			2,739		129		6/30/2010	1994
	Mesa, AZ	1,804		1,121		1,468		—			2,589		95		6/30/2010	2002
	Mt. Laurel, NJ	1,447		559		1,139		—			1,698		73		6/30/2010	2004
	Naperville, IL	1,494		1,260		1,786		(66		)	2,980		115		6/30/2010	1997
	Novi, MI	1,177		653		1,837		—			2,490		119		6/30/2010	1997
	Oklahoma City, OK	1,266		880		1,659		—			2,539		107		6/30/2010	1996

S-15

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

										Gross Amount at
										Which Carried
				Initial Costs to Company				Total		At December 31,		Accumulated
						Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
On the Border (continued)
	Peoria, AZ	$	1,562	$	1,071	$	1,245	$	—	$	2,316	$	81	6/30/2010	2002
	Rockwall, TX	1,355		761		1,836		—		2,597		119		6/30/2010	1999
	Rogers, AR	950		551		1,176		—		1,727		76		6/30/2010	2002
	Tulsa, OK	1,427		952		1,907		—		2,859		124		6/30/2010	1995
	West Springfield, MA	2,000		1,015		2,361		—		3,376		153		6/30/2010	1995
	West Windsor, NJ	2,433		1,114		2,013		—		3,127		130		6/30/2010	1998
	Woodbridge, VA	1,685		1,587		1,540		—		3,127		100		6/30/2010	1998
O’Reilly’s Auto Parts
	Breaux Bridge, LA	401		91		608		—		699		43		3/15/2010	2009
	Central, LA	(f)		75		737		—		812		29		6/10/2011	2010
	Christiansburg, VA	646		205		763		—		968		40		12/23/2010	2010
	Highlands, TX	485		217		605		—		822		33		12/23/2010	2010
	Houston, TX	560		254		680		—		934		36		1/13/2011	2010
	LaPlace, LA	507		221		682		—		903		48		3/12/2010	2008
	Louisville, KY	—		494		844		—		1,338		10		7/10/2012	2011
	New Roads, LA	410		111		616		—		727		44		3/12/2010	2008
	Ravenna, OH	(f)		102		866		—		968		45		1/25/2011	2010
	San Antonio, TX	703		356		853		—		1,209		45		12/23/2010	2010
	Willard, OH	—		121		843		—		964		12		6/8/2012	2011
Outback Steakhouse
	Baton Rouge, LA	1,080		567		1,178		—		1,745		24		3/14/2012	2001
	Boardman Township, OH	1,700		690		2,052		—		2,742		41		3/14/2012	1995
	Centennial, CO	1,560		1,150		1,274		—		2,424		26		3/14/2012	1996
	Colonial Heights, VA	2,160		1,656		1,715		—		3,371		35		3/14/2012	2000
	Conroe, TX	1,530		944		1,394		—		2,338		28		3/14/2012	2001
	Fort Smith, AR	1,620		1,017		1,558		—		2,575		32		3/14/2012	1999
	Fort Wayne, IN	1,570		701		1,806		—		2,507		37		3/14/2012	2000
	Garner, NC	1,580		1,005		1,508		—		2,513		30		3/14/2012	2004
	Houston, TX	1,620		1,076		1,449		—		2,525		29		3/14/2012	1998
	Independence, OH	(f)		695		1,398		—		2,093		28		3/14/2012	2006
	Jacksonville, FL	1,620		836		1,601		—		2,437		32		3/14/2012	2001
	Las Cruces, NM	1,120		491		1,299		—		1,790		26		3/14/2012	2000
	Lees Summit, MO	920		522		921		—		1,443		19		3/14/2012	1999
	Lexington, KY	1,820		1,153		1,587		—		2,740		32		3/14/2012	2002
	McAllen, TX	770		426		665		—		1,091		13		3/14/2012	1999
	Newport News, VA	2,060		1,577		1,430		—		3,007		29		3/14/2012	1993
	Pittsburg, PA	1,630		999		1,627		—		2,626		33		3/14/2012	1995
	Sebring , FL	1,470		810		1,617		—		2,427		33		3/14/2012	2001
	Southgate, MI	1,680		809		2,010		—		2,819		41		3/14/2012	1994
	Winchester, VA	2,190		1,508		1,848		—		3,356		37		3/14/2012	2006
Oxford Exchange
	Oxford, GA	(f)		3,946		37,509		494		41,949		1,870		4/18/2011	2006
Owens Corning
	Newark, OH	(f)		499		9,537		—		10,036		366		7/8/2011	2007
Petco
	Dardenne Prairie, MO	(f)		781		1,525		—		2,306		81		2/22/2011	2009
	Lake Charles, LA	2,145		412		2,852		—		3,264		168		10/25/2010	2008
Petsmart
	Bellingham, WA	2,526		1,019		2,286		—		3,305		45		4/30/2012	1993
	Boca Raton, FL	(f)		3,379		3,748		—		7,127		148		7/21/2011	2001
	Braintree, MA	(f)		3,539		4,775		—		8,314		196		7/21/2011	1996
	Dallas, TX	(f)		901		3,858		—		4,759		146		7/21/2011	1998

S-16

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

									Gross Amount at
									Which Carried
			Initial Costs to Company				Total		At December 31,		Accumulated
					Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances	Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Petsmart (continued)
	Evanston, IL	$ (f)	$	792	$	5,522	$	—	$	6,314	$	208	7/21/2011	2001
	Flint, MI	(f)	565		2,986		—		3,551		153		7/21/2011	1996
	Lake Mary, FL	(f)	2,035		2,323		—		4,358		99		7/21/2011	1997
	Oxon Hill, MD	(f)	2,426		2,993		—		5,419		125		7/21/2011	1998
	Parma, OH	(f)	866		2,848		—		3,714		103		8/4/2011	1996
	Phoenix, AZ	51,250	3,750		80,003		304		84,057		3,166		8/23/2011	2008
	Plantation, FL	(f)	1,077		3,868		—		4,945		153		7/21/2011	2001
	Southlake, TX	(f)	2,653		3,748		—		6,401		143		7/21/2011	1998
	Tallahassee, FL	(f)	1,221		1,341		—		2,562		65		7/21/2011	1998
	Westlake Village, CA	(f)	1,892		4,908		—		6,800		208		7/21/2011	1998
Petsmart/Hallmark
	Cincinnati, OH	—	942		3,417		—		4,359		99		2/14/2012	1998
Petsmart/Bevmo
	Redding, CA	3,206	1,185		3,484		—		4,669		76		3/21/2012	1989
Petsmart/Travos Credit Union
	Mercad, CA	2,974	1,389		3,135		—		4,524		69		3/21/2012	1993
Pick N Save Center
	Wauwatosa, WI	—	2,787		12,081		—		14,868		14		12/21/2012	2012
Pier 1 Imports
	Victoria, TX	—	390		1,500		—		1,890		19		7/2/2012	2011
Pinehurst Square West
	Bismark, ND	(f)	3,690		5,564		—		9,254		420		1/28/2011	2006
PLS Financial Services
	Calumet Park, IL	(f)	165		959		—		1,124		35		8/18/2011	2005
	Chicago (Diversey), IL	(f)	301		566		—		867		20		8/18/2011	2001
	Compton, CA	(f)	1,054		221		—		1,275		7		10/26/2011	2005
	Dallas (Camp Wisdom), TX	(f)	283		351		—		634		13		8/18/2011	1983
	Dallas (Davis), TX	(f)	156		619		—		775		23		8/18/2011	2003
	Fort Worth, TX	(f)	181		688		—		869		25		8/18/2011	2003
	Grand Prairie, TX	(f)	479		123		—		602		6		8/18/2011	1971
	Houston, TX	(f)	175		262		—		437		11		8/18/2011	2005
	Kenosha, WI	(f)	120		521		—		641		19		8/18/2011	2005
	Mesa (Broadway), AZ	(f)	225		394		—		619		15		8/18/2011	2006
	Mesquite, TX	(f)	197		712		—		909		26		8/18/2011	2006
	Phoenix, AZ	(f)	183		670		—		853		19		11/4/2011	2006
	Tucson, AZ	(f)	278		467		—		745		18		8/18/2011	2005
Prairie Market
	Oswego, IL	12,500	12,997		10,840		106		23,943		646		12/3/2010	(g)
Publix
	Mountain Brook, AL	3,275	2,492		2,830		—		5,322		231		12/1/2009	2004
RaceTrac
	Atlanta, GA	(f)	989		1,074		—		2,063		31		12/21/2011	2004
	Belleview, FL	(f)	882		2,712		—		3,594		79		12/21/2011	2007
	Bessemer, AL	(f)	982		1,703		—		2,685		50		12/21/2011	2003
	Denton, TX	(f)	960		1,690		—		2,650		48		12/21/2011	2003
	Houston (Hwy 6N), TX	(f)	888		950		—		1,838		27		12/21/2011	1995
	Houston (Kuykendahl), TX	(f)	1,043		1,036		—		2,079		30		12/21/2011	1997
	Jacksonville, FL	(f)	1,178		2,462		—		3,640		73		12/21/2011	2011
	Leesburg, FL	(f)	1,185		2,375		—		3,560		70		12/21/2011	2007
	Mobile, AL	(f)	650		908		—		1,558		26		12/21/2011	1998

S-17

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

										Gross Amount at
										Which Carried
				Initial Costs to Company				Total		At December 31,		Accumulated
						Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Red Oak Village
	San Marcos, TX	$	12,480	$	4,222	$	16,434	$	—	$	20,656	$	1,004	12/23/2010	2008
Riverside Centre
	St. Augustine, FL	(f)		1,368		3,148		267		4,783		150		6/8/2011	2007
Road Ranger
	Winnebago, IL	—		638		3,129		—		3,767		30		8/30/2012	1998
RSA Security
	Bedford, MA	51,400		13,692		67,747		—		81,439		1,024		7/25/2012	2001
Ryan’s
	Asheville, NC	—		1,177		1,233		—		2,410		58		4/29/2011	1996
	Beckley, WV	—		1,102		1,307		—		2,409		61		4/29/2011	1995
	Columbus, GA	—		1,394		1,325		—		2,719		61		4/29/2011	2002
	Commerce, GA	—		817		946		—		1,763		44		4/29/2011	1996
	Jasper, AL	—		663		1,439		—		2,102		66		4/29/2011	2000
	Owensboro, KY	—		1,239		893		—		2,132		41		4/29/2011	1997
	Paducah, KY	—		1,013		858		—		1,871		40		4/29/2011	1995
	Pearl, MS	—		913		1,135		—		2,048		53		4/29/2011	2000
	Prattville, AL	—		876		1,125		—		2,001		52		4/29/2011	1997
	Rome, GA	—		919		682		—		1,601		35		4/29/2011	1983
	Sevierville, TN	—		725		673		—		1,398		31		4/29/2011	2003
	Texas City, TX	—		677		1,593		—		2,270		73		4/29/2011	2002
Sam’s Club
	Colorado Springs, CO	9,581		2,626		10,817		—		13,443		358		1/20/2012	1998
	Douglasville, GA	(f)		2,016		9,290		—		11,306		416		7/28/2011	1999
	Hoover, AL	(f)		2,083		9,223		—		11,306		1,013		1/15/2009	2000
Santa Rosa Commons
	Pace, FL	13,000		2,887		19,811		112		22,810		892		6/30/2011	2008
San Tan Marketplace
	Gilbert, AZ	27,400		10,800		40,312		—		51,112		885		3/30/2012	2005
Shelby Corners
	Utica, MI	(f)		957		2,753		—		3,710		128		7/8/2011	2008
Sherwin Williams
	Muskegon, MI	(f)		158		880		—		1,038		49		12/10/2010	2008
Sherwood Retail Center
	Sherwood, AR	—		2,143		3,198		—		5,341		63		6/4/2012	2005
Shoppes at Port Arthur
	Port Arthur, TX	8,077		2,618		11,463		—		14,081		741		10/12/2010	2008
Shoppes at Sherbrooke
	Lake Worth, FL	—		3,161		5,609		55		8,825		115		4/27/2012	2004
Shoppes at Sugarmill Woods
	Homosassa, FL	—		882		5,381		112		6,375		166		12/13/2011	2008
Silverado Plaza
	Tucson, AZ	4,701		1,893		6,914		—		8,807		204		12/22/2011	1998
Sprouts
	Centennial, CO	—		1,692		6,070		—		7,762		22		11/14/2012	2009
Staples
	Houston, TX	1,815		1,020		2,232		—		3,252		151		6/17/2010	2008
	Iowa City, IA	—		1,223		2,201		—		3,424		190		11/13/2009	2009
	Pensacola, FL	(f)		1,503		2,011		—		3,514		125		1/6/2011	2010
Stearns Crossing
	Bartlett, IL	7,060		3,733		7,649		76		11,458		484		12/9/2010	1999

S-18

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

										Gross Amount at
										Which Carried
			Initial Costs to Company				Total			At December 31,		Accumulated
					Buildings &		Adjustment			2012		Depreciation		Date	Date
Description (a)		Encumbrances	Land		Improvements		to Basis			(b) (c)		(d) (e)		Acquired	Constructed
St. Luke’s Urgent Care
	Creve Coeur, MO	$ (f)	$	1,067	$	3,867	$	—		$	4,934	$	185	5/20/2011	2010
Stop & Shop
	Cranston, RI	(f)	13,301		—		—			13,301		—		8/5/2011	(g)
	Stamford, CT	14,900	12,881		14,592		—			27,473		926		7/30/2010	2006
Stripes
	Andrews, TX	(f)	110		1,777		—			1,887		137		12/30/2009	2008
	Brady, TX	—	205		2,628		—			2,833		30		8/30/2012	2007
	Brownsville, TX	—	561		2,715		—			3,276		31		8/30/2012	2007
	Carrizo Springs, TX	(f)	400		2,221		—			2,621		125		11/22/2010	2010
	Corpus Christi (Everh), TX	—	882		2,645		—			3,527		30		8/30/2012	2007
	Corpus Christi (Padre), TX	—	700		2,689		—			3,389		31		8/30/2012	2007
	Corpus Christi, TX	—	684		1,606		—			2,290		20		8/30/2012	2007
	Eagle Pass, TX	(f)	656		1,897		—			2,553		122		6/29/2010	2009
	Edinburg (Hwy 107), TX	—	405		2,419		—			2,824		28		8/30/2012	2007
	Edinburg (Raul), TX	—	408		1,997		—			2,405		23		8/30/2012	2007
	Edinburg, TX	(f)	906		1,259		—			2,165		81		6/29/2010	1999
	Fort Stockton, TX	(f)	1,035		3,319		—			4,354		284		12/30/2010	2010
	Haskell, TX	(f)	93		2,130		—			2,223		121		11/22/2010	2010
	Houston, TX	—	878		1,676		—			2,554		22		8/30/2012	2007
	LaFeria, TX	(f)	321		1,271		—			1,592		99		12/30/2009	2008
	Laredo (La Pita Mangana), TX	(f)	419		1,741		—			2,160		99		11/22/2010	2010
	Laredo (Willow), TX	(f)	438		1,785		—			2,223		74		8/3/2011	2010
	Midland, TX	—	1,152		3,945		—			5,097		44		8/30/2012	2006
	Mission, TX	—	1,009		2,238		—			3,247		26		8/30/2012	2003
	Odessa (Kermit), TX	—	733		5,594		—			6,327		58		8/30/2012	1998
	Odessa, TX	(f)	139		2,175		—			2,314		186		6/30/2011	2011
	Palmhurst, TX	(f)	467		448		—			915		29		6/29/2010	1986
	Pharr, TX	(f)	384		1,712		—			2,096		133		12/30/2009	1997
	Portales, NM	(f)	313		1,913		—			2,226		184		12/30/2010	2010
	Rio Hondo, TX	(f)	273		1,840		—			2,113		141		12/30/2009	2007
	San Angelo (Sherwood), TX	—	958		2,704		—			3,662		32		8/30/2012	2007
	San Angelo, TX	—	601		3,609		—			4,210		38		8/30/2012	1997
	San Benito (Ranchito), TX	(f)	401		1,967		—			2,368		126		6/29/2010	2010
Sunset Valley Shopping Center
	Austin, TX	17,441	10,249		19,345		131			29,725		1,460		3/26/2010	2007
Sysmex
	Lincolnshire, IL	22,500	3,778		41,462		736			45,976		58		8/31/2012	2010
Telegraph Plaza
	Monroe, MI	—	1,076		5,059		—			6,135		253		6/30/2011	2006
The Crossing
	Killeen, TX	(f)	1,280		6,767		(35		)	8,012		284		7/20/2011	2011
The Forum
	Fort Myers, FL	(f)	8,091		20,504		—			28,595		949		7/22/2011	2008
The Medicines Company
	Parsippany, NJ	27,700	4,195		39,488		23			43,706		1,066		2/27/2012	2009
The Plaza
	Queen Creek, AZ	7,290	2,659		9,523		—			12,182		418		8/12/2011	2007
Thornton’s
	Bloomington, IL	953	777		1,031		—			1,808		58		12/17/2010	1992

S-19

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

											Gross Amount at
											Which Carried
				Initial Costs to Company				Total			At December 31,		Accumulated
						Buildings &		Adjustment			2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis			(b) (c)		(d) (e)		Acquired	Constructed
Thorton’s (continued)
	Clarksville, IN	$	1,007	$	894	$	948	$	—		$	1,842	$	53	12/17/2010	2005
	Edinburgh, IN	1,047		780		1,138		—			1,918		67		12/17/2010	1997
	Evansville (Rosenberger), IN	1,032		727		1,039		—			1,766		63		12/17/2010	2007
	Evansville, IN	1,082		674		1,040		—			1,714		65		12/17/2010	1998
	Franklin Park, IL	1,628		1,427		1,373		—			2,800		79		12/17/2010	1999
	Galloway, OH	953		578		1,134		—			1,712		66		12/17/2010	1998
	Henderson (Green), KY	1,007		702		1,031		—			1,733		62		12/17/2010	2009
	Henderson, KY	1,975		1,212		2,089		—			3,301		119		12/17/2010	2007
	Jeffersonville, IN	1,439		1,475		1,057		—			2,532		64		12/17/2010	1995
	Joliet, IL	1,761		1,209		1,789		—			2,998		101		12/17/2010	2000
	Louisville, KY	1,037		684		1,154		—			1,838		66		12/17/2010	1994
	Oaklawn, IL	1,111		1,233		667		—			1,900		42		12/17/2010	1994
	Ottawa, IL	1,300		599		1,751		—			2,350		98		12/17/2010	2006
	Plainfield, IL	1,102		829		1,166		—			1,995		67		12/17/2010	2005
	Roselle, IL	1,399		926		1,425		—			2,351		83		12/17/2010	1996
	Shelbyville, KY	1,116		533		1,356		—			1,889		81		12/17/2010	2007
	South Elgin, IL	1,628		1,452		1,278		—			2,730		74		12/17/2010	2007
	Springfield, IL	1,915		1,221		2,053		—			3,274		116		12/17/2010	2008
	Summit, IL	1,116		1,316		662		—			1,978		37		12/17/2010	2000
	Terre Haute, IN	1,350		908		1,409		(37		)	2,280		83		12/17/2010	1999
	Waukegan, IL	1,161		797		1,199		—			1,996		68		12/17/2010	1999
	Westmont, IL	1,881		1,150		1,926		—			3,076		110		12/17/2010	1997
Tire Kingdom
	Auburndale, FL	1,205		625		1,487		—			2,112		94		7/20/2010	2010
Toys R Us/Mr. Hero
	Parma, OH	—		1,192		2,151		—			3,343		60		4/11/2012	1986
Toys R Us/Babies R Us
	Coral Springs, FL	—		2,507		4,675		—			7,182		43		9/27/2012	2010
Tractor Supply
	Alamogordo, NM	1,943		529		2,188		—			2,717		41		4/20/2012	2011
	Alton, IL	1,404		419		2,009		—			2,428		129		8/13/2010	2008
	Augusta, ME	1,423		362		2,121		—			2,483		133		10/12/2010	2009
	Bainbridge, GA	(f)		456		1,812		—			2,268		60		11/16/2011	2008
	Ballinger, TX	1,248		369		1,841		—			2,210		130		5/21/2010	2010
	Belchertown, MA	1,823		1,001		2,149		—			3,150		160		6/29/2010	2008
	Columbia, SC	(f)		773		1,794		—			2,567		41		3/30/2012	2011
	Del Rio, TX	1,113		657		1,387		—			2,044		131		7/27/2009	2009
	Dixon, CA	2,962		848		3,528		—			4,376		223		9/24/2010	2007
	Edinburg, TX	1,451		571		2,051		—			2,622		190		7/27/2009	2009
	Franklin, NC	1,480		422		1,914		—			2,336		118		11/30/2010	2009
	Gibsonia, PA	1,648		726		2,074		—			2,800		155		5/5/2010	2010
	Glenpool, OK	1,180		174		1,941		—			2,115		137		5/4/2010	2009
	Gloucester, NJ	2,600		1,590		2,962		—			4,552		253		12/17/2009	2009
	Grayson, KY	(f)		406		1,967		—			2,373		76		6/30/2011	2011
	Hamilton, OH	932		418		1,045		—			1,463		70		9/17/2010	1975
	Irmo, SC	1,125		697		1,501		—			2,198		165		10/15/2009	2009
	Jackson, CA	—		1,062		3,620		—			4,682		4		12/18/2012	2012
	Jefferson City, MO	1,125		398		1,269		—			1,667		76		11/9/2010	2009
	Kenedy, TX	1,220		215		1,985		—			2,200		144		4/29/2010	2009
	Lawrence, KS	1,377		427		2,016		—			2,443		119		9/24/2010	2010
	Little Rock, AR	1,500		834		1,223		—			2,057		74		11/9/2010	2009

S-20

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

											Gross Amount at
											Which Carried
				Initial Costs to Company				Total			At December 31,		Accumulated
						Buildings &		Adjustment			2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis			(b) (c)		(d) (e)		Acquired	Constructed
Tractor Supply (continued)
	Middletown, DE	$	—	$	1,306	$	2,703	$	—		$	4,009	$	42	6/29/2012	2007
	Mishawaka, IN	(f)		450		1,856		—			2,306		60		11/18/2011	2011
	Murphy, NC	1,402		789		1,580		—			2,369		120		5/21/2010	2010
	Nixa, MO	1,346		430		1,697		—			2,127		101		9/24/2010	2009
	Pearsall, TX	1,199		120		2,117		—			2,237		154		4/9/2010	2009
	Rincon, GA	(f)		678		1,509		—			2,187		65		8/23/2011	2007
	Roswell, TX	1,180		728		1,469		—			2,197		138		7/27/2009	2009
	Sedalia, MO	1,090		414		1,567		—			1,981		87		12/10/2010	2010
	Sellersburg, IN	1,433		815		1,426		—			2,241		89		9/13/2010	2010
	Southwick, MA	2,428		1,521		2,261		—			3,782		169		6/29/2010	2008
	St. John, IN	2,247		360		3,445		—			3,805		235		7/28/2010	2007
	Stillwater, OK	1,205		163		1,999		—			2,162		141		5/4/2010	2008
	Summerdale, AL	1,210		238		1,783		—			2,021		139		4/14/2010	2010
	Troy, MO	1,286		623		1,529		—			2,152		100		8/13/2010	2009
	Tuscaloosa, AL	—		641		1,951		—			2,592		7		11/21/2012	2012
	Union, MO	1,404		512		1,784		—			2,296		115		8/13/2010	2008
	Wauseon, OH	1,374		596		1,563		—			2,159		110		9/13/2010	2007
Trader Joe’s
	Lexington, KY	3,519		2,431		3,233		—			5,664		48		7/17/2012	2012
	Sarasota, FL	—		1,748		4,959		—			6,707		43		9/25/2012	2008
Tutor Time
	Austin, TX	(f)		216		1,445		—			1,661		88		12/15/2010	2000
	Downingtown, PA	(f)		143		1,473		—			1,616		84		12/15/2010	1998
Ulta Salon
	Jackson, TN	1,454		557		1,832		—			2,389		127		11/5/2010	2010
	Fort Gratiot, MI	1,104		289		1,382		—			1,671		19		6/29/2012	2012
United Technologies
	Bradenton, FL	10,050		2,094		16,618		—			18,712		541		12/8/2011	2004
University Plaza
	Flagstaff, AZ	8,350		3,008		11,545		845			15,398		1,130		11/17/2009	1982
USAA
	Fayetteville, NC	—		636		1,512		—			2,148		16		8/29/2012	2012
VA Clinic
	Oceanside, CA	27,750		4,373		36,082		—			40,455		1,027		12/22/2011	2010
Valley Blend
	Huntsville, AL	—		9,051		55,664		—			64,715		63		12/19/2012	2001
Volusia Square
	Daytona Beach, FL	16,557		7,004		22,427		(25		)	29,406		1,495		11/12/2010	2010
Walgreens
	Albuquerque, NM	(f)		1,066		1,870		76			3,012		54		11/17/2011	1996
	Anthony, TX	(f)		1,125		2,831		—			3,956		112		8/29/2011	2008
	Appleton (Meade), WI	1,880		885		2,505		—			3,390		183		2/3/2010	2008
	Appleton(Northland), WI	2,736		1,385		3,249		—			4,634		237		2/18/2010	2008
	Augusta, ME	3,157		2,271		3,172		—			5,443		231		3/5/2010	2007
	Bartlett, TN	(f)		1,716		1,516		—			3,232		58		8/1/2011	2001
	Baytown, TX	2,480		1,151		2,786		—			3,937		208		2/23/2010	2009
	Beloit, WI	2,184		763		3,064		—			3,827		205		5/20/2010	2008
	Birmingham, AL	1,560		660		2,015		—			2,675		152		3/30/2010	1999
	Brooklyn Park, MD	2,226		1,323		3,301		—			4,624		254		12/23/2009	2008
	Brownwood, TX	(f)		1,511		3,527		—			5,038		165		3/30/2011	2008
	Cape Carteret, NC	2,400		971		2,461		—			3,432		99		8/15/2011	2008
	Chicago (79th St.), IL	(f)		976		2,116		—			3,092		87		5/5/2011	2003

S-21

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

									Gross Amount at
									Which Carried
			Initial Costs to Company				Total		At December 31,		Accumulated
					Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances	Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Walgreens (continued)
	Chicago (N. Canfield), IL	$ (f)	$	818	$	3,317	$	—	$	4,135	$	143	4/28/2011	2000
	Chickasha, TX	1,869	746		2,900		—		3,646		245		10/14/2009	2007
	Clarkston, MI	(f)	1,506		2,885		—		4,391		111		6/24/2011	2001
	Cleveland (Clark), OH	2,692	451		4,312		—		4,763		313		2/10/2010	2008
	Country Club Hills, MO	(f)	717		3,697		—		4,414		168		3/9/2011	2009
	Decatur, GA	(f)	1,490		2,167		—		3,657		96		5/5/2011	2001
	Denton, TX	—	887		3,535		—		4,422		310		7/24/2009	2009
	Dubuque, IA	(f)	825		3,259		—		4,084		122		8/12/2011	2008
	Durham (Guess), NC	2,871	1,315		3,225		—		4,540		203		7/20/2010	2010
	Durham (Highway 54), NC	2,849	2,067		2,827		—		4,894		197		4/28/2010	2008
	Edmond, OK	2,250	901		2,656		—		3,557		263		7/7/2009	2000
	Elgin, IL	2,260	1,561		2,469		—		4,030		192		12/30/2009	2002
	Fayetteville, NC	(f)	916		4,118		—		5,034		216		12/30/2010	2009
	Fort Mill, SC	2,272	1,137		2,532		—		3,669		166		6/24/2010	2010
	Framingham, MA	3,046	2,234		2,852		—		5,086		220		1/19/2010	2007
	Fredericksburg, VA	3,773	2,729		4,072		—		6,801		405		1/9/2009	2008
	Goose Creek, SC	2,700	1,277		3,240		—		4,517		267		10/29/2009	2009
	Grand Junction , CO	—	1,041		3,215		—		4,256		271		9/30/2009	2009
	Grayson, GA	2,720	1,129		2,965		—		4,094		157		12/7/2010	2004
	Greenville, NC	3,030	645		3,532		—		4,177		261		2/19/2010	2009
	Independence, MO	(f)	1,240		2,436		—		3,676		105		5/5/2011	2001
	Indianapolis, IN	—	842		4,798		—		5,640		476		1/6/2009	2008
	Janesville (W Court), WI	2,235	689		3,099		—		3,788		213		4/13/2010	2010
	Janesville, WI	2,640	1,423		3,776		—		5,199		291		12/18/2009	2008
	Kingman, AZ	2,997	839		4,369		—		5,208		318		2/25/2010	2009
	La Crosse, WI	(f)	1,638		3,107		—		4,745		128		5/6/2011	2009
	Lafayette, IN	2,350	635		2,425		—		3,060		111		3/31/2011	2008
	Lancaster (Palmdale), CA	2,719	1,349		3,219		—		4,568		216		5/17/2010	2009
	Lancaster, SC	2,980	2,021		2,970		—		4,991		219		2/19/2010	2009
	Leland, NC	2,472	1,252		2,835		—		4,087		179		7/15/2010	2008
	Liberty Township, OH	(f)	1,353		3,285		—		4,638		153		3/31/2011	2011
	Loves Park, IL	1,767	892		2,644		—		3,536		199		1/19/2010	2008
	Machesney Park, IL	1,869	875		2,918		—		3,793		225		12/16/2009	2008
	Madisonville, KY	(f)	1,083		2,517		—		3,600		101		6/28/2011	2007
	Matteson, IL	2,450	430		3,246		—		3,676		174		11/30/2010	2008
	Medina, OH	(f)	829		2,966		—		3,795		126		5/5/2011	2001
	Muscatine, IA	(f)	532		2,450		—		2,982		105		5/5/2011	2001
	New Albany, OR	(f)	1,095		2,533		—		3,628		136		12/2/2010	2006
	North Mankato, MN	2,530	1,841		2,572		—		4,413		182		3/18/2010	2008
	North Platte, NE	2,328	1,123		3,367		—		4,490		246		2/23/2010	2009
	Omaha, NE	2,580	1,183		3,734		—		4,917		273		2/25/2010	2009
	Papillion, NE	1,967	1,039		2,731		—		3,770		222		10/6/2009	2009
	Pueblo, CO	(f)	510		2,651		—		3,161		138		12/7/2010	2003
	Roanoke, VA	(f)	1,042		3,923		—		4,965		176		4/26/2011	2009
	Rocky Mount, NC	2,995	1,419		3,516		—		4,935		236		5/26/2010	2009
	South Bend (Ironwood), IN	3,120	1,538		3,657		—		5,195		283		12/21/2009	2006
	South Bend, IN	—	1,234		3,245		—		4,479		255		11/18/2009	2007
	Spearfish, SD	2,426	1,028		3,355		—		4,383		274		10/6/2009	2008
	Springdale, AR	3,025	1,099		3,535		—		4,634		143		6/29/2011	2009
	St. Charles, IL	2,030	1,457		2,243		—		3,700		175		12/30/2009	2002

S-22

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

									Gross Amount at
									Which Carried
			Initial Costs to Company				Total		At December 31,		Accumulated
					Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances	Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Walgreens (continued)
	Stillwater, OK	$ (f)	$	562	$	2,903	$	8	$	3,473	$	289	7/21/2009	2000
	Tucson (Harrison), AZ	2,910	1,415		3,075		—		4,490		160		12/7/2010	2004
	Tucson (River), AZ	(f)	1,353		3,390		—		4,743		186		11/12/2010	2003
	Tulsa, OK	2,016	1,130		2,414		—		3,544		249		1/6/2009	2001
	Twin Falls, ID	2,432	1,088		3,153		—		4,241		240		1/14/2010	2009
	Union City, GA	(f)	916		3,120		—		4,036		112		9/9/2011	2005
	Warner Robins, GA	—	1,171		2,585		—		3,756		219		10/20/2009	2007
	Watertown, NY	(f)	2,696		2,545		—		5,241		117		7/26/2011	2006
	Wichita, KS	(f)	667		2,727		—		3,394		101		8/1/2011	2000
	Wilmington, NC	(f)	1,126		3,704		—		4,830		163		4/21/2011	2010
	Xenia, OH	(f)	840		3,575		—		4,415		112		10/4/2011	2009
Wal-Mart
	Albuquerque, NM	9,698	14,432		—		—		14,432		—		3/31/2009	(g)
	Cary, NC	—	2,749		5,062		—		7,811		7		12/21/2012	2005
	Douglasville, GA	(f)	4,781		13,166		—		17,947		628		7/28/2011	1999
	Lancaster, SC	—	2,664		10,223		—		12,887		359		12/21/2011	1999
	Las Vegas , NV	7,925	13,237		—		—		13,237		—		3/31/2009	(g)
	Pueblo, CO	8,250	1,877		10,162		—		12,039		679		11/12/2010	1998
	Riverside, CA	55,000	12,078		72,714		—		84,792		2,676		7/25/2011	2011
Waterside Marketplace
	Chesterfield, MI	19,350	8,078		15,727		911		24,716		1,463		12/20/2010	2007
WaWa
	Gap, PA	—	912		4,550		—		5,462		45		8/29/2012	2005
	Portsmouth, VA	1,241	2,080		—		—		2,080		—		9/30/2010	(g)
Wells Fargo
	Hillsboro, NH	13,500	8,088		15,955		—		24,043		1,247		12/8/2010	1979
Wendy’s
	Avon (10565 US36), IN	—	820		636		—		1,456		1		12/27/2012	1999
	Avon (5201 US36), IN	—	686		596		—		1,282		1		12/27/2012	1990
	Bellingham, WA	—	395		574		—		969		1		12/27/2012	1994
	Bothell, WA	—	317		407		—		724		—		12/27/2012	2004
	Carmel (116th St), IN	—	881		73		—		954		—		12/27/2012	1980
	Carmel (Michigan Rd), IN	—	826		556		—		1,382		1		12/27/2012	2001
	Fishers (116th St), IN	—	722		561		—		1,283		1		12/27/2012	1999
	Fishers (Olivia), IN	—	559		652		—		1,211		1		12/27/2012	2012
	Greenfield, IN	—	343		390		—		733		—		12/27/2012	1980
	Henderson (Eastern), NV	—	589		643		—		1,232		1		12/27/2012	2000
	Henderson (Green), NV	—	748		926		—		1,674		1		12/27/2012	1997
	Henderson (Lake), NV	—	670		507		—		1,177		1		12/27/2012	1999
	Indianapolis, IN	—	641		533		—		1,174		1		12/27/2012	1993
	Las Vegas (Lake Mead), NV	—	460		609		—		1,069		1		12/27/2012	1995
	Las Vegas (Nellis), NV	—	647		514		—		1,161		1		12/27/2012	1984
	Las Vegas (Rancho), NV	—	755		809		—		1,564		1		12/27/2012	1991
	Las Vegas (W Flamingo), NV	—	556		552		—		1,108		1		12/27/2012	1986
	Las Vegas (Charleston), NV	—	761		625		—		1,386		1		12/27/2012	1976
	Las Vegas (E. Flamingo), NV	—	319		539		—		858		1		12/27/2012	1976
	Lebanon, IN	—	1,445		767		—		2,212		1		12/27/2012	2012
	Noblesville, IN	—	546		69		—		615		—		12/27/2012	2012

S-23

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

										Gross Amount at
										Which Carried
				Initial Costs to Company				Total		At December 31,		Accumulated
						Buildings &		Adjustment		2012		Depreciation		Date	Date
Description (a)		Encumbrances		Land		Improvements		to Basis		(b) (c)		(d) (e)		Acquired	Constructed
Wendy’s (continued)
	Port Angeles, WA	—		437		1,237		—		1,674		1		12/27/2012	1980
	Redmond, WA	$	—	$	730	$	246	$	—	$	976	$	—	12/27/2012	1977
	San Antonio (De Zavala), TX	—		927		520		—		1,447		1		12/27/2012	1995
	San Antonio (Loop 410), TX	—		627		461		—		1,088		—		12/27/2012	1990
	San Antonio (Southcross), TX	—		572		927		—		1,499		1		12/27/2012	1992
	San Antonio (Stone Oak), TX	—		863		248		—		1,111		—		12/27/2012	2000
	San Antonio, TX	—		1,108		244		—		1,352		—		12/27/2012	2003
	San Marcos, TX	—		575		778		—		1,353		1		12/27/2012	2002
	Schertz, TX	—		984		213		—		1,197		—		12/27/2012	1994
	Selma, TX	—		1,368		252		—		1,620		—		12/27/2012	2003
	Silverdale, WA	—		1,144		1,777		—		2,921		2		12/27/2012	1995
West Marine
	Fort Lauderdale, FL	(f)		3,772		6,685		—		10,457		148		3/15/2012	2011
	Harrison Township, MI	(f)		666		2,623		—		3,289		50		4/30/2012	2009
West/East Valley Shopping Center
	Saginaw, MI	—		299		3,111		—		3,410		5		12/31/2012	2009
	Saginaw (East), MI	—		729		19,679		—		20,408		33		12/31/2012	1996
Whittwood Town Center
	Whittier, CA	43,000		35,268		64,486		408		100,162		5,081		8/27/2010	2006
White Oak Village
	Richmond, VA	34,250		12,243		44,405		—		56,648		481		8/30/2012	2008
Whole Foods
	Hinsdale, IL	5,710		4,227		6,749		—		10,976		491		5/28/2010	1999
Widewater Village
	Uniontown, PA	—		1,785		4,208		—		5,993		103		4/30/2012	2008
Winchester Station
	Winchester, VA	17,000		4,743		24,724		—		29,467		834		9/29/2011	2005
		$	2,415,190	$	1,495,935	$	4,372,195	$	46,399	$	5,914,529

(a) As of December 31, 2012, the Company owned 807 single-tenant retail properties, 120 single-tenant freestanding commercial properties, 70 multi-tenant retail properties, 16 office and industrial properties and one land parcel.

