Note 2 — Restatement of Previously Issued Financial Statements

The Company has restated its consolidated balance sheets as of March 31, 2014 and December 31, 2013 and its consolidated statements of operations, consolidated statements of comprehensive loss, consolidated statements of changes in equity and consolidated statements of cash flows for the three months ended March 31, 2014 and 2013, along with certain related notes to such restated consolidated financial statements. In addition, the December 31, 2013 and March 31, 2013 balance sheets, as disclosed in Note 3 —Mergers and Acquisitions (As Restated), have been recast in applying the carryover basis of accounting to include the effects of the merger with American Realty Capital Trust IV, Inc. (“ARCT IV”).

The Company determined that the restatement was necessary after an investigation was conducted by the Audit Committee of the Company’s Board of Directors (the “Audit Committee”) with the assistance of independent counsel and forensic accountants. The Audit Committee initiated the investigation in response to concerns regarding accounting practices and other matters that were first reported to it on September 7, 2014. The restatement corrects errors that were identified as a result of the investigation, as well as certain other errors that were identified by the Company. In addition, the restatement reflects corrections of certain immaterial errors and certain previously identified errors that were identified by the Company in the normal course of business and were determined to be immaterial, both individually and in the aggregate, when the consolidated financial statements for the three months ended March 31, 2014 were originally issued. In connection with the restatement, the Company has determined that it would be appropriate to correct such errors.

Year ended December 31, 2013 Error Corrections

Corrections to the Company’s consolidated financial statements for the year ended December 31, 2013 are disclosed within Amendment No. 2 to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2013 filed with the SEC (the “Amended 10-K”). The corrections reported in the Amended 10-K relate primarily to bonus accruals, real estate impairments, goodwill, merger and acquisition related expenses, transfer tax accrual and the accounting and reporting of non-controlling interests.

Three Months Ended March 31, 2013 Error Corrections

Merger and Other Non-routine Transaction Related

In light of the findings of the investigation conducted by the Audit Committee, the Company performed an internal review of all acquisition, merger and other non-routine transaction-related expenses. The work resulted in the identification of the following errors:

•

The Company improperly classified $5.4 million of expenses as “merger-related” for the three months ended March 31, 2013. As restated, the amount has been reclassified from merger and other non-routine transaction-related expenses to general and administrative expenses.

•

Upon consummation of the ARCT III Merger, the OP entered into an agreement with an affiliate to acquire certain furniture, fixtures, equipment (“FF&E”) and other assets. The Company originally capitalized $4.1 million of FF&E costs and expensed $1.7 million of costs. The Company has concluded that there was no evidence of the receipt and it could not support the value of the FF&E. As such, the Company has expensed the amount originally capitalized and recognized the expense in merger and other non-routine transaction-related expense for the period ended March 31, 2013. See Note 20 — Related Party Transactions and Arrangements (As Restated) for further discussion.

•

The Company identified $1.0 million of expenses that were improperly classified as merger and other non-routine transaction-related expenses that should have been capitalized as deferred financing costs and amortized accordingly. As such, an adjustment to properly record the deferred financing costs has been made for the period ended March 31, 2013. As a result of capitalizing these deferred financing costs, additional interest expense of $0.6 million was recorded for the period ended March 31, 2013.

•

The Company identified $13.0 million of management fees that were improperly classified as merger and other non-routine transaction-related expenses. Such amount has been properly classified as management fees to affiliates for the period ended March 31, 2013.

•

The Company has determined that it should have recorded a controlling interest transfer tax liability totaling $1.1 million upon consummation of the ARCT III Merger. The accrual and corresponding merger and other non-routine transaction related expense are recorded for the three months ended March 31, 2013.

The Company has updated the caption to “merger and other non-routine transactions” to appropriately include non-recurring costs that may not have been incurred solely for a merger transaction. See Note 4 —Summary of Significant Accounting Policies (As Restated) for a further breakout of the merger and other non-routine transactions.

In addition, the Company has concluded that $881,000 in equity-based compensation previously reported on a separate line item should instead be reported within general and administrative expenses.

Operating Fees to Affiliate

The Company identified $0.5 million of expense that was incorrectly recorded as operating fees to affiliate. As a result, the Company decreased operating fees to affiliate by this amount for the period ended March 31, 2013 and recorded the amount to the proper balance sheet account.

This line item caption has been updated to “management fees to affiliates” in the accompanying consolidated statements of operations.

Net Loss Attributable to Non-Controlling Interests

The original calculation of the net loss attributable to non-controlling interest holders for the three months ended March 31, 2013 excluded expenses that were improperly recorded at the Company’s level. These expenses were incurred by the OP, and therefore should have been included in the Company’s determination of the net loss attributable to its non-controlling interest holders. In addition, the net loss attributable to the non-controlling interest holders has been adjusted to reflect the impact of the cumulative restatement adjustments discussed and presented herein. As a result, the Company recorded an adjustment of $1.6 million for the three months ended March 31, 2013 for net loss attributable to non-controlling interest holders and a corresponding change in net loss attributable to stockholders.

