Exhibit 99.3

 

 

 

Supplemental Financial Information

Second Quarter 2013, Unaudited

August 5, 2013

---

Cole Real Estate Investments, Inc.

(f/k/a Cole Credit Property Trust III, Inc.)

Supplemental Unaudited Operating and Financial Data

As of and for the three months ended June 30, 2013

 

Highlights			3
Financial Information
Condensed Consolidated Unaudited Balance Sheets			8
Condensed Consolidated Unaudited Statements of Operations			9
Financial and Operational Statistics			10
Segment Reporting			11
Reconciliation of GAAP Net Income to Normalized EBITDA			12
Reconciliation of GAAP Net Income to FFO and AFFO			13
Adjusted G&A			15
Debt Overview			16
Real Estate Investment
Real Estate Portfolio Diversification			17
Same Store Summary			18
Tenant Diversification			19
Industry Diversification			21
Geographic Diversification			22
Lease Expirations			24
Multi-Tenant Property Summary			25
Unconsolidated Joint Venture Investment Summary			28
Private Capital Management
Managed Programs			29
Terms and Definitions			32

 

2

---

Cole Real Estate Investments Announces Record Second Quarter 2013 Financial Results

Increasing the Dividend and Increasing Second Half 2013 Guidance

PHOENIX, August 5, 2013 – Cole Real Estate Investments, Inc. (NYSE: COLE), a market-leading net lease REIT, today announced record financial results for the second quarter ended June 30, 2013.

Second Quarter 2013 Consolidated Highlights

 

•

NYSE Listing – Shares began trading on the NYSE on June 20, 2013 and received early inclusion in the MSCI U.S. REIT Index (RMS/RMZ) on July 3, 2013

 

•

Record Operating Results – Reported consolidated revenue of $250.3 million and net income of $29.1 million, a 91% and 26% year-over-year increase from the second quarter of 2012, respectively

 

•

Record AFFO – Reported consolidated AFFO of $0.23 per diluted share, a 44% year-over-year increase from the second quarter of 2012, which includes $0.03 per diluted share from the private capital management segment

 

•

Accretive Acquisitions – $266 million was acquired in the second quarter 2013 with a weighted average annual lease yield of 7.7% and $1.3 billion of assets were acquired over the past four quarters with a weighted average annual lease yield of 7.8%

 

•

Robust Private Capital Flows – $508 million of capital was raised on behalf of our managed REITs in the second quarter 2013 and also achieved a record-breaking month of $509 million of capital raised during July

 

•

Increased Guidance – 10% increase in second half AFFO guidance to the new range of $0.42 to $0.47 per diluted share

 

•

Increased Dividends – Increased the annual distribution rate to $0.72 from $0.70 per share effective with the August dividend payable September 3, 2013, which represents an 11% increase over the past two quarters

 

•

Tender Offer – Commenced a modified “Dutch auction” tender offer to purchase $250 million of shares currently scheduled to expire on August 8, 2013

 

•

Share Repurchase Program – Authorized to repurchase up to $250 million of shares in the open market starting on the 11th business day following completion of the tender offer

Real Estate Investment Segment Highlights

 

•

Revenue and net income of $167.6 million and $19.9 million, respectively

 

•

AFFO of $0.20 per diluted share, an increase of 25% over the second quarter of 2012

 

•

Normalized EBITDA of $139.3 million, an increase of 27% over the second quarter of 2012

 

•

Acquired six properties with a weighted average annual lease yield of 7.7% and generated an 18% net gain on five properties sold at a weighted average annual lease yield of 7.5%

 

•

Increased the unsecured credit facility to $1.4 billion from $858 million, extended the term of the revolving loans to June 2017 and the term loan to June 2018 and decreased the weighted average interest rate to 2.9% from 3.0%

 

•

Total portfolio occupancy of 99.1%, investment grade tenancy of 55%, and a weighted average remaining lease term of 12.2 years as of June 30, 2013

-more-

 

3

---

Private Capital Management Segment Highlights

 

•

Revenue and net income of $82.6 million and $9.2 million, respectively

 

•

AFFO of $0.03 per diluted share and Normalized EBITDA of $15.1 million

 

•

Structured $1.1 billion of real estate acquisitions and $422 million of real estate financing on behalf of the managed REITs in the second quarter 2013

 

•

Merger between Cole Credit Property Trust II, Inc. (“CCPT II”) and Spirit Realty Capital, Inc. (NYSE Ticker: SRC) completed on July 17, 2013

 

•

Cole Corporate Income Trust, Inc. (“CCIT”) announced the close of its offering on September 30, 2013 and CCIT’s Board of Directors has determined to begin the evaluation of potential strategies to provide CCIT stockholders with liquidity

Second Quarter 2013 Financial Results

Revenue

Consolidated revenue for the quarter ended June 30, 2013 increased 91% to $250.3 million, as compared to $131.4 million for the same quarter in 2012. This increase was due to an increase in revenue from the Real Estate Investment segment and the inclusion of revenue from the Private Capital Management segment, which was acquired on April 5, 2013.

Revenue for the Real Estate Investment segment for the quarter ended June 30, 2013 increased 28% to $167.6 million, as compared to $131.4 million for the same quarter in 2012. This increase was primarily due to a $1.0 billion increase in the average gross real estate assets net of gross intangible lease liabilities we owned, for the three months ended June 30, 2013, compared to the three months ended June 30, 2012. In addition, “same store” base rental revenue increased by 1.1% as compared to the year-ago quarter. Revenue for the Private Capital Management segment for the quarter ended June 30, 2013 was $82.6 million before reallowed fees and commissions.

 

4

---

Normalized EBITDA

Consolidated Normalized EBITDA increased 40% to $154.3 million for the quarter ended June 30, 2013, compared to $110.0 million for the same quarter in 2012. Normalized EBITDA for the Real Estate Investment segment increased 27% to $139.3 million for the quarter ended June 30, 2013, compared to $110.0 million for the year-ago quarter. Normalized EBITDA for the Private Capital Management segment was $15.0 million for the quarter ended June 30, 2013.

Net Income

Net income increased 26% to $29.1 million for the quarter ended June 30, 2013, compared to $23.1 million for the same quarter in 2012.

FFO and FFO per diluted share

Funds from Operations (FFO) for the quarter ended June 30, 2013, increased 17% to $76.2 million, or $0.16 per diluted share, as compared to $65.0 million, or $0.14 per diluted share, for the same quarter in 2012.

AFFO and AFFO per diluted share

Adjusted Funds from Operations (AFFO) for the quarter ended June 30, 2013, increased 44% to $110.8 million, or $0.23 per diluted share, as compared to $76.8 million, or $0.16 per diluted share, for the same quarter in 2012. AFFO for the Real Estate Investment segment increased 25% to $95.7 million, or $0.20 per diluted share for the quarter ended June 30, 2013, compared to $76.8 million, or $0.16 per diluted share, for the year-ago quarter. AFFO for the Private Capital Management segment was $15.1 million, or $0.03 per diluted share, for the quarter ended June 30, 2013.

Balance Sheet

As of June 30, 2013, Cole had total assets of $7.9 billion, unrestricted cash and cash equivalents of $167.5 million, total debt of $3.5 billion and $566.2 million available for borrowing under its senior unsecured credit facility. The leverage ratio of total debt to gross real estate and related assets was 47% and net debt, which represents total debt less cash, to annualized Normalized EBITDA was 5.4x.

During the second quarter, the Company increased the size of its senior unsecured credit facility to $1.4 billion from $858 million, extended the term of the revolving loans to June 2017 and the term loan to June 2018, while also decreasing the weighted average interest rate to 2.9% from 3.0%.

Tender Offer

On June 20, 2013, Cole commenced a modified “Dutch auction” tender offer to purchase for cash up to $250 million of shares of common stock on the terms and subject to the conditions described in its Offer to Purchase of that date. The tender offer and withdrawal rights will expire at 5:00 p.m. Eastern on August 8, 2013.

Increased Distributions

On August 2, 2013, Cole’s Board of Directors increased the amounts of the previously declared monthly dividends for August and September to $0.06 per share, representing an increase in the annual distribution rate to $0.72 from $0.70 per share. As previously announced, these dividends will be paid to stockholders of record as of August 30 and September 30, 2013, respectively, and the payments dates will be September 3 and October 1, 2013, respectively. The Board also declared a monthly dividend in the amount of $0.06 per share for the month of October 2013, which will be payable on November 1, 2013 to stockholders of record as of October 31, 2013.

 

5

---

Increased Second Half 2013 Guidance

The Company increased its guidance for the second half, as follows:

 

•

Total revenue guidance increased by 18% to the range of $557 million to $585 million and is comprised of:

 

•

Real Estate Investment segment revenue in the range of $327 million to $335 million

 

•

Private Capital Management segment revenue (on a gross basis before reallowed fees and commissions) in the range of $230 million to $250 million

 

•

Normalized EBITDA guidance increased by 11% to the range of $297 million to $324 million

 

•

AFFO per diluted share guidance increased by 10% to the range of $0.42 to $0.47

Business Segment Descriptions

Real Estate Investment

As of June 30, 2013, the Company owned 1,014 properties in 48 states with 44.0 million rentable square feet, including properties owned through Consolidated Joint Ventures. Property types owned include single and multi-tenant retail, single tenant office and single tenant industrial. The Company also owned 21 CMBS bonds and three notes receivable and had interests in 12 properties with 2.3 million rentable square feet of commercial and retail space through Unconsolidated Joint Ventures. Total gross asset value of the portfolio was $7.5 billion.

During the second quarter of 2013, the Company acquired six properties for an aggregate purchase price of $266 million, which included one property acquired through a joint venture arrangement.

Also during the second quarter, the Company sold five properties for an aggregate sale price of $31.5 million, recognizing a $4.9 million gain on sale during the second quarter of 2013.

