8-K

United States

Securities and Exchange Commission
Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report:  October 1, 2012
(Date of Earliest Event Reported)

REALTY INCOME CORPORATION
(Exact name of registrant as specified in its charter)

Maryland	1-13374	33-0580106
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(IRS Employer Identification No.)

600 La Terraza Boulevard, Escondido, California 92025-3873
(Address of principal executive offices)

(760) 741-2111
(Registrant’s telephone number, including area code)

N/A
(former name or former address, if changed since last report)

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:

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

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

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

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

Item 8.01Other Events.

As previously disclosed on September 6, 2012, Realty Income Corporation, a Maryland corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Tau Acquisition LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Merger Sub”), and American Realty Capital Trust, Inc. a Maryland corporation (“ARCT”).  The Merger Agreement provides for the merger of ARCT with and into Merger Sub (the “Merger”), with Merger Sub surviving as a wholly owned subsidiary of the Company.

The Company is filing this Current Report on Form 8-K to provide certain financial information with respect to the proposed Merger.  Specifically, this Current Report on Form 8-K provides: (1) ARCT’s audited consolidated financial statements as of December 31, 2011 and 2010, and for each of the years in the three year period ended December 31, 2011, attached herewith as Exhibit 99.1, (2) ARCT’s unaudited consolidated financial statements as of June 30, 2012 and for the three and six month periods ended June 30, 2012 and 2011, attached herewith as Exhibit 99.2 and (3) the Company’s unaudited pro forma condensed consolidated financial statements as of and for the six month period ended June 30, 2012 and for the year ended December 31, 2011, relating to the proposed Merger, attached herewith as Exhibit 99.3.  The information in Exhibits 99.1 and 99.2 was provided by ARCT.

Additional Information and Where to Find It

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed transaction, the Company and ARCT have filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 containing a joint proxy statement/prospectus and other documents regarding the proposed transaction. The joint proxy statement/prospectus contains important information about the proposed transaction and related matters. STOCKHOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC CAREFULLY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, ARCT AND THE PROPOSED TRANSACTION. NEITHER THE FORM S-4 NOR THE JOINT PROXY STATEMENT/PROSPECTUS CONTAINED THEREIN IS INCORPORATED BY REFERENCE OR CONSTITUTES A PART OF THIS CURRENT REPORT ON FORM 8-K.

Investors and security holders of the Company may obtain free copies of the registration statement, the joint proxy statement/prospectus and other relevant documents filed by the Company and ARCT with the SEC through the website maintained by the SEC at www.sec.gov. Copies of the documents filed by the Company with the SEC are also available on the Company’s website at www.realtyincome.com, and copies of the documents filed by ARCT with the SEC are available on ARCT’s website at www.ir.arctreit.com.

2

The Company, ARCT and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company’s and ARCT’s stockholders in respect of the proposed transaction. Information regarding the Company’s directors and executive officers can be found in the Company’s definitive proxy statement filed with the SEC on March 30, 2012. Information regarding ARCT’s directors and executive officers can be found in ARCT’s definitive proxy statement filed with the SEC on May 21, 2012. Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and other relevant documents filed with the SEC in connection with the proposed transaction if and when they become available. These documents are available on the SEC’s website and from the Company or ARCT, as applicable, using the sources indicated above.

Item 9.01         Financial Statements and Exhibits

(a)Financial Statements of Businesses Acquired

The audited consolidated financial statements of ARCT as of December 31, 2011 and 2010 and for each of the years in the three year period ended December 31, 2011 are filed herewith as Exhibit 99.1 and incorporated in this Item 9.01(a) by reference.

The unaudited consolidated financial statements of ARCT as of June 30, 2012 and for the three and six month periods ended June 30, 2012 and 2011 are filed herewith as Exhibit 99.2 and incorporated in this Item 9.01(a) by reference.

(b)Pro Forma Financial Information

The unaudited pro forma condensed consolidated financial statements of the Company as and for the six month period ended June 30, 2012 and for the year ended December 31, 2011, giving effect to the Merger, are filed herewith as Exhibit 99.3 and incorporated in this Item 9.01(b) by reference.

(d)  Exhibits

23.1	Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm.
99.1	Audited consolidated financial statements of ARCT as of December 31, 2011 and 2010, and for each of the years in the three year period ended December 31, 2011.
99.2	Unaudited consolidated financial statements of ARCT as of June 30, 2012 and for the three and six month periods ended June 30, 2012 and 2011.
99.3	Unaudited pro forma condensed consolidated financial statements of the Company as of and for the six month period ended June 30, 2012 and for the year ended December 31, 2011.

3

SIGNATURE

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 hereunto duly authorized.

Dated: October 1, 2012	REALTY INCOME CORPORATION
	By:	/s/ MICHAEL R. PFEIFFER
		Michael R. Pfeiffer
		Executive Vice President, General Counsel and Secretary

4

INDEX TO EXHIBITS

Exhibit No.	Description
23.1	Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm.
99.1	Audited consolidated financial statements of ARCT as of December 31, 2011 and 2010, and for each of the years in the three year period ended December 31, 2011.
99.2	Unaudited consolidated financial statements of ARCT as of June 30, 2012 and for the three and six month periods ended June 30, 2012 and 2011.
99.3	Unaudited pro forma condensed consolidated financial statements of the Company as of and for the six months ended June 30, 2012 and for the year ended December 31, 2011.

5

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated February 15, 2012, with respect to the consolidated financial statements and schedule of American Realty Capital Trust, Inc. and subsidiaries included in the Current Report of Realty Income Corporation on Form 8-K, dated October 1, 2012.  We hereby consent to the incorporation by reference of said report in the Registration Statement No. 333-158169 on Form S-3 and Registration Statement Nos. 033-97508, 333-102080 and 333-105504 and 333-181227 on Form S-8 of Realty Income Corporation.

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

October 1, 2012

EX-99.1

Exhibit 99.1

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Financial Statements
Report of Independent Registered Public Accounting Firm	2
Consolidated Balance Sheets as of December 31, 2011 and 2010	3
Consolidated Statements of Operations for the Years Ended December 31, 2011, 2010 and 2009	4
Consolidated Statement of Changes in Equity for the Years Ended December 31, 2011, 2010 and 2009	5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009	6
Notes to Consolidated Financial Statements	8
Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2011	35

1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

American Realty Capital Trust, Inc.

We have audited the accompanying consolidated balance sheets of American Realty Capital Trust, Inc. and subsidiaries (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, changes in equity and cash flows for each of the three years in the period ended December 31, 2011. Our audits of the basic consolidated financial statements included the financial statement schedule listed in the index appearing under Item 15(a). These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule 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 audit 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Realty Capital Trust, Inc. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

February 15, 2012

2

AMERICAN REALTY CAPITAL TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	December 31,
	2011			2010
ASSETS
Real estate investments, at cost:
Land	$	325,458		$	142,401
Buildings, fixtures and improvements	1,528,962			631,999
Acquired intangible lease assets	271,751			108,193
Total real estate investments, at cost	2,126,171			882,593
Less accumulated depreciation and amortization	(101,576		)	(32,777		)
Total real estate investments, net	2,024,595			849,816
Cash and cash equivalents	33,329			31,985
Investment securities, at fair value	17,275			—
Restricted cash	2,728			90
Investment in unconsolidated joint venture	11,201			11,945
Prepaid expenses and other assets	27,564			12,049
Deferred costs, net	13,883			8,169
Total assets	$	2,130,575		$	914,054
LIABILITIES AND EQUITY
Mortgage notes payable	$	673,978		$	372,755
Mortgage discount and premium, net	679			1,163
Long-term notes payable	—			12,790
Revolving credit facility	10,000			—
Below-market lease liabilities, net	8,150			8,454
Derivatives, at fair value	8,602			5,214
Accounts payable and accrued expenses	11,706			3,638
Deferred rent and other liabilities	6,619			3,858
Distributions payable	10,637			3,518
Total liabilities	730,371			411,390
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding	—			—
Common stock, $0.01 par value; 240,000,000 shares authorized, 177,963,413 and 61,824,238 shares issued and outstanding at December 31, 2011 and 2010, respectively	1,780			618
Additional paid-in capital	1,548,009			529,740
Accumulated other comprehensive loss	(5,053		)	(3,878		)
Accumulated deficit	(166,265		)	(46,464		)
Total stockholders’ equity	1,378,471			480,016
Non-controlling interests	21,733			22,648
Total equity	1,400,204			502,664
Total liabilities and equity	$	2,130,575		$	914,054

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

3

AMERICAN REALTY CAPITAL TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Year Ended December 31,
	2011			2010			2009
Revenues:
Rental income	$	124,851		$	44,773		$	14,964
Operating expense reimbursements	4,269			—			—
Total revenues	129,120			44,773			14,964
Operating expenses:
Acquisition and transaction related	30,005			12,471			506
Property operating	5,297			—			—
Asset management fees to affiliate	5,572			1,350			145
General and administrative	4,167			1,444			507
Depreciation and amortization	68,940			21,654			8,315
Total operating expenses	113,981			36,919			9,473
Operating income	15,139			7,854			5,491
Other income (expenses):
Interest expense	(37,373		)	(18,109		)	(10,352		)
Equity in income of unconsolidated joint venture	96			—			—
Other income, net	766			765			51
Unrealized loss on derivative instruments	(2,539		)	(305		)	495
Gain (loss) on disposition of property	(44		)	143			—
Total other expenses	(39,094		)	(17,506		)	(9,806		)
Net loss	(23,955		)	(9,652		)	(4,315		)
Net (income) loss attributable to non-controlling interests	(1,121		)	(181		)	49
Net loss attributable to stockholders	$	(25,076	)	$	(9,833	)	$	(4,266	)
Basic and diluted net loss attributable to stockholders per share	$	(0.20	)	$	(0.31	)	$	(0.74	)

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

4

AMERICAN REALTY CAPITAL TRUST, INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Years Ended December 31, 2011, 2010, and 2009

(Dollar amounts in thousands)

	Common Stock								Accumulated Other									Non-
	Number of Shares		Par Value			Additional Paid-In Capital			Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity			controlling Interests			Total Equity
Balance, January 01, 2009	1,276,814		$	13		$	9,220		$	(2,676	)	$	(4,798	)	$	1,759		$	—		$	1,759
Issuance of common stock	13,259,941		133			131,478			—			—			131,611			—			131,611
Offering costs, commissions and dealer manager fees	—		—			(19,478		)	—			—			(19,478		)	—			(19,478		)
Common stock issued through distribution reinvestment plan	135,482		1			1,286			—			—			1,287			—			1,287
Distributions declared	—		—			—			—			(4,605		)	(4,605		)	—			(4,605		)
Contributions from non-controlling interests	—		—			—			—			—			—			3,458			3,458
Distributions to non-controlling interest holders	—		—			—			—			—			—			(100		)	(100		)
Designated derivatives, fair value adjustment	—		—			—			939			—			939			—			939
Net loss	—		—			—			—			(4,266		)	(4,266		)	(49		)	(4,315		)
Total comprehensive income (loss)	—		—			—			—			—			(3,327		)	(49		)	(3,376		)
Balance, December 31, 2009	14,672,237		147			122,506			(1,737		)	(13,669		)	107,247			3,309			110,556
Issuance of common stock	45,724,124		457			452,158			—			—			452,615			—			452,615
Offering costs, commissions and dealer manager fees	—		—			(51,699		)	—			—			(51,699		)	—			(51,699		)
Common stock issued through distribution reinvestment plan	980,906		10			9,309			—			—			9,319			—			9,319
Distributions declared	—		—			—			—			(22,962		)	(22,962		)	—			(22,962		)
Common stock redemptions	(262,029	)	(3		)	(2,958		)	—			—			(2,961		)	—			(2,961		)
Share based compensation	709,000		7			(7		)	—			—			—			—			—
Amortization of restricted stock	—		—			431			—			—			431			—			431
Contributions from non-controlling interests	—		—			—			—			—			—			21,003			21,003
Gain on sale of assets to non-controlling interest holders	—		—			—			—			—			—			(778		)	(778		)
Distributions to non-controlling interest holders	—		—			—			—			—			—			(1,067		)	(1,067		)
Designated derivatives, fair value adjustment	—		—			—			(2,141		)	—			(2,141		)	—			(2,141		)
Net income (loss)	—		—			—			—			(9,833		)	(9,833		)	181			(9,652		)
Total comprehensive income (loss)	—		—			—			—			—			(11,974		)	181			(11,793		)
Balance, December 31, 2010	61,824,238		618			529,740			(3,878		)	(46,464		)	480,016			22,648			502,664
Issuance of common stock	112,795,422		1,128			1,112,561			—			—			1,113,689			—			1,113,689
Offering costs, commissions and dealer manager fees	—		—			(124,297		)	—			—			(124,297		)	—			(124,297		)
Common stock issued through distribution reinvestment plan	4,112,949		41			39,032			—			—			39,073			—			39,073
Distributions declared	—		—			—			—			(94,725		)	(94,725		)	—			(94,725		)
Common stock redemptions	(821,846	)	(8		)	(10,503		)	—			—			(10,511		)	—			(10,511		)
Share based compensation	52,650		1			(1		)	—			—			—			—			—
Amortization of restricted stock	—		—			1,477			—			—			1,477			—			1,477
Distributions to non-controlling interest holders	—		—			—			—			—			—			(2,036		)	(2,036		)
Designated derivatives, fair value adjustment	—		—			—			(825		)	—			(825		)	—			(825		)
Unrealized gain (loss) on investment securities, net	—		—			—			(350		)	—			(350		)	—			(350		)
Net income (loss)	—		—			—			—			(25,076		)	(25,076		)	1,121			(23,955		)
Total comprehensive income (loss)	—		—			—			—			—			(26,251		)	1,121			(25,130		)
Balance, December 31, 2011	177,963,413		$	1,780		$	1,548,009		$	(5,053	)	$	(166,265	)	$	1,378,471		$	21,733		$	1,400,204

The accompanying notes are an integral part of this financial statement.

5

AMERICAN REALTY CAPITAL TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2011			2010			2009
Cash flows from operating activities:
Net loss	$	(23,955	)	$	(9,652	)	$	(4,315	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	54,764			17,280			6,661
Amortization of intangibles	14,176			4,374			1,654
Amortization of deferred financing costs	4,481			1,158			562
Amortization of mortgage discounts and premiums, net	(153		)	—			—
Amortization of restricted stock grants	1,477			431			—
Accretion of below-market lease liability	(304		)	(311		)	(315		)
(Gain) loss on disposition of property	44			(143		)	—
Unrealized loss on derivative instruments	2,539			305			(495		)
Other	—			(778		)	—
Equity in income of unconsolidated joint venture	(96		)	—			—
Changes in assets and liabilities:
Prepaid expenses and other assets	(11,831		)	(7,616		)	(4,236		)
Accounts payable and accrued expenses	5,622			2,102			(181		)
Due to affiliated entity	—			—			(2,223		)
Deferred rent and other liabilities	2,761			2,714			362
Net cash provided by (used in) operating activities	49,525			9,864			(2,526		)
Cash flows from investing activities:
Investment in real estate and other assets	(1,186,775		)	(543,893		)	(173,786		)
Purchase of investment securities	(17,625		)	—			—
Investment in joint venture with affiliate	—			(12,000		)	—
Distributions from unconsolidated joint venture	840			—			—
Capital expenditures	(386		)	—			—
Proceeds from disposition of real estate and other assets	581			757			—
Net cash used in investing activities	(1,203,365		)	(555,136		)	(173,786		)
Cash flows from financing activities:
Proceeds from mortgage notes payable	287,602			217,827			72,084
Payments on mortgage notes payable	(43,808		)	(28,883		)	(1,016		)
Proceeds from revolving credit facilities	10,000			13,448			—
Payments on revolving credit facilities	—			(13,448		)	—
Proceeds from related party facility bridge and revolver	—			—			12,268
Payments on related party facility bridge and revolver	—			—			(27,245		)
Proceeds from short-term bridge funds	—			—			15,878
Payments on short-term bridge funds	—			(15,878		)	(11,954		)
Payments on convertible redeemable preferred	—			—			(3,995		)
Proceeds from long-term notes payable	—			—			11,911
Payments on long-term notes payable	(12,790		)	(210		)	—
Contributions from non-controlling interest holders	—			21,003			3,458
Distributions to non-controlling interest holders	(2,036		)	(1,067		)	(100		)
Proceeds from issuance of common stock, net	992,297			400,916			112,102
Payments of financing costs	(16,845		)	(6,827		)	(1,073		)
Distributions paid	(48,533		)	(11,626		)	(1,888		)
Redemptions paid	(8,065		)	(2,961		)	—
Restricted cash	(2,638		)	(47		)	5
Net cash provided by financing activities	1,155,184			572,247			180,435
Net increase in cash and cash equivalents	1,344			26,975			4,123
Cash and cash equivalents, beginning of year	31,985			5,010			887
Cash and cash equivalents, end of year	$	33,329		$	31,985		$	5,010

6

	Year Ended December 31,
	2011		2010		2009
Supplemental Disclosures:
Cash paid for interest	$	32,237	$	16,285	$	10,153
Cash paid for income taxes	144		388		—
Non-Cash Investing and Financing Activities:
Common stock issued through distribution reinvestment plan	39,073		9,319		1,287
Mortgages assumed in real estate acquisitions	57,098		24,068		—

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

7

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Note 1 — Organization

American Realty Capital Trust, Inc. (the “Company”), incorporated on August 17, 2007, is a Maryland corporation that qualifies as a real estate investment trust (“REIT”) for federal income tax purposes. On January 25, 2008, the Company commenced an initial public offering (“IPO”) on a “best efforts” basis of up to 150.0 million shares of common stock offered at a price of $10.00 per share, subject to certain volume and other discounts, pursuant to a registration statement on Form S-11 (the “Registration Statement”) filed with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended. The Registration Statement also covered up to 25.0 million shares of common stock available pursuant to a distribution reinvestment plan (the “DRIP”) under which the Company’s stockholders may elect to have their distributions reinvested in additional shares of the Company’s common stock at the greater of $9.50 per share, or 95% of the estimated value of a share of common stock.

On August 5, 2010, the Company filed a registration statement on Form S-11 to register 32.5 million shares of common stock in connection with a follow-on offering. The IPO was originally set to expire on January 25, 2011, three years after its effective date. However, as permitted by Rule 415 of the Securities Act, the Company was permitted to continue its IPO until July 25, 2011. On July 18, 2011, the Company’s IPO closed. All shares registered under the IPO and 22.2 million shares available under the DRIP were allocated to the IPO and sold. On July 11, 2011, the Company withdrew the registration for the additional 32.5 million shares in connection with the follow-on offering. In addition, on July 15, 2011, the Company filed a registration statement on Form S-3 to register an additional 24.0 million shares of common stock to be used for the DRIP.

The Company’s Board of Directors has determined that it is in the best interests of the Company and its stockholders to internalize the management services currently provided by American Realty Capital Advisors, LLC, which serves as the Company’s advisor (the “Advisor”), and American Realty Capital Properties, LLC, which, serves as the Company’s property manager (the “Property Manager”). The Company intends to become a self-administered REIT and will be managed full-time by William M. Kahane, one of the key executives who built the Company and assembled its property portfolio, and his management team (the “Internalization”). As part of our Internalization, the Company has applied to list its common stock on The NASDAQ Global Select Market under the symbol “ARCT” (the “Listing”). The Company anticipates that its common stock will be listed on NASDAQ on or about March 1, 2012. Furthermore, the Company intends to offer up to 6.6 million shares of its common stock in an underwritten public offering pursuant to a registration statement on Form S-11filed on February 15, 2012 with the SEC (the “Offering”). Upon consummation of the Listing, the Company expects to complete the Internalization and terminate its existing Advisory Agreement, which termination will be subject to a 60-day notice period (subject to three one-month extensions). Prior to Listing, the Company also intends to offer to purchase an amount in value of its shares of common stock between $200 million and $250 million from its stockholders, pursuant to a cash tender offer on Schedule TO to be filed with the SEC (the “Tender Offer”). The Tender Offer is subject to a number of customary conditions, including a financing condition.

As of December 31, 2011, the Company had 178.0 million shares of common stock outstanding including stock issued under the DRIP and restricted share plan. Total gross proceeds from these issuances were $1.8 billion, including shares issued pursuant to the DRIP.  As of December 31, 2011, the aggregate value of all share issuances and subscriptions outstanding was $1.8 billion based on a per share value of $10.00 (or $9.50 for shares issued under the DRIP). As of December 31, 2011, on a cumulative basis, 1.4 million shares of common stock had been redeemed under the stock repurchase program at a value of $13.5 million. Of that amount, 0.3 million shares with a redemption value of $2.8 million were accrued for redemption at December 31, 2011, and subsequently paid to stockholders in January 2012.

The Company has used the proceeds from its IPO to acquire and manage a diverse portfolio of real estate properties consisting primarily of freestanding, single-tenant properties net leased to investment grade and other creditworthy tenants throughout the United States and Puerto Rico. The Company typically funds acquisitions with a combination of equity and debt and in certain cases may use only equity capital or fund a portion of the purchase price through investments from unaffiliated third parties. The Company expects to arrange long-term financing on both a secured and unsecured fixed rate basis. The Company intends to continue to grow existing relationships and develop new relationships throughout the various markets the Company serves, which is expected to lead to further acquisition opportunities.

As of December 31, 2011, the Company owned 482 properties with 15.5 million square feet, 100% leased with a weighted average remaining lease term of 13.5 years. In constructing the portfolio, the Company has been committed to diversification (industry, tenant and geography).

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AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Substantially all of the Company’s business is conducted through American Realty Capital Operating Partnership, L.P. (the “OP”), a Delaware limited partnership. The Company is the sole general partner of and owns a 99.99% partnership interest in the OP. American Realty Capital Advisors, LLC, (the “Advisor”) is the sole limited partner and owner of 0.01% (non-controlling interest) of the partnership interests of the OP. The limited partner interests have the right to convert OP units into cash or, at the option of the Company, an equal number of common shares of the Company, as allowed by the limited partnership agreement.

Note 2 —Summary of Significant Accounting Policies

Basis of Accounting

The accompanying consolidated financial statements of the Company are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity for which the Company is the primary beneficiary.

Investment in Unconsolidated Joint Venture

The Company is a non-controlling member of a limited liability company that owns five condominium units, 100% leased and located in New York City. American Realty Capital New York Recovery REIT, Inc., an affiliate, is the controlling member. This investment is reflected as investment in unconsolidated joint venture in the accompanying consolidated financial statements.

The Company’s investment in this joint venture was $12.0 million, paid in December 2010. The cost basis of this investment is reduced by monthly distributions. The Company’s share of income and losses from the condominium units, which excludes depreciation and amortization pursuant to the limited liability company agreement, is recorded to investment in unconsolidated joint venture on the accompanying consolidated balance sheets and equity income of unconsolidated joint venture in the consolidated statement of operations. The Company was paid a 1% fee in connection with its investment and earns a preferred 7.0% return on its outstanding investment balance. See Note 11 — Related Party Transactions and Arrangements for additional information on this joint venture.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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. Management makes significant estimates regarding revenue recognition, to record investments in real estate, and derivative financial instruments and hedging activities, as applicable.

Real Estate Investments

The Company records acquired real estate at cost and makes assessments as to the useful lives of depreciable assets. The Company considers the period of future benefit of the asset to determine the appropriate useful lives. Depreciation is computed using a straight-line method over the estimated useful life of 40 years for buildings, five to 15 years for building fixtures and improvements and the remaining lease term for acquired intangible lease assets.

Impairment of Long Lived Assets

Operations related to properties that have been sold or properties that are intended to be sold are presented as discontinued operations in the statement of operations for all periods presented, and properties intended to be sold are designated as “held for sale” on the balance sheet.

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AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the asset for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists, due to the inability to recover the carrying value of a property, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income.

Allocation of Purchase Price of Acquired Assets

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, buildings, equipment 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. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates, the value of in-place leases, and the value of customer relationships.

Amounts allocated to land, buildings, equipment and fixtures are based on cost segregation studies performed by independent third-parties or on the Company’s analysis of comparable properties in its portfolio. Depreciation is computed using the straight-line method over the estimated lives of forty years for buildings, five to 15 years for building, equipment, fixtures and improvements, 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 by the Company in its 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 typically ranges from nine to 18 months. The Company also estimates costs to execute similar leases including leasing commissions, legal and other related expenses.

Above-market and below-market in-place lease values for owned properties 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-cancelable 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.

The aggregate value of intangible assets related to customer relationships is measured based on the Company’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the tenant. Characteristics considered by the Company in determining these values include the nature and extent of the Company’s existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors.

The value of in-place leases is amortized to expense over the initial term of the respective leases, which range primarily from 2 to 20 years. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.

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

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AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

and other market data. The Company also considers information obtained about each property as a result of its 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 consolidated balance sheets are substantially complete; however, there are certain items that the Company will finalize once the Company receives additional information. 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 the Company’s financial position or results of operations.

Intangible assets and acquired lease obligations consist of the following (amounts in thousands):

	December 31,
	2011		2010
Intangible assets:
In-place leases, gross	$	271,751	$	108,193
Accumulated amortization on in-place leases	20,677		6,513
In-place leases, net of accumulated amortization	$	251,074	$	101,680
Intangible liabilities:
Below-market leases, gross	$	9,087	$	9,087
Accumulated amortization on below market leases	937		633
Below-market leases, net of accumulated amortization	$	8,150	$	8,454

The following table provides the weighted-average amortization and accretion periods as of December 31, 2011 for intangible assets and liabilities and the projected amortization expense for the next five years (amounts in thousands):

	Weighted- Average Amortization Period in Years	2012	2013	2014	2015	2016
In-place leases:
Total to be included in depreciation and amortization expense	13.3	21,658	21,658	21,603	21,323	20,897
Below-market lease liabilities:
Total to be included in rental revenue	26.8	304	304	304	304	304

Cash and Cash Equivalents

Cash and cash equivalents include cash in bank accounts as well as investments in highly-liquid money market funds with original maturities of three months or less.

The Company deposits cash with high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company (“FDIC”) up to an insurance limit. At December 31, 2011 and 2010 the Company had deposits of $33.3 million and $32.0 million, respectively of which $32.1 million and $31.0 million, respectively were in excess of the amount insured by the FDIC. Although the Company bears risk to amounts in excess of those insured by the FDIC, it does not anticipate any losses as a result.

Restricted Cash

Restricted cash consists of maintenance, structural, and debt service reserves.

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AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Deferred Financing Costs

Deferred financing costs represent commitment fees, legal fees, and other costs associated with obtaining commitments for financing, which result in such financing. These costs are amortized over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close.

