Global Income Trust, Inc. - FORM 10-K

Global Income Trust, Inc. - FORM 10-K - March 13, 2015

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Attached files

Global Income Trust, Inc. Reports

file	filename
EXCEL - IDEA: XBRL DOCUMENT - Global Income Trust, Inc.	Financial_Report.xls
EX-31.2 - CERTIFICATION OF THE CHIEF FINANCIAL OFFICER, - Global Income Trust, Inc.	d832414dex312.htm
EX-31.1 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER - Global Income Trust, Inc.	d832414dex311.htm
EX-21.1 - SUBSIDIARIES OF THE REGISTRANT - Global Income Trust, Inc.	d832414dex211.htm
EX-32 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER - Global Income Trust, Inc.	d832414dex32.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-54684

Global Income Trust, Inc.

(Exact name of registrant as specified in its charter)


Maryland		26-4386951
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

CNL Center at City Commons 450 South Orange Avenue Orlando, Florida		32801
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (407) 650-1000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of exchange on which registered
None		Not applicable

Securities registered pursuant to Section 12(g) of the Act:

Common Stock

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

There is currently no established public market for the registrant’s shares of common stock. Based on the $10.00 share price of common stock in effect as of June 30, 2014 (last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the stock held by non-affiliates of the registrant on such date was $82,374,100.

The number of shares of common stock outstanding as of February 28, 2015 was 8,257,410.

DOCUMENTS INCORPORATED BY REFERENCE

None

Contents


		Page
Part I.
	Cautionary Note Regarding Forward-Looking Statements		1
Item 1.	Business		2
Item 1A.	Risk Factors		9
Item 1B.	Unresolved Staff Comments		23
Item 2.	Properties		24
Item 3.	Legal Proceedings		26
Item 4.	Mine Safety Disclosure		26

Part II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		27
Item 6.	Selected Financial Data		31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		56
Item 8.	Financial Statements and Supplementary Data		57
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		87
Item 9A.	Controls and Procedures		87
Item 9B.	Other Information		87

Part III.
Item 10.	Directors, Executive Officers and Corporate Governance		88
Item 11.	Executive Compensation		93
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		94
Item 13.	Certain Relationships and Related Transactions, and Director Independence		94
Item 14.	Principal Accountant Fees and Services		95

Part IV.
Item 15.	Exhibits and Financial Statement Schedules		96

Signatures			100

Exhibit Index			101

PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements contained under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (this “Annual Report”) that are not statements of historical or current fact may constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements be subject to the safe harbor created by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management’s current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of the Company’s business and its performance, the economy, and other future conditions and forecasts of future events and circumstances. Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “continues,” “pro forma,” “may,” “will,” “seeks,” “should,” “could” and words and terms of similar substance in connection with discussions of future operating or financial performance, business strategy and portfolios, projected growth prospects, cash flows, costs and financing needs, legal proceedings, amount and timing of anticipated future distributions, estimates of per share net asset value of the Company’s common stock, and/or other matters. The Company’s forward-looking statements are not guarantees of future performance. While the Company’s management believes its forward-looking statements are reasonable, such statements are inherently susceptible to uncertainty and changes in circumstances. As with any projection or forecast, forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise, and may not be realized. The Company’s forward-looking statements are based on management’s current expectations and a variety of risks, uncertainties and other factors, many of which are beyond the Company’s ability to control or accurately predict. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements due to a variety of risks, uncertainties and other factors. Given these uncertainties, the Company cautions you not to place undue reliance on such statements.

For further information regarding risks and uncertainties associated with the Company’s business, and important factors that could cause the Company’s actual results to vary materially from those expressed or implied in its forward-looking statements, please refer to the factors listed and described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Risk Factors” sections of the Company’s documents filed from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, this Annual Report and the Company’s quarterly reports on Form 10-Q, copies of which may be obtained from the Company’s website at http://www.incometrust.com.

All written and oral forward-looking statements attributable to the Company or persons acting on its behalf are qualified in their entirety by this cautionary note. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to, and expressly disclaims any obligation to, publicly release the results of any revisions to its forward-looking statements to reflect new information, changed assumptions, the occurrence of unanticipated subsequent events or circumstances, or changes to future operating results over time, except as otherwise required by law.

Item 1.

BUSINESS

General

Global Income Trust, Inc. was organized as a Maryland corporation on March 4, 2009 and has elected to be taxed, and currently operates as a real estate investment trust (“REIT”) for federal income tax purposes. The terms “our Company,” “we,” “our,” “us” and “Global Income Trust, Inc.” include Global Income Trust, Inc. and each of its subsidiaries.