Private Capital Management

As of June 30, 2013, the Company through subsidiaries, collectively known as Cole Capital^™, was the advisor to five publicly registered, non-listed REITs (“managed REITs”), for which it provides capital raising, acquisition, financing, leasing, asset management and shareholder services. As of June 30, 2013 the managed REITs, including CCPT II, owned 1,096 properties, with 37.0 million rentable square feet of single and multi-tenant retail and commercial space, representing $6.5 billion in gross real estate assets. Of the managed REITs properties, CCPT II owned 747 properties with 21.1 million square feet, representing $3.5 billion in gross real estate assets. On July 17, 2013, the merger of CCPT II and Spirit Realty Capital, Inc. was completed.

 

6

---

About Cole Real Estate Investments, Inc.

Cole is a real estate investment trust that owns and operates a diversified portfolio of core commercial real estate investments primarily consisting of 1,014 necessity retail, office and industrial properties located throughout the United States. Cole’s portfolio comprises more than 44.0 million square feet of rentable space located in 48 states, including properties owned through consolidated joint venture arrangements. As of June 30, 2013, the rentable space at these properties was 99.1% leased and the weighted average remaining lease term was 12.2 years. As of June 30, 2013, the Company also owned 21 CMBS and three notes receivable. In addition, through unconsolidated joint venture arrangements, as of June 30, 2013, the Company had interests in 12 properties comprising 2.3 million rentable square feet of commercial and retail space.

As of June 30, 2013, the Company was the advisor to Cole Credit Property Trust, Inc. (“CCPT”), CCPT II, Cole Credit Property Trust IV, Inc. (“CCPT IV”), CCIT and Cole Real Estate Income Strategy (Daily NAV), Inc. (“INAV”, collectively with CCPT, CCPT II, CCPT IV and CCIT, the “Managed REITs”). In addition, the Company sponsored 1031 programs and performs property management services for the related properties (collectively, with the Managed REITs, the “Managed Programs”). As of June 30, 2013, the Managed Programs owned 1,096 properties, comprising 37.0 million rentable square feet of single and multi-tenant retail and commercial space. As of June 30, 2013, the rentable space at these properties was 97.5% leased.

Contact for Cole Real Estate Investments, Inc.

 

Stephan Keller		Aaron Halfacre, CFA		Jessica Thorsheim
Executive Vice President, CFO		Head of Strategic Relations		Director, Investor Relations

Our Investor Relations department can be reached via telephone at (877) 405-2653 or via email at investorrelations@colereit.com.

Forward-Looking Statements

Certain statements contained in this release may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such statements include, in particular, statements about Cole’s plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of Cole’s performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Cole makes no representation or warranty (express or implied) about the accuracy of any such forward-looking statements contained in this release, and does not intend, and undertakes no obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

7

---

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS

(in thousands, except share and per share amounts)

 

		June 30, 2013				December 31, 2012
ASSETS
Investment in real estate assets:
Land		$	1,525,353			$	1,488,525
Buildings and improvements, less accumulated depreciation of $249,446 and $187,448, respectively			4,365,738				4,218,182
Acquired intangible lease assets, less accumulated amortization of $160,308 and $121,894, respectively			853,137				859,985
Total investment in real estate assets, net			6,744,228				6,566,692
Investment in notes receivable, net			90,464				90,358
Investment in marketable securities			10,499				51,103
Investment in marketable securities pledged as collateral			257,518				266,098
Investment in unconsolidated entities			94,932				96,785
Total investment in real estate assets and related assets, net			7,197,641				7,071,036
Assets related to real estate held for sale, net			—				23,153
Cash and cash equivalents			167,474				192,504
Restricted cash			25,502				18,444
Rents and tenant receivables, less allowance for doubtful accounts of $440 and $337, respectively			97,956				79,569
Intangible assets, prepaid expenses and other assets, net			104,332				11,790
Deferred financing costs, less accumulated amortization of $16,248 and $23,105, respectively			61,835				57,229
Goodwill			229,102				—
Leasehold improvements and property and equipment, net			21,295				—
Due from affiliates			8,036				—
Total assets		$	7,913,173			$	7,453,725
LIABILITIES AND EQUITY
Notes payable and other borrowings		$	3,501,428			$	3,292,048
Accounts payable and accrued expenses			58,115				42,756
Due to affiliates			—				4,525
Acquired below market lease intangibles, less accumulated amortization of $21,303 and $16,389, respectively			114,934				113,607
Distributions payable			28,501				26,399
Contingent consideration			211,143				5,341
Derivative liabilities, deferred rent and other liabilities			52,968				51,639
Total liabilities			3,967,089				3,536,315
Commitments and contingencies
Redeemable common stock			—				234,578
EQUITY:
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding			—				—
Common stock, $0.01 par value; 990,000,000 shares authorized and 489,808,175 and 479,547,099 shares outstanding, respectively			4,898				4,795
Capital in excess of par value			4,416,151				4,068,015
Accumulated distributions in excess of earnings			(510,539	)			(416,886	)
Accumulated other comprehensive income			18,856				23,101
Total stockholders’ equity			3,929,366				3,679,025
Noncontrolling interests			16,718				3,807
Total equity			3,946,084				3,682,832
Total liabilities and equity		$	7,913,173			$	7,453,725

 

8

---

COLE REAL ESTATE INVESTMENTS, INC.

(F/K/A COLE CREDIT PROPERTY TRUST III, INC.)

CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Revenues:
Real estate investment revenue		$	159,812			$	124,910			$	312,089			$	234,066
Interest income on real estate-related investments			7,837				6,452				15,785				10,241
Private capital management revenue			82,643				—				82,643				—
Total revenue			250,292				131,362				410,517				244,307
Expenses:
Reallowed fees and commissions			38,962				—				38,962				—
General and administrative expenses			41,436				4,652				45,467				8,676
Merger related stock-based compensation expense			10,278				—				10,278				—
Property operating expenses			17,507				11,543				33,129				21,298
Property and asset management expenses			1,393				10,988				15,302				21,043
Merger and acquisition related expenses			11,810				17,438				27,423				32,819
Depreciation and amortization			56,393				38,269				104,110				71,540
Total operating expenses			177,779				82,890				274,671				155,376
Operating income			72,513				48,472				135,846				88,931
Other income (expense):
Equity in income of unconsolidated entities			972				552				2,281				886
Other (expense) income			(774	)			675				(851	)			3,992
Interest expense			(48,938	)			(30,141	)			(88,007	)			(57,312	)
Total other expense			(48,740	)			(28,914	)			(86,577	)			(52,434	)
Income from continuing operations before income taxes			23,773				19,558				49,269				36,497
Benefit from income taxes			235				—				235				—
Income from continuing operations			24,008				19,558				49,504				36,497
Discontinued operations:
Income from discontinued operations			195				3,532				838				7,762
Gain on sale of real estate assets			4,931				—				19,007				14,781
Income from discontinued operations			5,126				3,532				19,845				22,543
Net income			29,134				23,090				69,349				59,040
Net income (loss) allocated to noncontrolling interests			111				(133	)			215				(120	)
Net income attributable to the Company		$	29,023			$	23,223			$	69,134			$	59,160
Basic earnings per share:
Income from continuing operations		$	0.05			$	0.04			$	0.10			$	0.08
Income from discontinued operations		$	0.01			$	0.01			$	0.04			$	0.05
Net income attributable to the Company		$	0.06			$	0.05			$	0.14			$	0.13
Diluted earnings per share:
Income from continuing operations		$	0.05			$	0.04			$	0.10			$	0.08
Income from discontinued operations		$	0.01			$	0.01			$	0.04			$	0.05
Net income attributable to the Company		$	0.06			$	0.05			$	0.14			$	0.13
Weighted average number of common shares outstanding:
Basic			487,915,368				473,159,051				484,396,906				470,033,648
Diluted			491,510,128				473,159,051				486,194,286				470,033,648
Distributions declared per common share issued		$	0.17			$	0.16			$	0.33			$	0.31

 

9

---

Financial and Operational Statistics

The following table presents certain financial and real estate portfolio information as of and for the three months ended June 30, 2013:

 

Market Capitalization
Shares outstanding (1)			489,808,175
Closing stock price		$	11.44
Market capitalization (thousands)		$	5,603,406
Total capitalization (thousands) (2)		$	9,104,834
Enterprise value (thousands) (3)		$	8,937,360
High stock close price		$	11.55
Low stock close price		$	9.85
Distributions declared per share (4)		$	0.70
Distribution yield (5)			6.1	%
Financial Ratios
Debt to enterprise value (3) (6)			39.2	%
Annualized Normalized EBITDA (thousands) (7) (8)		$	617,244
Net debt to Annualized Normalized EBITDA (7) (8) (9)			5.4
Gross real estate and related assets (thousands) (10)		$	7,462,923
Total debt to gross real estate and related assets (6) (10)			47.0	%
Unsecured debt to gross real estate and related assets (10)			9.4	%
Distribution payout (11)			76.1	%
Interest coverage ratio (7) (12)			3.15
Weighted average cost of debt (13)			4.22	%
Weighted average years to maturity of debt (13)			6.0
Owned Property Information
Number of properties			1,014
Number of tenants			567
Total square feet (thousands)			44,035
Occupancy (14)			99.1	%
Weighted average remaining lease term (years) (15)			12.2
Percent of investment grade tenants (16)			42.4	%

 

(1)	Excludes shares held in escrow as these are not considered outstanding in accordance with GAAP.

(2)	Total capitalization represents market capitalization plus notes payable and other borrowings.

(3)	Enterprise value represents total capitalization less cash and cash equivalents.

(4)	Represents the annualized distribution per share based on the distribution rate in effect as of June 30, 2013.

(5)	Annualized distributions to closing stock price.

(6)	Debt represents notes payable and other borrowings.

(7)	Normalized EBITDA is a non-GAAP measure. See the Terms and Definitions section that begins on page 32 for a description of our non-GAAP measures and page 12 for a reconciliation of net income to Normalized EBITDA.