(b) The aggregate cost for federal income tax purposes is approximately $6.9 billion.

S-24

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE III - REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)

(c) The following is a reconciliation of total real estate carrying value for the years ended December 31:

			2012				2011				2010
Balance, beginning of period				$	4,498,384			$	2,572,898			$	596,425
	Additions
		Acquisitions		1,743,548				1,922,180				1,975,533
		Improvements		98,337				3,376				1,003
		Adjustment to basis		—				—				—
	Total additions			1,841,885				1,925,556				1,976,536
	Deductions
		Cost of real estate sold		(425,577		)		—				—
		Other (including provisions for impairment of real estate assets)		(163		)		(70		)		(63		)
	Total deductions			(425,740		)		(70		)		(63		)
Balance, end of period				$	5,914,529			$	4,498,384			$	2,572,898

(d) The following is a reconciliation of accumulated depreciation for the years ended December 31:

			2012				2011			2010
Balance, beginning of period				$	98,707			$	28,868		$	3,178
	Additions
		Acquisitions - Depreciation Expense for Building, Acquisitions Costs & Tenant Improvements Acquired		109,614				69,756			25,672
		Improvements - Depreciation Expense for Tenant Improvements and Building Equipment		919				83			18
	Total additions			110,533				69,839			25,690
	Deductions
		Cost of real estate sold		(20,541		)		—			—
		Other (including provisions for impairment of real estate assets)		—				—			—
	Total deductions			(20,541		)		—			—
Balance, end of period				$	188,699			$	98,707		$	28,868

(e) The Company’s assets are depreciated or amortized using the straight-lined method over the useful lives of the assets by class. Generally, tenant improvements and lease intangibles are amortized over the respective lease term and buildings are depreciated over 40 years.

(f) Property is included in the Credit Facility’s underlying collateral pool of 309 commercial properties. As of December 31, 2012, the Company had $767.8 million outstanding under the Credit Facility.

(g) Subject to a ground lease and therefore date constructed is not applicable.

S-25

COLE CREDIT PROPERTY TRUST III, INC.

SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE

(in thousands)

Mortgage Loans Receivable	Description	Location	Interest Rate as of December 31, 2012 (a)	Final Maturity Date	Periodic Payment Terms (b)	Prior Liens	Outstanding Face Amount of Mortgages (in thousands)		Carrying Amount of Mortgages (in thousands)(c)
Consol Energy Notes	Office	(d)	5.93%	10/1/2018	P & I	None	$	72,860	$	64,923
Junior Mezzanine Note	Retail	(e)	9.50%	7/1/2015	I	None	25,000		25,435
							$	97,860	$	90,358

(a) Represents the interest rate in effect under the loan as of December 31, 2012.

(b) P & I = Principal and interest payments; I = Interest only.

(c) The aggregate cost for Federal Income Tax purposes is $87.7 million

(d) The Consol Energy Notes are secured by two office buildings located in Pennsylvania.

(e) The Junior Mezzanine Note is secured by 15 commercial retail centers located in various states.

The following shows changes in the carrying amounts of mortgage loans receivable during the period (in thousands):

	2012			2011			2010
Balance, beginning of period	$	64,683		$	63,933		$	—
Additions:
New mortgage loans	25,000			—			74,000
Discount on new mortgage loans and capitalized loan costs	—			—			(12,000		)
Acquisition costs related to investment in mortgage notes receivable	500			—			1,291
Deductions:
Collections of principal	(864		)	(276		)	—
Accretion of discount and amortization of premium and capitalized loan costs	1,039			1,026			642
Balance, end of period	$	90,358		$	64,683		$	63,933

S-26

EX-99.2

Exhibit 99.2

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

INDEX

Condensed Consolidated Unaudited Balance Sheets as of June 30, 2013 and December 31, 2012	3
Condensed Consolidated Unaudited Statements of Operations for the three and six months ended June 30, 2013 and 2012	4
Condensed Consolidated Unaudited Statements of Comprehensive Income for the three and six months ended June 30, 2013 and 2012	5
Condensed Consolidated Unaudited Statements of Equity for the six months ended June 30, 2013 and 2012	6
Condensed Consolidated Unaudited Statements of Cash Flows for the six months ended June 30, 2013 and 2012	7
Notes to Condensed Consolidated Unaudited Financial Statements	8

2

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS

(in thousands, except share and per share amounts)

	June 30, 2013			December 31, 2012
ASSETS
Investment in real estate assets:
Land	$	1,525,353		$	1,488,525
Buildings and improvements, less accumulated depreciation of $249,446 and $187,448, respectively	4,365,738			4,218,182
Acquired intangible lease assets, less accumulated amortization of $160,308 and $121,894, respectively	853,137			859,985
Total investment in real estate assets, net	6,744,228			6,566,692
Investment in notes receivable, net	90,464			90,358
Investment in marketable securities	10,499			51,103
Investment in marketable securities pledged as collateral	257,518			266,098
Investment in unconsolidated entities	94,932			96,785
Total investment in real estate assets and related assets, net	7,197,641			7,071,036
Assets related to real estate held for sale, net	—			23,153
Cash and cash equivalents	167,474			192,504
Restricted cash	25,502			18,444
Rents and tenant receivables, less allowance for doubtful accounts of $440 and $337, respectively	97,956			79,569
Intangible assets, prepaid expenses and other assets, net	104,332			11,790
Deferred financing costs, less accumulated amortization of $16,248 and $23,105, respectively	61,835			57,229
Goodwill	229,102			—
Leasehold improvements and property and equipment, net	21,295			—
Due from affiliates	8,036			—
Total assets	$	7,913,173		$	7,453,725
LIABILITIES AND EQUITY
Notes payable and other borrowings	$	3,501,428		$	3,292,048
Accounts payable and accrued expenses	58,115			42,756
Due to affiliates	—			4,525
Acquired below market lease intangibles, less accumulated amortization of $21,303 and $16,389, respectively	114,934			113,607
Distributions payable	28,501			26,399
Contingent consideration	211,143			5,341
Derivative liabilities, deferred rent and other liabilities	52,968			51,639
Total liabilities	3,967,089			3,536,315
Commitments and contingencies
Redeemable common stock	—			234,578
EQUITY:
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding	—			—
Common stock, $0.01 par value; 990,000,000 shares authorized and 489,808,175 and 479,547,099 shares outstanding, respectively	4,898			4,795
Capital in excess of par value	4,416,151			4,068,015
Accumulated distributions in excess of earnings	(510,539		)	(416,886		)
Accumulated other comprehensive income	18,856			23,101
Total stockholders’ equity	3,929,366			3,679,025
Noncontrolling interests	16,718			3,807
Total equity	3,946,084			3,682,832
Total liabilities and equity	$	7,913,173		$	7,453,725

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

3

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Revenues:
Real estate investment revenue	$	159,812		$	124,910		$	312,089		$	234,066
Interest income on real estate-related investments	7,837			6,452			15,785			10,241
Private capital management revenue	82,643			—			82,643			—
Total revenue	250,292			131,362			410,517			244,307
Expenses:
Reallowed fees and commissions	38,962			—			38,962			—
General and administrative expenses	41,436			4,652			45,467			8,676
Merger related stock-based compensation expense	10,278			—			10,278			—
Property operating expenses	17,507			11,543			33,129			21,298
Property and asset management expenses	1,393			10,988			15,302			21,043
Merger and acquisition related expenses	11,810			17,438			27,423			32,819
Depreciation and amortization	56,393			38,269			104,110			71,540
Total operating expenses	177,779			82,890			274,671			155,376
Operating income	72,513			48,472			135,846			88,931
Other income (expense):
Equity in income of unconsolidated entities	972			552			2,281			886
Other (expense) income	(774		)	675			(851		)	3,992
Interest expense	(48,938		)	(30,141		)	(88,007		)	(57,312		)
Total other expense	(48,740		)	(28,914		)	(86,577		)	(52,434		)
Income from continuing operations before income taxes	23,773			19,558			49,269			36,497
Benefit from income taxes	235			—			235			—
Income from continuing operations	24,008			19,558			49,504			36,497
Discontinued operations:
Income from discontinued operations	195			3,532			838			7,762
Gain on sale of real estate assets	4,931			—			19,007			14,781
Income from discontinued operations	5,126			3,532			19,845			22,543
Net income	29,134			23,090			69,349			59,040
Net income (loss) allocated to noncontrolling interests	111			(133		)	215			(120		)
Net income attributable to the Company	$	29,023		$	23,223		$	69,134		$	59,160
Basic earnings per share:
Income from continuing operations	$	0.05		$	0.04		$	0.10		$	0.08
Income from discontinued operations	$	0.01		$	0.01		$	0.04		$	0.05
Net income attributable to the Company	$	0.06		$	0.05		$	0.14		$	0.13
Diluted earnings per share:
Income from continuing operations	$	0.05		$	0.04		$	0.10		$	0.08
Income from discontinued operations	$	0.01		$	0.01		$	0.04		$	0.05
Net income attributable to the Company	$	0.06		$	0.05		$	0.14		$	0.13
Weighted average number of common shares outstanding:
Basic	487,915,368			473,159,051			484,396,906			470,033,648
Diluted	491,510,128			473,159,051			486,194,286			470,033,648
Distributions declared per common share issued	$	0.17		$	0.16		$	0.33		$	0.31

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

4

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income	$	29,134		$	23,090		$	69,349		$	59,040
Other comprehensive income:
Unrealized loss on marketable securities	(27,745		)	(15,434		)	(12,981		)	(1,311		)
Reclassification of previous unrealized gain on marketable securities into net income	(612		)	—			(612		)	—
Unrealized gain (loss) on interest rate swaps	3,977			(4,835		)	6,784			(5,677		)
Reclassification of previous unrealized loss on interest rate swaps into net income	2,564			—			2,564			—
Total other comprehensive loss	(21,816		)	(20,269		)	(4,245		)	(6,988		)
Total comprehensive income	7,318			2,821			65,104			52,052
Comprehensive income (loss) attributable to noncontrolling interests	111			(133		)	215			(120		)
Total comprehensive income attributable to the Company	$	7,207		$	2,954		$	64,889		$	52,172

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

5

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF EQUITY

(in thousands, except share amounts)

						Capital in			Accumulated			Accumulated
	Common Stock					Excess			Distributions			Other			Total			Non-
	Number of		Par			of Par			in Excess of			Comprehensive			Stockholders’			controlling			Total
	Shares		Value			Value			Earnings			Income			Equity			Interests			Equity
Balance, January 1, 2013	479,547,099		$	4,795		$	4,068,015		$	(416,886	)	$	23,101		$	3,679,025		$	3,807		$	3,682,832
Issuance of common stock	7,830,909		78			74,317			—			—			74,395			—			74,395
Issuance of common stock related to the Merger	8,568,980		86			90,574			—			—			90,660			—			90,660
Merger related stock-based compensation expense	—		—			10,278			—			—			10,278			—			10,278
Contributions from noncontrolling interests	—		—			—			—			—			—			13,206			13,206
Distributions to noncontrolling interests	—		—			—			—			—			—			(510		)	(510		)
Distributions to investors	—		—			—			(162,787		)	—			(162,787		)	—			(162,787		)
Redemptions and cancellations of common stock	(6,138,813	)	(61		)	(61,611		)	—			—			(61,672		)	—			(61,672		)
Changes in redeemable common stock	—		—			234,578			—			—			234,578			—			234,578
Comprehensive income (loss)	—		—			—			69,134			(4,245		)	64,889			215			65,104
Balance, June 30, 2013	489,808,175		$	4,898		$	4,416,151		$	(510,539	)	$	18,856		$	3,929,366		$	16,718		$	3,946,084

						Capital in			Accumulated			Accumulated
	Common Stock					Excess			Distributions			Other			Total			Non-
	Number of		Par			of Par			in Excess of			Comprehensive			Stockholders’			controlling			Total
	Shares		Value			Value			Earnings			Loss			Equity			Interests			Equity
Balance, January 1, 2012	385,236,590		$	3,852		$	3,322,924		$	(319,031	)	$	(24,757	)	$	2,982,988		$	1,275		$	2,984,263
Issuance of common stock	91,997,379		920			912,570			—			—			913,490			—			913,490
Contributions from noncontrolling interests	—		—			—			—			—			—			2,937			2,937
Distributions to noncontrolling interests	—		—			—			—			—			—			(41		)	(41		)
Distributions to investors	—		—			—			(145,140		)	—			(145,140		)	—			(145,140		)
Commissions on stock sales and related dealer manager fees	—		—			(72,926		)	—			—			(72,926		)	—			(72,926		)
Other offering costs	—		—			(13,188		)	—			—			(13,188		)	—			(13,188		)
Redemptions of common stock	(2,476,653	)	(25		)	(24,097		)	—			—			(24,122		)	—			(24,122		)
Changes in redeemable common stock	—		—			(56,384		)	—			—			(56,384		)	—			(56,384		)
Comprehensive income (loss)	—		—			—			59,160			(6,988		)	52,172			(120		)	52,052
Balance, June 30, 2012	474,757,316		$	4,747		$	4,068,899		$	(405,011	)	$	(31,745	)	$	3,636,890		$	4,051		$	3,640,941

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

6

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30,
	2013			2012
Cash flows from operating activities:
Net income	$	69,349		$	59,040
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	65,123			51,303
Amortization of intangibles and deferred financing costs, net	54,267			34,792
Accretion of marketable securities and notes receivable, net	(2,772		)	(1,418		)
Equity in income of unconsolidated entities	(2,281		)	(886		)
Return on investment from unconsolidated entities	2,281			886
Gain on sale of real estate assets	(19,007		)	(14,781		)
Loss on sale of marketable securities	1,331			—
Loss on derivatives and debt prepayment fees	4,688			—
Merger related stock-based compensation expense	10,278			—
Other operating activities	386			(561		)
Changes in assets and liabilities:
Rents and tenant receivables	(18,573		)	(18,517		)
Intangible assets, prepaid expenses and other assets	3,574			(1,615		)
Due from affiliates	(3,729		)	—
Accounts payable and accrued expenses	1,488			6,569
Contingent consideration	(3,345		)	—
Deferred rent and other liabilities	(11,771		)	(2,814		)
Due to affiliates	(4,525		)	682
Net cash provided by operating activities	146,762			112,680
Cash flows from investing activities:
Investment in real estate and related assets, net	(324,952		)	(1,319,297		)
Cash paid in connection with the Merger, net of cash acquired	(7,251		)	—
Return of investment and repayment of advance from unconsolidated entities	2,420			19,131
Proceeds from sale and condemnation of real estate assets	85,189			69,222
Proceeds from the sale of marketable securities	36,533			—
Payment of property escrow deposits	(27,864		)	(26,936		)
Refund of property escrow deposits	22,646			26,964
Change in restricted cash	(7,058		)	1,783
Other investing activities, net	33			438
Net cash used in investing activities	(220,304		)	(1,228,695		)
Cash flows from financing activities:
Proceeds from issuance of common stock	—			832,984
Offering costs on issuance of common stock	—			(87,195		)
Redemptions of common stock	(61,672		)	(24,122		)
Distributions to investors	(86,290		)	(60,195		)
Proceeds from notes payable and other borrowings	481,256			1,023,149
Repayment of notes payable and other borrowings	(282,136		)	(510,201		)
Deferred financing costs paid	(12,324		)	(11,111		)
Contributions from noncontrolling interests	13,206			2,937
Other financing activities, net	(3,528		)	(1,431		)
Net cash provided by financing activities	48,512			1,164,815
Net (decrease) increase in cash and cash equivalents	(25,030		)	48,800
Cash and cash equivalents, beginning of period	192,504			216,353
Cash and cash equivalents, end of period	$	167,474		$	265,153

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

7

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

June 30, 2013

NOTE 1 — ORGANIZATION AND BUSINESS

Cole Real Estate Investments, Inc. (formerly known as Cole Credit Property Trust III, Inc. (“CCPT III”), (the “Company”) is a Maryland corporation that was formed on January 22, 2008, which has elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes. The Company operates through two business segments, Real Estate Investment (“REI”) and Private Capital Management (“PCM”), as further discussed in Note 4. Substantially all of the Company’s REI segment is conducted through Cole REIT III Operating Partnership, LP (“CCPT III OP”), a Delaware limited partnership. Substantially all of the Company’s PCM segment is conducted through Cole Capital Advisors, Inc. (“CCA”), an Arizona corporation. CCA is treated as a taxable REIT subsidiary (“TRS”) under Section 856 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

On June 20, 2013, the Company listed its common stock on the New York Stock Exchange (the “NYSE”) under the ticker symbol “COLE” (the “Listing”). As of June 30, 2013, the Company had issued approximately 499.9 million shares of its common stock in the Offerings (as defined in Note 15) for aggregate gross proceeds of $5.0 billion, before share redemptions pursuant to the Company’s share redemption program of $174.7 million and offering costs, selling commissions and dealer management fees of $463.2 million.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The condensed consolidated unaudited financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting, including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, the statements for the interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. Results for these interim periods are not necessarily indicative of full year results. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with CCPT III’s audited consolidated financial statements for the year ended December 31, 2012, and related notes thereto set forth in CCPT III’s Annual Report on Form 10-K for the year ended December 31, 2012. The condensed consolidated unaudited financial statements should also be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Quarterly Report on Form 10-Q.

The condensed consolidated unaudited financial statements include the accounts of the Company, its wholly-owned subsidiaries, consolidated joint venture arrangements in which the Company has controlling financial interests and REITs in the registration process of which the Company is the sole stockholder. The portions of the consolidated joint venture arrangements not owned by the Company are presented as noncontrolling interests as of and during the period consolidated. All intercompany balances and transactions have been eliminated in consolidation. Certain prior year balances have been reclassified in the condensed consolidated unaudited balance sheets and statements of operations to conform with the current year presentation of real estate assets held for sale and discontinued operations. In addition, prior year revenue amounts were reclassified in the condensed consolidated unaudited statements of operations to conform to the current year presentation for the reportable segments. Also, certain balances have been combined in the condensed consolidated unaudited balance sheets, statements of operations and statements of cash flows.

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”).  A VIE is broadly defined as an entity where either (1) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance or (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support.  The Company consolidates any VIEs when it is determined to be the primary beneficiary of the VIE’s operations.

8

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to 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, its form of ownership interest, its representation on the entity’s governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions and to replace the manager of and/or liquidate the entity.

The Company continually evaluates the need to consolidate joint ventures and the managed investment programs based on standards set forth in GAAP. In determining whether the Company has a controlling interest in a joint venture or manged investment programs and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, power to make decisions and contractual and substantive participating rights of the partners/members as well as whether the entity is a VIE for which the Company is the primary beneficiary. As of June 30, 2013, the Company consolidated the accounts of four joint ventures (the “Consolidated Joint Ventures”), which held real estate assets with an aggregate book value of $275.0 million.

In addition, the Company evaluates its investments in marketable securities to determine if they represent variable interests in VIEs. As of June 30, 2013, the Company determined that investments in marketable securities are variable interests in VIEs, of which the Company is not the primary beneficiary because it does not have the ability to direct the activities of the VIEs that most significantly impact each entity’s economic performance. The Company’s maximum exposure to loss from these investments does not exceed their aggregate amortized cost basis.

Use of Estimates

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

Investment in and Valuation of Real Estate Assets

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

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

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

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

9

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

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

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

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

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

10

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

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

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 impact the Company’s results of operations.

Discontinued Operations

Upon the disposal of a real estate asset or the determination of a real estate asset as being held for sale, the Company determines if the asset disposed of is considered a component of the Company. A component is comprised of operations and cash flows that can clearly be distinguished, operationally and for financial reporting purposes, from the rest of the Company. If the asset is considered a component of the Company, the results of operations and gains or losses on the sale of the component are required to be presented in discontinued operations if both of the following criteria are met: (1) the operations and cash flows of the asset have been (or will be) eliminated from the ongoing operations of the Company as a result of the disposal transaction and (2) the Company will not have any significant continuing involvement in the operations of the asset after the disposal transaction. Also, the prior period results of operations for the asset are reclassified and presented in discontinued operations in the prior condensed consolidated unaudited statements of operations.

Sale of Real Estate Assets

Gains on the sale of real estate assets are generally recognized by the full accrual method when the following criteria are met: (1) the gain is determinable, that is, the collectability of the sales price is reasonably assured or the amount that will not be collectible can be estimated, and (2) the earnings process is virtually complete, that is, the Company is not obligated to perform significant activities after the sale to earn the gain.

Investment in Marketable Securities

Investments in marketable securities consist of investments in commercial mortgage-backed securities (“CMBS”), including those pledged as collateral. The Company classifies its investments as available-for-sale because although the Company does not actively trade these securities, the Company may sell them prior to their maturity. These investments are carried at estimated fair value with unrealized gains and losses reported in accumulated other comprehensive income. The Company uses estimated non-binding quoted market prices from the trading desks of financial institutions that are dealers in such securities, where available, for similar CMBS tranches that actively participate in the CMBS market and industry benchmarks, such as Trepp’s CMBS Analytics, where applicable. Market conditions, such as interest rates, liquidity, trading activity and credit spreads may cause significant variability to the received quotes. If the Company is unable to obtain quotes or if the Company believes the quotes received are inaccurate, the Company would estimate fair value using internal models that primarily consider Trepp’s CMBS Analytics, expected cash flows, known and expected defaults and rating agency reports. Changes in market conditions could result in a significant increase or decrease in the recorded amount of the securities. Significant judgment is involved in valuations and different judgments and assumptions used in management’s valuation could result in alternative valuations. If there are significant disruptions to the financial markets, the Company’s estimates of fair value may have significant volatility. Upon the sale of a security, the realized net gain or loss is computed on a specific identification basis.

11

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Accretion of discounts on the CMBS is recognized based on the effective yield method and is recorded in the accompanying condensed consolidated unaudited statements of operations in interest income on real estate-related investments. The effective yield on these CMBS is based on the projected cash flows from each security, which are estimated based on the Company’s observation of current information and events and include assumptions related to interest rates, prepayment rates and the timing and amount of credit losses. The Company reviews and, if appropriate, makes adjustments to its cash flow projections based on input and analysis received from external sources, internal models, and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield/interest income recognized on such securities. Actual maturities of the securities are affected by the contractual lives of the associated mortgage collateral, periodic payments of principal, and prepayments of principal. Therefore actual maturities of the securities may be shorter than stated contractual maturities.

Investment in Unconsolidated Entities

Investment in Unconsolidated Joint Ventures

Investment in unconsolidated joint ventures as of June 30, 2013 consisted of the Company’s interest in seven joint ventures that owned 12 properties (the “Unconsolidated Joint Ventures”). As of June 30, 2013, the Company owned aggregate equity investments of $94.4 million in the Unconsolidated Joint Ventures. The Company accounts for the Unconsolidated Joint Ventures using the equity method of accounting as the Company has the ability to exercise significant influence, but not control, over operating and financial policies of these investments. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the joint ventures’ earnings and distributions.

Investment in REITs

As of June 30, 2013, the Company owned aggregate equity investments of $555,000 in the following publicly registered, non-traded REITs: Cole Credit Property Trust, Inc. (“CCPT”), Cole Credit Property Trust II, Inc. (“CCPT II”), Cole Credit Property Trust IV, Inc. (“CCPT IV”), Cole Corporate Income Trust, Inc. (“CCIT”), Cole Real Estate Income Strategy (Daily NAV), Inc. (“INAV”, collectively with CCPT, CCPT II, CCPT IV and CCIT, the “Managed REITs”). The Company accounts for these investments using the equity method of accounting as the Company has the ability to exercise significant influence, but not control, over the Managed REITs’ operating and financial policies through its advisory and property management agreements with the respective Managed REITs. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the respective Managed REIT’s earnings and distributions.

Leasehold Improvements and Property and Equipment

The Company leases its office facilities under operating leases. Leasehold improvements related to these are recorded at cost less accumulated amortization. Leasehold improvements are amortized over the lesser of the estimated useful life or remaining lease term. The Company recorded $267,000 of amortization expense for the period from the Merger Date (as defined in Note 3) to June 30, 2013. Accumulated amortization was $267,000 as of June 30, 2013.

Property and equipment, which primarily include office furniture, fixtures and equipment and computer hardware and software, are stated at cost less accumulated depreciation. Property and equipment are depreciated on a straight-line method over the estimated useful lives of the assets, which range from five to seven years. Depreciation expense for property and equipment totaled $293,000 for the period from the Merger Date to June 30, 2013. Accumulated depreciation was $293,000 as of June 30, 2013. The Company reassesses the useful lives of its property and equipment and adjusts the future monthly depreciation expense based on the new useful life, as applicable. If the Company disposes of an asset, the asset and related accumulated depreciation are written off upon disposal.

12

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Goodwill

In the case of a business combination, after identifying all tangible and intangible assets and liabilities, the excess consideration paid over the fair value of the assets and liabilities acquired and assumed represents goodwill. The Company allocates goodwill to the respective reporting unit in which such goodwill arose. In connection with the Merger (as defined in Note 3), the Company recorded goodwill in its PCM segment. Prior to the Merger, there was no goodwill recorded.

Impairments

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 is 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 six months ended June 30, 2013 or 2012.

Investment in Marketable Securities

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.

Investment in Unconsolidated Entities

The Company is required to determine whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of any of its investment in the joint ventures or the Managed REITs. If an event or change in circumstance has occurred, the Company is required to evaluate its investment in the joint venture or Managed REIT for potential impairment and determine if the carrying amount of its investment exceeds its fair value. An impairment charge is recorded when an impairment is deemed to be other-than-temporary. To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until the carrying amount is fully recovered. The evaluation of an investment in a joint venture or Managed REIT for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions.  The use of different judgments and assumptions could result in different conclusions. No impairment indicators were identified and no impairment losses were recorded related to the joint ventures or the Managed REITs for the six months ended June 30, 2013 or 2012.

Leasehold Improvements and Property and Equipment

Leasehold improvements and property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If this review indicates that the carrying amount of the asset is not recoverable, the Company records an impairment loss, measured at fair value by estimated discounted cash flows or market appraisals. No impairments of leasehold improvements or property or equipment were identified during the period from the Merger Date to June 30, 2013.

13

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Goodwill

The Company will evaluate goodwill for possible impairment at least annually or upon the occurrence of a triggering event using a two-step process. To identify any impairment, the Company will first compare the estimated fair value of the business segment with its respective carrying amount, including goodwill. The Company will calculate the estimated fair value of the PCM segment by applying a multiple, based on comparable companies, to earnings. The selection of the comparable companies and transactions to be used in the Company’s evaluation process could have a significant impact on the fair value of the Company’s reporting unit and possible impairments. If the fair value of the reporting unit exceeds its carrying amount, the Company will not consider goodwill to be impaired and no further analysis will be required. If the carrying amount of the business segment exceeds its estimated fair value, the Company will then perform the second step to determine and measure the amount of the potential impairment charge.

For the second step, the Company will compare the implied fair value of the goodwill for the business segment with its respective carrying amount and record an impairment charge equal to the excess of the carrying amount over the implied fair value. The Company will determine the implied fair value of the goodwill by allocating the estimated fair value of the business segment to its assets and liabilities. The excess of the estimated fair value of the business segment over the amounts assigned to its assets and liabilities will be the implied fair value of the goodwill.

Due from Affiliates

The Company receives compensation and reimbursement for services relating to the Managed REITs’ offerings and the investment, management, financing and disposition of their respective assets. Refer to Note 14 for further explanation.

Program Development Costs

Program development costs consist of organization, registration and offering expenses associated with the sale of the Managed REITs’ common stock, which are paid for in advance by the Company and subject to reimbursement by the Managed REITs, up to certain limits per the respective advisory agreement and the Managed REIT’s respective charter. As of June 30, 2013, the Company had $15.3 million of program development costs paid on behalf of the Managed REITs in excess of such limits that have not been reimbursed, which are included in the accompanying condensed consolidated unaudited balance sheets in intangible assets, prepaid expenses and other assets, net. The Company assesses the collectability of the program development costs, considering the offering period and historical and forecasted sales of shares under the Managed REIT’s respective offering. No reserves were recorded as of June 30, 2013, as the Company expects to be reimbursed for these costs by the Managed REITs as they raise additional proceeds from the respective offerings.

Deferred Lease Liabilities and Rent Expense

The Company leases its office facilities under operating leases. Certain lease agreements contain rent escalation clauses that require scheduled rent increases during the lease term. The Company records rental expense for the non-cancelable lease term of each lease on a straight-line basis. As of June 30, 2013, the Company had deferred rent obligations related to the recognition of rental expense on a straight-line basis of $73,000, which are included in the accompanying condensed consolidated unaudited balance sheets in derivative liabilities, deferred rent and other liabilities.

Reportable Segments

The Company has concluded that it has two reportable segments as it has organized its operations into two segments for management and internal financial reporting purposes, Real Estate Investment and Private Capital Management. Refer to Note 4 for further information.

14

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Revenue Recognition

Real Estate Investment Segment

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

Private Capital Management Segment

Revenue consists of securities sales commissions and dealer manager fees, real estate acquisition fees, asset management fees and property management fees for services relating to the Managed REITs’ offerings and the investment and management of their respective assets, in accordance with the respective advisory and dealer manager agreements. The Company records revenue related to acquisition fees, securities sales commissions and dealer manager fees upon completion of a transaction and asset and property management fees as services are performed. The Company is also reimbursed for certain costs incurred in providing these services. Securities sales commission and dealer manager reimbursements are recorded as revenue as the expenses are incurred. Other reimbursements are recorded as revenue when reimbursements are reasonably assured.

