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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-->
<div align="left" style="font-family: 'Times New Roman',Times,serif">
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left">
</div>
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b>
</b>
</div>
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>1. Organization</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Cornerstone Core Properties REIT, Inc., a Maryland Corporation, was formed on October 22, 2004
under the General Corporation Law of Maryland for the purpose of engaging in the business of
investing in and owning commercial real estate. As used in this report, the “Company”, “we”, “us”
and “our” refer to Cornerstone Core Properties REIT, Inc. and its consolidated subsidiaries except
where the context otherwise requires. Subject to certain restrictions and limitations, our business
is managed pursuant to an advisory agreement by an affiliate, Cornerstone Realty Advisors, LLC, a
Delaware limited liability company that was formed on November 30, 2004 (the “Advisor”).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Cornerstone Operating Partnership, L.P., a Delaware limited partnership (the “Operating
Partnership”) was formed on November 30, 2004. At September 30, 2011, we owned a 99.88% general
partner interest in the Operating Partnership while the Advisor owned a 0.12% limited partnership
interest. We anticipate that we will conduct all or a portion of our operations through the
Operating Partnership. Our financial statements and the financial statements of the Operating
Partnership are consolidated in the accompanying condensed consolidated financial statements. These
financial statements include consolidation of a variable interest entity (see Note 9). All
intercompany accounts and transactions have been eliminated in consolidation.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 2 - ccpr:PublicOfferingsTextBlock-->
<div align="left" style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>2. Public Offerings</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On January 6, 2006, we commenced a public offering of a minimum of 125,000 shares and a maximum of
55,400,000 shares of our common stock, consisting of 44,400,000 shares for sale to the public (the
“Primary Offering”) and 11,000,000 shares for sale pursuant to our distribution reinvestment plan.
We stopped making offers under our initial public offering on June 1, 2009 upon raising gross
offering proceeds of approximately $172.7 million from the sale of approximately 21.7 million
shares, including shares sold under the distribution reinvestment plan. On June 10, 2009, the U.S.
Securities Exchange Commission (“SEC”) declared our follow-on offering effective and we commenced a
follow-on offering of up to 77,350,000 shares of our common stock, consisting of 56,250,000 shares
for sale to the public (the “Follow-On Offering”) and 21,100,000 shares for sale pursuant to our
dividend reinvestment plan. The Primary Offering and Follow-On Offering are collectively referred
to as the “Offerings”. We retained Pacific Cornerstone Capital, Inc. (“PCC”), an affiliate of our
Advisor, to serve as the dealer manager for the Offerings. PCC was responsible for marketing our
shares being offered pursuant to the Offerings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On November 23, 2010 we informed our investors of several decisions made by the board of directors
for the health of our REIT. Effective November 23, 2010, we stopped making and accepting offers to
purchase shares of our stock while our board of directors evaluates strategic alternatives to
maximize value. The board of directors continues to evaluate such alternatives and has engaged
consultants to assist in identifying such alternatives.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of September 30, 2011, approximately 20.9 million shares of our common stock had been sold in
our Offerings for aggregate gross proceeds of approximately $167.1 million. This excludes shares
issued under our distribution reinvestment plan.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:SignificantAccountingPoliciesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>3. Summary of Significant Accounting Policies</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of our condensed consolidated financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We
base these estimates on various assumptions that we believe to be reasonable under the
circumstances, and these estimates form the basis for our judgments concerning the carrying values
of assets and liabilities that are not readily apparent from other sources. We periodically
evaluate these estimates and judgments based on available information and experience. Actual
results could differ from our estimates under different assumptions and conditions. If actual
results significantly differ from our estimates, our financial condition and results of operations
could be materially impacted. For more information regarding our critical accounting policies and
estimates please refer to “Summary of Significant Accounting Policies” contained in our Annual
Report on Form 10-K for the year ended December 31, 2010. There have been no material changes to
the critical accounting policies previously disclosed in that report.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Interim Financial Information</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying interim condensed consolidated financial statements have been prepared by our
management in accordance with accounting principles generally accepted in the United States of
America (“GAAP”) and in conjunction with the rules and regulations of the SEC. Certain information
and footnote disclosures required for annual financial statements have been condensed or excluded
pursuant to SEC rules and regulations. Accordingly, the interim condensed consolidated financial
statements do not include all of the information and footnotes required by GAAP for complete
financial statements. The accompanying financial information reflects all adjustments which are, in
the opinion of our management, of a normal recurring nature and necessary for a fair presentation
of our financial position, results of operations and cash flows for the interim periods. Interim
results of operations are not necessarily indicative of the results to be expected for the full
year. The accompanying condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and the notes thereto included in the 2010
Annual Report on Form 10-K as filed with the SEC. Operating results for the three and nine months
ended September 30, 2011 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Fair Value of Financial Instruments</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 825-10, <i>Financial
Instruments</i>, requires the disclosure of fair value information about financial instruments whether
or not recognized on the face of the balance sheet, for which it is practical to estimate that
value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Fair value represents the estimate of the proceeds to be received, or paid in the case of a
liability, in a current transaction between willing parties. ASC 820, <i>Fair Value Measurement (“ASC
820”) </i>establishes a fair value hierarchy to categorize the inputs used in valuation techniques to
measure fair value. Inputs are either observable or unobservable in the marketplace. Observable
inputs are based on market data from independent sources and unobservable inputs reflect the
reporting entity’s assumptions about market participant assumptions used to value an asset or
liability.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Financial assets and liabilities recorded at fair value on the condensed consolidated balance
sheets are categorized based on the inputs to the valuation techniques as follows:
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Level 1. </i>Quoted prices in active markets for identical instruments.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Level 2. </i>Observable inputs other than Level 1 prices, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or
can be corroborated by observable market data for substantially the full term of the assets or
liabilities.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Level 3. </i>Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">Assets and liabilities measured at fair value are classified according to the lowest level input
that is significant to their valuation. A financial instrument that has a significant unobservable
input along with significant observable inputs may still be classified as a level 3 instrument.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We generally determine or calculate the fair value of financial instruments using quoted market
prices in active markets when such information is available or use appropriate present value or
other valuation techniques, such as discounted cash flow analyses, incorporating available market
discount rate information for similar types of instruments and our estimates for non-performance
and liquidity risk. These techniques are significantly affected by the assumptions used, including
the discount rate, credit spreads, and estimates of future cash flow.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Our condensed consolidated balance sheets include the following financial instruments: cash and
cash equivalents, notes receivable, note receivable from related party, tenant and other
receivables, other assets, deferred costs and deposits, deferred financing costs, accounts payable
and accrued liabilities, payable to related parties, prepaid rent, security deposits and deferred
revenue, distributions payable and notes payable. With the exception of notes receivable, note
receivable from related party and notes payable discussed below, we consider the carrying values to
approximate fair value for such financial instruments because of the short period of time between
origination of the instruments and their expected payment.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of notes payable is estimated using lending rates available to us for financial
instruments with similar terms and maturities. As of September 30, 2011 and December 31, 2010, the
fair value of notes payable was $27.3 million and $35.9 million, compared to the carrying value of
$27.0 million and $35.9 million, respectively. The carrying values noted above include notes
classified as liabilities associated with properties held for sale totaling $3.2 million and $9.3
million as of September 30, 2011 and December 31, 2010, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of September 30, 2011 and December 31, 2010, the fair value of notes receivable was $2.1 million
and $3.9 million, compared to the carrying value of $2.2 million and $4.0 million, respectively.