Distribution Reinvestment Plan

The Company has adopted a distribution reinvestment plan (the “DRIP”), in which eligible stockholders may elect to reinvest distributions by purchasing shares of common stock in lieu of receiving cash. No dealer manager fees or selling commissions are paid with respect to shares purchased pursuant to the DRIP. Participants purchasing shares pursuant to the DRIP have the same rights and are treated in the same manner as if such shares were issued pursuant to the IPO. The Board of Directors may designate that certain cash or other distributions be excluded from the DRIP. The Company has the right to amend any aspect of the DRIP or terminate the DRIP with ten days’ notice to participants. Shares issued under the DRIP are recorded to equity in the accompanying consolidated balance sheet in the period the distribution is declared. As of December 31, 2011, 5.2 million shares with a value of $49.8 million have been issued through the DRIP.

Share Repurchase Program

The Company’s Board of Directors has adopted a Share Repurchase Program (“SRP”) that enables its stockholders to sell their shares to the Company in limited circumstances. The SRP permits investors 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.

The purchase price per share will depend on the length of time the investor has held such shares as follows: after one year from the purchase date - 96.25% of the amount the investor actually paid for each share; and after two years from the purchase date - 97.75% of the amount the investor actually paid for each share; and after three years from the purchase date - 100% of the amount the investor actually paid for each share; (in each case, as adjusted for any stock distributions, combinations, splits, recapitalizations and the like with respect to the Company’s common stock). At any time the Company was engaged in an offering of shares, the per share price for shares purchased under the repurchase plan was equal to or lower than the applicable per share offering price. Presently, the per share purchase price is based on the greater of $10.00 or the then-current net asset value of the shares as determined by the Company’s Board of Directors (as adjusted for any stock distributions, combinations, splits, recapitalizations and the like with respect to the Company’s common stock). The Company’s Board of Directors will announce any purchase price adjustment and the time period of its effectiveness as a part of its regular communications with stockholders. The Company’s Board of Directors shall use the following criteria for determining the net asset value of the shares: value of its assets (estimated market value) less the estimated market value of the Company’s liabilities, divided by the number of shares. The Board, with advice from the Advisor, (i) will make internal valuations of the market value of the Company’s assets based upon the current capitalization rates of similar properties in the market, recent transactions for similar properties acquired by the Company and any extensions, cancellations, modifications or other material events affecting the leases, changes in rents or other circumstances related to such properties, (ii) review internal appraisals prepared by the Advisor following standard commercial real estate appraisal practice and (iii) every three years or earlier, in rotation will have all of the properties appraised by an external appraiser. Upon the death or disability of a stockholder, and upon request, the Company will waive the one-year holding requirement. Shares repurchased in connection with the death or disability of a stockholder will be repurchased at a purchase price equal to the price actually paid for the shares during the offering, or if not engaged in the offering, the per share purchase price will be based on the greater of $10.00 or the then-current net asset value of the shares as determined by the Company’s Board of Directors (as adjusted for any stock distributions, combinations, splits, recapitalizations and the like with respect to its common stock). In addition, the Company may waive the holding period in the event of a stockholder’s bankruptcy or other exigent circumstances.

Purchases under the SRP, subject to the terms of the SRP, may be funded from the proceeds from the sale of shares under the DRIP, from proceeds of the sale of shares in a public offering, and with other available allocated operating funds. However, purchases under the SRP by the Company will be limited in any calendar year to 5% of the weighted average number of shares outstanding during the prior year. In addition the redemption of shares is limited by cash available among other factors. The Board of Directors may reject a request for redemption at any time.

When a stockholder requests redemption and the redemption is approved by the Company, it will reclassify such obligation from equity to a liability based on the settlement value of the obligation.

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AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

The following table summarizes the SRP activity as of December 31, 2011 (dollars in thousands except for cost per share):

	Redemption Requests and Shares Redeemed
Year Ended December 31,	Shares	Value		Average Cost per share
2009	3,000	$	29	$	9.65
2010	299,528	2,933		9.79
2011	1,070,950	10,511		9.81
Cumulative redemptions as of December 31, 2011(1)	1,373,478	13,473		$	9.81
Value of shares issued through DRIP		49,828
Excess		$	36,355

(1)Cumulative share redemptions include 0.3 million shares with a value of $2.8 million which have been approved for redemption as of December 31, 2011, and were paid to stockholders in January 2012.

Derivative Instruments

The Company may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with its borrowings. Certain of the techniques used to hedge exposure to interest rate fluctuations may also be used to protect against declines in the market value of assets that result from general trends in debt markets. The principal objective of such agreements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions.

The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designed and qualifies for hedge accounting treatment. If the Company elects not to apply hedge accounting treatment, any changes in the fair value of these derivative instruments is recognized immediately in gains (losses) on derivative instruments in the consolidated statement of operations. If the derivative is designated and qualifies for hedge accounting treatment the change in the estimated fair value of the derivative is recorded in other comprehensive income (loss) to the extent that it is effective. Any ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.

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AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Revenue Recognition

Upon the acquisition of real estate, certain properties will have leases where minimum rent payments increase during the term of the lease. The Company will record rental revenue for the full term of each lease on a straight-line basis. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. Cost recoveries from tenants are included in tenant reimbursement income in the period the related costs are incurred, as applicable.

The Company’s revenues, which are derived primarily from rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. Since many of the leases provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable, and include in revenues, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. The Company defers the revenue related to lease payments received from tenants in advance of their due dates.

The Company continually reviews receivables related to rent and unbilled rent receivables and determines collectability 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 the event that the collectability of a receivable is in doubt, the Company will record an increase in the allowance for uncollectible accounts or record a direct write-off of the receivable in the consolidated statements of operations.

Organization, Offering, and Related Costs

Organization and offering costs (other than selling commissions and the dealer manager fee) of the Company may have been paid by the Advisor, the Company’s affiliated dealer manager, Realty Capital Securities, LLC (the “Dealer Manager”) or their affiliates on behalf of the Company. Such organization and offering costs represent all expenses to be paid by the Company in connection with the Offering, including but not limited to (i) legal, accounting, printing, mailing, and filing fees; (ii) escrow related fees; (iii) reimbursement of the Dealer Manager for amounts it may pay to reimburse the bona fide diligence expenses of broker-dealers; and (iv) reimbursement to the Advisor for the salaries of its employees and other costs in connection with preparing supplemental sales materials and related Offering activities. Pursuant to the Advisory Agreement and the Dealer Manager Agreement, the Company was obligated to reimburse the Advisor or its affiliates, as applicable, for organization and offering costs paid by them on behalf of the Company, provided that the Advisor was obligated to reimburse the Company to the extent organization and offering costs (excluding selling commissions, the dealer manager fee and bona fide due diligence cost reimbursements) incurred by the Company in the Offering exceed 1.5% of gross offering proceeds. See Note 11 — Related Party Transactions and Arrangements for more information on amounts reimbursed to the Advisor and Dealer Manager.

Share-Based Compensation

The Company has a stock-based incentive award plan for its directors and an employee and director restricted share plan, which are accounted for under the guidance for share based payments. The guidance on share based compensation also requires the tax benefits associated with these share-based payments to be classified as financing activities in the consolidated statements of cash flows. See Note 13 — Share-Based Compensation for additional information on these plans.

Income Taxes

The Company made an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with the taxable year ending December 31, 2008. If the Company qualifies for taxation as a REIT, it generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders, and so long as it distributes at least 90% of its REIT taxable income. REITs are subject to a number of other organizational and operational requirements. Even if the Company qualifies 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.

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AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Per Share Data

Income (loss) per basic share of common stock is calculated by dividing net income (loss) less dividends on unvested restricted stock by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted income (loss) per share of common stock considers the effect of potentially dilutive shares of common stock outstanding during the period.

Reportable Segments

The Company has determined that it has one reportable segment, with activities related to investing in real estate. The Company’s investments in real estate generate rental revenue and other income through the leasing of properties, which comprised 100% of its total consolidated revenues. Although the Company’s investments in real estate will be geographically diversified throughout the United States, management evaluates operating performance on an individual property level. The Company’s properties have been aggregated into one reportable segment.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) amended the guidance on transfers of financial assets to, among other things, eliminate the qualifying special-purpose entity concept, include a new unit of account definition that must be met for transfers of portions of financial assets to be eligible for sale accounting, clarify and change the derecognition criteria for a transfer to be accounted for as a sale, and require significant additional disclosure. This standard was effective January 1, 2010. Adoption of this guidance did not have a material impact on the Company’s financial position or results of operations.

In June 2009, the FASB issued new guidance which revised the consolidation guidance for variable-interest entities. The modifications include the elimination of the exemption for qualifying special purpose entities, a new approach for determining who should consolidate a variable-interest entity, and changes to when it is necessary to reassess who should consolidate a variable-interest entity. This standard was effective January 1, 2010. Adoption of this guidance did not have a material impact on the Company’s financial position or results of operations.

In January 2010, the FASB issued guidance which clarifies that the stock portion of a distribution to stockholders that allow them to receive cash or stock with a potential limitation on the total amount of cash that all stockholders can elect to receive in the aggregate is considered a share issuance that is reflected in earnings per share prospectively and is not a stock distribution. This standard was effective January 1, 2010. Adoption of this guidance did not have a material impact on the Company’s financial position or results of operations.

In January 2010, the FASB amended guidance to require a number of additional disclosures regarding fair value measurements. Specifically, the guidance revises two disclosure requirements concerning fair value measurements and clarifies two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. Also, it requires the presentation of purchases, sales, issuances and settlements within Level 3 on a gross basis rather than on a net basis. The amendments clarify that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. The adoption of the guidance related to Levels 1 and 2 were effective January 1, 2010 and did not have a material impact on the Company’s financial position or results of operations. The adoption of the guidance related to Level 3 was effective January 1, 2011 and did not have a material impact on the Company’s financial position or results of operations.

In February 2010, the FASB updated the guidance to no longer require companies that file with the United States Securities and Exchange Commission to indicate the date through which they have analyzed subsequent events. This updated guidance became effective immediately upon issuance; therefore the Company adopted it as of the first quarter of 2010.

In March 2010, the FASB issued a clarification of previous guidance that exempts certain credit related features from analysis as potential embedded derivatives subject to bifurcation and separate fair value accounting. This guidance specifies that an embedded credit derivative feature related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another is not subject to bifurcation from a host contract. All other embedded credit derivative features should be analyzed to determine whether their economic characteristics and risks are “clearly and closely related” to the economic characteristics and risks of the host contract and whether bifurcation and separate fair value accounting is required. The adoption of this guidance on July 1, 2010 had no material effect on the Company’s financial position or results of

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AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

operations.

In December 2010, the FASB updated its guidance related to goodwill which affected all entities that have recognized goodwill and have one or more reporting units whose carrying amount for purposes of performing Step 1 of the goodwill impairment test is zero or negative. The guidance modifies Step 1 so that for those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with existing guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. This guidance became effective on January 1, 2011. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operations.

In December 2010, the FASB updated the guidance related to business combinations to address diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. The amendment specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, non-recurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendment affects any public entity, as defined, that enters into business combinations that are material on an individual or aggregate basis. This guidance was effective for acquisitions occurring on or after January 1, 2011. The adoption of this guidance did not have a material impact upon the Company’s financial position or results of operations, as the guidance relates only to disclosure requirements.

In May 2011, the FASB issued guidance that expands the existing disclosure requirements for fair value measurements, primarily for Level 3 measurements, which are measurements based on unobservable inputs such as the Company’s own data. This guidance is largely consistent with current fair value measurement principles with few exceptions that do not result in a change in general practice. The guidance will be applied prospectively and will be effective for interim and annual reporting periods ending after December 15, 2011. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operations as the guidance relates only to disclosure requirements.

In June 2011, the FASB issued guidance requiring entities to present items of net income and other comprehensive income either in one continuous statement — referred to as the statement of comprehensive income — or in two separate, but consecutive, statements of net income and other comprehensive income. The new guidance does not change which components of comprehensive income are recognized in net income or other comprehensive income, or when an item of other comprehensive income must be reclassified to net income. The guidance will be applied prospectively and will be effective for interim and annual reporting periods ending after December 15, 2011. In December 2011, the FASB deferred certain provisions of this guidance related to the presentation of certain reclassification adjustments our of accumulated other comprehensive income, by component in both the statement and the statement where the reclassification is presented. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations but will change the location of the presentation of other comprehensive income to more closely associate the disclosure with net income.

In September 2011, the FASB issued guidance which modifies the requirements for testing for goodwill impairment, and gives entities the option to perform a qualitative assessment of goodwill before calculating the fair value of a reporting unit. If the entities determine based on the qualitative assessment that the fair value of a reporting unit is more likely than not less than the carrying value then further impairment tests would be required. Otherwise, further testing would not be needed. The guidance is effective for annual impairment tests for fiscal periods beginning after December 15, 2011.  The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.

In December 2011, the FASB issued guidance which contains new disclosure requirements regarding the nature of and entity’s rights of offset and related arrangements associated with its financial instruments and derivative instruments. The new disclosures are designed to make financial statements prepared under U.S. GAAP more comparable to those prepared under International Financial Reporting Standards and will give the financial statement users information about both gross and net exposures. The guidance is effective for interim and annual reporting periods beginning on or after January 1, 2013.  The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.

16

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Note 3 — Real Estate Investments

The following table presents the allocation of the assets acquired and liabilities assumed during the periods presented (amounts in thousands):

	Year Ended December 31, 2011			Year Ended December 31, 2010
Real estate investments, at cost:
Land	$	183,150		$	104,742
Buildings, fixtures and improvements	897,105			370,744
Total tangible assets	1,080,255			475,486
Acquired intangibles:
In-place leases	163,618			69,570
Mortgage assumed	(57,429		)	(22,900		)
Mortgage discount (premium), net	331			(1,168		)
Total assets acquired, net	$	1,186,775		$	520,988
Number of properties purchased	224			134

17

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

The Company acquires and operates commercial properties. All such properties may be acquired and operated by the Company alone or jointly with another party. As of December 31, 2011, all of the properties the Company owned were 100% leased. The Company acquired and disposed of the following properties during 2011 (dollar amounts in thousands other than annualized average rental income per square foot):

Property	Acquisition/ Disposal Date	No. of Buildings	Square Feet	Ownership Percentage		Remaining Lease Term(1)	Base Purchase Price(2)		Capitalization Rate(3)		Annualized Rental Income/NOI(4)
Portfolio as of Dec. 31, 2010		259	5,310,215	Various		15.2	$	867,215	8.43	%	$	73,068
Acquisitions for the year ended Dec. 31, 2011:
Lowes (5)	Jan. 2011	1	141,393	100	%	15.1	10,018		6.74	%	675
Citizens	Jan. 2011	2	14,307	100	%	7.6	3,811		9.11	%	347
QuikTrip	Jan. 2011	1	4,555	100	%	12.7	3,330		8.74	%	291
Dillons	Jan. 2011	1	56,451	100	%	8.3	5,075		7.80	%	396
Wawa	Jan. 2011	2	12,433	100	%	15.9	17,209		7.00	%	1,205
Walgreens VIII	Jan. 2011	9	122,963	100	%	23.6	54,569		6.86	%	3,742
DaVita Dialysis II	Feb. 2011	4	23,154	100	%	10.9	8,013		8.90	%	713
CVS III	Feb. 2011	1	13,338	100	%	25.6	5,199		7.25	%	377
Citigroup, Inc.	Feb. 2011	1	64,036	100	%	14.3	27,275		7.00	%	1,910
Coats & Clark	Feb. 2011	1	401,512	100	%	9.5	9,523		9.84	%	937
Walgreens IX	Feb. 2011	1	13,569	100	%	22.4	5,460		7.34	%	401
Express Scripts	Mar. 2011	2	416,141	100	%	7.9	51,281		9.02	%	4,623
DaVita Dialysis III	Mar. 2011	1	18,185	100	%	11.9	6,565		7.72	%	507
Dollar General V	Mar. 2011	6	55,363	100	%	14.6	5,195		8.84	%	459
Wal-Mart	Mar. 2011	1	183,442	100	%	7.8	12,633		7.15	%	903
Kohl’s	Mar. 2011	1	88,408	100	%	14.6	10,182		7.15	%	728
Texas Instruments	Mar. 2011	1	125,000	100	%	9.4	32,000		7.88	%	2,522
Sam’s Club (5)	Mar. 2011	1	141,583	100	%	14.2	12,821		6.64	%	851
CVS IV	Mar. 2011	1	13,225	100	%	23.6	5,330		7.95	%	424
Walgreens X	Mar. 2011	2	27,760	100	%	19.1	9,000		7.46	%	671
CVS V	Mar. 2011	1	12,900	100	%	22.6	5,759		7.29	%	420
Provident Bank	Mar. 2011	1	2,950	100	%	22.6	2,589		9.15	%	237
Dillons II	Mar. 2011	1	63,858	100	%	10.3	6,420		7.49	%	481
FedEx X	Mar. & May 2011	2	204,157	100	%	14.1	32,200		7.98	%	2,570
3M	Mar. 2011	1	650,760	100	%	9.8	44,800		7.35	%	3,294
Bojangles	Mar. 2011	13	47,865	100	%	11.9	24,789		8.85	%	2,193
Tractor Supply II	Mar. 2011	2	38,194	100	%	14.8	5,103		9.07	%	463
Dollar General VI	Apr. 2011	2	18,428	100	%	14.9	1,856		9.00	%	167
Dollar General VII	Apr. 2011	2	18,340	100	%	14.8	2,093		8.98	%	188
O’Reilly Auto II	Apr. 2011	1	8,154	100	%	11.6	1,894		8.92	%	169
Walgreens XI	Apr. 2011	1	14,550	100	%	24.0	4,993		7.35	%	367
DaVita Dialysis IV	Apr. 2011	1	6,020	100	%	8.4	2,061		8.88	%	183
Whirlpool	Apr. 2011	1	750,000	100	%	9.8	19,837		8.10	%	1,606
Wrangler	Apr. 2011	1	316,800	100	%	9.5	17,286		8.20	%	1,417
Walgreens XII	Apr. 2011	1	13,605	100	%	22.6	4,380		8.20	%	359
7-Eleven	May 2011	1	3,074	100	%	9.4	2,950		8.24	%	243
BSFS III	May 2011	1	7,864	100	%	14.5	2,661		8.53	%	227
Kohls II	May 2011	1	64,250	100	%	19.6	6,398		7.50	%	480
National Tire & Battery	May 2011	3	33,920	100	%	14.3	5,921		8.16	%	483
CVS VI	May 2011	1	13,224	100	%	23.7	9,110		7.21	%	657
BSFS IV	May 2011	3	22,904	100	%	13.4	8,539		8.60	%	734

18

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Property	Acquisition/ Disposal Date	No. of Buildings	Square Feet	Ownership Percentage		Remaining Lease Term(1)	Base Purchase Price(2)	Capitalization Rate(3)		Annualized Rental Income/NOI(4)
FedEx XI	May 2011	1	125,502	100	%	10.7	39,000	7.94	%	3,095
Pep Boys	May 2011	3	60,140	100	%	12.1	12,951	8.68	%	1,124
Royal Ahold - Tops Market	May 2011	1	57,833	100	%	11.7	10,956	7.61	%	834
7-Eleven II	May 2011	1	2,940	100	%	9.5	2,105	7.55	%	159
General Electric	May 2011	1	484,348	100	%	7.8	23,688	7.62	%	1,806
Wal-Mart II	May 2011	1	151,925	100	%	7.6	12,415	8.01	%	995
GSA - USPS	May 2011	1	39,297	100	%	13.8	7,260	6.79	%	493
Walgreens XIII	May 2011	2	27,195	100	%	17.1	9,819	7.25	%	712
Walgreens XIV	Jun. 2011	1	14,820	100	%	21.9	3,986	7.15	%	285
Mrs. Bairds	Jun. 2011	2	30,120	100	%	8.2	3,169	8.36	%	265
Walgreens XV	Jun. 2011	1	14,480	100	%	21.9	4,912	7.13	%	350
O’Reilly’s III	Jun. 2011	1	8,160	100	%	11.8	2,000	8.70	%	174
FedEx XII	Jun. 2011	1	182,326	100	%	11.8	35,000	7.79	%	2,726
Walgreens XVI	Jun. 2011	6	52,400	100	%	22.7	51,160	6.63	%	3,392
GSA - VA Clinic (6)	Jun. 2011	1	10,768	100	%	9.6	3,190	8.31	%	265
BSFS V	Jun. 2011	1	159,797	100	%	10.8	9,040	8.53	%	771
Tractor Supply IV	Jun. 2011	1	19,097	100	%	11.9	1,750	13.94	%	244
O’Reilly’s IV	Jun. 2011	2	16,000	100	%	11.7	3,724	8.75	%	326
Trader Joe’s	Jun. 2011	1	31,920	100	%	10.5	5,550	12.16	%	675
Dollar General VIII	Jul. & Aug. 2011	3	27,152	100	%	14.8	2,850	8.74	%	249
Dollar General IX	Jul. 2011	1	9,348	100	%	14.8	885	9.04	%	80
GSA I (6)	Jul. 2011	1	10,784	100	%	7.4	6,025	8.28	%	499
Lockheed Martin	Jul. 2011	1	102,466	100	%	8.3	13,048	8.05	%	1,050
FedEx XIII	Jul. 2011	4	274,602	100	%	8.3	27,615	7.96	%	2,199
GSA II (6)	Aug. 2011	1	10,803	100	%	9.0	4,546	7.81	%	355
Dollar General X	Aug. & Sep. 2011	6	55,200	100	%	14.8	5,418	8.84	%	479
PetSmart	Aug. 2011	1	1,000,375	100	%	10.8	48,648	7.55	%	3,672
GSA III (6)	Aug. 2011	1	11,190	100	%	14.8	4,355	7.94	%	346
Verizon	Aug. 2011	1	40,000	100	%	10.2	12,600	8.27	%	1,042
CVS VI	Aug. 2011	1	11,945	100	%	17.4	2,805	7.45	%	209
Renal Advantage	Aug. 2011	9	74,457	100	%	11.8	19,010	9.65	%	1,834
GSA IV (6)	Aug. 2011	1	23,485	100	%	9.6	7,424	8.45	%	627
Lowes II	Aug. 2011	1	135,197	100	%	9.4	15,000	7.33	%	1,099
GSA V (6)	Aug. 2011	1	64,455	100	%	7.3	7,250	8.08	%	586
CVS VII	Sep. 2011	1	10,885	100	%	10.4	2,820	8.19	%	231
Sealy	Sep. 2011	1	257,000	100	%	12.2	17,944	8.95	%	1,606
GSA VI (6)	Sep. 2011	1	34,285	100	%	14.8	8,590	8.07	%	693
GSA VII (6)	Sep. 2011	1	25,508	100	%	14.8	6,642	8.60	%	571
GSA VIII (6)	Oct. 2011	1	29,150	100	%	9.3	4,775	8.06	%	385
GSA IX (6)	Oct. 2011	1	17,626	100	%	9.8	6,750	8.22	%	555
GSA X (6)	Oct. 2011	1	43,596	100	%	11.8	13,000	7.75	%	1,007
Reliant Rehab	Oct. 2011	1	65,141	100	%	18.8	32,300	10.28	%	3,322
ConAgra	Oct. 2011	1	65,000	100	%	13.6	20,000	8.24	%	1,648
GSA XI (6)	Oct. 2011	1	30,762	100	%	14.5	9,000	7.99	%	719
Dollar General XI	Oct. 2011	2	18,225	100	%	14.7	1,926	8.31	%	160
Dollar General XII	Oct., Nov. & Dec. 2011	42	387,104	100	%	14.4	43,004	8.23	%	3,539
Whirlpool II	Nov. 2011	1	700,350	100	%	9.8	23,148	7.50	%	1,736
Dollar General XIII	Nov. 2011	1	9,234	100	%	14.7	932	8.80	%	82
Fed Ex XIV	Nov. 2011	1	81,612	100	%	10.3	4,592	9.49	%	436

19

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Property	Acquisition/ Disposal Date	No. of Buildings		Square Feet			Ownership Percentage		Remaining Lease Term(1)		Base Purchase Price(2)			Capitalization Rate(3)		Annualized Rental Income/NOI(4)
Fed Ex XV	Nov. 2011	1		252,505			100	%	15		56,000			7.49	%	4,194
Fed Ex XVI	Nov. 2011	1		194,262			100	%	10		20,000			7.60	%	1,520
AutoZone II	Nov. 2011	1		6,816			100	%	14.4		1,325			7.62	%	101
Aaron’s	Dec. 2011	18		214,739			100	%	10.8		25,806			7.41	%	2,184
GSA XII (6)	Dec. 2011	1		67,217			100	%	7.3		9,520			8.81	%	839
Danfoss	Dec. 2011	1		99,823			100	%	9.8		7,487			8.78	%	657
DaVita Dialysis V	Dec. 2011	1		6,502			100	%	10.9		3,360			9.14	%	307
Disposition for the year ended Dec. 31, 2011:
PNC	January 2011	(1	)	(1,992		)	100	%	(7.9	)	(680		)	6.91	%	(47		)
Total		482		15,514,727					13.5		$	2,110,738		8.16	%	$	172,150
Annualized average rental income per square foot				$	11.10
Other investments (7)											29,625
Total investment portfolio											$	2,140,363

(1)	Remaining lease term as of December 31, 2011, in years. If the portfolio has multiple locations with varying lease expirations, remaining lease term is calculated on a weighted-average basis. Total remaining lease term is an average of the remaining lease term of the total portfolio.
(2)	Contract purchase price excluding acquisition and transaction-related costs. Acquisition and transaction-related costs include legal costs, acquisition fees paid to the Advisor and closing costs on the property.
(3)	Annualized rental income on a straight-line basis or annualized net operating income (“NOI”) as applicable, divided by base purchase price. Total capitalization rate is an average of the capitalization rate of the total portfolio.
(4)	Annualized rental income/NOI for net leases is projected 2012 rental income on a straight-line basis for properties held as of December 31, 2011, which includes the effect of tenant concessions such as free rent, as applicable. For modified gross leased properties amount is rental income on a straight-line basis as of December 31, 2011, which includes the effect of tenant concessions such as free rent, as applicable, plus operating expense reimbursement revenue less property operating expenses.
(5)	Property is a parcel of land with a ground lease which contains a building that will be conveyed to the Company at the end of the ground lease. Square footage and number of buildings refers to the building that is constructed on the parcel of land.
(6)	Lease on the property is a modified gross lease. As such, annualized rental income/NOI for this property is rental income on a straight-line basis as of December 31, 2011, which includes the effect of tenant concessions such as free rent, as applicable, plus operating expense reimbursement revenue less property operating expenses.
(7)	Includes a $12.0 million investment in a joint venture and a $17.6 million investment in the common stock of certain publicly traded real estate investment trusts.

