Note 5 — Acquisitions of CapLease, Cole and CCPT (As Restated)

CapLease Acquisition

On November 5, 2013 (the “CapLease Acquisition Date”), the Company completed the CapLease Merger, an acquisition of a real estate investment trust that primarily owned and managed a diversified portfolio of single tenant commercial real estate properties subject to long-term leases, the majority of which were net leases, to high credit quality tenants, by acquiring 100% of the outstanding common stock and voting interests of CapLease. The acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The Company’s consolidated financial statements include the results of operations of CapLease subsequent to the CapLease Acquisition Date.

The purchase price includes a cash payment of $920.7 million, which was funded by the Company through additional borrowings under its revolving credit facility and the credit facility assumed from CapLease. See Note 13 — Other Debt and Note 14 — Credit Facilities.

The purchase price allocation for the CapLease Merger is considered preliminary, and additional adjustments may be recorded during the measurement period in accordance with U.S. GAAP. The purchase price allocation will be finalized as the Company receives additional information relevant to the acquisition, including a final valuation of the assets purchased and liabilities assumed.

The preliminary purchase price for the acquisition was allocated to assets acquired and liabilities assumed based on their estimated fair value and reflects a goodwill adjustment identified in the Amended 10-K in Note 2 — Restatement of Previously Issued Financial Statements. The following table presents the allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the CapLease Acquisition Date (in thousands):


	As of the CapLease Acquisition Date ⁽¹⁾
Fair value of consideration given	$	920,697


Assets purchased, at fair value:
Land		235,843
Buildings, fixtures and improvements		1,596,481
Land and construction in process		12,352
Acquired intangible lease assets		191,964

Total real estate investments		2,036,640
Cash and cash equivalents		41,799
Investment securities		60,730
Loans held for investment		26,457
Restricted cash		29,119
Deferred costs and other assets, net		21,574

Total identifiable assets purchased		2,216,319


Liabilities assumed, at fair value:
Mortgage notes payable		1,037,510
Secured credit facility		121,000
Other debt		114,208
Below-market leases		57,058
Derivative liabilities		158
Accounts payable and accrued expenses		49,291
Deferred rent, derivative and other liabilities		8,619

Total liabilities assumed		1,387,844


Non-controlling interest retained by third party		567


Net identifiable assets acquired by Company		827,908

Goodwill	$	92,789

(1)	As reported in the Amended 10-K.

Management is in the process of further evaluating the purchase price accounting. The fair value of real estate investments and below-market leases have been estimated by the Company with the assistance of third party valuation firms. Based on a preliminary analysis received to-date, the estimated fair value of these assets and liabilities total $2.0 billion and $57.1 million, respectively. The recorded values represent the estimated fair values related to such assets and liabilities. Upon completion of the analysis, including a review of the appraisals and assessment of current market rates, changes to the estimated fair values may result. Such post-closing adjustments are customary in nature in accordance with ASC 805, Business Combinations.

The ascribed value of the non-controlling interest has been estimated based on the fair value of the percentage ownership of The Woodlands, Texas development activity not held by the Company. See Note 7 — Real Estate Investments (As Restated) for further information on this development project.

The fair value of the remaining CapLease assets and liabilities have been calculated in accordance with the Company’s policy on purchase price allocation, as disclosed in the Amended 10-K for the year ended December 31, 2013.

Goodwill of approximately $92.8 million has been preliminarily assigned to the REI segment. The goodwill recognized is attributed to the enhancement of the Company’s year-round rental revenue stream, expected synergies and the assembled work force at CapLease.

The pro forma consolidated statements of operations in Note 7 — Real Estate Investments (As Restated) are presented as if CapLease had been included in the consolidated results of the Company for the entire periods ended June 30, 2014 and 2013.

Cole Acquisition

The Company accounted for the Cole Merger as a business combination under the acquisition method of accounting. Therefore, the Company’s consolidated financial statements include the results of operations of Cole subsequent to the Cole Acquisition Date.

Fair Value of Consideration Transferred

The Company is in the process of gathering certain additional information in order to finalize its assessment of the fair value of the consideration transferred; thus, the fair values of currently recorded assets and liabilities are subject to change. The estimated fair value of the consideration transferred at the Cole Acquisition Date totaled approximately $7.5 billion and consisted of the following (in thousands):


	As of Cole Acquisition Date (Preliminary)
Estimated Fair Value of Consideration Transferred:
Cash	$	181,775
Common stock		7,285,868

Total consideration transferred	$	7,467,643

The fair value of the 520.8 million shares of common stock issued, excluding those common shares transferred to former Cole executives, was determined based on the closing market price of the Company’s common stock on the Cole Acquisition Date.

Allocation of Consideration

The consideration transferred pursuant to the Cole Merger Agreement was allocated to the assets acquired and liabilities assumed for the REI segment and Cole Capital, based upon their preliminary estimated fair values as of the Cole Acquisition 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. Such post-closing adjustments are customary in nature in accordance with ASC 805, Business Combinations. The measurement periods recorded for the period from the Cole Acquisition Date to June 30, 2014 are presented consolidated and by segments in the tables below.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed, including all measurement period adjustments, at the Cole Acquisition Date (in thousands):


	Preliminary
	REI Segment		Cole Capital		Total as of Cole Acquisition Date
Identifiable Assets Acquired at Fair Value:
Land	$	1,737,839	$	—	$	1,737,839
Buildings, fixtures and improvements		5,901,827		—		5,901,827
Intangible lease assets		1,324,217		—		1,324,217