The fair value of notes receivable is estimated using current rates at which management believes
similar loans would be made. During the quarter ended June 30, 2011, we determined the note
receivable was impaired and therefore adjusted its carrying value to estimated fair value based on
our assessment of the borrower’s business prospects (See Note 7).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At December 31, 2010, the fair value of the note receivable from related party was $8.0 million,
consistent with its carrying value, estimated using current rates at which management believes
similar loans would be made with similar terms and maturities. On September 30, 2011, we
consolidated the related party with which we entered this transaction as we determined that we were
the primary beneficiary of the entity at that date (see Note 9).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As a result of our ongoing analysis for potential impairment of our investments in real estate,
including properties classified as held for sale, we were required to adjust the carrying value of
certain assets to their estimated fair values as of September 30, 2011 (see Note 4). The following
table summarizes the assets measured at fair value on a nonrecurring basis during the third quarter
of 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
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<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Assets at</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Assets at</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Assets at</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Investments in real estate
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">846,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">846,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Property held for sale
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">893,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">893,000</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the assets measured at fair value on a nonrecurring basis during the
nine months ended September 30, 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
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<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 1</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Level 3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Assets at</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Assets at</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Assets at</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Investments in real estate
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">42,816,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">42,816,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Properties held for sale
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">893,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">23,472,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">24,365,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Note receivable
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,200,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,200,000</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The investments in real estate are deemed to be Level 3 assets as their fair value measurements
rely primarily on our estimates of market based inputs and our assumptions about the use of the assets, as
observable inputs are not available. We estimate the fair value of real estate using unobservable
data such as net operating income and estimated capitalization and discount rates. We also consider
local and national
industry market data including comparable sales, and at times engage an external real estate
appraiser to assist us in our estimation of fair value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The property held for sale measured at fair value during the third quarter of 2011 is deemed to be
a Level 2 asset as we have received a formal offer for the property. We do not believe that this
asset is a Level 1 asset as the provisions in the purchase and sale agreement allowing the
potential buyer to opt out of the purchase have not yet lapsed. The properties held for sale that
were measured at fair value and deemed to be Level 3 assets were valued based primarily on
company-specific inputs and our assumptions about the use of the assets, as observable inputs are
not available. We estimate the fair value of real estate using unobservable data such as net
operating income and estimated capitalization and discount rates. We also consider local and
national industry market data including comparable sales, and at times engage an external real
estate appraiser to assist us in our estimation of fair value.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The note receivable was valued using our estimation of market-based inputs, such as an appropriate
discount rate based on the risk profile and duration of the note, to an income approach valuation
model.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At September 30, 2011 and December 31, 2010, we do not have any significant financial assets or
financial liabilities that are measured at fair value on a recurring basis in our consolidated
financial statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Variable Interest Entities</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company analyzes its contractual and/or other interests to determine whether such interests
constitute an interest in a variable interest entity (“VIE”) in accordance with ASC 810,
<i>Consolidation </i>(“ASC 810”), and, if so, whether the Company is the primary beneficiary. If the
Company is determined to be the primary beneficiary of a VIE, it must consolidate the VIE. A VIE is
an entity with insufficient equity investment or in which the equity investors lack some of the
characteristics of a controlling financial interest. In determining whether it is the primary
beneficiary, the Company considers, among other things, whether it has the power to direct the
activities of the VIE that most significantly impact the entity’s economic performance, including,
but not limited to, determining or limiting the scope or purpose of the VIE, selling or
transferring property owned or controlled by the VIE, or arranging financing for the VIE. The
Company also considers whether it has the obligation to absorb losses of the VIE or the right to
receive benefits from the VIE (see Note 9).
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Real Estate Assets Held for Sale</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company evaluates the held for sale classification of its owned real estate each quarter.
Assets that are classified as held for sale are recorded at the lower of their carrying amount or
fair value less cost to sell. Assets are classified as held for sale once management commits to a
plan to sell the properties and has initiated an active program to market them for sale. The
results of operations of these real estate properties are reflected as discontinued operations in
all periods presented. During the second quarter of 2011, management committed to a plan to sell
the Mack Deer Valley, Pinnacle Park Business Center, and 2111 South Industrial Park properties to
third parties and as such we have classified the properties as held for sale. These properties have
not been sold as of September 30, 2011 (see Note 4).
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Recent Accounting Pronouncements</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements in
U.S. GAAP and IFRSs” (“ASU 2011-04”). The amendment provides a uniform framework for fair value measurements and related
disclosures between GAAP and International Financial Reporting Standards (“IFRS”). Additional
disclosure requirements in the update include: (1) for Level 3 fair value measurements,
quantitative information about unobservable inputs used, a description of the valuation processes
used by the entity, and a qualitative discussion about the sensitivity of the measurements to
changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is
different from the asset’s highest and best use, the reason for the difference; (3) for financial
instruments not measured at fair value but for which disclosure of fair value is required, the fair
value hierarchy level in which the fair value measurements were determined; and (4) the disclosure
of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will be
effective for interim and annual periods beginning on or after December 15, 2011, which for us will
be our 2012 first quarter. We are currently evaluating the impact ASU 2011-04 will have on our
financial statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2011, the FASB issued Accounting Standards Update No. 2011-02, A Creditor’s Determination
of Whether a Restructuring Is a Troubled Debt Restructuring (“ASU 2011-02”). The amendments in this
update clarify, among other things, the guidance on a creditor’s evaluation of whether it has
granted a concession and whether a debtor is experiencing financial difficulties. The Company’s
adoption of ASU 2011-02 on July 1, 2011 did not have a significant impact on its consolidated
financial position or results of operations.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 4 - us-gaap:RealEstateDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>4. Investments in Real Estate</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Property Portfolio</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of September 30, 2011, our portfolio, including properties held for sale, consists of twelve
properties which were approximately 67.5% leased. The following table provides summary information
regarding our properties.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="28%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Date</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Square</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Purchase</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>30, 2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Property</b><sup>(1)</sup></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Location</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Purchased</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Footage</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Debt</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>% Leased</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2111 South Industrial Park
</div></td>
<td> </td>
<td colspan="3" align="left">North Tempe, AZ</td>
<td> </td>
<td colspan="3" align="left">June 1, 2006</td>
<td> </td>
<td> </td>
<td align="right">26,800</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,975,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">82.1</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Shoemaker Industrial Buildings
</div></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">Santa Fe Springs, CA</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">June 30, 2006</td>
<td> </td>
<td> </td>
<td align="right">18,921</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,400,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">100.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">20100 Western Avenue
</div></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">Torrance, CA</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">December 1, 2006</td>
<td> </td>
<td> </td>
<td align="right">116,433</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,650,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,786,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">29.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Mack Deer Valley
</div></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">Phoenix, AZ</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">January 21, 2007</td>
<td> </td>
<td> </td>
<td align="right">180,985</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,150,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,469,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">68.3</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Marathon Center
</div></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">Tampa Bay, FL</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">April 2, 2007</td>
<td> </td>
<td> </td>
<td align="right">52,020</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,450,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">26.1</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Pinnacle Park Business Center
</div></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">Phoenix, AZ</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">October 2, 2007</td>
<td> </td>
<td> </td>
<td align="right">159,661</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,050,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,730,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">63.8</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Orlando Small Bay Portfolio
Carter Commerce Center
</div></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">Winter Garden, FL</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">November 15, 2007</td>
<td> </td>
<td> </td>
<td align="right">49,125</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">42.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Goldenrod Commerce Center
</div></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">Orlando, FL</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">November 15, 2007</td>
<td> </td>
<td> </td>
<td align="right">78,646</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">88.6</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Hanging Moss Commerce Center
</div></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">Orlando, FL</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">November 15, 2007</td>
<td> </td>
<td> </td>
<td align="right">94,200</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">93.4</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Monroe South Commerce Center
</div></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">Sanford, FL</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">November 15, 2007</td>
<td> </td>
<td> </td>
<td align="right">172,500</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">63.7</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Orlando Small Bay Portfolio
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">394,471</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">37,128,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,300,000</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Monroe North Commerce Center
</div></td>
<td> </td>
<td colspan="3" align="left">Sanford, FL</td>
<td> </td>
<td colspan="3" align="left">April 17, 2008</td>
<td> </td>
<td> </td>
<td align="right">181,348</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,275,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,715,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">86.5</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">1830 Santa Fe
</div></td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">Santa Ana, CA</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="left">August 5, 2010</td>
<td> </td>
<td> </td>
<td align="right">12,200</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,315,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">100.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,142,839</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">124,393,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">27,000,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">67.5</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="2%"></td>
<td width="1%"></td>
<td width="97%"></td>
</tr>
<tr>
<td valign="top">(1)</td>
<td> </td>
<td>The table excludes Sherburne Commons, a variable interest
entity for which we became the primary beneficiary and therefore began
consolidating their financial results as of June 30, 2011. Sherburne Commons is the only property in our senior housing reportable segment (See Notes 8 and 9).</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of September 30, 2011, adjusted cost and accumulated depreciation and amortization related
to investments in real estate and related intangible lease assets were as follows:
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Acquired</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Acquired</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Buildings and</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Above-Market</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>In-Place Lease</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Below-Market</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Land</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Improvements</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Leases</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Leases</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Investments in real estate
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">11,733,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">34,176,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,401,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,181,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(620,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: accumulated
depreciation and
amortization
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(509,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,361,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,123,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">566,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net investments in real
estate and related lease
intangibles from
continuing operations
</div></td>
<td> </td>
<td> </td>
<td align="right">11,733,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">33,667,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">58,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(54,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net investments in real