20

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Future Lease Payments

The following table presents future minimum base rental cash payments due to the Company subsequent to December 31, 2011. These amounts exclude contingent rentals 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 (amounts in thousands):

Year	Future Minimum Base Rent Payments
2012	$	167,731
2013	169,049
2014	171,379
2015	172,379
2016	172,385
Thereafter	1,485,625
Total	$	2,338,548

Tenant Concentration

The following table lists tenants whose annualized rental income on a straight-line basis or NOI represented greater than 10% of consolidated annualized rental income as of December 31, 2011, 2010, and 2009:

	Year Ended December 31,
	2011		2010		2009
FedEx	17	%	17	%	14	%
Walgreens	10	%	10	%	*
CVS	*		13	%	11	%
PNC	*		*		25	%
First Niagara	*		*		21	%
Rockland Trust	*		*		17	%
Rite Aid	*		*		10	%

* Tenant’s annualized rental income on a straight-line basis or NOI was not greater than 10% of total annualized rental income for all portfolio properties as of the period specified.

The termination, delinquency or non-renewal of one of the above tenants may have a material adverse effect on revenues.  No other tenant represented more than 10% of the annualized rental income for the periods presented.

21

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Geographic Concentration

The following table lists the states where we have concentrations of properties whose annualized rental income on a straight-line basis or NOI represented greater than 10% of consolidated annualized rental income as of December 31, 2011, 2010, and 2009:

	Year Ended December 31,
	2011		2010		2009
New York	12	%	*		*
California	*		11	%	*
Pennsylvania	*		*		21	%
Texas	*		*		14	%

* Annualized rental income on a straight-line basis or NOI from properties located in this state was not greater than 10% of total annualized rental income for all portfolio properties as of the period specified.

No other state had properties that in total represented more than 10% of the annualized rental income for the periods presented.

Note 4 — Investment Securities

At December 31, 2011, the Company had investments in common stock with a fair value of $17.3 million. These investments are accounted for as available-for-sale investments and therefore increases or decreases in the fair value of these investments are recorded in other comprehensive income as a component of equity on the balance sheet unless the securities are considered to be permanently impaired at which time the losses would be reclassified to expense.

The following table details the unrealized gains and losses on investment securities as of December 31, 2011 (in thousands):

	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Common stock	$	17,625	$	246	$	(596	)	$	17,275

All unrealized losses had a holding period of less than four months. No available for sale investments were held at December 31, 2010.

Note 5 — Revolving Credit Facilities

In August 2011, the Company obtained a revolving credit facility with RBS Citizens, N.A. and a syndicate of financial institutions (“RBS Facility”) for an aggregate maximum principal amount of $115.0 million. The facility has an accordion feature that allows it to be increased up to a maximum of $230.0 million under certain conditions and the Company intends to increase the facility to this maximum. The proceeds of loans made under the credit agreement may be used to finance the acquisition of net leased, investment or non-investment grade occupied properties or general corporate purposes. Up to $15.0 million of the facility is available for letter of credits. The initial term of the credit agreement is 36 months.

Any loan made under the RBS Facility shall bear floating interest at per annum rates equal to the one month London Interbank Offered Rate (“LIBOR”) plus 2.05% to 2.85% depending on the Company’s loan to value ratio as specified in the agreement. In the event of a default, RBS has the right to terminate its obligations under the credit agreement, including the funding of future loans, and to accelerate the payment on any unpaid principal amount of all outstanding loans. The revolving credit facility requires a fee of 0.15% on the unused balance if amounts outstanding under the facility are 50% or more of the total facility amount and 0.25% on the unused balance if amounts outstanding under the facility are 50% or less of the total facility amount.  As of December 31, 2011, there was $10.0 million outstanding on this facility. In addition, the Company had a letter of credit in the amount of $0.4 million under this facility at December 31, 2011.

22

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

At December 31, 2011 and 2010, the Company had available a $10.0 million revolving unsecured line of credit bridge facility with an affiliated entity. There were no amounts outstanding under this facility at December 31, 2011 or December 31, 2010. There are no unused borrowing fees associated with this facility.

The RBS Facility requires the Company to meet certain financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth.  As of December 31, 2011, the Company was in compliance with the debt covenants under the RBS Facility agreement.

In July 2010, the Company obtained a secured revolving credit facility with Capital One, N.A. (“Capital One”) for an aggregate maximum principal amount of $30.0 million. The proceeds of loans made under the credit agreement could be used to finance the acquisition of net leased, investment or non-investment grade occupied properties. The initial term of the credit agreement was 30 months. The agreement was terminated in August 2011 when the Company obtained the RBS Facility.

In August 2010, the Company obtained a secured revolving credit facility with U.S. Bank, N.A. (“U.S. Bank”) for an aggregate maximum principal amount of $20.0 million, which subsequently increased to $30.0 million.  The initial term of the credit agreement was 24 months. The credit agreement was unused and was terminated in August 2011 when the Company obtained the RBS Facility.

There were no amounts outstanding on the Capital One or U.S. Bank lines of credit as of December 31, 2010.

Note 6 — Mortgage Notes Payable

The Company’s mortgage notes payable consist of the following (dollar amounts in thousands):

	Encumbered Properties	Outstanding Loan Amount		Weighted Average Effective Interest Rate(1)		Weighted Average Maturity(2)
December 31, 2011	254	$	673,978	5.27	%	5.21
December 31, 2010	196	$	372,755	5.73	%	6.15

(1)	Mortgage notes payable have fixed rates or rates that are fixed through the use of interest rate hedging instruments. Effective interest rates range from 4.09% to 6.97% at December 31, 2011 and 4.36% to 6.97% at December 31, 2010.
(2)	Weighted average remaining years until maturity as of the periods presented.

The following table summarizes the scheduled aggregate principal repayments subsequent to December 31, 2011 (amounts in thousands):

Year	Total
2012	$	3,308
2013	59,196
2014	33,749
2015	119,807
2016	283,768
Thereafter	174,150
Total	$	673,978

23

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

The Company’s sources of recourse financing generally require financial covenants, including restrictions on corporate guarantees, the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth. As of December 31, 2011, the Company was in compliance with the debt covenants under the mortgage loan agreements.

The balances of two mortgage notes payable in the aggregate amount of $34.0 million were prepaid for the entire remaining balance in December 2011. In connection with these early payoffs, $0.3 million of unamortized deferred financing costs and $0.4 million of prepayment penalties were charged to interest expense.

Note 7 — Long-Term Notes Payable

As of December 31, 2010, the Company had $12.8 million of outstanding long-term notes payable (the “Notes”) from a private placement pursuant to Rule 506 of Regulation D promulgated under the Securities Act. The proceeds of the private placement were used to repay outstanding short-term bridge equity fund draws.

The Notes bore interest at 9.0% annually, provided that the interest rate would be adjusted to 9.57% annually for Notes on which the Company did not incur a selling commission. The Company paid interest-only monthly payments to subscribers of the Notes. The balances of the Notes were repaid in full in May 2011. In connection with this payoff, $0.7 million of unamortized deferred financing costs were charged to interest expense.

Note 8 — Fair Value of Financial Instruments

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. This alternative approach also reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The guidance defines three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 — Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of December 31, 2011 and December 31, 2010, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

24

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments, are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.

The Company has common stock investments which are traded on a national exchange and therefore, due to the availability of quoted market prices in active markets, classified these investments as Level 1 in the fair value hierarchy.

The following table presents information about the Company’s assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of December 31, 2011 and December 31, 2010, aggregated by the level in the fair value hierarchy within which those instruments fall (amounts in thousands):

	Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
December 31, 2011
Common stock	$	17,275	$	—	$	—	$	17,275
Interest rate swap and collar derivatives, net	$	—	$	8,602	$	—	$	8,602
December 31, 2010
Interest rate swap and collar derivatives, net	$	—	$	5,214	$	—	$	5,214

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, other receivables, accounts payable and distributions payable approximates their carrying value on the consolidated balance sheet due to their short-term nature. The fair value of mortgage notes payable are obtained by calculating the present value at current market rates.

The fair values of the Company’s financial instruments that are not reported at fair value on the consolidated balance sheet are reported below (amounts in thousands):

	Carrying Amount at		Fair Value at		Carrying Amount at		Fair Value at
	December 31, 2011 (1)		December 31, 2011		December 31, 2010 (1)		December 31, 2010
Mortgage notes payable	$	674,657	$	687,481	$	373,918	$	388,984
Other long-term notes payable	$	—	$	—	$	12,790	$	12,790
Revolving credit facility	$	10,000	$	10,000	$	—	$	—

(1)Carrying amount includes premiums and discounts on mortgage notes payable.

Note 9 — Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial

25

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the balance sheets as of December 31, 2011 and 2010 (amounts in thousands):

	Balance Sheet Location	December 31, 2011			December 31, 2010
Derivatives designated as hedging instruments:
Interest Rate Collar and Swaps	Derivatives, at fair value	$	(7,702	)	$	(3,828	)
Derivatives not designated as hedging instruments:
Interest Rate Collar	Derivatives, at fair value	$	(900	)	$	(1,386	)

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $2.2 million will be reclassified from other comprehensive income as an increase to interest expense.

Derivatives Designated as Hedging Instruments

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and collars as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate collars designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract and payments of variable-rate amounts if interest rates fall below the floor strike rate on the contract.

Derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.

As of December 31, 2011, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollar amounts in thousands):

Interest Rate Derivative	Number of Instruments	Notional Amount
Interest Rate Swaps	10	$	106,348
Interest Rate Collar	1	4,115

As of December 31, 2010, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollar amounts in thousands):

Interest Rate Derivative	Number of Instruments	Notional Amount
Interest Rate Swaps	4	$	63,532
Interest Rate Collar	1	4,115

26

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the years ended December 31, 2011, 2010 and 2009 (amounts in thousands):

	December 31,
	2011			2010			2009
Amount of loss recognized in accumulated other comprehensive income as interest rate derivatives (effective portion)	$	(2,964	)	$	(4,186	)	$	(938	)
Amount of loss reclassified from accumulated other comprehensive income into income as interest expense (effective portion)	$	(2,137	)	$	(2,045	)	$	(1,218	)
Amount of gain (loss) recognized in income on derivative as loss on derivative instruments (ineffective portion and amount excluded from effectiveness testing) (1)	$	(111	)	$	(40	)	$	—

(1) Excludes $3.2 million that was recognized as a loss on derivative instruments for the year ended December 31, 2011 for interest rate swap agreements that were entered into at an above market rate in conjunction with entering into a series of rate lock agreements on forecasted mortgages. Once the mortgages closed, the swap agreements qualified as hedging instruments, however the portion of the forecasted change in fair value related to the above market rate of the swaps was excluded from the effectiveness testing and was expensed.

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedges are not speculative. These derivatives are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements to be classified as hedging instruments. The Company has one interest rate collar contract outstanding, with an aggregate notional amount of $22.7 million and $23.2 million at December 31, 2011 and 2010, respectively, with an established ceiling and floor for the underlying variable rate at 4.125% and 3.54%, respectively. This contract was not able to be designated as a hedging instrument as it does not qualify for hedge accounting based on the results of the net written option test. As such, all changes in the fair value of the interest rate collar have been included in the Company’s statements of operations for the years ended December 31, 2011 and 2010.

The table below details the amount and location in the financial statements of the gain or loss recognized on derivatives not designated as hedging instruments for the years ended December 31, 2011, 2010 and 2009 (amounts in thousands):

	Year Ended December 31,
	2011			2010			2009
Location of Gain or (Loss) Recognized in Income on Derivative:
Interest expense	$	(770	)	$	(776	)	$	(787	)
Gains (losses) on derivative instruments	487			(267		)	293
Total	$	(283	)	$	(1,043	)	$	(494	)

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

As of December 31, 2011, the fair value of derivatives in a net liability position related to these agreements was $8.6 million. As of December 31, 2011, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of $9.1 million at December 31, 2011.

27

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Note 10 — Commitments and Contingencies

Litigation

In the ordinary course of business, the Company may become subject to litigation or claims. There are no material legal proceedings pending or known to be contemplated against the Company.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. The Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and the Company is not aware of any other environmental condition that it believes will have a material adverse effect on the consolidated results of operations.

Note 11 — Related Party Transactions and Arrangements

Fees Paid in Connection with Common Stock Offering

The Company’s affiliated Dealer Manager receives selling commissions of 7% of the gross offering proceeds from the sale of the Company’s common stock (as well as sales of long-term notes and exchange transactions) before reallowance of commissions earned by participating broker-dealers. The Dealer Manager re-allows 100% of commissions earned to participating broker-dealers. In addition, the Dealer Manager receives dealer manager fees of 3% of the gross offering proceeds before reallowance to participating broker-dealers. No selling commissions or dealer-manager fees are paid to the Dealer Manager with respect to shares sold under the DRIP. The Company incurred total commissions to the Dealer Manager of $114.8 million, $41.0 million and $12.3 million during the years ended December 31, 2011, 2010 and 2009, respectively.

The Company will reimburse the Advisor up to 1.5% of its gross offering proceeds. The following table details the results of such activities related to organizational and offering costs reimbursed to the Advisor (amounts in thousands):

	Year Ended December 31,
	2011		2010		2009
Organizational and offering expense reimbursements	$	5,949	$	4,378	$	5,617

At December 31, 2010, the Company had a payable to the Dealer Manager and the Advisor of $0.4 million, respectively, for commissions and reimbursements of expenses. At December 31, 2011, there were no amounts owed to the Dealer Manager or Advisor for offering costs or dealer manager fees.

The Company issued all shares authorized under its IPO and closed the offering on July 18, 2011.  Common shares of the Company will continue to be issued under the DRIP.

Fees Paid in Connection With the Operations of the Company

The Advisor receives an acquisition fee of 1.0% of the contract purchase price of each acquired property and is reimbursed for acquisition costs incurred in the process of acquiring properties, expected to approximate 0.5% of the contract purchase price. In no event will the total of all acquisition and advisory fees and acquisition expenses payable with respect to a particular investment exceed 4% of the contract purchase price.

28

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

The Company will pay the Advisor a yearly fee of up to 1% of the contract purchase price of each property based on assets held by the Company on the measurement date, adjusted for appropriate closing dates for individual property acquisitions. On June 7, 2011, the Company and the Advisor agreed to modify the timing of the payment of asset management fees by the Company to the Advisor such that the Company shall pay to the Advisor asset management fees on a current basis, and shall no longer pre-pay those fees beyond the subsequent month’s fees, as was allowed under the previous arrangement. In addition, such asset management fees shall be payable, at the discretion of the Company’s Board subject to the Advisor’s approval, on a prospective basis, in cash, common stock or restricted stock grants, or any combination thereof. See Note 13 — Share-Based Compensation, for additional information of limitations on the issuance of restricted shares to the Advisor.

For the management and leasing of its properties, the Company will pay to an affiliate of its Advisor a property management fee of (a) 2% of gross revenues from its single tenant properties and (b) 4% of gross revenues from its multi-tenant properties, plus, in each case, market-based leasing commissions applicable to the geographic location of the property. The Company also will reimburse the affiliate costs of managing the properties. The affiliate may also receive a fee for the initial leasing of newly constructed properties, which would generally equal one month’s rent. In the unlikely event that the affiliate assists a tenant with tenant improvements, a separate fee may be charged to, and payable by the Company. This fee will not exceed 5% of the cost of the tenant improvements. The aggregate of all property management and leasing fees paid to its affiliates plus all payments to third parties for such fees will not exceed the amount that other nonaffiliated management and leasing companies generally charge for similar services in the same geographic location as determined by a survey of brokers and agents in such area. No such fees were incurred or paid for the years ended December 31, 2011, 2010 or 2009.

The Company may reimburse its Advisor’s costs of providing administrative services, subject to the limitation that it will not reimburse its Advisor 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 (a) 2% of average invested assets, or (b) 25% of net income other than any additions to reserves for depreciation, bad debt or other similar non-cash reserves and excluding any gain from the sale of assets for that period. Additionally, the Company will not reimburse the Advisor for personnel costs in connection with services for which the Advisor receives acquisition fees or real estate commissions. No such fees were incurred or paid for the years ended December 31, 2011, 2010 or 2009.

If the Company’s Advisor provides services in connection with the origination or refinancing of any debt that the Company obtains, and uses 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 the Advisor a financing coordination fee equal to 1% of the amount available and/or outstanding under such financing, subject to certain limitations.

The following tables detail amounts paid and reimbursed to affiliates as well as amounts contractually due to the Advisor which were forgiven in connection with the operations related services described above (amounts in thousands):

	Year Ended December 31,
	2011				2010				2009
	Paid		Forgiven		Paid		Forgiven		Paid		Forgiven
One-time fees:
Acquisition fees and related cost reimbursements	$	20,838	$	—	$	9,167	$	—	$	1,690	$	—
Financing coordination fees and related cost reimbursements	4,567		—		2,679		—		880		—
Other expense reimbursements	403		—		374		—		—		—
On-going fees:
Asset management fees(1)	5,572		9,658		1,350		4,015		145		1,779
Property management and leasing fees	—		2,361		—		833		—		300
Total operational fees and reimbursements	$	31,380	$	12,019	$	13,570	$	4,848	$	2,715	$	2,079

(1) The Company’s Board of Directors, subject to the Advisor’s approval, on a prospective basis, may elect to pay an equivalent amount of the cash fees forgiven in unvested performance based restricted shares. The Company will record expense for such shares if the Board of Directors approves the issuance.

29

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

As of December 31, 2010, $4.4 million of asset management fees were prepaid to the Advisor in accordance with the terms of the Advisory Agreement.  The Advisory Agreement provided for two quarters of fees to be paid in advance by the Company.  On June 7, 2011, the Company and the Advisor modified the provisions of the Advisory Agreement with respect to the timing of asset management fees payments such that the Company will pay the Advisor asset management fees on a current basis. As of December 31, 2011, the Company funded asset management fees of $1.8 million relating to January 2012, as required by the modified provisions of the Advisory Agreement.

Fees Paid in Connection with the Liquidation or Listing of the Company’s Real Estate Assets

The Company will pay a brokerage commission on the sale of property, not to exceed the lesser of one-half of reasonable, customary and competitive real estate commission or 3% of the contract price for property sold (inclusive of any commission paid to outside brokers), in each case, payable to the Advisor if the Advisor or its affiliates, as determined by a majority of the independent directors, provided a substantial amount of services in connection with the sale.

The Company will pay a subordinated participation in the net proceeds of the sale of real estate assets of 15% of remaining net proceeds after return of capital contributions plus payment to investors of a 6% cumulative, non-compounded return on the capital contributed by investors. The Company cannot assure that it will provide this 6% return but the Advisor will not be entitled to the subordinated participation in net sale proceeds unless its investors have received a 6% cumulative non-compounded return on their capital contributions. No such fees were incurred or paid for the years December 31, 2011, 2010 or 2009.

The Company will pay a subordinated incentive listing fee of 15% of the amount by which the adjusted market value of real estate assets plus distributions exceeds the aggregate capital contributed by investors plus an amount equal to a 6% cumulative, non-compounded annual return to investors. The Company cannot assure that it will provide this 6% return but the Advisor will not be entitled to the subordinated incentive listing fee unless its investors have received a 6% cumulative non-compounded return on their capital contributions. No such fees were incurred or paid for the years ended December 31, 2011, 2010 or 2009.

The following table details amounts paid to affiliates in connection with the sale of property (amounts in thousands):

	Year Ended December 31,
	2011		2010		2009
Real estate commissions	$	19	$	26	$	—

Financing

The OP entered into an agreement with the principals of the Advisor whereby the OP can obtain up to $10.0 million of bridge equity from the principals from time to time as needed to provide short-term bridge equity for property acquisitions or for general working capital purposes. Such bridge equity advances need to be satisfied within a one year period and will accrue a yield of 8%. There were no amounts outstanding under this facility as of December 31, 2011, 2010 and 2009. There was no interest expense for this facility during the years December 31, 2011, 2010 or 2009.

The Company has a $0.4 million letter of credit from its revolving credit facility. This letter of credit was used as a security deposit on rented office space for the Advisor.

Common Stock Investment

In December 31, 2011, the Company purchased 0.3 million shares of common stock in an initial public offering of an affiliated public company, valued at $2.9 million at December 31, 2011. The aggregate fair value of all investment securities owned by the Company was $17.3 million at December 31, 2011.

Investment in Unconsolidated Joint Venture

In December 2010, the Company entered into a joint venture agreement with an affiliate and an unrelated third party investor to invest in a portfolio of five retail condominium units. The Company’s initial investment in this joint venture was $12.0 million and a 1.0% fee was paid to the Company by the affiliate. For the year ended December 31, 2011, the Company’s

30

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

share of the net profit on the property was $0.1 million. In addition, the Company received cash distributions of $0.8 million for the year ended December 31, 2011. No fees were paid to the Advisor in connection with this agreement.

Note 12 — Economic Dependency

Under various agreements, the Company has engaged or will engage the Advisor 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 issue, 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 the Advisor and its affiliates. In the event that these companies were unable to provide the Company with the respective services, the Company would be required to find alternative providers of these services.

Note 13 — Share-Based Compensation

Stock Option Plan

The Company has a stock option plan (the “Plan”), which authorizes the grant of nonqualified stock options to the Company’s independent directors, subject to the absolute discretion of the Board of Directors and the applicable limitations of the Plan. The exercise price for all stock options granted under the Plan was fixed at $10.00 per share until the termination of the Company’s IPO, and thereafter the exercise price for stock options granted to its independent directors will be equal to the fair market value of a share on the last business day preceding the annual meeting of stockholders. As of December 31, 2011 and 2010, the Company had granted options to purchase 27,000 shares at $10.00 per share, each with a two year vesting period and an expiration of 10 years. A total of 1.0 million shares have been authorized and reserved for issuance under the Plan.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. During the years ended December 31, 2011, 2010 and 2009, no options were forfeited or were exercised, and 9,000, 9,000 and 0 shares became vested, respectively. As of December 31, 2011 and 2010, unvested options to purchase 9,000 and 18,000 shares, respectively, at $10.00 per share remained outstanding with a weighted average contractual remaining life of 7.3 and 8.3 years, respectively. The total compensation charge relating to these option grants was immaterial.

Restricted Share Plan

On January 22, 2010, the Board of Directors adopted an employee and director incentive restricted share plan (the “RSP”). The RSP provides for the automatic grant of 3,000 restricted shares of common stock to each of the independent directors, without any further action by the Company’s Board of Directors or the stockholders, on the date of each annual stockholder’s meeting. Restricted stock issued to independent directors will vest over a five-year period following the first anniversary of the date of grant in increments of 20% annually. The employee and director incentive restricted share plan provides the Company with the ability to grant awards of restricted shares to the Company’s directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, certain of its consultants and certain consultants to the Advisor and its affiliates or to entities that provide services to the Company. The total number of common shares reserved for issuance under the RSP is equal to 1.0% of its authorized shares.

In April 2011, the Board of Directors approved the modification of the RSP to provide that, for as long as the Company remains a non-traded REIT, the aggregate value of the asset management fees paid by the Company over the life of the offering plus the value of all restricted shares issued by the Company pursuant to its RSP cannot exceed 1% of the contract purchase price of all the properties based on assets held by the Company on the measurement date, adjusted for appropriate closing dates for individual property acquisitions. For purposes of this calculation, the value of the restricted stock granted to the Advisor and its employees will be the value of the Company’s common stock on the date of such grant.

31

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Restricted share awards entitle the recipient to common shares from the Company under terms that provide for vesting over a specified period of time or upon attainment of pre-established performance objectives. Shares issued under the RSP vest immediately upon a change of control of the Company or sale of the Company’s assets. Such awards would typically be forfeited with respect to the unvested shares upon the termination of the recipient’s employment or other relationship with the Company. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the restricted shares have lapsed. Any distributions payable in common shares shall be subject to the same restrictions as the underlying restricted shares. As of December 31, 2011 and 2010, 18,000 and 9,000 shares, respectively, had been issued to independent directors under this plan at a fair value of $10.00 per share. The fair value of the shares are being expensed ratably over the five-year vesting period.

In June 2010, the Company’s independent directors approved and authorized the issuance of up to 1.5 million common restricted shares to the Advisor equaling 1% of authorized shares under the primary offering, subject to certain terms and conditions. Of the total shares granted, 50% vest over a five year period and the remaining 50% vest only to the extent the Company’s net asset value plus distributions paid to stockholders equals 106% of the original selling price of the Company’s common stock.

Compensation expense for restricted shares of $1.5 million and $0.4 million was recorded for the years ended December 31, 2011 and 2010. There were no restricted shares outstanding at December 31, 2009.

Note 14 — Net Loss Per Share

The following is a summary of the basic and diluted net loss per share computation for the years ended December 31, 2011, 2010 and 2009 (in thousands, except share and per share amounts):

	Year Ended December 31,
	2011			2010			2009
Net loss attributable to stockholders	$	(25,076	)	$	(9,833	)	$	(4,266	)
Less: distributions paid on unvested restricted stock	(1,024		)	(299		)	—
	$	(26,100	)	$	(10,132	)	$	(4,266	)
Weighted average common shares outstanding	133,730,159			32,539,393			5,768,761
Net loss per share attributable to stockholders, basic and diluted	$	(0.20	)	$	(0.31	)	$	(0.74	)

As of December 31, 2011, 27,000 stock options and 1.5 million restricted shares were outstanding; as of December 31, 2010, 27,000 stock options and 1.4 million restricted shares were outstanding. These items were not included in the calculation of diluted earnings per share since the effect of their inclusion would have been anti-dilutive.

Note 15 — Non-controlling Interests

The Company has investment arrangements with unaffiliated third parties whereby the investor receives an ownership interest in the property and is entitled to receive a proportionate share of the net operating cash flow derived from the property. Upon disposition of the property, the investor will receive a proportionate share of the net proceeds from the sale of the property. The investor has no recourse to any other assets of the Company. Due to the nature of the Company’s involvement with each of the arrangements described below and the significance of its investment in relation to the investment of the other interest holders, the Company has determined that it is the primary beneficiary in each of these arrangements and therefore the entities related to these arrangements are consolidated within the Company’s financial statements.