Three Months Ended March 31, 2014 Error Corrections

Merger and Other Non-routine Transaction Related

•

The Company identified a net amount of $16.1 million of merger and other non-routine transaction-related expenses that were improperly recorded in the period ended March 31, 2014. Of this amount, a net amount of $14.5 million has been properly recorded for the year ended December 31, 2013 and a net amount of $1.6 million has been properly recorded in the period ended June 30, 2014.

•

Upon consummation of the ARCT IV Merger (as defined in Note 3 — Mergers and Acquisitions (As Restated)), the OP entered into an agreement with an affiliate to acquire certain furniture, fixtures, equipment (“FF&E”) and other assets. The Company originally capitalized $2.1 million of FF&E costs. The Company has concluded that there was no evidence of the receipt and it could not support the value of the FF&E. As such, the Company has expensed the amount originally capitalized and recognized the expense in merger and other non-routine transaction-related expense. See Note 20 — Related Party Transactions and Arrangements (As Restated) for further discussion.

•

The Company identified $20.6 million of expenses that were improperly recorded as merger and other non-routine transaction-related expenses that should have been capitalized as deferred financing costs and amortized accordingly. As such, an adjustment to capitalize and amortize the deferred financing costs has been properly recorded. As a result of deferred financing costs being capitalized, additional interest expense of $8.7 million and extinguishment of debt expense of $2.3 million was recorded.

•

The Company originally improperly classified $9.4 million of expenses as merger related. However the Company has determined that such amounts should have been accounted for as general and administrative expenses. As such, the Company properly recorded such amount as general and administrative expense.

•

Upon consummation of the ARCT III Merger and CapLease Merger (each, as defined in Note 3 – Merger and Acquisitions (As Restated)) in 2013, the Company did not properly accrue a controlling interest transfer tax liability for each respective merger. As such, the Company properly recorded an estimated $8.9 million as of December 31, 2013. The Company considered its existing accrual amount for such liabilities, in determining the liability amounts for the ARCT IV and Cole mergers that were consummated, noting that it had over accrued for such liabilities, and as a result recorded too much expense. Therefore, the Company properly reduced the expense recorded in the period by $4.0 million.

•

The Company identified $13.9 million of management fee expenses that were improperly classified as merger and other non-routine transaction related expenses. Such amounts have been properly recorded as management fees to affiliates.

The Company also updated the caption from “merger and other transaction related” to “merger and other non-routine transactions” to appropriately include non-recurring costs that may not have been incurred solely for a merger transaction. See Note 4 - Summary of Significant Accounting Policies (As Restated) for a further breakout of the merger costs and other non-routine transactions.

Acquisition-Related

The Company identified a net amount of $0.9 million of acquisition-related salary expense had been improperly recorded as general and administrative expense. As such, the Company properly recorded the amount as acquisition-related for the three months ended March 31, 2014.

General and Administrative

The Company identified a net amount of $1.7 million of general and administrative expenses that were recorded in the incorrect period. As such, the Company recorded this amount as additional expense in the three months ended March 31, 2014.

Equity-Based Compensation

The investigation found that equity awards made to Nicholas S. Schorsch and Brian S. Block in connection with the Company’s transition from external to internal management contained vesting provisions that, as drafted, were more favorable to them than the Compensation Committee had authorized. In addition, the investigation found that the Compensation Committee’s intention in respect of the OPP was that the maximum award pool opportunity should have been based upon the Company’s equity market capitalization as of the date of the approval of the OPP in October 2013, equaling approximately $120.0 million, rather than the $218.1 million which was derived from a pro forma equity market capitalization giving effect to the closing of various transactions as of the Company’s transition to self-management. These items resulted in a decrease of $6.3 million to stock-based compensation reported in general and administrative expense for the three months ended March 31, 2014.

In addition, the Company assessed its accrual for distributions recorded on LTIP units, noting distributions had not been properly recorded. As a result, the Company increased the distributions recorded in equity and the distributions payable on LTIP awards by $6.2 million for the three months ended March 31, 2014.

The Company also determined that the documentation of awards granted to its directors provided for accelerated vesting of shares upon voluntary resignation of the directors. As a result, the Company determined there was no required service period for the vesting of such awards and $3.3 million has been recorded as a general and administrative expense during the three months ended March 31, 2014. Based upon the findings of the Audit Committee and the Company in connection with the recent review of the Company’s previously issued financial statements, the Company has subsequently modified such awards to provide that voluntary resignation would not accelerate the vesting of such awards.

The Company originally reported $22.5 million in equity-based compensation its own line item, however it now reports such compensation as general and administrative expenses.