We are externally managed and advised by CNL Global Income Advisors, LLC (the “Advisor”), a Delaware limited liability company that is wholly owned by affiliates of CNL Financial Group, LLC, our sponsor (the “Sponsor”). CNL Financial Group, LLC is an affiliate of CNL Financial Group, Inc. (“CNL”), which is a leading private investment management firm providing global real estate and alternative investments.

The Advisor is responsible for managing our day-to-day affairs and for identifying, recommending and executing acquisitions and dispositions on our behalf. We believe we benefit from the investment expertise and experience of our Advisor’s management team and members of its investment committee. Our Advisor is responsible for providing advisory services relating to substantially all aspects of our investments and operations, including real estate acquisitions or dispositions, asset management and other operational matters.

Our offices are located at 450 South Orange Avenue within the CNL Center at City Commons in Orlando, Florida, 32801, and our telephone number is (407) 650-1000.

Our Investment Objectives and Strategy

We were formed primarily to acquire and operate a diverse portfolio of income-oriented commercial real estate and real estate-related assets on a global basis. As discussed further below in “Our Exit Strategy,” in connection with us exploring strategic alternatives for the Company, as of December 31, 2014, we classified our entities that hold the German properties as held for sale and the results of operations therefore as discontinued operations in the accompanying consolidated financial statements for all periods presented. As of December 31, 2014, we owned nine properties located in Texas, Florida and Germany, of which five properties in Germany were classified as held for sale. As of December 31, 2014, excluding properties held for sale, our portfolio was comprised of approximately 1.2 million square feet of leasable space and was 100% leased with a weighted average remaining lease term of 6.0 years based on annualized base rents as of December 31, 2014. Generally, the leases for our properties are non-cancelable and provide for annual base rents, payable monthly, with periodic increases throughout the lease terms. Each tenant generally has the option to extend the lease term for an additional period (generally ranging from two to five years). In addition, the tenants are generally responsible for the payment of some, and in two cases substantially all, of the operating expenses of the property. In the event the property operating expenses exceed a cap, as defined in the tenant lease agreements, the excess expenses are not reimbursable.

Since the completion of our Offering and acquisition phase, we are focused on building stockholder value. In connection therewith, as described in Item 8. “Financial Statements and Supplementary Data - Note 6. Operating Leases” in the accompanying financial statements, in February 2014, we executed a lease amendment with the tenant at our Jacksonville Distribution Center, which extended the lease term from February 2018 to November 2024. As an incentive for entering into the extended lease term, the tenant was granted four months of “free rent” in 2014, and an additional nine months of “free rent” at the end of the lease term in 2024. Although the lease amendment initially lowered our operating cash flow from this property, we believe the extended term increased the value of the property and resulted in our overall weighted average lease term increasing from 4.5 years to 6.0 years as of December 31, 2014, based on annualized base rents as of December 31, 2014. We continue to pursue value creation opportunities relating to our properties including, but not limited to, seeking lease extensions with other tenants in advance of renewal option periods.

Our Real Estate Portfolio

As of February 28, 2015, we owned four properties with approximately 1.2 million square feet of leasable space and our portfolio was 100% leased with a weighted average remaining lease term of 6.0 years based on annualized base rents as of December 31, 2014 (excluding properties held for sale). In January 2015, we sold a 94.9% equity interest in the entities that own our German properties, which were classified as held for sale. Our remaining leases generally include terms whereby, in addition to payments of base rent with periodic escalations, tenants are responsible for some, and in two cases substantially all, of the operating expenses of the property.

As of February 28, 2015, our tenants include Mercedes-Benz Financial Services USA, LLC, DynCorp International, LLC, Samsonite, LLC, and FedEx Ground Package System, Inc. Our top three tenants, which excludes FedEx Ground Package System, Inc., represented approximately 96.1% of our total revenues for the year ended December 31, 2014, and we monitor their businesses through direct interaction, discussions with onsite property managers, subscription news services, and review of financial information. While our leases with each of these three tenants do not require them to provide us with financial results or maintain any specific operating metrics, site visits and direct dialogue with our tenants provide valuable insight into their businesses. Additionally, each of our top three tenants are affiliated with parent entities that publicly report interim or annual financial results. This allows us to assess financial performance and trends affecting the parent. As discussed further in our “Our Exit Strategy,” in February 2015, we committed to a plan to sell our property leased to FedEx Ground Package System, Inc.