32

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

The following table summarizes the activity related to investment arrangements with unaffiliated third parties (dollars in thousands):

							Total Assets		Total Liabilities		Distributions
Property/ Portfolio Name	No. of Buildings	Investment Date	Net Investment Amount		Third Party Ownership Percentage		Subject to Investment Agreement		Subject to Investment Agreement		Year Ended December 31, 2011			Year Ended December 31, 2010			Year Ended December 31, 2009
Walgreens	1	Jul. 2009	$	1,068	44	%	$	3,474	$	1,550	$	(80	)	$	(80	)	$	(37	)
FedEx/PNC Bank	2	Jul. 2009 to Jan. 2010	2,002		49	%	11,303		8,917		(167		)	(167		)	(52		)
PNC Bank	1	Sep. 2009	444		35	%	3,316		2,306		(35		)	(35		)	(11		)
CVS	3	Jan. 2010 to Mar. 2010	2,577		49	%	10,636		6,670		(195		)	(178		)	—
Rickett Benckiser	1	Feb. 2010	2,400		15	%	28,367		14,709		(210		)	(169		)	—
FedEx III	1	Apr. 2010	3,000		15	%	31,294		15,000		(256		)	(156		)	—
BSFS	6	Jun. 2010 to Sep. 2010	6,468		49	%	11,993		—		(512		)	(201		)	—
Brown Shoe/Payless	2	Oct. 2010	6,000		9	%	65,196		28,200		(540		)	(81		)	—
Jared Jewelry	1	May 2010	500		25	%	1,578		—		(41		)	—			—
Total	18		$	24,459			$	167,157	$	77,352	$	(2,036	)	$	(1,067	)	$	(100	)

33

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

Note 16 — Quarterly Results (Unaudited)

Presented below is a summary of the unaudited quarterly financial information for the years ended December 31, 2011, 2010 and 2009 (in thousands, except per share amounts):

	Quarters Ended
	March 31, 2011			June 30, 2011			September 30, 2011			December 31, 2011
Rental revenue	$	20,718		$	28,054		$	34,943		$	41,136
Net loss	$	(4,520	)	$	(9,517	)	$	(5,661	)	$	(5,378	)
Weighted average shares outstanding	72,741			110,777			173,087			176,740
Basic and diluted loss attributable to stockholders per share	$	(0.07	)	$	(0.09	)	$	(0.03	)	$	(0.03	)

	Quarters Ended
	March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010
Rental revenue	$	7,428		$	9,382		$	11,928		$	16,035
Net loss	$	(389	)	$	(992	)	$	(74	)	$	(8,378	)
Weighted average shares outstanding	17,845			25,165			36,122			51,402
Basic and diluted loss attributable to stockholders per share	$	(0.02	)	$	(0.04	)	$	—		$	(0.17	)

	Quarters Ended
	March 31, 2009			June 30, 2009			September 30, 2009			December 31, 2009
Rental revenue	$	2,926		$	2,935		$	3,774		$	5,319
Net loss	$	(1,339	)	$	(673	)	$	(1,484	)	$	(770	)
Weighted average shares outstanding	1,527			3,151			6,639			11,637
Basic and diluted loss attributable to stockholders per share	$	(0.88	)	$	(0.21	)	$	(0.22	)	$	(0.07	)

Note 17— Subsequent Events

The Company has evaluated subsequent events through the filing of this Form 10-K, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements.

34

Real Estate and Accumulated Depreciation

Schedule III

December 31, 2011

(in thousands)

						Initial Costs						Gross Amount
Property	City	State	Encumbrances at December 31, 2011			Land		Buildings and Fixtures		Adjustment to Basis		Carried at December 31, 2011		Accumulated Depreciation
7-Eleven	Mount Dora	FL	$	—		$	1,475	$	1,207	$	—	$	2,681	$	45
7-Eleven Bradenton	Bradenton	FL	—			959		959		—		1,918		31
3M	DeKalb	IL	20,500			5,982		33,896		—		39,878		1,551
Aaron’s	Asheboro	NC	—			244		976		—		1,220		5
Aaron’s	Ashtabula	OH	—			60		1,142		—		1,202		5
Aaron’s	Bay City	MI	—			281		1,124		—		1,405		5
Aaron’s	Cortlandville	NY	—			187		1,062		—		1,249		5
Aaron’s	Cranberry	PA	—			233		933		—		1,167		4
Aaron’s	Grand Island	NE	—			446		1,041		—		1,487		5
Aaron’s	Hudson	FL	—			390		910		—		1,300		4
Aaron’s	Kettering	OH	—			162		920		—		1,082		4
Aaron’s	Murrells Inlet	SC	—			253		760		—		1,013		4
Aaron’s	Oneonta	NY	—			170		961		—		1,130		4
Aaron’s	Palm Harbor	FL	—			478		717		—		1,195		3
Aaron’s	Pensacola	FL	—			243		971		—		1,214		5
Aaron’s	Piqua	OH	—			254		1,017		—		1,271		5
Aaron’s	Pueblo	CO	—			183		1,034		—		1,217		5
Aaron’s	Ridgeland	MS	—			203		811		—		1,014		4
Aaron’s	Rotterdam	NY	—			59		1,129		—		1,189		5
Aaron’s	Spring Hill	FL	—			531		649		—		1,181		3
Aaron’s	Victoria	TX	—			305		711		—		1,016		3
Advance Auto	Plainfield	MI			(1)	230		1,303		—		1,533		112
Advance Auto II	Harvest	AL			(1)	116		1,040		—		1,155		70
Advance Auto II	Crystal Springs	MS			(1)	45		854		—		899		58
Advance Auto II	Vicksburg	MS			(1)	104		938		—		1,042		63
Advance Auto III	Lafayette	LA			(1)	296		888		—		1,183		54
Advance Auto III	Slidell	LA			(1)	382		891		—		1,272		54
Advance Auto III	West Monroe	LA			(1)	383		894		—		1,277		54
Advance Auto IV	Dunkirk	NY			(4)	495		606		—		1,101		30
AutoZone	Columbia	SC			(3)	281		842		—		1,123		4
AutoZone	San Juan	PR			(3)	353		2,003		—		2,356		107
AutoZone	Guayama	PR			(3)	483		1,127		—		1,609		60
AutoZone	Ponce	PR			(3)	404		2,287		—		2,691		122
AutoZone	Humacoa	PR			(3)	115		2,187		—		2,302		117
BB&T	Fort Myers	FL			(4)	1,020		2,380		—		3,400		102
Bojangles	Northport	AL	—			582		874		—		1,456		46
Bojangles	Buford	GA	—			727		1,351		—		2,078		71
Bojangles	Hartwell	GA	—			352		1,055		—		1,407		56
Bojangles	Hickory	NC	—			644		1,504		—		2,148		79
Bojangles	Highpoint	NC	—			361		1,084		—		1,445		57
Bojangles	Hildebran	NC	—			220		1,247		—		1,468		66
Bojangles	Lincolnton	NC	—			1,037		2,420		—		3,458		128
Bojangles	Raeford	NC	—			258		1,033		—		1,291		55
Bojangles	Thomasville	NC	—			437		1,310		—		1,746		69
Bojangles	Walkertown	NC	—			475		1,108		—		1,582		58

35

					Initial Costs			Gross Amount
Property	City	State	Encumbrances at December 31, 2011		Land	Buildings and Fixtures	Adjustment to Basis	Carried at December 31, 2011	Accumulated Depreciation
Bojangles	Batesburg	SC	—		208	1,176	—	1,384	62
Bojangles	Inman	SC	—		194	1,102	—	1,297	58
Bojangles	Piedmont	SC	—		410	957	—	1,367	51
Brown Shoe	Lecbec	CA	9,100		1,977	17,795	—	19,772	886
BSFS	Middleburg	FL	—		347	1,968	—	2,315	169
BSFS	Edmond	OK	—		340	1,929	—	2,270	166
BSFS	Oklahoma City	OK	—		315	1,787	—	2,102	154
BSFS	Owasso	OK	—		327	1,852	—	2,179	159
BSFS	Tulsa	OK	—		352	1,997	—	2,350	172
BSFS	Yukon	OK	—		338	1,917	—	2,255	165
BSFS II	Benton	AR		(4)	461	1,383	—	1,844	103
BSFS II	Grand Junction	CO		(4)	506	1,518	—	2,024	113
BSFS II	Wichita	KS		(4)	344	1,374	—	1,718	103
BSFS II	Baton Rouge	LA		(4)	503	1,509	—	2,012	113
BSFS II	Austin	TX		(4)	463	1,390	—	1,853	104
BSFS II	Pearland	TX		(4)	556	1,297	—	1,853	97
BSFS II	Allen	TX	—		592	1,381	—	1,973	109
BSFS II	Crowley	TX	—		355	1,419	—	1,773	111
BSFS II	League City	TX	—		261	1,477	—	1,737	116
BSFS II	Weatherford	TX	—		243	1,375	—	1,618	108
BSFS II	Albuquerque	NM	—		487	1,462	—	1,949	115
BSFS II	Rockwall	TX	—		642	1,497	—	2,139	118
BSFS III	Milwaukee	WI	—		702	1,639	—	2,341	61
BSFS IV	Northfield	NJ	—		1,145	1,718	—	2,863	58
BSFS IV	Chester	VA	—		677	1,580	—	2,257	53
BSFS IV	Dardenne	MO	—		843	1,566	—	2,409	53
BSFS V	Prescott	AR	—		382	7,261	—	7,643	211
Citigroup, Inc.	Mt. Pleasant	SC	13,800		8,543	15,865	—	24,407	781
Citizens	Oak Lawn	IL	—		1,737	745	—	2,482	38
Citizens	Stickney	IL	—		282	230	—	512	12
Coats & Clark	Albany	GA	—		406	8,098	—	8,504	386
ConAgra	Omaha	NE	—		882	16,759	—	17,641	165
CSAA/Chase Bank	Decatur	GA		(2)	1,284	2,995	—	4,279	181
CSAA/Chase Bank	Montgomery	IL		(2)	2,679	—	—	2,679	—
CSAA/CVS	Schaumburg	IL		(2)	3,519	—	—	3,519	—
CSAA/Fifth Third Bank	Chelsea	AL		(2)	1,224	4,897	—	6,121	296
CSAA/Fifth Third Bank	Austin	TX		(2)	1,568	2,911	—	4,479	176
CSAA/Home Depot	Joliet	IL	3,900		1,115	2,601	—	3,716	157
CSAA/Walgreens	Marysville	OH		(2)	984	2,951	—	3,935	178
CSAA/Walgreens	Upper Arlington	OH		(2)	1,929	3,583	—	5,512	217
CSAA/Walgreens	Northlake	IL		(2)	3,507	—	—	3,507	—
CSAA/Walgreens	Carpentersville	IL		(2)	2,989	—	—	2,989	—
CSAA/Walgreens	Austell	GA		(2)	8,720	—	—	8,720	—
CVS	Chicago	IL	3,874		3,722	3,330	—	7,052	322
CVS	Visalia	CA	1,655		—	2,778	—	2,778	269
CVS	Smyrna	GA	2,532		654	3,705	—	4,359	359
CVS	Phoenix	AZ	1,899		—	3,228	—	3,228	312
CVS	Moline	IL	2,543		658	3,729	—	4,388	361
CVS	Northville	MI	2,450		626	3,549	—	4,175	344
CVS	Asheville	NC	1,033		—	1,770	—	1,770	171

36

					Initial Costs			Gross Amount
Property	City	State	Encumbrances at December 31, 2011		Land	Buildings and Fixtures	Adjustment to Basis	Carried at December 31, 2011	Accumulated Depreciation
CVS	Wilton	NY	2,327		603	3,414	—	4,017	331
CVS	Columbia	SC	1,741		446	2,525	—	2,970	244
CVS	Coppell	TX	3,138		810	4,588	—	5,398	444
CVS II	Jacksonville	FL	2,398		598	3,391	—	3,990	304
CVS II	Harrisonville	MO	2,035		508	2,876	—	3,384	258
CVS II	Creedmoor	NC	1,831		454	2,573	—	3,027	231
CVS II	Reno	NV	1,643		—	2,708	—	2,708	243
CVS II	Pico Rivera	CA	2,431		—	4,014	—	4,014	360
CVS II	Auburn	AL	2,288		571	3,237	—	3,808	290
CVS II	Chandler	AZ	2,103		—	3,459	—	3,459	310
CVS II	Gainesville	FL	3,232		807	4,575	—	5,382	410
CVS II	East Ellijay	GA	2,072		516	2,923	—	3,439	262
CVS II	Rome	GA	1,643		—	2,699	—	2,699	242
CVS II	Chesterton	IN	3,209		804	4,557	—	5,361	408
CVS II	Biddeford	ME	1,958		—	3,225	—	3,225	289
CVS II	Brooklyn Park	MN	1,465		—	2,379	—	2,379	213
CVS II	Holly Springs	NC	2,061		513	2,906	—	3,419	261
CVS II	Walkertown	NC	2,006		499	2,830	—	3,329	254
CVS III	King George	VA		(8)	677	3,838	—	4,516	211
CVS IV	Charlotte	MI		(9)	449	4,041	—	4,490	182
CVS Stony Point	Stony Point	NY		(9)	1,979	2,968	—	4,947	134
CVS V	DelRay Beach	FL	—		3,875	3,875	—	7,750	136
CVS VI	Roanoke Rapids	NC	—		119	2,257	—	2,376	45
CVS VII	Cohoes	NY	—		241	2,167	—	2,408	43
Danfoss	Loves Park	IL	—		989	5,606	—	6,595	28
DaVita Dialysis	Lincoln	NE		(4)	122	2,326	—	2,449	99
DaVita Dialysis II	Abbeville	SC		(5)	360	1,439	—	1,799	78
DaVita Dialysis II	Enterprise	AL	—		443	1,773	—	2,216	79
DaVita Dialysis II	Okmulgee	OK		(5)	76	1,437	—	1,513	71
DaVita Dialysis II	Shreveport	LA		(5)	158	1,421	—	1,579	77
DaVita Dialysis III	Wilmington	NC		(5)	1,166	4,662	—	5,828	230
DaVita Dialysis IV	Blackfoot	ID	—		184	1,655	—	1,839	65
DaVita Dialysis V	Sellersville	PA	—		1,465	1,465	—	2,931	—
Dillons	Lawrence	KS		(5)	1,022	3,067	—	4,089	166
Dillons II	Wichita	KS	—		528	4,751	—	5,279	250
Dollar General	Jacksonville	FL		(4)	201	803	—	1,004	51
Dollar General II	Hilliard	FL		(4)	217	868	—	1,085	40
Dollar General III	Gillespie	IL		(4)	35	672	—	708	29
Dollar General III	Marseilles	IL		(4)	117	661	—	778	28
Dollar General III	Mt. Zion	IL		(4)	119	677	—	796	29
Dollar General IV	San Mateo	FL			208	834	—	1,042	36
Dollar General V	Alanson	MI			73	654	—	726	32
Dollar General V	Wellston	MI			34	655	—	689	32
Dollar General V	Copermish	MI			72	645	—	717	32
Dollar General V	Buckley	MI			74	663	—	737	33
Dollar General V	North Muskegon	MI			35	667	—	703	30
Dollar General V	Spring Arbor	MI			73	655	—	728	32
Dollar General VI	Florien	LA	—		69	620	—	689	26
Dollar General VI	Abbeville	LA	—		81	727	—	808	24
Dollar General VII	Port Vincent	LA	—		176	705	—	881	30

37

				Initial Costs			Gross Amount
Property	City	State	Encumbrances at December 31, 2011	Land	Buildings and Fixtures	Adjustment to Basis	Carried at December 31, 2011	Accumulated Depreciation
Dollar General VII	West Monroe	LA	—	123	697	—	820	23
Dollar General VIII	Caitlin	IL	—	71	642	—	714	15
Dollar General VIII	Cerro Gordo	IL	—	35	666	—	701	12
Dollar General VIII	Columbia	IL	—	129	731	—	860	14
Dollar General IX	Robeline	LA	—	71	640	—	711	15
Dollar General X	Litchfield	MI	—	68	614	—	682	14
Dollar General X	Mancelona	MI	—	74	662	—	736	16
Dollar General X	St Johns	MI	—	71	641	—	713	15
Dollar General X	Clinton	MI	—	150	599	—	748	11
Dollar General X	Pinckney	MI	—	73	659	—	732	12
Dollar General X	Tekonsha	MI	—	67	600	—	667	11
Dollar General XI	Sheridan	MI	—	155	620	—	774	6
Dollar General XI	Gladwin	MI	—	77	694	—	771	6
Dollar General XII	Bessemer	AL	—	105	945	—	1,050	9
Dollar General XII	Andalusia	AL	—	78	705	—	784	7
Dollar General XII	Shelby	AL	—	77	690	—	767	6
Dollar General XII	Thorsby	AL	—	126	715	—	841	7
Dollar General XII	Crossville	AL	—	107	607	—	714	6
Dollar General XII	Jasper	AL	—	116	659	—	776	6
Dollar General XII	Jasper	AL	—	76	684	—	760	6
Dollar General XII	Jasper	AL	—	118	666	—	784	6
Dollar General XII	Irwinton	GA	—	82	734	—	815	7
Dollar General XII	Dorton	KY	—	117	661	—	777	6
Dollar General XII	Bronston	KY	—	166	664	—	830	6
Dollar General XII	Smiths Station	AL	—	188	753	—	941	7
Dollar General XII	Sunbright	TN	—	77	689	—	766	6
Dollar General XII	Opelika	AL	—	123	697	—	820	7
Dollar General XII	Leonville	LA	—	80	719	—	799	7
Dollar General XII	Fayette	OH	—	78	699	—	777	7
Dollar General XII	Kingston	OH	—	128	723	—	851	7
Dollar General XII	Oak Harbor	OH	—	139	788	—	927	7
Dollar General XII	Cardington	OH	—	170	679	—	849	6
Dollar General XII	Seville	OH	—	122	691	—	813	6
Dollar General XII	Oronago	MO	—	75	676	—	752	6
Dollar General XII	Queen City	MO	—	77	693	—	770	6
Dollar General XII	Laurel Hill	FL	—	79	714	—	793	7
Dollar General XII	San Antonio	TX	—	203	811	—	1,013	8
Dollar General XII	Granite Shoals	TX	—	140	792	—	932	7
Dollar General XII	Bloomington	TX	—	66	590	—	656	6
Dollar General XII	Lafayette Parish	LA	—	201	805	—	1,006	8
Dollar General XII	Mermentau	LA	—	81	728	—	809	7
Dollar General XII	Waterloo	IA	—	179	716	—	894	7
Dollar General XII	Jackson	MO	—	117	662	—	779	6
Dollar General XII	Cole - Camp	MO	—	107	606	—	713	6
Dollar General XII	Bonne Terre	MO	—	112	449	—	561	4
Dollar General XII	Breman	OH	—	138	784	—	922	7
Dollar General XII	Duson	LA	—	88	792	—	880	7
Dollar General XII	Monte Alto	TX	—	84	756	—	841	7
Dollar General XII	Corpus Christie	TX	—	135	763	—	898	7
Dollar General XII	Nashport	OH	—	183	731	—	913	—

38

					Initial Costs			Gross Amount
Property	City	State	Encumbrances at December 31, 2011		Land	Buildings and Fixtures	Adjustment to Basis	Carried at December 31, 2011	Accumulated Depreciation
Dollar General XII	Elsa	TX	—		75	422	—	497	2
Dollar General XII	Melville	LA	—		43	818	—	861	4
Dollar General XII	Montrose	IA	—		69	618	—	687	3
Dollar General XII	Opelousas	LA	—		112	635	—	747	3
Dollar General XII	Unionville	MO	—		127	719	—	846	3
Dollar General XIII	Dayton	OH	—		111	627	—	738	6
Express Scripts	St. Louis	MO	19,173		—	30,150	—	30,150	1,888
Express Scripts	St. Louis	MO	9,537		1,492	13,425	—	14,917	682
FedEx	Snow Shoe	PA	6,965		1,413	7,930	—	9,343	1,308
FedEx II	Houston	TX	15,894		4,021	22,786	—	26,808	2,451
FedEx III	Sacramento	CA	15,000		7,283	21,849	—	29,132	1,554
FedEx IV	Sioux Falls	SD		(3)	606	2,423	—	3,028	129
FedEx V	Grand Forks	ND		(4)	599	1,796	—	2,395	83
FedEx VI	Louisville	KY	14,662		3,776	21,397	—	25,172	989
FedEx VII	Springfield	MO	9,638		3,304	13,217	—	16,521	611
FedEx VIII	Beckley	WV		(4)	322	2,901	—	3,223	124
FedEx VIII	St. Cloud	MN		(4)	300	2,702	—	3,003	115
FedEx VIII	Dodge City	KS		(4)	86	1,633	—	1,719	70
FedEx VIII	Hays	KS		(4)	63	1,199	—	1,262	51
FedEx IX	Lincoln	NE		(4)	773	4,379	—	5,152	187
FedEx X	Ann Arbor	MI		(9)	1,624	6,497	—	8,121	297
FedEx X	Bronx	NY	15,250		—	20,372	—	20,372	725
FedEx XI	Baltimore	MD	—		14,154	21,231	—	35,385	755
FedEx XII	Green	OH	—		1,272	29,185	—	30,457	926
FedEx XIII	Saginaw	MI			308	5,861	—	6,169	149
FedEx XIII	Lebanon	NH			1,738	5,215	—	6,953	133
FedEx XIII	Sherman	TX			284	5,390	—	5,674	137
FedEx XIII	Spokane	WA		(10)	603	5,426	—	6,029	138
FedEx XIV	North Canton	OH	—		—	3,745	—	3,745	19
FedEx XV	Rensselaer	NY	—		7,329	41,530	—	48,859	211
FedEx XVI	North Phoenix	AZ	—		3,468	13,871	—	17,339	71
First Niagara	Walnutport	PA	—		233	1,321	—	1,554	218
First Niagara	Springhouse	PA	—		561	3,165	—	3,726	522
First Niagara	Lehighton	PA	—		137	777	—	914	128
First Niagara	Lansdale	PA	—		251	1,423	—	1,674	235
First Niagara	Lansdale	PA	—		224	1,258	—	1,482	207
First Niagara	Wyomissing	PA	—		212	1,203	—	1,415	198
First Niagara	Harleysville	PA	—		1,853	10,427	—	12,279	1,720
First Niagara	Slatington	PA	—		163	926	—	1,089	153
First Niagara	Summit Hill	PA	—		245	1,391	—	1,636	229
First Niagara	Limerick	PA	—		232	1,316	—	1,548	217
First Niagara	Sellersville	PA	—		159	904	—	1,063	149
First Niagara	Skippack	PA	—		210	1,188	—	1,398	196
First Niagara	Palmerton	PA	—		455	2,577	—	3,032	425
First Niagara	Lansford	PA	—		279	1,578	—	1,857	260
First Niagara	Slatington	PA	—		492	2,786	—	3,278	460
Fresenius	Shasta Lake	CA	2,922		273	5,195	—	5,468	425
Fresenius	Apple Valley	CA	3,052		262	4,973	—	5,235	407
General Electric	Muskego	WI		(10)	2,134	19,206	—	21,340	683
GSA - USPS	Minneapolis	MN	—		1,241	4,964	—	6,205	203

39

					Initial Costs			Gross Amount
Property	City	State	Encumbrances at December 31, 2011		Land	Buildings and Fixtures	Adjustment to Basis	Carried at December 31, 2011	Accumulated Depreciation
GSA - VA Clinic	Caldwell	ID	—		566	2,265	—	2,831	67
GSA I	Brownsville	TX	—		507	4,784	—	5,291	125
GSA II	Paris	TX	—		182	3,785	—	3,968	100
GSA III	Sioux City	IA	—		185	3,508	—	3,692	69
GSA IV	Sierra Vista	AZ	—		960	5,440	—	6,400	107
GSA V	Colorado Springs	CO	—		584	5,257	—	5,841	104
GSA VI	New Port Rici	FL	—		1,432	5,730	—	7,162	85
GSA VII	Knoxville	TN	—		770	4,364	—	5,135	64
GSA VIII	Eagle Pass	TX	—		373	3,354	—	3,726	33
GSA IX	Dallas	TX	—		551	4,959	—	5,510	49
GSA X	Redding	CA	—		546	10,378	—	10,925	102
GSA XI	Malone	NY	—		717	6,451	—	7,168	64
GSA XII	Parkersburg	WV	—		812	7,306	—	8,118	36
Home Depot	Topeka	KS	12,150		—	18,306	—	18,306	1,641
IHOP	Hilton Head	SC		(4)	634	1,478	—	2,112	100
IHOP II	Buford	GA		(4)	497	1,491	—	1,988	95
IHOP III	Cincinnati	OH	1,344		862	2,012	—	2,875	129
IHOP IV	LaVerne	CA	586		—	1,240	—	1,240	71
IHOP IV	Shawnee	KS	521		—	1,076	—	1,076	61
IHOP IV	Topeka	KS	844		360	1,438	—	1,798	82
IHOP IV	Alexandria	LA	497		—	1,047	—	1,047	60
IHOP IV	Baton Rouge	LA			—	1,842	—	1,842	105
IHOP IV	Springfield	MO	715		—	1,509	—	1,509	86
IHOP IV	Albuquerque	NM	525		—	1,106	—	1,106	63
IHOP IV	Rochester	NY	659		—	1,378	—	1,378	78
IHOP IV	Memphis	TN	894		381	1,525	—	1,907	87
IHOP IV	Memphis	TN	624		—	1,313	—	1,313	75
IHOP IV	El Paso	TX	678		—	1,428	—	1,428	81
IHOP IV	Centerville	UT	814		87	1,646	—	1,733	94
IHOP IV	Charlottesville	VA	437		—	912	—	912	52
IHOP IV	Roanoke	VA	494		—	1,036	—	1,036	59
IHOP IV	El Paso	TX	527		—	1,104	—	1,104	63
IHOP IV	Parker	CO	658		—	1,361	—	1,361	77
IHOP IV	Beaverton	OR	615		—	1,296	—	1,296	74
IHOP IV	Salem	OR	—		—	901	—	901	51
IHOP IV	Sugar Land	TX	1,018		651	1,519	—	2,170	86
Jack in the Box	Desloge	NM	1,069		876	876	—	1,752	69
Jack in the Box	The Dalles	NM	998		737	901	—	1,638	70
Jack in the Box	Corpus Christi	NM	901		588	882	—	1,470	69
Jack in the Box	Vancouver	NM	1,344		1,024	1,251	—	2,275	98
Jack in the Box	Houston	TX	955		623	935	—	1,558	66
Jack in the Box II	Beaumont	TX		(4)	363	1,451	—	1,814	93
Jack in the Box II	Ferris	TX		(4)	366	1,098	—	1,464	70
Jack in the Box II	Forney	TX		(4)	627	1,164	—	1,790	74
Jack in the Box II	Houston	TX		(4)	607	1,127	—	1,733	72
Jack in the Box II	Victoria	TX		(4)	280	1,120	—	1,400	72
Jack in the Box II	Victoria	TX		(4)	491	1,146	—	1,637	73
Jared Jewelry	Watchung	NJ	—		—	2,218	—	2,218	158
Jared Jewelry	Amherst	NY	—		—	811	—	811	58
Jared Jewelry	Lake Grove	NY	—		—	1,423	—	1,423	101