estate and related lease
intangibles held for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">7,866,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16,282,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">65,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">152,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(28,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">19,599,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">49,949,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">105,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">210,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(82,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of December 31, 2010, cost and accumulated depreciation and amortization related to real
estate and related intangible lease assets were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="40%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Acquired</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Acquired</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Buildings and</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Above-Market</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>In-Place Lease</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Below-Market</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Land</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Improvements</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Leases</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Leases</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Investments in real estate
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">18,073,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">57,847,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,401,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,181,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(620,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: accumulated
depreciation and
amortization
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5,926,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,334,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,069,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">531,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net investments in real
estate and related lease
intangibles from
continuing operations
</div></td>
<td> </td>
<td> </td>
<td align="right">18,073,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">51,921,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">67,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">112,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(89,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net investments in real
estate and related lease
intangibles held for sale
</div></td>
<td> </td>
<td> </td>
<td align="right">20,607,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32,198,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">84,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">199,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(39,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">38,680,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">84,119,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">151,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">311,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(128,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Depreciation
expense associated with buildings and improvements, including
properties held for sale, for the three months ended
September 30, 2011 and 2010 was $0.3 million and $0.7 million, respectively. Depreciation expense
associated with buildings and improvements for the nine months ended September 30, 2011 and 2010
was $1.7 million and $2.2 million, respectively. We are required to make subjective assessments as
to the useful lives of our depreciable assets. In making such assessments, we consider the assets
expected period of future economic benefit to estimate the appropriate useful lives.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Net
amortization expense associated with the intangible lease assets and
liabilities, including those associated with properties held for sale, for the three
months ended September 30, 2011 and 2010 was $9,000 and $76,000, respectively. Net amortization
expense associated with the intangible lease assets and liabilities for the nine months ended
September 30, 2011 and 2010 was $0.1 million and $0.2 million, respectively. Estimated net amortization
expense for October 1, 2011 through December 31, 2011 and each of the subsequent years is as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Amortization of Intangible</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Lease Assets</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">October 1, 2011 to December 31, 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">78,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">82,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">51,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">12,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2015
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">10,000</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The estimated useful lives for intangible lease assets range from approximately one month to four
years. As of September 30, 2011, the weighted-average amortization period for in-place leases,
acquired above market leases and acquired below market leases were 2.0 years, 1.6 years and 1.5
years, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Impairments</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with ASC 360, <i>Property, Plant, and Equipment </i>(“ASC 360”), we conduct a comprehensive
review of our real estate assets for impairment. ASC 360 requires that asset values be analyzed
whenever events or changes in circumstances indicate that the carrying value of a property may not
be fully recoverable.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Indicators of potential impairment include the following:
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" style="background: transparent"> </td>
<td width="2%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Change in strategy resulting in a decreased holding period;</td>
</tr>
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" style="background: transparent"> </td>
<td width="2%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Decreased occupancy levels;</td>
</tr>
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" style="background: transparent"> </td>
<td width="2%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Deterioration of the rental market as evidenced by rent decreases over numerous
quarters;</td>
</tr>
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" style="background: transparent"> </td>
<td width="2%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Properties adjacent to or located in the same submarket as those with recent impairment
issues;</td>
</tr>
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" style="background: transparent"> </td>
<td width="2%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Significant decrease in market price; and/or</td>
</tr>
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" style="background: transparent"> </td>
<td width="2%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Tenant financial problems.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The intended use of an asset, either held for sale or held for the long term, can significantly
impact how impairment is measured. If an asset is intended to be held for the long term, the
impairment analysis is based on a two-step test.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The first test measures estimated expected future cash flows over the holding period, including a
residual value (undiscounted and without interest charges), against the carrying value of the
property. If the asset fails that test, the asset carrying value is compared to the estimated fair
value from a market participant standpoint, with the excess of the asset’s carrying value over the
estimated fair value recognized as an impairment charge to earnings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2011, we reviewed the impairment indicators as described above. At that
time, our board of directors was evaluating strategic alternatives to maximize shareholder value
and therefore we believed that our properties could potentially have shorter holding periods than
previously planned in past reporting periods when estimating whether the carrying value of the
properties was recoverable. The use of shorter hold periods reduced our future (undiscounted) cash
flows attributable to the properties. Consequently, we were required to adjust certain properties
to their estimated fair values resulting in an impairment charge of $23.2 million, which is
classified as impairment of real estate on our condensed consolidated statements of operations for
the nine months ended September 30, 2011. If our holding period assumptions change, additional
properties could require additional testing and could result in additional impairment charges in
future periods.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">
In the third quarter of 2011, we noted an increase in uncollected
rent payments at the 1830 Sante Fe property. The corresponding
reduction in our undiscounted cash flow forecasts caused us to fail
step 1 of our impairment test. Accordingly, we recorded an impairment of $0.4 million related to this
property.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of the properties was derived using an income approach primarily utilizing Level 3
inputs. This approach estimates fair value based on expected future cash flows and requires us to
estimate, among other things, (1) future market rental income amounts subsequent to the expiration
of current lease agreements, (2) property operating expenses, (3) risk-adjusted rate of return and
capitalization rates, (4) the number of months it is expected to take to re-lease the property and
(5) the number of years the property is expected to be held for investment. A change in any one or
more of these factors could materially impact whether a property is impaired as of any given
valuation date. When available, current market information, such as comparative sales prices, was
used to determine capitalization, discount, and rental growth rates. In cases where market
information was not readily available, the inputs were based on our understanding of market
conditions and the experience of our management team.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table illustrates, by property, the impairment charge recorded to impairment of real
estate during the nine months ended September 30, 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Impairment</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Property</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Charge</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">20100 Western Avenue
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">6,905,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Carter Commerce Center
</div></td>
<td> </td>
<td> </td>
<td align="right">1,471,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Goldenrod Commerce Center
</div></td>
<td> </td>
<td> </td>
<td align="right">3,403,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Hanging Moss Commerce Center
</div></td>
<td> </td>
<td> </td>
<td align="right">2,544,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Monroe North Commerce Center
</div></td>
<td> </td>
<td> </td>
<td align="right">4,530,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Monroe South Commerce Center
</div></td>
<td> </td>
<td> </td>
<td align="right">4,366,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Santa Fe
</div></td>
<td> </td>
<td> </td>
<td align="right">425,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">23,644,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Real Estate Held for Sale</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2011, we reclassified the 15172 Goldenwest Circle property (“Goldenwest”),
which was sold on June 14, 2011, and the Mack Deer Valley, the Pinnacle Park Business Center, and
the 2111 South Industrial Park properties, which we expect to sell in the fourth quarter of 2011,
to properties held for sale. Additionally, the financial results for the properties classified as
properties held for sale have been reclassified to discontinued operations for all periods
presented (see Note 15).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">When assets are classified as held for sale, they are recorded at the lower of carrying value or
the estimated fair value of the asset, net of estimated selling costs. Accordingly, we recorded an
impairment charge of $19.2 million for the Goldenwest, Mack Deer Valley, Pinnacle Park, and 2111
South Industrial properties upon their transfer into real estate held for sale in the second
quarter of 2011 (see Note 15). In the third quarter of 2011, we recorded an additional impairment
of $0.1 million for the 2111 South Industrial Park property.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On
November 23, 2011, the previously cancelled purchase and sale
agreement executed on August 31, 2011 between us and Columbia
Industrial Properties Midwest, LLC, in connection with the sale of
the Mack Deer Valley and Pinnacle Park
properties, was reinstated. The Company sold these two properties on
November 28, 2011, and will recognize the related loss of
approximately $0.3 million in the fourth quarter, reflecting a change
in facts and circumstances related to the value of the assets
subsequent to September 30, 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On October
26, 2011, we entered into a purchase and sale agreement in connection
with the sale of the 2111 South Industrial Park property for proceeds
of $0.9 million. The sale is expected to close on or before December
21, 2011.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table illustrates, by property, the impairment charge recorded in discontinued
operations in the nine months ended September 30, 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Impairment</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Property</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Charge</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Mack Deer Valley
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">9,674,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Pinnacle Park Business Center
</div></td>
<td> </td>
<td> </td>
<td align="right">7,279,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2111 South Industrial Park
</div></td>
<td> </td>
<td> </td>
<td align="right">250,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Goldenwest
</div></td>
<td> </td>
<td> </td>
<td align="right">2,129,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">19,332,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Leasing Commissions</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Leasing commissions are stated at cost and amortized on a straight-line basis over the related
lease term. As of September 30, 2011 and December 31, 2010, we recorded approximately $0.6 million
and $0.5 million in leasing commissions, respectively. Amortization expense for the three months
ended September 30, 2011 and 2010 was approximately $28,000 and
$0.1 million, respectively. Amortization
expense for the nine months ended September 30, 2011 and 2010
was approximately $92,000 and
$0.2 million, respectively.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 5 - ccpr:AllowanceForDoubtfulAccountsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>5. Allowance for Doubtful Accounts</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Our allowance for doubtful accounts was $0.2 million and $0.4 million as of September 30, 2011 and
December 31, 2010, respectively.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 6 - us-gaap:ConcentrationRiskDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>6. Concentration of Risk</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Financial instruments that potentially subject us to a concentration of credit risk are primarily
cash investments, notes receivable and the note receivable from related party. Refer to Notes 7 and 8
with regard to credit risk evaluation of notes receivable and note receivable from related
party. Cash is generally invested in investment-grade short-term instruments. On July 21, 2010,
President Obama signed into law the “Dodd-Frank Wall Street Reform and Consumer Protection Act”
that implements significant changes to the regulation of the financial services industry, including
provisions that made permanent the $250,000 limit for federal deposit insurance and increased the
cash limit of Securities Investor Protection Corporation protection from $100,000 to $250,000, and
provided unlimited federal deposit insurance until January 1, 2013, for non-interest bearing demand
transaction accounts at all insured depository institutions. As of September 30, 2011, none of our
depository accounts are in excess of the federal deposit insurance nor SIPC- insured limits.
Therefore we do not have credit risks related to these depository accounts.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of September 30, 2011, we owned three properties in the state of California, three properties in
the state of Arizona and six properties in the state of Florida. Accordingly, there is a geographic
concentration of risk subject to fluctuations in each state’s economy.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>7. Notes Receivable</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to agreements originally entered into in May 2008, and amended in March 2009 and May 2010,
we committed to loan up to $8.75 million at a rate of 10% per annum to two real estate operating
companies, Servant Investments, LLC and Servant Healthcare Investments, LLC (collectively,
“Servant”). The commitment was fully funded in December 2010, and the loans mature on May 19, 2013.