For additional information regarding our real estate properties, see Item 2. “Properties.”

Our Common Stock Offering

On April 23, 2010, we commenced a public offering (the “Offering”) pursuant to a registration statement on Form S-11 under the Securities Act of 1933, as amended (the “Securities Act”). Our Offering closed on April 23, 2013, and as of such date, we had received aggregate offering proceeds of approximately $83.7 million, including proceeds received through our distribution reinvestment plan.

With the completion of our Offering, our Advisor is focused on actively managing our portfolio and seeking to reduce our operating expenses. In addition, our Advisor has begun exploring possible strategic alternatives, as described further below in our “Our Exit Strategy.”

Our Borrowing Policies

We generally target our aggregate borrowings to be between 50% to 60% of the aggregate carrying value of our assets. Under our articles of incorporation, the maximum amount of our indebtedness cannot exceed 300% of our “net assets,” as defined by the Statement of Policy Regarding Real Estate Investment Trusts adopted by the North American Securities Administrators Association on May 7, 2007 (the “NASAA REIT Guidelines”), as of the date of any borrowing unless any excess borrowing is approved by a majority of our independent directors and is disclosed to stockholders in our next quarterly report, together with a justification for the excess. In addition to the limitations contained in our articles of incorporation, our board of directors has adopted a policy to limit our aggregate borrowings to approximately 75% of the aggregate carrying value of our assets unless substantial justification exists that borrowing a greater amount is in our best interests. Our policy limitation, however, does not apply to individual real estate assets. As a result, we may borrow more than 75% of the contract purchase price of each asset we acquire to the extent our board of directors determines that borrowing these amounts is prudent. As of December 31, 2014, we had an aggregate debt leverage ratio of 63.1% of the aggregate carrying value of our assets, excluding our properties held for sale.

Our Distribution Policy

In order to qualify as a REIT, we are required to distribute 90% of our annual REIT taxable income to our stockholders. We may fund all or a portion of the payment of distributions from sources other than cash flow from operations or funds from operations, such as from cash flows generated by financing activities, a component of which includes our borrowings and the proceeds of our Offering. Our Advisor, its affiliates or other related parties may advance cash to us, or defer or waive asset management fees, expense reimbursements or other fees in order for us to have cash to pay distributions in excess of available cash flow or funds from operations. We have not established any limit on the extent to which we may use borrowings or proceeds of our Offering to pay distributions, and there is no assurance that we will be able to sustain distributions at any level.

Our board of directors determines the distribution policy and whether the distribution will be in cash or other property, which may include our own securities. The distribution policy generally will be based upon such factors as expected and actual cash flow from operations, our overall financial condition, our objective of qualifying as a REIT for tax purposes, the determination of reinvestment versus distribution following the sale of an asset, as well as other factors, including an objective of maintenance of stable and predictable distributions regardless of the composition. Because of the effect of certain items, including depreciation and amortization associated with real estate investments, distributions, in whole or in part, in any period may constitute a return of capital for federal income tax purposes.

On May 25, 2010, our board of directors authorized a daily cash distribution of $0.0017808 per share of common stock. Distributions are calculated based on the number of days each stockholder has been a stockholder of record. Currently, each month’s distributions are aggregated and paid in the following month. Distributions pursuant to this policy began on October 7, 2010. The daily distribution rate is equal to an annualized distribution rate of 6.5%, using our historical Offering price of $10.00 per share or 8.7% using our estimated net asset value (“NAV”) per share as of December 31, 2014.

The table in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presents total cash distributions declared and issued, including distributions reinvested in additional shares through our distribution reinvestment plan (“DRP”), net cash provided by (used in) operating activities, and funds from operations (“FFO”) for each quarter in the years ended December 31, 2014, 2013 and 2012.

The table in Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Use of Proceeds from Registered Securities” presents how we have used proceeds received from the Offering, including amounts used to fund distributions since inception. Our board of directors intends to evaluate our distribution policy and reserves the right to change the per share distribution amount or otherwise amend or terminate this distribution policy at any time.

Our Significant Tenants

For the years ended December 31, 2014, 2013 and 2012, and as of December 31, 2014 and 2013, the following tenants individually accounted for 10% or more of our aggregate total revenues or leased more than 10% of the net book value of our real estate assets, respectively:


	Percentage of Total Revenues ⁽¹⁾									Percentage of Net Book Value ⁽²⁾
Tenant	2014			2013			2012			2014			2013

Mercedes-Benz Financial Services USA, LLC (“Mercedes”)		40.2	%		38.6	%		52.6	%		31.0	%		30.8	%

DynCorp International, LLC (“DynCorp”)		25.0	%		23.8	%		32.3	%		19.2	%		18.8	%

Samsonite, LLC (“Samsonite”)		30.9	%		33.7	%		9.9	%		46.6	%		45.8	%

FOOTNOTES:

⁽¹⁾	Includes contractual rental income, tenant reimbursements, straight-line rent adjustments, and amortization of above market lease intangibles. Amounts relating to discontinued operations are excluded.