40

					Initial Costs			Gross Amount
Property	City	State	Encumbrances at December 31, 2011		Land	Buildings and Fixtures	Adjustment to Basis	Carried at December 31, 2011	Accumulated Depreciation
Jared Jewelry II	Plymouth	MA	—		—	1,321	—	1,321	85
Kohl’s	Georgetown	KY	5,680		1,327	7,522	—	8,849	348
Kohl’s II	Collinsville	IL	3,570		800	4,535	—	5,335	212
Kum & Go I	Bolivar	MO	—		252	1,006	—	1,258	54
Kum & Go I	Bolivar	MO	—		273	1,091	—	1,364	58
Kum & Go I	Fair Grove	MO	—		123	490	—	613	26
Kum & Go I	Hollister	MO	—		314	1,255	—	1,568	67
Kum & Go I	Monett	MO	—		249	746	—	995	40
Kum & Go I	Springfield	MO	—		244	1,380	—	1,624	74
Kum & Go I	Springfield	MO	—		504	1,177	—	1,681	63
Kum & Go I	Springfield	MO	—		189	1,070	—	1,259	57
Kum & Go I	Springfield	MO	—		371	866	—	1,237	46
Kum & Go I	Springfield	MO	—		293	1,171	—	1,464	62
Kum & Go I	Springfield	MO	—		209	838	—	1,047	45
Kum & Go I	Springfield	MO	—		203	1,152	—	1,355	61
Kum & Go I	Springfield	MO	—		934	2,180	—	3,114	116
Kum & Go I	Waynesville	MO	—		369	685	—	1,054	37
Kum & Go II	Adair	IA	—		61	1,155	—	1,216	57
Kum & Go II	Neola	IA	—		260	1,041	—	1,301	52
Lockheed Martin	Lufkin	TX		(10)	572	10,876	—	11,448	268
Lowe’s	Knoxville	TN		(4)	10,018	—	—	10,018	—
Lowe’s II	Augusta	GA	—		1,306	11,757	—	13,063	275
Mrs. Bairds	Oklahoma City	OK	—		346	1,038	—	1,385	32
Mrs. Bairds	Weslaco	TX	—		367	1,102	—	1,469	34
National Tire & Battery	Kennesaw	GA	—		471	1,100	—	1,571	43
National Tire & Battery	Liburn	GA	—		745	1,118	—	1,863	43
National Tire & Battery	Douglasville	GA	—		607	911	—	1,518	35
O’Reilly Auto	Joliet	IL		(3)	531	1,592	—	2,123	91
O’Reilly Auto II	Waterford	MI	—		334	1,336	—	1,670	58
O’Reilly Auto III	Roseville	MI	—		442	1,327	—	1,770	38
O’Reilly Auto IV	Buena Vista	MI	—		387	1,160	—	1,547	34
O’Reilly Auto IV	Saginaw	MI	—		511	1,193	—	1,704	35
Payless	Brookville (Dayton)	OH	19,100		1,870	35,522	—	37,391	1,769
Pep Boys	North Wales	PA	—		1,396	3,258	—	4,654	110
Pep Boys	Stockton	CA	—		1,019	1,528	—	2,547	52
Pep Boys	Las Vegas	NV	—		1,296	2,408	—	3,704	81
PetSmart	Ottawa	IL	—		2,187	41,546	—	43,732	845
PNC	Bloomfield	NJ	592		125	712	—	838	95
PNC	Cedar Grove	NJ	964		197	1,123	—	1,322	149
PNC	Clementon	NJ	1,017		196	1,117	—	1,314	148
PNC	Dayton	NJ	859		172	974	—	1,148	129
PNC	Deptford	NJ	697		138	782	—	921	104
PNC	Dunellen	NJ	749		157	889	—	1,046	118
PNC	East Brunswick	NJ	806		175	976	—	1,151	129
PNC	Fairfield	NJ	1,387		268	1,701	—	1,968	280
PNC	Fanwood	NJ	859		167	947	—	1,114	126
PNC	Garfield	NJ	859		190	1,079	—	1,270	143
PNC	Haddonfield	NJ	697		149	842	—	990	112
PNC	Kearny	NJ	592		145	821	—	966	109

41

					Initial Costs			Gross Amount
Property	City	State	Encumbrances at December 31, 2011		Land	Buildings and Fixtures	Adjustment to Basis	Carried at December 31, 2011	Accumulated Depreciation
PNC	Mahwah	NJ	592		128	723	—	851	96
PNC	Martinsville	NJ	1,017		227	1,285	—	1,512	170
PNC	Millstone	NJ	645		125	709	—	834	94
PNC	Mountain Lakes	NJ	749		149	842	—	991	112
PNC	Northvale	NJ	592		131	744	—	875	99
PNC	Orange	NJ	697		158	897	—	1,055	119
PNC	Parlin	NJ	697		169	960	—	1,130	127
PNC	Paterson	NJ	592		138	785	—	923	104
PNC	Paterson	NJ	277		90	512	—	602	68
PNC	Pompton Plains	NJ	224		90	511	—	601	68
PNC	Raritan	NJ	859		210	1,189	—	1,399	158
PNC	Somerville	NJ	912		180	1,005	—	1,185	133
PNC	Tenafly	NJ	540		132	748	—	880	99
PNC	Trenton	NJ	1,070		208	1,177	—	1,385	156
PNC	Vineland	NJ	540		120	666	—	786	88
PNC	West Orange	NJ	593		131	743	—	875	99
PNC	West Orange	NJ	382		92	521	—	613	69
PNC	West Paterson	NJ	487		105	598	—	703	79
PNC	Westwood	NJ	382		112	632	—	744	84
PNC	West Chester	OH	908		176	997	—	1,173	132
PNC	Blairsville	PA	490		131	728	—	858	97
PNC	Clarks Summit	PA	388		103	586	—	690	78
PNC	Dillsburg	PA	332		91	517	—	608	69
PNC	Media	PA	544		128	727	—	855	96
PNC	Media	PA	227		78	440	—	517	58
PNC	Philadelphia	PA	654		138	767	—	905	102
PNC	Philadelphia	PA	867		169	956	—	1,124	127
PNC	Philadelphia	PA	388		103	583	—	686	77
PNC	Philadelphia	PA	441		116	644	—	760	85
PNC	Philadelphia	PA	707		142	806	—	949	107
PNC	Philadelphia	PA	229		84	478	—	562	63
PNC	Pittsburgh	PA	491		119	675	—	794	90
PNC	Somerset	PA	861		191	1,085	—	1,276	144
PNC	Swarthmore	PA	386		98	553	—	650	73
PNC	Tannersville	PA	648		126	715	—	841	95
PNC	Warren	PA	490		132	746	—	877	99
PNC Bank	Palm Coast	FL	1,919		427	2,417	—	2,844	347
PNC Bank	Pompano Beach	FL	2,339		519	2,940	—	3,459	401
Provident Bank	Stony Point	NY		(9)	899	1,349	—	2,249	54
QuikTrip	Decatur	GA		(5)	728	2,183	—	2,910	118
Reckitt Benckiser	Tooele	UT	14,709		1,290	24,510	—	25,800	1,918
Reliant Rehab	Bedford	TX	16,150		1,330	25,261	—	26,591	251
Renal Advantage	Augusta	GA	—		264	1,497	—	1,761	29
Renal Advantage	Valdosta	GA	—		246	1,394	—	1,640	27
Renal Advantage	Valdosta	GA	—		321	1,286	—	1,607	25
Renal Advantage	New Castle	IN	—		81	1,540	—	1,621	30
Renal Advantage	Kansas City	KS	—		94	1,789	—	1,883	35
Renal Advantage	North Augusta	SC	—		540	1,261	—	1,801	25
Renal Advantage	Dickson	TN	—		96	1,817	—	1,913	36
Renal Advantage	Memphis	TN	—		182	1,639	—	1,821	32

42

					Initial Costs			Gross Amount
Property	City	State	Encumbrances at December 31, 2011		Land	Buildings and Fixtures	Adjustment to Basis	Carried at December 31, 2011	Accumulated Depreciation
Renal Advantage	Memphis	TN	—		248	2,228	—	2,476	44
Rite Aid	Lisbon	OH	1,090		205	1,160	—	1,365	162
Rite Aid	East Liverpool	OH	1,630		305	1,729	—	2,034	242
Rite Aid	Carrollton	OH	1,730		325	1,826	—	2,151	255
Rite Aid	Cadiz	OH	1,240		232	1,317	—	1,550	184
Rite Aid	Carlisle	PA	3,008		637	3,597	—	4,234	503
Rite Aid	Pittsburgh	PA	4,110		866	4,906	—	5,772	686
Rockland Trust	Brockton	MA	440		88	498	—	586	79
Rockland Trust	Chatham	MA	1,026		206	1,167	—	1,373	184
Rockland Trust	Hull	MA	473		95	537	—	631	85
Rockland Trust	Hyannis	MA	1,626		325	1,840	—	2,165	290
Rockland Trust	Middleboro	MA	2,391		478	2,697	—	3,176	425
Rockland Trust	Orleans	MA	938		188	1,066	—	1,254	168
Rockland Trust	Randolph	MA	1,053		211	1,194	—	1,405	188
Rockland Trust	Centerville	MA	772		155	879	—	1,034	139
Rockland Trust	Duxbury	MA	905		182	1,034	—	1,216	163
Rockland Trust	Hanover	MA	903		182	1,029	—	1,210	162
Rockland Trust	Middleboro	MA	631		127	719	—	845	113
Rockland Trust	Pembroke	MA	1,058		213	1,206	—	1,419	190
Rockland Trust	Plymouth	MA	3,540		714	4,013	—	4,727	633
Rockland Trust	Rockland	MA	2,800		563	3,173	—	3,736	501
Rockland Trust	Rockland	MA	1,210		242	1,369	—	1,611	216
Rockland Trust	S. Yarmouth	MA	1,084		218	1,235	—	1,453	195
Rockland Trust	Scituate	MA	864		174	986	—	1,159	155
Rockland Trust	West Dennis	MA	946		167	1,080	—	1,247	170
Royal Ahold - Stop and Shop	Nanuet	NY	10,800		3,094	17,532	—	20,626	1,185
Royal Ahold - Tops Market	Canandaigua	NY	—		466	8,848	—	9,313	363
Sam’s Club	Augusta	GA		(7)	12,821	—	—	12,821	—
Sealy	Green Island	NY	10,479		766	14,558	—	15,325	222
St. Joseph’s Mercy Medical	Hot Springs	AR	—	(3)	379	1,516	—	1,894	75
St. Joseph’s Mercy Medical	Hot Springs	AR	—	(3)	385	1,539	—	1,924	77
St. Joseph’s Mercy Medical	Hot Springs	AR	—	(3)	486	4,377	—	4,863	218
Texas Instruments	Tucson	AZ	15,000		1,286	27,189	—	28,475	1,296
Tractor Supply	Dubois	PA		(3)	237	2,130	—	2,366	136
Tractor Supply	Lewisburg	WV		(3)	479	1,918	—	2,397	109
Tractor Supply	Elizabethville	PA		(3)	228	2,050	—	2,278	124
Tractor Supply	Mansfield	PA		(3)	234	2,107	—	2,342	127
Tractor Supply II	Marksville	LA		(4)	203	1,831	—	2,034	91
Tractor Supply II	Demopolis	AL		(9)	111	2,102	—	2,213	93
Tractor Supply II	New Boston	TX		(9)	325	1,839	—	2,163	81
Tractor Supply III	Sonora	CA		(4)	1,052	3,157	—	4,209	135
Tractor Supply IV	Kalamazoo	MI	—		—	1,380	—	1,380	33
Trader Joe’s	Portland	ME	—		—	4,672	—	4,672	164
Verizon	Harmans	MD		(10)	5,632	5,632	—	11,264	115
Wal-Mart	Blytheville	AR		(7)	1,093	9,837	—	10,930	456
Wal-Mart II	Edensburg	PA	—		475	9,018	—	9,493	370
Walgreens	Sealy	TX	1,550		515	2,918	—	3,433	303
Walgreens II	Byram	MS	3,000		1,973	2,960	—	4,933	200
Walgreens III	LeRoy	NY		(1)	439	3,955	—	4,395	253
Walgreens IV	Grand Rapids	MN		(3)	1,135	4,542	—	5,677	258

43

					Initial Costs						Gross Amount
Property	City	State	Encumbrances at December 31, 2011		Land		Buildings and Fixtures		Adjustment to Basis		Carried at December 31, 2011		Accumulated Depreciation
Walgreens V	Mount Pleasant	MI		(3)	835		3,339		—		4,173		178
Walgreens VI	Princeton	IN	3,013		713		4,040		—		4,753		186
Walgreens VI	Louisville	KY	3,674		2,662		3,253		—		5,915		150
Walgreens VI	Louisville	KY	3,266		1,839		3,415		—		5,254		158
Walgreens VI	Louisville	KY	3,061		1,718		3,190		—		4,908		147
Walgreens VI	Mayfield	KY	2,996		1,204		3,613		—		4,817		167
Walgreens VI	Radcliff	KY	3,257		1,835		3,407		—		5,242		157
Walgreens VI	Huntington	WV	3,633		1,178		4,713		—		5,891		217
Walgreens VII	Conway	SC		(4)	—		2,440		—		2,440		104
Walgreens VIII	Angola	NY	—		737		2,948		—		3,685		157
Walgreens VIII	Auburn	NY	2,978		542		4,880		—		5,422		262
Walgreens VIII	Greece	NY	3,463		1,297		5,190		—		6,487		278
Walgreens VIII	Greece	NY	2,102		—		3,895		—		3,895		201
Walgreens VIII	Irondequoit	NY	4,901		424		3,813		—		4,236		205
Walgreens VIII	Orchard Park	NY	3,309		615		5,532		—		6,147		296
Walgreens VIII	Penn Yan	NY	4,338		567		3,212		—		3,779		172
Walgreens VIII	Plattsburgh	NY	3,740		1,048		5,940		—		6,989		317
Walgreens VIII	Syracuse	NY	3,628		1,346		5,385		—		6,731		288
Walgreens IX	Martinsville	VA		(6)	237		4,496		—		4,733		225
Walgreens X	Ottumwa	IA		(6)	183		3,470		—		3,653		156
Walgreens X	Mansfield	OH	—	(6)	397		3,576		—		3,973		161
Walgreens XI	Amite	LA		(8)	431		3,878		—		4,309		155
Walgreens XII	Forest	MS	—		—		3,734		—		3,734		145
Walgreens XIII	Acworth	GA	—		1,483		2,754		—		4,236		96
Walgreens XIII	Lithia Springs	GA	—		632		3,581		—		4,213		125
Walgreens XIV	Morgan City	LA	—		520		2,946		—		3,466		88
Walgreens XV	Elkhart	IN	—		427		3,843		—		4,270		115
Walgreens XVI	Brooklyn	NY	—		3,404		6,321		—		9,725		190
Walgreens XVI	Brooklyn	NY	—		—		4,556		—		4,556		137
Walgreens XVI	Queens	NY	—		—		4,862		—		4,862		146
Walgreens XVI	Flushing	NY	—		6,390		6,390		—		12,781		192
Walgreens XVI	Flushing	NY	—		—		4,535		—		4,535		136
Walgreens XVI	Patchogue	NY	—		1,708		6,834		—		8,542		205
Wawa	Allentown	PA		(6)	2,791		6,513		—		9,304		353
Wawa	Yorktown	VA		(6)	1,544		4,631		—		6,175		251
Whirlpool	Iowa City	IA		(10)	2,559		14,500		—		17,058		590
Whirlpool II	Marion	OH	—		1,013		19,239		—		20,252		196
Wrangler	El Paso	TX		(10)	1,549		13,942		—		15,491		567
Encumbrances allocated based on notes below			207,052
Total			673,978		$	325,458	$	1,528,962	$	—	$	1,854,420	$	80,899

(1)These properties collateralize a $6.5 million mortgage note payable of which $6.5 million was outstanding as of December 31, 2011.

(2)These properties collateralize a $19.6 million mortgage note payable of which $19.6 million was outstanding as of December 31, 2011.

(3)These properties collateralize a $24.7 million mortgage note payable of which $24.7 million was outstanding as of December 31, 2011.

(4)These properties collateralize a $51.6 million mortgage note payable of which $51.6 million was outstanding as of December 31, 2011.

(5)These properties collateralize a $11.4 million mortgage note payable of which $11.4 million was outstanding as of December 31, 2011.

(6)These properties collateralize a $17.6 million mortgage note payable of which $17.6 million was outstanding as of December 31, 2011.

(7)These properties collateralize a $11.5 million mortgage note payable of which $11.5 million was outstanding as of December 31, 2011.

(8)These properties collateralize a $5.6 million mortgage note payable of which $5.6 million was outstanding as of December 31, 2011.

(9)These properties collateralize a $14.7 million mortgage note payable of which $14.7 million was outstanding as of December 31, 2011.

(10)These properties collateralize a $43.8 million mortgage note payable of which $43.8 million was outstanding as of December 31, 2011.

44

Each location is a single tenant, freestanding property. Each of our properties has a depreciable life of 40 years. Acquired intangibles in the amount of $271.8 million are not allocated to individual properties as reflected in the table above. The accumulated depreciation column excludes $20.7 million of amortization associated with acquired intangible lease assets.

A summary of activity for real estate and accumulated depreciation for the years ended December 31, 2011, 2010 and 2009 (amounts in thousands):

	Year Ended December 31,
	2011			2010			2009
Real estate investments, at cost:
Balance at beginning of year	$	774,400		$	299,718		$	148,322
Additions- acquisitions and improvements	1,080,640			475,436			151,396
Deductions- cost of real estate sold	(620		)	(754		)	—
Balance at end of the year	$	1,854,420		$	774,400		$	299,718
Accumulated depreciation and amortization:	—
Balance at beginning of year	$	26,263		$	9,115		$	2,534
Depreciation expense	54,683			17,200			6,581
Real estate sold	(47		)	(52		)	—
Balance at end of the year	$	80,899		$	26,263		$	9,115

45

EX-99.2

Exhibit 99.2

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Financial Statements
Consolidated Balance Sheets as of June 30, 2012 (Unaudited) and December 31, 2011	2
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2012 and 2011 (Unaudited)	3
Consolidated Statement of Changes in Equity for the Six Months Ended June 30, 2012 (Unaudited)	4
Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2012 and 2011 (Unaudited)	5
Notes to Consolidated Financial Statements	6

1

AMERICAN REALTY CAPITAL TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share and per share data)

	June 30, 2012			December 31, 2011
	(Unaudited)
ASSETS
Real estate investments, at cost:
Land	$	328,448		$	325,458
Buildings, fixtures and improvements	1,537,166			1,528,962
Acquired intangible lease assets	273,504			271,751
Total real estate investments, at cost	2,139,118			2,126,171
Less: accumulated depreciation and amortization	(153,576		)	(101,576		)
Total real estate investments, net	1,985,542			2,024,595
Cash and cash equivalents	12,383			33,329
Investment securities, at fair value	19,207			17,275
Restricted cash	2,731			2,728
Investment in unconsolidated joint venture	—			11,201
Prepaid expenses and other assets	23,020			27,564
Deferred costs, net	13,183			13,883
Total assets	$	2,056,066		$	2,130,575
LIABILITIES AND EQUITY
Revolving credit facility	$	201,138		$	10,000
Note payable	200,000			—
Mortgage notes payable	511,543			673,978
Mortgage discount and premium, net	815			679
Below-market lease liabilities, net	7,998			8,150
Derivatives, at fair value	162			8,602
Accounts payable and accrued expenses	11,966			11,706
Deferred rent and other liabilities	6,849			6,619
Dividends payable	—			10,637
Total liabilities	940,471			730,371
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding	—			—
Common stock, $0.01 par value; 240,000,000 shares authorized, 158,576,630 and 177,963,413 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively	1,586			1,780
Additional paid-in capital	1,338,382			1,548,009
Accumulated other comprehensive income (loss)	1,429			(5,053		)
Accumulated deficit	(241,159		)	(166,265		)
Total stockholders’ equity	1,100,238			1,378,471
Non-controlling interests	15,357			21,733
Total equity	1,115,595			1,400,204
Total liabilities and equity	$	2,056,066		$	2,130,575

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

2

AMERICAN REALTY CAPITAL TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except for per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenues:
Rental income	$	44,110		$	28,054		$	88,190		$	48,772
Operating expense reimbursements	1,538			922			3,072			1,061
Total revenues	45,648			28,976			91,262			49,833
Operating expenses:
Acquisition and transaction related	58			10,691			699			17,823
Property operating	1,993			911			4,691			1,124
Fees to affiliate	—			950			4,143			1,550
General and administrative	3,030			562			5,014			732
Equity-based compensation	650			370			1,157			725
Depreciation and amortization	26,154			15,244			52,212			25,187
Listing and internalization	391			—			17,660			—
Total operating expenses	32,276			28,728			85,576			47,141
Operating income	13,372			248			5,686			2,692
Other income (expenses):
Interest expense	(10,078		)	(8,769		)	(19,935		)	(15,515		)
Extinguishment of debt	(276		)	(720		)	(6,902		)	(720		)
Equity in income of unconsolidated joint venture	14			25			36			49
Other income (loss), net	1,452			—			1,716			(102		)
Gain (loss) on derivative instruments	(9		)	6			(4,055		)	148
Loss on disposition of property	—			—			—			(44		)
Total other expenses, net	(8,897		)	(9,458		)	(29,140		)	(16,184		)
Net income (loss)	4,475			(9,210		)	(23,454		)	(13,492		)
Net income attributable to non-controlling interests	(203		)	(307		)	(347		)	(545		)
Net income (loss) attributable to stockholders	4,272			(9,517		)	(23,801		)	(14,037		)
Other comprehensive income (loss) items:
Designated derivatives, fair value adjustment	30			(728		)	4,551			(26		)
Unrealized gain on investment securities, net	663			—			1,931			—
Total other comprehensive income (loss)	693			(728		)	6,482			(26		)
Comprehensive income (loss)	$	4,965		$	(10,245	)	$	(17,319	)	$	(14,063	)
Basic and diluted net income (loss) per share attributable to stockholders	$	0.03		$	(0.09	)	$	(0.14	)	$	(0.16	)

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

3

AMERICAN REALTY CAPITAL TRUST, INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Six Months Ended June 30, 2012

(In thousands, except for share data)

(Unaudited)

	Common Stock								Accumulated Other						Total			Non-
	Number of Shares		Par Value			Additional Paid-In Capital			Comprehensive Income (Loss)			Accumulated Deficit			Stockholders’ Equity			Controlling Interests			Total Equity
Balance, December 31, 2011	177,963,413		$	1,780		$	1,548,009		$	(5,053	)	$	(166,265	)	$	1,378,471		$	21,733		$	1,400,204
Common stock repurchased, inclusive of fees and expenses	(20,952,380	)	(210		)	(232,149		)	—			—			(232,359		)	—			(232,359		)
Repurchase of fractional shares	(12,251	)	—			(126		)	—			—			(126		)	—			(126		)
Offering costs	—		—			(651		)	—			—			(651		)	—			(651		)
Common stock issued through distribution reinvestment plan	1,009,415		10			9,579			—			—			9,589			—			9,589
Dividends declared	—		—			—			—			(51,093		)	(51,093		)	—			(51,093		)
Common stock redemptions	(289,685	)	(3		)	(20		)	—			—			(23		)	—			(23		)
Share based compensation	858,118		9			844			—			—			853			—			853
Amortization of restricted stock	—		—			13,152			—			—			13,152			—			13,152
Increase in interest in subsidiaries	—		—			(256		)	—			—			(256		)	(5,744		)	(6,000		)
Distributions to non-controlling interest holders	—		—			—			—			—			—			(979		)	(979		)
Net income (loss)	—		—			—			—			(23,801		)	(23,801		)	347			(23,454		)
Other comprehensive income	—		—			—			6,482			—			6,482			—			6,482
Balance, June 30, 2012	158,576,630		$	1,586		$	1,338,382		$	1,429		$	(241,159	)	$	1,100,238		$	15,357		$	1,115,595

The accompanying notes are an integral part of this financial statement.

4

AMERICAN REALTY CAPITAL TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2012			2011
Cash flows from operating activities:
Net loss	$	(23,454	)	$	(13,492	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	41,331			19,949
Amortization of intangibles	10,881			5,238
Amortization of deferred financing costs	4,283			2,148
Amortization (accretion) of mortgage discounts and premiums, net	136			(79		)
Equity-based compensation	14,005			725
Accretion of below-market lease liability	(152		)	(152		)
Loss on disposition of property	—			44
Equity in income of unconsolidated joint venture	(36		)	(49		)
Gain on redemption of investment in unconsolidated joint venture	(1,175		)	—
Loss (gain) on derivative instruments	4,055			(148		)
Changes in assets and liabilities:
Prepaid expenses and other assets	9,866			(7,733		)
Accounts payable and accrued expenses	185			7,118
Deferred rent and other liabilities	230			358
Net cash provided by operating activities	60,155			13,927
Cash flows from investing activities:
Investment in real estate	(12,947		)	(717,054		)
Investment in other assets	(5,534		)	—
Distributions from unconsolidated joint venture	12,412			419
Proceeds from disposition of real estate and other assets	—			581
Net cash used in investing activities	(6,069		)	(716,054		)
Cash flows from financing activities:
Proceeds from revolving credit facility	224,938			—
Payments on revolving credit facility	(33,800		)	—
Proceeds from note payable	200,000			—
Payments on long-term notes payable	—			(12,790		)
Proceeds from mortgage notes payable	—			243,852
Payments on mortgage notes payable	(162,435		)	(4,814		)
Payments related to extinguishment of debt	(7,942		)	—
Payments of financing costs	(3,404		)	(9,273		)
Proceeds from issuance of common stock, net	—			751,053
Repurchase of common stock	(220,000		)	—
Repurchase of fractional shares	(126		)	—
Payments of costs for listing, tender offer and registration of common stock	(10,274		)	—
Dividends paid	(52,141		)	(16,051		)
Redemptions paid	(2,866		)	(1,917		)
Repayments of investments to non-controlling interest holders	(6,000		)	—
Distributions to non-controlling interest holders	(979		)	(1,016		)
Restricted cash	(3		)	(1,918		)
Net cash provided by (used in) financing activities	(75,032		)	947,126
Net (decrease) increase in cash and cash equivalents	(20,946		)	244,999
Cash and cash equivalents, beginning of period	33,329			31,985
Cash and cash equivalents, end of period	$	12,383		$	276,984
Supplemental Disclosures:
Cash paid for interest	$	15,676		$	13,534
Cash paid for income taxes	262			144
Non-Cash Investing and Financing Activities:
Common stock issued through distribution reinvestment plan	9,589			12,274
Mortgages assumed in real estate acquisitions	—			30,751

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

5

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

Note 1 — Organization

American Realty Capital Trust, Inc. (the “Company”), incorporated in August 2007, is a Maryland corporation that qualifies as a real estate investment trust (“REIT”) for federal income tax purposes. The Company was formed to acquire a diversified portfolio of commercial real estate, primarily freestanding single tenant properties net leased to credit worthy tenants on a long-term basis. In January 2008, the Company commenced an initial public offering (“IPO”) on a “best efforts” basis to sell up to 150.0 million shares of common stock, excluding 25.0 million shares issuable pursuant to a Distribution Reinvestment Plan (“DRIP”), offered at a price of $10.00 per share, subject to certain volume and other discounts. In March 2008, the Company commenced real estate operations.  The Company’s IPO closed in July 2011 and the Company operated as a non-traded REIT through February 29, 2012.

Effective as of March 1, 2012, the Company internalized the management services previously provided by American Realty Capital Advisors, LLC (the “Former Advisor”) and its affiliates, as a result of which the Company became a self-administered REIT managed full-time by its own management team (the “Internalization”). Concurrent with the Internalization, the Company listed its common stock on The NASDAQ Global Select Market (“NASDAQ”) under the symbol “ARCT” (the “Listing”).