At the time the loans were made, Servant was a party to an alliance with the managing member of our
Advisor.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On a quarterly basis, we evaluate the collectability of our notes receivable. Our evaluation of
collectability involves judgment, estimates, and a review of the underlying collateral and
borrower’s business models and future cash flows from operations. During the quarter ended
September 30, 2009, we concluded that the collectability of the Servant Investments, LLC (“Servant
Investments”) note could not be reasonably assured and therefore, we recorded a reserve of $4.75
million against the note balance. As of September 30, 2011 and December 31, 2010, the Servant
Investments note receivable had a net balance of $0. It is our policy to recognize interest income
on the reserved loan on a cash basis. For the three months ended September 30, 2011 and 2010,
interest income related to the
Servant Investments note receivable was $0 and $80,000, respectively. For the nine months ended
September 30, 2011 and 2010, interest income from the note was $0 and $0.4 million, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the quarter ended June 30, 2011, after evaluating the expected effects of changes in the
borrower’s business prospects, including the uncertainty surrounding Servant’s realization of the
fees pursuant to the subadvisory agreement, we concluded that it was probable that the Company
would be unable to collect all amounts due according to the terms of the Servant Healthcare, LLC
(“Servant Healthcare”) note and consequently, we recorded a note receivable impairment of $1.65
million against the balance of that note. Although the extent to
which we will collect the amount due under the Servant Health care
note remains uncertain, we do not have information that indicates
that a further write-down of the note is warranted at this time. We
are continuing to monitor the collectibility of the note and explore
repayment alternatives with the Servant entities.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table reconciles the notes receivable balance from January 1, 2011 to September 30,
2011 and January 1, 2010 to September 30, 2010<b>:</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Beginning Balance
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">4,000,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,875,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Additions:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Additions to note receivable
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">750,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Deductions:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Note receivable repayments
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(150,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Note receivable impairments
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,650,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Ending Balance
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,200,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,625,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of September 30, 2011 and December 31, 2010, the note receivable had a balance of $2.2
million and $4.0 million respectively. For the three months ended September 30, 2011 and 2010,
interest income related to the note receivable was $98,000 and $88,000, respectively. For the nine
months ended September 30, 2011 and 2010, interest income from the note was $0.3 million and $0.2
million, respectively.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>8. Note Receivable from Related Party</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On December 14, 2009, we made a participating first mortgage loan commitment of $8.0 million to
Nantucket Acquisition LLC (“Nantucket Acquisition”), a Delaware limited liability company owned and
managed by Cornerstone Ventures Inc., an affiliate of our Advisor. The loan was made in connection
with Nantucket Acquisition’s purchase of a 60-unit senior living community, Sherburne Commons
Residences, LLC (“Sherburne Commons”), located on the island of Nantucket, MA. The loan matures on
January 1, 2015, with no option to extend and bears interest at a fixed rate of 8.0% for the term
of the loan. Interest is payable monthly with the principal balance due at maturity. Under the
terms of the loan, we are entitled to receive additional interest in the form of a 40%
participation in the appreciation in value of the property, which is calculated based on the net
sales proceeds if the property is sold, or the property’s appraised value, less ordinary
disposition costs, if the property has not been sold by the time the loan matures. Prepayment of
the loan is not permitted without our consent and the loan is not assumable.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Leasing activity at Sherburne Commons has been lower than originally anticipated and to preserve
cash flow for operating requirements, the borrower suspended interest payments to us beginning in
the first quarter of 2011. Consequently, we began recognizing interest income on a cash basis
commencing in the first quarter of 2011. In the second quarter of 2011, the loan balance was
increased by $0.3 million to provide funds to meet Sherburne Commons’ operating shortfalls. It is
anticipated that additional disbursements may be required while we
continue to increase occupancy and evaluate other alternatives to
maximize the value of the property, including the potential for
additional development, joint ventures or the disposition of the
property.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended September 30, 2011 and 2010, interest income recognized on the note was
$0 and $0.2 million, respectively. For the nine months ended September 30, 2011 and 2010, interest
income recognized from the note was approximately $55,000 and $0.5 million, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On a quarterly basis, we evaluate the collectability of our notes receivable from related parties.
Our evaluation of collectability involves judgment, estimates, and a review of the underlying
collateral and borrower’s business models and future cash flows. For the three months ended
September 30, 2011 and 2010, we did not record any impairment on the note receivable from related
party.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table reconciles the note receivable from related party from January 1, 2011 to
September 30, 2011 and January 1, 2010 to September 30, 2010<b>:</b>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Beginning Balance
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">8,000,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,911,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Additions:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Additions to note receivable from related parties
</div></td>
<td> </td>
<td> </td>
<td align="right">318,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,089,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Deductions:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Repayments of note receivable from related parties
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Ending Balance
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">8,318,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,000,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Nantucket Acquisition is considered a variable interest entity because the equity owners of
Nantucket Acquisition do not have sufficient equity at risk, and our mortgage loan commitment was
determined to be a variable interest. Due to the suspension of interest payments by the borrower,
we issued a notice of default to the borrower on June 30, 2011 and determined that we are the
primary beneficiary of the VIE due to our enhanced ability to direct the activities of the VIE. The
primary beneficiary of a VIE is required to consolidate the operations of the VIE. Consequently, we
have consolidated the operations of the VIE as of June 30, 2011 and, accordingly, eliminated the
note receivable from related party balance in consolidation (see Note 9).
</div>
</div>
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<!-- Begin Block Tagged Note 9 - ccpr:VariableInterestEntityTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>9. Consolidation of Variable Interest Entity</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">GAAP requires the consolidation of variable interest entities (“VIE”) in which an enterprise has a
controlling financial interest. A controlling financial interest has both of the following
characteristics: (i) the power to direct the activities of a VIE that most significantly impact the
VIEs economic performance and (ii) the obligation to absorb losses of the VIE that could
potentially be significant to the VIE or the right to receive benefits from the VIE that could
potentially be significant to the VIE.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In compliance with ASC 810, <i>Consolidation, </i>we continuously analyze and reconsider our initial
determination of VIE status to determine whether we are the primary beneficiary by considering,
among other things, whether we have the power to direct the activities of the VIE that most
significantly impact its economic performance. Such activities would include, among other things,
determining or limiting the scope or purpose of the VIE, selling or transferring property owned or
controlled by the VIE, or arranging financing for the VIE. We also consider whether we have the
obligation to absorb losses of the VIE or the right to receive benefits from the VIE.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of September 30, 2011, we had a variable interest in one VIE in the form of a note receivable
from Nantucket Acquisition in the amount of $8.3 million (see Note 8).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As a result of our issuing a notice of default with respect to the note, we determined that we were
the primary beneficiary of the VIE, and therefore consolidated the operations of the VIE beginning
June 30, 2011. Assets of the VIE may only be used to settle obligations of the VIE and creditors of
the VIE have no recourse to the general credit of the Company. As of June 30, 2011, our evaluation
of the value of the assets and liabilities of Sherburne Commons was preliminary. During the quarter
ended September 30, 2011, the evaluation was finalized. The following table illustrates our final
fair value allocation of the assets and liabilities of Sherburne Commons consolidated in our
condensed consolidated balance sheets as of June 30, 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">236,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Buildings and improvements
</div></td>
<td> </td>
<td> </td>
<td align="right">5,658,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Site improvements
</div></td>
<td> </td>
<td> </td>
<td align="right">610,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Furniture and fixtures
</div></td>
<td> </td>
<td> </td>
<td align="right">390,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Below-market ground lease
</div></td>
<td> </td>
<td> </td>
<td align="right">3,180,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">In-place leases
</div></td>
<td> </td>
<td> </td>
<td align="right">90,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Below-market leases
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(290,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accounts receivable and other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">195,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accounts payable and accrued liabilities
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(289,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest payable
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(57,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loan payable
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(128,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Note payable
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,332,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total net assets
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">8,263,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following unaudited pro forma information for the three and nine months ended September
30, 2011 and 2010 has been prepared to reflect the incremental effect on the Company had the
operations of Sherburne Commons been consolidated on January 1, 2010.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Three months</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Three months</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>September 30, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>September 30, 2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,794,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,871,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,447,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,283,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic and diluted net loss per common share attributable to common stockholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.06</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.06</td>
<td nowrap="nowrap">)</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Nine months</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Nine months</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>September 30, 2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>September 30, 2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">5,081,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5,766,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(48,180,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2,147,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic and diluted net loss per common share attributable to common stockholders
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2.04</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.09</td>
<td nowrap="nowrap">)</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">No adjustments for non-recurring charges were made in the pro-forma information presented
above. For Sherburne Commons, we recorded revenues of $0.6 million and expenses of $0.8 million in
our condensed consolidated statements of operations for the three and nine months ended September
30, 2011.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 10 - ccpr:PayableToRelatedPartiesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>10. Payable to Related Parties</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Payable to related parties at September 30, 2011 consists of expense reimbursements payable to the
Advisor.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 11 - us-gaap:StockholdersEquityNoteDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>11. Equity</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Common Stock</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Our articles of incorporation authorize 290,000,000 shares of common stock with a par value of
$0.001 and 10,000,000 shares of preferred stock with a par value of $0.001. As of September 30,
2011 and December 31, 2010, we had cumulatively issued 20.9 million shares of common stock for a
total of $167.1 million of gross proceeds, exclusive of shares issued under our distribution
reinvestment plan. On November 23, 2010, we stopped making and accepting offers to purchase shares
of our stock (see Note 1).