Earnings Per Share

Basic earnings per share is calculated by dividing net income attributable to the Company, as adjusted for distributions attributable to participating securities, by the weighted average number of shares outstanding during each period. Diluted earnings per share reflects the potential dilution, calculated in accordance with GAAP, of securities that could share in earnings, such as potentially dilutive common shares that may be issuable under the equity incentive plans and certain contingent consideration arrangements, and is calculated by dividing net income by the weighted average number of shares, including dilutive securities outstanding during the period.

Income Taxes

The Company currently qualifies and has elected to be taxed as a REIT for federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code. As a REIT, except as discussed below, the Company generally is not subject to federal income tax on taxable income that it distributes to its stockholders so long as it distributes at least 90% of its annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains). REITs are subject to a number of other organizational and operational requirements. Even if the Company maintains its qualification for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.

The Company conducts substantially all of its PCM segment operations through a TRS. A TRS is a subsidiary of a REIT that is subject to corporate federal, state and local income taxes, as applicable. The Company’s use of a TRS enables it to engage in certain businesses while complying with the REIT qualification requirements and to retain any income generated by these businesses for reinvestment without the requirement to distribute those earnings. The Company conducts all of its business in the United States (the “U.S.”), and as a result, the Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. Certain of the Company’s inter-company transactions that have been eliminated in consolidation for financial accounting purposes are also subject to taxation.

The Company provides for income taxes in accordance with current authoritative accounting and tax guidance. The tax expense or benefit related to significant, unusual or extraordinary items is recognized in the quarter in which those items occur. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the quarter in which the change occurs. The accounting estimates used to compute the benefit from or provision for income taxes may change as new events occur, additional information is obtained or the tax environment changes.

15

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Employee Benefit Plans

The Company maintains a 401(k) defined contribution plan (the “401(k) Plan”), which covers substantially all employees. The 401(k) Plan permits participants to contribute to the 401(k) Plan on the first of the month following their date of hire subject to Internal Revenue Code restrictions. Employer matching contributions are discretionary and determined to be a percent of the respective employee’s contribution, subject to maximum limits. The Company’s matching contributions were $201,000 for the period from the Merger Date to June 30, 2013, and are included in general and administrative expenses in the accompanying condensed consolidated unaudited statements of operations.

Concentration of Credit Risk

As of June 30, 2013, the Company had cash on deposit, including restricted cash accounts held by the Company, in 11 financial institutions, nine of which had deposits in excess of federally insured levels, totaling $172.4 million; however, the Company has not experienced any losses in such accounts. The Company limits significant cash investments to accounts held by financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk on its cash deposits.

No single tenant or industry accounted for greater than 10% of the Company’s 2013 gross annualized rental revenues. The Company has certain geographic concentrations in its property holdings. In particular, as of June 30, 2013, 187 of the Company’s properties were located in Texas, which accounted for 17% of its 2013 gross annualized rental revenues.

Repurchase Agreements

In certain circumstances the Company may obtain financing through a repurchase agreement. The Company evaluates the initial transfer of a financial instrument and the related repurchase agreement for sale accounting treatment. In instances where the Company maintains effective control over the transferred securities, the Company accounts for the transaction as a secured borrowing, and accordingly, both the securities and related repurchase agreement payable are recorded separately in the consolidated balance sheets. In instances where the Company does not maintain effective control over the transferred securities, the Company accounts for the transaction as a sale of securities for proceeds consisting of cash and a forward purchase contract.

Recent Accounting Pronouncements

In February 2013, the U.S. Financial Accounting Standards Board issued Accounting Standards Update, 2013-02 Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”), which amends the reporting requirements for comprehensive income pertaining to the reclassification of items out of accumulated other comprehensive income. ASU 2013-02 was effective for the Company beginning January 1, 2013 and the Company has presented the required information within the condensed consolidated unaudited statements of comprehensive income and notes to the financial statements. 

NOTE 3 — MERGER

Overview

On March 5, 2013, CCPT III, Cole Holdings Corporation (“Holdings”), an Arizona corporation that was originally wholly owned by Christopher H. Cole, the current executive chairman of the Company’s board of directors, and the former chairman, chief executive officer and president of the Company (the “Holdings Stockholder”), CREInvestments, LLC, a Maryland limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), and the Holdings Stockholder entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provided for the merger of Holdings with and into Merger Sub (the “Merger”), with Merger Sub surviving and continuing its existence under the laws of the state of Maryland as a wholly owned subsidiary of the Company. The Merger Agreement, and the transactions contemplated thereby, were approved by the Company’s board of directors at the recommendation of a special committee of the board of directors comprised solely of independent directors. Effective April 5, 2013 (the “Merger Date”), the Company closed the Merger and entered into a registration rights agreement and an escrow agreement in connection with the completion of the Merger.

16

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Consideration

As a result of the Merger, certain of Holdings’ executive officers became entitled to a portion of the consideration that otherwise would have been paid to the Holdings Stockholder in the Merger. In the Merger, the Holdings Stockholder and such executive officers (collectively, the “Holdings Executives”) received a total of $21.9 million in cash, which included $1.9 million paid related to an excess working capital adjustment, and approximately 10.7 million newly-issued shares of common stock of the Company (including approximately 661,000 shares withheld to satisfy applicable tax withholdings, the “Upfront Stock Consideration”). In addition, as a result of the listing of the Company’s common stock on the NYSE, an aggregate of approximately 2.1 million shares of common stock (including approximately 135,000 shares withheld to satisfy applicable tax withholdings, the “Listing Consideration”) were issued to the Holdings Executives. In accordance with the Merger Agreement and as further discussed below, approximately 4.3 million shares of the Upfront Stock Consideration and the Listing Consideration were placed into escrow (the “Escrow Shares”) and will be released on April 5, 2014, subject to meeting certain requirements. The Upfront Stock Consideration and the Listing Consideration are subject to a three-year lock-up with approximately one-third of the shares released each year following the Merger Date.

Pursuant to the Merger Agreement and certain preexisting transaction bonus entitlements, additional shares of the Company’s common stock are potentially payable in 2017 by the Company to the Holding Executives as an “earn-out” contingent upon the acquired business’ demonstrated financial success based on two criteria: (a) the acquired business generating Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) above a minimum threshold during the years ending December 31, 2015 and 2016 and (b) the Company’s stock performance relative to its peer group during the same period (collectively, the “Earnout Consideration”). The Earnout Consideration is subject to a lockup until December 31, 2017. Additionally, the Holdings Executives may be entitled to additional shares of the Company’s common stock (the “Incentive Consideration” and collectively with the Earnout Consideration, the “Merger Contingent Consideration”) based on the terms of the Company’s advisory agreement with Holdings in effect prior to the Merger. However, the Holdings Stockholder agreed as part of the Merger to reduce the amount that would have been payable by 25%. The Incentive Consideration is based on 11.25% (reduced from 15% in the advisory agreement) of the amount by which the market value of the Company’s common stock raised in the Offerings (the “Capital Raised”) plus all distributions paid on such shares through the Incentive Consideration Test Period (as defined below) exceeds the amount of Capital Raised and the amount of distributions necessary to generate an 8% cumulative, non-compounded annual return to investors. The market value of the Capital Raised is based on the average closing price over a period of 30 consecutive trading days (the “Incentive Consideration Test Period”) beginning 180 days after June 20, 2013, the date the Company’s shares of common stock were listed on the NYSE.

Other Agreements

Under the Merger Agreement, the Holdings Stockholder has agreed, subject to certain limitations, to indemnify the Company with respect to certain representations and warranties regarding Holdings and other matters.

The Company and the Holdings Executives entered into an escrow agreement with U.S. Bank National Association related to the Escrow Shares, in part to satisfy the Holdings Stockholder’s indemnity obligations. Under the terms of the escrow agreement, the Company pays non-refundable dividends to the Holdings Executives and no forfeitures are expected.

At the closing of the Merger, the Company and the Holdings Executives entered into a registration rights agreement pursuant to which the Company agreed to customary demand and piggyback registration rights with respect to the shares of the Company’s common stock issued pursuant to the Merger or otherwise held by any of the Holdings Executives. The registration rights agreement also contains the lock-up provisions that are set forth in the Merger Agreement.

17

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Fair Value of Consideration Transferred

The Company accounted for the Merger as a business combination under the acquisition method of accounting. During the three and six months ended June 30, 2013, the Company incurred $13.1 million and $27.7 million, respectively, for legal, consulting and other expenses related to the Merger, which are included in merger and acquisition related expenses in the accompanying condensed consolidated unaudited statements of operations. As the release of the Escrow Shares from escrow is dependent upon continued employment by the Holdings Executives, among other factors, the fair value of the Escrow Shares of $50.3 million at the respective grant date is considered compensation that will be amortized over the period that the shares are required to be held in escrow. During the three and six months ended June 30, 2013, the Company recorded $10.3 million of amortization, which is recorded as merger related stock-based compensation expense in the accompanying condensed consolidated unaudited statements of operations. As of June 30, 2013, the remaining unamortized stock-based compensation expense totaled $40.0 million.

The Company is in the process of gathering certain additional information in order to finalize its assessment of the fair value of the consideration transfered; thus, the fair values are subject to change. The estimated fair value of the consideration transferred at the Merger Date, excluding the Escrow Shares value noted above, totaled $322.1 million and consisted of the following (in thousands):

Estimated Fair Value of Consideration Transferred:	April 5, 2013
Cash	$	21,886
Common stock - Upfront Stock Consideration	75,550
Common stock - Listing Consideration	15,110
Merger Contingent Consideration	209,553
Total consideration transferred	$	322,099

The estimated fair value of the Company’s shares of common stock issued in the Merger as part of the Upfront Stock Consideration and the Listing Consideration was determined using a market approach that considered share prices as compared to performance measures of comparative public companies and management’s estimates of the Company’s pro forma results for the year ending December 31, 2013, adjusted for illiquidity discounts. The estimated fair value of the Incentive Consideration was calculated using the Monte Carlo method, a probabilistic valuation approach. The Company estimated the fair value of the Earnout Consideration based on probability-weighted discounted estimates of the acquired business’ EBITDA. These fair value measurements are based on significant inputs not observable in the market and thus represents a Level 3 measurement as discussed in Note 5. The key assumptions used in estimating the fair value of the Upfront Stock Consideration, the Listing Consideration and the Merger Contingent Consideration, as applicable, included (i) a discount rate of 12%, (ii) undiscounted price per share, on the Merger Date, ranging from $12.25 to $13.22, (iii) aggregate illiquidity discounts ranging from 10% to 20%, (iv) average implied volatility of 17%, (v) average dividend yield of 6.0% and (vi) probability adjusted annual EBITDA ranging from $36.0 million to $147.0 million.

18

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Allocation of Consideration

The consideration transferred pursuant to the Merger Agreement was allocated to the assets acquired and liabilities assumed, based upon their preliminary estimated fair values as of the Merger Date. The Company is in the process of gathering certain additional information in order to finalize its assessment of the fair value of certain intangible assets; thus, the provisional measurements of intangible assets and goodwill are subject to change. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Merger Date (in thousands):

Identifiable Assets Acquired at Fair Value	April 5, 2013
Cash and cash equivalents	$	14,635
Leasehold improvements and property and equipment	21,495
Due from affiliates	4,304
Investment in unconsolidated entities	570
Intangible assets	70,092
Program development costs and other assets	24,126
Total identifiable assets acquired	135,222
Identifiable Liabilities Assumed at Fair Value
Accounts payable and accrued expenses	23,619
Above market lease liabilities	5,183
Deferred tax liabilities, net	13,424
Total liabilities assumed	42,226
Net identifiable assets acquired	92,996
Goodwill	229,103
Net assets acquired	$	322,099

The intangible assets acquired primarily consist of management and advisory contracts that the Company has with the Managed REITs and are subject to an estimated useful life of approximately four years. The Company recorded $5.5 million of amortization expense for the period from the Merger Date to June 30, 2013. The estimated amortization expense for the remainder of the year ending December 31, 2013 is $11.8 million. The estimated amortization expense for the years ending December 31, 2014, 2015 and 2016 is $23.3 million, $23.3 million and $6.1 million, respectively.

The goodwill recognized is supported by several factors of the Company as a combined entity, including that the Company is one of the largest publicly-traded REITs in the net-lease sector and the PCM segment brings an established management platform with numerous strategic benefits including growth from new income streams and the ability to offer new products. None of the goodwill is expected to be deductible for income tax purposes. As of June 30, 2013, there were no changes in the recognized amounts of goodwill resulting from the Merger.

The fair value of the above market lease liabilities related to certain office leases assumed were recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (1) the contractual amounts to be paid pursuant to the in-place leases and (2) an estimate of fair market lease rates for the corresponding in-place leases, which was obtained from independent market reports, measured over a period equal to the remaining non-cancelable term of the lease including any bargain renewal periods. The above market lease liabilities are amortized as a decrease to rental expense over the remaining terms of the respective leases. Above market lease liabilities are included in derivative liabilities, deferred rent and other liabilities in the accompanying condensed consolidated unaudited balance sheet as of June 30, 2013.

19

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Pro Forma Financial Information

The following table summarizes selected pro forma financial information of the Company, as if the Merger had occurred on January 1, 2012 for each period presented below. The pro forma financial information is presented for informational purposes only and is not necessarily indicative of what the Company’s actual results of operations would have been had it completed the acquisition on January 1, 2012, nor does it purport to represent the results of future operations. The table below presents the Company’s estimated revenue and net income, on a pro forma basis, for the three and six months ended June 30, 2013 and 2012, respectively (in thousands).

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Pro forma basis:
Revenue	$	254,311	$	164,961	$	460,047	$	305,638
Net income	$	50,755	$	40,998	$	116,467	$	35,142

The pro forma financial information for the three and six months ended June 30, 2013 was adjusted to exclude $13.1 million and $27.7 million, respectively, for legal, consulting and other expenses related to the Merger recorded during the three and six months ended June 30, 2013, and $10.3 million for each of the three and six months ended June 30, 2013 for Merger related stock-based compensation expense. These costs were recognized in the pro forma financial information for the three and six months ended June 30, 2012. In addition, the pro forma financial information was adjusted to exclude fees paid by CCPT III to a subsidiary of Holdings during the three and six months ended June 30, 2012 and the three months ended June 30, 2013 as these fees were eliminated upon consolidation.

NOTE 4 — SEGMENT REPORTING

The Company operates under two segments, Real Estate Investment and Private Capital Management.

Real Estate Investment - Through its REI segment, the Company acquires and operates a diverse portfolio of core commercial real estate investments primarily consisting of necessity retail properties located throughout the U.S., including U.S. protectorates. The REI segment’s operating results and cash flows are primarily influenced by rental income from its commercial properties, interest expense on the Company’s property acquisition indebtedness and acquisition and operating expenses. As of June 30, 2013, the Company owned 1,014 properties, comprising 44.0 million rentable square feet of single and multi-tenant retail and commercial space located in 48 states, which include properties owned through the Consolidated Joint Ventures. As of June 30, 2013, the rentable space at these properties was 99% leased. As of June 30, 2013, the Company also owned 21 CMBS, three notes receivable and, through the Unconsolidated Joint Ventures, had interests in 12 properties comprising 2.3 million rentable square feet of commercial and retail space.

Private Capital Management - The Company’s PCM segment is responsible for managing the Managed REITs’ affairs on a day-to-day basis, identifying and making acquisitions and investments on the Managed REITs’ behalf, and recommending to each of the Managed REIT’s respective board of directors an approach for providing investors with liquidity. The PCM segment distributes the shares of common stock for certain Managed REITs and advises them regarding offerings, manages relationships with participating broker-dealers and financial advisors and provides assistance in connection with compliance matters relating to the offerings. The PCM segment receives compensation and reimbursement for services relating to the Managed REITs’ offerings and the investment, management, financing and disposition of their respective assets, as applicable. The PCM segment also develops new REIT offerings, including obtaining regulatory approvals from the SEC, the Financial Industry Regulatory Authority and various jurisdictions for such offerings. As of June 30, 2013, the Company was the advisor to certain investment programs, which primarily included the Managed REITs, and a subsidiary of Holdings was the advisor to CCPT III until the Merger. Refer to Note 3 for further discussion. In addition, as of June 30, 2013, Cole Capital Corporation (“CCC”), a wholly owned subsidiary of CCA, was the dealer manager in connection with the offer and sale of shares to the public in the offerings for CCPT IV, CCIT and INAV. As of June 30, 2013, the Company held aggregate equity investments of $555,000 in the Managed REITs.

20

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

The Company allocates certain operating expenses, such as audit and legal fees, employee related costs and benefits and general overhead expenses between its two segments. The following tables present a summary of the comparative financial results and total assets for each business segment (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Real Estate Investment
Rental and other property income	$	144,756		$	114,317		$	283,334		$	214,359
Tenant reimbursement income	15,056			10,593			28,755			19,707
Interest income on notes receivable	1,936			1,476			3,859			2,848
Interest income on marketable securities	5,901			4,976			11,926			7,393
Total real estate investment revenue	167,649			131,362			327,874			244,307
General and administrative expenses	12,757			4,652			16,788			8,676
Merger related stock-based compensation expense	10,278			—			10,278			—
Property operating expenses	17,507			11,543			33,129			21,298
Property and asset management expenses	1,393			10,988			15,302			21,043
Merger and acquisition related expenses	11,810			17,438			27,423			32,819
Depreciation and amortization	50,335			38,269			98,052			71,540
Total operating expenses	104,080			82,890			200,972			155,376
Total other expense	(48,747		)	(28,914		)	(86,584		)	(52,434		)
Income from continuing operations	14,822			19,558			40,318			36,497
Income from discontinued operations	5,126			3,532			19,845			22,543
Net income	$	19,948		$	23,090		$	60,163		$	59,040
Private Capital Management
Dealer manager fees, selling commissions and offering reimbursements	$	51,818		$	—		$	51,818		$	—
Transaction service fees	21,509			—			21,509			—
Management fees and reimbursements	9,316			—			9,316			—
Total private capital management revenue	82,643			—			82,643			—
Reallowed fees and commissions	38,962			—			38,962			—
General and administrative expenses	28,679			—			28,679			—
Depreciation and amortization	6,058			—			6,058			—
Total operating expenses	73,699			—			73,699			—
Total other income	7			—			7			—
Benefit from income taxes	235			—			235			—
Net income	$	9,186		$	—		$	9,186		$	—
Total Company
Total revenue	$	250,292		$	131,362		$	410,517		$	244,307
Total operating expenses	177,779			82,890			274,671			155,376
Total other expense, net	(48,740		)	(28,914		)	(86,577		)	(52,434		)
Benefit from income taxes	235			—			235			—
Income from continuing operations	24,008			19,558			49,504			36,497
Income from discontinued operations	5,126			3,532			19,845			22,543
Net income	$	29,134		$	23,090		$	69,349		$	59,040

21

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

	Total Assets as of
	June 30, 2013		December 31, 2012
Real estate investment	$	7,546,129	$	7,453,725
Private capital management	367,044		—
Total company	$	7,913,173	$	7,453,725

NOTE 5 — FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

Cash and cash equivalents and restricted cash – The Company considers the carrying values of these financial assets to approximate fair value because of the short period of time between their origination and their expected realization.

Notes receivable – The fair value is estimated by discounting the expected cash flows on the notes at rates at which management believes similar loans would be made as of the measurement date. The estimated fair value of these notes was $96.4 million and $97.3 million as of June 30, 2013 and December 31, 2012, respectively, compared to the carrying value of $90.5 million and $90.4 million as of June 30, 2013 and December 31, 2012, respectively. The fair value of the Company’s notes receivable is estimated using Level 2 inputs.

Marketable securities – The Company’s marketable securities are carried at fair value and are valued using Level 3 inputs. The Company used estimated non-binding quoted market prices from the trading desks of financial institutions that are dealers in such securities for similar CMBS tranches that actively participate in the CMBS market and industry benchmarks, such as Trepp’s CMBS Analytics. As of June 30, 2013 and December 31, 2012, no marketable securities were valued using internal models.

Notes payable and other borrowings – The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of the measurement date. The estimated fair value of the notes payable and other borrowings was $3.5 billion as of June 30, 2013, which approximated the carrying value on such date. As of December 31, 2012, the estimated fair value of the notes payable and other borrowings was $3.4 billion, compared to the carrying value of $3.3 billion. The fair value of the Company’s notes payable and other borrowings is estimated using Level 2 inputs.

22

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

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

Contingent consideration arrangements – The contingent consideration arrangements are carried at fair value and are valued using Level 3 inputs. The Holdings Executives have the right to the Merger Contingent Consideration to be paid by the Company in connection with the Merger and the Listing. Refer to Note 3 for further details regarding the Merger and the valuation of the Merger Contingent Consideration. The estimated fair value of the Merger Contingent Consideration totaled $207.3 million and $209.6 million as of June 30, 2013 and the Merger Date, respectively. The change in fair value of $2.3 million for each of the three and six months ended June 30, 2013 is included as an offset to Merger related expenses and is included in the accompanying condensed consolidated statements of operations in merger and acquisition related expenses.

The fair value of the contingent payments related to property acquisitions is determined based on the estimated timing and probability of the seller leasing vacant space subsequent to the Company’s acquisition of certain properties. The estimated fair value of the property-related contingent consideration arrangements totaled $3.9 million and $5.3 million as of June 30, 2013 and December 31, 2012, respectively.

Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, on disposition of the financial assets and liabilities.As of June 30, 2013, there have been no transfers of financial assets or liabilities between 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 June 30, 2013 and December 31, 2012 (in thousands):

	Balance as of June 30, 2013			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Interest rate swaps	$	2,177		$	—	$	2,177		$	—
Marketable securities	268,017			—		—			268,017
Total assets	$	270,194		$	—	$	2,177		$	268,017
Liabilities:
Interest rate swaps	$	(17,940	)	$	—	$	(17,940	)	$	—
Contingent consideration	(211,143		)	—		—			(211,143		)
Total liabilities	$	(229,083	)	$	—	$	(17,940	)	$	(211,143	)
	Balance as of December 31, 2012			Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable  Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Marketable securities	$	317,201		$	—	$	—		$	317,201
Liabilities:
Interest rate swaps	$	(23,046	)	$	—	$	(23,046	)	$	—
Contingent consideration	(5,339		)	—		—			(5,339		)
Total liabilities	$	(28,385	)	$	—	$	(23,046	)	$	(5,339	)

23

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

The following tables show a reconciliation of the change in fair value of the Company’s marketable securities and contingent consideration arrangements valued using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Marketable Securities						Contingent Consideration
	Three Months Ended			Six Months Ended			Three Months Ended			Six Months Ended
	June 30, 2013			June 30, 2013			June 30, 2013			June 30, 2013
Balance at beginning of period	$	333,115		$	317,201		$	4,796		$	5,339
Total gains and losses
Reclassification of previous unrealized gain on marketable securities into net income	(612		)	(612		)	—			—
Unrealized loss included in other comprehensive income, net	(27,745		)	(12,981		)	—			—
Gains included in net income, net	—			—			(2,802		)	(3,345		)
Purchases, issuances, settlements, sales and accretion
Purchases	—			—			209,553			209,553
Settlements	—			—			(404		)	(404		)
Sales	(37,864		)	(37,864		)	—			—
Accretion included in net income, net	1,123			2,273			—			—
Balance at end of period	$	268,017		$	268,017		$	211,143		$	211,143

	Marketable Securities						Contingent Consideration
	Three Months Ended			Six Months Ended			Three Months Ended		Six Months Ended
	June 30, 2012			June 30, 2012			June 30, 2012		June 30, 2012
Balance at beginning of period	$	165,948		$	114,129		$	7,231	$	5,519
Total gains and losses
Unrealized loss included in other comprehensive income, net	(15,434		)	(1,311		)	—		—
Losses included in net income	—			—			330		330
Purchases, issuances, settlements, sales and accretion
Purchases	123,299			161,065			430		2,142
Accretion included in net income, net	948			878			—		—
Balance at end of period	$	274,761		$	274,761		$	7,991	$	7,991

24

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

NOTE 6 — REAL ESTATE ACQUISITIONS

2013 Property Acquisitions

During the six months ended June 30, 2013, the Company acquired interests in 15 commercial properties, including a property held in one of the Consolidated Joint Ventures, for an aggregate purchase price of $290.7 million (the “2013 Acquisitions”). The Company purchased the 2013 Acquisitions with net proceeds from the DRIP Offering (as defined in Note 15), borrowings and the sale of properties. The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation (in thousands):

	June 30, 2013
Land	$	42,993
Building and improvements	225,650
Acquired in-place leases	30,408
Acquired above market leases	557
Acquired below market leases	(8,523		)
Fair value adjustment of assumed note payable	(362		)
Total purchase price	$	290,723

The Company recorded revenue for the three and six months ended June 30, 2013 of $4.8 million and $4.6 million, respectively, and a net loss for the three and six months ended June 30, 2013 of $2.0 million and $1.2 million, respectively, related to the 2013 Acquisitions.

The table below presents the Company’s estimated revenue and net income, on a pro forma basis, as if all of the 2013 Acquisitions were completed on January 1, 2012 for each period presented below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Pro forma basis:
Revenue	$	252,320	$	148,093	$	419,651	$	278,567
Net income	$	31,338	$	23,703	$	70,394	$	58,498

The pro forma information for the three and six months ended June 30, 2013 was adjusted to exclude $1.0 million and $2.0 million, respectively, of property related acquisition costs recorded during the three and six months ended June 30, 2013. These costs were recognized in the pro forma information for the three and six months ended June 30, 2012. 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 2012, nor does it purport to represent the results of future operations.

2013 Investment in Development Projects

During the six months ended June 30, 2013, the Company completed the construction of an office building. Total costs for the construction of the building were $42.9 million. The development of the project was initiated in 2011, and therefore, the property is not included in the 2013 Acquisitions.

25

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

2012 Property Acquisitions

During the six months ended June 30, 2012, the Company acquired interests in 245 commercial properties, including a property held in one of the Consolidated Joint Ventures, for an aggregate purchase price of $1.1 billion (the “2012 Acquisitions”). The Company purchased the 2012 Acquisitions with net proceeds from the Follow-on Offering (as defined in Note 15) and the DRIP Offering and through the issuance or assumption of mortgage notes. The Company allocated the purchase price of the 2012 Acquisitions to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocation (in thousands):

	June 30, 2012
Land	$	255,281
Building and improvements		687,062
Acquired in-place leases		141,665
Acquired above market leases		17,829
Acquired below market leases		(20,833	)
Total purchase price	$	1,081,004

The Company recorded revenue for the three and six months ended June 30, 2012 of $17.6 million and $19.9 million, respectively, and a net loss for the three and six months ended June 30, 2012 of $9.4 million and $19.5 million, respectively, related to the 2012 Acquisitions.

The table below presents the Company’s estimated revenue and net income, on a pro forma basis, as if all of the 2012 Acquisitions were completed on January 1, 2011 for each period presented below (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Pro forma basis:
Revenue	$	147,308	$	104,039	$	291,890	$	197,963
Net income	$	42,836	$	19,442	$	102,747	$	17,991

The pro forma information for the three and six months ended June 30, 2012 was adjusted to exclude $16.6 million and $27.5 million, respectively, of acquisition costs recorded during the three and six months ended June 30, 2012. These costs were recognized in the pro forma information for the six months ended June 30, 2011. 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 2011, nor does it purport to represent the results of future operations.

2012 Investments in Unconsolidated Joint Ventures

During the six months ended June 30, 2012, the Company acquired a $36.1 million interest in an unconsolidated joint venture arrangement. In addition, the Company acquired a $27.7 million financial interest in one of the Consolidated Joint Ventures, whose only assets are interests in three of the Unconsolidated Joint Ventures. The acquired interests are included in the accompanying condensed consolidated unaudited balance sheets in investment in unconsolidated entities.

In connection with the acquired interests in the unconsolidated joint venture arrangements discussed above, one of the Unconsolidated Joint Ventures borrowed $17.6 million (the “Advance Note”) from one of the Consolidated Joint Ventures and fully repaid the Advance Note during the six months ended June 30, 2012. The Advance Note had a variable interest rate equal to the one-month LIBOR plus 225 basis points. During the six months ended June 30, 2012, the Company recorded $107,000 of interest income on the Advance Note. No financing coordination fees were incurred in connection with the Advance Note.

26

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

NOTE 7 — INVESTMENT IN NOTES RECEIVABLE

As of June 30, 2013, the Company owned a junior mezzanine loan (the “Mezzanine Note”), secured by equity interests in a joint venture which owns 15 shopping centers. The Mezzanine Note has an interest rate of LIBOR plus 9.0% with a LIBOR floor of 0.50% and matures in July 2015 with two one-year extension options. As of both June 30, 2013 and December 31, 2012, the Mezzanine Note had an interest rate of 9.5%. As of both June 30, 2013 and December 31, 2012, investment in notes receivable included $25.4 million related to the Mezzanine Note. As of June 30, 2013, the Mezzanine Note balance consisted of the outstanding face amount of the loan of $25.0 million, $500,000 of acquisition costs and net accumulated amortization of acquisition costs of $139,000. As of December 31, 2012, the Mezzanine Note balance consisted of the outstanding face amount of the loan of $25.0 million, $500,000 of acquisition costs and net accumulated amortization of acquisition costs of $65,000. The acquisition costs are amortized over the term of the loan using the effective interest rate method. Interest only payments are due each month. There were no amounts past due as of June 30, 2013.

In addition, as of June 30, 2013, the Company owned two mortgage notes receivable, each of which is secured by an office building (collectively the “Mortgage Notes”). As of June 30, 2013 and December 31, 2012, investment in notes receivable included $65.1 million and $64.9 million, respectively related to the Mortgage Notes. As of June 30, 2013, the Mortgage Notes balance consisted of the outstanding face amount of the notes of $72.5 million, a $12.0 million discount, $1.3 million of acquisition costs and net accumulated accretion of discounts and amortization of acquisition costs of $3.3 million. As of December 31, 2012, the Mortgage Notes balance consisted of the outstanding face amount of the notes of $72.9 million, a $12.0 million discount, $1.3 million of acquisition costs and net accumulated accretion of discounts and amortization of acquisition costs of $2.8 million. The discount is accreted and acquisition costs are amortized over the terms of each respective Mortgage Note using the effective interest rate method. The Mortgage Notes have a fixed interest rate of 5.93% per annum and mature on October 1, 2018. Interest and principal payments are due each month until October 1, 2018. There were no amounts past due as of June 30, 2013.

The Company evaluates the collectability of both interest and principal on each note receivable to determine whether it is collectible, primarily through the evaluation of credit quality indicators, such as underlying collateral and payment history. No impairment losses were recorded related to notes receivable for the six months ended June 30, 2013 or 2012. In addition, no allowances for uncollectability were recorded related to notes receivable as of June 30, 2013 or December 31, 2012.

NOTE 8 — INVESTMENT IN MARKETABLE SECURITIES

During the six months ended June 30, 2013, the Company sold eight CMBS for aggregate proceeds of $36.5 million, net of closing fees, and realized a loss on the sale of $1.3 million. As of June 30, 2013, the Company owned 21 CMBS, with an estimated aggregate fair value of $268.0 million. As of December 31, 2012, the Company owned 29 CMBS, with an estimated aggregate fair value of $317.2 million.

As of June 30, 2013, certain of these securities were pledged as collateral under repurchase agreements (the “Repurchase Agreements”), as discussed in Note 11 to these condensed consolidated unaudited financial statements. The following table provides the activity for the CMBS during the six months ended June 30, 2013 (in thousands):

	Amortized Cost Basis			Unrealized Gain			Fair Value
Marketable securities as of December 31, 2012	$	271,054		$	46,147		$	317,201
Net accretion on marketable securities	2,273			—			2,273
Decrease in fair value of marketable securities	—			(12,981		)	(12,981		)
Decrease due to sale of marketable securities	(37,864		)	(612		)	(38,476		)
Marketable securities as of June 30, 2013	$	235,463		$	32,554		$	268,017

27

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

The following table shows the fair value and gross unrealized gains of the Company’s CMBS as of June 30, 2013 (in thousands) and the length of time the CMBS has been in the unrealized gain position. No CMBS were in an unrealized loss position at June 30, 2013.

	Less than 12 months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Gains		Fair Value		Unrealized Gains		Fair Value		Unrealized Gains
CMBS	$	145,552	$	12,310	$	122,465	$	20,244	$	268,017	$	32,554

The scheduled maturity of the Company’s CMBS as of June 30, 2013 is as follows (in thousands):

	Amortized Cost		Estimated Fair Value
Due within one year	$	—	$	—
Due after one year through five years	—		—
Due after five years through ten years	235,463		268,017
Due after ten years	—		—
	$	235,463	$	268,017

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

NOTE 9 — DISCONTINUED OPERATIONS

During the six months ended June 30, 2013, the Company disposed of 15 single-tenant properties for an aggregate gross sales price of $86.9 million (the “2013 Property Dispositions”). During the year ended December 31, 2012, the Company disposed of 26 single-tenant properties and two multi-tenant properties for an aggregate gross sales price of $573.8 million (the “2012 Property Dispositions”). No disposition fees were paid in connection with the sale of the 2013 Property Dispositions or the 2012 Property Dispositions. The Company has no continuing involvement with the 2013 Property Dispositions or the 2012 Property Dispositions. The following table presents the major classes of assets and liabilities of the 2013 Property Dispositions and 2012 Property Dispositions as of the respective closing dates (in thousands):

	June 30, 2013		December 31, 2012
Assets:
Investment in real estate assets, net	$	67,309	$	450,214
Straight-line rent receivables	$	565	$	12,698
Liabilities:
Notes payable	$	—	$	180,250	(1)
Below market lease liabilities, net	$	1,974	$	8,966

________________

(1) Includes $24.3 million assumed by a buyer of one of the properties.