To provide for an orderly transition in conjunction with the Internalization and the Listing, the Company and American Realty Capital Operating Partnership, L.P. (the “OP”) entered into an agreement, effective as of March 1, 2012, with the Former Advisor, a wholly-owned subsidiary of AR Capital, LLC (“ARC”) that managed the day-to-day business and affairs of the Company prior to the Internalization, to terminate the advisory agreement between the Company, the OP and the Former Advisor (the “Advisory Agreement”) and provide for certain transitional services to the Company. See Note 13 — Related Party Transactions and Arrangements.

In connection with the Listing, the Company offered to purchase up to $220.0 million in shares of its common stock from stockholders, pursuant to a modified “Dutch Auction” cash tender offer (the “Tender Offer”). As a result of the Tender Offer, on April 4, 2012, the Company purchased 21.0 million shares of its common stock at a purchase price of $10.50 per share, for an aggregate cost of $220.0 million, excluding fees and expenses relating to the Tender Offer.  See Note 9 — Common Stock.

Substantially all of the Company’s business is conducted through the OP, a Delaware limited partnership. The Company is the sole general partner of the OP and owns over 99.99% of the partnership interest in the OP. The Former Advisor is the sole limited partner of the OP and owns less than a 0.01% partnership interest (non-controlling interest) in the OP. The limited partner interests have the right to convert OP units into cash or, at the Company’s option, a corresponding number of shares of the Company’s common stock, as allowed by the limited partnership agreement of the OP.

As of June 30, 2012, the Company owned 486 properties with 15.6 million square feet of leasable area, 100% leased with a weighted average remaining lease term of 13.0 years. In constructing the portfolio, the Company has been committed to diversification by industry, tenant and geography.

Note 2 — Listing and Internalization

The Listing occurred on March 1, 2012. In addition, effective March 1, 2012, in connection with the Internalization, the Company provided the Former Advisor with notice of termination of the Advisory Agreement. For the three and six months ended June 30, 2012, the Company incurred $0.4 million and $17.7 million of expenses that resulted from the Listing and Internalization, respectively. Of the $17.7 million of expenses for the six months ended June 30, 2012, $12.9 million related to the vesting of previously issued restricted shares that became fully vested upon the Listing of the Company, $3.3 million related to a contract termination fee paid to the Former Advisor to terminate the Advisory Agreement and $1.5 million related to transfer agent fees and other transition costs.

6

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

In conjunction with the Internalization, the Company paid the Former Advisor $5.5 million for certain tangible and intangible assets. This transaction was accounted for as a business combination, which requires the Company to allocate the $5.5 million first to the fair value of identifiable assets, with any excess amounts allocated to goodwill. In accordance with accounting guidance, the Company has one year to finalize the amounts allocated to the fair value of the assets it acquired and to goodwill. Any amounts allocated to identifiable assets, except for any indefinite or non-amortizing intangibles identified, will be depreciated or amortized in accordance with the Company’s policy. Amounts allocated to goodwill will be periodically and at least annually evaluated for impairment.  At June 30, 2012, the entire $5.5 million is recorded in prepaid expenses and other assets on the consolidated balance sheet as the Company finalizes its accounting for the business combination. See Note 13 — Related Party Transactions and Arrangements.

Note 3 —Summary of Significant Accounting Policies

The financial statements of the Company included herein were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the results for the entire year or any subsequent interim period. These financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2011, which are included in the Company’s Form 10-K filed with the SEC on February 15, 2012 and as amended on May 11, 2012.

The Company’s significant accounting policies are described in Note 2 to the consolidated financial statements in the Company’s Form 10-K for the year ended December 31, 2011. There have been no material changes to these policies during the three and six months ended June 30, 2012, except for the following:

Business Combination

The Company accounts for transactions that meet the definition of a business combination by recording the assets acquired and liabilities assumed at their fair value upon acquisition. Intangible assets are identified and recognized individually. If the purchase price plus the fair value of the liabilities assumed exceeds the fair value of the assets acquired, goodwill is recognized. The Company has a period, not to exceed one year, from the date of acquisition, to gather all facts that existed at the acquisition date in determining fair value. Any amounts allocated to identifiable assets, except for any indefinite or non-amortizing intangibles identified, will be depreciated or amortized in accordance with the Company’s policy. Amounts allocated to goodwill will be periodically and at least annually evaluated for impairment.

Reclassifications

Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current year presentation.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued guidance that expands the existing disclosure requirements for fair value measurements, primarily for Level 3 measurements, which are measurements based on unobservable inputs such as the Company’s own data. This guidance was largely consistent with previous fair value measurement principles with few exceptions that did not result in a change in general practice. The guidance became effective for interim and annual reporting periods ending after December 15, 2011. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operations as the guidance relates only to disclosure requirements.

7

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

In June 2011, the FASB issued guidance requiring entities to present items of net income and other comprehensive income either in one continuous statement - referred to as the statement of comprehensive income - or in two separate, but consecutive, statements of net income and other comprehensive income. The new guidance did not change which components of comprehensive income are recognized in net income or other comprehensive income, or when an item of other comprehensive income must be reclassified to net income. In December 2011, the FASB deferred certain provisions of this guidance related to the presentation of certain reclassification adjustments out of accumulated other comprehensive income, by component, in both the statement and the statement where the reclassification is presented. This guidance was applied prospectively and was effective for interim and annual periods ending after December 15, 2011. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operations but changed the location of the presentation of other comprehensive income to more closely associate the disclosure with net income.

In September 2011, the FASB issued guidance that allows entities to perform a qualitative analysis as the first step in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is determined that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then a quantitative analysis for impairment is not required. The guidance was effective for interim and annual impairment tests for fiscal periods beginning after December 15, 2011.  The adoption of this guidance did not have a material impact on the Company’s financial position or results of operations.

In December 2011, the FASB issued guidance which contains new disclosure requirements regarding the nature of an entity’s rights of offset and related arrangements associated with its financial instruments and derivative instruments. The new disclosures are designed to make financial statements prepared under U.S. GAAP more comparable to those prepared under International Financial Reporting Standards and will give the financial statement users information about both gross and net exposures. The guidance is effective for interim and annual reporting periods beginning on or after January 1, 2013.  The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.

Note 4 — Real Estate Investments

The following table presents the allocation of the assets acquired and liabilities assumed during the periods presented (dollar amounts in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2012		2011			2012		2011
Real estate investments, at cost:
Land	$	62	$	58,826		$	2,990	$	132,350
Buildings, fixtures and improvements	1,974		250,039			8,204		523,616
Total tangible assets	2,036		308,865			11,194		655,966
Acquired intangibles:
In-place leases	340		45,943			1,753		91,508
Mortgage assumed	—		(18,321		)	—		(30,751		)
Mortgage discount	—		—			—		331
Total assets acquired, net	$	2,376	$	336,487		$	12,947	$	717,054
Number of properties purchased	1		50			4		110

8

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

The Company acquires and operates commercial properties. All such properties may be acquired and operated by the Company alone or jointly with another party. As of June 30, 2012, all of the properties the Company owned were 100% leased. The Company acquired the following properties during the six months ended June 30, 2012 (dollar amounts in thousands other than annualized average rental income per square foot):

Property	Acquisition Date	No. of Buildings	Square Feet		Ownership Percentage		Remaining Lease Term(1)	Base Purchase Price(2)		Capitalization Rate(3)		Annualized Rental Income/NOI(4)
Portfolio as of Dec. 31, 2011		482	15,514,727		Various		13.0	$	2,110,738	8.16	%	$	172,150
Acquisitions for the six months ended June 30, 2012:
Tractor Supply V	Jan. 2012	1	19,097		100	%	13.4	4,280		8.27	%	354
Tractor Supply VI	Jan. 2012	2	41,767		100	%	10.2	6,291		8.52	%	536
Expansion of FedEx XIV	Jun. 2012	—	13,200		100	%	9.8	1,657		9.11	%	151
Family Dollar	Jun. 2012	1	8,090		100	%	11.0	719		9.18	%	66
Total		486	15,596,881				13.0	$	2,123,685	8.16	%	$	173,257
Annualized average rental income per square foot			$	11.11
Other investments (5)								17,625
Total investment portfolio								$	2,141,310

(1)Remaining lease term as of June 30, 2012, in years. If the portfolio has multiple locations with varying lease expirations, remaining lease term is calculated on a weighted-average basis. Total remaining lease term is an average of the remaining lease term of the total portfolio.

(2)Contract purchase price excluding acquisition and transaction-related costs. Acquisition and transaction-related costs include legal costs, acquisition fees paid to the Former Advisor for properties acquired prior to March 1, 2012 and closing costs on the property.

(3)Annualized rental income or annualized net operating income (“NOI”), on a straight-line basis, as applicable, divided by base purchase price. Total capitalization rate is an average of the capitalization rate of the total portfolio.

(4)Annualized rental income/NOI for net leases is projected rental income for 2012, including annualized rents for properties acquired in 2012, on a straight-line basis, as of June 30, 2012, which includes the effect of tenant concessions such as free rent, as applicable. For modified gross leased properties, amount is projected rental income for 2012, on a straight-line basis, as of June 30, 2012, which includes the effect of tenant concessions such as free rent, as applicable, plus operating expense reimbursement revenue less property operating expenses.

(5)Includes a $17.6 million (cost basis) investment in the common stock of certain publicly traded REITs. See Note 5 — Investment Securities.

9

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

Future Lease Payments

The following table presents future minimum base rental cash payments due to the Company subsequent to June 30, 2012. These amounts exclude contingent rentals 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 (amounts in thousands):

Period	Future Minimum Base Rent Payments
July 1, 2012 to December 31, 2012	$	84,468
2013	169,973
2014	172,312
2015	173,313
2016	173,331
Thereafter	1,500,927
Total	$	2,274,324

Tenant Concentration

The following table lists tenants whose annualized rental income or NOI, on a straight-line basis, represented greater than 10% of consolidated annualized rental income as of June 30, 2012 and 2011:

	June 30, 2012		June 30, 2011
FedEx	17	%	16	%
Walgreens	10	%	13	%

The termination, delinquency or non-renewal of one of the above tenants may have a material adverse effect on revenues.  No other tenant represented more than 10% of the annualized rental income for the periods presented.

Geographic Concentration

The following table lists the states where the Company has concentrations of properties whose annualized rental income or NOI, on a straight-line basis, represented greater than 10% of consolidated annualized rental income as of June 30, 2012 and 2011:

	June 30, 2012		June 30, 2011
New York	12	%	10	%

No other state had properties that in total represented more than 10% of the annualized rental income or NOI for the periods presented.

10

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

Note 5 — Investment Securities

At June 30, 2012, the Company had investments in common stock with a fair value of $19.2 million. These investments are accounted for as available-for-sale investments and therefore increases or decreases in the fair value of these investments are recorded in accumulated other comprehensive income as a component of equity on the balance sheet unless the securities are considered to be permanently impaired at which time the losses would be reclassified to expense.

The following table details the unrealized gains and losses on investment securities as of the dates indicated (in thousands):

	June 30, 2012
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Common stock	$	17,625	$	2,174	$	(592	)	$	19,207

	December 31, 2011
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Common stock	$	17,625	$	246	$	(596	)	$	17,275

All unrealized losses had a holding period of less than twelve months.

Note 6 — Revolving Credit Facility

In August 2011, the Company entered into a revolving credit facility with RBS Citizens, N.A. and a syndicate of financial institutions (the “RBS Facility”) for an aggregate maximum principal amount of $330.0 million at June 30, 2012. Additionally, the RBS Facility has an accordion feature that allows it to be increased up to a maximum of $500.0 million under certain conditions. The proceeds of loans made under the RBS Facility may be used to finance the acquisition of net leased, investment or non-investment grade occupied properties or for general corporate purposes. Up to $15.0 million of the facility is available for letters of credit. The RBS Facility matures in August 2014.

The RBS Facility bears interest at the rate of (i) LIBOR with respect to Eurodollar rate loans plus a margin of 2.05% to 2.85%, depending on the Company’s leverage ratio; or (ii) the greater of the federal funds rate plus 1.0% and the interest rate publicly announced by RBS Citizens, N.A. as its ‘‘prime rate’’ or ‘‘base rate’’ at such time with respect to base rate loans plus a margin of 1.25% to 1.75% depending on the Company’s leverage ratio.

The RBS Facility requires the Company to meet certain financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth. As of June 30, 2012, the Company was in compliance with the financial covenants under the RBS Facility agreement.

In the event of a default, RBS Citizens, N.A. has the right to terminate its obligations under the credit agreement, including the funding of future loans, and to accelerate the payment on any unpaid principal amount of all outstanding loans. The RBS Facility requires a fee of 0.15% on the unused balance if amounts outstanding under the facility are 50% or more of the total facility amount and 0.25% on the unused balance if amounts outstanding under the facility are 50% or less of the total facility amount.

As of June 30, 2012, there was $201.1 million outstanding on the RBS Facility. The Company had letters of credit in the amount of $0.4 million under the RBS Facility at June 30, 2012. The effective annualized interest rate on the RBS Facility was 2.32% as of June 30, 2012. The Company had $128.5 million of unused borrowing capacity under the RBS Facility at June 30, 2012. On July 2, 2012, an additional $33.3 million was repaid on the RBS Facility, increasing the unused borrowing capacity to $161.8 million.

11

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

Note 7 —Note Payable

In April 2012, through the OP, the Company entered into an agreement with Wells Fargo Bank, National Association (“Wells Fargo”) for an interim term loan in the amount of $200.0 million (the “Interim Term Loan”). Proceeds from the Interim Term Loan were used to prepay $161.2 million of the Company’s outstanding mortgage indebtedness and related prepayment and other costs and to repay $23.8 million of the RBS Facility. As of June 30, 2012, the Company had $200.0 million outstanding on the Interim Term Loan, which bore interest at an effective annualized rate of 2.62%.

The Interim Term Loan was repaid in July 2012 with proceeds from a new $235.0 million five-year term loan (the “Term Loan”) that bears interest at the rate of LIBOR with respect to Eurodollar rate loans plus a margin of 1.95% to 2.75%, depending on the Company’s leverage ratio. The Term Loan requires interest-only payments until maturity in June 2017. Excess proceeds, after expenses and the repayment of the Interim Term Loan, were used to repay $33.3 million of the RBS Facility. The effective annualized interest rate on the Term Loan was 2.62% at its inception.

The Term Loan requires and the Interim Term Loan required the Company to meet certain financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth.  As of June 30, 2012, the Company was in compliance with the financial covenants under the Interim Term Loan agreement.

Note 8 — Mortgage Notes Payable

The Company’s mortgage notes payable consist of the following (dollar amounts in thousands):

	Encumbered Properties	Outstanding Loan Amount		Weighted Average Effective Interest Rate(1)		Weighted Average Maturity(2)
June 30, 2012	171	$	511,543	5.22	%	4.94
December 31, 2011	254	$	673,978	5.27	%	5.21

(1)Mortgage notes payable have fixed rates or rates that are fixed through the use of interest rate hedging instruments. Effective interest rates range from 4.09% to 6.97% at June 30, 2012 and December 31, 2011.

(2)Weighted average remaining years until maturity as of the periods presented.

The Company’s sources of mortgage loan financing generally require financial covenants, including restrictions on corporate guarantees, the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth. As of June 30, 2012, the Company was in compliance with the debt covenants under the mortgage loan agreements.

In April 2012, the Company prepaid $161.2 million of mortgage indebtedness and related prepayment costs. In connection with the Company’s extinguishment of outstanding indebtedness, the Company incurred zero and $4.6 million of prepayment penalties and fees related to the termination of certain interest rate derivative arrangements that were associated with the extinguished mortgages and wrote off $0.3 million and $2.3 million of related deferred financing costs and unamortized mortgage discounts during the three and six months ended June 30, 2012, respectively.

12

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

The following table summarizes the scheduled aggregate principal repayments subsequent to June 30, 2012 (amounts in thousands):

Period	Total
July 1, 2012 to December 31, 2012	$	842
2013	5,922
2014	33,031
2015	87,744
2016	239,868
Thereafter	144,136
Total	$	511,543

Note 9 — Common Stock

The Company listed its common stock on NASDAQ under the symbol “ARCT” on March 1, 2012. As of June 30, 2012 and December 31, 2011, the Company had 158.6 million and 178.0 million shares of common stock outstanding, respectively.

On February 15, 2012, the Company announced its intention to offer to purchase its common stock in an amount up to $220.0 million from its stockholders, pursuant to the Tender Offer. As a result of the Tender Offer, on March 29, 2012, the Company accepted for purchase 21.0 million shares of its common stock at a purchase price of $10.50 per share, for an aggregate cost of $220.0 million, excluding related fees and expenses. The Company purchased the 21.0 million tendered shares on April 4, 2012. The Company incurred $12.4 million in costs related to the Tender Offer.

The Company’s annualized dividend is $0.70 per share or $0.0583 per share per month, which is payable, but not guaranteed, monthly to stockholders of record at the close of business on the 8th day of each month and payable on the 15th day of such month.  In July 2012, the Company’s Board of Directors authorized an increase to the annualized dividend to $0.715 per share, or $0.0596 per share per month, payable on September 15, 2012 to stockholders of record at the close of business on September 8, 2012.

Prior to February 2012, the Company had a DRIP whereby shareholders could elect to have their distributions reinvested in shares of common stock at $9.50 per share. In February 2012, at the time the Company announced its intention to list its common stock on NASDAQ, the DRIP was suspended. On a cumulative basis, 6.3 million shares were issued under the DRIP.

Prior to February 2012, the Company had a Share Repurchase Program (“SRP”) whereby shareholders could sell their shares to the Company in limited circumstances.  In February 2012, at the time the Company announced its intention to list its common stock on NASDAQ, the SRP was terminated. On a cumulative basis, 1.4 million shares were repurchased under the SRP.

In May 2012, the Company filed a universal shelf registration statement on Form S-3 that permits the Company to sell, at any time and from time to time, in one or more offerings, an indeterminate number, principal amount or liquidation amount of common stock, preferred stock, debt securities, warrants, units or any combination thereof, up to the amount authorized by the Company’s charter. As of June 30, 2012, the Company’s charter authorized the Company to issue up to a maximum of 240.0 million shares of common stock (including the shares currently outstanding) and 10.0 million shares of preferred stock; however, the Board of Directors has the ability to amend the Company’s charter from time to time to increase or decrease the number of authorized shares. Net proceeds from the securities issued may be used for general corporate purposes, including the funding of the Company’s investment activity, the repayment of outstanding indebtedness, working capital or other corporate purposes. No amounts have been issued under this registration statement as of June 30, 2012.

Note 10 — Fair Value of Financial Instruments

The Company determines fair value based on quoted prices when available or through the use of alternative approaches,

13

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. This alternative approach also reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The guidance defines three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 — Unobservable inputs that reflect the entity’s own assumptions about how market participants would value the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of June 30, 2012 and December 31, 2011, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments, are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.

The Company has common stock investments that are traded on a national exchange and therefore, due to the availability of quoted market prices in active markets, classified these investments as Level 1 in the fair value hierarchy.

The following table presents information about the Company’s assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011, aggregated by the level in the fair value hierarchy within which those instruments fall (amounts in thousands):

	Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
June 30, 2012
Investments in common stock	$	19,207	$	—	$	—	$	19,207
Interest rate swap and cap derivatives, net	$	—	$	162	$	—	$	162
December 31, 2011
Investments in common stock	$	17,275	$	—	$	—	$	17,275
Interest rate swap and collar derivatives, net	$	—	$	8,602	$	—	$	8,602

14

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets.  There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended June 30, 2012.

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, other receivables, accounts payable and distributions payable approximates their carrying value on the consolidated balance sheet due to their short-term nature. The fair values of the mortgage notes payable and the portion of the floating rate debt that is fixed through the use of derivative instruments are obtained by calculating the present value at current market rates. The interest rates of the note payable and the RBS Facility that are not fixed with derivative instruments are determined by variable market rates and the Company’s leverage ratio, and each has terms commensurate with the market; as such, the outstanding balances on the note payable and the RBS Facility approximate fair value.

The fair values of the Company’s financial instruments that are not reported at fair value on the consolidated balance sheet are reported below (amounts in thousands):

		Carrying Amount (1) at		Fair Value at		Carrying Amount (1) at		Fair Value at
	Level	June 30, 2012		June 30, 2012		December 31, 2011		December 31, 2011
Mortgage notes payable	3	$	512,358	$	534,342	$	674,657	$	687,481
Note payable	3	$	200,000	$	200,000	$	—	$	—
Revolving credit facility	3	$	201,138	$	201,138	$	10,000	$	10,000

(1)Carrying amount includes premiums and discounts on mortgage notes payable.

Note 11 — Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the balance sheets as of June 30, 2012 and December 31, 2011 (amounts in thousands):

	Balance Sheet Location	June 30, 2012			December 31, 2011
Derivatives designated as hedging instruments:
Interest Rate Products	Derivatives, at fair value	$	(162	)	$	(7,702	)
Derivatives not designated as hedging instruments:
Interest Rate Products	Derivatives, at fair value	$	—		$	(900	)

15

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $0.1 million will be reclassified from other comprehensive income as an increase to interest expense.

Derivatives Designated as Hedging Instruments

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps and collars as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate collars designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract and payments of variable-rate amounts if interest rates fall below the floor strike rate on the contract.

Derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.

As of June 30, 2012, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollar amounts in thousands):

Interest Rate Derivative	Number of Instruments	Notional Amount
Interest Rate Swaps	1	$	101
Interest Rate Collar	1	4,115

As of December 31, 2011, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollar amounts in thousands):

Interest Rate Derivative	Number of Instruments	Notional Amount
Interest Rate Swaps	10	$	106,348
Interest Rate Collar	1	4,115

The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three and six months ended June 30, 2012 and 2011 (amounts in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Amount of loss recognized in accumulated other comprehensive income as interest rate derivatives (effective portion)	$	(4	)	$	(1,250	)	$	(491	)	$	(1,095	)
Amount of loss reclassified from accumulated other comprehensive income into income as interest expense or extinguishment of debt costs (effective portion)	$	(34	)	$	(522	)	$	(5,044	)	$	(1,069	)
Amount of gain (loss) recognized in income on derivative as loss on derivative instruments (ineffective portion and amount excluded from effectiveness testing)	$	—		$	10		$	(4,432	)	$	(63	)

16

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

In March 2012, the Company had informed certain lenders of its intention to repay certain mortgage notes payable and terminate the related swap arrangements. Therefore, all interest rate hedging instruments associated with those mortgage notes payable were transferred from hedging instruments to derivatives not designated as hedging instruments and $4.5 million related to those derivatives previously recorded in other comprehensive income was reclassified to extinguishment of debt on the accompanying consolidated statement of operations during the three months ended March 31, 2012.

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedges are not speculative. These derivatives are used to manage the Company’s exposure to interest rate movements and other identified risks but are not designated or do not meet the strict hedge accounting requirements to be classified as hedging instruments.

As of June 30, 2012, the Company had the following outstanding interest rate derivatives that were not designated as cash flow hedges in qualifying hedging relationships (dollar amounts in thousands):

Interest Rate Derivative	Number of Instruments	Notional Amount
Interest Rate Cap	1	$	50,000

As of December 31, 2011, the Company had the following outstanding interest rate derivatives that were not designated as cash flow hedges in qualifying hedging relationships (dollar amounts in thousands):

Interest Rate Derivative	Number of Instruments	Notional Amount
Interest Rate Collar	1	$	22,680

The table below details the amount and location in the financial statements of the gain or loss recognized on derivatives not designated as hedging instruments for the three and six months ended June 30, 2012 and 2011 (amounts in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Location of Gain or (Loss) Recognized in Income on Derivative:
Interest expense	$	—		$	(381	)	$	—		$	(383	)
Gains (losses) on derivative instruments	$	(9	)	$	6		$	(53	)	$	148
Total	$	(9	)	$	(375	)	$	(53	)	$	(235	)

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

As of June 30, 2012, the fair value of derivatives in a net liability position related to these agreements was $0.2 million. As of June 30, 2012, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of $0.2 million at June 30, 2012.

17

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

Note 12 — Commitments and Contingencies

Litigation

In the ordinary course of business, the Company may become subject to litigation or claims. There are no material legal proceedings pending or known to be contemplated against the Company.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. The Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and the Company is not aware of any other environmental condition that it believes will have a material adverse effect on the consolidated results of operations.

Note 13 — Related Party Transactions and Arrangements

Effective as of March 1, 2012, the Company internalized the management services previously provided to it by the Former Advisor and its affiliates, concurrently with the Listing. The Former Advisor is wholly-owned by ARC. ARC is majority-owned and controlled by Nicholas S. Schorsch, the Company’s Chairman of the Board of Directors and William M. Kahane, the Company’s Chief Executive Officer, President and Director.

Amounts Paid or Accrued in Connection with Listing, Internalization and Tender Offer

Effective as of March 1, 2012, the Company and the OP entered into an Amendment and Acknowledgment of Termination of the Amended and Restated Advisory Agreement (the “Amendment and Acknowledgment of Termination”) with the Former Advisor, a wholly-owned subsidiary of ARC that managed the day-to-day business and affairs of the Company prior to the Internalization. Pursuant to the Amendment and Acknowledgment of Termination, the Company and the OP provided the Former Advisor with notice of termination of that certain Amended and Restated Advisory Agreement, dated June 2, 2010, effective on April 30, 2012, in accordance with the terms thereof. The Company paid the Former Advisor a termination fee and other costs in the amount of $3.6 million on March 1, 2012.

In conjunction with the Internalization, the Company paid the Former Advisor $5.5 million for tangible and intangible assets. This transaction was accounted for as a business combination, which requires the Company to allocate the $5.5 million first to the fair value of identifiable assets, with any excess amounts allocated to goodwill. In accordance with accounting guidance, the Company has one year to finalize the amounts allocated to the fair value of the assets it acquired and to goodwill.

In addition to the amount paid for tangible and intangible assets, $3.3 million was paid to the Former Advisor for cost reimbursements related to amounts incurred by the Former Advisor on the Company’s behalf for the Listing, Tender Offer and a registration statement that was filed with the SEC and subsequently withdrawn.

Fees Paid in Connection With the Operations of the Company

Prior to the Internalization on March 1, 2012, the Company paid fees to the Former Advisor and its affiliates as described below. Subsequent to March 1, 2012 the Company is no longer obligated to pay fees to the Former Advisor. The Company pays the Former Advisor and its affiliates for legal, technology and other services based on usage of such services.  For the three and six months ended June 30, 2012, the Company paid the Former Advisor $0.3 million and $0.4 million, respectively, for such services.

Pursuant to the Advisory Agreement, the Former Advisor received an acquisition fee of 1.0% of the contract purchase price of each acquired property and was reimbursed for acquisition costs incurred in the process of acquiring properties. In no event could the total of all acquisition and advisory fees and acquisition expenses payable with respect to a particular investment exceed 4.0% of the contract purchase price.

