Segment Reporting

The Company has organized its operations into two segments for management and internal financial reporting purposes, REI and Cole Capital, as further discussed below.

REI – Through its REI segment, the Company owns and actively manages a diversified portfolio of retail, restaurant, office and industrial real estate properties subject to long-term net leases with creditworthy tenants. As of September 30, 2017, the Company owned 4,094 properties comprising 92.5 million square feet of retail and commercial space located in 49 states, Puerto Rico and Canada, which includes properties owned through consolidated joint ventures. The rentable space at these properties was 98.7% leased with a weighted-average remaining lease term of 9.5 years. In addition, as of September 30, 2017, the Company owned eight commercial mortgage-backed securities (“CMBS”) and eight mortgage notes receivable.

Cole Capital – Through its Cole Capital segment, the Company is responsible for managing the day-to-day affairs of Cole Credit Property Trust IV, Inc. (“CCPT IV”); Cole Real Estate Income Strategy (Daily NAV), Inc. (“INAV”); Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”); Cole Office & Industrial REIT (CCIT III), Inc. (“CCIT III”); Cole Credit Property Trust V, Inc. (“CCPT V”); and other real estate offerings in registration (collectively with CCPT IV, INAV, CCIT II, CCIT III and CCPT V, the “Cole REITs”), raising capital for those Cole REITs still in offering, identifying and making acquisitions and investments on the Cole REITs’ behalf and recommending to the respective board of directors of each of the Cole REITs an approach for providing investors with liquidity. Cole Capital serves as the dealer manager and distributes shares of common stock for certain Cole REITs, 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. Cole Capital receives compensation and reimbursement for services relating to the Cole REITs’ offerings and the investment, management, financing and disposition of their respective assets, as applicable. Cole Capital also develops new REIT offerings and assists in obtaining regulatory approvals from the SEC, the Financial Industry Regulatory Authority, Inc. and various blue sky jurisdictions for such offerings. See Note 17 – Related Party Transactions and Arrangements for further discussion on the Cole REITs.

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
REI segment:
Revenues:
Rental income	$	282,341		$	303,383		$	862,371		$	928,706
Direct financing lease income	376			494			1,212			1,598
Operating expense reimbursements	23,826			27,969			72,103			77,862
Total real estate investment revenues	306,543			331,846			935,686			1,008,166
Operating expenses:
Acquisition-related	909			90			2,246			334
Litigation and other non-routine costs, net of insurance recoveries	9,507			4,630			36,793			2,372
Property operating	30,645			34,820			96,288			107,832
General and administrative	13,075			12,069			39,929			37,998
Depreciation and amortization	171,576			187,897			529,306			574,124
Impairment of real estate	6,363			6,872			30,857			176,214
Total operating expenses	232,075			246,378			735,419			898,874
Operating income	74,468			85,468			200,267			109,292
Other (expense) income:
Interest expense	(71,708		)	(79,869		)	(219,072		)	(242,763		)
Gain (loss) on extinguishment and forgiveness of debt, net	9,756			(2,003		)	18,691			(1,751		)
Other income, net	1,405			1,649			3,834			3,433
Equity in income and gain on disposition of unconsolidated entities	374			212			805			10,686
Gain (loss) on derivative instruments, net	1,294			(2,023		)	2,710			(3,286		)
Total other expenses, net	(58,879		)	(82,034		)	(193,032		)	(233,681		)
Income (loss) before taxes and real estate dispositions	15,589			3,434			7,235			(124,389		)
(Loss) gain on disposition of real estate and held for sale assets, net	(688		)	28,111			54,432			45,723
Income (loss) before taxes	14,901			31,545			61,667			(78,666		)
Provision for income taxes	(1,185		)	(1,539		)	(5,439		)	(4,695		)
Net income (loss)	$	13,716		$	30,006		$	56,228		$	(83,361	)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Cole Capital segment:
Revenues:
Offering-related fees and reimbursements	$	3,882		$	9,545		$	12,721		$	32,850
Transaction service fees and reimbursements	4,000			3,779			13,159			10,639
Management fees and reimbursements	19,303			17,745			57,121			51,299
Total Cole Capital revenues	27,185			31,069			83,001			94,788
Operating expenses:
Cole Capital reallowed fees and commissions	2,373			5,897			7,907			20,940
Acquisition-related	—			—			36			39
General and administrative	16,721			17,692			48,426			54,257
Depreciation and amortization	4,947			7,276			14,657			22,702
Total operating expenses	24,041			30,865			71,026			97,938
Operating income (loss)	3,144			204			11,975			(3,150		)
Total other income, net	502			95			706			589
Income (loss) before taxes	3,646			299			12,681			(2,561		)
(Provision for) benefit from income taxes	(868		)	(59		)	(3,439		)	3,321
Net income	$	2,778		$	240		$	9,242		$	760

Total Company:
Total revenues	$	333,728		$	362,915		$	1,018,687		$	1,102,954
Total operating expenses	$	(256,116	)	$	(277,243	)	$	(806,445	)	$	(996,812	)
Total other expense, net	$	(58,377	)	$	(81,939	)	$	(192,326	)	$	(233,092	)
Net income (loss)	$	16,494		$	30,246		$	65,470		$	(82,601	)



	Total Assets
	September 30, 2017		December 31, 2016
REI segment	$	14,522,637	$	15,337,623
Cole Capital segment	214,096		249,951
Total Company	$	14,736,733	$	15,587,574