As of June 30, 2013, there were no properties classified as held for sale. The Company included three properties as held for sale in the accompanying condensed consolidated unaudited balance sheet of December 31, 2012 (the “Held for Sale Properties”). The results of operations for the 2013 Property Dispositions, the 2012 Property Dispositions and the Held for Sale Properties (collectively, the “Discontinued Operations Properties”) have been presented as discontinued operations on the Company’s condensed consolidated unaudited statements of operations for all periods presented.

28

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

The following table summarizes the operating income from discontinued operations of the Discontinued Operations Properties for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Total revenue	$	253	$	10,845	$	1,302	$	22,580
Total expenses	58		7,313		464		14,818
Income from discontinued operations	195		3,532		838		7,762
Gain on sale of real estate assets	4,931		—		19,007		14,781
Total income from discontinued operations	$	5,126	$	3,532	$	19,845	$	22,543

The following table presents the major classes of assets and liabilities of the Held for Sale Properties as of December 31, 2012 (in thousands):

	December 31, 2012
Investment in real estate assets, net	$	22,853
Other assets	300
Assets related to real estate held for sale, net	$	23,153
Liabilities related to real estate assets held for sale (1)	$	322

________________

(1) Liabilities related to real estate assets held for sale includes net below market lease intangibles and deferred rent and are included in derivative liabilities, deferred rent and other liabilities in the Company’s condensed consolidated unaudited balance sheet as of December 31, 2012.

NOTE 10 — 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 risks. The following table summarizes the terms of the Company’s executed swap agreements designated as hedging instruments (in thousands):

							Fair Value of (Liabilities)
		Outstanding Notional					and Assets
	Balance Sheet	Amount as of		Interest	Effective	Maturity	June 30,			December 31,
	Location	June 30, 2013		Rates (1)	Dates	Dates	2013			2012
Interest Rate Swaps	Derivative liabilities, deferred rent and other liabilities	$	1,159,312	3.15% to 6.83%	12/18/2009 to 7/17/2013	6/27/2014 to 4/1/2021	$	(17,940	)	$	(22,102	)
Interest Rate Swaps	Prepaid expenses and other assets (2)	$	92,400	3.27% to 4.49%	7/5/2012 to 12/14/2012	7/5/2017 to 11/20/2019	$	2,177		$	(944	)

_______________

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

(2) As of December 31, 2012, these interest rate swaps were in a liability position and are included in derivative liabilities, deferred rent and other liabilities in the accompanying condensed consolidated unaudited balance sheet as of December 31, 2012.

Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 5 to these condensed consolidated unaudited financial statements. The notional amount under the interest rate swap agreements is an indication of the extent of the Company’s involvement in each instrument, but does not represent exposure to credit, interest rate or market risks.

29

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

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, to hedge the variability of the anticipated cash flows on its variable rate notes payable. The change in fair value of the effective portion of the derivative instruments that are designated as hedges is recorded in other comprehensive income. Any ineffective portion of the change in fair value of the derivative instruments is recorded in interest expense.

The following table summarizes the unrealized gains and losses on the Company’s derivative instruments and hedging activities for the three and six months ended June 30, 2013 and 2012 (in thousands):

	Amount of Gain (Loss) Recognized in Other Comprehensive Income										Amount of Loss Reclassified from Accumulated Other Comprehensive Income to Net Income (1)
Derivatives in Cash Flow Hedging Relationships	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended June 30,					Six Months Ended June 30,
	2013		2012			2013		2012			2013			2012		2013			2012
Interest Rate Swaps	$	3,977	$	(4,835	)	$	6,784	$	(5,677	)	$	(2,564	)	$	—	$	(2,564	)	$	—

_______________

(1) In connection with the amendment of the Company’s senior unsecured credit facility discussed in Note 11, two interest rate swap agreements, with an aggregate notional amount of $278.8 million and a maturity date of June 27, 2014, were deemed to be ineffective and the Company reclassified $2.6 million of unrealized losses previously recorded in accumulated other comprehensive income through March 31, 2013 into interest expense during the six months ended June 30, 2013. The Company recorded a $500,000 increase in the fair value related to these swaps in interest expense during the three months ended June 30, 2013. The remaining interest rate swaps were considered effective during the six months ended June 30, 2013.

The Company has agreements with each of its derivative counterparties that contain a provision whereby if the Company defaults on certain of its unsecured indebtedness, then the Company could also be declared in default on its derivative obligations resulting in an acceleration of payment. 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 respective credit quality of the Company and the counterparty. During the six months ended June 30, 2013 and 2012, there were no termination events or events of default related to the interest rate swaps.

NOTE 11 — NOTES PAYABLE AND OTHER BORROWINGS

As of June 30, 2013, the Company and the Consolidated Joint Ventures had $3.5 billion of debt outstanding, with a weighted average years to maturity of 6.0 years and weighted average interest rate of 4.22%. The following table summarizes the debt activity during the six months ended and balances as of June 30, 2013 (in thousands):

			During the Six Months Ended June 30, 2013
	Balance as of December 31, 2012		Debt Issuance and Assumptions		Repayments			Other (1)		Balance as of June 30, 2013
Fixed rate debt	$	2,311,541	$	275,088	$	(9,252	)	$	399	$	2,577,776
Variable rate debt	84,942		11,901		—			—		96,843
Construction facilities	27,758		6,878		(7,884		)	—		26,752
Credit facility	767,750		197,250		(265,000		)	—		700,000
Repurchase agreements	100,057		—		—			—		100,057
Total(2)	$	3,292,048	$	491,117	$	(282,136	)	$	399	$	3,501,428

________________

(1) Represents fair value adjustment of assumed mortgage note payable, net of amortization.

(2) The table above does not include loan amounts associated with the Unconsolidated Joint Ventures of $196.0 million, of which $10.2 million is recourse to CCPT III OP. These loans mature on various dates ranging from October 2015 to July 2021.

30

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

As of June 30, 2013, the fixed rate debt included $473.0 million of variable rate debt subject to interest rate swap agreements which had the effect of fixing the variable interest rates per annum through the maturity date of the loan. In addition, the fixed rate debt included mortgage notes assumed with an aggregate face amount of $45.0 million and an aggregate fair value of $43.9 million at the date of assumption. The fixed rate debt has interest rates ranging from 2.75% to 6.83% per annum. The variable rate debt has variable interest rates ranging from LIBOR plus 225 basis points to 350 basis points per annum. In addition, the construction facility has an interest rate of LIBOR plus 235 basis points. The debt outstanding matures on various dates from December 2013 through June 2023. The aggregate balance of gross real estate and related assets, net of gross intangible lease liabilities, securing the fixed and variable rate debt outstanding was $5.0 billion as of June 30, 2013. Each of the mortgage notes payable is secured by the respective properties on which the debt was placed.

As of June 30, 2013, the Company had $566.2 million available for borrowing under a senior unsecured credit facility (the “Credit Facility”) based on the underlying collateral pool of $1.9 billion. During the six months ended June 30, 2013, the Company entered into an amended and restated credit agreement (the “Amended and Restated Credit Agreement”), which increased the available borrowings, extended the term and decreased the interest rates associated with the original Credit Facility. The Company expensed $2.6 million of unamortized deferred financing costs incurred in connection with the original Credit Facility and $2.6 million of new loan costs in connection with the amendment, which are included in interest expense in the accompanying condensed consolidated unaudited statements of operations. The Credit Facility provides borrowings up to $1.4 billion, which includes a $500.0 million term loan (the “Term Loan”) and up to $900.0 million in revolving loans (the “Revolving Loans”). The Credit Facility may be increased to a maximum of $1.75 billion. The Term Loan matures on June 3, 2018 and the Revolving Loans mature on June 3, 2017; however, the Company may elect to extend the maturity date to June 3, 2018 subject to satisfying certain conditions described in the Amended and Restated Credit Agreement. Depending upon the type of loan specified and overall leverage ratio, the Revolving Loans bear interest at either LIBOR plus an interest rate spread ranging from 1.65% to 2.25% or a base rate, ranging from 0.65% to 1.25%, plus the greatest of (1) LIBOR plus an interest rate spread ranging from 2.65% to 3.25%, (2) Bank of America N.A.’s Prime Rate or (3) the Federal Funds Rate plus 0.50%. The Company executed a swap agreement associated with the Term Loan, which will have the effect of fixing the variable interest rates per annum on July 17, 2013 through the maturity date of the respective loan at 3.30%. The Revolving Loans and Term Loan had a combined weighted average interest rate of 2.90% as of June 30, 2013.

The Repurchase Agreements have interest rates ranging from LIBOR plus 120 basis points to 175 basis points and mature on various dates from July 2013 through September 2013. Upon maturity, the Company may elect to renew the Repurchase Agreements for a period of 90 days until the CMBS mature. The CMBS have a weighted average remaining term of 8.6 years. Under the Repurchase Agreements, the lender retains the right to mark the underlying collateral to fair value. A reduction in the value of the pledged assets would require the Company to provide additional collateral to fund margin calls. As of June 30, 2013, the securities held as collateral had a fair value of $257.5 million and an amortized cost of $226.9 million. There was no cash collateral held by the counterparty as of June 30, 2013. The Repurchase Agreements are being accounted for as secured borrowings because the Company maintains effective control of the financed assets. The Repurchase Agreements are non-recourse to the Company and CCPT III OP.

The Credit Facility and certain notes payable contain customary affirmative, negative and financial covenants, representations, warranties and borrowing conditions. These agreements also include usual and customary events of default and remedies for facilities of this nature. Based on the Company’s analysis and review of its results of operations and financial condition, the Company believes it was in compliance with the covenants of the Credit Facility and such notes payable as of June 30, 2013.

31

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

NOTE 12 — SUPPLEMENTAL CASH FLOW DISCLOSURES

Supplemental cash flow disclosures for the six months ended June 30, 2013 and 2012 are as follows (in thousands):

	Six Months Ended June 30,
	2013			2012
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
Distributions declared and unpaid	$	28,501		$	25,297
Fair value of mortgage notes assumed in real estate acquisitions at date of assumption	$	10,223		$	24,000
Common stock issued through distribution reinvestment plan	$	74,395		$	80,506
Net unrealized gain (loss) on interest rate swaps	$	6,784		$	(5,677	)
Unrealized loss on marketable securities	$	(12,981	)	$	(1,311	)
Contingent consideration	$	209,553		$	—
Common stock issued as consideration related to the Merger	$	90,660		$	—
Accrued construction and capital expenditures	$	1,511		$	3,937
Supplemental Cash Flow Disclosures:
Interest paid, net of capitalized interest of $43 and $146, respectively	$	70,095		$	53,622

NOTE 13 — COMMITMENTS AND CONTINGENCIES

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

Litigation in Connection with the Merger

In connection with the Merger, between March 20 and April 30, 2013, three putative class action lawsuits were filed in the Circuit Court for Baltimore City, Maryland making various claims alleging that the Merger injured the Company and its shareholders. On April 30, 2013, the actions were consolidated by order of the Court as one action called In Re Cole Credit Property Trust, III, Inc. Derivative And Class Litigation. On May 8, 2013, plaintiffs filed a consolidated amended class action and derivative complaint naming as defendants Holdings; Cole REIT Advisors III, LLC (“CR III Advisors”); Merger Sub; CCA; CCC; Equity Fund Advisors, Inc.; Cole Realty Advisors, Inc.; each of the Company’s directors; and the Company as a nominal defendant. The consolidated amended complaint alleges a variety of claims against some or all of the defendants including claims for breaches of fiduciary duties and aiding abetting those breaches; unjust enrichment; corporate waste; breaches of the Company’s charter and the advisory agreement with CR III Advisors; and disclosure violations in connection with disclosures for the Company’s 2013 annual meeting. The plaintiffs seek, among other relief, class certification; various forms of injunctive relief; compensatory damages; and restitution. On June 7, 2013, defendants in the consolidated action moved to dismiss the amended complaint for, among other reasons, lack of standing and failure to state a claim upon which relief can be granted. On July 15, 2013, plaintiffs opposed defendants’ motion. The motion is pending.

On March 27, 2013, a putative derivative action was filed in the U.S. District Court, Arizona District, captioned Carter v. Cole Holdings, et al. (“Carter”) making various claims alleging that the Merger injured the Company and its shareholders. On May 13, 2013, Carter amended the complaint naming as defendants Holdings; CR III Advisors; Merger Sub; each of the Company’s directors, and the Company as nominal defendant. The amended complaint alleges a variety of claims against some or all of the defendants including claims for breaches of fiduciary duty and aiding and abetting those breaches; breaches of the Company’s charter and the advisory agreement with CR III Advisors; breach of the implied covenant of good faith; abuse of control; corporate waste; unjust enrichment; and, in connection with disclosures for the Company’s 2013 annual meeting, violations of Sections 14 and 20 of the Securities Exchange Act of 1934. Carter seeks, among other relief, a declaratory judgment; various forms of injunctive relief; compensatory damages; and restitution.

32

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

On April 8, 2013, a putative class action and derivative action was filed in the U.S. District Court, Arizona District, captioned Schindler v. Cole Holdings Corporation, et al. (“Schindler”) making various claims alleging that the Merger injured the Company and its shareholders. On June 7, 2013, Schindler amended the complaint naming as defendants Holdings; CR III Advisors; Merger Sub; the Company’s directors; and the Company as nominal defendant. The amended complaint alleges a variety of claims against some or all of the defendants including claims for breaches of fiduciary duty and aiding and abetting those breaches; unjust enrichment; corporate waste; and, in connection with disclosures for the Company’s 2013 annual meeting, violations of Sections 14 and 20 of the Securities Exchange Act of 1934. Schindler seeks, among other relief, class certification; various forms of injunctive relief; compensatory damages; and restitution.

On June 3, 2013, defendants moved to consolidate the Carter and Schindler actions pursuant to Federal Rule of Civil Procedure 42(a). Plaintiff in the Carter action responded on June 7, 2013, supporting consolidation of the Carter and Schindler actions for pretrial purposes, but opposing consolidation for all other purposes. Plaintiff in the Schindler action responded on June 20, 2013, agreeing that the Carter and Schindler actions should be consolidated. That motion is pending. The parties in the Carter action have entered into stipulations agreeing that once the court rules on the motion to consolidate, the parties shall confer about an agreed upon deadline for defendants to answer or otherwise respond to plaintiff’s amended complaint, which in any case shall not be sooner than fifteen days from the court’s order. The parties in the Schindler action have entered into a stipulation agreeing that, unless and until the court in the Carter action denies the motion to consolidate, defendants shall answer or otherwise respond to the amended complaint within fifteen days of the court’s order. On June 25, 2013, plaintiff in the Schindler action filed a motion for appointment as lead plaintiff and for approval of lead plaintiff’s selection of lead counsel. On July 8, 2013, plaintiff in the Carter action filed a motion for appointment of lead plaintiff and lead and liaison counsel for purposes of prosecuting derivative claims on behalf of the Company. The motions for lead plaintiff in both the Carter and Schindler actions are pending.

The Company believes that these lawsuits are without merit, but the ultimate outcome of these matters cannot be predicted.  While losses and legal expenses may be incurred, at this time it is impossible to develop a range of reasonably possible potential losses, and no provisions for losses have been recorded in the accompanying condensed consolidated unaudited financial statements.

Purchase Commitments

Under its PCM segment, the Company enters into purchase and sale agreements, and deposits funds into escrow towards the purchase of such acquisitions, most of which are expected to be assigned to one of the Managed REITs at or prior to the closing of the respective acquisition. As of June 30, 2013, the Company was a party in 48 purchase and sale agreements with unaffiliated third-party sellers to purchase a 100% interest in 139 properties, subject to meeting certain criteria, for an aggregate purchase price of $461.7 million, exclusive of closing costs.  As of June 30, 2013, the Company had $9.7 million of property escrow deposits held by escrow agents in connection with these future property acquisitions, which may be forfeited if the transactions are not completed under certain circumstances. The Company will be reimbursed by the assigned Managed REIT for amounts escrowed when it acquires a property. As of August 1, 2013, the Company had assigned 13 of these properties, with an aggregate purchase price of $107.9 million, to certain of the Managed REITs. As of August 1, 2013, two agreements were terminated and no escrow deposits were forfeited.

In addition, the Holdings Executives have the right to the Merger Contingent Consideration amounts to be paid by the Company in connection with the Merger and the Listing. The Company also had properties subject to earnout provisions obligating it to pay additional consideration to the respective seller contingent on the future leasing and occupancy of vacant space at the properties. Refer to Note 5 for further discussion.

33

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Environmental Matters

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

NOTE 14 — RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS

The Company’s PCM segment is contractually responsible for managing the Managed REITs’ affairs on a day-to-day basis, identifying and making acquisitions and investments on the Managed REITs’ behalf, and recommending to each of the Managed REIT’s respective board of directors an approach for providing investors with liquidity. In addition, the Company distributes the shares of common stock for certain of the Managed REITs and advises them regarding offerings, manages relationships with participating broker-dealers and financial advisors and provides assistance in connection with compliance matters relating to the offerings. The Company receives compensation and reimbursement for services relating to the Managed REITs’ offerings and the investment, management and disposition of their respective assets, as applicable.

Offerings

The Company receives a selling commission of up to 7.0% of gross offering proceeds related to the sale of shares of CCPT IV and CCIT common stock, before reallowance of commissions earned by participating broker-dealers. The Company has and intends to continue to reallow 100% of selling commissions earned to participating broker-dealers. In addition, the Company receives 2.0% of gross offering proceeds, before reallowance to participating broker-dealers, as a dealer manager fee in connection with the sale of CCPT IV and CCIT shares of common stock. The Company, in its sole discretion, may reallow all or a portion of its dealer manager fee to such participating broker-dealers as a marketing and due diligence expense reimbursement, based on factors such as the volume of shares sold by such participating broker-dealers and the amount of marketing support provided by such participating broker-dealers. No selling commissions or dealer manager fees are paid to the Company or other broker-dealers with respect to shares sold under the respective Managed REIT’s distribution reinvestment programs under which the stockholders may elect to have distributions reinvested in additional shares.

In connection with the sale of INAV shares of common stock, the Company receives an asset-based dealer manager fee that is payable in arrears on a monthly basis and accrues daily in an amount equal to 1/365^th of 0.55% of the INAV’s net asset value (“NAV”). The Company, in its sole discretion, may reallow all or a portion of its dealer manager fee equal to an amount up to 1/365^th of 0.20% of INAV’s NAV to participating broker-dealers.

All other organization and offering expenses associated with the sale of the Managed REITs’ common stock (excluding selling commissions, if applicable, and the dealer manager fee) paid by the Company are reimbursed by the Managed REITs, up to certain limits per the respective advisory agreement. As these costs are incurred, they are recorded as reimbursement revenue and are included in dealer manager fees, selling commissions and offering reimbursements in the financial results for the PCM segment in Note 4.  As of June 30, 2013, the Company had $15.3 million of organization and offering costs recorded on behalf of the Managed REITs in excess of the limits that have not been reimbursed, which is expected to be reimbursed by the Managed REITs as they raise additional proceeds from the respective offering and are included in intangible assets, prepaid expenses and other assets, net in the accompanying condensed consolidated unaudited balance sheets. Subsequent to June 30, 2013, the Company had incurred $1.2 million of additional organization and offering costs and the Managed REITs reimbursed the Company $1.2 million.

34

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

The Company recorded commissions, fees and expense reimbursements as shown in the table below for services provided to the Managed REITs related to the services described above during the three and six months ended June 30, 2013 (in thousands). As the Company did not commence operations for the PCM segment until the Merger Date, comparative financial data is not presented for the three and six months ended June 30, 2012.

	CCPT IV		CCIT		INAV		Total
Offering:
Selling commissions	$	14,367	$	19,028	$	—	$	33,395
Selling commissions reallowed	$	14,367	$	19,028	$	—	$	33,395
Dealer manager fees	$	4,188	$	5,601	$	46	$	9,835
Dealer manager fees reallowed	$	2,297	$	3,269	$	1	$	5,567
Other organization and offering expense reimbursements	$	4,245	$	4,242	$	101	$	8,588

Operations

The Company earns acquisition fees related to the acquisition, development or construction of properties on behalf of certain of the Managed REITs. In addition, the Company is reimbursed for acquisition expenses incurred in the process of acquiring properties up to certain limits per the respective advisory agreement. The Company is not reimbursed for personnel costs in connection with services for which it receives acquisition fees or real estate commissions. In connection with services provided by the Company related to the origination or refinancing of any debt financing obtained by certain Managed REITs that is used to acquire properties or to make other permitted investments, or that is assumed, directly or indirectly, in connection with the acquisition of properties, the Company receives a finance coordination fee and reimbursement, subject to certain limitations. In addition, the Company may earn disposition fees related to the sale of one or more properties, including those held indirectly through joint ventures, on behalf of a Managed REIT. Acquisition, finance coordination and disposition fees and reimbursements, as applicable, are included in transaction service fees in the financial results for the PCM segment in Note 4.

The Company earns advisory and asset and property management fees from certain Managed REITs and other affiliates. In addition, the Company may be reimbursed for expenses incurred in providing advisory and asset and property management services, subject to certain limitations. Advisory fees, asset and property management fees and reimbursements of expenses are included in management fees and reimbursements in the financial results for the PCM segment in Note 4.

The Company recorded fees and expense reimbursements as shown in the table below for services provided to the Managed REITs and other programs sponsored by Cole Capital, a trade name used to refer to a group of affiliated entities directly or indirectly controlled by the Company, related to the services described above during the three and six months ended June 30, 2013 (in thousands). As the Company did not commence operations for the PCM segment until the Merger Date, comparative financial data is not presented for the three and six months ended June 30, 2012.

	CCPT II		CCPT IV		CCIT		Other		Total
Operations:
Acquisition fees	$	—	$	10,596	$	10,764	$	149	$	21,509
Asset management fees	$	2,148	$	—	$	—	$	236	$	2,384
Property management and leasing fees	$	1,450	$	—	$	—	$	178	$	1,628
Operating expense reimbursements	$	853	$	873	$	522	$	—	$	2,248
Advisory fees	$	—	$	1,797	$	1,184	$	75	$	3,056

35

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Investment in Managed REITs

As of June 30, 2013, the Company owned aggregate equity investments of $555,000 in the Managed REITs, which is included in investment in unconsolidated entities in the accompanying condensed consolidated unaudited balance sheets. The table below presents certain information related to the Company’s investments in the Managed REITs.

	% of Outstanding Shares Owned at		Carrying Amount of Investment at
Managed REIT	June 30, 2013		June 30, 2013 (in thousands)
CCPT	0.01	%	$	6
CCPT II	0.01	%	116
CCPT IV	0.03	%	151
CCIT	0.03	%	108
INAV	0.51	%	174
			$	555

As of June 30, 2013, the Company, as the sole stockholder, had an aggregate investment of $400,000 in two REITs in the registration process, Cole Credit Property Trust V, Inc. and Cole Office & Industrial REIT (CCIT II), Inc., which is included in cash and cash equivalents in the accompanying condensed consolidated unaudited balance sheets.

Due from Affiliates

As of June 30, 2013, $8.0 million was expected to be collected from the Managed REITs for services provided by the Company and expenses subject to reimbursement by the Managed REITs in accordance with their respective advisory and property management agreements and was included in due from affiliates on the accompanying condensed consolidated unaudited balance sheets.

Pre-Merger Expenses

Prior to the Merger, CCPT III was externally advised by a subsidiary of Holdings. CCPT III recorded fees and expense reimbursements for property management and advisory services provided by a subsidiary of Holdings of $280,000 and $16.4 million, respectively, for the three and six months ended June 30, 2013, and $35.6 million and $59.9 million, respectively, for the three and six months ended June 30, 2012.

Transactions

During the six months ended June 30, 2013, CCPT III entered into the Merger Agreement with Holdings, Merger Sub and the Holdings Stockholder and consummated the Merger and acquired the business conducted by Holdings. Refer to Note 3 for further discussion. Prior to the Merger, Holdings issued a subordinate revolving line of credit agreement that provided for $10.0 million of available borrowings to CCPT IV.  The line of credit agreement matured in April 2013 and no amounts remained outstanding under the line of credit as of June 30, 2013. 

NOTE 15 — EQUITY AND STOCK-BASED COMPENSATION

Common Stock

The Company is authorized to issued up to 990.0 million shares of common stock, $0.01 par value per share. As of June 30, 2013, the Company had approximately 494.1 million shares, net of share redemptions, issued, of which the approximately 4.3 million Escrow Shares, as discussed in Note 3, were not considered outstanding in accordance with GAAP. As of December 31, 2012, the Company had approximately 479.5 million shares issued and outstanding. On June 20, 2013, the Company listed its common stock on the NYSE under the ticker symbol “COLE”.

Preferred Stock

The Company is authorized to issue up to 10.0 million shares of preferred stock, $0.01 par value per share. As of December 31, 2012 and June 30, 2013, the Company did not have any preferred stock issued or outstanding. The Company’s board of directors has no present plans to issue shares of preferred stock, but it may do so at any time in the future without stockholder approval.

36

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Prior Public Offerings and Distribution Reinvestment Plan

The Company offered shares of common stock in its initial offering (the “Initial Offering”) from January 2009 to October 2010. At the completion of the Initial Offering, a total of approximately 217.5 million shares of common stock had been issued, including approximately 211.6 million shares issued in the primary offering and approximately 5.9 million shares issued pursuant to a distribution reinvestment plan (the “DRIP”). The remaining approximately 32.5 million unsold shares in the Initial Offering were deregistered.

The Company offered shares of its common stock pursuant to a follow-on offering (the “Follow-on Offering”) from October 2010 to April 2012. At the completion of the Follow-on Offering, a total of approximately 262.2 million shares of common stock had been issued, including approximately 242.9 million shares issued in the primary offering and approximately 19.3 million shares issued pursuant to the DRIP. The remaining approximately 12.8 million unsold shares in the Follow-on Offering were deregistered.

In addition, the Company registered 75.0 million shares of common stock under the DRIP pursuant to a registration statement filed on Form S-3 (the “DRIP Offering” and collectively with the Initial Offering and the Follow-on Offering, the “Offerings”), which was filed with the SEC on March 14, 2012 and automatically became effective with the SEC upon filing. On April 12, 2013, the Company announced that the board of directors, including all of the Company’s independent directors, had voted to suspend the DRIP. On June 17, 2013, the board of directors, including all of the Company’s independent directors, voted to terminate the DRIP effective as of the date of the Listing. Prior to the termination date, the Company had issued approximately 20.3 million shares pursuant to the DRIP Offering. Subsequent to June 30, 2013, the Company deregistered the remaining approximately 54.7 million unsold shares.

As of June 30, 2013, the Company had issued approximately 499.9 million shares of its common stock in the Offerings for aggregate gross proceeds of $5.0 billion (including shares sold pursuant to the DRIP), before share redemptions pursuant to the share redemption program of $174.7 million and offering costs, selling commissions and dealer management fees of $463.2 million.

In connection with the Merger, the Company issued approximately 12.8 million shares of the Company’s common stock during the six months ended June 30, 2013 in a transaction exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Company redeemed approximately 796,000 shares to satisfy applicable tax withholdings related to the Upfront Stock Consideration and Listing Consideration.

Tender Offer

On June 20, 2013, the Company commenced a modified “Dutch auction” tender offer to purchase for cash up to $250.0 million in value of shares of its common stock from its stockholders (the “Tender Offer”). Under the terms of the Tender Offer, the Company intends to select the lowest price, not greater than $13.00 nor less than $12.25 per share, net to the tendering stockholder in cash, less any applicable withholding taxes and without interest, which would enable the Company to purchase the maximum number of shares having an aggregate purchase price not to exceed $250.0 million. The Company intends to fund the purchase price for shares of common stock accepted for payment pursuant to the Tender Offer, and related fees and expenses, from available cash and/or borrowings under the Credit Facility. Subject to modification or withdrawal in accordance with its terms, the Tender Offer is scheduled to expire on August 8, 2013.

Share Redemption Program

The Company had a share redemption program whereby stockholders could sell shares of the Company’s common stock to the Company in compliance with the applicable requirements and guidelines of the Company’s share redemption program. On April 12, 2013, the Company’s board of directors, including all of its independent directors, voted to suspend the share redemption program in anticipation of the planned listing of its shares of common stock on the NYSE. On June 17, 2013, the Company’s board of directors, including all of its independent directors, voted to terminate the share redemption program effective as of the date of the Listing, and the share redemption program was terminated as of such date. During the six months ended June 30, 2013, the Company received valid redemption requests relating to approximately 5.3 million shares, which were redeemed in full for $52.3 million (an average of $9.82 per share).

37

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

Fractional Share Redemptions

In connection with the Listing, the Company’s board of directors, including all of its independent directors, approved eliminating all outstanding fractional shares of the Company’s common stock no earlier than the 11^th business day following the completion or termination of the Tender Offer by paying each holder of a fractional share as of the record date for the payments an amount in cash equal to the fraction of a share being repurchased multiplied by the average closing price of the Company’s common stock on the NYSE for the ten trading days ending on the trading day prior to the record date, rounded to the nearest whole cent.

Share Repurchase Program

The Company’s board of directors adopted a share repurchase program, authorizing the repurchase by the Company, from time to time, of the Company’s shares of common stock for an aggregate purchase price (excluding fees, commissions and all other ancillary expenses) of up to $250.0 million commencing no earlier than the 11th business day following the completion or termination of the Tender Offer (the “Share Repurchase Program”). The Company may conduct repurchases on the open market, including through the facilities of the NYSE, in privately negotiated transactions, or otherwise, by direct purchases of common stock or purchases pursuant to derivative instruments or securities relating to common stock, or other transactions. The timing and extent of any repurchases will depend upon market conditions, the trading price of the common stock and other factors. The Share Repurchase Program does not require the Company to acquire any specific number of or value of shares (subject to the maximum value stated above) and may be terminated at any time. The Company intends to fund the purchase price for shares of common stock repurchased pursuant to the Share Repurchase Program, and all related fees and expenses, from available cash and/or borrowings under the Credit Facility.

Equity Incentive Plans

During the six months ended June 30, 2013, the Company’s board of directors, upon the recommendation of the special committee comprised solely of independent directors, approved and adopted the Cole Credit Property Trust III, Inc. 2013 Omnibus Employee Incentive Plan (the “Employee Plan”) and the Cole Credit Property Trust III, Inc. 2013 Non-Employee Director Plan (the “Non-Employee Director Plan”, and together with the Employee Plan, the “Equity Plans”). The Equity Plans were adopted and became effective on May 8, 2013 and, unless earlier terminated by the board of directors, will terminate on May 8, 2023. The compensation committee, or other committee designated by the board of directors, will administer the Equity Plans.

Approximately 40.2 million shares of common stock of the Company (subject to adjustment) are reserved for issuance pursuant to the Employee Plan and a total of 500,000 shares of common stock of the Company (subject to adjustment) are reserved for issuance pursuant to the Non-Employee Director Plan. Both Equity Plans provide for the grant of non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, dividend equivalents and other stock-based awards; the Employee Plan also provides for the grant of stock options intended to be incentive stock options under Section 422 of the Internal Revenue Code and cash-based awards.

Awards under the Employee Plan may only be granted to employees and consultants of the Company, while awards under the Non-Employee Director Plan may only be granted to non-employee directors of the Company’s board of directors. Under the Non-Employee Director Plan, the maximum number of awards that may be granted to any non-employee director in a calendar year may not exceed a grant date fair market value of $300,000.

Subsequent to June 30, 2013, the compensation committee of the Company’s board of directors approved the grants of restricted share units (the “RSUs”) and performance share units (the “PSUs”) under the Employee Plan to certain Company employees, including the Company’s chief executive officer and its other executive officers. The RSUs vest and will be settled in shares of the Company’s common stock in installments subject to the employee’s continued employment over a three year period. The PSUs have a performance vesting condition based on achievement of relative total stockholder return and a continued employment condition over a three year period, and will be settled in shares of the Company’s common stock in installments over a three year period. No shares were granted under the Equity Plans as of June 30, 2013.

38

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

NOTE 16 — EARNINGS PER SHARE

The Escrow Shares are included in the computation of earnings per share under the two-class method as they contain non-forfeitable rights to distributions and are considered to be participating securities in accordance with GAAP. The two-class method is an earnings allocation formula that determines earnings per share for each class of common shares and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. The Company’s Escrow Shares contain rights to receive non-forfeitable distribution equivalents, and therefore the Company applies the two-class method of computing earnings per share. The calculation of earnings per share below excludes the income attributable to the Escrow Shares from the numerator. The following table summarizes basic and diluted earnings (in thousands, except share amounts):

	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Numerator:
Net income attributable to the Company	$	29,023		$	23,223	$	69,134		$	59,160
Distributions paid and declared on Escrow Shares	(605		)	—		(605		)	—
Net income - basic and diluted	$	28,418		$	23,223	$	68,529		$	59,160
Denominator:
Weighted average number of shares outstanding - basic	487,915,368			473,159,051		484,396,906			470,033,648
Effect of dilutive securities	3,594,760			—		1,797,380			—
Weighted average number of shares outstanding - diluted	491,510,128			473,159,051		486,194,286			470,033,648
Basic earnings per common share:
Net income per share attributable to the Company	$	0.06		$	0.05	$	0.14		$	0.13
Diluted earnings per common share:
Net income per share attributable to the Company	$	0.06		$	0.05	$	0.14		$	0.13

In accordance with GAAP, shares of common stock included in the Company’s diluted earnings per common share determination consist of the Merger Contingent Consideration pursuant to the Merger Agreement using the if-converted method and unvested shares from the Escrow Share arrangements using the treasury share method. A total of 199,727 shares of common stock for each of the three and six months ended June 30, 2013 were excluded from the earnings per share computations above as their effect would have been antidilutive.