Depreciation and Amortization

The Company identified that its depreciation expense and acquisition related expenses were under expensed by $2.3 million and $0.6 million, respectively, based on its accounting for certain properties acquired in 2013. As such, the Company properly recorded additional depreciation expense and acquisition related expense by the respective amounts.

In addition, the Company identified that it did not properly record $6.0 million of depreciation expense for real estate properties acquired during the period. Therefore, the Company properly recorded the expense.

Gain (Loss) on Disposition of Properties and Held for Sale Assets

Subsequent to the CapLease and Cole Mergers (as defined in Note 3 - Mergers and Acquisitions (As Restated)), the Company disposed of certain properties acquired in those mergers. The disposition of such properties resulted in a net loss on disposition; however, the Company incorrectly adjusted its purchase price allocation by increasing its goodwill recorded in connection with the mergers by $13.6 million. The Company has determined that there was not sufficient evidence to support adjusting its goodwill as a measurement period adjustment. As a result, the Company reversed the measurement period adjustments that were made to goodwill and recognized a net loss on dispositions for the period ended March 31, 2014.

In addition, the Company assigned goodwill associated with the certain mergers to the Company’s REI segment. However, the Company determined that it did not properly account for disposals of real estate because a portion of goodwill was not included in the carrying amount of the associated real estate in its determination of the gain or loss on disposition. To correct the accounting, the Company allocated $7.0 million of goodwill to real estate dispositions in the three months ended March 31, 2014, which increased the loss on disposition of properties recognized.

Gain (Loss) on Derivative Instruments

The Company determined that a portion of one of its interest rate swaps was incorrectly designated as effective, rather than ineffective for the three months ended March 31, 2014. Therefore, the Company incorrectly recorded the ineffective portion of the hedge through other comprehensive income (“OCI”), rather than earnings. As such, the Company recorded a gain on derivative instruments of $1.0 million and reversed the same amount from OCI.

As part of the Cole Merger, the Company acquired a derivative liability in the amount of $10.0 million for interest rate swaps. The swaps were subsequently settled in connection with the extinguishment of the related debt. This settlement should have been recorded as a reduction of the derivative liability acquired, however it was improperly recorded as a loss on derivative instruments. As such, the Company reversed the amount recorded as a loss on derivative instruments and adjusted goodwill to be properly recorded for the period.

In addition, The Company identified $2.1 million of expenses which were originally improperly reported as loss on derivative instruments, rather than interest expense. As such, the Company reported the respective amount as interest expense for the three months ended March 31, 2014.

Interest Expense

The Company determined that breakage costs incurred on an interest rate lock were improperly recorded as interest expense rather than OCI. As such, the Company properly recorded $3.9 million of breakage costs as OCI for the three months ended March 31, 2014.

The Company concluded that the interest expense related to a swap was underestimated by $1.4 million. As such, the Company recorded additional interest expense for the respective amount for the three months ended March 31, 2014.

In addition, the Company concluded that $7.8 million of debt extinguishment costs, which were originally reported as interest expense, should be reported as its own line item caption within the consolidated statements of operations for the three months ended March 31, 2014.

Net Loss Attributable to Non-Controlling Interests

The original calculation of the net loss attributable to non-controlling interest holders for the three months ended March 31, 2014 excluded substantial expenses that were improperly recorded at the Company’s level, but were, in fact, incurred by the OP, and therefore should have been included in the Company’s determination of the net loss attributable to its non-controlling interest holders. The 2014 restated consolidated financial statements reflect an adjustment of $2.4 million during the three months ended March 31, 2014 for net loss attributable to non-controlling interest holders.

Other Expense

As a result of the restatement corrections, the Company updated its tax provision calculation which resulted in an additional tax benefit of $1.2 million for the three months ended March 31, 2014.

Other Changes

Along with restating the consolidated financial statements to correct the errors discussed above, the Company recorded adjustments for certain previously identified immaterial accounting errors related to the three months ended March 31, 2014 and 2013. When these consolidated financial statements were originally issued, the Company assessed the impact of these errors and concluded that they were not material to the consolidated financial statements. However, in conjunction with the need to restate the consolidated financial statements as a result of the errors noted above, the Company determined that it would be appropriate to make adjustments for all such previously unrecorded adjustments.

The original calculation of net loss per share for the three months ended March 31, 2014 was based on an incorrect weighted average share count. The original weighted average share count treated a portion of certain restricted share awards as outstanding common stock prior to the actual vesting date of such awards, and as a result, the weighted average share count was overstated. Therefore, the 2014 restated consolidated financial statements reflect a decrease of 311,475 shares to the weighted average share count used in the net loss per share calculation for the three months ended March 31, 2014.

The Company also recorded certain reclassifications to update the presentation of its consolidated statement of operations for the three months ended March 31, 2014 and 2013.