The Company paid the Former Advisor an annual fee of up to 1.0% of the contract purchase price of each property based on assets held by the Company on the measurement date, adjusted for appropriate closing dates for individual property

18

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

acquisitions.

For the management and leasing of its properties, the Company paid to an affiliate of its Former Advisor a property management fee of (a) 2.0% of gross revenues from its single tenant properties and (b) 4.0% of gross revenues from its multi-tenant properties, plus, in each case, market-based leasing commissions applicable to the geographic location of the property. The Company also reimbursed the affiliate costs of managing the properties.

The Company was required to pay the Former Advisor a financing coordination fee for services in connection with the origination or refinancing of any debt that the Company obtained and used to acquire properties or to make other permitted investments, or that was assumed, directly or indirectly, in connection with the acquisition of properties, equal to 1.0% of the amount available and/or outstanding under such financing, subject to certain limitations.

The following tables detail amounts paid and reimbursed to affiliates as well as amounts contractually due to the Former Advisor which were forgiven in connection with the operations-related services described above (amounts in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,
	2012				2011				2012				2011
	Paid		Forgiven		Paid		Forgiven		Paid		Forgiven		Paid		Forgiven
One-time fees:
Acquisition fees and related cost reimbursements	NA		NA		$	5,474	$	—	$	682	$	—	$	11,209	$	—
Financing coordination fees and related cost reimbursements	NA		NA		860		—		1,050		—		2,720		—
Other expense reimbursements	NA		NA		1,902		—		27		—		2,381		—
On-going fees:
Asset management fees	NA		NA		950		2,486		3,486		—		1,550		4,350
Property management and leasing fees	NA		NA		—		529		585		—		—		918
Total operational fees and reimbursements	$	—	$	—	$	9,186	$	3,015	$	5,830	$	—	$	17,860	$	5,268

NA — The agreement pursuant to which this fee or expense reimbursement applies was terminated on March 1, 2012.

Fees Paid in Connection with the Liquidation or Listing of the Company’s Real Estate Assets

The Company was obligated to pay a brokerage commission on the sale of property, not to exceed the lesser of one-half of reasonable, customary and competitive real estate commission or 3.0% of the contract price for property sold (inclusive of any commission paid to outside brokers), in each case, payable to the Former Advisor if the Former Advisor or its affiliates, as determined by a majority of the independent directors, provided a substantial amount of services in connection with the sale. As of March 1, 2012, the Company is no longer obligated to pay such fees. No amounts were paid for the three and six months ended June 30, 2012 or for the three months ended June 30, 2011, and $19,000 was paid for the six months ended June 30, 2011.

In connection with the Listing, ARC is entitled to a subordinated incentive listing fee equal to 15.0% of the amount, if any, by which (a) the market value of the Company’s common stock, based on the average market value of the shares issued and outstanding at March 1, 2012 over the 30 trading days beginning August 28, 2012, which is the 181st day after the shares were first listed on NASDAQ, plus distributions paid by the Company, from May 21, 2008 and prior to March 1, 2012, exceeds (b) the sum of the total amount of capital raised from stockholders during the IPO and the amount of cash flow necessary to generate a 6.0% annual cumulative, non-compounded return to such stockholders through March 1, 2012, which equates to a minimum stock price of $9.81 per share. To the extent such fee is earned, payment will initially be in the form of a three year promissory note bearing interest at the applicable federal rate established by the Internal Revenue Service on the date of issuance, payable quarterly in arrears. In the event the subordinated incentive listing fee is earned, at maturity and at the option of the holder, such note can be paid in cash or converted into shares of the Company’s common stock, the number of which will be based on the valuation described above, if such conversion occurs. The Company has the option to prepay the note in cash at any time.

19

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

Fees Paid in Connection with Common Stock Offering

Realty Capital Securities, LLC (the “Dealer Manager”), which is wholly-owned by ARC, was the dealer manager for the IPO. In connection with its services as dealer manager, the Dealer Manager received selling commissions of 7.0% of the gross offering proceeds from the sale of the Company’s common stock (as well as sales of long-term notes and exchange transactions) from the IPO before reallowance of commissions earned by participating broker-dealers. In addition, the Dealer Manager received dealer manager fees of 3.0% of the gross offering proceeds from the IPO before reallowance to participating broker-dealers. No selling commissions or dealer manager fees were paid to the Dealer Manager with respect to shares sold under the DRIP. The agreement with the Dealer Manager terminated at the completion of the IPO in July 2011. As no proceeds were raised during the three and six months ended June 30, 2012, no selling commissions or dealer manager fees were paid to the Dealer Manager for such periods. The Company incurred total commissions to the Dealer Manager of $54.4 million and $76.5 million during the three and six months ended June 30, 2011, respectively.

Prior to the termination of the IPO, the Company reimbursed the Former Advisor up to 1.5% of the gross offering proceeds from the IPO. As no proceeds were raised during the three and six months ended June 30, 2012, no offering expense reimbursements were paid to the Former Advisor for such periods. The Company incurred total offering expense reimbursements to the Former Advisor of $1.5 million and $2.8 million during the three and six months ended June 30, 2011, respectively.

Financing

The Company has a $0.4 million letter of credit from the RBS Facility, which was used as a security deposit on rented office space for the Former Advisor.

Common Stock Investment

In September 2011, the Company purchased 0.3 million shares of common stock in an initial public offering of an affiliated public company, valued at $2.9 million at June 30, 2012 and December 31, 2011. The aggregate fair value of all investment securities owned by the Company was $19.2 million at June 30, 2012 and $17.3 million at December 31, 2011.

Investment in Unconsolidated Joint Venture

In December 2010, the Company entered into a joint venture agreement with an affiliate and an unrelated third party investor to invest in a portfolio of five retail condominium units. The Company’s initial investment in this joint venture was $12.0 million and a 1.0% fee was paid to the Company by the affiliate. During the three months ended June 30, 2012, this investment was fully redeemed, for which the Company recorded a gain of $1.2 million. The Company received cash distributions of $12.4 million for the six months ended June 30, 2012. For the three and six months ended June 30, 2012, the Company’s share of the net profit on the property was $14,000 and $36,000, respectively. For the three and six months ended June 30, 2011, the Company’s share of the net profit on the property was $25,000 and $49,000. No fees were paid to the Former Advisor in connection with this agreement. As of June 30, 2012, the joint venture agreement has been terminated.

Restricted Shares Granted

On June 7, 2012, the Company made a one-time grant of 65,843 restricted shares to non-employees who work for the Former Advisor. These restricted shares will vest ratably each January 1st from January 1, 2013 through January 1, 2016. The share-based compensation expense related to these restricted shares granted to the non-employees is calculated using the fair value of stock at the vesting date. For the three and six months ended June 30, 2012, the share-based compensation expense related to these restricted shares was $9,000.

20

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

Note 14 — Economic Dependency

Under various agreements, prior to Internalization, the Company had engaged the Former Advisor and its affiliates to provide certain services, for a fee, that were 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 issue, as well as other administrative responsibilities for the Company including accounting services and investor relations.

As a result of these relationships, the Company was dependent upon the Former Advisor and its affiliates prior to Internalization. As of March 1, 2012, the Company became a self-administered REIT and therefore the Company no longer relies on the Former Advisor and its affiliates to provide the Company with these services. The Company may from time to time engage the Former Advisor for legal, information technology or other support services for which it will pay market rates. See Note 13 — Related Party Transactions and Arrangements.

Note 15 — Share-Based Compensation

Annual Incentive Compensation

In March 2012, the Company adopted an Annual Incentive Compensation Plan (“AICP”) under which the Company’s executives, employees and non-employee directors selected by the Company’s compensation committee (the “Committee”) will be eligible to earn annual performance-based bonus awards from a pool established each fiscal year that will be funded via both a discretionary component and a formulaic component. Funding of the discretionary component will be subject to the annual approval of the Committee based upon an assessment of corporate and individual performance relative to certain performance criteria and objectives to be determined by the Company’s Board of Directors. For fiscal 2012, the maximum size of the AICP pool will be calculated as the sum of:

·Discretionary Component:  an amount equal to up to 0.5% of the Company’s stockholder’s equity of $1.9 billion on March 1, 2012; and

·Formulaic Component:  an amount equal to 20.0% of the Company’s annualized funds from operations (“FFO”) in excess of 6.0% of the Company’s market capitalization of $1.9 billion as of March 1, 2012.

Any performance-based awards earned under the AICP and allocated to participants may be divided into the following three separate incentive compensation components, with payment of each conditioned on the participant’s continued employment or continued service with the Company through the applicable payment date: cash bonus payable in the year; a deferred cash bonus; and in the form of restricted stock payable in the following year to the extent shares are available for issuance under the Company’s equity incentive plans.  Any deferred cash bonus and restricted stock will vest, and be paid in the case of the deferred cash bonus, subject to the participant’s continued employment or continued service with the Company, in three substantially equal installments over a three year period. To the extent shares are not available under the Company’s equity incentive plans, the equity bonus will be paid as a deferred cash bonus.

As of June 30, 2012, 70.0% of the fiscal 2012 AICP pool has been allocated. The remaining 30.0% will be allocated to the Company’s other executives and employees at the discretion of the Committee. Of the allocated fiscal 2012 AICP pool, 50.0% is payable as a cash bonus in 2013, 25.0% as a deferred cash bonus and 25.0% as restricted stock.

For the three and six months ended June 30, 2012, the Company has recorded expense of $0.2 million for the estimated cash amounts earned for the allocated portion of this plan. Any amounts earned for restricted stock will be recorded over the vesting period.

Long-Term Equity Performance Compensation

In March 2012, the Company adopted a performance-based multi-year Outperformance Plan (the “OPP”), in which the Company’s executive officers, Chairman and other select key employees will participate. Participants will be able to potentially earn additional compensation only upon the attainment of stockholder value creation targets.

21

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

Under the OPP agreements, participants will be eligible to earn performance-based bonus awards equal to a percentage of a pool that will be funded up to a maximum award opportunity equal to 5.0% of the Company’s equity market capitalization of $1.9 billion upon the Listing (the “OPP Cap”). Subject to the OPP Cap, the pool will equal an amount to be determined based on the Company’s total return to stockholders (including both share price appreciation and common stock distributions) (“Total Return”), for the three-year performance period consisting of:

·Absolute Component:  4.0% of any excess Total Return attained above an absolute hurdle of 7.0% per annum, non-compounded (i.e., a Total Return threshold of 21.0% for the performance period); and

·Relative Component:  4.0% of any excess Total Return attained above the Total Return for the performance period of a peer group comprised of the following companies: CapLease, Inc.; Entertainment Properties Trust, Inc.; Getty Realty Corporation; Lexington Realty Trust; National Retail Properties, Inc. and Realty Income Corporation.

Awards under the OPP are dependent on achieving an annual hurdle, an interim (two-year) hurdle and then the aforementioned three-year hurdle.

In order to further ensure that the interests of participants in the OPP are aligned with the Company’s investors, the Relative Component is subject to a ratable sliding scale factor as follows:

·100.0% will be earned if the Company attains a cumulative Total Return of 6.0% per annum or higher, non-compounded (i.e., attainment of a Total Return threshold of 18.0% for the performance period);

·50.0% will be earned if the Company attains a cumulative Total Return of 0.0% or greater but less than 6.0% per annum;

·0.0% will be earned if we attain a cumulative Total Return of less than 0.0%; and

·A percentage from 50.0% to 100.0% calculated by linear interpolation will be earned if the Company’s cumulative Total Return is between 0.0% and 6.0% per annum.

For each year during the performance period a portion of the OPP Cap equal to a maximum of up to 1.0% of the Company’s equity market capitalization of $1.9 billion upon the Listing will be “locked-in” for funding of the OPP pool based upon the attainment of pro-rata performance of the performance hurdles set forth above for the applicable year. In addition, a portion of the OPP Cap equal to a maximum of up to 2.5% of the Company’s equity market capitalization upon the Listing will be “locked-in” for funding of the OPP pool based upon the attainment of cumulative pro-rata performance of the performance hurdles set forth above over years one and two of the performance period, which if achieved, will supersede and negate any prior “locked-in” portion based upon performance in years one and two of the performance period (i.e., a maximum award opportunity equal to a maximum of up to 2.5% of the Company’s equity market capitalization upon the Listing may be “locked-in” through the end of the second year of the performance period).

Following the performance period, the Absolute Component and the Relative Component will be calculated separately and then added together to determine the aggregate OPP pool, which will be the lesser of the sum of the two components and the OPP Cap. At June 30, 2012, 70.0% of the pool has been allocated. The remaining 30.0% will be allocated to the Company’s other executives and employees at the discretion of the Company’s senior management.

Any awards earned under the OPP agreements will be issued in the form of LTIP Units, which represent units of partnership interest in the OP that are structured as a profits interest in the OP. Subject to the participant’s continued employment or service through each vesting date, a portion of any LTIP Units earned will vest on the last day of the performance period and the remainder will vest over a two year period thereafter. This vesting period is intended to create, in the aggregate, up to a five-year retention period with respect to the individuals party to an OPP agreement.

For the three and six months ended June 30, 2012, the Company has recorded expense of $0.6 million and $0.9 million, respectively, for the allocated portion of the OPP agreements.

22

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

Stock Option Plan

The Company has a stock option plan (the “Plan”), which authorizes the grant of nonqualified stock options to the Company’s independent directors, subject to the absolute discretion of the Board of Directors and the applicable limitations of the Plan. The exercise price for all stock options granted under the Plan was fixed at $10.00 per share until the termination of the IPO, and thereafter the exercise price for stock options granted to its independent directors will be equal to the fair market value of a share on the last business day preceding the annual meeting of stockholders. As of June 30, 2012 and December 31, 2011, the Company had granted options to purchase 27,000 shares of common stock at $10.00 per share, each with a two year vesting period and an expiration of 10 years. A total of 1.0 million shares of common stock have been authorized and reserved for issuance under the Plan.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. During the six months ended June 30, 2012 and 2011, no options were forfeited or exercised, and no shares became vested. As of June 30, 2012 and December 31, 2011, unvested options to purchase zero and 9,000 shares of common stock at $10.00 per share remained outstanding with a weighted average contractual remaining life of 6.8 and 7.3 years, respectively.

Restricted Share Plan

We have an employee and director incentive restricted share plan (as amended, the “RSP”). The RSP provides the Company with the ability to grant awards of restricted shares to the Company’s directors, officers and employees, employees of entities that provide services to the Company, directors of the entities that provide services to the Company, certain of its consultants or to entities that provide services to the Company. The total number of common shares reserved for issuance under the RSP is equal to 7.7% of the Company’s authorized shares, or 18.5 million shares.

Restricted share awards entitle the recipient to common shares from the Company under terms that provide for vesting over a specified period of time or upon attainment of pre-established performance objectives. Shares issued under the RSP vest immediately upon a change of control of the Company or sale of the Company’s assets. Such awards would typically be forfeited with respect to the unvested shares upon the termination of the recipient’s employment or other relationship with the Company. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the restricted shares have lapsed. Any distributions payable in common shares shall be subject to the same restrictions as the underlying restricted shares.

Any restricted shares paid out under the AICP or OPP would be issued out of the RSP.

Common Stock Awards

	Number of Common Shares Awarded	Weighted-Average Price
Awarded, January 1, 2012	1,505,300	$	10.00
Granted	114,468	10.39
Forfeited	—	—
Awarded, June 30, 2012	1,619,768	$	10.03

Unvested Common Stock Awards

	Number of Common Shares		Weighted-Average Issue Price
Non-vested, January 1, 2012	1,503,500		$	10.00
Granted	114,468		10.39
Vested	(1,516,200	)	10.00
Non-vested, June 30, 2012	101,768		$	10.44

23

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

The fair value of common stock awards to employees is determined on the grant date using the closing stock price on NASDAQ that day. The fair value of common stock awards to non-employees is determined based on the fair value of the stock at the vesting date.

Prior to March 1, 2012, 1.5 million restricted shares had been issued to independent directors and the Former Advisor. Upon the Listing on March 1, 2012, all unvested restricted shares that had previously been granted became fully vested.

Total share-based compensation expense related to common stock awards for the three and six months ended June 30, 2012 was $42,000 and $13.2 million, respectively, with $42,000 and $0.3 million recognized in general and administrative expenses for the three and six months ended June 30, 2012, and $12.9 million charged to listing and internalization expense for the six months ended June 30, 2012. At June 30, 2012, share-based compensation expense of $1.0 million related to non-vested common stock awards is expected to be recognized over a weighted average period of 3.6 years.

Note 16 — Earnings Per Share

The following is a summary the income and share data used in the basic and diluted earnings per share computations for the three and six months ended June 30, 2012 and 2011 (in thousands, except share and per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Net income (loss) attributable to stockholders	$	4,272		$	(9,517	)	$	(23,801	)	$	(14,037	)
Less: dividends paid on unvested restricted stock	(7		)	(253		)	(257		)	(495		)
	$	4,265		$	(9,770	)	$	(24,058	)	$	(14,532	)
Weighted average common shares outstanding applicable to basic earnings per share	159,165,544			110,777,070			168,705,683			91,864,174
Dilutive effect of unvested common stock equivalents	59,547			—			—			—
Adjusted weighted average common shares outstanding applicable to diluted earnings per share	159,225,091			110,777,070			168,705,683			91,864,174
Earnings per share attributable to stockholders, basic	$	0.03		$	(0.09	)	$	(0.14	)	$	(0.16	)
Earnings per share attributable to stockholders, diluted	$	0.03		$	(0.09	)	$	(0.14	)	$	(0.16	)

As of June 30, 2012, 27,000 stock options and 0.1 million unvested restricted shares were outstanding; as of June 30, 2011, 27,000 stock options and 1.5 million unvested restricted shares were outstanding. These items were not included in the calculation of diluted earnings per share for the six months ended June 30, 2012 and the three and six months ended June 30, 2011 since the effect of their inclusion would have been anti-dilutive.

Note 17 — Non-controlling Interests

The Company has investment arrangements with unaffiliated third parties whereby the investor receives an ownership interest in the property and is entitled to receive a proportionate share of the net operating cash flow derived from the property. Upon disposition of the property, the investor will receive a proportionate share of the net proceeds from the sale of the property. The investor has no recourse to any other assets of the Company. Due to the nature of the Company’s involvement with each of the arrangements described below and the significance of its investment in relation to the investment of the other interest holders, the Company has determined that it is the primary beneficiary in each of these arrangements and therefore the entities related to these arrangements are consolidated within the Company’s financial statements.

24

AMERICAN REALTY CAPITAL TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2012

(Unaudited)

The following table summarizes the activity related to investment arrangements with unaffiliated third parties (dollar amounts in thousands):

							Total Assets		Total Liabilities		Distributions
Property/ Portfolio	No. of	Investment	Net Investment		Third Party Ownership		Subject to Investment		Subject to Investment		Three Months Ended June 30,						Six Months Ended June 30,
Name	Buildings	Date	Amount		Percentage		Agreement		Agreement		2012			2011			2012			2011
Walgreens	1	Jul. 2009	$	1,068	44	%	$	3,403	$	1,550	$	(20	)	$	(20	)	$	(40	)	$	(40	)
FedEx/PNC Bank	2	Jul. 2009 to Jan. 2010	2,002		49	%	11,036		8,898		(42		)	(42		)	(84		)	(83		)
PNC Bank	1	Sep. 2009	444		35	%	3,245		2,284		(8		)	(9		)	(17		)	(17		)
CVS	3	Jan. 2010 to Mar. 2010	2,577		49	%	10,400		6,629		(49		)	(49		)	(98		)	(98		)
Rickett Benckiser	1	Feb. 2010	2,400		15	%	27,621		—		(36		)	(53		)	(87		)	(104		)
FedEx III	1	Apr. 2010	3,000		15	%	30,632		15,000		(65		)	(64		)	(129		)	(127		)
BSFS	6	Jun. 2010 to Sep. 2010	6,468		49	%	11,869		—		(128		)	(128		)	(256		)	(256		)
Brown Shoe/Payless (1)	—	Oct. 2010	—		—	%	—		—		(113		)	(136		)	(248		)	(269		)
Jared Jewelry	1	May 2010	500		25	%	1,541		—		(10		)	(10		)	(20		)	(22		)
Total	16		$	18,459			$	99,747	$	34,361	$	(471	)	$	(511	)	$	(979	)	$	(1,016	)

(1)Non-controlling interest of $6.0 million was repaid in May 2012.

Note 18 — Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements except for the following:

Completion of Property Acquisitions

The following table presents certain information about the properties that the Company acquired from July 1, 2012 to July 31, 2012 (dollar amounts in thousands):

	No. of Buildings	Square Feet	Base Purchase Price (1)
Total portfolio – June 30, 2012	486	15,596,881	$	2,123,685
Acquisitions	1	8,000	$	867
Total portfolio – July 31, 2012	487	15,604,881	$	2,124,552

(1)Contract purchase price, excluding acquisition and transaction related costs.

The acquisition made subsequent to June 30, 2012 was made in the normal course of business and was not individually significant to the total portfolio.

25

EX-99.3

Exhibit 99.3

REALTY INCOME CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Six Months ended June 30, 2012 and for the Year Ended December 31, 2011

On September 6, 2012, Realty Income Corporation, a Maryland corporation (the “Company” or “Realty Income”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Tau Acquisition LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Merger Sub”), and American Realty Capital Trust, Inc., a Maryland corporation (“ARCT”).  The Merger Agreement provides for the merger of ARCT with and into Merger Sub (the “Merger”), with Merger Sub surviving as a wholly owned subsidiary of the Company.

The following tables present unaudited pro forma condensed consolidated financial condition and results of operations of the Company, after giving effect to the Merger.  The unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2012 and year ended December 31, 2011 give effect to the Merger as if the Merger had occurred on January 1, 2011.  The unaudited pro forma condensed consolidated balance sheet gives effect to the Merger as if it had occurred on June 30, 2012.

The following unaudited pro forma condensed consolidated financial information has been prepared by applying the purchase method of accounting with the Company treated as the acquirer.  These unaudited pro forma condensed consolidated financial statements are prepared for informational purposes only and are based on assumptions and estimates considered appropriate by the Company’s management; however, they are not necessarily indicative of what the Company’s financial condition or results of operations actually would have been if the Merger had been consummated as of the dates indicated, nor do they purport to represent the consolidated financial position or results of operations for future periods.  These unaudited pro forma condensed consolidated financial statements do not include the impact of all the potential synergies that may be achieved in the transactions or any strategies that management may consider in order to continue to efficiently manage the Company’s operations.  Additionally, these unaudited pro forma condensed consolidated financial statements do not include any adjustments associated with: (1) ARCT or Realty Income acquisitions closed after June 30, 2012 or the related financing of those acquisitions, (2) ARCT or Realty Income acquisitions currently under contract or the related financing of those proposed acquisitions, (3) ARCT or Realty Income near-term future CPI rental rate increases in the existing property portfolios, (4) the purchase of ARCT’s minority partners’ interest in the eight joint ventures outstanding at June 30, 2012, which are anticipated to be eliminated prior to the Merger, (5) the termination of the ARCT asset management agreement, which occurred in the first quarter of 2012, and the elimination of the associated asset management fees, and (6) internalization and listing costs of ARCT incurred in 2012.  Further, no adjustment has been made for other nonrecurring costs of ARCT in these unaudited pro forma consolidated financial statements as they are unrelated to the Merger.

This unaudited pro forma condensed consolidated financial information should be read in conjunction with (1) the Company’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 13, 2012, (2) the Company’s updated 2011 consolidated financial statements included on Form 8-K, filed with the SEC on October 1, 2012, (3) the Company’s unaudited financial statements and the related notes thereto as of and for the six months ended June 30, 2012 included in the Company’s Quarterly Report on Form 10-Q, filed with the SEC on July 26, 2012, (4) ARCT’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2011 included in ARCT’s Annual Report on Form 10-K/A, filed with the SEC on May 11, 2012, and (5) ARCT’s unaudited consolidated financial statements and the related notes thereto as of and for the six months ended June 30, 2012 included in ARCT’s Quarterly Report on Form 10-Q, filed with the SEC on July 31, 2012.

The total purchase price, based on an exchange ratio of the Company’s common stock, will be allocated to the assets ultimately acquired and liabilities ultimately assumed based on their respective fair values.  The allocations of the purchase price reflected in these unaudited pro forma condensed consolidated financial statements have not been finalized and are based upon preliminary estimates of these fair values, which is the best available information at the current time.  A final determination of the fair values of the assets and liabilities, which cannot be made prior to the completion of the Merger and which is anticipated to occur either during the fourth quarter of 2012 or the first quarter of 2013, will be based on the actual valuations of the tangible and intangible assets and liabilities that exist as of the date of completion of the Merger.  The completion of the final valuations, the allocations of the purchase price, the impact of ongoing integration activities, the timing of the completion of the Merger and other changes in tangible and intangible assets and liabilities that occur prior to completion of the Merger could cause material differences in the information presented.