NOTE 17 — INCOME TAXES

As a REIT, the Company generally is not subject to federal income tax, with the exception of its TRS.  However, the Company, including its TRS, is still subject to certain state and local income taxes in the various jurisdictions in which it operates.

Based on the above, the PCM segment, substantially all of which is conducted through a TRS, recognized a benefit from federal and state income taxes of $235,000 for both the three and six months ended June 30, 2013. No provision for or benefit from income taxes was recognized for the three and six months ended June 30, 2012 as the Company did not commence operations for the PCM segment until the Merger Date. The difference in the benefit from income taxes reflected in the condensed consolidated unaudited statements of operations as compared to the benefit calculated at the statutory federal income tax rate is primarily attributable to state and local income taxes, the tax classification of entities in the consolidated group and various permanent differences.

39

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – (Continued)

June 30, 2013

The REI segment recognized state income taxes of $442,000 and $658,000 during the three and six months ended June 30, 2013, respectively, and $283,000 and $476,000 during the three and six months ended June 30, 2012, respectively, which are included in general and administrative expenses in the accompanying condensed consolidated unaudited statements of operations.

NOTE 18 — SUBSEQUENT EVENTS

Equity Incentive Awards

Subsequent to June 30, 2013, the compensation committee of the Company’s board of directors approved grants of an aggregate of approximately 2.8 million RSUs and PSUs under the Employee Plan to certain Company employees, including the Company’s chief executive officer and its other executive officers.

Deregistration of DRIP Offering

Subsequent to June 30, 2013, the Company deregistered the remaining unsold shares pursuant to the DRIP Offering, as discussed in Note 15.

Distributions

The Company’s board of directors previously authorized the payment of cash dividends on a monthly basis, in the amount of $0.05833334 per share of common stock (a monthly rate that is equivalent to an annual rate of $0.70 per share) for stockholders of record as of each of July 31, 2013, August 30, 2013 and September 30, 2013. Subsequent to June 30, 2013, the Company’s board of directors authorized (i) an increase to its previous authorization of the payment of cash dividends for each of the months of August and September 2013 from $0.05833334 per share of common stock (a monthly rate that is equivalent to an annual rate of $0.70 per share) to $0.06 per share of common stock (a monthly rate that is equivalent to an annual rate of $0.72 per share) and (ii) the declaration and payment of a cash dividend on a monthly basis, in the amount of $0.06 per share of common stock (a monthly rate that is equivalent to an annual rate of $0.72 per share) for stockholders of record as of October 31, 2013. The payment dates for the dividends for the stockholders of record as of August 30, 2013 and September 30, 2013 will remain unchanged and will be September 3, 2013 and October 1, 2013, respectively. The payment date for the dividends for the stockholders of record as of October 31, 2013 will be November 1, 2013.

Other Transactions

Real Estate Investment Segment

As of August 1, 2013, the Company had $700.0 million outstanding under the Credit Facility.

Private Capital Management Segment

As of August 1, 2013, the Company was a party in 65 purchase and sale agreements with unaffiliated third-party sellers to purchase a 100% interest in 152 retail properties, subject to meeting certain criteria, for an aggregate purchase price of $595.7 million, exclusive of closing costs. 

Subsequent to June 30, 2013 through August 1, 2013, the PCM segment raised $536.6 million of capital on behalf of the Managed REITs. In addition, the PCM segment facilitated the acquisition of $353.0 million of real estate investments and $53.4 million of real estate financing on behalf of the Managed REITs subsequent to June 30, 2013 through August 1, 2013.

40

EX-99.3

Exhibit 99.3

American Realty Capital Properties, Inc.
Unaudited Pro Forma Consolidated Balance Sheet

The following unaudited pro forma Consolidated Balance Sheet is presented as if American Realty Capital Properties, Inc. (the “Company” or “ARCP”) had acquired the following on June 30, 2013: (i) CapLease, Inc. (“CapLease”); (ii) American Realty Capital Trust IV, Inc. (“ARCT IV”), including ARCT IV's acquisition of a portfolio of 578 properties to be acquired from affiliates of GE Capital, the majority of which were acquired subsequent to June 30, 2013 (“ARCT IV GE Capital Portfolio”); (iii) the individual properties purchased by ARCP and ARCT IV from July 1, 2013 to September 30, 2013, including the related financing thereon; (iv) a portfolio of 120 properties to be acquired through AR Capital, LLC, which will be acquired from Fortress Investment Group, LLC (the “Fortress Portfolio”); of the 120 properties, 41 were acquired subsequent to June 30, 2013 and the acquisition of the remaining properties is considered to be probable; (v) the equity interests in 67 companies to be acquired through AR Capital, LLC, which will be acquired from Inland American Real Estate Trust, Inc. (the “Inland Portfolio”). The Inland Portfolio includes 33 buildings, including 2 multi-tenant buildings; of the 33 buildings, 5 were acquired subsequent to June 30, 2013 and the acquisition of the remaining buildings is considered to be probable; and (vi) Cole Real Estate Investments, Inc. (“Cole”).

The Company purchased a portfolio of 477 properties from an affiliate of GE Capital Corp. (“the GE Capital Portfolio”) which closed on June 27, 2013. Therefore, the GE Capital Portfolio information is included in the ARCP Consolidated Balance Sheet as of June 30, 2013, and is presented in the unaudited pro forma Consolidated Statements of Operations for the six months ended June 30, 2013 and year ended December 31, 2012 as if the GE Capital Portfolio had been purchased at the beginning of the fiscal year presented and carried through the interim period presented.

In conjunction with the merger with CapLease, the Company will redeem all the outstanding shares of CapLease’s preferred stock for $25.00 per share as well as exchange all of the outstanding shares of CapLease’s common stock including common stock equivalents (partnership units and restricted shares) for $8.50 per share in exchange for all of the assets and liabilities of CapLease (“CapLease Merger”). The CapLease Merger is expected to close in the fourth quarter of 2013. However, as of the date of this report, the consummation of the CapLease Merger has not yet occurred and, although the Company believes that the completion of the CapLease Merger is probable, the closing of the CapLease Merger is subject to customary conditions, and therefore there can be no assurance that the CapLease Merger will be consummated. Accordingly, the Company cannot assure that the CapLease Merger as presented in the unaudited pro forma Consolidated Balance Sheet and unaudited pro forma Consolidated Statements of Operations will be completed based on the terms of the CapLease Merger or at all.

In conjunction with the merger of ARCP with ARCT IV (the “ARCT IV Merger”), the Company will exchange all of the outstanding shares of ARCT IV’s common stock for (i) $9.00 to be paid in cash plus (ii) 0.5190 shares of the Company’s common stock, par value $0.01 per share and (iii) 0.5937 share of Series F Preferred Stock (“Series F Preferred Stock”), par value $0.01 per share.

ARCP and ARCT IV are considered to be variable interest entities under common control. Both companies’ advisors are wholly owned subsidiaries of the companies’ sponsor, AR Capital, LLC. The sponsor and its related parties have ownership interests in ARCP through the ownership of shares of common stock and other equity interests. In addition, the advisors of both companies are contractually eligible to charge significant fees for their services to both of the companies including asset management fees, fees for the arrangement of financing and incentive fees and other fees. Due to the significance of these fees, the advisors and ultimately the sponsor are determined to have a significant economic interest in both companies in addition to having the power to direct the activities of the companies through the advisory agreements, which qualifies them as variable interest entities under common control in accordance with Accounting Principles Generally Accepted in the United States of America (“U.S. GAAP”). The acquisition of an entity under common control is accounted for on the carryover basis of accounting whereby the assets and liabilities of the companies are recorded upon the merger on the same basis as they were carried by the companies on the merger date.

The ARCT IV Merger is expected to close in the fourth quarter of 2013. However, as of the date of this report, the consummation of the ARCT IV Merger has not yet occurred and although the Company believes that the completion of the ARCT IV Merger is probable, the closing of the ARCT IV Merger is subject to a vote by the common stockholders of each of the Company and ARCT IV and other customary conditions, and therefore there can be no assurance that the ARCT IV Merger will be consummated. Accordingly, the Company cannot assure that the ARCT IV Merger as presented in the unaudited pro forma Consolidated Balance Sheet and unaudited pro forma Consolidated Statements of Operations will be completed based on the terms of the ARCT IV Merger or at all.

As of the date of this report, 79 of the Fortress Portfolio properties had not been acquired by the Company. The purchase and sale agreement includes provisions that allow the Company to exclude certain properties based on criteria related to issues with obtaining clear title to the property and obtaining satisfactory environmental reports among other provisions. Therefore, the Company cannot assure that all 79 properties in the Fortress Portfolio presented in the accompanying Unaudited Pro Forma Consolidated Balance Sheet or the Unaudited Pro Forma Consolidated Statements of Operations will be included in the final purchased portfolio. Although the closing of the remainder of the acquisition is subject to certain conditions, including the completion of due diligence, there can be no assurance that the Company will acquire any or all of the remaining 79 properties, however, the Company believes that the completion of such acquisitions is probable.

As of the date of this report, 28 of the Inland Portfolio properties had not been acquired by the Company. The purchase and sale agreement includes provisions that allow the Company to exclude certain properties based on criteria related to issues with obtaining clear title to the property and obtaining satisfactory environmental reports among other provisions. Therefore, the Company cannot assure that all 28 properties in the Inland Portfolio presented in the accompanying Unaudited Pro Forma Consolidated Balance Sheet or the Unaudited Pro Forma Consolidated Statements of Operations will be included in the final purchased portfolio. Although the closing of the remainder of the acquisition is subject to certain conditions, including the completion of due diligence, there can be no assurance that the Company will acquire any or all of the remaining 28 properties, however, the Company believes that the completion of such acquisitions is probable.

In conjunction with the merger with Cole, the Company will exchange all of the outstanding shares of Cole’s common stock including common stock equivalents (shares held in escrow, restricted shares and performance share units) for (i) $13.82 to be paid in cash, up to a maximum of 20% of Cole common stock outstanding or (ii) 1.0929 shares of the Company’s common stock, par value $0.01 per share, in exchange for all of the assets and liabilities of Cole (“Cole Merger”). The unaudited pro forma consolidated balance sheet below has been prepared with the assumption that the Company has been determined to be the acquirer under U.S. GAAP and that 20% of Cole’s outstanding common stock will be paid in cash and 80% of the outstanding common stock will be converted to the Company’s common shares. Although these represent estimates of the percentage of Cole’s outstanding common stock that will be converted to cash or exchanged for shares, the actual percentages will not known until the close of the merger. The Cole Merger is expected to close in the first quarter of 2014. However, as of the date of this report, the consummation of the Cole Merger has not yet occurred and, although the Company believes that the completion of the Cole Merger is probable, the closing of the Cole Merger is subject to stockholder approval from both the Company’s and Cole’s stockholder and other customary conditions, and therefore there can be no assurance that the Cole Merger will be consummated. Accordingly, the Company cannot assure that the Cole Merger as presented in the unaudited pro forma Consolidated Balance Sheet and unaudited pro forma Consolidated Statements of Operations will be completed based on the terms of the Cole Merger or at all.

This financial statement should be read in conjunction with the unaudited pro forma Consolidated Statement of Operations and the Company’s historical financial statements and notes thereto. The pro forma Consolidated Balance Sheet is unaudited and is not necessarily indicative of what the actual financial position would have been had the Company acquired the individual properties, CapLease, or ARCT IV, including the ARCT IV GE Capital Portfolio, the Fortress Portfolio, the Inland Portfolio and Cole as of June 30, 2013, nor does it purport to present the future financial position of the Company.

American Realty Capital Properties, Inc.

Unaudited Pro Forma Consolidated Balance Sheet

June 30, 2013

(In thousands)

	ARCP Historical (1)			Subsequent Activity Adjustments (2)				ARCP as Adjusted			CapLease Historical (3)			CapLease Merger Related Adjustments (4)				ARCP as Adjusted with CapLease Pro Forma			ARCT IV Historical (5)			ARCT IV Subsequent Activity Adjustments (6)				ARCT IV GE Capital Portfolio (7)
Assets
Real estate investments, at cost:
Land	$	504,562		$	10,367		(13)	$	514,929		$	235,282		$	2,458		(13)	$	752,669		$	249,931		$	8,434		(13)	$	245,156		(13)
Buildings, fixtures and improvements		2,043,270			33,097		(13)		2,076,367			1,543,880			16,131		(13)		3,636,378			770,009			108,525		(13)		572,031		(13)
Construction in progress		-			-				-			2,361			-				2,361			-			-				-
Acquired intangible lease assets		318,488			4,916		(13)		323,404			183,939			1,922		(13)		509,265			113,465			17,897		(13)		81,002		(13)
Total real estate investments, at cost		2,866,320			48,380				2,914,700			1,965,462			20,511				4,900,673			1,133,405			134,856				898,189
Less: accumulated depreciation and amortization		(108,765	)		-				(108,765	)		(336,980	)		336,980		(14)		(108,765	)		(7,905	)		-				-
Total real estate investments, net		2,757,555			48,380				2,805,935			1,628,482			357,491				4,791,908			1,125,500			134,856				898,189
Cash and cash equivalents		10,958			250,866				261,824			24,618			(30,123	)			256,319			261,490			(136,060	)			(173,556	)
Investment in direct financing leases, net		67,518			-				67,518			-			-				67,518			8,892			-				1,973
Investment securities, at fair value		9,920			-				9,920			58,859			-				68,779			68,082			-				-
Investments in unconsolidated entities		-			-				-			-			-				-			-			-				-
Derivatives, at fair value		10,161			-				10,161			-			-				10,161			41			-				-
Loans held for investment, net		-			-				-			24,061			2,544		(15)		26,605			-			-				-
Restricted cash		1,576			-				1,576			302			-				1,878			-			-				-
Leasehold improvements and property and equipment, net		-			-				-			-			-				-			-			-				-
Prepaid expenses and other assets		14,626			-				14,626			73,727			(33,405	)	(16)		54,948			50,262			-				-
Deferred costs, net		38,443			10,075				48,518			11,971			(11,971	)	(17)		48,518			15,064			-				-
Assets held for sale		6,028			-				6,028			-			-				6,028			-			-				-
Receivable for issuance of common stock		-			-				-			-			-				-			443			-				-
Goodwill and other intangible assets		-			-				-			-			108,947		(18)		108,947			-			-				-
Total assets	$	2,916,785		$	309,321			$	3,226,106		$	1,822,020		$	393,483			$	5,441,609		$	1,529,774		$	(1,204	)		$	726,606
Liabilities and Equity
Mortgage notes payable	$	269,918		$	-				269,918		$	991,483		$	46,501		(17)	$	1,307,902		$	2,124		$	-			$	-
Notes Payable		-			-				-			-			-				-			-			-				-
Convertible debt		-			299,391				299,391			-			-				299,391						-				-
Secured term loan		-			-				-			63,045			221		(17)		63,266			-			-				-
Secured credit agreements		-			-				-			99,457			-				99,457			-			-				-
Senior corporate credit facility		600,000			-				600,000			-			481,103		(19)		1,081,103			-			-				739,112
Convertible senior notes		-			-				-			19,210			(19,210	)	(20)		-			-			-				-
Other long-term debt		-			-				-			30,930			470,824		(21)		501,754			-			-				-
Contingent Considerations		-			-				-			-			-				-			-			-				-
Convertible obligation to Series C Convertible Preferred stockholders		445,000			-				445,000			-			(445,000	)	(22)		-			-			-				-
Contingent value rights obligation to preferred and common investors, at fair value		31,134			-				31,134			-			(15,041	)	(23)		16,093			-			-				-
Derivatives, at fair value		1,186			-				1,186			-			-				1,186			-			-				-
Accounts payable, accrued expenses and other liabilities		12,060			-				12,060			60,000			(287	)	(16)		71,773			5,494			-				-
Deferred rent		5,274			-				5,274			-			-				5,274			1,796			-				-
Acquired below market lease intangibles		-			-				-			-			-				-			-			-				-
Distributions payable		1			-				1			10,138			-				10,139			9,717			-				-
Total liabilities		1,364,573			299,391				1,663,964			1,274,263			519,111				3,457,338			19,131			-				739,112
Preferred Stock		8			-				8			150,717			(150,518	)	(24)		207			-			-				-
Common stock		1,846			-				1,846			888			(723	)	(24)		2,011			709			-				-
Additional paid-in capital		1,801,460			10,609				1,812,069			395,445			72,737		(25)		2,280,251			1,550,697			-				-
Accumulated other comprehensive income (loss)		8,919			-				8,919			(297	)		297		(26)		8,919			(1,337	)		-
Accumulated deficit		(379,502	)		(679	)	(27)		(380,181	)		-			(46,417	)	(27)		(426,598	)		(68,175	)		(1,204	)	(27)		(12,506	)	(27)
Total stockholders' equity		1,432,731			9,930				1,442,661			546,753			(124,624	)			1,864,790			1,481,894			(1,204	)			(12,506	)
Non-controlling interests		119,481			-				119,481			1,004			(1,004	)	(28)		119,481			28,749			-				-
Total equity		1,552,212			9,930				1,562,142			547,757			(125,628	)			1,984,271			1,510,643			(1,204	)			(12,506	)
Total liabilities and equity	$	2,916,785		$	309,321			$	3,226,106		$	1,822,020		$	393,483			$	5,441,609		$	1,529,774		$	(1,204	)		$	726,606

	ARCT IV Merger Related Adjustments (8)				ARCP as Adjusted with CapLease and ARCT IV Pro Forma			Fortress Portfolio (9)				Inland Portfolio (10)				ARCP as Adjusted with CapLease, ARCT IV, Fortress and Inland Pro Forma			Cole Historical (11)			Cole Merger Related Adjustments (12)				ARCP Pro Forma
Assets
Real estate investments, at cost:
Land	$	-			$	1,256,190		$	94,680		(13)	$	78,821		(13)	$	1,429,691		$	1,525,353		$	291,964		(13)	$	3,247,008
Buildings, fixtures and improvements		-				5,086,943			443,180		(13)		368,947		(13)		5,899,070			4,615,184			883,380		(13)		11,397,634
Construction in progress		-				2,361			-				-				2,361			-			-				2,361
Acquired intangible lease assets		-				721,629			67,565		(13)		65,262		(13)		854,456			1,013,445			193,981		(13)		2,061,882
Total real estate investments, at cost		-				7,067,123			605,425				513,030				8,185,578			7,153,982			1,369,325				16,708,885
Less: accumulated depreciation and amortization		-				(116,670	)		-				-				(116,670	)		(409,754	)		409,754		(14)		(116,670	)
Total real estate investments, net		-				6,950,453			605,425				513,030				8,068,908			6,744,228			1,779,079				16,592,215
Cash and cash equivalents		(105,800	)	(29)		102,393			-				-				102,393			167,474			-				269,867
Investment in direct financing leases, net		-				78,383			-				-				78,383			-			-				78,383
Investment securities, at fair value		-				136,861			-				-				136,861			268,017			-				404,878
Investments in unconsolidated entities		-				-			-				-				-			94,932			-				94,932
Derivatives, at fair value						10,202			-				-				10,202			2,177			-				12,379
Loans held for investment, net		-				26,605			-				-				26,605			90,464			5,936		(15)		123,005
Restricted cash		-				1,878			-				-				1,878			25,502			-				27,380
Leasehold improvements and property and equipment, net		-				-			-				-				-			21,295			-				21,295
Prepaid expenses and other assets		1,070		(30)		106,280			-				-				106,280			143,555			(78,810	)	(16)		171,025
Deferred costs, net		-				63,582			-				-				63,582			61,835			(61,835	)	(17)		63,582
Assets held for sale		-				6,028			-				-				6,028			-			-				6,028
Receivable for issuance of common stock		-				443			-				-				443			-			-				443
Goodwill and other intangible assets		-				108,947			-				-				108,947			293,694			1,692,720		(18)		2,095,361
Total assets	$	(104,730	)		$	7,592,055		$	605,425			$	513,030			$	8,710,510		$	7,913,173		$	3,337,090			$	19,960,773
Liabilities and Equity
Mortgage notes payable	$	-			$	1,310,026		$	112,258		(35)	$	319,676		(35)	$	1,741,960		$	2,674,619		$	-			$	4,416,579
Notes Payable		-				-			-				-				-						-				-
Convertible debt		-				299,391			-				-				299,391			-			-				299,391
Secured term loan		-				63,266			-				-				63,266			-			-				63,266
Secured credit agreements		-				99,457			-				-				99,457			-			-				99,457
Senior corporate credit facility		465,903		(31)		2,286,118			199,866		(31)		-				2,485,984			700,000			-				3,185,984
Convertible senior notes		-				-			-				-				-			-			-				-
Other long-term debt		110,000		(32)		611,754			300,000		(32)		202,147		(32)		1,113,901			126,809			1,673,671		(32)		2,914,381
Contingent Considerations		-				-			-				-				-			211,143			(211,143	)	(36)		-
Convertible obligation to Series C Convertible Preferred stockholders		-				-			-				-				-			-			-				-
Contingent value rights obligation to preferred and common investors, at fair value		-				16,093			-				-				16,093			-			-				16,093
Derivatives, at fair value		-				1,186			-				-				1,186			17,940			-				19,126
Accounts payable, accrued expenses and other liabilities		-				77,267			-				-				77,267			93,070			-				170,337
Deferred rent		-				7,070			-				-				7,070			73			-				7,143
Acquired below market lease intangibles		-				-			-				-				-			114,934			-				114,934
Distributions payable		-				19,856			-				-				19,856			28,501			-				48,357
Total liabilities		575,903				4,791,484			612,124				521,823				5,925,431			3,967,089			1,462,528				11,355,048
Preferred Stock		429		(33)		636			-				-				636						-				636
Common stock		375		(33)		3,095			-				-				3,095			4,898			(412	)	(37)		7,581
Additional paid-in capital		(651,707	)	(33)		3,179,241			-				-				3,179,241			4,416,151			1,635,291		(38)		9,230,683
Accumulated other comprehensive income (loss)		-				7,582			-				-				7,582			18,856			(18,856	)	(39)		7,582
Accumulated deficit		(101,887	)	(27)		(610,370	)		(6,699	)	(27)		(8,793	)	(27)		(625,862	)		(510,539	)		258,539		(40)		(877,862	)
Total stockholders' equity		(752,790	)			2,580,184			(6,699	)			(8,793	)			2,564,692			3,929,366			1,874,562				8,368,620
Non-controlling interests		72,157		(34)		220,387			-				-				220,387			16,718			-				237,105
Total equity		(680,633	)			2,800,571			(6,699	)			(8,793	)			2,785,079			3,946,084			1,874,562				8,650,725
Total liabilities and equity	$	(104,730	)		$	7,592,055		$	605,425			$	513,030			$	8,710,510		$	7,913,173		$	3,337,090			$	19,960,773

American Realty Capital Properties, Inc.

Notes to Unaudited Pro Forma Consolidated Balance Sheet

(1) Reflects the historical Consolidated Balance Sheet of American Realty Capital Properties, Inc. for the period indicated as presented in the Company’s Form 10-Q filed with the Securities and Exchange Commission (“SEC”) on August 6, 2013.

(2) Reflects adjustments to best reflect the current portfolio, debt balances and capital structure including adjustments to:

(i) Reflect ARCP property acquisitions from July 1, 2013 to September 30, 2013 of 33 properties with a total purchase price of $48.3 million and $0.1 million of other asset additions. These acquisitions were funded through the issuance of convertible debt described in (ii) below.

(ii) Reflects the issuance of $310.0 million of convertible debt, with a fair value of $299.4 million, bearing an annual interest rate of 3.0% (“Notes”). The Notes will mature on August 1, 2018, unless earlier repurchased, redeemed or converted. Holders may convert all or any portion of their Notes, in multiples of $1,000 principal amount, at their option at any time prior to the close of business on the business day immediately preceeding February 1, 2018 only under certain circumstances. On or after February 1, 2018, until the close of business on the business day immediately preceding the maturity date of the Notes, holders may convert all or any portion of their Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the circumstances. The conversion rate for the Notes is initially 59.8050 shares of the Company’s common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $16.72 per share of the Company’s common stock, representing a 15% conversion premium based on the closing price of the Company’s common stock of $14.54 per share on July 23, 2013). The initial conversion rate is subject to adjustment upon the occurrence of certain events. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election. The fair value of convertible debt was estimated by a discounting the cash flow of the debt using a market interest rate, estimated to be 3.76%, which the Company believes represents the rate at which it could enter into a similar debt arrangement without the conversion features associated with this debt.

(3) Reflects the historical Balance Sheet of CapLease for the period indicated as presented in CapLease’s Form 10-Q filed with the SEC on August 7, 2013. Certain balances reported in CapLease’s previously issued financial statements have been reclassified to conform to ARCP’s presentation.

(4) Reflects pro forma adjustments to record the assets and liabilities of CapLease at their fair values and to record cash consideration of $956.1 million to be paid to the CapLease’s shareholders, the mandatory conversion of the Company’s Series C Convertible Preferred Stock (“Series C Stock”) and payment of obligations for contingent value rights to the Series C Stockholders (“Preferred CVR”) and estimated CapLease Merger related costs of $27.0 million incurred in the CapLease Merger transaction. These amounts were funded through borrowings which are further described in notes 15 and 17.

(5) Reflects the historical Balance Sheet of ARCT IV for the period indicated as presented in ARCT IV’s Form 10-Q filed with the SEC on August 14, 2013.

(6) Reflects adjustments to record ARCT IV property acquisitions from July 1, 2013 to September 30, 2013 of 71 properties with a total purchase price of $134.9 million. Property purchases were funded with available cash.

(7) Reflects pro forma adjustments for the ARCT IV GE Capital Portfolio acquisition of 578 properties, 536 of which were acquired subsequent to June 30, 2013 and 42 of which are deemed to be probable to be acquired. The acquisitions were or are anticipated to be funded with $173.6 million of available cash and $739.1 million of funding from the Company’s line of credit facility at an annualized interest rate of 1.80%.

(8) Adjustments and pro forma balance based on the purchase of all of the outstanding shares of ARCT IV’s common stock for (i) $9.00 to be paid in cash plus (ii) 0.5190 shares of the Company’s common stock, par value $0.01 per share and (iii) 0.5937 share of Series F Preferred Stock (“Series F Preferred Stock”), par value $0.01 per share.

The Series F Preferred Stock is not redeemable by the Company before the fifth anniversary of the date on which such Series F Preferred Stock is issued (the “Initial Redemption Date”), except under circumstances intended to preserve the Company’s status as a real estate investment trust for federal and/or state income tax purposes and except as described below upon the occurrence of a change of control (as defined). On and after the Initial Redemption Date, the Company may, at its option, redeem shares of the Series F Preferred Stock, in whole or from time to time in part, at a redemption price of $25.00 per share plus, subject to exceptions, any accrued and unpaid dividends thereon to the date fixed for redemption. In addition, upon the occurrence of a change of control, the Company may, at its option, redeem shares of the Series F Preferred Stock, in whole or in part, within 120 days after the first date on which such change of control occurred, at a redemption price of $25.00 per share plus, subject to exceptions, any accrued and unpaid dividends thereon to the date fixed for redemption. Upon the occurrence of a change of control after which neither the Company nor the acquiring entity has a class of common securities listed on a national stock exchange, each holder of Series F Preferred Stock will have the right (unless, prior to the change of control conversion date (as defined), the Company has provided or provides notice of its election to redeem some or all of the shares of Series F Preferred Stock as provided in either of the two preceding sentences, in which case such holder will have the right only with respect to shares of Series F Preferred Stock that are not called for redemption) to convert some or all of the shares of Series F Preferred Stock into the Company’s common stock (or, in specified circumstances, certain alternative consideration). The shares of Series F Preferred Stock have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the Company redeems or otherwise repurchases them or they become convertible and are converted into common stock (or, if applicable, alternative consideration).

The impact of bifurcating the Series F Preferred Stock conversion feature as an imbedded derivative has not yet been determined. If determined, a bifurcated embedded derivative would be classified as a liability and recorded at fair value with a corresponding reduction to equity.

As the acquisition of ARCT IV will be accounted for on the carryover basis, no adjustments have been made to the fair value of its assets and liabilities.

(9) Reflects the pro forma balance sheet of the Fortress Portfolio for the period indicated as presented in the Company’s Current Report on Form 8-K filed with the SEC on October 7, 2013.

(10) Reflects the pro forma balance sheet of the Inland Portfolio for the period indicated as presented in the Company’s Current Report on Form 8-K/A filed with the SEC on September 25, 2013.

(11) Reflects the historical Balance Sheet of Cole for the period indicated as presented in Cole’s Form 10-Q filed with the SEC on August 5, 2013. Certain balances reported in Cole’s previously issued financial statements have been reclassified to conform to ARCP’s presentation.

(12) Reflects pro forma adjustments to record the assets and liabilities of Cole at their fair values and the purchase of all outstanding Cole common stock for (i) $13.82 to be paid in cash, up to a maximum of 20% of Cole common stock outstanding or (ii) 1.0929 shares of the Company’s common stock, par value $0.01 per share. Cash payments include estimated Cole Merger related costs of $252.0 million incurred in the Cole Merger transaction. These amounts were funded through a borrowing which is further described in note 32. The balance sheet does not reflect 1.3 million shares of Cole restricted stock units and performance stock units that were issued subsequent to June 30, 2013, or the repurchase of 20.4 million shares of Cole’s common stock pursuant to a tender offer, which was completed in August 2013. The effect of these subsequent transactions would be to reduce cash merger consideration by $52.9 million assuming the maximum of 20% of Cole’s common stock was exchanged for cash, and a reduction of 16.7 million shares of the Company common stock would be issued.

(13) The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Amounts allocated to land, land improvements, buildings, fixtures, and tenant improvements are based on cost segregation studies performed by independent third-parties or the Company's analysis of comparable properties in its portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates and the value of in-place leases. Depreciation is computed using the straight-line method over the estimated lives of forty years for buildings, fifteen years for land improvements, five years for fixtures and the shorter of the useful life or the remaining lease term for tenant improvements.

The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as-if vacant. Factors considered in the analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period, which is estimated to be nine months. Estimates of costs to execute similar leases including leasing commissions, legal and other related expenses are also utilized. The value of in-place leases is amortized to expense over the initial term of the respective lease, which generally ranges from two to 25 years. If a tenant terminates its lease, the unamortized portion of the in-place lease value and intangible is charged to expense.

Above-market and below-market in-place lease values, if any, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancellable term of the lease. The capitalized above-market lease intangibles are amortized as a decrease to rental income over the remaining term of the lease. The capitalized below-market lease values will be amortized as an increase to rental income over the remaining term and any fixed rate renewal periods provided within the respective leases. In determining the amortization period for below-market lease intangibles, the Company initially will consider, and periodically evaluate on a quarterly basis, the likelihood that a lessee will execute the renewal option. The likelihood that a lessee will execute the renewal option is determined 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 making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed. The allocations presented in the accompanying Pro Forma Consolidated Balance Sheet are in progress. Certain items will be finalized once additional information is received. Accordingly, these allocations are subject to revision when final information is available, although the Company does not expect future revisions to have a significant impact on its financial position or results of operations.

(14) Reflects the elimination of the respective company’s historical accumulated depreciation and amortization upon acquisition.

(15) Reflects an adjustment to the fair value for loans held for investment by the respective company based upon discounted cash flows and estimates of current interest rates for loans with similar terms.

(16) Reflects the elimination of the respective company’s existing straight-line rent adjustments.

(17) Reflects an adjustment to the fair value of debt assumed from the respective company based on discounted cash flows and estimates of current interest rates for similar debt instruments, and write-off of the related unamortized balance of deferred financing costs incurred by the respective company on the assumed debt.

(18) Reflects preliminary adjustment to record goodwill and other intangible assets including intangibles for customer relationships. In the case of Cole, the amount includes the write off of $293.7 million of existing good will and the recording of $1.9 billion of new goodwill and intangible assets, which include intangibles related to the acquisition of Cole’s private capital management business that includes broker dealer activities, relationships and existing broker dealer contracts as well as asset management activities including contracts to manage other REITs day to day activities for fees, in accounting for the acquisition of Cole as a business combination. Amounts are preliminary and will be finalized once the purchase price allocation to the assets and liabilities acquired is finalized.

(19) Reflects additional borrowings on the Company’s existing unsecured line of credit at an estimated annualized rate of 3.00%. The Company has commitments on its unsecured credit facility (including revolving and term loans) for total borrowings of $1.7 billion with an accordion feature of up to $2.5 billion, subject to borrowing base availability among other conditions.

(20) Reflects the required redemption of CapLease’s Convertible Senior Notes subject to the CapLease Merger Agreement.

(21) Reflects the anticipated issuance of $475.0 million of term debt at an assumed interest rate of 3.00%, partially offset by a $4.1 million fair value adjustment to CapLease’s debt balance.