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Distributions</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We have adopted a distribution reinvestment plan that allows our stockholders to have their
distributions invested in additional shares of our common stock. We have registered 21,100,000
shares of our common stock for sale pursuant to the distribution reinvestment plan. The purchase
price per share is 95% of the price paid by the purchaser for our common stock, but not less than
$7.60 per share. As of September 30, 2011 and December 31, 2010, approximately 2.3 million shares
had been issued under the distribution reinvestment plan. On November 23, 2010, our board of
directors adopted a resolution to suspend the distribution reinvestment plan indefinitely effective
December 14, 2010. As a result, distributions were paid entirely in cash during the period between
December 14, 2010 and March 31, 2011. Commencing with the April 2011 distributions, the board
elected to pay distributions on a quarterly basis. However, due to cash constraints, the board has
elected to defer the second quarter 2011 distribution payment until the Company’s cash position
improves.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We cannot provide any assurance as to if or when we will resume our distribution reinvestment plan.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following are the distributions declared during the nine months ended September 30, 2011 and
2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Cash flows <br />
Provided by<br />
(used in)</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Distribution Declared (2)</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>operating</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Period</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cash</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Reinvested</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>activities</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">First quarter 2010 (1)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,221,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,490,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,711,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,103,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Second
quarter 2010 (1)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,256,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,468,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,724,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">461,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Third quarter 2010
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,323,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,448,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,771,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,003,000</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">First quarter 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">454,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">454,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">481,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Second quarter 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">468,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">468,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(219,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Third quarter 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(323,000</td>
<td nowrap="nowrap">)</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>Distributions declared primarily represented a return of capital for tax purposes.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(2)</td>
<td> </td>
<td>In order to meet the requirements for being treated as a REIT under the Internal Revenue
Code, we must pay distributions to our shareholders each taxable year equal to at least 90% of
our net ordinary taxable income. Some of our distributions have been paid from sources other
than operating cash flow, such as offering proceeds.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The declaration of distributions is at the discretion of our board of directors and our board will
determine the amount of distributions on a regular basis. The amount of distributions will depend
on our funds from operations, financial condition, capital requirements, annual distribution
requirements under the REIT provisions of the Internal Revenue Code and other factors our board of
directors deems relevant. On November 23, 2010, our board of directors resolved to lower our
distributions to an annualized rate of $0.08 per share (1% based on a share price of $8.00). No
distributions have been declared for periods after June 30, 2011. The rate and frequency of
distributions is subject to the discretion of our board of directors and may change from time to
time based on our operating results and cash flow.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">From our inception in October 2004 through September 30, 2011, we declared aggregate distributions
of $32.8 million. Our cumulative net loss and cumulative cash flows from operations during the same
period were $63.5 million and $6.3 million, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Stock Repurchase Program</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On November 23, 2010, our board of directors concluded that we did not have sufficient funds
available to us to continue funding share repurchases. Accordingly, our board of directors
suspended repurchases under the program effective December 31, 2010. In January 2011, repurchases
due to the death of a shareholder that were requested in 2010, prior to the suspension of the stock
repurchase program were funded. We can make no assurance as to when and on what terms redemptions
will resume. Our board has the authority to resume, suspend again, or terminate the share
redemption program at any time upon 30 days written notice to our stockholders. Our board of
directors may modify our stock repurchase program so that we can redeem stock using the proceeds
from the sale of our real estate investments or other sources.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the nine months ended September 30, 2011, we redeemed shares pursuant to our stock
repurchase program as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Period</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total Number of Shares Redeemed</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Average Price Paid per Share</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">January
</div></td>
<td> </td>
<td> </td>
<td align="right">47,146</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7.82</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">February
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">March
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">April
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">May
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">June
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">July
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">August
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">September
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">47,146</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We have received requests to redeem 61,123 shares during this period, however, due to the
current suspension of the stock repurchase program we were not able to fulfill any of these
requests.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">During the nine months ended September 30, 2010, we redeemed shares pursuant to our stock
repurchase program as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Period</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total Number of Shares Redeemed</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Average Price Paid per Share</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">January
</div></td>
<td> </td>
<td> </td>
<td align="right">249,146</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7.46</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">February
</div></td>
<td> </td>
<td> </td>
<td align="right">100,999</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7.63</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">March
</div></td>
<td> </td>
<td> </td>
<td align="right">159,479</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7.76</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">April
</div></td>
<td> </td>
<td> </td>
<td align="right">161,356</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7.82</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">May
</div></td>
<td> </td>
<td> </td>
<td align="right">123,562</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7.64</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">June
</div></td>
<td> </td>
<td> </td>
<td align="right">39,821</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7.98</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">July
</div></td>
<td> </td>
<td> </td>
<td align="right">13,750</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8.00</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">August
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">September
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">848,113</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Employee and Director Incentive Stock Plan</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We have adopted an Employee and Director Incentive Stock Plan (“the Plan”) which provides for the
grant of awards to directors, full-time employees, and other eligible participants that provide
services to us. We have no employees, and we do not intend to grant awards under the Plan to
persons who are not directors. Awards granted under the Plan may consist of nonqualified stock
options, incentive stock options, restricted stock, share appreciation rights, and distribution
equivalent rights. The term of the Plan is 10 years. The total number of shares of common stock
reserved for issuance under the Plan is equal to 10% of our outstanding shares of stock at any
time.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Effective January 1, 2006, we adopted the provisions of, FASB ASC 718-10<i>, Compensation — Stock
Compensation</i>, which requires the measurement and recognition of compensation expense for all
share-based payment awards to employees and directors based on estimated fair values. On August 6,
2008 and August 8, 2007, we granted our non-employee directors nonqualified stock options to
purchase an aggregate of 20,000 and 20,000 shares of common stock, respectively, at an exercise
price of $8.00 per share. Of these options, 15,000 lapsed on November 8, 2008 due to the
resignation of one director from the board of directors on August 6, 2008. Outstanding stock
options became immediately exercisable in full on the grant date, will expire ten years after their
grant date, and have no intrinsic value as of September 30, 2011. For the three and nine months
ended September 30, 2011 and 2010, we did not incur any non-cash compensation expenses. No stock
options were exercised or canceled during the three and nine months ended September 30, 2011 and
2010. In connection with the registration of the shares in our follow-on offering, we have
suspended the issuance of options to our independent directors under the Plan, and we do not expect
to issue additional options to our independent directors until we cease offering shares pursuant to
our offering.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 12 - us-gaap:RelatedPartyTransactionsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>12. Related Party Transactions</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Our company has no employees. Our Advisor is primarily responsible for managing our business
affairs and carrying out the directives of our board of directors. We have an advisory agreement
with the Advisor and a dealer manager agreement with PCC which entitle the Advisor and PCC to
specified fees upon the provision of certain services with regard to our Offerings and investment
of funds in real estate projects, among other services, as well as reimbursement for organizational
and offering costs incurred by the Advisor and PCC on our behalf and reimbursement of certain costs
and expenses incurred by the Advisor in providing services to us.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Advisory Agreement</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Under the terms of the advisory agreement, the Advisor will use commercially reasonable efforts to
present to us investment opportunities to provide a continuing and suitable investment program
consistent with the investment policies and objectives adopted by our board of directors. The
advisory agreement calls for the Advisor to provide for our day-to-day management and to retain
property managers and leasing agents, subject to the authority of our board of directors, and to
perform other duties.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fees and expense reimbursements payable to the Advisor under the advisory agreement are
described below. As discussed below, we amended the advisory agreement on August 31, 2011 to reduce
the asset management fee payable by us to our Advisor beginning on October 1, 2011.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Organizational and Offering Costs.</u> Organizational and offering costs of our offerings are
being paid by the Advisor on our behalf and will be reimbursed to the Advisor from the proceeds of
our offerings. Organizational and offering costs consist of all expenses (other than sales
commissions and the dealer manager fee) to be paid by us in connection with our offerings,
including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder
and other accountable offering expenses, including, but not limited to, (i) amounts to reimburse
the Advisor for all marketing-related costs and expenses such as salaries and direct expenses of
employees of the Advisor and its affiliates in connection with registering and marketing our
shares; (ii) technology costs associated with the offering of our shares; (iii) the costs of
conducting our training and education meetings; (iv) the costs of attending retail seminars
conducted by participating broker-dealers; and (v) payment or reimbursement of bona fide due
diligence expenses. In no event will we have any obligation to reimburse the Advisor for
organizational and offering costs totaling in excess of 3.5% of the gross proceeds from our initial
public offering and follow-on offering. At times during our offering stage, before the maximum
amount of gross proceeds has been raised, the amount of organization and offering expenses that we
incur, or that our Advisor and its affiliates incur on our behalf, may exceed 3.5% of the gross
offering proceeds then raised. In no event will we have any obligation to reimburse the Advisor for
organizational and offering costs totaling in excess of 3.5% of the gross proceeds from our public
offerings at the conclusion of our offerings.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of September 30, 2011 and December 31, 2010, the Advisor and its affiliates had incurred on our
behalf organizational and offering costs totaling approximately $5.6 million, including
approximately $0.1 million of organizational costs that was expensed and approximately $5.5 million
of offering costs which reduced net proceeds of our offerings. Of this amount, $4.4 million reduced
the net proceeds of our initial public offering and $1.1 million reduced the net proceeds of our
follow-on offering.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Acquisition Fees and Expenses</u>. The advisory agreement requires us to pay the Advisor
acquisition fees in an amount equal to 2.0% of the gross proceeds from our offerings. We have paid
the acquisition fees upon receipt of the gross proceeds from our initial and follow-on offerings
(excluding gross proceeds related to sales pursuant to our distribution reinvestment plan).
