Real Estate Investments

The Company acquired controlling financial interests in 14 commercial properties, including nine land parcels for build-to-suit development, for an aggregate purchase price of $10.2 million during the six months ended June 30, 2015 (the “2015 Acquisitions”). During the six months ended June 30, 2014, the Company acquired controlling interests in 337 commercial properties, excluding the properties acquired in the Cole Merger and the ARCT IV Merger, for an aggregate purchase price of $1.5 billion. The following table presents the preliminary allocation of the fair values of the assets acquired and liabilities assumed during the periods presented (in thousands):



	Six Months Ended June 30,
	2015			2014
Real estate investments, at cost:
Land	$	2,043		$	239,663
Buildings, fixtures and improvements	5,249			946,381
Land and construction in progress	2,140			239,260
Total tangible assets	9,432			1,425,304
Acquired intangible assets:
In-place leases	715			128,581
Above-market leases	168			21,145
Assumed intangible liabilities:
Below-market leases	(108		)	(3,321		)
Fair value adjustment of assumed notes payable	—			(23,589		)
Total purchase price of assets acquired, net	10,207			1,548,120
Mortgage notes payable assumed	—			(301,532		)
Cash paid for acquired real estate investments	$	10,207		$	1,246,588

Future Lease Payments

The following table presents future minimum base rent payments due to the Company over the next five years and thereafter. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items (in thousands):



	Future Minimum Operating Lease Base Rent Payments		Future Minimum Direct Financing Lease Payments ⁽¹⁾
July 1, 2015 - December 31, 2015	$	607,976	$	2,333
2016	1,243,488		4,672
2017	1,212,653		4,271
2018	1,176,142		3,182
2019	1,135,398		2,380
Thereafter	10,051,959		7,937
Total	$	15,427,616	$	24,775

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(1)	37 properties are subject to direct financing leases and, therefore, revenue is recognized as direct financing lease income on the discounted cash flows of the lease payments. Amounts reflected are the minimum base rental cash payments due to the Company under the lease agreements on these respective properties.

Investment in Direct Financing Leases, Net

The components of the Company’s net investment in direct financing leases as of June 30, 2015 and December 31, 2014 are as follows (in thousands):



	June 30, 2015			December 31, 2014
Future minimum lease payments receivable	$	24,775		$	27,199
Unguaranteed residual value of property	33,558			39,852
Unearned income	(8,532		)	(10,975		)
Net investment in direct financing leases	$	49,801		$	56,076

Development Activities

The Company has contracted with a developer to complete a portfolio of build-to suit development projects, of which, as of June 30, 2015, 19 have been completed, for an aggregate cost of $41.1 million to date, and the remaining 18 projects are estimated to be completed within the next 12 months. Pursuant to the agreement between the Company and the developer, the Company will acquire the respective land parcel for each development and subsequently pay a fixed construction draw until the project is complete. The Company is also in the process of completing six other build-to-suit, redevelopment and expansion projects, which are expected to increase our revenue as a result of the additional square footage and improvement of the quality of the properties. Below is a summary of the construction commitments as of June 30, 2015 (dollar amounts in thousands):



Development projects in progress	24

Investment to date	$	67,911
Estimated cost to complete ⁽¹⁾	26,195
Total Investment ⁽²⁾	$	94,106

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(1) The Company is contractually committed to fund a developer $12.9 million to complete the remaining 18 build-to-suit developments.

(2) Excludes tenant improvement costs incurred in accordance with existing leases. As of June 30, 2015, $10.7 million of tenant improvement costs were included in land and construction in progress in the consolidated financial statements.

Unconsolidated Joint Ventures

As of June 30, 2015, the Company had interests in six unconsolidated joint ventures with aggregate equity investments of $90.8 million, which had interests in six properties comprising 1.6 million of square feet of retail and office space (the “Unconsolidated Joint Ventures”). The following is a summary of the Company’s percentage ownership and carrying amount related to each of the unconsolidated joint ventures (dollar amounts in thousands):



Name of Joint Venture	Partner	Ownership %		Carrying Amount of Investment ⁽²⁾
Cole/Mosaic JV South Elgin IL, LLC	Affiliate of Mosaic Properties and Development, LLC	50%		$	7,003
SanTan Festival, LLC	Propstra Chandler Trust & RED Development, LLC	45%	⁽¹⁾	4,586
Chandler Village Center, LLC	Propstra Chandler Trust & RED Development, LLC	45%	⁽¹⁾	20,612
Cole/LBA JV OF Pleasanton CA, LLC	Affiliate of LBA Realty	90%		34,508
Chandler Gateway Partners, LLC	Propstra Chandler Trust & RED Development, LLC	45%	⁽¹⁾	9,663
Cole/Faison JV Bethlehem GA, LLC	Faison-Winder Investors, LLC	90%		14,422
				$	90,794

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(1) Represents the Company's 90% interest in a consolidated joint venture, whose only assets are 50% interests in the respective unconsolidated joint ventures.

(2) The total carrying amount of the investments is greater than the underlying equity in net assets by $55.9 million. This difference relates to a purchase price allocation of goodwill and a step up in fair value of the investment assets acquired in connection with the Cole Merger. The step up in fair value was allocated to the individual investment assets and is being amortized in accordance with the Company's depreciation policy.

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. The Company records its proportionate share of net income from the Unconsolidated Joint Ventures in other income, net in the accompanying consolidated statements of operations. During the three and six months ended June 30, 2015, the Company recognized $1.3 million and $1.4 million, respectively, of equity in income from the Unconsolidated Joint Ventures, which is included in other income, net in the accompanying consolidated statements of operations. During the three and six months ended June 30, 2014, the Company recognized $0.4 million and $1.4 million of equity in income from the Unconsolidated Joint Ventures, respectively.

Tenant Concentration

As of June 30, 2015, leases with Red Lobster^® restaurants represented 11.9% of consolidated annualized rental income. Annualized rental income is rental revenue under our leases reflecting straight-line rent adjustments associated with contractual rent increases in the leases as required by GAAP, which includes the effect of any tenant concessions, such as free rent, and excludes any contingent rent, such as percentage rent. There were no other tenants exceeding 10% of consolidated annualized rental income as of June 30, 2015.

Geographic Concentration

As of June 30, 2015, properties located in Texas represented 12.9% of consolidated annualized rental income. There were no other geographic concentrations exceeding 10% of consolidated annualized rental income as of June 30, 2015.

Industry Concentration

As of June 30, 2015, tenants in the casual dining restaurant industry accounted for 18.8% of consolidated annualized rental income. There were no other industry concentrations exceeding 10% of consolidated annualized rental income as of June 30, 2015.