(22) Reflects the required conversion of the Series C Stock upon the consummation of the CapLease Merger. In accordance with the agreement dated September 15, 2013, the Series C Stock will be converted to 1.4 million shares of common stock representing $18.3 million of value, and the remaining balance will be paid in cash in accordance with the original Series C Stock agreement. Total consideration to be paid in cash will be $435.6 million. Certain holders of the Series C Stock have agreed to reinvest their cash proceeds into Series D Stock representing $249.6 million or 18.8 million shares. The remaining stock holders will convert their Series C Stock to common stock representing $186.0 million or 15.1 million shares. The impact of bifurcating the Series D Cumulative Convertible Preferred Stock conversion feature as an imbedded derivative has not yet been determined. If determined, a bifurcated embedded derivative would be classified as a liability and recorded at fair value with a corresponding reduction to equity.

(23) Reflects the required repayment of the Preferred CVRs upon the closing of the CapLease Merger. In accordance with the agreement dated September 15, 2013, the Preferred CVRs will be settled for $0.90 per Preferred CVR or a total of $25.6 million. The holders of certain of the Preferred CVRs have agreed to reinvest their payment into a new Series D Cumulative Convertible Preferred stock (“Series D Stock”) representing $14.6 million or 1.1 million shares with the remaining $11.0 million paid in cash.

(24) Reflects the elimination of CapLease’s Preferred stock capital balance of $150.7 million partially offset by an increase of $0.2 million for the par value of preferred stock to be issued for the Series C Stock conversion and Preferred CVR repayment, and the elimination of CapLease’s common stock capital balance of $0.9 million partially offset by an increase of $0.2 million for the par value of common stock to be issued for the conversion of Series C Stock.

(25) Reflects the elimination of CapLease’s capital balance of $395.4 million, offset by the issuance of $459.6 million of equity securities comprised of 19.9 million shares of Series D Stock and 16.5 million shares of common stock for conversion of the Series C Stock explained in note 20 above and the repayment of the Preferred CVR explained in note 21 above. Also includes a fair value adjustment of $8.9 million to settle the Series C Stock obligation.

(26) Reflects adjustment for the elimination of CapLease’s accumulated other comprehensive income balance.

(27) Reflects estimated costs of the respective merger or acquisition including professional fees for investment banking, legal services and accounting fees, printing fees. These fees are estimated based in part on contractual arrangements and in part on estimates derived from similar mergers that the Company’s external advisor has knowledge of including the February 28, 2013 merger of ARCT III with the Company. For the CapLease merger, amount includes $8.9 million of expenses related to the conversion of the Series C Stock and $10.5 million related to the payment of the Preferred CVRs. For the CapLease Merger, amount includes costs of the Preferred CVR described in note 23 above that have been expensed. For the ARCT IV Merger, amount includes estimated costs of the issuance of operating partnership units described in note 34 below.

(28) Reflects the elimination of CapLease’s non-controlling interests related to partnership units, which will be canceled and converted to the right to receive $8.50 per partnership unit.

(29) Reflects the use of $100.0 million of available cash for the repurchase of shares of ARCT IV common stock. In addition, the Company entered into an asset purchase agreement whereby they agreed to purchase assets from their external advisor in addition to the reimbursement of certain expenses related to the ARCT IV Merger and issuance of common stock for a total of $5.8 million. Also includes estimated merger costs of approximately $25.0 million.

(30) Reflects the purchase of assets with a cost basis of $1.1 million from the external advisor.

(31) Reflects the anticipated additional borrowing on the Company’s unsecured line of credit at an estimated borrowing rate of 3.00%. The Company has commitments on its unsecured facility (including revolving and term loans) of $1.7 billion with an accordion feature of up to $2.5 billion, subject to borrowing base availability among other conditions.

(32) Reflects the anticipated issuance of (i) $110.0 million of term debt for the ARCT IV Merger, $300.0 million of term debt for the Fortress Portfolio and $202.1 million of term debt for the Inland Portfolio at an assumed interest rate of 3.00% used to partially fund the cash payment for the purchase of the two Portfolio’s assets and closing costs and (ii) the issuance of $1.7 billion of long term debt for the Cole Merger at an assumed interest rate of 4.10%. The issuance of the debt is comprised of (1) $1.4 billion for Cole shares exchanged for cash, (ii) $252 million for the estimated Cole merger costs, and (iii) $56 million for the cash portion of the settlement of contingent obligations of Cole. The Company has a committed term loan facility to fund the borrowings. The term loan has a maximum borrowing of $2.175 billion with a five-year term and includes a variable interest rate, which is determined, at the Company option, using a base of several different indices including prime and LIBOR, and a floor of 4.00%. The issuance of debt or, alternatively, equity securities is based on a number of factors including the availability of alternative debt instruments and the ability to issue preferred equity securities among other factors. In addition, the debt issued in conjunction with the Cole Merger is dependent on the number of securities submitted for cash redemption. The pro forma financial statements assume the maximum number of shares are redeemed for cash.

(33) Reflects the issuance of 42.9 million shares of Series F Preferred stock and 37.5 million shares of common stock. See note 8 for a description of the exchange of ARCT IV common stock for cash and equity shares of the Company

Cash of $9.00 per share for each outstanding share of ARCT IV	$   (650,903)
Par value of ARCP shares exchanged for ARCT IV shares	(804)
	$   (651,707)

(34) Reflects $3.7 million for 0.1 million operating partnership units of ARCT IV that will convert to 0.3 million operating partnership units of ARCP upon consummation of the ARCT IV Merger at an assumed value of $12.50 per share. In addition, the sponsor of ARCT IV is entitled to a fee based compensation on the achievement of certain total return to the ARCT IV shareholders, as applicable. This estimated calculation is based on the number of shares of ARCT IV outstanding and the conversion ratio as defined in the ARCT IV Merger agreement, as well as the Company’s stock price on the merger date. At an assumed stock price of $12.50, the fee would be $61.6 million. Should the stock price on the merger date be $0.50 higher or lower, the fee could be approximately $2.8 million higher or lower, and result in an increase, in the case of a higher stock price in the number of operating partnership units outstanding, or decrease, in the case of a lower stock price in the number of operating partnership units outstanding of approximately 0.1 million units. The actual amount to be paid will not be known until the ARCT IV Merger date. The fee will be paid in OP units in ARCP’s operating partnership which represent equity interests in the Company’s consolidated operating partnership.

(35) Reflects mortgage notes payable which the Company intends to assume from the seller upon the closing of the respective portfolios, at fair value. The Fortress Portfolio mortgage note bears an annualized interest rate of 5.55% and the Inland Portfolio mortgage notes bear an annualized interest rate of between 5.90% and 6.34%.

(36) Reflects the required payout of certain obligations related to the merger of Cole Holding Corporation into Cole. Total payout of $280 million will be paid to certain executive officers of Cole for certain obligations related to the merger of Cole Holdings Corporation into Cole as well as amounts due to executives related to the Cole Merger. Cole had $211.1 million accrued for these obligations as of June 30, 2013. Amounts will be paid in shares of Cole common stock which will immediately be exchanged for Company common stock and cash consideration in accordance with the ratio specified in the merger agreement.

(37) Reflects the elimination of Cole’s common stock capital balance of $4.9 million partially offset by an increase of $4.5 million for the par value of the Company’s common stock to be issued.

(38) Reflects the elimination of Cole’s additional paid-in capital balance of $4.4 billion, offset by additional paid-in capital of $6.1 billion resulting from the issuance of 449 million shares of the Company’s common stock .

(39) Reflects adjustment for the elimination of Cole’s accumulated other comprehensive loss balance.

(40) Reflects the (i) elimination of Cole’s accumulated deficit and (ii) $252 million in estimated costs for the Cole Merger including professional fees for investment banking, legal services and accounting fees, printing fees, of which $80 million is expected to be paid to affiliates. The merger fees are estimated based in part on contractual arrangements and in part on estimates derived from similar mergers that the Company’s external advisor has knowledge of including the February 28, 2013 merger of ARCT III with the Company.

Unaudited Pro Forma Consolidated Statement of Operations

Six Months Ended June 30, 2013

(In thousands, except share based data)

	ARCP Historical (1)			Subsequent Activity Adjustments (2)			GE Capital Portfolio (3)		GE Capital Portfolio Acquisition Adjustments (4)				ARCP as Adjusted			CapLease Historical (5)			CapLease Merger Related Adjustments (6)				ARCP as Adjusted with CapLease Pro Forma			ARCT IV Historical (7)
Revenues:
Rental income	$	81,379		$	6,830		$	27,320	$	558		(18)	$	116,087		$	72,536		$	6,351		(18)	$	194,974		$	12,048
Direct financing lease income		-			-			1,580		-				1,580			-			-				1,580			-
Operating expense reimbursements		3,652			-			310		-				3,962			12,239			-				16,201			634
Private capital management revenue		-			-			-		-				-			-			-				-			-
Other revenues		-			-			68		-				68			3,703			-				3,771			-
Total revenues		85,031			6,830			29,278		558				121,697			88,478			6,351				216,526			12,682
Operating expenses:
Acquisition related		20,726			-			-		-				20,726			-			-				20,726			26,890
Merger and other transaction related		142,449			-			-		-				142,449			2,421			-				144,870			1,713
Property operating		4,869			-			630		-				5,499			18,340			-				23,839			766
General and administrative		2,432			-			-		-				2,432			6,313			-				8,745			1,392
Equity-based compensation		4,330			-			-		-				4,330			1,770			(1,770	)	(22)		4,330			-
Depreciation and amortization		52,829			20,646			-		15,858		(19)		89,333			24,633			15,079		(19)		129,045			7,590
Operating fees to affiliates		-			-			-		1,412		(20)		1,412			-			4,015		(20)		5,427			-
Total operating expenses		227,635			20,646			630		17,270				266,181			53,477			17,324				336,982			38,351
Operating income (loss)		(142,604	)		(13,816	)		28,648		(16,712	)			(144,484	)		35,001			(10,973	)			(120,456	)		(25,669	)
Other income (expenses):
Interest expense		(17,454	)		(17,049	)		-		-				(34,503	)		(32,507	)		(9,157	)	(23)		(76,167	)		(186	)
Loss on contingent value rights		(31,134	)		-			-		-				(31,134	)		-			-				(31,134	)
Income from investment securities		218			-			-		-				218			-			-				218			1,759
Gain on sale of investment securities		451			-			-		-				451			-			-				451			-
Loss on derivative instruments		(45	)		-			-		-				(45	)		5			-				(40	)		-
Other income (expense)		126			-			-		-				126			-			-				126			419
Total other expenses		(47,838	)		(17,049	)		-		-				(64,887	)		(32,502	)		(9,157	)			(106,546	)		1,992
Income (loss) from continuing operations		(190,442	)		(30,865	)		28,648		(16,712	)			(209,371	)		2,499			(20,130	)			(227,002	)		(23,677	)
Net income (loss) from continuing operations attributable to non-controlling interests		756			1,251			-		(484	)	(21)		1,523			8			665		(21)		2,196			155
Net income (loss) from continuing operations attributable to stockholders		(189,686	)		(29,614	)		28,648		(17,196	)			(207,848	)		2,507			(19,465	)			(224,806	)		(23,522	)
Discontinued operations:
Income from operations of held for sale properties		63			-			-		-				63			-			-				63			-
Gain on held for sale properties		14			-			-		-				14			-			-				14			-
Net income from discontinued operations		77			-			-		-				77			-			-				77			-
Net income from discontinued operations attributable to non-controlling interests		(4	)		-			-		-				(4	)		-			-				(4	)		-
Net income from discontinued operations attributable to stockholders		73			-			-		-				73			-			-				73			-
Net income (loss)		(190,365	)		(30,865	)		28,648		(16,712	)			(209,294	)		2,499			(20,130	)			(226,925	)		(23,677	)
Dividends allocable to preferred shares		-			-			-		-				-			(6,791	)		6,791		(24)		-			-
Net income (loss) attributable to non-controlling interests		752			1,251			-		(484	)	(21)		1,519			8			665		(21)		2,192			155
Net income (loss) attributable to stockholders	$	(189,613	)	$	(29,614	)	$	28,648	$	(17,196	)		$	(207,775	)	$	(4,284	)	$	(12,674	)		$	(224,733	)	$	(23,522	)
Earnings per share:
Basic	$	(1.20	)										$	(1.32	)								$	(1.29	)
Fully diluted	$	(1.20	)										$	(1.32	)								$	(1.29	)
Weighted average common shares:
Basic and diluted (28)		157,904												157,904						16,538				174,442

	ARCT IV Subsequent Activity Adjustments (8)			ARCT IV GE Capital Portfolio (9)		ARCT IV GE Capital Portfolio Acquisition Adjustments (10)				ARCT IV Merger Related Adjustments (11)				ARCP as Adjusted with CapLease and ARCT IV Pro Forma			Fortress Portfolio (12)		Pro Forma Adjustments Fortress Portfolio (13)
Revenues:
Rental income	$	18,818		$	49,500	$	1,344		(18)	$	-			$	276,684		$	19,675	$	616		(18)
Direct financing lease income		-			224		-				-				1,804			-		-
Operating expense reimbursements		-			166		-				-				17,001			547		-
Private capital management revenue		-			-		-				-				-			-		-
Other revenues		-			68		-				-				3,839			72		-
Total revenues		18,818			49,958		1,344				-				299,328			20,294		616
Operating expenses:
Acquisition related		-			-		-				-				47,616			-		-
Merger and other transaction related		-			-		-				(8,814	)	(25)		137,769			-		-
Property operating		-			529		-				-				25,134			693		-
General and administrative		-			-		-				-				10,137			-		-
Equity-based compensation		-			-		-				-				4,330			-		-
Depreciation and amortization		30,370			-		23,690		(19)		-				190,695			-		13,578		(19)
Operating fees to affiliates		-			-		-				4,333		(20)		9,760			-		1,211		(20)
Total operating expenses		30,370			529		23,690				(4,481	)			425,441			693		14,789
Operating income (loss)		(11,552	)		49,429		(22,346	)			4,481				(126,113	)		19,601		(14,173	)
Other income (expenses):
Interest expense		-			-		(6,615	)	(23)		(8,639	)	(23)		(91,607	)		-		(10,977	)	(23)
Loss on contingent value rights		-			-		-								(31,134	)		-		-
Income from investment securities		-			-		-				-				1,977			-		-
Gain on sale of investment securities		-			-		-				-				451			-		-
Loss on derivative instruments		-			-		-				-				(40	)		-		-
Other income (expense)		-			-		-				-				545			-		-
Total other expenses		-			-		(6,615	)			(8,639	)			(119,808	)		-		(10,977	)
Income (loss) from continuing operations		(11,552	)		49,429		(28,961	)			(4,158	)			(245,921	)		19,601		(25,150	)
Net income (loss) from continuing operations attributable to non-controlling interests		-			-		(34	)			1,091		(21)		3,408			-		271		(21)
Net income (loss) from continuing operations attributable to stockholders		(11,552	)		49,429		(28,995	)			(3,067	)			(242,513	)		19,601		(24,879	)
Discontinued operations:
Income from operations of held for sale properties		-			-		-				-				63			-		-
Gain on held for sale properties		-			-		-				-				14			-
Net income from discontinued operations		-			-		-				-				77			-		-
Net income from discontinued operations attributable to non-controlling interests		-			-										(4	)		-		-
Net income from discontinued operations attributable to stockholders		-			-		-				-				73			-		-
Net income (loss)		(11,552	)		49,429		(28,961	)			(4,158	)			(245,844	)		19,601		(25,150	)
Dividends allocable to preferred shares		-			-		-				(35,960	)	(26)		(35,960	)		-		-
Net income (loss) attributable to non-controlling interests		-			-		(34	)			1,091		(21)		3,404			-		271		(21)
Net income (loss) attributable to stockholders	$	(11,552	)	$	49,429	$	(28,995	)		$	(39,027	)		$	(278,400	)	$	19,601	$	(24,879	)
Earnings per share:
Basic														$	(1.31	)
Fully diluted														$	(1.31	)
Weighted average common shares:
Basic and diluted (28)											37,535				211,977

	Inland Portfolio (14)		Pro Forma Adjustments Inland Portfolio (15)				ARCP as Adjusted with CapLease, ARCT IV, Fortress and Inland Pro Forma			Cole Historical (16)			Cole Merger Related Adjustments (17)				ARCP Pro Forma
Revenues:
Rental income	$	22,876	$	818		(18)	$	320,669		$	312,089		$	19,806		(18)	$	652,564
Direct financing lease income		-		-				1,804			-			-				1,804
Operating expense reimbursements		1,710		-				19,258			-			-				19,258
Private capital management revenue		-		-				-			82,643			-				82,643
Other revenues		64		-				3,975			15,785			-				19,760
Total revenues		24,650		818				345,706			410,517			19,806				776,029
Operating expenses:
Acquisition related		-		-				47,616			-			-				47,616
Merger and other transaction related		-		-				137,769			37,701			-				175,470
Property operating		2,557		-				28,384			33,129			-				61,513
General and administrative		-		-				10,137			45,467			-				55,604
Equity-based compensation		-		-				4,330			-			-				4,330
Depreciation and amortization		-		9,942		(19)		214,215			104,110			30,756		(19)		349,081
Operating fees to affiliates		643		383		(20)		11,997			54,264			(37,217	)	(20)		29,044
Total operating expenses		3,200		10,325				454,448			274,671			(6,461	)			722,658
Operating income (loss)		21,450		(9,507	)			(108,742	)		135,846			26,267				53,371
Other income (expenses):
Interest expense		-		(13,701	)	(23)		(116,285	)		(88,007	)		(29,157	)	(27)		(233,449	)
Loss on contingent value rights		-		-				(31,134	)		-			-				(31,134	)
Income from investment securities		-		-				1,977			-			-				1,977
Gain on sale of investment securities		-		-				451			-			-				451
Loss on derivative instruments		-		-				(40	)		-			-				(40	)
Other income (expense)		-		-				545			1,665			-				2,210
Total other expenses		-		(13,701	)			(144,486	)		(86,342	)		(29,157	)			(259,985	)
Income (loss) from continuing operations		21,450		(23,208	)			(253,228	)		49,504			(2,890	)			(206,614	)
Net income (loss) from continuing operations attributable to non-controlling interests		-		82		(21)		3,761			(215	)		1,034		(21)		4,580
Net income (loss) from continuing operations attributable to stockholders		21,450		(23,126	)			(249,467	)		49,289			(1,856	)			(202,034	)
Discontinued operations:
Income from operations of held for sale properties		-		-				63			838			-				901
Gain on held for sale properties		-		-				14			19,007			-				19,021
Net income from discontinued operations		-		-				77			19,845			-				19,922
Net income from discontinued operations attributable to non-controlling interests		-		-				(4	)		-			-				(4	)
Net income from discontinued operations attributable to stockholders		-		-				73			19,845			-				19,918
Net income (loss)		21,450		(23,208	)			(253,151	)		69,349			(2,890	)			(186,692	)
Dividends allocable to preferred shares		-		-				(35,960	)		-			-				(35,960	)
Net income (loss) attributable to non-controlling interests		-		82		(21)		3,757			(215	)		1,034		(21)		4,576
Net income (loss) attributable to stockholders	$	21,450	$	(23,126	)		$	(285,354	)	$	69,134		$	(1,856	)		$	(218,076	)
Earnings per share:
Basic							$	(1.35	)								$	(0.34	)
Fully diluted							$	(1.35	)								$	(0.34	)
Weighted average common shares:
Basic and diluted (28)								211,977						431,995				643,972

Unaudited Pro Forma Consolidated Statement of Operations

Year Ended December 31, 2012

(In thousands, except share based data)

	ARCP Historical (1)			Subsequent Activity Adjustments (2)			GE Capital Portfolio (3)		GE Capital Portfolio Acquisition Adjustments (4)				ARCP as Adjusted			CapLease Historical (5)			CapLease Merger Related Adjustments (6)				ARCP as Adjusted with CapLease Pro Forma			ARCT IV Historical (7)
Revenues:
Rental income	$	64,791		$	117,020		$	49,246	$	891		(18)	$	231,948		$	137,126		$	7,582		(18)	$	376,656		$	378
Direct financing lease income		-			-			2,947		-				2,947			-			-				2,947			-
Operating expense reimbursements		2,002			-			302		-				2,304			16,287			-				18,591			36
Other revenues		-			-			350		-				350			8,629			-				8,979			-
Total revenues		66,793			117,020			52,845		891				237,549			162,042			7,582				407,173			414
Operating expenses:
Acquisition related		42,761			-			-		-				42,761			-			-				42,761			2,309
Merger and other transaction related		2,603			-			-		-				2,603			-			-				2,603			-
Property operating		3,484			-			1,135		-				4,619			27,798			-				32,417			38
General and administrative		3,912			-			-		-				3,912			12,643			-				16,555			320
Equity-based compensation		1,180			-			-		-				1,180			3,200			(3,200	)	(22)		1,180			-
Depreciation and amortization		40,700			106,245			-		31,720		(19)		178,665			48,189			31,235		(19)		258,089			303
Operating fees to affiliates		212			-			-		2,826		(20)		3,038			-			8,029		(20)		11,067			-
Total operating expenses		94,852			106,245			1,135		34,546				236,778			91,830			36,064				364,672			2,970
Operating income (loss)		(28,059	)		10,775			51,710		(33,655	)			771			70,212			(28,482	)			42,501			(2,556	)
Other income (expenses):
Interest expense		(11,856	)		(44,218	)		-		-				(56,074	)		(67,137	)		(18,314	)	(23)		(141,525	)		-
Income from investment securities		534			-			-		-				534			1,009			-				1,543			-
Gain on sale of investment securities		-			-			-		-				-			10,790			-				10,790			-
Loss on derivative instruments		-			-			-		-				-			-			-				-			-
Other income (expense)		426			-			-		-				426			-			-				426			19
Total other expenses		(10,896	)		(44,218	)		-		-				(55,114	)		(55,338	)		(18,314	)			(128,766	)		19
Income (loss) from continuing operations		(38,955	)		(33,443	)		51,710		(33,655	)			(54,343	)		14,874			(46,796	)			(86,265	)		(2,537	)
Net income (loss) from continuing operations attributable to non-controlling interests		255			1,306			-		(705	)	(21)		856			27			1,132		(21)		2,015			-
Net income (loss) from continuing operations attributable to stockholders		(38,700	)		(32,137	)		51,710		(34,360	)			(53,487	)		14,901			(45,664	)			(84,250	)		(2,537	)
Discontinued operations:
Income from operations of held for sale properties		(145	)		-			-		-				(145	)		(16,601	)		-				(16,746	)		-
Gain on held for sale properties		(600	)		-			-		-				(600	)		-			-				(600	)		-
Net income from discontinued operations		(745	)		-			-		-				(745	)		(16,601	)		-				(17,346	)		-
Net income from discontinued operations attributable to non-controlling interests		46			-			-		-				46			-			801				847			-
Net income from discontinued operations attributable to stockholders		(699	)		-			-		-				(699	)		(16,601	)		801				(16,499	)		-
Net income (loss)		(39,700	)		(33,443	)		51,710		(33,655	)			(55,088	)		(1,727	)		(46,796	)			(103,611	)		(2,537	)
Dividends allocable to preferred shares		-			-			-		-				-			(10,003	)		10,003		(24)		-			-
Net income (loss) attributable to non-controlling interests		301			1,306			-		(705	)	(21)		902			27			1,933		(21)		2,862			-
Net income (loss) attributable to stockholders	$	(39,399	)	$	(32,137	)	$	51,710	$	(34,360	)		$	(54,186	)	$	(11,703	)	$	(34,860	)		$	(100,749	)	$	(2,537	)
Earnings per share:
Basic	$	(0.39	)										$	(0.53	)								$	(0.85	)
Fully diluted	$	(0.39	)										$	(0.53	)								$	(0.85	)
Weighted average common shares:
Basic and diluted (28)		102,514			-									102,514						16,538				119,052

	ARCT IV Subsequent Activity Adjustments (8)			ARCT IV GE Capital Portfolio (9)		ARCT IV GE Capital Portfolio Acquisition Adjustments (10)				ARCT IV Merger Related Adjustments (11)				ARCP as Adjusted with CapLease and ARCT IV Pro Forma			Fortress Portfolio (12)		Pro Forma Adjustments Fortress Portfolio (13)
Revenues:
Rental income	$	61,354		$	95,564	$	1,195		(18)	$	-			$	535,147		$	29,965	$	10,554		(18)
Direct financing lease income		-			584		-				-				3,531			-		-
Operating expense reimbursements		-			128		-				-				18,755			857		-
Other revenues		-			230		-				-				9,209			149		-
Total revenues		61,354			96,506		1,195				-				566,642			30,971		10,554
Operating expenses:
Acquisition related		-			-		-				-				45,070			-		-
Merger and other transaction related		-			-		-				-				2,603			-		-
Property operating		-			662		-				-				33,117			858		-
General and administrative		-			-		-				-				16,875			-		-
Equity-based compensation		-			-		-				-				1,180			-		-
Depreciation and amortization		75,617			-		63,696		(19)		-				397,705			-		27,156		(19)
Operating fees to affiliates		-			-		-				8,666		(20)		19,733			-		2,422		(20)
Total operating expenses		75,617			662		63,696				8,666				516,283			858		29,578
Operating income (loss)		(14,263	)		95,844		(62,501	)			(8,666	)			50,359			30,113		(19,024	)
Other income (expenses):
Interest expense		(72	)		-		(15,521	)	(23)		(17,277	)	(23)		(174,395	)		-		(21,952	)	(23)
Income from investment securities		-			-		-				-				1,543			-		-
Gain on sale of investment securities		-			-		-				-				10,790			-		-
Loss on derivative instruments		-			-		-				-				-			-		-
Other income (expense)		-			-		-				-				445			-		-
Total other expenses		(72	)		-		(15,521	)			(17,277	)			(161,617	)		-		(21,952	)
Income (loss) from continuing operations		(14,335	)		95,844		(78,022	)			(25,943	)			(111,258	)		30,113		(40,976	)
Net income (loss) from continuing operations attributable to non-controlling interests		-									1,376		(21)		3,391			-		969		(21)
Net income (loss) from continuing operations attributable to stockholders		(14,335	)		95,844		(78,022	)			(24,567	)			(107,867	)		30,113		(40,007	)
Discontinued operations:
Income from operations of held for sale properties		-			-		-				-				(16,746	)		-		-
Gain on held for sale properties		-			-		-				-				(600	)		-		-
Net income from discontinued operations		-			-		-				-				(17,346	)		-		-
Net income from discontinued operations attributable to non-controlling interests		-			-		-								847			-		-
Net income from discontinued operations attributable to stockholders		-			-		-				-				(16,499	)		-		-
Net income (loss)		(14,335	)		95,844		(78,022	)			(25,943	)			(128,604	)		30,113		(40,976	)
Dividends allocable to preferred shares		-			-		-				(71,921	)	(26)		(71,921	)		-		-
Net income (loss) attributable to non-controlling interests		-			-		-				1,376		(21)		4,238			-		969		(21)
Net income (loss) attributable to stockholders	$	(14,335	)	$	95,844	$	(78,022	)		$	(96,488	)		$	(196,287	)	$	30,113	$	(40,007	)
Earnings per share:
Basic														$	(1.25	)
Fully diluted														$	(1.25	)
Weighted average common shares:
Basic and diluted (28)											37,535				156,587

	Inland Portfolio (14)		Pro Forma Adjustments Inland Portfolio (15)				ARCP as Adjusted with CapLease, ARCT IV, Fortress and Inland Pro Forma			Cole Historical (16)			Cole Merger Related Adjustments (17)				ARCP Pro Forma
Revenues:
Rental income	$	46,192	$	2,792		(18)	$	624,650		$	471,333		$	512		(18)	$	1,096,495
Direct financing lease income		-		-				3,531			-			-				3,531
Operating expense reimbursements		2,933		-				22,545			44,541			-				67,086
Other revenues		144		-				9,502			27,068			-				36,570
Total revenues		49,269		2,792				660,228			542,942			512				1,203,682
Operating expenses:
Acquisition related		-		-				45,070			63,892			-				108,962
Merger and other transaction related		-		-				2,603			-			-				2,603
Property operating		5,000		-				38,975			49,278			-				88,253
General and administrative		-		-				16,875			14,915			-				31,790
Equity-based compensation		-		-				1,180			-			-				1,180
Depreciation and amortization		-		19,884		(19)		444,745			159,609			110,123		(19)		714,477
Operating fees to affiliates		1,313		739		(20)		24,207			46,364			(12,271	)	(20)		58,300
Total operating expenses		6,313		20,623				573,655			334,058			97,852				1,005,565
Operating income (loss)		42,956		(17,831	)			86,573			208,884			(97,340	)			198,117
Other income (expenses):
Interest expense		-		(27,403	)	(23)		(223,750	)		(140,113	)		(58,315	)	(23)		(422,178	)
Income from investment securities		-		-				1,543			-			-				1,543
Gain on sale of investment securities		-		-				10,790			12,455			-				23,245
Loss on derivative instruments		-		-				-			-			-				-
Other income (expense)		-		-				445			6,629			-				7,074
Total other expenses		-		(27,403	)			(210,972	)		(121,029	)		(58,315	)			(390,316	)
Income (loss) from continuing operations		42,956		(45,234	)			(124,399	)		87,855			(155,655	)			(192,199	)
Net income (loss) from continuing operations attributable to non-controlling interests		107		4,467		(21)		(100	)		(1,462	)		2,905		(21)
Net income (loss) from continuing operations attributable to stockholders		42,956		(45,127	)			(119,932	)		87,755			(157,117	)			(189,294	)
Discontinued operations:
Income from operations of held for sale properties		-		-				(16,746	)		7,126			-				(9,620	)
Gain on held for sale properties		-		-				(600	)		108,457			-				107,857
Net income from discontinued operations		-		-				(17,346	)		115,583			-				98,237
Net income from discontinued operations attributable to non-controlling interests		-		-				847			-							847
Net income from discontinued operations attributable to stockholders		-		-				(16,499	)		115,583			-				99,084
Net income (loss)		42,956		(45,234	)			(141,745	)		203,438			(155,655	)			(93,962	)
Dividends allocable to preferred shares		-		-				(71,921	)		-			-		-		(71,921	)
Net income (loss) attributable to non-controlling interests		-		107		(21)		5,314			(100	)		(1,462	)	(21)		3,752
Net income (loss) attributable to stockholders	$	42,956	$	(45,127	)		$	(208,352	)	$	203,338		$	(157,117	)		$	(162,131	)
Earnings per share:
Basic							$	(1.33	)								$	(0.28	)
Fully diluted							$	(1.33	)								$	(0.28	)
Weighted average common shares:
Basic and diluted (28)								156,587						431,995				588,582

American Realty Capital Properties, Inc.

Notes to Unaudited Pro Forma Consolidated Statements of Operations

(1) Reflects the historical Statement of Operations of the Company for the period indicated. The balances for the six months ended June 30, 2013 were presented in the Company’s Form 10-Q filed with the SEC on August 6, 2013. The balances for the year ended December 31, 2012 reflect the effect of the February 2013 merger of the Company and American Realty Capital Trust III, Inc. (“ARCT III”) as presented in the Current Report on Form 8-K/A filed with the SEC on May 8, 2013.

(2) Adjustments reflect the annualization of certain ARCP lease rental income, lease asset depreciation and amortization and interest expense on additional financing used for acquisitions for ARCP property acquisitions made in 2012 and up to September 30, 2013 as if they were made at the beginning of the fiscal year presented and carried through the interim period presented. Interest expense on the borrowings used for the funding of these acquisitions is at a fixed annual rate.

(3) Reflects the historical balances of the GE Capital Portfolio. Balances for the year ended December 31, 2012 were presented in the Company’s Current Report on Form 8-K/A filed with the SEC on June 7, 2013.

(4) Adjustments reflect the annualization of the GE Capital Portfolio’s lease rental income and lease asset depreciation and amortization expense as if the acquisition was completed at the beginning of the fiscal year presented and carried through the interim period presented.

(5) Reflects the historical Statement of Operations of CapLease for the periods indicated. The balances for the six months ended June 30, 2013 were presented in CapLease’s Form 10-Q filed with the SEC on August 7, 2013. The balances for the year ended December 31, 2012 were presented in CapLease’s Annual Report on Form 10-K filed with the SEC on February 21, 2013. Certain balances reported in CapLease’s previously issued financial statements have been reclassified to conform to ARCP’s presentation.

(6) Adjustments and pro forma balances reflect adjustments related to the acquisition of CapLease by the Company. Excludes estimated closing costs of $27.0 million expected to be incurred for the CapLease Merger.

(7) Reflects the historical Consolidated Statement of Operations of ARCT IV for the period indicated. The balances for the six months ended June 30, 2013 were presented in ARCT IV’s Form 10-Q filed with the SEC on August 14, 2013. The balances for the year ended December 31, 2012 were presented in ARCT IV’s Annual Report on Form 10-K filed with the SEC on March 8, 2013.

(8) Adjustments reflect the annualization of certain ARCT IV lease rental income, lease asset depreciation and amortization expense and interest expense on additional financing used for ARCT IV’s property acquisitions made in 2012 and up to September 30, 2013 as if they were made at the beginning the fiscal year presented and carried through the interim period presented.

(9) Reflects the historical balances of the ARCT IV GE Capital Portfolio. Balances for the year ended December 31, 2012 were presented in the ARCT IV’s Current Report on Form 8-K/A filed with the SEC on July 16, 2013. Excludes $23.4 million of closing costs incurred in connection with the purchase of these properties.

(10) Adjustments reflect the annualization of the ARCT IV GE Capital Portfolio’s lease rental income and lease asset depreciation and amortization expense as if the acquisition was completed at the beginning of the fiscal year presented and carried through the interim period presented.