In addition to the restatement of the consolidated financial statements, the Company has also restated the following notes for the three months ended March 31, 2014 and March 31, 2013 to reflect the error corrections noted above.

•

Note 3 – Mergers and Acquisitions

•

Note 4 – Summary of Significant Accounting Policies

•

Note 5 – Acquisitions of CapLease and Cole

•

Note 6 – Segment Reporting

•

Note 7 – Real Estate Investments

•

Note 10 – Deferred Costs and Other Assets

•

Note 15 – Derivatives and Hedging Activities

•

Note 16 – Accounts Payable and Accrued Expenses

•

Note 19 – Equity-based Compensation

•

Note 20 – Related Party Transactions and Arrangements

•

Note 22 – Net Loss Per Share

•

Note 24 – Income Taxes

•

Note 25 – Subsequent Events

The following tables present the combined impact of all changes, as described above, to the applicable line items in the consolidated financial statements to the Company’s previously issued consolidated financial statements for the periods ended March 31, 2014 and 2013 and the year ended December 31, 2013 (in thousands, except share and per share amounts):

March 31, 2014 and December 31, 2013 Restated Consolidated Balance Sheets


	March 31, 2014												December 31, 2013
	As Previously Reported			Reclassifications			Restatement Adjustments			As Restated			As Previously Reported ⁽¹⁾			Reclassifications			Restatement Adjustments			As Restated
ASSETS
Real estate investments, at cost:
Land	$	3,226,615		$	—		$	(2,358	)	$	3,224,257		$	1,379,453		$	—		$	855		$	1,380,308
Buildings, fixtures and improvements		11,841,722			(3,565	)		(1,502	)		11,836,655			5,291,031			—			6,369			5,297,400
Land and construction in progress		40,459			—			—			40,459			21,839			—			—			21,839
Acquired intangible lease assets		2,209,747			382			(227	)		2,209,902			758,376			382			837			759,595

Total real estate investments, at cost		17,318,543			(3,183	)		(4,087	)		17,311,273			7,450,699			382			8,061			7,459,142
Less: accumulated depreciation and amortization		(422,355	)		(167	)		(6,044	)		(428,566	)		(267,352	)		(155	)		229			(267,278	)

Total real estate investments, net		16,896,188			(3,350	)		(10,131	)		16,882,707			7,183,347			227			8,290			7,191,864
Investment in unconsolidated entities		105,775			—			—			105,775			—			—			—			—
Investment in direct financing leases, net		65,723			—			—			65,723			66,112			—			—			66,112
Investment securities, at fair value		213,803			—			—			213,803			62,067			—			—			62,067
Loans held for investment, net		98,185			—			—			98,185			26,279			—			—			26,279
Cash and cash equivalents		83,067			—			149			83,216			52,725			—			—			52,725
Derivative assets, at fair value ⁽²⁾		—			—			—			—			9,189			(9,189	)		—			—
Restricted cash		55,559			—			—			55,559			35,921			—			—			35,921
Intangible assets, net		371,634			—			—			371,634			—			—			—			—
Deferred costs and other assets, net		294,694			3,350			6,053			304,097			—			281,326			—			281,326
Prepaid expenses and other assets, net ⁽²⁾		—			—			—			—			187,930			(186,726	)		(1,204	)		—
Goodwill		2,287,122			—			11,555			2,298,677			102,419			—			(9,630	)		92,789
Due from affiliates		8,550			—			169			8,719			—			—			—			—
Deferred costs, net ⁽²⁾		—			—			—			—			81,311			(84,973	)		3,662			—
Assets held for sale		—			—			—			—			679			(665	)		(14	)		—

Total assets	$	20,480,300		$	—		$	7,795		$	20,488,095		$	7,807,979		$	—		$	1,104		$	7,809,083

LIABILITIES AND EQUITY
Mortgage notes payable, net	$	4,234,668		$	—		$	(594	)	$	4,234,074		$	1,301,114		$	—		$	—		$	1,301,114
Corporate bonds, net		2,545,884			—			—			2,545,884			—			—			—			—
Convertible debt, net		973,737			—			—			973,737			972,490			—			—			972,490
Senior corporate credit facilities ⁽³⁾		—			—			—			—			1,819,800			(1,819,800	)		—			—
Secured credit facility ⁽³⁾		—			—			—			—			150,000			(150,000	)		—			—
Credit facilities		2,415,800			—			—			2,415,800			—			1,969,800			—			1,969,800
Other debt, net		148,809			—			—			148,809			104,804			—			—			104,804
Below-market lease liabilities, net		287,199			—			(620	)		286,579			77,789			—			(620	)		77,169
Derivative liabilities, at fair value ⁽⁴⁾		—			—			—			—			18,455			(18,455	)		—			—
Accounts payable and accrued expenses		143,860			—			5,682			149,542			808,900						(78,329	)		730,571
Deferred rent, derivative and other liabilities		195,826			—			10,279			206,105			21,816			18,455			—			40,271
Distributions payable		4,414			—			6,819			11,233			10,278			—			625			10,903
Due to affiliates		217			—			2,397			2,614			—						103,434			103,434