However, if the advisory agreement is terminated or not renewed, the Advisor must return
acquisition fees not yet allocated to one of our investments. In addition, we are required to
reimburse the Advisor for direct costs the Advisor incurs and amounts the Advisor pays to third
parties in connection with the selection and acquisition of a property, whether or not ultimately
acquired. For the three months ended September 30, 2011 and 2010, the Advisor earned $0 and $1,200
of acquisition fees, respectively, which are included in real estate acquisition costs on our
condensed consolidated statement of operations. For the nine months ended September 30, 2011 and
2010, the Advisor earned $0 and $23,000 of acquisition fees, respectively, which are included in
real estate acquisition costs on our condensed consolidated statement of operations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Management Fees</u>. Prior to October 1, 2011, the advisory agreement required us to pay the
Advisor a monthly asset management fee of one-twelfth of 1.0% of the Average Invested Assets (as
defined in the advisory agreement). For the three months ended September 30, 2011 and 2010, the
Advisor earned $0.4 million and $0.4 million, respectively of asset management fees, which were
expensed and included in asset management fees in our condensed consolidated statement of
operations. For the nine months ended September 30, 2011 and 2010, the Advisor earned $1.2 million
and $1.1 million, respectively of asset management fees, which were expensed and included in asset
management fees in our condensed consolidated statement of operations. On August 31, 2011, we
amended the advisory agreement to provide that, beginning on October 1, 2011, the asset management
fee payable by us to our Advisor shall be reduced to a monthly rate of one-twelfth of 0.75% of our
Average Invested Assets, as defined above.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In addition, we reimburse the Advisor for the direct and indirect costs and expenses incurred by
the Advisor in providing asset management services to us, including personnel and related
employment costs related to providing asset management services on our behalf. These fees and
expenses are in addition to management fees that we pay to third party property managers. For the
three months ended September 30, 2011 and 2010, the Advisor reimbursed $44,000 and $45,000,
respectively, of such direct and indirect costs and expenses on our behalf, which are included in
asset management fees and expenses in our condensed consolidated statement of operations. For the
nine months ended September 30, 2011 and 2010, the Advisor earned $129,000 and $124,000,
respectively, of such direct and indirect costs and expenses on our behalf, which are included in
asset management fees and expenses in our condensed consolidated statement of operations.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Operating Expenses</u>. The advisory agreement provides for reimbursement of the Advisor’s
direct and indirect costs of providing administrative and management services to us. For the three
months ended September 30, 2011 and 2010, $0.2 million and $0.3 million of such costs were
reimbursed and are included in general and administrative expenses in our condensed consolidated
statement of operations, respectively. For the nine months ended September 30, 2011 and 2010, $0.7
million and $0.8 million of such costs, respectively, were reimbursed and are included in general
and administrative expenses in our condensed consolidated statement of operations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">
Pursuant to provisions contained in our charter and in our amended and restated advisory agreement with our Advisor, our
board of directors has the ongoing responsibility of limiting our total operating expenses for the trailing four
consecutive quarters to amounts that do not exceed the greater of 2% of our average invested assets or 25% of our net
income, calculated in the manner set forth in our charter, unless a majority of the directors (including a majority of the
independent directors) has made a finding that, based on unusual and non-recurring factors that they deem sufficient, a higher
level of expenses is justified (the “2%/25% Test”). In the event that a majority of the directors (including a majority of the
independent directors) does not determine that such excess expenses are justified, our Advisor must reimburse to us the amount
of the excess expenses paid or incurred (the “Excess Amount”).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">
As previously disclosed, for the periods ended March 31, 2011 and June 30, 2011 our board of directors conditioned
its findings that Excess Amounts for such periods were justified upon the Advisor agreeing to carry over such Excess
Amounts and include them in total operating expenses in subsequent periods, with any waiver of such amounts being dependent
on our Advisor’s satisfactory progress with respect to executing the strategic alternative to be chosen by the independent
directors. Accordingly, for the five-fiscal-quarter period ended June 30, 2011, our total operating expenses exceeded the
greater of 2% of our average invested assets and 25% of our net income. We incurred operating expenses of
approximately $5.0 million and incurred an Excess Amount of approximately $1.3 million during the five quarters
ended June 30, 2011, which has been carried over and included in the total operating expenses for the current period
for the purpose of the 2%/25% Test.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">
For the six-fiscal-quarter period ended September 30, 2011, our total operating expenses again exceeded the greater
of 2% of our average invested assets and 25% of our net income. We incurred operating expenses of approximately $6.1 million
and incurred an Excess Amount of approximately $1.7 million during the six quarters ended September 30, 2011. Our board of
directors (including a majority of our independent directors) has determined that this Excess Amount is justified as unusual
because of our small size (for a public reporting company) and non-recurring because of (i) the Advisor’s current progress
toward developing strategic alternatives for consideration by the independent directors, and (ii) the recent amendment to the
advisory agreement to reduce asset management fees payable to the Advisor. However, notwithstanding such justification, and as a
condition to such justification, the Advisor has again agreed that the Excess Amount the six-fiscal-quarter period ended
September 30, 2011 shall be carried over and included in total operating expenses in subsequent periods, with any
waiver dependent on our Advisor’s satisfactory progress with respect to executing the strategic alternative to be
chosen by the independent directors.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Property Management Fees.</u> The advisory agreement provides that if we retain our Advisor or
an affiliate to manage and lease some of our properties, we will pay a market-based property
management fee or property leasing fee, which may include reimbursement of our Advisor’s or
affiliate’s personnel costs and other costs of managing the properties. For the three months ended
September 30, 2011 and 2010, the Advisor earned $2,000 and $8,000, respectively, of such property
management fees. For the nine months ended September 30, 2011 and 2010, the Advisor earned $13,000
and $20,000, respectively, of such property management fees. These costs are included in property
operations and maintenance expenses in our condensed consolidated statements of operations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Disposition
Fee</u>. Prior to the second amendment to the Amended and Restated
Advisory Agreement executed on November 11, 2011, the advisory agreement provided that if the Advisor or its affiliates
provide a substantial amount of the services (as determined by a majority of our directors,
including a majority of our independent directors) in connection with the sale of one or more
properties, we will pay the Advisor or such affiliate a disposition fee up to 3% of the sales price
of such property or properties upon closing. This disposition fee may be paid in addition to real
estate commissions paid to non-affiliates, provided that the total real estate commissions
(including such disposition fee) paid to all persons by us for each property shall not exceed an
amount equal to the lesser of (i) 6% of the aggregate contract sales price of each property or (ii)
the competitive real estate commission for each property. We will pay the disposition fees for a
property at the time the property is sold. For the three and nine months ended September 30, 2011,
the Advisor earned $94,000 of disposition fees. We did not incur any
such fees in 2010. Subsequent to November 11, 2011, the disposition
fee was changed from up to 3% of the sales price of properties sold
to up to 1% of the sales price of properties sold if the Advisor or
its affiliates provide a substantial amount of the services (as
determined by a majority of our directors, including a majority of
our independent directors).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Subordinated Participation Provisions</u>. The Advisor is entitled to receive a subordinated
participation upon the sale of our properties, listing of our common stock or termination of the
Advisor, as follows:
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" style="background: transparent"> </td>
<td width="2%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>After stockholders have received cumulative distributions equal to $8.00 per share
(less any returns of capital) plus cumulative, non-compounded annual returns on net
invested capital, the Advisor will be paid a subordinated participation in net sales
proceeds ranging from a low of 5% of net sales proceeds provided investors have earned
annualized returns of 6% to a high of 15% of net sales proceeds if investors have earned
annualized returns of 10% or more.</td>
</tr>
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div style="margin-top: 6pt">
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" style="background: transparent"> </td>
<td width="2%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>Upon termination of the advisory agreement, the Advisor will receive the subordinated
performance fee due upon termination. This fee ranges from a low of 5% of the amount by
which the sum of the appraised value
of our assets minus our liabilities on the date the advisory agreement is terminated plus
total distributions (other than stock distributions) paid prior to termination of the
advisory agreement exceeds the amount of invested capital plus annualized returns of 6%, to a
high of 15% of the amount by which the sum of the appraised value of our assets minus our
liabilities plus all prior distributions (other than stock distributions) exceeds the amount
of invested capital plus annualized returns of 10% or more.</td>
</tr>
</table>
</div>
<div style="margin-top: 6pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="3%" style="background: transparent"> </td>
<td width="2%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td>In the event we list our stock for trading, the Advisor will receive a subordinated
incentive listing fee instead of a subordinated participation in net sales proceeds. This
fee ranges from a low of 5% of the amount by which the market value of our common stock
plus all prior distributions (other than stock distributions) exceeds the amount of
invested capital plus annualized returns of 6%, to a high of 15% of the amount by which the
sum of the market value of our common stock plus all prior distributions (other than stock
distributions) exceeds the amount of invested capital plus annualized returns of 10% or
more.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Dealer Manager Agreement</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">PCC, as dealer manager, is entitled to receive sales commissions of up to 7% of gross proceeds from
sales of our initial and follow-on offerings. PCC, as dealer manager, is also entitled to receive a
dealer manager fee equal to up to 3% of gross proceeds from sales of our primary or follow-on
offerings. The dealer manager is also entitled to receive a reimbursement of bona fide due
diligence expenses up to 0.5% of the gross proceeds from sales of our primary and follow-on
offerings. The advisory agreement requires the Advisor to reimburse us to the extent that offering
expenses including sales commissions, dealer manager fees and organization and offering expenses
(but excluding acquisition fees and acquisition expenses discussed above) are in excess of 13.5% of
gross proceeds from our offerings. For the three months ended September 30, 2011 and 2010, our
dealer manager earned sales commissions and dealer manager fees of $0 and $6,000, respectively. For
the nine months ended September 30, 2011 and 2010, our dealer manager earned sales commissions and
dealer manager fees of approximately $0 and $0.1 million, respectively. Dealer manager fees and
sales commissions paid to PCC are a cost of capital raised and, as such, are included as a
reduction of additional paid-in capital in the accompanying condensed consolidated balance sheets.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>13. Notes Payable</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We have total debt obligations of $27.0 million, including $3.2 million classified as liabilities
associated with real estate held for sale, that will mature in
December 2011, February 2012, and November 2014. We
are pursuing options for restructuring these debts and other repayment alternatives, including
asset sales, sourcing additional equity capital and obtaining new financing that will reposition
the assets. However, there can be no assurance that we will be successful in executing such debt
restructuring or repayment options. If we are unable to obtain alternative financing or sell
properties in order to repay the debt, this could result in the lenders foreclosing on properties.