(11) Adjustments and pro forma balances reflect adjustments related to the acquisition of ARCT IV by the Company. As the acquisition of ARCT IV by the Company will be accounted for on the carryover basis of accounting, no adjustments have been made to the fair value of the assets or liabilities, therefore there are no adjustments such as recalculation of the straight-lining of rent or depreciation and amortization expense. Excludes estimated closing costs of approximately $25.0 million and estimated fees to be paid to the ARCT IV sponsor and ARCT IV advisor of $75.4 million, expected to be incurred in connection with the ARCT IV Merger.

(12) Reflects the historical balances of the Fortress Portfolio. Balances for the year ended December 31, 2012 were presented in the Company’s Current Report on Form 8-K filed with the SEC on October 7, 2013. Excludes $7.0 million of estimated closing costs to be incurred upon the closing of the portfolio purchase.

(13) Adjustments reflect the annualization of certain Fortress Portfolio lease rental income, lease asset depreciation and interest on financing arrangements as of the properties had been acquired as of the beginning of the fiscal year presented and carried through the interim period presented.

(14) Reflects the historical balances of the Inland Portfolio. Balances for the year ended December 31, 2012 were presented in the Company’s Current Report on Form 8-K/A filed with the SEC on September 25, 2013. Excludes $8.8 million of estimated closing costs to be incurred upon the closing of the portfolio purchase.

(15) Adjustments reflect the annualization of certain Inland Portfolio lease rental income, lease asset depreciation and interest on financing arrangements as of the properties had been acquired as of the beginning of the fiscal year presented and carried through the interim period presented.

(16) Reflects the historical Statement of Operations of Cole for the periods indicated. The balances for the six months ended June 30, 2013 were presented in Cole’s Form 10-Q filed with the SEC on August 5, 2013. The balances for the year ended December 31, 2012 were presented in Cole’s Annual Report on Form 10-K filed with the SEC on March 29, 2013. Certain balances reported in Cole’s previously issued financial statements have been reclassified to conform to ARCP’s presentation.

(17) Adjustments and pro forma balances reflect adjustments related to the acquisition of Cole by the Company. Excludes estimated closing costs of $252.0 million expected to be incurred for the Cole Merger.

(18) Reflects an adjustment to straight-line rent for each portfolio of properties as if the properties had been acquired at the beginning of each period.

(19) Adjustment reflects the depreciation and amortization expense that would have been recorded if each portfolio of properties had been acquired as of the beginning of each period based on the estimated fair values assigned to each asset class.

(20) Adjustment reflects recognition of full contractual asset management fees due to the Company’s affiliated external manager, as if the Company had owned the properties and the external manager had charged these fees for the entirety of each period. Fees are 0.50% annually for average unadjusted book value of real estate assets up to $3.0 billion and 0.40% annually for assets in excess of $3.0 billion.

(21) Adjustment represents the allocation to ARCP non-controlling interests for the net effect of the each respective merger, acquisition of the GE Capital Portfolio as well as adjustments related thereto based on the percentage of non-controlling interests ownership after each transaction.

(22) Adjustment represents the elimination of the expenses of CapLease's equity compensation plan for outstanding restricted shares. As part of the CapLease Merger agreement, all unamortized restricted shares will become fully vested and therefore this expense will no longer be recognized.

(23) Adjustment reflects interest expense related to borrowings expected to be incurred on the Company’s existing senior corporate credit facility and anticipated term loan borrowings at an assumed annual interest rate of 3.00% and interest expense for any assumed mortgage notes for each transaction. In the case of CapLease, increases in interest expense are offset by the reduction in interest for the write-off of deferred financing costs of $1.1 million and $2.2 million for the six months ended June 30, 2013 and year ended December 31, 2012, respectively, and amortization of increases in the fair value of the debt of $2.8 million and $11.0 million for the six months ended June 30, 2013 and year ended December 31, 2012, respectively. The interest rate on the Company’s existing senior corporate credit facility is partially dependent on corporate leverage ratios and is also based on floating interest rates that can be fixed with the use of hedging instruments once the borrowing is consummated. In addition, the interest rates for anticipated term loan borrowings will not be known until the borrowing agreement is finalized. For every one-eighth of a percent change in interest rates, interest expense could increase or decrease by $4.3 million annually.

(24) Adjustment reflects the reduction of dividend expense upon the redemption of CapLease’s preferred stock as required by the CapLease Merger agreement

(25) Adjustment reflects the elimination of costs recorded for the CapLease Merger and ARCT IV Merger, as these costs are not ongoing costs of the company and are specifically related to the transactions presented in these pro forma financial statements.

(26) Adjustment reflects the dividend expense allocable to the preferred stock issued under the ARCT IV Merger transaction.

(27) Adjustment reflects interest expense related to borrowings expected to be incurred on term loan borrowings at an assumed annual interest rate of 4.10% and interest expense for any assumed mortgage notes for each transaction. The Company has a committed term loan facility to fund the borrowings. The term loan has a maximum borrowing of $2.175 billion with a five-year term and includes a variable interest rate, which is determined, at the Company option, using a base of several different indices including prime and LIBOR, and a floor of 4.00%. A 0.125% increase in the assumed annual interest rate would result in an additional $2.1 million in annual interest expense on the borrowings. In the case of Cole, increases in interest expense are offset by the reduction in interest for the write-off of deferred financing costs of $5.2 million and $10.3 million for the six months ended June 30, 2013 and year ended December 31, 2012, respectively.

(28) Weighted average shares include the pro forma effect of certain transactions which occurred in conjunction with the Company's merger with ARCT III in February 2013, including the repurchase of 27.7 million shares of common stock, based on the conversion ratio of 0.95 share of ARCP common stock to one share of ARCT III common stock in conjunction with the merger of ARCP and ARCT III in February 2013. Excludes the effect of restricted shares and partnership equity units convertible to common stock as the effect would be anti-dilutive.

American Realty Capital Properties, Inc.

Funds From Operations, and Adjusted Funds From Operations

(In thousands except per share data)

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”), an industry trade group, has promulgated a measure known as funds from operations (“FFO”), which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income or loss as determined under U.S. GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the “White Paper”). The White Paper defines FFO as net income or loss computed in accordance with U.S. GAAP, excluding gains or losses from sales of property but including asset impairment writedowns, plus depreciation and amortization, after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of U.S. GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in U.S. GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO and adjusted funds from operations (“AFFO”), as described below, should not be construed to be more relevant or accurate than the current U.S. GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under U.S. GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and AFFO measures and the adjustments to U.S. GAAP in calculating FFO and AFFO.

We consider FFO and AFFO useful indicators of the performance of a REIT. Because FFO calculations exclude such factors as depreciation and amortization of real estate assets and gains or losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs in our peer group. Accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT's definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. While certain companies may experience significant acquisition activity, other companies may not have significant acquisition activity and management believes that excluding costs such as merger and transaction costs and acquisition related costs from property operating results provides useful information to investors and provides information that improves the comparability of operating results with other companies who do not have significant merger or acquisition activities. AFFO is not equivalent to our net income or loss as determined under GAAP, and AFFO may not be a useful measure of the impact of long-term operating performance if we continue to have such activities in the future.

We exclude certain income or expense items from AFFO that we consider more reflective of investing activities, other non-cash income and expense items and the income and expense effects of other activities that are not a fundamental attribute of our business plan. These items include unrealized gains and losses, which may not ultimately be realized, such as gains or losses on derivative instruments, gains or losses on contingent valuation rights, gains and losses on investments and early extinguishment of debt. In addition, by excluding non-cash income and expense items such as amortization of above and below market leases, amortization of deferred financing costs, straight-line rent and non-cash equity compensation from AFFO we believe we provide useful information regarding income and expense items which have no cash impact and do not provide liquidity to the company or require capital resources of the company. By providing AFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our ongoing operating performance without the impacts of transactions that are not related to the ongoing profitability of our portfolio of properties. We also believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry. Further, we believe AFFO is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies that are not as involved activities which are excluded from our calculation. Investors are cautioned that AFFO should only be used to assess the sustainability of our operating performance excluding these activities, as it excludes certain costs that have a negative effect on our operating performance during the periods in which these costs are incurred.

In addition, we exclude certain interest expenses related to securities that are convertible to common stock as the shares are assumed to have converted to common stock in our calculation of weighted average common shares-fully diluted.

In calculating AFFO, we exclude expenses, which under GAAP are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us, and therefore such funds will not be available to distribute to investors. All paid and accrued merger and acquisition fees and certain other expenses negatively impact our operating performance during the period in which expenses are incurred or properties are acquired and will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property and certain other expenses. Therefore, AFFO may not be an accurate indicator of our operating performance, especially during periods in which mergers are being consummated or properties are being acquired or certain other expense are being incurred. AFFO that excludes such costs and expenses would only be comparable to companies that did not have such activities. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments as items which are unrealized and may not ultimately be realized. We view both gains and losses from fair value adjustments as items which are not reflective of ongoing operations and are therefore typically adjusted for when assessing operating performance. Excluding income and expense items detailed above from our calculation of AFFO provides information consistent with management's analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe AFFO provides useful supplemental information.

As a result, we believe that the use of FFO and AFFO, together with the required U.S. GAAP presentations, provide a more complete understanding of our performance relative to our peers and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities.

FFO and AFFO are non-GAAP financial measures and do not represent net income as defined by U.S. GAAP. FFO and AFFO do not represent cash flows from operations as defined by U.S. GAAP, are not indicative of cash available to fund all cash flow needs and liquidity, including our ability to pay distributions and should not be considered as alternatives to net income, as determined in accordance with U.S. GAAP, for purposes of evaluating our operating performance. Other REITs may not define FFO in accordance with the current NAREIT definition (as we do) or may interpret the current NAREIT definition differently than we do and/or calculate AFFO differently than we do. Consequently, our presentation of FFO and AFFO may not be comparable to other similarly titled measures presented by other REITs.

American Realty Capital Properties, Inc.

Unaudited Supplementary Information

(In thousands except per share data)

	Six Months Ended June 30, 2013
	ARCP Historical			ARCP including subsequent activity adjustments and GE Capital Portfolio			ARCP Pro Forma Including Subsequent Adjustments, GE Capital Portfolio and Caplease			ARCP Pro Forma Including Subsequent Adjustments, GE Capital Portfolio, Caplease and ARCT IV with adjustments			ARCP Pro Forma Including Subsequent Adjustments, GE Capital Portfolio, Caplease, ARCT IV with adjustments, Fortress and Inland			ARCP Pro Forma Including all Completed and Probable Mergers and Acquisitions
Unaudited Pro Forma Funds From Operations and Adjusted Funds From Operations
Adjusted net loss attributable to stockholders	$	(189,613	)	$	(207,775	)	$	(224,733	)	$	(278,400	)	$	(285,354	)	$	(218,076	)
Loss (gain) on held for sale properties		(14	)		(14	)		(14	)		(14	)		(14	)		(19,021	)
Depreciation and amortization		52,829			89,333			129,045			190,695			214,215			349,081
Total Funds from Operations (FFO)		(136,798	)		(118,456	)		(95,702	)		(87,719	)		(71,153	)		111,984
AFFO adjustments:
Acquisition related		20,726			20,726			20,726			47,616			47,616			47,616
Merger and other transaction costs		142,449			142,449			144,870			137,769			137,769			175,470
Listing and tender offer expenses and other adjustments		-			-			-			-			-			2,854
Loss on contingent value rights		31,134			31,134			31,134			31,134			31,134			31,134
Gain/losses on investment securities and early extinguishment of debt		(451	)		(451	)		(451	)		927			927			2,258
Loss on derivative instruments		45			45			40			40			40			7,822
Interest on convertible obligation to preferred investors (2)		1,630			1,630			1,630			1,630			1,630			1,630
Interest on convertible debt (2)		-			5,828			5,828			5,828			5,828			5,828
Amortization of above and below-market lease asset		126			126			(777	)		(779	)		(779	)		822
Amortization of deferred financing costs		3,274			4,282			5,482			5,588			5,588			13,295
Other amortization expense and other adjustments		-			-			-			-			-			3,177
Proportionate share of adjustments for unconsolidated joint ventures		-			-			-			-			-			151
Straight-line rent		(2,975	)		(4,203	)		(8,816	)		(10,667	)		(12,447	)		(50,822	)
Non-cash equity compensation expense		4,330			4,330			4,330			4,330			4,330			4,330
Total Adjusted Funds from Operations (AFFO)	$	63,490		$	87,440		$	108,294		$	135,697		$	150,483		$	357,549
Weighted average common shares (1):
Basic		187,316			187,316			233,266			270,801			270,801			702,796
Fully Diluted		220,543			239,083			255,621			299,987			299,987			731,982
FFO per share:
Basic	$	(0.73	)	$	(0.63	)	$	(0.41	)	$	(0.32	)	$	(0.26	)	$	0.16
Diluted	$	(0.62	)	$	(0.50	)	$	(0.37	)	$	(0.29	)	$	(0.24	)	$	0.15
AFFO per share:
Basic	$	0.34		$	0.47		$	0.46		$	0.50		$	0.56		$	0.51
Diluted	$	0.29		$	0.37		$	0.42		$	0.45		$	0.50		$	0.49

	Year Ended December 31, 2012
	ARCP Historical			ARCP including subsequent activity adjustments and GE Capital Portfolio			ARCP Pro Forma Including Subsequent Adjustments, GE Capital Portfolio and Caplease			ARCP Pro Forma Including Subsequent Adjustments, GE Capital Portfolio, Caplease and ARCT IV with adjustments			ARCP Pro Forma Including Subsequent Adjustments, GE Capital Portfolio, Caplease, ARCT IV with adjustments, Fortress and Inland			ARCP Pro Forma Including all Completed and Probable Mergers and Acquisitions
Unaudited Pro Forma Funds From Operations and Adjusted Funds From Operations
Adjusted net loss attributable to stockholders	$	(39,399	)	$	(54,186	)	$	(100,749	)	$	(196,287	)	$	(208,352	)	$	(162,131	)
Loss (gain) on held for sale properties		600			600			600			600			600			(107,857	)
Depreciation and amortization		40,700			178,665			258,089			388,104			444,745			714,477
Total Funds from Operations (FFO)		1,901			125,079			157,940			192,417			236,993			444,489
AFFO adjustments:
Acquisition related		42,761			42,761			42,761			45,070			45,070			108,962
Merger and other transaction costs		2,603			2,603			2,603			2,603			2,603			2,603
Listing and tender offer expenses and other adjustments		-			-			-			-			-			-
Loss on contingent value rights		-			-			-			-			-			-
Gain/losses on investment securities and early extinguishment of debt		-			-			(10,790	)		(10,790	)		(10,790	)		(23,245	)
Loss on derivative instruments		-			-			-			-			-			12,903
Interest on convertible obligation to preferred investors (2)		-			-			-			-			-			-
Interest on convertible debt (2)		-			11,656			11,656			11,656			11,656			11,656
Amortization of above and below-market lease asset		117			117			(722	)		(723	)		(723	)		2,360
Amortization of deferred financing costs		841			2,856			3,149			3,149			3,149			19,107
Other amortization expense and other adjustments		-			-			-			-			-			(7,027	)
Proportionate share of adjustments for unconsolidated joint ventures		-			-			-			-			-			(1,795	)
Straight-line rent		(2,008	)		(8,406	)		(9,748	)		(13,451	)		(16,924	)		(51,733	)
Non-cash equity compensation expense		1,180			1,180			1,180			1,180			1,180			1,180
Total Adjusted Funds from Operations (AFFO)	$	47,395		$	177,846		$	198,029		$	231,111		$	272,214		$	519,460
Weighted average common shares (1):
Basic		180,650			180,650			197,188			234,723			234,723			666,718
Fully Diluted		210,099			228,639			245,177			289,543			289,543			721,538
FFO per share:
Basic	$	0.01		$	0.69		$	0.80		$	0.82		$	1.01		$	0.67
Diluted	$	0.01		$	0.55		$	0.64		$	0.66		$	0.82		$	0.62
AFFO per share:
Basic	$	0.26		$	0.98		$	1.00		$	0.98		$	1.16		$	0.78
Diluted	$	0.23		$	0.78		$	0.81		$	0.80		$	0.94		$	0.72

(1) Weighted average shares include the pro forma effect of the repurchase of 27.7 million shares of common stock, based on the conversion ratio of 0.95 share of ARCP common stock to 1 share of ARCT III common stock in conjunction with the merger of ARCP and ARCT III in February 2013, as well as the issuance of an additional 29.4 million shares of common stock and 28.4 million shares of convertible preferred stock that was issued in the second quarter of 2013 as if it had been issued at the beginning of the period.

(2) Interest on obligations that are convertible to common stock are added back to our net income in the calculation of AFFO as the instruments are assumed to have been converted to common stock in our calculation of weighted average shares — fully diluted.

EX-99.4

Exhibit 99.4

EXECUTION VERSION

AMERICAN REALTY CAPITAL PROPERTIES, INC.

405 Park Avenue, 15^th Floor

New York, New York 10022

Kirk McAllaster

c/o Cole Real Estate Investments, Inc.
2325 E. Camelback Road
Suite 1100
Phoenix, AZ 85016

October 22, 2013

Re: Agreement and Plan of Merger between American Realty Capital Properties, Inc. and Cole Real Estate Investments, Inc.

Reference is made to (i) that certain Agreement and Plan of Merger, dated as of the date hereof (the “ARCP Merger Agreement”), by and among American Realty Capital Properties, Inc., a Maryland corporation (“Parent”), Clark Acquisition, LLC, a Delaware limited liability company and wholly owned subsidiary of Parent (“Merger Sub”), and Cole Real Estate Investments, Inc. (formerly known as Cole Credit Property Trust III, Inc.), a Maryland corporation (the “Company”), pursuant to which, among other things, the Company will merge with and into Merger Sub (the “ARCP Transaction”), and (ii) that certain Agreement and Plan of Merger, dated as of March 5, 2013 (the “Cole Holdings Merger Agreement”), by and among the Company, CREInvestments, LLC (“Cole Merger Sub”), a Maryland limited liability company and wholly owned subsidiary of the Company, Cole Holdings Corporation, an Arizona corporation (“Cole Holdings”) wholly owned by Christopher H. Cole (together with his assignees, “Cole”), and Cole, pursuant to which, among other things, Cole Holdings merged with and into Cole Merger Sub (the “Cole Holdings Transaction”). Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Cole Holdings Merger Agreement, unless otherwise indicated. Kirk McAllaster (“McAllaster”) is one of the “Bonus Executives,” as defined in the Cole Holdings Merger Agreement and is entitled to certain Bonus Entitlements (as defined on Schedule 1.4 to the Cole Holdings Merger Agreement) in respect of the Incentive Consideration and Contingent Consideration payable under the Cole Holdings Merger Agreement.

In connection with Parent’s entry into the ARCP Merger Agreement, Parent and McAllaster have agreed to certain arrangements relating to, among other things, the payment in full of all amounts to which McAllaster is entitled pursuant to the Bonus Entitlements under Cole Holdings Merger Agreement. Accordingly, in consideration of the foregoing and the mutual representations, warranties and covenants herein contained, and intending to be legally bound hereby, Parent and McAllaster each hereby agree as follows:

1.Amounts Payable to McAllaster Under the Cole Holdings Merger Agreement. McAllaster hereby acknowledges and confirms that (i) the maximum aggregate amount of the Aggregate Merger Consideration potentially payable to McAllaster under the Cole Holdings

Merger Agreement to which he remains entitled as of the date hereof is $5,223,160, which amount consists of McAllaster’s Bonus Entitlement in respect of the Incentive Consideration and the Contingent Consideration and (ii) he has received in full any Bonus Entitlement in respect of the Closing Consideration and Listing Consideration, although a substantial portion of the consideration paid in respect of these items (as indicated in Section 6 below) is being held in escrow pursuant to the terms of the Escrow Agreement and McAllaster expressly reserves all rights to recover such consideration as and when the same is due for release to McAllaster, subject to the terms and conditions of the Cole Holdings Merger Agreement and the Escrow Agreement.

2.Incentive Consideration and Contingent Consideration. Pursuant to Section 2.2 of the Cole Holdings Merger Agreement, in connection with the Listing, the Company is required to pay to McAllaster certain Bonus Entitlements in respect of the Incentive Consideration and Contingent Consideration as set forth in Section 1.4 of the Disclosure Schedule to the Cole Holdings Merger Agreement, calculated and payable in accordance with Annex A to the Cole Holdings Merger Agreement (“Annex A”), and pursuant to Section 3.1 of the Cole Holdings Merger Agreement, the Company is required to pay to McAllaster certain Bonus Entitlements in respect of the Contingent Consideration as set forth in Section 1.4 of the Disclosure Schedule to the Cole Holdings Merger Agreement, calculated and payable in accordance with Annex B to the Cole Holdings Merger Agreement (“Annex B”). Notwithstanding anything contained in Annex A or Annex B, Parent and McAllaster each hereby acknowledge and agree that in satisfaction of the Bonus Entitlements in respect of the Incentive Consideration and Contingent Consideration payable to McAllaster pursuant to the Merger Agreement, subject to Section 5(c) below, Parent shall issue to McAllaster, within three (3) Business Days following the date that the ARCP Transaction is consummated, a number of validly issued, fully paid and non-assessable shares of common stock, par value $0.01 per share, of Parent (“ARCP Common Stock”), which shares will be approved for listing on the NASDAQ, subject to official notice of issuance, with an aggregate value equal to $5,223,160, such number of shares to be calculated on the Closing Date based on the volume weighted average closing sale price of a share of ARCP Common Stock over the ten (10) consecutive trading days ending the trading day immediately prior to the date that the ARCP Transaction is consummated on the NASDAQ Stock Market, as reported in the Wall Street Journal, rounded down to the nearest whole share; provided, however, that if the ARCP Transaction is consummated after the end of the Incentive Consideration Test Period and payment of the Bonus Entitlement in respect of the Incentive Consideration by the Company to McAllaster, then the amount otherwise payable by Parent to McAllaster pursuant to this Section 2 shall be reduced on a dollar-for-dollar basis by the dollar amount upon which the Company determined the number of shares of common stock of the Company, par value $0.01 per share (“Company Common Stock”) to be paid to McAllaster as Bonus Entitlements in respect of the Incentive Consideration pursuant to and in accordance with Section 2.2 of the Cole Holdings Merger Agreement. McAllaster hereby acknowledges and agrees that the issuance of the Parent Common Stock to him pursuant to this Section 2 will be in full and complete satisfaction of the Bonus Entitlement in respect of the Incentive Consideration (if applicable) and Contingent Consideration otherwise payable to him pursuant to the terms of the Cole Holdings Merger Agreement, and that upon such issuance Parent shall have no further obligation to McAllaster in respect thereof.

2

3.Intentionally Omitted.

4.Intentionally Omitted.

5.Registration Rights; Restrictions on Transfer.

a.Parent and McAllaster each hereby agree that (i) all shares of Parent Common Stock issued to McAllaster pursuant to Paragraph 2 hereunder and all other shares of Parent Common Stock received by McAllaster in connection with the merger provided for in the ARCP Merger Agreement shall be deemed to be Registrable Securities under (and as defined in) the Registration Rights Agreement, dated as of April 5, 2013 (the “Registration Rights Agreement”), by and among the Company, Cole and the other individuals listed on the signature pages thereto, including McAllaster, (ii) all shares of ARCP Common Stock issued in the ARCP Transaction in respect of shares of Company Common Stock that are, as of the date hereof, or that will be, as of Closing, Registrable Securities under the Registration Rights Agreement shall continue to be Registrable Securities following the effective time of the ARCP Transaction pursuant to the terms of the ARCP Merger Agreement, and (iii) following the effective time of the ARCP Transaction, all obligations of the Company pursuant to the terms of the Registration Rights Agreement shall be obligations of Parent.

b.Parent and McAllaster each hereby acknowledge, confirm and agree that, following the effective time of the ARCP Transaction, all of the shares of Company Common Stock held by McAllaster and any Affiliate of McAllaster as of the Closing, including, without limitation, shares of Company Common Stock deemed to be issued to holders of Company RSUs and Company PSUs and including all shares of Company Common Stock received by McAllaster prior to the closing of the ARCP Transaction as a Bonus Entitlement in respect of the Incentive Consideration, if any (collectively, the “McAllaster Shares”) that are subject to the restrictions on transfer contained in the Registration Rights Agreement shall remain subject to the restrictions on transfer contained therein to the same extent such restrictions would apply if the ARCP Transaction did not occur.

c.Parent and McAllaster each hereby agree that, following the effective time of the ARCP Transaction, the Contingent Consideration Shares (as defined below) shall be subject to the restrictions on transfer contained in the Registration Rights Agreement; provided, however, that notwithstanding anything contained in the Registration Rights Agreement to the contrary, the Contingent Consideration Shares shall be subject to the restrictions on transfer contained therein through December 31, 2017, with releases of such restrictions on a quarterly basis on the last day of each calendar quarter, beginning on the last day of the first full calendar quarter following the date that the ARCP Transaction is consummated, of a number of Contingent Consideration Shares equal to the quotient of the aggregate number of Contingent Consideration Shares issued pursuant to Section 2 above divided by the number of full calendar quarters between the date that

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the ARCP Transaction is consummated and December 31, 2017. In the event McAllaster attempts to Transfer all or any portion of the Contingent Consideration Shares in violation of this Section 5(c), such Transfer shall be null and void ab initio, and Parent shall instruct its transfer agent and other third parties not to record or recognize any such purported transaction. Parent may impose stop-transfer instructions with respect to the Contingent Consideration Shares to the extent reasonably required to ensure compliance with the provisions of this Section 5(c). For purposes of this letter, “Contingent Consideration Shares” means: (i) if the ARCP Transaction is consummated after the end of the Incentive Consideration Test Period and payment of the Bonus Entitlement in respect of the Incentive Consideration by the Company to McAllaster, all of the shares of Parent Common Stock actually issued to McAllaster pursuant to Section 2 above; (ii) if the ARCP Transaction is consummated before the end of the Incentive Consideration Test Period, a number of shares equal to (x) all of the shares of Parent Common Stock actually issued to McAllaster pursuant to Section 2 above minus (y) the number of shares of Parent Company Stock that would have been issued in the ARCP Transaction upon conversion of the number of shares Company Common Stock that would have been issued to McAllaster as the Bonus Entitlement in respect of the Incentive Consideration if the Incentive Consideration Test Period had been the thirty (30) trading day period ended on the business day immediately prior closing of the ARCP Transaction; and (iii) if the ARCP Transaction is consummated after the end of the Incentive Consideration Test Period but before the issuance of the Bonus Entitlement in respect of the Incentive Consideration by the Company to McAllaster, a number of shares equal to (x) all of the shares of Parent Common Stock actually issued to McAllaster pursuant to Section 2 above minus (y) the number of shares of Parent Common Stock that would have been issued in the ARCP Transaction upon conversion of the number of shares of Company Common Stock that would have been issued to McAllaster as the Bonus Entitlement in respect of the Incentive Consideration if such issuance had been made prior to consummation of the ARCP Transaction.

6.Escrow Agreement. Based on the latest annex to the Indemnification Escrow Agreement, dated as of April 5, 2013 (the “Escrow Agreement”), by and among Cole, the Company, the Bonus Executives and U.S. Bank National Association, as escrow agent (the “Escrow Agent”), a total of 4,284,489 shares of Company Common Stock (the “Escrow Share Deposit”) are currently on deposit with the Escrow Agent under the Escrow Agreement. In furtherance of the foregoing, McAllaster acknowledges and agrees that, as of and following the effective time of the ARCP Transaction, the Escrow Share Deposit shall remain on deposit with the Escrow Agent in accordance with and subject to the terms of the Escrow Agreement. Notwithstanding anything contained in the Escrow Agreement or the Cole Holdings Merger Agreement, Parent and McAllaster each hereby acknowledge and agree that as of the effective time of the ARCP Transaction, (i) each share of Company Common Stock that forms a part of the Escrow Share Deposit shall automatically, without any action by or on behalf of McAllaster or Parent, be converted into the right to receive such number of shares of ARCP Common Stock equal to the Exchange Ratio (as defined in the ARCP Merger Agreement) pursuant to the terms of the ARCP Merger Agreement, (ii) all references in the Escrow Agreement to “Company Common Stock” (including, but not limited to, Section 3 of the Escrow Agreement governing the

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release of the Escrow Share Deposit) will be deemed to be references to ARCP Common Stock, and any reference to a number of shares of “Company Common Stock” shall be a number of shares of ARCP Common Stock adjusted to reflect the Exchange Ratio, (iii) the references in Section 1.6(b) and in Section 11.2(b) of the Cole Holdings Merger Agreement to “the volume-weighted average of the sale prices per share of Parent Common Stock as reported on the NYSE composite transactions reporting system” will be deemed to refer to “the volume-weighted average of the sale prices per share of ARCP Common Stock as reported on the NASDAQ composite transactions reporting system,” (iv) to the extent that McAllaster makes a Cash Election with respect to any shares of Company Common Stock that form a part of the Escrow Share Deposit, any and all amounts payable in respect of such shares shall remain on deposit with the Escrow Agent under the Escrow Agreement in accordance with the terms of the Escrow Agreement; provided that any releases under the Escrow Agreement to McAllaster will be satisfied first with such cash amounts held in the escrow and attributable to McAllaster and thereafter in shares, and (v) all dividends or other income earned in respect of the Escrow Share Deposit or otherwise under the Escrow Agreement (including dividends on the Parent Common Stock to be substituted for the Company Common Stock now held in the escrow) shall be paid to McAllaster in accordance with Section 2(c) of the Escrow Agreement, assuming the conversion of the shares of Company Common Stock that form the Escrow Share Deposit into shares of ARCP Common Stock in accordance with the terms of the ARCP Merger Agreement.

7.Intentionally Omitted.

8.Intentionally Omitted.

9.Intentionally Omitted.

10.Intentionally Omitted.

11.Intentionally Omitted.

12.Further Assurances. From time to time after the date hereof as and when requested by McAllaster or Parent and at such party’s expense, each of McAllaster and Parent agree to execute such further assignments, assumptions, notifications and other documents as may be reasonably requested for the purpose of giving effect to, or evidencing or giving notice of, the transactions contemplated by this letter.

13.Notices. Any notice, request, claim, demand and other communications hereunder shall be sufficient if in writing and sent (a) if personally delivered to an authorized representative of the recipient, when actually delivered to such authorized representative, (b) if sent by facsimile transmission (providing confirmation of transmission) or e-mail of a pdf attachment (provided that any notice received by facsimile transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m. (in the time zone of the recipient) or any day other than a Business Day shall be deemed to have been received at 9:00 a.m. on the next Business Day) or (c) if sent by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage

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prepaid), addressed as follows (or at such other address for a party as shall be specified in a notice given in accordance with this Section 13):

a. If to McAllaster, to:

Kirk McAllaster

2325 East Camelback Road, Suite 1100
Phoenix, Arizona  85016

Facsimile:  (480) 449-7023

with a copy (which shall not constitute notice) to:

Sullivan & Cromwell LLP

Century Park East, 21^st Floor

Los Angeles, California 90067

Attention: Alison S. Ressler, Esq.

Facsimile: (310) 712-8800

Phone: (310) 712-6630

b. If to Parent, to:

American Realty Capital Partners, Inc.
405 Park Avenue, 15^th Floor
New York, New York 10022
Fax: (212) 415-6507; and (646) 861-7743
Phone: (212) 415-6501
Attention: Nicholas S. Schorsch and James A. Tanaka
Email: nschorsch@arlcap.com; and jtanaka@rcscapital.com

with a copy (which shall not constitute notice) to:

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036

Phone: (212) 969-3000

Fax: (212) 969-2900

Attention: Peter M. Fass, Esq., Steven L. Lichtenfeld, Esq., and
Daniel I. Ganitsky, Esq.

Email:  PFass@proskauer.com; SLichtenfeld@proskauer.com; and DGanitsky@proskauer.com

14.Specific Performance. The parties hereto agree that irreparable damage, for which monetary damages (even if available) would not be an adequate remedy, would occur in the event that the parties hereto do not perform the provisions of this letter in accordance with its specified terms or otherwise breach such provisions. Accordingly, the parties acknowledge and

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agree that the parties shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this letter and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. Each of the parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that the other party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity. Any party seeking an injunction or injunctions to prevent breaches of this letter and to enforce specifically the terms and provisions of this letter shall not be required to provide any bond or other security in connection with any such order or injunction.

15.Miscellaneous. This letter may be amended, modified or supplemented only by a written instrument executed by each of the parties hereto. The provisions of this letter are the result of negotiations between the parties; accordingly, this letter shall not be construed in favor of or against any party by reason of the extent to which the party or any of his or its professional advisors participated in its preparation. This letter may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same letter agreement. Delivery of an executed counterpart of a signature page to this letter by facsimile transmission or by e-mail of a pdf attachment shall be effective as delivery of a manually executed counterpart of this letter. This letter shall be governed by and interpreted and enforced in accordance with the laws of the State of Maryland (without reference to the choice of law provisions).

[Signature Page Follows]

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Very truly yours,

AMERICAN REALTY CAPITAL PROPERTIES, INC.

By: /s/ Edward M. Weil, Jr.

Name: Edward M. Weil, Jr.

Title: President

ACKNOWLEDGED AND AGREED TO

AS OF THE DATE FIRST SET

FORTH ABOVE BY:

/s/ D. Kirk McAllaster, Jr.

D. KIRK McAllaster, Jr.

ACKNOWLEDGED AND AGREED TO

AS OF THE DATE FIRST SET

FORTH ABOVE BY:

COLE REAL ESTATE INVESTMENTS, INC.