Total liabilities		10,950,414			—			23,963			10,974,377			5,285,446			—			25,110			5,310,556

Series D preferred stock, $0.01 par value, 21,735,008 shares (part of 100,000,000 aggregate preferred shares authorized) issued and outstanding at March 31, 2014 and December 31, 2013, respectively	$	269,299		$	—		$	—		$	269,299		$	269,299		$	—		$	—		$	269,299
Preferred stock (excluding Series D Preferred Stock), $0.01 par value, 100,000,000 shares authorized and 42,654,919 and 42,199,547 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively		427			—			—			427			422			—			—			422
Common stock, $0.01 par value, 1,500,000,000 and 750,000,000 shares authorized and 769,931,938 and 239,234,725 issued and outstanding at March 31, 2014 and December 31, 2013, respectively		7,699			—			—			7,699			2,392			—			—			2,392
Additional paid-in capital		10,305,815			(4,437	)		790			10,302,168			2,939,287			—			1,620			2,940,907
Accumulated other comprehensive income		13,397			—			(4,934	)		8,463			7,666			—			—			7,666
Accumulated deficit		(1,365,467	)		269			6,455			(1,358,743	)		(864,516	)		—			(13,441	)		(877,957	)

Total stockholders’ equity		8,961,871			(4,168	)		2,311			8,960,014			2,085,251			—			(11,821	)		2,073,430
Non-controlling interests		298,716			4,168			(18,479	)		284,405			167,983			—			(12,185	)		155,798

Total equity		9,260,587			—			(16,168	)		9,244,419			2,253,234			—			(24,006	)		2,229,228

Total liabilities and equity	$	20,480,300		$	—		$	7,795		$	20,488,095		$	7,807,979		$	—		$	1,104		$	7,809,083

(1)

These financial statements have been recast in applying the carryover basis of accounting to include the effects of the merger with ARCT IV.

(2)

This line item caption has been reclassified and included within deferred costs and other assets, net in the accompanying consolidated balance sheets for the period ended March 31, 2014.

(3)

This line item caption has been reclassified and included within credit facilities in the accompanying consolidated balance sheets for the period ended March 31, 2014.

(4)

This line item caption has been reclassified and included within deferred rent, derivative and other liabilities in the accompanying consolidated balance sheets for the period ended March 31, 2014.

March 31, 2013 Restated Consolidated Balance Sheet


	March 31, 2013
	As Previously Reported			ARCT IV Adjustments ⁽¹⁾			Reclassifications			Restatement Adjustments			As Restated
ASSETS
Real estate investments, at cost:
Land	$	298,280		$	39,326		$	—		$	—		$	337,606
Buildings, fixtures and improvements		1,521,505			161,868			—			—			1,683,373
Land and construction in progress		—			—			—			—			—
Acquired intangible lease assets		241,501			24,875			347			—			266,723

Total real estate investments, at cost		2,061,286			226,069			347			—			2,287,702
Less: accumulated depreciation and amortization		(81,207	)		(1,954	)		(121	)					(83,282	)

Total real estate investments, net		1,980,079			224,115			226			—			2,204,420
Investment securities, at fair value		4			61,600			—			—			61,604
Cash and cash equivalents		52,412			1,067,095			—			—			1,119,507
Restricted cash		1,287			—			—			—			1,287
Deferred costs and other assets, net		—			—			229,320			(698	)		228,622
Prepaid expenses and other assets, net		15,397			6,129			(21,526	)		—			—
Receivable for issuances of common stock		—			169,097			(169,097	)		—			—
Deferred costs, net		38,244			—			(38,244	)		—			—
Assets held for sale		679			—			(679	)		—			—

Total assets	$	2,088,102		$	1,528,036		$	—		$	(698	)	$	3,615,440

LIABILITIES AND EQUITY
Mortgage notes payable, net	$	265,118		$	—		$	—		$	—		$	265,118
Senior corporate credit facilities		640,000			—			—			—			640,000
Derivative liabilities, at fair value		5,012			—			—			—			5,012
Accounts payable and accrued expenses		6,589			641,094			(138	)		(484	)		647,061
Deferred rent and other liabilities		5,270			148			138			—			5,556
Distributions payable		92			6,619			—			62			6,773
Due to affiliates		—			—			—			1,569			1,569