(8)	Annualized three months ended June 30, 2013.

(9)	Net debt represents total GAAP-basis debt less cash.

(10)	Gross real estate and related assets represents total gross real estate and related assets, including investments in notes receivables, marketable securities and net investment in unconsolidated entities, net of gross intangible lease liabilities.

(11)	Computed by dividing annualized distribution per share by annualized AFFO per share.

(12)	Computed by dividing Annualized Normalized EBITDA by interest expense.

(13)

Calculated based on the Company’s total debt outstanding of $3.5 billion, which includes $700.0 million outstanding under a senior unsecured credit facility. Rates ranging from 2.44% to 3.44% were used to calculate the variable debt payment obligations in future periods. These were the rates effective as of June 30, 2013.

(14)	Percent of leasable square feet for which there is a lease in place.

(15)	Calculated using the remaining non-cancelable lease terms.

(16)	Based on annualized rental revenue from tenants with credit ratings of BBB- or higher, excluding tenants with implied investment grade ratings. Tenant credit rating may reflect the credit rating of the parent company or a guarantor.

 

10

---

Segment Reporting

The Company operates under two business segments - Real Estate Investment and Private Capital Management. The following table presents a summary of the financial results for each business segment (in thousands):

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Real Estate Investment
Rental and other property income		$	144,756			$	114,317			$	283,334			$	214,359
Tenant reimbursement income			15,056				10,593				28,755				19,707
Interest income on notes receivable			1,936				1,476				3,859				2,848
Interest income on marketable securities			5,901				4,976				11,926				7,393
Total real estate investment revenue			167,649				131,362				327,874				244,307
General and administrative expenses			12,757				4,652				16,788				8,676
Merger related stock-based compensation expense			10,278				—				10,278				—
Property operating expenses			17,507				11,543				33,129				21,298
Property and asset management expenses			1,393				10,988				15,302				21,043
Merger and acquisition related expenses			11,810				17,438				27,423				32,819
Depreciation and amortization			50,335				38,269				98,052				71,540
Total operating expenses			104,080				82,890				200,972				155,376
Total other expense (1)			(48,747	)			(28,914	)			(86,584	)			(52,434	)
Income from continuing operations			14,822				19,558				40,318				36,497
Income from discontinued operations			5,126				3,532				19,845				22,543
Net income		$	19,948			$	23,090			$	60,163			$	59,040
Private Capital Management
Dealer manager fees, selling commissions and offering reimbursements		$	51,818			$	—			$	51,818			$	—
Transaction service fees			21,509				—				21,509				—
Management fees and reimbursements			9,316				—				9,316				—
Total private capital management revenue			82,643				—				82,643				—
Reallowed fees and commissions			38,962				—				38,962				—
General and administrative expenses			28,679				—				28,679				—
Depreciation and amortization			6,058				—				6,058				—
Total operating expenses			73,699				—				73,699				—
Total other income			7				—				7				—
Benefit from income taxes (2)			235				—				235				—
Net income		$	9,186			$	—			$	9,186			$	—
Total Company
Total revenue		$	250,292			$	131,362			$	410,517			$	244,307
Total operating expenses			177,779				82,890				274,671				155,376
Total other expense, net			(48,740	)			(28,914	)			(86,577	)			(52,434	)
Benefit from income taxes			235				—				235				—
Income from continuing operations			24,008				19,558				49,504				36,497
Income from discontinued operations			5,126				3,532				19,845				22,543
Net income		$	29,134			$	23,090			$	69,349			$	59,040

 

(1)	Primarily consists of interest expense.

(2)

While most of the business activities of the Company’s Private Capital Management segment are conducted through a subsidiary of the Company that is a taxable REIT subsidiary (“TRS”), revenues and expenses recorded in the TRS for tax purposes are not the same as those included in the Private Capital Management segment in accordance with GAAP. In future periods, we expect to recognize an income tax expense, not a benefit from income taxes.

 

		Total Assets as of
		June 30, 2013				December 31, 2012
Real estate investment		$	7,546,129			$	7,453,725
Private capital management			367,044				—
Total company		$	7,913,173			$	7,453,725

 

11

---

Reconciliation of GAAP Net Income to Normalized EBITDA

The calculations of EBITDA and Normalized EBITDA, and reconciliation to net income, which is the most directly comparable GAAP financial measure, are presented in the table below (in thousands):

 

		Three Months Ended June 30, 2013												Three Months Ended June 30, 2012
		Total				Real Estate Investment				Private Capital Management				Total				Real Estate Investment				Private Capital Management
Net income attributable to the company		$	29,023			$	19,837			$	9,186			$	23,223			$	23,223			$	—
Adjustments:
Interest expense			48,938				48,938				—				28,846				28,846				—
Depreciation and amortization			56,463				50,405				6,058				41,294				41,294				—
Benefit from income taxes			(235	)			—				(235	)			—				—				—
Proportionate share of adjustments for unconsolidated joint ventures			111				111				—				(133	)			(133	)			—
EBITDA (1)			134,300				119,291				15,009				93,230				93,230				—
Management adjustments:
Gain on sale of real estate assets			(4,931	)			(4,931	)			—				(664	)			(664	)			—
Merger and acquisition related expenses			11,810				11,810				—				17,438				17,438				—
Merger related stock-based compensation expense			10,278				10,278				—				—				—				—
Listing and tender offer expenses			2,854				2,854				—				—				—				—
Total adjustments			20,011				20,011				—				16,774				16,774				—
Normalized EBITDA (1)		$	154,311			$	139,302			$	15,009			$	110,004			$	110,004			$	—

 

(1)	EBITDA and Normalized EBITDA are non-GAAP measures. See the Terms and Definitions section that begins on page 32 for a description of our non-GAAP measures.

 

12

---

Reconciliation of GAAP Net Income to

Funds from Operations and Adjusted Funds from Operations

The calculations of funds from operations (FFO) and adjusted funds from operations (AFFO), and reconciliation to net income, which is the most directly comparable GAAP financial measure, are presented in the tables below (in thousands, except share and per share amounts):

 

		Three Months Ended
		June 30, 2013				March 31, 2013				December 31, 2012				September 30, 2012				June 30, 2012
Total Company
Net income attributable to the company		$	29,023			$	40,111			$	125,611			$	18,567			$	23,223
Depreciation and amortization of real property			50,405				47,835				45,516				44,380				41,294
Depreciation and amortization of real estate assets in unconsolidated joint ventures			1,733				1,860				2,162				1,549				1,138
Net gain on sale and condemnation of real estate assets			(4,931	)			(13,953	)			(93,676	)			—				(664	)
FFO - Total Company (1)			76,230				75,853				79,613				64,496				64,991
Merger and acquisition related expenses			11,810				15,613				17,460				13,612				17,438
Merger related stock-based compensation expense			10,278				—				—				—				—
Listing and tender offering expenses			2,854				—				—				—				—
Amortization of deferred financing costs			3,958				3,753				5,477				3,859				3,379
Straight-line rent adjustments			(8,881	)			(9,688	)			(8,942	)			(8,937	)			(8,209	)
Above/below market lease intangibles amortization, net			731				888				834				535				801
Loss on derivatives and extinguishment of debt			7,782				—				3,514				9,263				—
Loss (gain) on the sale of marketable securities			1,331				—				(12,455	)			—				—
Other amortization (accretion), net (2)			4,547				(1,375	)			(1,524	)			(1,403	)			(1,190	)
Proportionate share of adjustments for unconsolidated joint ventures			121				30				(567	)			(888	)			(409	)
AFFO - Total Company (1) (3)		$	110,761			$	85,074			$	83,410			$	80,537			$	76,801
FFO per common share, basic		$	0.16			$	0.16			$	0.17			$	0.14			$	0.14
FFO per common share, diluted		$	0.16			$	0.16			$	0.17			$	0.14			$	0.14
AFFO per common share, basic		$	0.23			$	0.18			$	0.17			$	0.17			$	0.16
AFFO per common share, diluted		$	0.23			$	0.18			$	0.17			$	0.17			$	0.16
Distributions paid (including DRIP)		$	83,791			$	76,894			$	77,246			$	77,705			$	76,419
Weighted average shares outstanding, basic			487,915,368				480,819,849				478,762,187				476,353,149				473,159,051
Weighted average shares outstanding, diluted			491,510,128				480,819,849				478,762,187				476,353,149				473,159,051

 

13

---

Reconciliation of Net Income to

Funds from Operations and Adjusted Funds from Operations (Continued)

 

		Three Months Ended
		June 30, 2013				March 31, 2013				December 31, 2012				September 30, 2012				June 30, 2012
Real Estate Investment Segment
Net income attributable to the company		$	19,837			$	40,111			$	125,611			$	18,567			$	23,223
Depreciation and amortization of real property			50,405				47,835				45,516				44,380				41,294
Depreciation and amortization of real estate assets in unconsolidated joint ventures			1,733				1,860				2,162				1,549				1,138
Net gain on sale and condemnation of real estate assets			(4,931	)			(13,953	)			(93,676	)			—				(664	)
FFO - Real Estate Investment Segment (1)			67,044				75,853				79,613				64,496				64,991
Merger and acquisition related expenses			11,810				15,613				17,460				13,612				17,438
Merger related stock-based compensation expense			10,278				—				—				—				—
Listing and tender offering expenses			2,854				—				—				—				—
Amortization of deferred financing costs			3,958				3,753				5,477				3,859				3,379
Straight-line rent adjustments			(8,881	)			(9,688	)			(8,942	)			(8,937	)			(8,209	)
Above/below market lease intangibles amortization, net			731				888				834				535				801
Loss on derivatives and extinguishment of debt			7,782				—				3,514				9,263				—
Loss (gain) on the sale of marketable securities			1,331				—				(12,455	)			—				—
Other accretion, net			(1,365	)			(1,375	)			(1,524	)			(1,403	)			(1,190	)
Proportionate share of adjustments for unconsolidated joint ventures			121				30				(567	)			(888	)			(409	)
AFFO - Real Estate Investment Segment (1) (3)		$	95,663			$	85,074			$	83,410			$	80,537			$	76,801
Private Capital Management Segment
Net income attributable to the company		$	9,186			$	—			$	—			$	—			$	—
Other amortization, net			5,912				—				—				—				—
AFFO - Private Capital Management Segment (1) (3)		$	15,098			$	—			$	—			$	—			$	—

 

(1)	FFO and AFFO are non-GAAP measures. See the Terms and Definitions section that begins on page 32 for a description of our non-GAAP measures.