Based on the various options available to us and ongoing discussions with our lenders, management
believes that we will be able to meet or successfully restructure our debt obligations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In connection with our notes payable, we incurred financing costs totaling $0.7 million and $2.0
million, as of September 30, 2011 and December 31, 2010, respectively. These financing costs have
been capitalized and are being amortized over the life of the agreements. For the three months
ended September 30, 2011 and 2010, $0.2 million and $0.1 million, respectively, of deferred
financing costs were amortized and included in interest expense in the condensed consolidated
statements of operations. For the nine months ended September 30, 2011 and 2010, $0.4 million and
$0.2 million, respectively, of deferred financing costs were amortized and included in interest
expense in the condensed consolidated statements of operations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>HSH Nordbank AG</b></u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We have amended our credit agreement with HSH Nordbank AG, New York Branch (“HSH Nordbank”) in a
series of amendments extending the credit facility maturity date from September 20, 2010 to
December 16, 2011. As a part of these amendments, we made a principal reduction payment and paid
extension fees.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The July 2011 amendment to this credit agreement extended the maturity date from September 30, 2011
to December 16, 2011 and increased the margin spread over LIBOR from a range of 350 to 375 basis
points to a fixed 375 basis points from June 1, 2011 to September 30, 2011 and to 400 basis points
from October 1, 2011 to the
maturity date. Additionally, this amendment eliminated our requirement
to make principal reduction payments of $0.3 million in July, August, and September 2011,
respectively. We may not draw additional funds under this credit
agreement. In connection with this extension and the sale of the Goldenwest property (See Note 15),
we made a principal payment of approximately $7.8 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of September 30, 2011 and December 31, 2010, the outstanding principal amount of our obligations
under the credit agreement was approximately $5.0 million and $13.1 million, respectively. The
weighted average interest rate as of September 30, 2011 and December 31, 2010 was 3.79% and 2.11%,
respectively. The facility contains various covenants including financial covenants with respect to
consolidated interest and fixed charge coverage and secured debt to secured asset value. As of
September 30, 2011, we were not in compliance with the financial
covenant pertaining to the maintenance of minimum occupancy levels. This loan was repaid in
its entirety on November 28, 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>Wells Fargo Bank, National Association</b></u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On November 13, 2007, we entered into a loan agreement with Wells Fargo Bank, National Association
(“Wells Fargo Bank”), successor by merger to Wachovia Bank, N.A to facilitate the acquisition of
properties during our offering period. Through a series of amendments, we have extended the
maturity date from November 13, 2010 to February 13, 2012.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In connection with our most recent amendment on August 12, 2011, the 2111 South Industrial Park and
Shoemaker Industrial buildings were added to the loan collateral, and we made a principal payment
of $0.5 million. The terms of the amended loan provide for two one-year extensions, subject to
meeting certain loan-to-value and debt service coverage ratios and require monthly principal
payments. Interest on the amended loan increased to 300 basis points over the one-month LIBOR with
a 150 basis point LIBOR floor.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As of September 30, 2011 and December 31, 2010, we had net borrowings of $15.3 million and $15.9
million under the loan agreement, respectively. The weighted average interest rate as of September
30, 2011 and December 31, 2010 was 1.92% and 1.66%, respectively. This loan agreement contains
various reporting covenants including providing periodic balance sheets, statements of income and
expenses of borrower and each guarantor, statements of income and expenses and changes in financial
position of each secured property and cash flow statements of borrower and each guarantor. As of
September 30, 2011, we were in compliance with all financial covenants.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><u><b>Transamerica Life Insurance Company</b></u>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In connection with our acquisition of Monroe North Commerce Center, on April 17, 2008, we entered
into an assumption and amendment of note, mortgage and other loan documents (the “Loan Assumption
Agreement”) with Transamerica Life Insurance Company (“Transamerica”). Pursuant to the Loan
Assumption Agreement, we assumed the outstanding principal balance of approximately $7.4 million on
the Transamerica secured mortgage loan. The loan matures on November 1, 2014 and bears interest at
a fixed rate of 5.89% per annum. As of September 30, 2011 and December 31, 2010, we had an
outstanding balance of $6.7 million and $6.9 million, respectively, under this loan agreement. This
Loan Assumption Agreement contains various reporting covenants including an annual income
statement, rent roll, operating budget and a narrative summary of leasing prospects for vacant
spaces. As of September 30, 2011, we were in compliance with all these reporting covenants. The
monthly payment on this loan is approximately $50,370. During each of the three months ended
September 30, 2011 and 2010, we incurred $0.1 million of interest expense related to this loan
agreement. During each of the nine months ended September 30, 2011 and 2010, we incurred $0.3
million of interest expense related to this loan agreement.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The principal payments due on the Monroe North Commerce Center mortgage loan for October 1, 2011 to
December 31, 2011 and each of the subsequent years are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Year</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Principal amount</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">October 1, 2011 to December 31, 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">35,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">217,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">230,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">6,234,000</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
</div>
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>14. Commitments and Contingencies</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We monitor our properties for the presence of hazardous or toxic substances. While there can be no
assurance that a material environmental liability does not exist, we are not currently aware of any
environmental liability with respect to the properties that would have a material effect on our
condensed consolidated financial condition, results of operations and cash flows. Further, we are
not aware of any environmental liability or any unasserted claim or assessment with respect to an
environmental liability that we believe would require additional disclosure or the recording of a
loss contingency.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Our commitments and contingencies include the usual obligations of real estate owners and operators
in the normal course of business. In the opinion of management, these matters are not expected to
have a material impact on our condensed consolidated financial condition, results of operations and
cash flows. We are also subject to contingent losses related to the notes receivable and note
receivable from related party. For further details see Notes 7 and 8. We are not presently subject
to any material litigation nor, to our knowledge, any material litigation threatened against us
which if determined unfavorably to us would have a material effect on our condensed
consolidated financial condition, results of operations and cash flows.
</div>
</div>
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<!-- Begin Block Tagged Note 15 - us-gaap:DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>15. Discontinued Operations</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Divestitures</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with FASB ASC 360-10, <i>Property, Plant & Equipment</i>, we report results of operations
from real estate assets that meet the definition of a component of an entity that have been sold,
or meet the criteria to be classified as held for sale, as discontinued operations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On June 14, 2011, our wholly-owned subsidiary sold the Goldenwest property to Westminster
Redevelopment Agency, a non-related party, for a purchase price of approximately $9.4 million.