Total liabilities		922,081			647,861			—			1,147			1,571,089

Series A convertible preferred stock, $0.01 par value, 545,454 shares (liquidation preference $11.00 per share) authorized, issued and outstanding at March 31, 2013		5			—			(5	)		—			—
Series B convertible preferred stock, $0.01 par value, 283,018 shares (liquidation preference $10.60 per share) authorized, issued and outstanding at March 31, 2013		3			—			(3	)		—			—
Preferred stock (excluding Series D Preferred Stock), $0.01 par value, 100,000,000 shares authorized and 35,863,711 shares issued and outstanding at March 31, 2013		—			412			8			—			420
Common stock, $0.01 par value, 240,000,000 shares authorized, 154,322,183 issued and outstanding at March 31, 2013		1,543			361			—			—			1,904
Additional paid-in capital		1,335,863			898,056			(615	)		3,035			2,236,339
Accumulated other comprehensive income		(5,018	)		335			—			—			(4,683	)
Accumulated deficit		(290,484	)		(18,989	)		—			(2,433	)		(311,906	)

Total stockholders’ equity		1,041,912			880,175			(615	)		602			1,922,074
Non-controlling interests		124,109			—			615			(2,447	)		122,277

Total equity	$	1,166,021		$	880,175		$	—		$	(1,845	)	$	2,044,351

Total liabilities and equity	$	2,088,102		$	1,528,036		$	—		$	(698	)	$	3,615,440

(1)	Adjustments to financial statements in order to apply the carryover basis of accounting to include the effects of the merger with ARCT IV.

Restated Consolidated Statements of Operations


	March 31, 2014												March 31, 2013
	As Previously Reported			Reclassifications			Restatement Adjustments			As Restated			As Previously Reported			Reclassifications			Restatement Adjustments			As Restated
Revenues:
Rental income	$	244,445		$	—		$	(30	)	$	244,415		$	40,987		$	—		$	—		$	40,987
Direct financing lease income		1,006			—			—			1,006			—			—			—			—
Operating expense reimbursements		21,096			—			380			21,476			1,910			—			—			1,910
Cole Capital revenue		54,067			190			—			54,257			—			—			—			—

Total revenues		320,614			190			350			321,154			42,897			—			—			42,897

Operating expenses:
Cole Capital reallowed fees and commissions		34,436			—			—			34,436			—			—			—			—
Acquisition related		11,884			—			1,533			13,417			10,327			—			—			10,327
Merger and other transaction related ⁽¹⁾		222,192			—			(61,894	)		160,298			137,769			—			(14,201	)		123,568
Property operating		29,627			31			97			29,755			2,549			—			—			2,549
Operating fees to affiliate ⁽²⁾		—			—			13,888			13,888			—			—			12,493			12,493
General and administrative		26,839			(31	)		29,684			56,492			1,454			—			6,318			7,772
Equity-based compensation ⁽³⁾		22,510			—			(22,510	)		—			881			—			(881	)		—
Depreciation and amortization		165,363			—			8,479			173,842			26,753			—			—			26,753

Total operating expenses		512,851			—			(30,723	)		482,128			179,733			—			3,729			183,462

Operating loss		(192,237	)		190			31,073			(160,974	)		(136,836	)		—			(3,729	)		(140,565	)

Other (expense) income:
Interest expense, net		(116,712	)		(3,653	)		(586	)		(120,951	)		(6,056	)		(146	)		(599	)		(6,801	)
Extinguishment of debt, net ⁽⁴⁾		—			—			(9,399	)		(9,399	)		—			—			—			—
Other income, net		5,512			3,463			1,235			10,210			853			146			—			999
Loss on derivative instruments, net		(20,197	)		—			13,076			(7,121	)		(5	)		—			—			(5	)
Gain on disposition of properties, net ⁽⁵⁾		2,979			—			(20,584	)		(17,605	)		—			—			—			—
Gain on sale of investments		—			—			—			—			451			—			—			451

Total other expenses, net		(128,418	)		(190	)		(16,258	)		(144,866	)		(4,757	)		—			(599	)		(5,356	)

Net loss from continuing operations		(320,655	)		—			14,815			(305,840	)		(141,593	)		—			(4,328	)		(145,921	)

Discontinued operations:
Loss from operations of held for sale properties		—			—			—			—			(16	)		—			—			(16	)
Gain on held for sale properties		—			—			—			—			14			—			(14	)		—

Net loss from discontinued operations		—			—			—			—			(2	)		—			(14	)		(16	)
Net loss		(320,655	)		—			14,815			(305,840	)		(141,595	)		—			(4,342	)		(145,937	)
Net loss attributable to non-controlling interest		11,974			—			2,422			14,396			432			—			1,625			2,057

Net loss attributable to the Company	$	(308,681	)	$	—		$	17,237		$	(291,444	)	$	(141,163	)	$	—		$	(2,717	)	$	(143,880	)

Basic and diluted net loss per share attributable to common stockholders	$	(0.61	)	$	—		$	0.03		$	(0.58	)	$	(0.84	)	$	—		$	(0.02	)	$	(0.86	)

(1)	This line item caption has been updated to merger and other non-routine transactions in the accompanying consolidated statements of operations.