⁽²⁾	Net book value represents the aggregate net real estate investment property balances and net lease intangibles adjusted for any deferred rent asset (liability) as of December 31, 2014, excluding assets held for sale.

Given the percentage of assets leased and revenues contributed by our significant tenants, any failure of these tenants to fulfill their obligations under their leases could have a material effect on us until such time as the applicable property could be leased to a new tenant.

Geographic and Industry Diversification of the Real Property Portfolio

The following table provides a summary of the geographic diversification of our portfolio (excluding properties held for sale) based on net book value and annualized base rent as of December 31, 2014, and revenues for the year ended December 31, 2014:


Geographic Region	Percentage of Net Book Value ⁽¹⁾			Percentage of Annualized Base Rent ⁽²⁾			Percentage of Revenues for the Year Ended December 31, 2014 ⁽³⁾
Texas		53.4	%		63.3	%		69.1	%
Florida		46.6	%		36.7	%		30.9	%

Total		100.0	%		100.0	%		100.0	%

FOOTNOTES:

⁽¹⁾	Net book value represents the aggregate net real estate investment property balances and net lease intangibles adjusted for any deferred rent asset (liability) as of December 31, 2014, excluding assets held for sale.

⁽²⁾	Annualized base rent represents the monthly base rent in effect as of December 31, 2014 multiplied times 12. Excludes tenant reimbursements, straight-line rent adjustments, amortization of above-market leases, and amounts relating to discontinued operations.

⁽³⁾	Includes contractual rental income, tenant reimbursements, straight-line rent adjustments, and amortization of above market lease intangibles. Amounts relating to discontinued operations are excluded.

The following table provides a summary of the industry diversification of our tenants based on net book value (excluding properties held for sale) and annualized base rent as of December 31, 2014, and revenues for the year ended December 31, 2014:


Industry	Percentage of Net Book Value ⁽¹⁾			Percentage of Annualized Base Rent ⁽²⁾			Percentage of Revenues for the Year Ended December 31, 2014 ⁽³⁾

Distribution services		46.6	%		36.7	%		30.9	%
Automotive & finance		31.0	%		37.8	%		40.2	%
Government services		19.2	%		21.4	%		25.0	%
Air courier services		3.2	%		4.1	%		3.9	%

Total		100.0	%		100.0	%		100.0	%

FOOTNOTES:

⁽¹⁾	Net book value represents the aggregate net real estate investment property balances and net lease intangibles adjusted for any deferred rent asset (liability) as of December 31, 2014, excluding assets held for sale.

⁽²⁾	Annualized base rent represents the base rent in effect as of December 31, 2014 multiplied times 12. Excludes tenant reimbursements, straight-line rent adjustments and amortization of above-market leases and amounts relating to discontinued operations.

⁽³⁾	Includes contractual rental income, tenant reimbursements, straight-line rent adjustments, and amortization of above market lease intangibles. Amounts relating to discontinued operations are excluded.

Our Disposition Policies

As we have completed our Offering, our Advisor has begun to consider strategic alternatives. See “Our Exit Strategy” below. In connection therewith, we have determined to sell certain of our investments and may sell additional investments for the purpose of either distributing the net sales proceeds to our stockholders, investing the proceeds in other assets, or retaining the proceeds as part of a plan to achieve an optimal exit value. The determination of when a particular investment should be sold or otherwise disposed of will be made after considering all of the relevant factors, including prevailing and projected economic and market conditions, whether the value of the property or other investment is anticipated to decline substantially, whether we could apply the proceeds from the sale of the asset to make other investments consistent with our investment objectives, and whether our portfolio as a whole is attractive to a potential acquirer of the entire company.

A determination as to whether to sell an asset will also be based on whether the sale of the asset would constitute a prohibited transaction under the Internal Revenue Code (“Code”) or otherwise impact our status as a REIT. Our ability to dispose of properties is restricted to a substantial extent as a result of the rules that we must comply with to remain qualified as a REIT. Under applicable provisions of the Code regarding prohibited transactions by REITs, a REIT that sells property other than foreclosure property that is deemed to be inventory or property held primarily for sale in the ordinary course of business is deemed a “dealer” and subject to a 100% penalty tax on the net income from any such transaction. As a result, our board of directors will attempt to structure any disposition of our properties to avoid this penalty tax through reliance on safe harbors available under the Code for properties held at least two years or through the use of a taxable REIT subsidiary.