(2)	Primarily consists of CMBS accretion and amortization of intangible assets.

(3)

During the three months ended June 30, 2013, March 31, 2013, December 31, 2012, September 30, 2012 and June 30, 2012, the Company capitalized expenses incurred related to the ongoing maintenance of the properties, including tenant improvements and leasing commissions, of $983,000, $1.3 million, $1.4 million, $2.1 million, and $2.8 million, respectively.

 

14

---

Adjusted G&A

The following table shows information regarding the Company’s general and administrative expenses (in thousands):

 

		Three Months Ended June 30, 2013
		Total				Real Estate Investment				Private Capital Management
G&A		$	41,436			$	12,757			$	28,679
Less:
Listing and tender offer expenses			2,854				2,854				—
Expense reimbursements from managed programs			10,836				—				10,836
Adjusted G&A (1)		$	27,746			$	9,903			$	17,843

 

(1)	Adjusted G&A is a non-GAAP measure. See the Terms and Definitions section that begins on page 32 for a description of our non-GAAP measures.

 

15

---

Debt Overview

As of June 30, 2013, the Company had $3.5 billion of debt outstanding, with a weighted average years to maturity of 6.0 years and weighted average interest rate of 4.22%. The following tables show certain information regarding the Company’s debt, as of June 30, 2013 (in thousands):

 

		Minimum Interest Rate				Maximum Interest Rate				Weighted Average Interest Rate				Weighted Average Years to Maturity				Balance
Fixed rate debt			2.75	%			6.83	%			4.74	%			6.8			$	2,578,318
Variable rate debt			1m LIBOR + 2.25	%			1m LIBOR + 3.25	%			3.01	%			3.0				96,843
Construction facilities			1m LIBOR + 2.35	%			1m LIBOR + 2.35	%			2.54	%			0.5				26,752
Credit facility - term loan			3.30	%			3.30	%			3.30	%			4.9				500,000
Credit facility - revolving line of credit			1m LIBOR + 1.65	%			1m LIBOR + 2.25	%			1.92	%			3.9				200,000
Repurchase agreements			3m LIBOR + 1.20	%			3m LIBOR + 1.75	%			1.72	%			0.1				100,057
Total																		$	3,501,970

 

Year of Maturity		Balloon Payments				Amortizing Principal Payments				Debt Maturity
Remaining 2013		$	126,809			$	1,146			$	127,955
2014			51,809				2,338				54,147
2015			174,000				3,191				177,191
2016			162,836				5,892				168,728
2017			387,089				6,064				393,153
2018			685,385				6,545				691,930
2019			307,648				8,225				315,873
2020			330,065				5,444				335,509
Thereafter			1,235,294				2,190				1,237,484
Total		$	3,460,935			$	41,035			$	3,501,970

 

 

16

---

Real Estate Portfolio Diversification

The following table presents diversifications of the Company’s real estate portfolio, including property type information, as of June 30, 2013:

 

		Number of Investments				Rentable Square Feet (thousands)				Annualized Revenue (1) (thousands)				% of Annualized Revenue				Weighted Average Lease Term Remaining (2)
Freestanding retail			886				17,740			$	270,685				44.3	%			14.8
Multi-tenant retail			73				11,056				144,714				23.8	%			7.5
Office			34				5,940				108,888				17.9	%			11.8
Industrial			21				9,299				43,645				7.2	%			12.4
Total real estate assets			1,014				44,035				567,932				93.2	%			12.2
Secured notes and CMBS			24				N/A				22,364				3.7	%			N/A
Unconsolidated joint ventures			12	(3)			2,306				18,851				3.1	%			7.7
Total real estate and related assets			1,050				46,341			$	609,147				100.0	%

 

(1)

Annualized revenue for real estate assets represents the average annual base rental income over the respective lease terms, including adjustments for rent concessions or abatements, if any. Annualized revenue for the secured notes and CMBS represents average annual interest income over the respective loan term, excluding adjustments for accretion or amortization of discounts or premiums. Annualized revenue for the unconsolidated joint ventures represents the Company’s interest in the average annual base rental income over the respective lease terms, including adjustments for rent concessions or abatements, if any.

(2)	Calculated using the non-cancelable lease terms.

(3)	Represents properties owned by unconsolidated joint ventures.

 

17

---

Same Store Summary

We review our stabilized operating results from properties that we owned for the entirety of both the current and prior year reporting periods, referred to as “same store.”

The following tables show our same store portfolio statistics, which include 700 properties, acquired prior to April 1, 2012 and owned through June 30, 2013, excluding properties acquired through the Unconsolidated Joint Ventures:

 

		Three Months Ended June 30,								Increase/(Decrease)
		2013				2012				$ Change				% Change
Same store base rental revenue (1)		$	101,769			$	100,701			$	1,068				1.1	%
Same store other rental revenue			4,994				6,013				(1,019	)			(16.9	)%
Total same store rental revenue			106,763				106,714				49				—	%
Rental and other property income from income-producing properties acquired subsequent to March 31, 2012 and properties sold prior to June 30, 2013			37,993				7,603				30,390				399.7	%
Total rental and other property income		$	144,756			$	114,317			$	30,439				26.6	%

 

						Base Rental Revenue (in thousands) (1)
		Number of				Three Months Ended June 30,								Increase/(Decrease)
Property Type		Properties				2013				2012				$ Change				% Change
Freestanding retail			598			$	52,806			$	52,581			$	225				0.4	%
Multi-tenant retail			58				26,178				25,592				586				2.3	%
Office			26				15,784				15,568				216				1.4	%
Industrial			18				7,001				6,960				41				0.6	%
Total			700			$	101,769			$	100,701			$	1,068				1.1	%

The following tables show our same store portfolio statistics, which include 647 properties, acquired prior to January 1, 2012 and owned through June 30, 2013, excluding properties acquired through the Unconsolidated Joint Ventures:

 

		Six Months Ended June 30,								Increase/(Decrease)
		2013				2012				$ Change				% Change
Same store base rental revenue (1)		$	186,924			$	185,096			$	1,828				1.0	%
Same store other rental revenue			9,293				10,482				(1,189	)			(11.3	)%
Total same store rental revenue			196,217				195,578				639				0.3	%
Rental and other property income from income-producing properties acquired subsequent to December 31, 2011 and properties sold prior to June 30, 2013			87,117				18,781				68,336				363.9	%
Total rental and other property income		$	283,334			$	214,359			$	68,975				32.2	%

 

						Base Rental Revenue (in thousands) (1)
		Number of				Six Months Ended June 30,								Increase/(Decrease)
Property Type		Properties				2013				2012				$ Change				% Change
Freestanding retail			555			$	99,134			$	98,789			$	345				0.3	%
Multi-tenant retail			51				44,492				43,565				927				2.1	%
Office			23				29,296				28,848				448				1.6	%
Industrial			18				14,002				13,894				108				0.8	%
Total			647			$	186,924			$	185,096			$	1,828				1.0	%

 

(1)

Base rental revenue represents contractual base rental revenue earned and does not include the impact of certain GAAP adjustments to rental revenue, such as straight-line rent and amortization of above market intangible lease assets and below market lease intangible liabilities. Such GAAP adjustments are included in the line item referred to as “same store other rental revenue.”

 

18

---

Tenant Diversification

The following table shows certain information regarding the tenant diversification of the Company’s real estate portfolio, including consolidated joint ventures, as of June 30, 2013:

 

		Tenant		Number of Leases				Number of States				Leased Square Feet (thousands)				% of Leased Square Feet				Annualized Rental Revenue (1) (thousands)				% of Annualized Rental Revenue				Weighted Average Lease Term Remaining (2)				S&P Credit Rating (3)
1		Walgreens			73				30				1,078				2.5	%		$	27,229				4.8	%			17.9			BBB
2		Albertson’s			34				6				1,969				4.5	%			24,074				4.2	%			16.8			B
3		PetSmart			42				16				1,300				3.0	%			23,800				4.2	%			8.3			BB+
4		CVS			54				22				860				2.0	%			20,275				3.6	%			18.1			BBB+
5		BJ’s Wholesale Club			3				8				2,230				5.1	%			19,106				3.4	%			17.7			B
6		Wal-Mart			9				7				1,913				4.4	%			15,320				2.7	%			11.0			AA
7		Apollo Group			1				1				600				1.4	%			14,557				2.6	%			17.8			Not Rated
8		L.A. Fitness			17				8				752				1.7	%			14,208				2.5	%			11.0			Not Rated
9		Amazon			3				2				3,048				7.0	%			13,922				2.5	%			13.3			AA-
10		Home Depot			12				8				1,810				4.1	%			13,207				2.3	%			14.9			A-
11		Kohl’s			19				9				1,499				3.4	%			13,012				2.3	%			15.1			BBB+
12		Family Dollar			140				26				1,185				2.7	%			12,839				2.3	%			13.8			BBB-
13		Tractor Supply			42				20				875				2.0	%			11,092				2.0	%			11.7			Not Rated
14		Merrill Lynch			1				1				482				1.1	%			10,963				1.9	%			11.4			A
15		Best Buy			20				12				673				1.5	%			9,506				1.7	%			6.2			BB
16		On The Border			27				13				190				0.4	%			8,556				1.5	%			16.8			Not Rated
17		Encana Oil & Gas, USA			1				1				319				0.7	%			7,806				1.4	%			14.0			Not Rated
18		HealthNow			1				1				430				1.0	%			7,722				1.4	%			11.1			BBB-
19		Stripes			24				2				140				0.3	%			6,932				1.2	%			15.6			Not Rated
20		RSA Security			1				1				328				0.8	%			6,915				1.2	%			10.7			A
21		Lowe’s			9				9				1,204				2.8	%			6,445				1.1	%			13.8			A-
22		AT&T			9				7				1,021				2.3	%			6,279				1.1	%			6.2			A-
23		Advance Auto Parts			45				10				304				0.7	%			5,885				1.0	%			9.9			BBB-
24		Cigna			2				2				299				0.7	%			5,773				1.0	%			9.2			A+
25		Dick’s Sporting Goods			10				6				472				1.1	%			5,650				1.0	%			6.5			Not Rated
		Top 25 Tenants			599								24,981				57.2	%		$	311,073				54.9	%