(2)	This line item caption has been updated to management fees to affiliates in the accompanying consolidated statements of operations.

(3)	As disclosed above, this line item caption has been reclassified into general and administrative in the accompanying consolidated statements of operations.

(4)	This line item caption has been added and is included in the accompanying consolidated statements of operations for the period ended March 31, 2014.

(5)	This line item caption has been updated to loss on disposition of properties, net in the accompanying consolidated statements of operations.

Restated Statements of Comprehensive Loss


	March 31, 2014											March 31, 2013
	As Previously Reported			Reclassifications		Restatement Adjustments			As Restated			As Previously Reported			Reclassifications		Restatement Adjustments			As Restated
Net loss ⁽¹⁾	$	(320,655	)	$	—	$	14,815		$	(305,840	)	$	(141,595	)	$	—	$	(4,342	)	$	(145,937	)
Other comprehensive income (loss):
Designated derivatives, fair value adjustments		2,636			—		(4,934	)		(2,298	)		(1,177	)		—		—			(1,177	)
Unrealized gain (loss) on investment securities		3,095			—		—			3,095			428			—		—			428

Total other comprehensive income (loss)		5,731			—		(4,934	)		797			(749	)		—		—			(749	)

Total comprehensive loss		(314,924	)		—		9,881			(305,043	)		(142,344	)		—		(4,342	)		(146,686	)
Comprehensive loss attributable to non-controlling interests		11,974			—		2,422			14,396			432			—		1,625			2,057

Total comprehensive income attributable to the Company ⁽²⁾	$	(302,950	)	$	—	$	12,303		$	(290,647	)	$	(141,912	)	$	—	$	(2,717	)	$	(144,629	)

(1)	The statement of comprehensive loss previously began with net loss attributable to common stockholders . The statement has been updated to begin with net loss to properly show the total comprehensive loss.

(2)	This line item caption has been added and is included in the accompanying statement of comprehensive loss for the period ended March 31, 2014.

Restated Statements of Cash Flows


	March 31, 2014												March 31, 2013
	As Previously Reported			Reclassifications			Restatement Adjustments			As Restated			As Previously Reported			Reclassifications		Restatement Adjustments			As Restated
Cash flows from operating activities:
Net loss	$	(320,655	)	$	—		$	14,815		$	(305,840	)	$	(141,595	)	$	—	$	(4,342	)	$	(145,937	)
Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of OP Units		153,884			—			(61,000	)		92,884			108,247			—		(476	)		107,771
Depreciation and amortization ⁽¹⁾		—			185,177			28,863			214,040			—			—		—			—
Depreciation ⁽¹⁾		111,015			(111,015	)		—			—			21,474			—		599			22,073
Amortization of intangible lease assets ⁽¹⁾		40,159			(40,159	)		—			—			5,279			—		—			5,279
Amortization of deferred costs ⁽¹⁾		38,064			(38,064	)		—			—			1,222			—		—			1,222
Amortization of above- and below-market lease asset ⁽¹⁾		358			(358	)		—			—			68			—		—			68
Amortization of intangible assets ⁽¹⁾		13,992			(13,992	)		—			—			—			—		—			—
Amortization of discounts and premiums ⁽¹⁾		(18,411	)		18,411			—			—			—			—		—			—
Gain (loss) on disposition of properties		(2,979	)		—			20,584			17,605			(14	)		—		14			—
Equity-based compensation	$	22,510		$	—		$	(936	)	$	21,574		$	3,260		$	—	$	73		$	3,333
Equity in income of unconsolidated entities		(251	)		—			—			(251	)		—			—		—			—
Distributions from unconsolidated entities⁽²⁾		—			—			941			941			—			—		—			—
Net direct financing lease adjustments ⁽³⁾		—			—			—			—			—			—		—			—
Loss (gain) on derivative instruments		8,048			—			(927	)		7,121			5			—		—			5
Loss (gain) on sale of investments, net		—			—			—			—			(451	)		—		—			(451	)
Loss on extinguishment of debt		15,681			—			(35,309	)		(19,628	)		—			—		—			—
Changes in assets and liabilities:
Investment in direct financing leases		(3,104	)		—			3,493			389			—			—		—			—
Deferred costs and other assets		3,348			—			4,597			7,945			(4,710	)		—		—			(4,710	)
Due from affiliates		(8,349	)		—			31			(8,318	)		—			—		—			—
Accounts payable and accrued expenses		(148,052	)		—			74,657			(73,395	)		(1,960	)		—		(484	)		(2,444	)
Deferred rent and other liabilities		(12,365	)		—			(24,266	)		(36,631	)		1,024			—		—			1,024
Due to affiliates		981			—			(42,245	)		(41,264	)		—			—		1,569			1,569

Net cash used in operating activities		(106,126	)		—			(16,702	)		(122,828	)		(8,151	)		—		(3,047	)		(11,198	)