By: /s/ Stephan Keller

Name: Stephan Keller

Title: Executive Vice President and Chief Financial Officer

EX-99.5

Exhibit 99.5

EXECUTION VERSION

AMERICAN REALTY CAPITAL PROPERTIES, INC.

405 Park Avenue, 15^th Floor

New York, New York 10022

Stephan Keller

c/o Cole Real Estate Investments, Inc.
2325 E. Camelback Road
Suite 1100
Phoenix, AZ 85016

October 22, 2013

Re: Agreement and Plan of Merger between American Realty Capital Properties, Inc. and Cole Real Estate Investments, Inc.

Reference is made to (i) that certain Agreement and Plan of Merger, dated as of the date hereof (the “ARCP Merger Agreement”), by and among American Realty Capital Properties, Inc., a Maryland corporation (“Parent”), Clark Acquisition, LLC, a Delaware limited liability company and wholly owned subsidiary of Parent (“Merger Sub”), and Cole Real Estate Investments, Inc. (formerly known as Cole Credit Property Trust III, Inc.), a Maryland corporation (the “Company”), pursuant to which, among other things, the Company will merge with and into Merger Sub (the “ARCP Transaction”), and (ii) that certain Agreement and Plan of Merger, dated as of March 5, 2013 (the “Cole Holdings Merger Agreement”), by and among the Company, CREInvestments, LLC (“Cole Merger Sub”), a Maryland limited liability company and wholly owned subsidiary of the Company, Cole Holdings Corporation, an Arizona corporation (“Cole Holdings”) wholly owned by Christopher H. Cole (together with his assignees, “Cole”), and Cole, pursuant to which, among other things, Cole Holdings merged with and into Cole Merger Sub (the “Cole Holdings Transaction”). Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Cole Holdings Merger Agreement, unless otherwise indicated. Stephan Keller (“Keller”) is one of the “Bonus Executives,” as defined in the Cole Holdings Merger Agreement and is entitled to certain Bonus Entitlements (as defined on Schedule 1.4 to the Cole Holdings Merger Agreement) in respect of the Incentive Consideration and Contingent Consideration payable under the Cole Holdings Merger Agreement.

In connection with Parent’s entry into the ARCP Merger Agreement, Parent and Keller have agreed to certain arrangements relating to, among other things, the payment in full of all amounts to which Keller is entitled pursuant to the Bonus Entitlements under Cole Holdings Merger Agreement. Accordingly, in consideration of the foregoing and the mutual representations, warranties and covenants herein contained, and intending to be legally bound hereby, Parent and Keller each hereby agree as follows:

1.Amounts Payable to Keller Under the Cole Holdings Merger Agreement. Keller hereby acknowledges and confirms that (i) the maximum aggregate amount of the Aggregate Merger Consideration potentially payable to Keller under the Cole Holdings Merger Agreement

to which he remains entitled as of the date hereof is $9,421,000, which amount consists of Keller’s Bonus Entitlement in respect of the Incentive Consideration and the Contingent Consideration and (ii) he has received in full any Bonus Entitlement in respect of the Closing Consideration and Listing Consideration, although a substantial portion of the consideration paid in respect of these items (as indicated in Section 6 below) is being held in escrow pursuant to the terms of the Escrow Agreement and Keller expressly reserves all rights to recover such consideration as and when the same is due for release to Keller, subject to the terms and conditions of the Cole Holdings Merger Agreement and the Escrow Agreement.

2.Incentive Consideration and Contingent Consideration. Pursuant to Section 2.2 of the Cole Holdings Merger Agreement, in connection with the Listing, the Company is required to pay to Keller certain Bonus Entitlements in respect of the Incentive Consideration and Contingent Consideration as set forth in Section 1.4 of the Disclosure Schedule to the Cole Holdings Merger Agreement, calculated and payable in accordance with Annex A to the Cole Holdings Merger Agreement (“Annex A”), and pursuant to Section 3.1 of the Cole Holdings Merger Agreement, the Company is required to pay to Keller certain Bonus Entitlements in respect of the Contingent Consideration as set forth in Section 1.4 of the Disclosure Schedule to the Cole Holdings Merger Agreement, calculated and payable in accordance with Annex B to the Cole Holdings Merger Agreement (“Annex B”). Notwithstanding anything contained in Annex A or Annex B, Parent and Keller each hereby acknowledge and agree that in satisfaction of the Bonus Entitlements in respect of the Incentive Consideration and Contingent Consideration payable to Keller pursuant to the Merger Agreement, subject to Section 5(c) below, Parent shall issue to Keller, within three (3) Business Days following the date that the ARCP Transaction is consummated, a number of validly issued, fully paid and non-assessable shares of common stock, par value $0.01 per share, of Parent (“ARCP Common Stock”), which shares will be approved for listing on the NASDAQ, subject to official notice of issuance, with an aggregate value equal to $9,421,000, such number of shares to be calculated on the Closing Date based on the volume weighted average closing sale price of a share of ARCP Common Stock over the ten (10) consecutive trading days ending the trading day immediately prior to the date that the ARCP Transaction is consummated on the NASDAQ Stock Market, as reported in the Wall Street Journal, rounded down to the nearest whole share; provided, however, that if the ARCP Transaction is consummated after the end of the Incentive Consideration Test Period and payment of the Bonus Entitlement in respect of the Incentive Consideration by the Company to Keller, then the amount otherwise payable by Parent to Keller pursuant to this Section 2 shall be reduced on a dollar-for-dollar basis by the dollar amount upon which the Company determined the number of shares of common stock of the Company, par value $0.01 per share (“Company Common Stock”) to be paid to Keller as Bonus Entitlements in respect of the Incentive Consideration pursuant to and in accordance with Section 2.2 of the Cole Holdings Merger Agreement. Keller hereby acknowledges and agrees that the issuance of the Parent Common Stock to him pursuant to this Section 2 will be in full and complete satisfaction of the Bonus Entitlement in respect of the Incentive Consideration (if applicable) and Contingent Consideration otherwise payable to him pursuant to the terms of the Cole Holdings Merger Agreement, and that upon such issuance Parent shall have no further obligation to Keller in respect thereof.

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3.Intentionally Omitted.

4.Intentionally Omitted.

5.Registration Rights; Restrictions on Transfer.

a.Parent and Keller each hereby agree that (i) all shares of Parent Common Stock issued to Keller pursuant to Paragraph 2 hereunder and all other shares of Parent Common Stock received by Keller in connection with the merger provided for in the ARCP Merger Agreement shall be deemed to be Registrable Securities under (and as defined in) the Registration Rights Agreement, dated as of April 5, 2013 (the “Registration Rights Agreement”), by and among the Company, Cole and the other individuals listed on the signature pages thereto, including Keller, (ii) all shares of ARCP Common Stock issued in the ARCP Transaction in respect of shares of Company Common Stock that are, as of the date hereof, or that will be, as of Closing, Registrable Securities under the Registration Rights Agreement shall continue to be Registrable Securities following the effective time of the ARCP Transaction pursuant to the terms of the ARCP Merger Agreement, and (iii) following the effective time of the ARCP Transaction, all obligations of the Company pursuant to the terms of the Registration Rights Agreement shall be obligations of Parent.

b.Parent and Keller each hereby acknowledge, confirm and agree that, following the effective time of the ARCP Transaction, all of the shares of Company Common Stock held by Keller and any Affiliate of Keller as of the Closing, including, without limitation, shares of Company Common Stock deemed to be issued to holders of Company RSUs and Company PSUs and including all shares of Company Common Stock received by Keller prior to the closing of the ARCP Transaction as a Bonus Entitlement in respect of the Incentive Consideration, if any (collectively, the “Keller Shares”) that are subject to the restrictions on transfer contained in the Registration Rights Agreement shall remain subject to the restrictions on transfer contained therein to the same extent such restrictions would apply if the ARCP Transaction did not occur.

c.Parent and Keller each hereby agree that, following the effective time of the ARCP Transaction, the Contingent Consideration Shares (as defined below) shall be subject to the restrictions on transfer contained in the Registration Rights Agreement; provided, however, that notwithstanding anything contained in the Registration Rights Agreement to the contrary, the Contingent Consideration Shares shall be subject to the restrictions on transfer contained therein through December 31, 2017, with releases of such restrictions on a quarterly basis on the last day of each calendar quarter, beginning on the last day of the first full calendar quarter following the date that the ARCP Transaction is consummated, of a number of Contingent Consideration Shares equal to the quotient of the aggregate number of Contingent Consideration Shares issued pursuant to Section 2 above divided by the number of full calendar quarters between the date that the ARCP Transaction is consummated and December 31, 2017. In the event Keller attempts to Transfer all or any portion of the Contingent Consideration Shares in

3

violation of this Section 5(c), such Transfer shall be null and void ab initio, and Parent shall instruct its transfer agent and other third parties not to record or recognize any such purported transaction. Parent may impose stop-transfer instructions with respect to the Contingent Consideration Shares to the extent reasonably required to ensure compliance with the provisions of this Section 5(c). For purposes of this letter, “Contingent Consideration Shares” means: (i) if the ARCP Transaction is consummated after the end of the Incentive Consideration Test Period and payment of the Bonus Entitlement in respect of the Incentive Consideration by the Company to Keller, all of the shares of Parent Common Stock actually issued to Keller pursuant to Section 2 above; (ii) if the ARCP Transaction is consummated before the end of the Incentive Consideration Test Period, a number of shares equal to (x) all of the shares of Parent Common Stock actually issued to Keller pursuant to Section 2 above minus (y) the number of shares of Parent Company Stock that would have been issued in the ARCP Transaction upon conversion of the number of shares Company Common Stock that would have been issued to Keller as the Bonus Entitlement in respect of the Incentive Consideration if the Incentive Consideration Test Period had been the thirty (30) trading day period ended on the business day immediately prior closing of the ARCP Transaction; and (iii) if the ARCP Transaction is consummated after the end of the Incentive Consideration Test Period but before the issuance of the Bonus Entitlement in respect of the Incentive Consideration by the Company to Keller, a number of shares equal to (x) all of the shares of Parent Common Stock actually issued to Keller pursuant to Section 2 above minus (y) the number of shares of Parent Common Stock that would have been issued in the ARCP Transaction upon conversion of the number of shares of Company Common Stock that would have been issued to Keller as the Bonus Entitlement in respect of the Incentive Consideration if such issuance had been made prior to consummation of the ARCP Transaction.

6.Escrow Agreement. Based on the latest annex to the Indemnification Escrow Agreement, dated as of April 5, 2013 (the “Escrow Agreement”), by and among Cole, the Company, the Bonus Executives and U.S. Bank National Association, as escrow agent (the “Escrow Agent”), a total of 4,284,489 shares of Company Common Stock (the “Escrow Share Deposit”) are currently on deposit with the Escrow Agent under the Escrow Agreement. In furtherance of the foregoing, Keller acknowledges and agrees that, as of and following the effective time of the ARCP Transaction, the Escrow Share Deposit shall remain on deposit with the Escrow Agent in accordance with and subject to the terms of the Escrow Agreement. Notwithstanding anything contained in the Escrow Agreement or the Cole Holdings Merger Agreement, Parent and Keller each hereby acknowledge and agree that as of the effective time of the ARCP Transaction, (i) each share of Company Common Stock that forms a part of the Escrow Share Deposit shall automatically, without any action by or on behalf of Keller or Parent, be converted into the right to receive such number of shares of ARCP Common Stock equal to the Exchange Ratio (as defined in the ARCP Merger Agreement) pursuant to the terms of the ARCP Merger Agreement, (ii) all references in the Escrow Agreement to “Company Common Stock” (including, but not limited to, Section 3 of the Escrow Agreement governing the release of the Escrow Share Deposit) will be deemed to be references to ARCP Common Stock, and any reference to a number of shares of “Company Common Stock” shall be a number of shares of

4

ARCP Common Stock adjusted to reflect the Exchange Ratio, (iii) the references in Section 1.6(b) and in Section 11.2(b) of the Cole Holdings Merger Agreement to “the volume-weighted average of the sale prices per share of Parent Common Stock as reported on the NYSE composite transactions reporting system” will be deemed to refer to “the volume-weighted average of the sale prices per share of ARCP Common Stock as reported on the NASDAQ composite transactions reporting system,” (iv) to the extent that Keller makes a Cash Election with respect to any shares of Company Common Stock that form a part of the Escrow Share Deposit, any and all amounts payable in respect of such shares shall remain on deposit with the Escrow Agent under the Escrow Agreement in accordance with the terms of the Escrow Agreement; provided that any releases under the Escrow Agreement to Keller will be satisfied first with such cash amounts held in the escrow and attributable to Keller and thereafter in shares, and (v) all dividends or other income earned in respect of the Escrow Share Deposit or otherwise under the Escrow Agreement (including dividends on the Parent Common Stock to be substituted for the Company Common Stock now held in the escrow) shall be paid to Keller in accordance with Section 2(c) of the Escrow Agreement, assuming the conversion of the shares of Company Common Stock that form the Escrow Share Deposit into shares of ARCP Common Stock in accordance with the terms of the ARCP Merger Agreement.

7.Intentionally Omitted.

8.Intentionally Omitted.

9.Intentionally Omitted.

10.Intentionally Omitted.

11.Intentionally Omitted.

12.Further Assurances. From time to time after the date hereof as and when requested by Keller or Parent and at such party’s expense, each of Keller and Parent agree to execute such further assignments, assumptions, notifications and other documents as may be reasonably requested for the purpose of giving effect to, or evidencing or giving notice of, the transactions contemplated by this letter.

13.Notices. Any notice, request, claim, demand and other communications hereunder shall be sufficient if in writing and sent (a) if personally delivered to an authorized representative of the recipient, when actually delivered to such authorized representative, (b) if sent by facsimile transmission (providing confirmation of transmission) or e-mail of a pdf attachment (provided that any notice received by facsimile transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m. (in the time zone of the recipient) or any day other than a Business Day shall be deemed to have been received at 9:00 a.m. on the next Business Day) or (c) if sent by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows (or at such other address for a party as shall be specified in a notice given in accordance with this Section 13):

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a. If to Keller, to:

Stephan Keller

2325 East Camelback Road, Suite 1100
Phoenix, Arizona  85016

Facsimile:  (480) 449-7024

with a copy (which shall not constitute notice) to:

Sullivan & Cromwell LLP

Century Park East, 21^st Floor

Los Angeles, California 90067

Attention: Alison S. Ressler, Esq.

Facsimile: (310) 712-8800

Phone: (310) 712-6630

b. If to Parent, to:

American Realty Capital Partners, Inc.
405 Park Avenue, 15^th Floor
New York, New York 10022
Fax: (212) 415-6507; and (646) 861-7743
Phone: (212) 415-6501
Attention: Nicholas S. Schorsch and James A. Tanaka
Email: nschorsch@arlcap.com; and jtanaka@rcscapital.com

with a copy (which shall not constitute notice) to:

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036

Phone: (212) 969-3000

Fax: (212) 969-2900

Attention: Peter M. Fass, Esq., Steven L. Lichtenfeld, Esq., and
Daniel I. Ganitsky, Esq.

Email:   PFass@proskauer.com; SLichtenfeld@proskauer.com; and DGanitsky@proskauer.com

14.Specific Performance. The parties hereto agree that irreparable damage, for which monetary damages (even if available) would not be an adequate remedy, would occur in the event that the parties hereto do not perform the provisions of this letter in accordance with its specified terms or otherwise breach such provisions. Accordingly, the parties acknowledge and agree that the parties shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this letter and to enforce specifically the terms and provisions

6

hereof, in addition to any other remedy to which they are entitled at law or in equity. Each of the parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that the other party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity. Any party seeking an injunction or injunctions to prevent breaches of this letter and to enforce specifically the terms and provisions of this letter shall not be required to provide any bond or other security in connection with any such order or injunction.

15.Miscellaneous. This letter may be amended, modified or supplemented only by a written instrument executed by each of the parties hereto. The provisions of this letter are the result of negotiations between the parties; accordingly, this letter shall not be construed in favor of or against any party by reason of the extent to which the party or any of his or its professional advisors participated in its preparation. This letter may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same letter agreement. Delivery of an executed counterpart of a signature page to this letter by facsimile transmission or by e-mail of a pdf attachment shall be effective as delivery of a manually executed counterpart of this letter. This letter shall be governed by and interpreted and enforced in accordance with the laws of the State of Maryland (without reference to the choice of law provisions).

[Signature Page Follows]

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Very truly yours,

AMERICAN REALTY CAPITAL PROPERTIES, INC.

By: /s/ Edward M. Weil, Jr.

Name: Edward M. Weil, Jr.

Title:President

8

ACKNOWLEDGED AND AGREED TO

AS OF THE DATE FIRST SET

FORTH ABOVE BY:

/s/ Stephan Keller

Stephan Keller

ACKNOWLEDGED AND AGREED TO

AS OF THE DATE FIRST SET

FORTH ABOVE BY:

COLE REAL ESTATE INVESTMENTS, INC.

By: /s/ Stephan Keller

Name: Stephan Keller

Title: Executive Vice President and Chief Financial Officer

EX-99.6

Exhibit 99.6

EXECUTION VERSION

AMERICAN REALTY CAPITAL PROPERTIES, INC.

405 Park Avenue, 15^th Floor

New York, New York 10022

Jeffrey Holland

c/o Cole Real Estate Investments, Inc.
2325 E. Camelback Road
Suite 1100
Phoenix, AZ 85016

October 22, 2013

Re: Agreement and Plan of Merger between American Realty Capital Properties, Inc. and Cole Real Estate Investments, Inc.

Reference is made to (i) that certain Agreement and Plan of Merger, dated as of the date hereof (the “ARCP Merger Agreement”), by and among American Realty Capital Properties, Inc., a Maryland corporation (“Parent”), Clark Acquisition, LLC, a Delaware limited liability company and wholly owned subsidiary of Parent (“Merger Sub”), and Cole Real Estate Investments, Inc. (formerly known as Cole Credit Property Trust III, Inc.), a Maryland corporation (the “Company”), pursuant to which, among other things, the Company will merge with and into Merger Sub (the “ARCP Transaction”), and (ii) that certain Agreement and Plan of Merger, dated as of March 5, 2013 (the “Cole Holdings Merger Agreement”), by and among the Company, CREInvestments, LLC (“Cole Merger Sub”), a Maryland limited liability company and wholly owned subsidiary of the Company, Cole Holdings Corporation, an Arizona corporation (“Cole Holdings”) wholly owned by Christopher H. Cole (together with his assignees, “Cole”), and Cole, pursuant to which, among other things, Cole Holdings merged with and into Cole Merger Sub (the “Cole Holdings Transaction”). Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Cole Holdings Merger Agreement, unless otherwise indicated. Jeffrey Holland (“Holland”) is one of the “Bonus Executives,” as defined in the Cole Holdings Merger Agreement and is entitled to certain Bonus Entitlements (as defined on Schedule 1.4 to the Cole Holdings Merger Agreement) in respect of the Incentive Consideration and Contingent Consideration payable under the Cole Holdings Merger Agreement.

In connection with Parent’s entry into the ARCP Merger Agreement, Parent and Holland have agreed to certain arrangements relating to, among other things, the payment in full of all amounts to which Holland is entitled pursuant to the Bonus Entitlements under Cole Holdings Merger Agreement. Accordingly, in consideration of the foregoing and the mutual representations, warranties and covenants herein contained, and intending to be legally bound hereby, Parent and Holland each hereby agree as follows:

1.Amounts Payable to Holland Under the Cole Holdings Merger Agreement. Holland hereby acknowledges and confirms that (i) the maximum aggregate amount of the Aggregate Merger Consideration potentially payable to Holland under the Cole Holdings Merger

Agreement to which he remains entitled as of the date hereof is $9,421,000, which amount consists of Holland’s Bonus Entitlement in respect of the Incentive Consideration and the Contingent Consideration and (ii) he has received in full any Bonus Entitlement in respect of the Closing Consideration and Listing Consideration, although a substantial portion of the consideration paid in respect of these items (as indicated in Section 6 below) is being held in escrow pursuant to the terms of the Escrow Agreement and Holland expressly reserves all rights to recover such consideration as and when the same is due for release to Holland, subject to the terms and conditions of the Cole Holdings Merger Agreement and the Escrow Agreement.

2.Incentive Consideration and Contingent Consideration. Pursuant to Section 2.2 of the Cole Holdings Merger Agreement, in connection with the Listing, the Company is required to pay to Holland certain Bonus Entitlements in respect of the Incentive Consideration and Contingent Consideration as set forth in Section 1.4 of the Disclosure Schedule to the Cole Holdings Merger Agreement, calculated and payable in accordance with Annex A to the Cole Holdings Merger Agreement (“Annex A”), and pursuant to Section 3.1 of the Cole Holdings Merger Agreement, the Company is required to pay to Holland certain Bonus Entitlements in respect of the Contingent Consideration as set forth in Section 1.4 of the Disclosure Schedule to the Cole Holdings Merger Agreement, calculated and payable in accordance with Annex B to the Cole Holdings Merger Agreement (“Annex B”). Notwithstanding anything contained in Annex A or Annex B, Parent and Holland each hereby acknowledge and agree that in satisfaction of the Bonus Entitlements in respect of the Incentive Consideration and Contingent Consideration payable to Holland pursuant to the Merger Agreement, subject to Section 5(c) below, Parent shall issue to Holland, within three (3) Business Days following the date that the ARCP Transaction is consummated, a number of validly issued, fully paid and non-assessable shares of common stock, par value $0.01 per share, of Parent (“ARCP Common Stock”), which shares will be approved for listing on the NASDAQ, subject to official notice of issuance, with an aggregate value equal to $9,421,000, such number of shares to be calculated on the Closing Date based on the volume weighted average closing sale price of a share of ARCP Common Stock over the ten (10) consecutive trading days ending the trading day immediately prior to the date that the ARCP Transaction is consummated on the NASDAQ Stock Market, as reported in the Wall Street Journal, rounded down to the nearest whole share; provided, however, that if the ARCP Transaction is consummated after the end of the Incentive Consideration Test Period and payment of the Bonus Entitlement in respect of the Incentive Consideration by the Company to Holland, then the amount otherwise payable by Parent to Holland pursuant to this Section 2 shall be reduced on a dollar-for-dollar basis by the dollar amount upon which the Company determined the number of shares of common stock of the Company, par value $0.01 per share (“Company Common Stock”) to be paid to Holland as Bonus Entitlements in respect of the Incentive Consideration pursuant to and in accordance with Section 2.2 of the Cole Holdings Merger Agreement. Holland hereby acknowledges and agrees that the issuance of the Parent Common Stock to him pursuant to this Section 2 will be in full and complete satisfaction of the Bonus Entitlement in respect of the Incentive Consideration (if applicable) and Contingent Consideration otherwise payable to him pursuant to the terms of the Cole Holdings Merger Agreement, and that upon such issuance Parent shall have no further obligation to Holland in respect thereof.

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3.Intentionally Omitted.

4.Intentionally Omitted.

5.Registration Rights; Restrictions on Transfer.

a.Parent and Holland each hereby agree that (i) all shares of Parent Common Stock issued to Holland pursuant to Paragraph 2 hereunder and all other shares of Parent Common Stock received by Holland in connection with the merger provided for in the ARCP Merger Agreement shall be deemed to be Registrable Securities under (and as defined in) the Registration Rights Agreement, dated as of April 5, 2013 (the “Registration Rights Agreement”), by and among the Company, Cole and the other individuals listed on the signature pages thereto, including Holland, (ii) all shares of ARCP Common Stock issued in the ARCP Transaction in respect of shares of Company Common Stock that are, as of the date hereof, or that will be, as of Closing, Registrable Securities under the Registration Rights Agreement shall continue to be Registrable Securities following the effective time of the ARCP Transaction pursuant to the terms of the ARCP Merger Agreement, and (iii) following the effective time of the ARCP Transaction, all obligations of the Company pursuant to the terms of the Registration Rights Agreement shall be obligations of Parent.

b.Parent and Holland each hereby acknowledge, confirm and agree that, following the effective time of the ARCP Transaction, all of the shares of Company Common Stock held by Holland and any Affiliate of Holland as of the Closing, including, without limitation, shares of Company Common Stock deemed to be issued to holders of Company RSUs and Company PSUs and including all shares of Company Common Stock received by Holland prior to the closing of the ARCP Transaction as a Bonus Entitlement in respect of the Incentive Consideration, if any (collectively, the “Holland Shares”) that are subject to the restrictions on transfer contained in the Registration Rights Agreement shall remain subject to the restrictions on transfer contained therein to the same extent such restrictions would apply if the ARCP Transaction did not occur.

c.Parent and Holland each hereby agree that, following the effective time of the ARCP Transaction, the Contingent Consideration Shares (as defined below) shall be subject to the restrictions on transfer contained in the Registration Rights Agreement; provided, however, that notwithstanding anything contained in the Registration Rights Agreement to the contrary, the Contingent Consideration Shares shall be subject to the restrictions on transfer contained therein through December 31, 2017, with releases of such restrictions on a quarterly basis on the last day of each calendar quarter, beginning on the last day of the first full calendar quarter following the date that the ARCP Transaction is consummated, of a number of Contingent Consideration Shares equal to the quotient of the aggregate number of Contingent Consideration Shares issued pursuant to Section 2 above divided by the number of full calendar quarters between the date that the ARCP Transaction is consummated and December 31, 2017. In the event Holland

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attempts to Transfer all or any portion of the Contingent Consideration Shares in violation of this Section 5(c), such Transfer shall be null and void ab initio, and Parent shall instruct its transfer agent and other third parties not to record or recognize any such purported transaction. Parent may impose stop-transfer instructions with respect to the Contingent Consideration Shares to the extent reasonably required to ensure compliance with the provisions of this Section 5(c). For purposes of this letter, “Contingent Consideration Shares” means: (i) if the ARCP Transaction is consummated after the end of the Incentive Consideration Test Period and payment of the Bonus Entitlement in respect of the Incentive Consideration by the Company to Holland, all of the shares of Parent Common Stock actually issued to Holland pursuant to Section 2 above; (ii) if the ARCP Transaction is consummated before the end of the Incentive Consideration Test Period, a number of shares equal to (x) all of the shares of Parent Common Stock actually issued to Holland pursuant to Section 2 above minus (y) the number of shares of Parent Company Stock that would have been issued in the ARCP Transaction upon conversion of the number of shares Company Common Stock that would have been issued to Holland as the Bonus Entitlement in respect of the Incentive Consideration if the Incentive Consideration Test Period had been the thirty (30) trading day period ended on the business day immediately prior closing of the ARCP Transaction; and (iii) if the ARCP Transaction is consummated after the end of the Incentive Consideration Test Period but before the issuance of the Bonus Entitlement in respect of the Incentive Consideration by the Company to Holland, a number of shares equal to (x) all of the shares of Parent Common Stock actually issued to Holland pursuant to Section 2 above minus (y) the number of shares of Parent Common Stock that would have been issued in the ARCP Transaction upon conversion of the number of shares of Company Common Stock that would have been issued to Holland as the Bonus Entitlement in respect of the Incentive Consideration if such issuance had been made prior to consummation of the ARCP Transaction.

6.Escrow Agreement. Based on the latest annex to the Indemnification Escrow Agreement, dated as of April 5, 2013 (the “Escrow Agreement”), by and among Cole, the Company, the Bonus Executives and U.S. Bank National Association, as escrow agent (the “Escrow Agent”), a total of 4,284,489 shares of Company Common Stock (the “Escrow Share Deposit”) are currently on deposit with the Escrow Agent under the Escrow Agreement. In furtherance of the foregoing, Holland acknowledges and agrees that, as of and following the effective time of the ARCP Transaction, the Escrow Share Deposit shall remain on deposit with the Escrow Agent in accordance with and subject to the terms of the Escrow Agreement. Notwithstanding anything contained in the Escrow Agreement or the Cole Holdings Merger Agreement, Parent and Holland each hereby acknowledge and agree that as of the effective time of the ARCP Transaction, (i) each share of Company Common Stock that forms a part of the Escrow Share Deposit shall automatically, without any action by or on behalf of Holland or Parent, be converted into the right to receive such number of shares of ARCP Common Stock equal to the Exchange Ratio (as defined in the ARCP Merger Agreement) pursuant to the terms of the ARCP Merger Agreement, (ii) all references in the Escrow Agreement to “Company Common Stock” (including, but not limited to, Section 3 of the Escrow Agreement governing the release of the Escrow Share Deposit) will be deemed to be references to ARCP Common Stock,

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and any reference to a number of shares of “Company Common Stock” shall be a number of shares of ARCP Common Stock adjusted to reflect the Exchange Ratio, (iii) the references in Section 1.6(b) and in Section 11.2(b) of the Cole Holdings Merger Agreement to “the volume-weighted average of the sale prices per share of Parent Common Stock as reported on the NYSE composite transactions reporting system” will be deemed to refer to “the volume-weighted average of the sale prices per share of ARCP Common Stock as reported on the NASDAQ composite transactions reporting system,” (iv) to the extent that Holland makes a Cash Election with respect to any shares of Company Common Stock that form a part of the Escrow Share Deposit, any and all amounts payable in respect of such shares shall remain on deposit with the Escrow Agent under the Escrow Agreement in accordance with the terms of the Escrow Agreement; provided that any releases under the Escrow Agreement to Holland will be satisfied first with such cash amounts held in the escrow and attributable to Holland and thereafter in shares, and (v) all dividends or other income earned in respect of the Escrow Share Deposit or otherwise under the Escrow Agreement (including dividends on the Parent Common Stock to be substituted for the Company Common Stock now held in the escrow) shall be paid to Holland in accordance with Section 2(c) of the Escrow Agreement, assuming the conversion of the shares of Company Common Stock that form the Escrow Share Deposit into shares of ARCP Common Stock in accordance with the terms of the ARCP Merger Agreement.

7.Intentionally Omitted.

8.Intentionally Omitted.

9.Intentionally Omitted.

10.Intentionally Omitted.

11.Intentionally Omitted.

12.Further Assurances. From time to time after the date hereof as and when requested by Holland or Parent and at such party’s expense, each of Holland and Parent agree to execute such further assignments, assumptions, notifications and other documents as may be reasonably requested for the purpose of giving effect to, or evidencing or giving notice of, the transactions contemplated by this letter.

13.Notices. Any notice, request, claim, demand and other communications hereunder shall be sufficient if in writing and sent (a) if personally delivered to an authorized representative of the recipient, when actually delivered to such authorized representative, (b) if sent by facsimile transmission (providing confirmation of transmission) or e-mail of a pdf attachment (provided that any notice received by facsimile transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m. (in the time zone of the recipient) or any day other than a Business Day shall be deemed to have been received at 9:00 a.m. on the next Business Day) or (c) if sent by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage

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prepaid), addressed as follows (or at such other address for a party as shall be specified in a notice given in accordance with this Section 13):

a. If to Holland, to:

Jeffrey Holland

2325 East Camelback Road, Suite 1100

Phoenix, Arizona 85016

Facsimile: (480) 449-7022

with a copy (which shall not constitute notice) to:

Sullivan & Cromwell LLP

Century Park East, 21^st Floor

Los Angeles, California 90067

Attention: Alison S. Ressler, Esq.

Facsimile: (310) 712-8800

Phone: (310) 712-6630

b. If to Parent, to:

American Realty Capital Partners, Inc.
405 Park Avenue, 15^th Floor
New York, New York 10022
Fax: (212) 415-6507; and (646) 861-7743
Phone: (212) 415-6501
Attention: Nicholas S. Schorsch and James A. Tanaka
Email: nschorsch@arlcap.com; and jtanaka@rcscapital.com

with a copy (which shall not constitute notice) to:

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036

Phone: (212) 969-3000

Fax: (212) 969-2900

Attention: Peter M. Fass, Esq., Steven L. Lichtenfeld, Esq., and
Daniel I. Ganitsky, Esq.

Email: PFass@proskauer.com; SLichtenfeld@proskauer.com; and DGanitsky@proskauer.com

14.Specific Performance. The parties hereto agree that irreparable damage, for which monetary damages (even if available) would not be an adequate remedy, would occur in the event that the parties hereto do not perform the provisions of this letter in accordance with its specified terms or otherwise breach such provisions. Accordingly, the parties acknowledge and

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agree that the parties shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this letter and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. Each of the parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that the other party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity. Any party seeking an injunction or injunctions to prevent breaches of this letter and to enforce specifically the terms and provisions of this letter shall not be required to provide any bond or other security in connection with any such order or injunction.

15.Miscellaneous. This letter may be amended, modified or supplemented only by a written instrument executed by each of the parties hereto. The provisions of this letter are the result of negotiations between the parties; accordingly, this letter shall not be construed in favor of or against any party by reason of the extent to which the party or any of his or its professional advisors participated in its preparation. This letter may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same letter agreement. Delivery of an executed counterpart of a signature page to this letter by facsimile transmission or by e-mail of a pdf attachment shall be effective as delivery of a manually executed counterpart of this letter. This letter shall be governed by and interpreted and enforced in accordance with the laws of the State of Maryland (without reference to the choice of law provisions).

[Signature Page Follows]

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Very truly yours,

AMERICAN REALTY CAPITAL PROPERTIES, INC.

By: /s/ Edward M. Weil, Jr.

Name: Edward M. Weil, Jr.

Title: President

ACKNOWLEDGED AND AGREED TO

AS OF THE DATE FIRST SET

FORTH ABOVE BY:

/s/ Jeffrey Holland

Jeffrey Holland

ACKNOWLEDGED AND AGREED TO

AS OF THE DATE FIRST SET

FORTH ABOVE BY:

COLE REAL ESTATE INVESTMENTS, INC.

By: /s/ Stephan Keller

Name: Stephan Keller

Title: Executive Vice President and Chief Financial Officer