 

19

---

Tenant Diversification (Continued)

 

 

		Tenant		Number of Leases				Number of States				Leased Square Feet (thousands)				% of Leased Square Feet				Annualized Rental Revenue (1) (thousands)				% of Annualized Rental Revenue				Weighted Average Lease Term Remaining (2)				S&P Credit Rating (3)
26		Academy Sports			7				4				591				1.4	%		$	5,464				1.0	%			14.6			B
27		Outback Steakhouse			20				14				124				0.3	%			5,196				0.9	%			18.8			B+
28		Thorntons Oil			23				4				79				0.2	%			4,935				0.9	%			12.5			Not Rated
29		Aaron Rents			6				17				655				1.5	%			4,912				0.9	%			11.3			Not Rated
30		Ross			16				10				466				1.1	%			4,830				0.9	%			4.4			A-
31		Bed Bath & Beyond			16				10				431				1.0	%			4,677				0.8	%			4.9			BBB+
32		VA Clinic			1				1				66				0.2	%			4,657				0.8	%			16.7			AA+
33		The Medicines Company			1				1				179				0.4	%			4,577				0.8	%			10.4			Not Rated
34		Golden Corral			22				7				234				0.5	%			4,391				0.8	%			13.9			Not Rated
35		Giant Eagle			4				1				303				0.7	%			4,365				0.8	%			14.1			Not Rated
36		MedAssets			1				1				231				0.5	%			4,364				0.8	%			14.7			B+
37		Hobby Lobby			10				8				552				1.3	%			4,306				0.8	%			7.6			Not Rated
38		Applebee’s			9				12				95				0.2	%			4,284				0.8	%			15.0			Not Rated
39		Cracker Barrel			12				5				120				0.3	%			3,929				0.7	%			15.0			Not Rated
40		Wendy’s			9				6				107				0.2	%			3,856				0.7	%			19.1			Not Rated
41		FedEx			8				8				390				0.9	%			3,559				0.6	%			7.6			BBB
42		Stop & Shop			2				2				122				0.3	%			3,521				0.6	%			18.1			BBB
43		Sysmex			1				1				163				0.4	%			3,507				0.6	%			13.3			Not Rated
44		Wells Fargo			8				7				241				0.6	%			3,414				0.6	%			9.5			AA-
45		Ryan’s Buffet			1				9				137				0.3	%			3,373				0.6	%			9.5			Not Rated
46		Igloo			1				1				914				2.1	%			3,345				0.6	%			11.3			Not Rated
47		Banner Life Insurance Company			1				1				116				0.3	%			3,131				0.6	%			13.2			AA-
48		Sam’s Club			3				3				373				0.9	%			3,109				0.5	%			7.5			AA
49		Carmax			2				2				116				0.3	%			3,039				0.5	%			15.4			Not Rated
50		Hanesbrands			1				1				930				2.1	%			2,993				0.5	%			8.5			BB
		Tenants 26—50			185								7,735				18.0	%		$	101,734				18.1	%
		Top 50 Tenants			784								32,716				75.2	%		$	412,807				73.0	%
		Total Portfolio			1,767				48				43,629				100	%		$	567,932				100.0	%

 

(1)	Represents the average annual base rental income over the respective lease terms, including adjustments for rent concessions or abatements, if any.

(2)	Calculated using the non-cancelable lease terms.

(3)	Standard & Poor’s Credit rating may reflect the credit rating of the parent company or a guarantor.

 

20

---

Industry Diversification

The following table shows certain information regarding the tenant industry diversification of the Company’s real estate portfolio, including consolidated joint ventures, as of June 30, 2013:

 

Industry		Number of Leases				Number of Tenants				Number of States				Leased Square Feet (thousands)				Annualized Rental Revenue (1) (thousands)				% of Annualized Rental Revenue				Weighted Average Lease Term Remaining (2)
Grocery			75				25				24				4,014			$	52,524				9.1	%			15.3
Drugstore			127				2				36				1,938				47,504				8.4	%			18.0
Discount store			228				15				32				4,563				44,030				7.8	%			10.1
Full service restaurant			189				80				30				1,100				38,856				6.8	%			14.6
Home and garden			69				9				29				3,937				31,442				5.5	%			13.4
Pet supplies			49				2				18				1,405				25,438				4.5	%			8.2
Warehouse club			7				3				11				2,767				24,200				4.3	%			16.2
Healthcare			58				44				17				899				22,439				4.0	%			11.2
Financial services			61				29				14				859				20,067				3.5	%			12.0
Limited service restaurant			133				57				26				730				18,934				3.3	%			11.3
Convenience store			82				9				16				346				17,567				3.1	%			14.3
Other professional services			9				8				8				953				17,113				3.0	%			11.1
Fitness			26				9				10				882				16,217				2.9	%			10.7
Specialty retail			96				44				20				1,310				15,613				2.7	%			8.1
Education			6				5				4				632				15,127				2.7	%			17.4
Department store			27				6				10				2,266				15,081				2.7	%			14.8
Apparel			111				50				12				933				14,552				2.6	%			5.0
Wholesale			3				1				2				3,048				13,922				2.5	%			13.3
Sporting goods			25				9				12				1,256				13,891				2.4	%			10.3
Manufacturing			5				5				5				3,207				13,295				2.3	%			10.5
Electronics and appliances			32				6				18				930				13,029				2.3	%			6.8
Automotive			75				9				19				613				12,239				2.2	%			12.5
Insurance services			8				6				7				571				11,756				2.1	%			9.6
Hobby, books and music			46				13				17				995				9,957				1.8	%			5.8
Home furnishings			40				15				13				757				8,899				1.6	%			6.0
Communications			33				9				11				1,076				7,991				1.4	%			5.6
Mining and natural resources			1				1				1				319				7,806				1.4	%			14.0
Office supplies			23				4				11				441				6,434				1.1	%			5.5
Logistics (shipping, delivery, warehousing)			11				2				11				394				3,674				0.6	%			7.4
Personal services			95				78				14				148				3,642				0.6	%			4.0
Agriculture			2				2				2				156				1,927				0.3	%			12.7
Technology			1				1				1				107				1,594				0.3	%			8.5
Childcare			8				4				5				60				868				0.2	%			12.2
Government and non-profit			4				3				3				10				177				—	%(3)			1.1
Real estate services			1				1				1				4				70				—	%(3)			0.8
Entertainment and recreation			1				1				1				3				57				—	%(3)			1.9
Total			1,767				567				48				43,629			$	567,932				100.0	%

 

(1)	Represents the average annual base rental income over the respective lease terms, including adjustments for rent concessions or abatements, if any.

(2)	Calculated using the non-cancelable lease terms.

(3)	Represents less than 0.1% of total annualized rental revenue.

 

21

---

Geographic Diversification

The following table shows certain information regarding the geographic diversification of the Company’s real estate portfolio, including consolidated joint ventures, as of June 30, 2013:

 

State		Number of Properties				% Leased				Rentable Square Feet (thousands)				Annualized Rental Revenue  (1) (thousands)				% of Annualized Rental Revenue
Texas			187				99.3	%			6,446			$	95,967				16.9	%
Arizona			41				99.6	%			2,976				48,996				8.6	%
California			22				98.8	%			2,905				40,401				7.1	%
Florida			81				96.9	%			3,287				39,864				7.0	%
Illinois			46				98.2	%			1,548				30,851				5.4	%
Georgia			40				99.1	%			2,967				28,963				5.1	%
Michigan			43				94.2	%			1,690				21,840				3.8	%
New Jersey			14				100.0	%			894				20,450				3.6	%
Ohio			71				100.0	%			1,709				18,114				3.2	%
Virginia			23				97.4	%			1,336				18,024				3.2	%
South Carolina			27				100.0	%			2,148				16,885				3.0	%
Alabama			24				99.2	%			1,258				16,085				2.8	%
Tennessee			19				99.6	%			2,529				15,577				2.7	%
Massachusetts			10				100.0	%			1,222				14,332				2.5	%
North Carolina			33				100.0	%			1,498				13,215				2.3	%
Indiana			44				100.0	%			531				10,101				1.8	%
New York			6				100.0	%			640				9,677				1.7	%
Colorado			15				99.2	%			803				9,123				1.6	%
Louisiana			31				100.0	%			866				9,032				1.6	%
Pennsylvania			15				99.8	%			1,046				8,037				1.4	%
New Mexico			18				100.0	%			685				7,739				1.4	%
Nevada			17				100.0	%			699				7,428				1.3	%
Maryland			6				100.0	%			366				7,346				1.3	%
Oklahoma			20				100.0	%			386				6,918				1.2	%
Missouri			26				100.0	%			428				6,316				1.1	%
Wisconsin			16				99.7	%			381				5,905				1.0	%
Iowa			14				100.0	%			474				4,787				0.8	%
Kentucky			18				100.0	%			144				3,755				0.7	%
Nebraska			5				100.0	%			225				3,739				0.7	%
Maine			14				100.0	%			282				3,325				0.6	%
Mississippi			11				100.0	%			258				2,899				0.5	%
Arkansas			13				100.0	%			246				2,671				0.5	%
Minnesota			8				100.0	%			116				2,649				0.5	%
Kansas			7				100.0	%			205				2,602				0.5	%
Connecticut			1				100.0	%			70				2,511				0.4	%
Oregon			1				100.0	%			213				2,489				0.4	%
New Hampshire			4				100.0	%			126				2,023				0.4	%
Alaska			2				100.0	%			92				1,615				0.3	%

 

22

---

Geographic Diversification (Continued)

 

 

State		Number of Properties				% Leased				Rentable Square Feet (thousands)				Annualized Rental Revenue (1) (thousands)				% of Annualized Rental Revenue
Rhode Island			1				100.0	%			52			$	1,010				0.2	%
Washington			6				100.0	%			40				939				0.2	%
North Dakota			1				100.0	%			70				926				0.2	%
Delaware			2				100.0	%			35				624				0.1	%
Idaho			2				100.0	%			24				498				0.1	%
Utah			2				100.0	%			63				496				0.1	%
South Dakota			2				100.0	%			22				491				0.1	%
West Virginia			1				100.0	%			11				302				0.1	%
Montana			1				100.0	%			16				261				—	%(2)
Vermont			3				100.0	%			7				134				—	%(2)
Total			1,014				99.1	%			44,035			$	567,932				100.0	%

 

(1)	Represents the average annual base rental income over the respective lease terms, including adjustments for rent concessions or abatements, if any.