Goldenwest is a 102,200 square foot industrial building situated on 5.4 acres of land in
Westminster, CA. Approximately $7.8 million in proceeds from the sale were used to pay down a
portion of the HSH Nordbank credit facility. The operations of Goldenwest, including an impairment
charge of $2.1 million recorded in the second quarter of 2011, are presented as loss from
discontinued operations on our condensed consolidated statement of operations. Prior year results
of operations have been reclassified to discontinued operations.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Real Estate Held for Sale</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2011, our board of directors authorized us to actively market the Mack
Deer Valley, Pinnacle Park Business Center, and 2111 South Industrial Park properties for sale.
The 2111 South Industrial Park property is currently in escrow and
the sale is expected to close on or before December 21, 2011. The
Pinnacle Park Business Center and Mack Deer Valley properties were
sold on November 28, 2011 for proceeds of $23.9 million. The assets and liabilities of properties for which we have initiated plans to sell, but
have not yet sold as of September 30, 2011, have been classified as real estate held for sale and
liabilities associated with real estate held for sale on the accompanying condensed consolidated
balance sheets. As of September 30, 2011, this represents the assets and liabilities of the three
properties noted above. The results of operations for the above properties have been presented in
discontinued operations on the accompanying condensed consolidated statements of operations for all
periods presented.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following is a summary of the components of income / (loss) from discontinued operations for
the three and nine months ended September 30, 2011 and 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Nine Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Rental revenues, tenant reimbursements and other income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">677,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">967,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,427,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,245,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Operating expenses, real estate taxes, and interest expense
</div></td>
<td> </td>
<td> </td>
<td align="right">239,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">367,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">996,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">956,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">381,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">476,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">974,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Impairment of real estate
</div></td>
<td> </td>
<td> </td>
<td align="right">153,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">19,332,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Income (loss) from discontinued operations
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">285,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">219,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(18,377,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">1,315,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">FASB ASC 360-10 requires that assets classified as held for sale be carried at the lesser of
their carrying amount or fair value less selling costs. Consequently, we recorded an impairment
charge of $19.2 million, classified as income (loss) from discontinued operations, in the second
quarter of 2011 to reduce the carrying value of those properties.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of these
properties was derived using an income approach utilizing our internal estimate of market-based leasing projections for each
property and discount and capitalization rates derived from market surveys (see Note 4).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In the third quarter of 2011, we recorded an impairment charge of $0.1 million, classified as
income (loss) from discontinued operations, to adjust the 2111 South Industrial Park property to
its estimated fair value, net of estimated selling costs. The fair value of this property was
derived from a recent offer received on the property.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table presents balance sheet information for the properties classified as held for
sale on September 30, 2011. No properties were classified as held for sale as of December 31, 2010.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Investments in real estate:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Land
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">7,865,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Buildings and improvements, net
</div></td>
<td> </td>
<td> </td>
<td align="right">16,283,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Intangible lease assets, net
</div></td>
<td> </td>
<td> </td>
<td align="right">217,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Real estate held for sale, net
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">24,365,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other assets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Tenant and other receivables, net
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">259,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">6,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Leasing commissions, net
</div></td>
<td> </td>
<td> </td>
<td align="right">100,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Non-real estate assets associated with real estate held for sale
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">365,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total assets
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">24,731,000</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Liabilities:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Accounts payable and accrued liabilities
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">49,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Real estate taxes payable
</div></td>
<td> </td>
<td> </td>
<td align="right">369,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Tenant security deposits
</div></td>
<td> </td>
<td> </td>
<td align="right">195,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Intangible lease liabilities, net
</div></td>
<td> </td>
<td> </td>
<td align="right">27,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Loan payable
</div></td>
<td> </td>
<td> </td>
<td align="right">3,199,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Liabilities associated with properties held for sale
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">3,839,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 16 - us-gaap:SegmentReportingDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>16. Segment Reporting</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Prior to the third quarter of 2011, we operated in one reportable segment: industrial. As of
September 30, 2011, we operated in two reportable business segments for management and internal
financial reporting purposes: industrial and senior housing. These operating segments are the
segments for which separate financial information is available and for which operating results are
evaluated regularly by the chief operating decision maker in deciding how to allocate resources and
in assessing performance. Our senior housing segment consists solely of the operations of the
Sherburne Commons property, a senior-living facility owned by Nantucket Acquisition LLC and a VIE
that we consolidated on June 30, 2011 as a result of our becoming the primary beneficiary of
the entity (see Note 9). Our industrial segment consists of 12 multi-tenant industrial properties,
including the properties held for sale, offering a combination of warehouse and office space
adaptable to a broad range of tenants and uses typically catering to local and regional businesses.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">We evaluate performance of the combined properties in each segment based on net operating income.
Net operating income is defined as total revenue less property operating and maintenance expenses.
There were no intersegment transactions in the third quarter of 2011 as we record interest income
from the Sherburne Commons note on a cash basis (see Note 8). We believe net operating income is
useful to investors in understanding the value of income producing real estate property. We use net
operating income to evaluate the operating performance of our real estate investments and to make
decisions concerning the operations of each property. Net income is the GAAP measure that is most
directly comparable to net operating income; however, net operating income should not be considered
an alternative to net income as the primary indicator of operating performance as it excludes
certain items such as interest income from notes receivable, depreciation and amortization, asset
management fees and expenses, real estate acquisition costs, interest expense and general and
administrative expenses. Additionally, net operating income, as we define it, may not be comparable
to net operating income as defined by other REITs or companies.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables reconcile the segment activity to consolidated net income for the three and
nine months ended September 30, 2011. We operated in a single reportable segment in 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Three Months Ended September 30, 2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Senior</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Industrial</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Housing</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Consolidated</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Rental revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">849,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">849,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Resident services and fee income
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">639,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">639,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Tenant reimbursements and other
income
</div></td>
<td> </td>
<td> </td>
<td align="right">204,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">204,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">1,053,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">639,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,692,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Property operating and maintenance
expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">428,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">648,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,076,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net operating income (loss)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">625,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(9,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">616,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">General and administrative expenses
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">713,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Asset management fees and expenses
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">403,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Real estate acquisition costs
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">494,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Impairment of real estate
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">425,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest (income) on notes receivable (1)
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(102,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest expense
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">452,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Income from discontinued operations
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(285,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,484,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Noncontrolling interests’ share of loss
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">352,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss applicable to common shares
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,132,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>Interest income on notes receivable is not allocated to a reportable segment</td>
</tr>
</table>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="64%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Nine Months Ended September 30, 2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Senior</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Industrial</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Housing</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Consolidated</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Rental revenues
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,640,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,640,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Resident services and fee income
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">639,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">639,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Tenant reimbursements and other income
</div></td>
<td> </td>
<td> </td>
<td align="right">669,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">669,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">3,309,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">639,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,948,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Property operating and maintenance
expenses
</div></td>
<td> </td>
<td> </td>
<td align="right">1,247,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">648,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,895,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net operating income (loss)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,062,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(9,000</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">2,053,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">General and administrative expenses
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,083,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Asset management fees and expenses
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,230,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Real estate acquisition costs
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation and amortization
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,567,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Impairment of notes receivable
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,650,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Impairment of real estate
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,644,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest (income) on notes receivable (1)
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(366,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest expense
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,063,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Loss from discontinued operations
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,377,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(47,195,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Noncontrolling interests’ share of loss
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">404,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net loss applicable to common shares
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(46,791,000</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>Interest income on notes receivable is not allocated to a
reportable segment</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table reconciles the segment activity to consolidated financial position as of
September 30, 2011. As we had only one reportable segment in 2010, that period is excluded from the
table.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="88%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>September 30, 2011</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Assets:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Investments in real estate:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Industrial
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">69,863,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Senior housing
</div></td>
<td> </td>
<td> </td>
<td align="right">9,810,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total reportable segments
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">79,673,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Reconciliation to consolidated assets:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Cash and cash equivalents
</div></td>
<td> </td>
<td> </td>
<td align="right">439,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Tenant and other receivables, net
</div></td>
<td> </td>
<td> </td>
<td align="right">449,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Note receivables, net
</div></td>
<td> </td>
<td> </td>
<td align="right">2,200,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Deferred financing costs, net
</div></td>
<td> </td>
<td> </td>
<td align="right">297,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Non-real estate assets held for sale, net
</div></td>
<td> </td>
<td> </td>
<td align="right">365,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Other assets
</div></td>
<td> </td>
<td> </td>
<td align="right">522,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px"><b>Total assets</b>
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">83,945,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:30px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 17 - us-gaap:SubsequentEventsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>17. Subsequent Events</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Other than
the purchase and sale agreement entered into for the sale of the 2111 South Industrial
Park property and the sale of the Mack Deer Valley and Pinnacle Park Business
Center properties (discussed in Notes 4 and 15), and the amendment to the
Amended and Restated Advisory Agreement (discussed in Note 12), no significant events have occurred subsequent to our balance
sheet date that require further disclosure or adjustment to our balances.
</div>
</div>
0
435000
0
196000
0
10082000
0
76000
8263000
0
9810000
0
1993000
0
1332000
10069000
0
99000
1806000
0
127000