Total real estate investments		8,963,883		—		8,963,883
Investment in unconsolidated entities		100,659		3,307		103,966
Investment securities		151,197		—		151,197
Loans held for investment		72,326		—		72,326
Cash and cash equivalents		129,552		20,413		149,965
Restricted cash		15,704		—		15,704
Intangible assets		—		385,368		385,368
Deferred costs and other assets		43,774		50,893		94,667
Due from affiliates		—		3,301		3,301

Total identifiable assets acquired		9,477,095		463,282		9,940,377


Identifiable Liabilities Assumed at Fair Value:
Mortgage notes payable	$	2,706,585	$	—	$	2,706,585
Credit facilities		1,309,000		—		1,309,000
Other debt, net		49,013		—		49,013
Below-market lease intangibles		212,433		—		212,433
Accounts payable and accrued expenses		87,628		54,615		142,243
Prepaid rent, derivative and other liabilities		67,841		167,458		235,299
Dividends payable		6,271		—		6,271
Due to affiliates		—		44		44

Total liabilities assumed		4,438,771		222,117		4,660,888


Non-controlling interests		24,766		—		24,766

Net identifiable assets acquired		5,013,558		241,165		5,254,723
Goodwill		1,654,085		558,835		2,212,920

Net assets acquired	$	6,667,643	$	800,000	$	7,467,643

The fair value of real estate investments, including acquired lease intangibles, and below-market lease liabilities allocated to the REI segment have been estimated by the Company with the assistance of a third party valuation firm. Based on a preliminary analysis received to date, the estimated fair value of these assets and liabilities total $9.0 billion and $212.4 million, respectively. The recorded values represent the estimated fair values related to such assets and liabilities. Upon completion of the analysis, including a review of the appraisals and assessment of current market rates, changes to the estimated fair values may result.

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 $38.0 million of amortization expense for the period from the Cole Acquisition Date to June 30, 2014. The estimated amortization expense for the remainder of the year ending December 31, 2014 is $48.6 million. The estimated amortization expense for each of the years ending December 31, 2015, 2016 and 2017 is $96.3 million and the estimated amortization expense for the year ending December 31, 2018 is $9.8 million.

Goodwill of approximately $1.7 billion has been preliminarily assigned to the REI segment. The goodwill recognized is attributed to the enhancement of the Company’s year-round rental revenue stream, realized and expected synergies, the impact of the merger on lowering the Company’s cost of capital, as well as the benefits of critical mass, improved portfolio diversification and enhanced access to capital markets. Goodwill of approximately $558.8 million has been preliminarily assigned to Cole Capital. The goodwill is primarily supported by management’s belief that Cole Capital 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.

The fair value of the remaining Cole assets and liabilities have been calculated in accordance with the Company’s policy on purchase price allocation, as disclosed in the Amended10-K for the year ended December 31, 2013.

The amounts of revenue and net income related to Cole property acquisitions and Cole Capital included in the accompanying consolidated statements of operations from the Cole Acquisition Date to the period ended June 30, 2014 were $366.2 million and $32.0 million, respectively.

The pro forma consolidated statements of operations in Note 7 — Real Estate Investments (As Restated) are presented as if Cole had been included in the consolidated results of the Company for the entire periods ended June 30, 2014 and 2013.

CCPT Acquisition

On May 19, 2014, the Company completed its acquisition of CCPT, as discussed in Note 3 — Mergers and Acquisitions (As Restated). The Company accounted for the CCPT Merger as a business combination under the acquisition method of accounting. Therefore, the Company’s consolidated financial statements include the results of operations of CCPT subsequent to the CCPT Acquisition Date.

Fair Value of Consideration Transferred

The Company is in the process of gathering certain additional information in order to finalize its assessment of the fair value of the consideration transferred; thus, the fair values of currently recorded assets and liabilities are subject to change. The estimated fair value of the consideration transferred at the CCPT Acquisition Date totaled approximately $73.2 million, which was paid in cash. The acquisition was funded by the Company through additional borrowings under its revolving credit facility.

Allocation of Consideration

The consideration transferred pursuant to the CCPT Merger Agreement was allocated to the assets acquired and liabilities assumed based upon their preliminary estimated fair values as of the CCPT Acquisition 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. Such post-closing adjustments are customary in nature in accordance with ASC 805, Business Combinations. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed by segment at the CCPT Acquisition Date (in thousands):


	Preliminary May 19, 2014
Identifiable Assets Acquired at Fair Value:
Land	$	28,258
Buildings, fixtures and improvements		113,296
Acquired intangible lease assets		17,960

Total real estate investments		159,514
Cash and cash equivalents		167
Restricted cash		2,420
Prepaid expenses and other assets		297

Total identifiable assets acquired		162,398

Identifiable Liabilities Assumed at Fair Value:
Mortgage notes payable		85,286
Unsecured credit facility		800
Accounts payable and accrued expenses		443
Below-market lease liability		1,752
Due to affiliates		568
Deferred rent and other liabilities		390

Total liabilities assumed		89,239



Net identifiable assets acquired	$	73,159

The fair value of real estate investments, including acquired lease intangibles, and below-market lease liabilities have been estimated by the Company with the assistance of a third party valuation firm. Based on a preliminary analysis received to date, the estimated fair value of these assets and liabilities total $159.5 million and $1.8 million, respectively. The recorded values represent the estimated fair values related to such assets and liabilities. Upon completion of the analysis, including a review of the appraisals and assessment of current market rates, changes to the estimated fair values may result.

The fair value of the remaining CCPT assets and liabilities have been calculated in accordance with the Company’s policy on purchase price allocation, as disclosed in the Amended 10-K for the year ended December 31, 2013.

The amounts of revenue and net loss related to CCPT property acquisitions included in the accompanying consolidated statements of operations from the Cole Acquisition Date to the period ended June 30, 2014 were $1.5 million and $0.3 million, respectively.