(2)	Represents less than 0.1% of total annualized rental revenue.

 

23

---

Lease Expirations

The following table shows certain information regarding the lease expirations of the Company’s real estate portfolio, including consolidated joint ventures, as of June 30, 2013, during each of the next ten years and thereafter, assuming no exercise of renewal options:

 

Lease Expiration Year		Number of Leases Expiring				Leased Square Feet (thousands)				% of Leased Square Feet				Annualized Rental Revenue (1) (thousands)				% of Annualized Rental Revenue
2013			32				93				0.2	%		$	1,731				0.3	%
2014			69				289				0.7	%			5,286				0.9	%
2015			89				446				1.0	%			7,089				1.2	%
2016			125				1,164				2.7	%			15,795				2.8	%
2017			141				1,013				2.3	%			14,541				2.6	%
2018			156				2,115				4.8	%			27,919				4.9	%
2019			97				2,255				5.2	%			27,347				4.8	%
2020			57				1,169				2.7	%			14,694				2.6	%
2021			85				2,919				6.7	%			36,030				6.3	%
2022			72				2,737				6.3	%			23,094				4.1	%
Thereafter			844				29,429				67.4	%			394,406				69.5	%
Totals			1,767				43,629				100.0	%		$	567,932				100.0	%

 

(1)	Represents the average annual base rental income over the respective lease terms, including adjustments for rent concessions or abatements, if any.

 

 

24

---

Multi-Tenant Property Summary

The following table shows certain information regarding the Company’s multi-tenant property investments, including consolidated joint ventures, as of June 30, 2013:

 

Property		Location		Type		Rentable Square Feet (thousands)				Occupancy				Purchase Price (thousands)				Annualized Rental Revenue (1) (thousands)				Major Tenants
Atascocita Commons		Humble, TX		Power Center			318				98.6	%		$	56,500			$	4,605			Kohl’s, TJ Maxx, Ross, Palais Royal, Office Depot, Petco
Bellview Plaza		Pensacola, FL		Grocery			84				100.0	%			8,200				833			Publix, Planet Fitness
Big Lots & Tractor Supply		Northport, AL		Anchored			58				100.0	%			3,314				253			Big Lots, Tractor Supply
Breakfast Pointe		Panama Beach City, FL		Grocery			96				98.9	%			16,000				1,341			Publix, Office Depot
Camp Creek Marketplace		East Point, GA		Power Center			426				97.0	%			76,350				6,355			BJ’s Wholesale Club, Marshall’s, Ross, TJ Maxx, Barnes & Noble, Staples, Petsmart, Old Navy
Century Town Center		Vero Beach, FL		Power Center			106				92.4	%			14,775				1,362			Marshall’s
Cleveland Towne Center		Cleveland, TN		Power Center			154				92.8	%			17,650				1,732			Ross, Bed Bath & Beyond, Michael’s, Electronic Express, Books-A-Million
Crossroads Marketplace		Warner Robbins, GA		Anchored			78				98.5	%			11,250				1,029			Best Buy, Bed Bath & Beyond
CVS & Huntington Bank		Northville, MI		Anchored			16				100.0	%			3,797				292			CVS
CVS & Noble Roman		Mishawaka, IN		Anchored			12				100.0	%			4,611				366			CVS
CVS & Tres Amigos		Ringgold, GA		Anchored			15				100.0	%			3,990				323			CVS
Del Monte Plaza		Reno, NV		Grocery			83				100.0	%			18,300				1,514			Whole Foods, Sierra Trading Post
Denver West Plaza		Lakewood, CO		Anchored			71				91.5	%			14,000				1,215			Best Buy, Office Depot
Dimond Crossing		Anchorage, AK		Anchored			85				100.0	%			14,376				1,348			Petsmart, Bed Bath & Beyond
East Valley Center (2)		Saginaw, MI		Power Center			122				66.6	%			4,366				539			Burlington Coat Factory
Eastland Center		West Covina, CA		Power Center			811				97.3	%			145,900				10,217			Target, Wal-Mart, Burlington Coat Factory, Albertson’s, Dick’s Sporting Goods, Bed Bath & Beyond, Ashley Furniture, Marshall’s, Ross, CVS, Office Depot, DSW, Petsmart
Evans Exchange (2)		Evans, GA		Power Center			66				97.5	%			13,356				1,172			Home Depot, Food Lion
Evans Exchange (2)		Evans, GA		Power Center			131				100.0	%			6,044				524			Home Depot, Food Lion
Fairlane Green		Allen Park, MI		Power Center			273				98.3	%			47,000				4,769			TJ Maxx, Bed Bath & Beyond, Barnes & Noble, Michael’s, Old Navy
Falcon Valley		Lenexa, KS		Grocery			77				100.0	%			12,500				1,016			Price Chopper
Folsum Gateway II		Folsum, CA		Power Center			115				96.8	%			36,000				2,860			Bed Bath & Beyond, Petsmart, DSW
Glynn Isles		Brunswick, GA		Power Center			192				94.7	%			38,000				2,801			Dick’s Sporting Goods, Ross, Petsmart, Michael’s, Office Depot
Greenway Commons		Houston, TX		Power Center			253				97.4	%			68,250				4,596			Costco, L.A. Fitness
Highlands Ranch		Highland Ranch, CO		Anchored			51				100.0	%			6,346				553			Ross, Staples
Hillside Town Center		Chicago, IL		Power Center			167				92.0	%			26,945				2,463			Ross, Home Goods, Michael’s, Staples
Hobby Lobby Center		Greenville, SC		Anchored			70				100.0	%			6,300				593			Hobby Lobby
Indian Lakes Crossing		Virginia Beach, VA		Grocery			71				95.8	%			14,200				1,069			Harris Teeter

 

25

---

Multi-Tenant Property Summary – (Continued)

 

Property		Location		Type		Rentable Square Feet (thousands)				Occupancy				Purchase Price (thousands)				Annualized Rental Revenue (1) (thousands)				Major Tenants
Kingman Gateway		Kingman, AZ		Anchored			49				100.0	%		$	4,756			$	433			Ross, Petsmart
Kingsbury Center		Chicago, IL		Anchored			54				100.0	%			26,400				1,632			Buy Buy Baby, Petsmart
Kohl’s & Academy Sports		Hixson, TN		Power Center			131				100.0	%			10,769				896			Kohl’s, Academy Sports
Kohl’s Plaza		Napa, CA		Anchored			76				97.2	%			19,825				1,695			Kohl’s
Kyle Marketplace		Kyle, TX		Grocery			218				98.6	%			45,000				3,481			HEB! Plus
Lakeshore Crossing		Gainesville, GA		Power Center			123				100.0	%			9,000				695			Lowe’s
Midtowne Park		Anderson, SC		Power Center			167				100.0	%			25,600				1,940			Kohl’s, Dick’s Sporting Goods, Staples
Mueller Regional Retail District		Austin, TX		Power Center			348				95.9	%			67,250				5,775			Home Depot, Best Buy, Marshall’s, Chair King, Bed Bath & Beyond, Petsmart, Staples
Nature Coast Commons		Spring Hill, FL		Power Center			225				83.2	%			29,000				2,837			Sports Authority, Best Buy, Ross, Office Depot, Petsmart
Northpoint Shopping Center		Cape Coral, FL		Power Center			113				70.3	%			10,000				1,040			Bed Bath & Beyond, AC Moore, Petsmart
Oxford Exchange		Oxford, AL		Power Center			334				97.1	%			45,500				3,898			Hobby Lobby, Dick’s Sporting Goods, Ross, TJ Maxx, Bed Bath & Beyond, Petsmart, Best Buy, Office Max
Petco & Portrait Innovations		Lake Charles, LA		Anchored			18				100.0	%			3,901				363			Petco
Petsmart & Bevmo		Redding, CA		Anchored			45				100.0	%			5,788				530			Petsmart, Bevmo
Petsmart & Hallmark		Cincinnati, OH		Anchored			34				100.0	%			5,042				426			Petsmart
Petsmart & Travis Credit Union		Mercad, CA		Anchored			31				100.0	%			5,369				460			Petsmart
Pick ‘N Save Center		Wauwatosa, WI		Grocery			70				98.4	%			16,191				1,330			Pick N Save
Pinehurst Square		Bismarck, ND		Anchored			70				100.0	%			10,250				926			Best Buy, Petsmart
Prairie Market		Oswego, IL		Grocery			113				95.6	%			25,100				2,448			Aldi, Petsmart
Red Oak Village		San Marcos, TX		Power Center			177				98.2	%			22,500				1,974			Ross, Best Buy, Marshall’s, Bed Bath & Beyond, Petsmart
Riverside Centre		St. Augustine, FL		Anchored			62				100.0	%			4,725				482			Hobby Lobby
San Tan Marketplace		Gilbert, AZ		Power Center			284				98.3	%			54,780				4,284			Jo-Ann’s Fabric, Big Lots, Bed Bath & Beyond, Marshall’s, DSW, Office Max, Downeast Home & Clothing, Old Navy
Santa Rosa Commons		Pace, FL		Grocery			140				100.0	%			25,450				2,024			Publix, TJ Maxx, Petsmart
Shelby Corners		Utica, MI		Anchored			77				91.9	%			4,255				478			Chrismas Tree Shops, Buy Buy Baby
Sherwood Retail Center		Sherwood, AR		Power Center			119				100.0	%			5,825				601			Gander Mountain, Tractor Supply, Hobby Lobby
Shoppes at Port Arthur		Port Arthur, TX		Power Center			96				100.0	%			15,000				1,336			Ross, Best Buy, Petco
Shoppes at Sherbrooke		Lake Worth, FL		Anchored			58				98.1	%			10,500				1,009			L.A. Fitness
Shoppes at Sugarmill Woods		Homosassa, FL		Grocery			50				86.8	%			8,100				657			Publix
Silverado Plaza		Tucson, AZ		Grocery			77				98.7	%			9,250				746			Safeway
South Plains Crossing		Lubbock, TX		Power Center			146				98.3	%			16,350				1,502			Hobby Lobby, Spec’s
Stearns Crossing		Bartlett, IL		Grocery			96				90.4	%			12,375				1,145			Dominick’s