Cash flows from investing activities:
Investments in real estate and other assets		(672,856	)		—			38,315			(634,541	)		(412,628	)		—		1,041			(411,587	)
Acquisition of a real estate business, net of cash acquired		(681,510	)		—			(1,730	)		(683,240	)		—			—		—			—
Capital expenditures		(4,796	)		—			1,684			(3,112	)		—			—		—			—
Real estate developments ⁽²⁾		—			—			(13,044	)		(13,044	)		—			—		—			—
Return of investment from unconsolidated entities ⁽³⁾		941			—			(941	)		—						—		—			—
Principal repayments received from borrowers		3,062			—			—			3,062			—			—		—			—
Investments in unconsolidated entities		(2,500	)		—			—			(2,500	)		—			—		—			—
Proceeds from disposition of properties		60,036			—			749			60,785			—			—		—			—
Investment in intangible assets		(258	)		—			—			(258	)		—			—		—			—
Deposits for real estate investments		(55,029	)		—			16,816			(38,213	)		(7,769	)		—		—			(7,769	)
Uses and refunds of deposits for real estate investments		137,688			—			—			137,688			—			—		—			—
Purchases of investment securities		—			—			—			—			(63,269	)		—		—			(63,269	)
Line of credit advances to affiliates		(36,000	)		—			35,000			(1,000	)		—			—		—			—
Line of credit repayments from affiliates		39,100			—			(35,200	)		3,900			—			—		—			—
Proceeds from sale of investment securities		—			—			—			—			44,198			—		—			44,198
Change in restricted cash		—			—			(3,934	)		(3,934	)		—			—		—			—

Net cash used in investing activities		(1,212,122	)		—			37,715			(1,174,407	)		(439,468	)		—		1,041			(438,427	)

Cash flows from financing activities:
Proceeds from mortgage notes payable	$	669,336		$	—		$	—		$	669,336		$	—		$	—	$	—		$	—
Payments on mortgage notes payable		(739,087	)		—			(593	)		(739,680	)		—			—		—			—
Payments on other debt		(4,938	)		—			—			(4,938	)		—			—		—			—
Proceeds from credit facilities		2,131,000			—			—			2,131,000			675,000			—		—			675,000
Payments on credit facilities		(2,994,000	)		—			—			(2,994,000	)		(159,604	)		—		—			(159,604	)
Proceeds from corporate bonds		2,545,760			—			—			2,545,760			—			—		—			—
Payments of deferred financing costs		(43,037	)		—			(23,797	)		(66,834	)		(24,587	)		—		(956	)		(25,543	)
Common stock repurchases		—			—			—			—			(350,522	)		—		—			(350,522	)
Proceeds from issuances of common stock		—			—			—			—			1,317,389			—		—			1,317,389
Payments of offering costs and fees related to stock issuances		(1,715	)		—			(418	)		(2,133	)		(138,578	)		—		(73	)		(138,651	)
Consideration to Former Manager for internalization		—			—			—			—			(3,035	)		—		3,035			—
Contributions from non-controlling interest holders		279			—			—			279			750			—		—			750
Distributions to non-controlling interest holders		(9,589	)		—			101			(9,488	)		(921	)		—		—			(921	)
Distributions paid		(201,485	)		—			(91	)		(201,576	)		(40,636	)		—		—			(40,636	)
Payments to affiliates, net		—			—			—			—			(526	)		—		—			(526	)
Change in restricted cash		(3,934	)		—			3,934			—			(179	)		—		—			(179	)

Net cash provided by financing activities		1,348,590			—			(20,864	)		1,327,726			1,274,551			—		2,006			1,276,557

Net change in cash and cash equivalents		30,342			—			149			30,491			826,932			—		—			826,932
Cash and cash equivalents, beginning of period		52,725			—			—			52,725			292,575			—		—			292,575

Cash and cash equivalents, end of period	$	83,067		$	—		$	149		$	83,216		$	1,119,507		$	—	$	—		$	1,119,507

Supplemental Disclosures:
Cash paid for interest	$	52,518		$	—		$	(186	)	$	52,332		$	1,363		$	—	$	—		$	1,363
Cash paid for income taxes	$	—		$	—		$	7,616		$	7,616		$	222		$	—	$	—		$	222

Non-cash investing and financing activities:
Common stock issued through distribution reinvestment plan	$	—		$	—		$	—		$	—		$	7,498		$	—	$	—		$	7,498

(1)	These five depreciation and amortization line item captions have been consolidated into one line item caption named depreciation and amortization in the accompanying consolidated statements of cash flows.

(2)	This line item caption has been added and is included in the accompanying consolidated statements of cash flows for the period ended March 31, 2014.

(3)	This line item has been removed from the accompanying consolidated statements of cash flows for the period ended March 31, 2014.