Realty Income Corporation

Unaudited Pro Forma Condensed Consolidated Balance Sheet

June 30, 2012

(in thousands)

	Realty												Realty
	Income			ARCT			Pro Forma			ARCT			Income
	Historical			Historical			Adjustments(1)			Pro Forma			Pro Forma
Assets:
Real estate, at cost:
Land	$	1,807,891		$	328,448		$	128,352	(2)	$	456,800		$	2,264,691
Buildings and improvements	3,347,490			1,537,166			531,034		(2)	2,068,200			5,415,690
Total real estate, at cost	5,155,381			1,865,614			659,386			2,525,000			7,680,381
Less accumulated depreciation and amortization	(870,165		)	(122,223		)	122,223		(3)	—			(870,165		)
Net real estate held for investment	4,285,216			1,743,391			781,609			2,525,000			6,810,216
Real estate held for sale, net	18,965			—			—			—			18,965
Net real estate	4,304,181			1,743,391			781,609			2,525,000			6,829,181
Acquired intangible lease assets, net	147,899			242,151			207,749		(4)	449,900			597,799
Cash and cash equivalents, accounts receivable, net and other assets	124,479			70,524			(30,743		)(5)	39,781			164,260
Total assets	$	4,576,559		$	2,056,066		$	958,615		$	3,014,681		$	7,591,240
Liabilities:
Distributions payable	$	22,993		$	—		$	—		$	—		$	22,993
Other liabilities	90,422			26,975			11,424		(6)	38,399			128,821
Lines of credit payable	183,600			201,138			313,862		(7)	515,000			698,600
Mortgages payable, net	56,661			512,358			15,185		(8)	527,543			584,204
Notes payable	1,750,000			200,000			(200,000		)(9)	—			1,750,000
Total liabilities	2,103,676			940,471			140,471			1,080,942			3,184,618
Stockholders’ equity:
Preferred stock and paid-in capital	609,363			—			—			—			609,363
Common stock and paid-in capital	2,567,148			1,339,968			596,114		(10)	1,936,082			4,503,230
Distributions in excess of net income	(703,628		)	(241,159		)	210,459		(11)	(30,700		)	(734,328		)
Accumulated other comprehensive income	—			1,429			(1,429		)(12)	—			—
Total stockholders’ equity	2,472,883			1,100,238			805,144			1,905,382			4,378,265
Noncontrolling interests	—			15,357			13,000		(13)	28,357			28,357
Total equity	2,472,883			1,115,595			818,144			1,933,739			4,406,622
Total liabilities and equity	$	4,576,559		$	2,056,066		$	958,615		$	3,014,681		$	7,591,240

Realty Income Corporation

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the six months ended June 30, 2012

(in thousands, except share data)

	Realty												Realty
	Income			ARCT			Pro Forma			ARCT			Income
	Historical			Historical			Adjustments(14)			Pro Forma			Pro Forma
REVENUE
Rental	$	229,060		$	88,190		$	(2,130	)(15)	$	86,060		$	315,120
Other	858			1,716			—			1,716			2,574
Operating expense reimbursements	—			3,072			—		(16)	3,072			3,072
Total Revenue	229,918			92,978			(2,130		)	90,848			320,766
EXPENSES
Depreciation and amortization	70,560			52,212			2,268		(17)	54,480			125,040
Interest	57,758			19,935			(2,765		)(18)	17,170			74,928
General and administrative	18,441			6,171			(4,821		)(19)	1,350			19,791
Property	4,536			4,691			(711		)(20)	3,980			8,516
Income taxes	810			—			310		(21)	310			1,120
Other	—			11,620			68		(22)	11,688			11,688
Asset management fees to affiliate	—			4,143			—			4,143			4,143
Listing and internalization	—			17,660			—			17,660			17,660
Total expenses	152,105			116,432			(5,651		)	110,781			262,886
Income (loss) from continuing operations	77,813			(23,454		)	3,521			(19,933		)	57,880
Preferred stock dividends	(19,953		)	—			—			—			(19,953		)
Excess of redemption value over carrying value of preferred shares redeemed	(3,696		)	—			—			—			(3,696		)
Net income attributable to noncontrolling interest	—			(347		)	220		(23)	(127		)	(127		)
Income (loss) from continuing operations attributable to common stockholders	$	54,164		$	(23,801	)	$	3,741		$	(20,060	)	$	34,104
Income (loss) from continuing operations attributable to common stockholders per common share:
Basic	$	0.41		$	(0.14	)	n/a			$	(0.44	)	$	0.19
Diluted	$	0.41		$	(0.14	)	n/a			$	(0.44	)	$	0.19
Weighted average common shares outstanding:
Basic	132,643,698			168,705,683			(123,129,364		)(24)	45,576,319			178,220,017
Diluted	132,785,213			168,750,277			(122,856,987		)(25)(26)	45,893,290			178,678,503

Realty Income Corporation

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the year ended December 31, 2011

(in thousands, except share data)

	Realty												Realty
	Income			ARCT			Pro Forma			ARCT			Income
	Historical			Historical			Adjustments(14)			Pro Forma			Pro Forma
REVENUE
Rental	$	416,300		$	124,851		$	47,269	(15)	$	172,120		$	588,420
Other	1,663			766			—			766			2,429
Operating expense reimbursements	—			4,269			1,881		(16)	6,150			6,150
Total Revenue	417,963			129,886			49,150			179,036			596,999
EXPENSES
Depreciation and amortization	120,813			68,940			40,020		(17)	108,960			229,773
Interest	108,301			37,373			(1,713		)(18)	35,660			143,961
General and administrative	30,954			4,167			(1,467		)(19)	2,700			33,654
Property	7,244			5,297			2,663		(20)	7,960			15,204
Income taxes	1,470			—			610		(21)	610			2,080
Other	—			2,487			135		(22)	2,622			2,622
Acquisition and transaction related	—			30,005			—			30,005			30,005
Asset management fees to affiliate	—			5,572			—			5,572			5,572
Total expenses	268,782			153,841			40,248			194,089			462,871
Income (loss) from continuing operations	149,181			(23,955		)	8,902			(15,053		)	134,128
Preferred stock dividends	(24,253		)	—			—			—			(24,253		)
Net income attributable to noncontrolling interest	—			(1,121		)	112		(23)	(1,009		)	(1,009		)
Income (loss) from continuing operations attributable to common stockholders	$	124,928		$	(25,076	)	$	9,014		$	(16,062	)	$	108,866
Income (loss) from continuing operations attributable to common stockholders per common share:
Basic	$	0.99		$	(0.20	)	n/a			$	(0.35	)	$	0.63
Diluted	$	0.99		$	(0.20	)	n/a			$	(0.35	)	$	0.63
Weighted average common shares outstanding:
Basic	126,142,696			133,730,159			(88,153,840		)(24)	45,576,319			171,719,015
Diluted	126,189,399			135,275,159			(89,381,869		)(25)(26)	45,893,290			172,082,689

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

General

The ARCT and Realty Income historical amounts include the reclassification of certain historical balances to conform to the post-Merger Realty Income presentation of these unaudited pro forma condensed consolidated financial statements, as described below:

Balance Sheet:

·Realty Income’s intangible lease assets, net previously classified as a component of Other assets, net, were reclassified to Acquired intangible lease assets, net due to the materiality of the post-Merger balance.

·Realty Income’s balances for Accounts receivable, net, Cash and cash equivalents, Goodwill and Other assets, net previously disclosed as separate components of Realty Income’s balance sheet have been reclassified to Cash and cash equivalents, accounts receivable, net and other assets.

·Realty Income’s balances for Accounts payable and accrued expenses previously disclosed as a separate component of Realty Income’s balance sheet have been reclassified to Other liabilities.

·ARCT’s balances for Cash and cash equivalents, Restricted cash, Deferred costs, net, Investment securities, at fair value and Prepaid expenses and other assets previously disclosed as separate components of ARCT’s balance sheet have been reclassified to Cash and cash equivalents, accounts receivable, net and Other assets.

·ARCT’s balance for Mortgage discount and premium, net previously disclosed as a separate component of ARCT’s balance sheet has been reclassified to Mortgages payable, net.

·ARCT’s balances for Below-market lease liabilities, net, Derivatives, at fair value, Accounts payable and accrued expenses, and Deferred rent and other liabilities previously disclosed as separate components of ARCT’s balance sheet have been reclassified to Other liabilities.

Statement of Operations:

·Realty Income’s Provisions for impairment, previously disclosed as a separate line item of expense, was combined with Property.

·ARCT’s Equity-based compensation previously disclosed as a separate component of expense was reclassified into General and administrative.

·ARCT’s Other income (loss) net, previously disclosed as a separate component of Other income (expenses) was reclassified under Revenue as Other.

·ARCT’s Equity in income of unconsolidated joint venture, Gain (loss) on derivative instruments, Extinguishment of debt, Other income (loss), net and Loss on disposition of property previously disclosed as separate components of Other income (expenses) have been reclassified into Other expenses.

Balance Sheet

General

(1)Represents adjustments to record the acquisition of ARCT by Realty Income based upon the estimated purchase price of approximately $3.0 billion.  The calculation of the estimated purchase price to be allocated is as follows (in thousands, except shares, units and per share amounts):

Equity to be issued (a)	$	1,936,082
Operating partnership (OP) units (316,971 units)	13,000
Preferred units	6,750
Anticipated borrowings on unsecured credit facility	515,000
Assumption of debt	512,358
Estimated purchase price	$	2,983,190

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(a)ARCT’s 158.6 million common shares outstanding are to be converted to Realty Income common shares at a fixed conversion rate of .2874 per ARCT share.  The per share closing price of Realty Income’s common stock on September 5, 2012 was $42.48, which is the price used in the Merger announcement.

The purchase price will be adjusted based on the share price of Realty Income’s common stock at closing consistent with the requirements of ASC 805, Business Combinations.  The preliminary purchase price allocation to assets acquired and liabilities assumed is provided throughout these notes.  The following provides a summary of the preliminary purchase price allocation by major categories of assets and liabilities in the unaudited pro forma condensed consolidated balance sheet as of June 30, 2012:

Assets:
Total real estate	$	2,525,000
Acquired intangible lease assets	449,900
Cash and cash equivalents, accounts receivable, net other assets	39,781
Total Assets	$	3,014,681
Liabilities:
Lines of credit payable	$	515,000
Mortgage notes payable	527,543
Other liabilities	38,399
Total Liabilities	$	1,080,942
Estimated fair value of net assets acquired	$	1,933,739

Assets

(2)Land and Buildings and improvements, reflects adjustment to record the estimated increase over ARCT’s historical investment in real estate based upon the preliminary estimated fair value for the tangible and intangible real estate assets to be acquired.  The final determination of the allocation of the purchase price will be based on the fair value of such assets and liabilities as of the actual consummation date of the Merger and will be completed after the Merger is consummated.  Such final determination of the purchase price may be significantly different from the preliminary estimates used in the unaudited pro forma financial statements.  The estimated values are as follows (in thousands):

	Pro forma Adjustment		ARCT Pro Forma
Land	$	128,352	$	456,800
Buildings and improvements	531,034		2,068,200
In-place lease assets	138,249		380,400
Above-market lease assets	69,500		69,500
Below-market lease liabilities	4,602		(12,600		)
Estimated fair value of net real estate investments	$	871,737	$	2,962,300

(3)Accumulated depreciation and amortization was adjusted to eliminate ARCT’s historical accumulated depreciation and amortization. ARCT historical in-place lease accumulated amortization of $31.4 million was reclassified to Acquired intangible lease assets, net.

(4)Acquired intangible lease assets, net, adds purchase price allocation of in-place lease and above-market lease assets—see Note 2 for preliminary fair value estimates.  ARCT’s historical in-place lease

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

accumulated amortization of $31.4 million was reclassified to Acquired intangible lease assets, net from Accumulated depreciation and amortization.

(5)Cash and cash equivalents, Accounts receivable, net and Other assets adjustments to ARCT’s historical balances of accounts receivable and other assets are as follows (in thousands):

Elimination of ARCT deferred financing costs, net	$	(13,183	)
Recognition of deferred financing costs incurred	1,500
Adjustment to cash and cash equivalents	750
Elimination of straight-line rent receivable	(14,119		)
Elimination of goodwill	(2,248		)
Elimination of corporate assets excluded from transaction, net	(3,474		)
Other	31
	$	(30,743	)

The recognition of deferred financing costs is a reflection of the fees associated with assuming ARCT’s mortgages.  The adjustment to cash and cash equivalents reflects the $750,000 received from the sale of preferred units issued at transaction closing.

Liabilities

(6)Other liabilities adjustments to ARCT’s historical balances are as follows (in thousands):

Recognition of value of acquired leases that have below-market rents (see Note 2)	$	4,602
Recognition of preferred units issued in Merger	6,750
Other	72
	$	11,424

The recognition of preferred units reflects the issuance of $6.75 million of preferred units as part of the Merger.  These units have certain characteristics that result in the classification as a liability in this unaudited pro forma balance sheet.

(7)Lines of credit payable adjustments to ARCT’s historical balance is as follows (in thousands):

Repayment of ARCT line of credit balance	$	(201,138	)
Borrowings under revolving line of credit for Merger	515,000
	$	313,862

The repayment of ARCT’s line of credit, notes outstanding, management incentive debt obligation, Merger transaction costs and change of control costs that will occur at the time of the Merger (the Closing) constitute the pro forma borrowings of $515 million under Realty Income’s $1 billion unsecured credit facility.

(8)Mortgages payable, net reflects adjustment from historical ARCT mortgage payable balance for the fair value of debt assumed.  The fair value debt adjustment of $15.2 million is to reflect the increase in mortgage discount and premium, net from $815,000 to $16.0 million.  The mortgage discount and premium amortization is estimated to be $2.5 million per year, based on the $16.0 million pro forma balance.

(9)Notes payable adjustment to reflect the repayment of ARCT’s outstanding notes at Closing on Realty Income’s unsecured credit facility (see Note 7).

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Equity

(10)Common stock and paid-in capital represents the adjustment to convert ARCT’s historical equity into Realty Income common stock.  This calculation was based on 158.6 million ARCT shares outstanding times the fixed conversion rate of .2874 per share times Realty Income share price of $42.48 on September 5, 2012, which is the last closing price prior to the Merger announcement.

(11)Elimination of ARCT’s distributions in excess of net income to reflect the estimated Merger transaction costs of $30.7 million.  Merger transaction costs include, but are not limited to, advisor fees, debt assumptions costs, legal fees, accounting fees, printing fees and transfer taxes.

(12)Elimination of ARCT’s accumulated other comprehensive income.

(13)Noncontrolling interest was adjusted to reflect the $13.0 million of Operating Partnerships Units (OP Units) issued as part of the Merger (316,971 OP units). The OP Units are non-voting ownership units.

Income Statements

General

(14)Adjustments reflect the effect on Realty Income’s and ARCT’s historical consolidated statements of operations and shares used in computing earnings per common share as if the ARCT acquisitions occurred on January 1, 2011.  These unaudited pro forma condensed consolidated financial statements include adjustments as if ARCT had consummated its 2011 and 2012 (through June 30th) property acquisitions on January 1, 2011.  These adjustments primarily relate to the acquisition of 224 properties in 2011 for $1.24 billion and four properties acquired in the first six months of 2012 for $12.9 million.

Revenue

(15)Rental

a.The ARCT pro forma reflects rental revenue generated on a straight-line basis as if ARCT had consummated each of its 2011 and 2012 (through June 30th) property acquisitions on January 1, 2011.  The ARCT pro forma rental revenue is calculated as follows (in thousands):

	For the six months ended June 30, 2012			For the year ended December 31, 2011
Cash rental	$	84,220		$	168,440
Straight-line rent adjustment	3,840			7,680
(Above) and Below market lease amortization, net	(2,000		)	(4,000		)
ARCT Pro forma Rental revenue	$	86,060		$	172,120

b.The pro forma adjustment is the difference between the ARCT pro forma amount and the ARCT historical amount.

(16)Operating expense reimbursements adjustment represents the additional operating expense reimbursements generated as if ARCT had consummated each of its 2011 and 2012 property acquisitions on January 1, 2011.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Expense

(17)The pro forma adjustment is the difference between the ARCT pro forma amount and the ARCT historical amount. The pro forma depreciation and amortization reflects the revised depreciation expense as follows (in thousands), based upon the estimated purchase price allocations:

	For the six months ended June 30, 2012		For the year ended December 31, 2011
Buildings and improvements	$	41,365	$	82,730
In-place lease assets	13,115		26,230
Total depreciation and amortization	$	54,480	$	108,960

(18)Interest expense reflects an adjustment to ARCT’s historical interest expense to account for the assumption of mortgages on ARCT properties acquired in 2011 and 2012 as if the Merger had closed on January 1, 2011, plus the differential in interest rates between Realty Income and ARCT’s credit lines.  The adjustment includes the following (in thousands):

	For the six months ended June 30, 2012			For the year ended December 31, 2011
Interest on mortgages assumed	$	13,351		$	26,958
Interest on incremental credit facility financing	4,952			10,968
Mortgage premium adjustment	(1,250		)	(2,500		)
Amortization of deferred financing costs	117			234
	$	17,170		$	35,660

Interest expense related to mortgages assumed in the Merger is based on ARCT’s average mortgage interest rates of 5.27% for 2011 and 5.22% for the first six months of 2012.  Interest expenses from credit facility financings are based on the average interest rate of Realty Income’s unsecured credit facility of 2.1% for 2011 and 1.9% for the first six months of 2012.  The mortgage premium adjustment reflects the amortization of the $16.0 million premium amortized over the remaining weighted-average term of the assumed mortgages of approximately 6.4 years.

(19)General and administrative were adjusted to reflect the elimination of ARCT historical general and administrative expense and the addition of Realty Income’s estimated general and administrative expense as a result of the Merger.

(20)Property adjustment represents the property expenses as if ARCT had consummated each of its 2011 and 2012 property acquisitions on January 1, 2011.

(21)A pro forma adjustment was made for ARCT income taxes based on an estimate of income taxes associated with properties acquired in the Merger.

(22)Other was adjusted to reflect the 2% payments on the $6.75 million of preferred units issued at Closing.

Shares used in computing earnings per common share:

(23)Income (loss) from continuing operations was adjusted to allocate the ARCT historical loss to the OP Units.

(24)Weighted average common shares outstanding — basic, reflects the adjustment from ARCT’s historical common shares outstanding to the Realty Income shares issued at Closing.  This is calculated by taking the 158.6 million shares of ARCT common stock assumed outstanding at Closing, multiplied by the fixed

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

conversion rate of .2874 ARCT per share, which represents 45.6 million shares of Realty Income common stock.

(25)ARCT’s historical earnings diluted per share calculation excludes the effect of 27,000 stock options and 1.5 million of restricted shares that were outstanding at December 31, 2011, and 27,000 stock options and 0.1 million of restricted shares that were outstanding at June 30, 2012, as the effect of their inclusion would be anti-dilutive.

(26)Weighted average common shares outstanding — diluted.  In addition to the calculation of the basic weighted average common shares outstanding (see note 23), the diluted weighted average common shares outstanding are adjusted to represent the number of OP Units issued and outstanding as part of the Merger transaction totaling 316,971.  These OP units are economically equivalent to Realty Income common stock for purposes of calculating diluted earnings per share.

Funds from operations (FFO) and adjusted funds from operations (AFFO)

Realty Income’s historical and pro forma FFO and AFFO for the six months ended June 30, 2012 and the year ended December 31, 2011 are summarized as follows (in thousands):

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Realty Income Corporation

Unaudited Pro Forma Funds From Operations and Adjusted Funds From Operations

For the six months ended June 30, 2012

(in thousands, except share data)

	Realty												Realty
	Income			ARCT			Pro Forma			ARCT			Income
	Historical			Historical			Adjustments			Pro Forma			Pro Forma
Income (loss) from continuing operations attributable to common stockholders	$	54,164		$	(23,801	)	$	3,741		$	(20,060	)	$	34,104
Income from discontinued operations	4,858			—			—			—			4,858
Net income (loss) available to common stockholders	59,022			(23,801		)	3,741			(20,060		)	38,962
Depreciation and amortization:
Continuing operations	70,560			52,212			2,268			54,480			125,040
Allocated to noncontrolling interest	—			(433		)	433			—			—
Discontinued operations	381			—			—			—			381
Depreciation of furniture, fixtures and equipment	(135		)	(213		)	213			—			(135		)
(Gain) loss on sales of investment properties, discontinued operations	(3,965		)	—			—			—			(3,965		)
Total Funds from operations (FFO)	125,863			27,765			6,655			34,420			160,283
Adjustments:
Listing and internalization	—			17,660			—			17,660			17,660
Debt extinguishment expenses	—			6,902			—			6,902			6,902
Loss on derivative instruments	—			4,520			—			4,520			4,520
Non-cash mark-to-market adjustments	—			(465		)	—			(465		)	(465		)
Acquisition and transaction related expenses	—			699			—			699			699
Other income, revenue on marketable securities	—			—			(1,716		)	(1,716		)	(1,716		)
Elimination of the joint venture income allocation	—			—			347			347			347
Asset management fees to affiliates	—			4,143			—			4,143			4,143
Normalized FFO (1)	$	125,863		$	61,224		$	5,286		$	66,510		$	192,373
Net income (loss) available to common stockholders	$	59,022		$	(23,801	)	$	3,741		$	(20,060	)	$	38,962
Cumulative adjustments to calculate normalized FFO (2)	66,841			85,025			1,545			86,570			153,411
Normalized FFO available to common stockholders	125,863			61,224			5,286			66,510			192,373
Excess of redemption value over carrying value of Class D preferred share redemption	3,696			—			—			—			3,696
Amortization of stock compensation	5,550			1,290			(1,290		)	—			5,550
Amortization of deferred financing costs (3)	1,111			1,890			(3,023		)	(1,133		)	(22		)
Capitalized leasing costs and commissions	(698		)	—			—			—			(698		)
Capitalized building improvements	(1,707		)	—			—			—			(1,707		)
Other adjustments (4)	(1,022		)	(3,994		)	2,158			(1,836		)	(2,858		)
Adjusted funds from operations	$	132,793		$	60,410		$	3,131		$	63,541		$	196,334
Normalized FFO per common share:
Basic	$	0.95		$	0.36		n/a			$	1.46		$	1.08
Diluted	$	0.95		$	0.36		n/a			$	1.44		$	1.08
AFFO per common share:
Basic	$	1.00		$	0.36		n/a			$	1.39		$	1.10
Diluted	$	1.00		$	0.36		n/a			$	1.38		$	1.10
Weighted average common shares outstanding:
Basic	132,643,698			168,705,683			(123,129,364		)	45,576,319			178,220,017
Diluted	132,785,213			168,750,277			(122,856,987		)	45,893,290			178,678,503

(1)Normalized FFO adjusts for activity we believe will be completed prior to the Merger and for nonreccuring activity that is not expected to occur after the Merger.

(2)See reconciling items for FFO and Normalized FFO.

(3)Includes the amortization of costs incurred and capitalized when our notes were issued. Does not include costs associated with our credit facility agreement or annual fees paid to credit rating agencies.

(4)Includes straight-line rent revenue and the amortization of above and below-market leases.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Realty Income Corporation

Unaudited Pro Forma Funds From Operations and Adjusted Funds From Operations

For the year ended December 31, 2011

(in thousands, except share data)

	Realty												Realty
	Income			ARCT			Pro Forma			ARCT			Income
	Historical			Historical			Adjustments			Pro Forma			Pro Forma
Income (loss) from continuing operations attributable to common stockholders	$	124,928		$	(25,076	)	$	9,014		$	(16,062	)	$	108,866
Income from discontinued operations	7,851			—			—			—			7,851
Net income (loss) available to common stockholders	132,779			(25,076		)	9,014			(16,062		)	116,717
Depreciation and amortization:
Continuing operations	120,813			68,940			40,020			108,960			229,773
Allocated to noncontrolling interest	—			(862		)	862			—			—
Discontinued operations	1,366			—			—			—			1,366
Depreciation of furniture, fixtures and equipment	(238		)	(81		)	81			—			(238		)
Provisions for impairment	405			—			—			—			405
Other non-cash losses	—			102			—			102			102
(Gain) loss on sales of investment properties:
Continuing operations	(540		)	44			—			44			(496		)
Discontinued operations	(5,193		)	—			—			—			(5,193		)
Total Funds from operations (FFO)	$	249,392		$	43,067		$	49,977		$	93,044		$	342,436
Adjustments:
Acquisition and transaction related expenses	—			30,002			—			30,002			30,002
Non-cash mark-to-market adjustments	—			2,539			—			2,539			2,539
Non-recurring losses from extinguishment of debt	—			1,423			—			1,423			1,423
Other income, revenue on marketable securities	—			—			(766		)	(766		)	(766		)
Elimination of the joint venture income allocation	—			—			1,121			1,121			1,121
Asset management fees to affiliates	—			5,572			—			5,572			5,572
Normalized FFO (1)	$	249,392		$	82,603		$	50,332		$	132,935		$	382,327
Net income (loss) available to common stockholders	$	132,779		$	(25,076	)	$	9,014		$	(16,062	)	$	116,717
Cumulative adjustments to calculate normalized FFO (2)	116,613			107,679			41,318			148,997			265,610
Normalized FFO available to common stockholders	249,392			82,603			50,332			132,935			382,327
Amortization of stock compensation	7,873			1,477			(1,477		)	—			7,873
Amortization of deferred financing costs (3)	1,881			—			(2,266		)	(2,266		)	(385		)
Capitalized leasing costs and commissions	(1,722		)	—			—			—			(1,722		)
Capitalized building improvements	(2,450		)	—			(368		)	(368		)	(2,818		)
Other adjustments (4)	(1,602		)	(304		)	(3,368		)	(3,672		)	(5,274		)
Adjusted funds from operations	$	253,372		$	83,776		$	42,853		$	126,629		$	380,001
Normalized FFO per common share:
Basic	$	1.98		$	0.62		n/a			$	2.92		$	2.23
Diluted	$	1.98		$	0.61		n/a			$	2.89		$	2.22
AFFO per common share:
Basic	$	2.01		$	0.63		n/a			$	2.78		$	2.21
Diluted	$	2.01		$	0.62		n/a			$	2.76		$	2.21
Weighted average common shares outstanding:
Basic	126,142,696			133,730,159			(88,153,840		)	45,576,319			171,719,015
Diluted	126,189,399			135,275,159			(89,381,869		)	45,893,290			172,082,689

(1)Normalized FFO adjusts for activity we believe will be completed prior to the Merger and for nonreccuring activity that is not expected to occur after the Merger.

(2)See reconciling items for FFO and Normalized FFO.

(3)Includes the amortization of costs incurred and capitalized when our notes were issued. Does not include costs associated with our credit facility agreement or annual fees paid to credit rating agencies.

(4)Includes straight-line rent revenue and the amortization of above and below-market leases.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Pro forma FFO and AFFO are presented for information purposes only, and are based on available information and assumptions that the Company’s management believes to be reasonable; however they are not necessarily indicative of what Realty Income’s FFO or AFFO actually would have been assuming the transactions had occurred as of the dates indicated.

Realty Income defines FFO, a non-GAAP measure, consistent with the National Association of Real Estate Investment Trust’s definition, as net income available to common stockholders, plus depreciation and amortization of real estate assets, plus impairments of real estate assets, reduced by gains on sales of investment properties and extraordinary items.

Realty Income considers FFO to be an appropriate supplemental measure of a REIT’s operating performance as it is based on a net income analysis of property portfolio performance that adds back items such as depreciation and impairments. 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. Since real estate values historically rise and fall with market conditions, presentations of operating results for a REIT, using historical accounting for depreciation, could be less informative. The use of FFO is recommended by the REIT industry as a supplemental performance measure. In addition, FFO is used as a measure of our compliance with the financial covenants of our credit facility.

Realty Income believes the non-GAAP financial measure AFFO provides useful information to investors because it is a widely accepted industry measure of the operating performance of real estate companies that is used by industry analysts and investors who look at and compare those companies.  In particular, AFFO provides an additional measure to compare the operating performance of different REITs without having to account for differing depreciation assumptions and other unique revenue and expense items that are not pertinent to measuring a particular company’s on-going operating performance.  Therefore, we believe that AFFO is an appropriate supplemental performance metric, and that the most appropriate GAAP performance metric to which AFFO should be reconciled is net income available to common stockholders.

Presentation of the information regarding FFO and AFFO is intended to assist the reader in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and AFFO in the same way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and AFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income as an indication of our performance. FFO and AFFO should not be considered as an alternative to reviewing our cash flows from operating, investing and financing activities.  In addition, FFO and AFFO should not be considered as a measure of liquidity, of our ability to make cash distributions, or of our ability to pay interest payments.

Presentation of this information is intended to assist the reader in comparing the operating performance of different REITs, although it should be noted that not all REITs calculate FFO the same way, so comparisons with other REITs may not be meaningful.