 

26

---

Multi-Tenant Property Summary – (Continued)

 

Property		Location		Type		Rentable Square Feet (thousands)				Occupancy				Purchase Price (thousands)				Annualized Rental Revenue (1) (thousands)				Major Tenants
Sunset Valley		Sunset Valley, TX		Power Center			150				94.6	%		$	35,500			$	3,148			Petsmart, Babies R Us, DSW
Telegraph Plaza (2)		Monroe, MI		Power Center			73				80.0	%			7,040				720			Kohl’s, TJ Maxx, Petsmart
Telegraph Plaza (2)		Monroe, MI		Power Center			69				100.0	%			5,860				501			Kohl’s, TJ Maxx, Petsmart
The Crossing		Killeen, TX		Anchored			61				100.0	%			9,000				944			Gold’s Gym, University of Phoenix
The Forum		Fort Myers, FL		Power Center			189				96.9	%			34,250				2,900			Ross, Best Buy, Bed Bath & Beyond, Staples, Books-A- Million, Petco
The Plaza		Queen Creek, AZ		Anchored			70				93.4	%			13,250				1,344			L.A. Fitness
Toys “R” Us Center		Parma, OH		Anchored			49				100.0	%			3,749				341			Toys R Us
University Plaza		Flagstaff, AZ		Grocery			165				100.0	%			17,165				1,907			Safeway, Ross, Bed Bath & Beyond, Petsmart
Valley Bend		Huntsville, AL		Power Center			416				100.0	%			72,530				5,861			Hobby Lobby, Dick’s Sporting Goods, Ross, Marshall’s, Huntsville Hospital, Barnes & Noble, Bed Bath & Beyond, Petsmart
Volusia Square		Daytona Beach, FL		Power Center			232				96.4	%			31,000				2,667			Hobby Lobby, HH Gregg, TJ Maxx, Home Depot
Waterside Marketplace		Chesterfield, MI		Power Center			250				88.1	%			26,500				3,066			Dick’s Sporting Goods, Best Buy, TJ Maxx, Bed Bath & Beyond, Old Navy
West Valley Center (2)		Saginaw, MI		Power Center			281				99.1	%			26,120				2,908			Dick’s Sporting Goods, TJ Maxx, Petsmart, Barnes & Noble, Babies R Us
White Oak Village		Richmond, VA		Power Center			433				93.6	%			68,000				6,409			J.C. Penney, Martin’s, K&G Fashion Superstore, Petsmart, Michael’s, Office Max
Whittwood Town Center		Whittier, CA		Power Center			785				98.9	%			83,500				6,068			Target, J.C. Penney, Sears, Kohl’s, Von’s, Petsmart, 24 Hour Fitness, Cost Plus
Widewater Commons		Uniontown, PA		Anchored			48				96.6	%			6,600				626			Petsmart
Winchester Station		Winchester, VA		Power Center			183				97.5	%			26,881				2,521			HH Gregg, Ross, Bed Bath & Beyond, Michael’s, Old Navy
Total							11,056				96.3	%		$	1,709,116			$	144,714

 

 

(1)	Represents the average annual base rental income over the respective lease terms, including adjustments for rent concessions or abatements, if any.

(2)	The Company purchased multiple parcels at the same multi-tenant property in separate transactions.

 

27

---

Unconsolidated Joint Venture Investment Summary

The following table shows certain information regarding the Company’s interests in unconsolidated joint ventures, as of June 30, 2013 (in thousands):

 

Joint Venture		Partner		Cole Ownership %				Rentable Square  Feet (1)				Annualized Rental Revenue  (1) (2)				Gross Asset Book Value (1)				Debt (1) (3)				Major Tenants
Cole/CoTops Portfolio LLC		Affiliate of Cofinance Group			80	%			702			$	5,935			$	42,894			$	24,639			Tops Market, Dollar Tree, Gander Mountain, Big Lots, BJ’s Wholesale Club
Cole/Mosaic JV South Elgin IL, LLC		Affiliate of Mosaic Properties and Development, LLC			50	%			232				2,916				30,081				20,400			Home Depot, Best Buy
Chandler Festival SPE, LLC		Propstra Chandler Trust & RED Development, LLC			45	%			359				4,706				40,083				25,894			Nordstrom Rack, Buy Buy Baby, Ross, TJ Maxx
Chandler Village Center, LLC (AZ)		Propstra Chandler Trust & RED Development, LLC			45	%			130				2,429				100,298				57,000			Sports Authority, Bed Bath & Beyond
Cole/LBA JV OF Pleasanton CA		Affiliate of LBA Realty			90	%			343				6,491				18,321				20,370			Clorox Companies
Chandler Gateway SPE, LLC		Propstra Chandler Trust & RED Development, LLC			45	%			260				1,680				35,062				29,128			Hobby Lobby
Cole/Faison JV Bethlehem GA, LLC		Faison-Winder Investors, LLC			90	%			280				3,151				16,386				18,536			Publix, Belk
Total Unconsolidated Joint Ventures									2,306			$	27,308			$	283,125			$	195,967
Cole Interest (4)									1,575			$	18,851			$	159,541			$	115,336

 

(1)	Amounts represent information for total unconsolidated joint venture.

(2)	Represents the average annual base rental income over the respective lease terms, including adjustments for rent concessions or abatements, if any.

(3)	Debt amounts represent secured fixed and variable rates ranging from 2.09% to 6.25% and maturities ranging from July 2015 to July 2021, with a weighted average interest rate of 4.04% as of June 30, 2013 and a weighted average years to maturity of 3.8 years as of June 30, 2013.

(4)	Amounts represent the Company’s interest in unconsolidated joint ventures as of June 30, 2013.

 

28

---

Managed Programs

Offering Summary

The following table shows the Company’s Managed Programs offering summary, as of June 30, 2013:

 

Program (1)		Inception Date				Cole Ownership % (2)				Offering Price/NAV  (3)				Current Annualized Distribution
Open Programs:
CCPT IV			7/27/2010				0.03	%		$	10.00				6.25	%
CCIT			4/6/2010				0.03	%		$	10.00				6.50	%
INAV			7/27/2010				0.51	%		$	16.56				5.35	% (4)
Closed Programs:
CCPT II (5)			9/29/2004				0.01	%		$	9.45				6.61	% (6)
Other programs (7)			Various				Various	(7)			Various				Various	(7)

 

(1)	The Company is currently in the registration process for Cole Office & Industrial REIT (CCIT II), Inc. and Cole Credit Property Trust V, Inc.

(2)	Calculated based on the outstanding shares owned at June 30, 2013.

(3)

The Company generally calculates the NAV for CCPT, CCPT II and INAV, relying in part on an estimate of the fair market value of each of the respective REITs’ real estate portfolio provided by a third party, adjusted to give effect to the estimated fair value of mortgages encumbering the respective REITs’ assets as well as other adjustments. The NAVs are based on a number of variables, including individual tenant credits, lease terms, lending credit spreads and tenant defaults, among others.

(4)	Calculated using a daily distribution of $0.002429042 per share and NAV of $16.56 per share.

(5)	Merger between CCPT II and Spirit was completed subsequent to June 30, 2013.

(6)	Calculated based on the current NAV of $9.45 per share.

(7)

Includes CCPT and 1031 Programs. The Company has a 0.01% interest in CCPT and no interest in the 1031 Programs. CCPT has a current annualized distribution rate of 6.45%, based on the current NAV of $7.75 per share. The 1031 Programs have a weighted average current annualized distribution rate of 6.32%.

Fee Summary

The following table shows the Company’s Managed Programs fee summary information, as of June 30, 2013:

 

		Offering Fees								Transaction Fees								Management Fees
Program		Selling Commissions  (1)				Dealer Manager Fees  (2)				Acquisition Transactional Fees (3)				Financing Transactional Fees				Property Management Fees (4)				Asset Management / Advisory Fees				Performance Fees
Open Programs:
CCPT IV			7	%			2	%			2	%			—	%			—  %				0.65% - 0.75% (5)				15%(6)
CCIT			7	%			2	%			2	%			—	%			—  %				0.65% - 0.75% (5)				15%(6)
INAV			—	%			0.55	%			—	%			—	%			—  %				0.90% (7)				25%(8)
Closed Programs:
CCPT II (9)			N/A				N/A				2	%			1	%			2%,4%(10)				0.25%				(9)
Other programs (11)			N/A				N/A				Various				Various				Various				Various				Various

 

(1)	The Company reallows 100% of selling commissions earned to participating broker-dealers.

(2)	The Company may reallow all or a portion of its dealer manager fee to participating broker-dealers as a marketing and due diligence expense reimbursement.

(3)	Percent taken on gross purchase price.

(4)	Percent taken on gross revenues (leasing fees based on prevailing market rates with restrictions).

(5)	Annualized fee based on the average monthly invested assets.

(6)	Performance Fee paid only under the following events (i) if shares are listed on a national securities exchange; (ii) if the company is sold or the assets are liquidated; or (iii) termination of the advisory agreement.

(7)	The Company has waived this fee.

(8)	Performance Fee paid for any year in which the total return on stockholders’ capital exceeds 6% per annum on a calendar year basis.

(9)	Merger between CCPT II and Spirit was completed subsequent to June 30, 2013. No performance fees were recorded with respect to the merger.

(10)	Annualized fee for single-tenant and multi-tenant properties, respectively.

(11)	Includes CCPT and 1031 Programs.

 

29

---

Managed Programs (Continued)

 

Program Summary

The following table shows the Company’s Managed Programs cumulative activity summary information, as of June 30, 2013:

 

Program		Capital Raised  (1) (thousands)				Number of Properties				Assets Under Management (2) (thousands)				Total Debt Outstanding (thousands)
Open Programs:
CCPT IV		$	666,298				178			$	1,232,983			$	677,418
CCIT			598,879				35				916,491				431,410
INAV			42,148				20				54,103				16,775
Total Open Programs			1,307,325				233				2,203,577				1,125,603
Closed Programs:
CCPT II (3)			2,280,595				747				3,413,197				1,763,300
Other programs (4)			449,324				116				881,934				456,447
Total Closed Programs			2,729,919				863				4,295,131				2,219,747
Total		$	4,037,244				1,096			$	6,498,708			$	3,345,350

 

(1)	Includes DRIP issued, excludes redemptions and discounts.

(2)	Represents total gross real estate and related assets net of gross intangible lease liabilities.

(3)	Merger between CCPT II and Spirit was completed subsequent to June 30, 2013.

(4)	Includes CCPT and 1031 Programs.

Program Activity Summary

The following table shows the Company’s Managed Programs activity summary information, for the period beginning on April 6, 2013 (the day after the merger with Cole Holdings) through June 30, 2013:

 

Program		Capital Raised  (1) (thousands)				Number of Properties Acquired				Purchase Price (thousands)				New Debt (thousands)
Open Programs:
CCPT IV		$	212,263				56			$	529,803			$	300,596	(2)
CCIT			282,785				13				538,207				121,000
INAV			13,404				6				15,757				—
Total Open Programs			508,452				75				1,083,767				421,596
Closed Programs:
CCPT II (3)			—				—				—				—
Other programs (4)			—				2				4,959				—
Total Closed Programs			—				2				4,959				—
Total		$	508,452				77			$	1,088,726			$	421,596

 

(1)	Includes DRIP issued, excludes redemptions and discounts.

(2)	Includes $100.0 million increase in allowable borrowings pursuant to an amendment to the CCPT IV credit facility.

(3)	Merger between CCPT II and Spirit was completed subsequent to June 30, 2013.

(4)	Includes CCPT and 1031 Programs.

 

30

---

Managed Programs (Continued)

 

Revenue Summary

The following table shows the Company’s Managed Programs revenue information, for the period beginning on April 6, 2013 (the day after the merger with Cole Holdings) through June 30, 2013 (in thousands):

 

Program		Offering Related Revenue and Reimbursements				Transaction Service Revenue				Management Service Revenue and Reimbursements				Total Private Capital Management Revenue and Reimbursements
Open Programs:
CCPT IV		$	22,800			$	10,596			$	2,670			$	36,066
CCIT			28,871				10,764				1,706				41,341
INAV			147				—				75				222
Gross revenue - Open Programs			51,818				21,360				4,451				77,629
Less:
Reallowed revenue			38,962				—				—				38,962
Reimbursements			8,588				—				1,395				9,983
Adjusted revenue - Open Programs (1)			4,268				21,360				3,056				28,684
Closed Programs:
CCPT II (2)			—				—				4,451				4,451
Other programs (3)			—				149				414				563
Gross revenue - Closed Programs			—				149				4,865				5,014
Less:
Reimbursements			—				—				853				853
Adjusted revenue - Closed Programs (1)			—				149				4,012				4,161
Total adjusted revenue (1)		$	4,268			$	21,509			$	7,068			$	32,845

 

(1)	Adjusted revenue is a non-GAAP measure. See the Terms and Definitions Section that begins on page 32 for a description of our non-GAAP measures.

(2)	Merger between CCPT II and Spirit was completed subsequent to June 30, 2013.

(3)	Includes CCPT and 1031 Programs.

 

31

---

Terms and Definitions

Non-GAAP Financial Disclosures

FFO and AFFO

Funds From Operations (“FFO”) is a non-GAAP financial performance measure defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and widely recognized by investors and analysts as one measure of operating performance of a real estate company. The FFO calculation excludes items such as real estate depreciation and amortization, gains and losses on the sale of depreciable real estate and impairments of depreciable real estate. Depreciation and amortization as applied in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, it is management’s view, and we believe the view of many industry investors and analysts, that the presentation of operating results for real estate companies by using the historical cost accounting method alone is insufficient. In addition, FFO excludes gains and losses from the sale of depreciable real estate and impairment charges on depreciable real estate, which we believe provides management and investors with a helpful additional measure of the performance of our real estate portfolio, as it allows for comparisons, year to year, that reflect the impact on operations from trends in items such as occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs. We compute FFO in accordance with NAREIT’s definition.

In addition to FFO, we use Adjusted Funds From Operations (“AFFO”) as a non-GAAP supplemental financial performance measure to evaluate the operating performance of our real estate portfolio. AFFO, as defined by our company, excludes from FFO merger and acquisition related costs, amortization and write off of deferred financing costs, straight-line rent adjustments, above and below market lease intangibles amortization, realized loss on derivatives and debt prepayment fees, gain on sale of marketable securities, other amortization or accretion, other gains, adjustments for discontinued operations and our proportionate share of adjustments for unconsolidated joint ventures, all of which are required to be expensed or recorded as additions to revenue or other income in accordance with GAAP. In evaluating the performance of our portfolio over time, management employs business models and analyses that differentiate the costs to acquire investments from the investments’ revenues and expenses. Management believes that excluding the items noted above from AFFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time, including after the Company ceases to acquire properties on a frequent and regular basis. AFFO also allows for a comparison of the performance of our portfolio with other REITs that are not currently engaging in acquisitions and mergers, as well as a comparison of our performance with that of other REITs, as AFFO, or an equivalent measure, is routinely reported by other REITs, and we believe often used by analysts and investors for comparison purposes.

For all of these reasons, we believe FFO and AFFO, in addition to net income and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful in understanding the various ways in which our management evaluates the performance of our real estate portfolio over time. However, not all REITs calculate FFO and AFFO the same way, so comparisons with other REITs may not be meaningful. FFO and AFFO should not be considered as alternatives to net income or to cash flows from operating activities, and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs.

EBITDA and Normalized EBITDA

Normalized EBITDA as disclosed represents EBITDA, or earnings before interest, taxes, depreciation and amortization, modified to include other adjustments to GAAP net income for merger expenses which are considered non-recurring and gain/losses in real estate, foreign exchange and derivatives which are not considered fundamental attributes of our business plans and do not affect our overall long-term operating performance. We exclude these items from Normalized EBITDA as they are not the primary drivers in our decision making process. Our assessment of our operations is focused on long-term sustainability and not on such non-cash items, which may cause short term fluctuations in net income but have no impact on cash flows. We believe that Normalized EBITDA is a useful supplemental measure to investors and analysts for assessing the performance of our business segments, although it does not represent net income that is computed in accordance with GAAP. Therefore, Normalized EBITDA should not be considered as an alternative to net income or as an indicator of our financial performance. We use Normalized EBITDA as one measure of our operating performance when we formulate corporate goals and evaluate the effectiveness of our strategies. Normalized EBITDA may not be comparable to similarly titled measures of other companies.

 

32

---

Terms and Definitions (Continued)

 

Adjusted G&A

Adjusted G&A is a non-GAAP financial measure that represents general and administrative expense on a GAAP basis adjusted for both non-recurring items, including listing and tender offer expenses, and recurring items, including management service fee-related expenses. We believe that Adjusted G&A is useful to investors and analysts as a supplemental measure of expenses, and we use it to evaluate the profitability of our overall operations. Adjusted G&A should not be considered as an alternative to general and administrative expense computed on a GAAP basis as a measure of our profitability. Adjusted G&A may not be comparable to similarly titled measures of other companies.

Adjusted Revenues

Adjusted Revenues is a non-GAAP financial measure that represents revenue on a GAAP basis adjusted to eliminate revenue recorded as reimbursement revenue in accordance with GAAP, of certain expenses, which are included in reallowed fees and commissions and general and administrative expenses. We believe that excluding the items noted above from revenue provides investors with supplemental performance information that is consistent with the performance models and analysis used by management. Adjusted Revenues should not be considered as an alternative to revenue or cash flows from operating activities computed on a GAAP basis as a measure of our profitability. Adjusted Revenues may not be comparable to similarly titled measures of other companies.

Lease Yield

Lease yield is calculated as the average annual rental income, adjusted for any rent concessions or abatements, for the in-place leases over the non-cancellable lease term at the respective property divided by the property purchase price, exclusive of acquisition costs. In general, our properties are subject to long-term triple net or double net leases, and the future costs associated with the double net leases are unpredictable and may reduce the yield.

 

33