Our Exit Strategy

Although our board of directors is not required to review or recommend an exit strategy by any certain date, with the completion of our Offering, our Advisor began exploring possible strategic alternatives and our board formed a special committee (the “Special Committee”). In connection therewith, in August 2013, the Special Committee engaged SunTrust Robinson Humphrey, Inc. (“STRH”) as its financial advisor.

In conjunction with the work performed by STRH, in February 2014, we engaged Jones Lang LaSalle GmbH (“JLL”) to identify potential strategic alternatives for our German portfolio. In June 2014, our Advisor and Special Committee of the board of directors committed to a plan to sell the German portfolio based on market feedback of potential buyers and ranges of prices for the properties. In December 2014, we entered into an agreement to sell 94.9% of our equity interest in the entities that own the German properties, and will retain a 5.1% non-controlling interest with limited protective rights (i.e. no significant continuing involvement). In connection therewith, as of December 31, 2014, we classified our entities that own the German properties as held for sale and the results of operations therefrom as discontinued operations in the accompanying consolidated financial statements for all periods presented. In January 2015, we completed the sale of 94.9% of our equity interest in the entities that own our German properties. We evaluated the German portfolio for impairment and determined that the carrying value was not recoverable based on an analysis comparing the sales proceeds, less transaction costs, received in January 2015 to the carrying value the assets, including cumulative translation adjustments related to foreign currency exchange, as of December 31, 2014. Therefore, for the year ended December 31, 2014, we recognized an impairment provision of approximately $0.5 million in order to write-down the carrying value of the German portfolio to an amount equal to the sales proceeds, less transaction costs, received in January 2015. We have not determined how we will use the proceeds from the sale of our controlling interest in the entities that own the German portfolio, but expect to assess this in tandem with the continuing dialog among STRH, our Special Committee and management. Our options include a partial liquidating distribution or the reinvestment of such proceeds.

In February 2015, we committed to a plan to sell our Austin Property in Pflugerville, Texas as part of our continuous evaluation of strategic alternatives. We evaluated the Austin property for impairment and determined that the carrying value was not recoverable based on an analysis comparing estimated and current projected undiscounted cash flows, including estimated net sales proceeds, of the property over its remaining useful life to the property’s carrying value as of December 31, 2014. Therefore, we recognized an impairment provision of approximately $1.3 million for the year ended December 31, 2014 in order to write-down the carrying value of the property to an amount equal to our estimated net sales proceeds less transaction costs.

Although the Special Committee has engaged STRH to help us evaluate our strategic alternatives and we have committed to a plan to sell our Austin Property, we are not obligated to enter into any particular transaction. In addition, the timing of when we may pursue a sale of our properties or any other potential strategic event is subject to various items beyond the control of our Advisor or our board of directors, including real estate and market conditions, in general. Any strategic event is at the discretion of the board of directors, and would be subject to our governing documents, which require certain transactions be presented to our stockholders for approval, and in which case, generally require approval of a majority of the shares of our common stock outstanding and entitled to vote.

Our Financial Information about Industry Segments

We have determined that we operate in one reportable segment, real estate, which consists of acquiring, investing in, managing, leasing, owning, and as conditions warrant, disposing of real estate assets. We internally evaluate all of our real estate assets as one operating segment and, accordingly, we do not report segment information.

Our Competition

We compete with many other entities engaged in real estate investment and leasing activities, including individuals, corporations, bank and insurance company investment accounts, REITs, real estate limited partnerships and other entities engaged in real estate investment activities, many of which have greater resources than we do.

Our Employees

We are externally managed and as such we do not have any employees.

Our Advisor

Substantially all of our acquisition, operating, administrative and property management services are provided by sub-advisors to our Advisor and sub-property managers to the Property Manager, including an affiliate of BlackRock, Inc. (NYSE: BLK) which provided services with respect to our assets previously held in Germany. This network of sub-advisors and sub-property managers offers us access to professionals experienced in making and managing real estate and real estate-related investments in various regions around the world. We have been able to invest in global income-oriented real estate investments by leveraging the international and domestic real estate expertise of this network.

Under the terms of the advisory agreement, our Advisor has responsibility for our day-to-day operations and provides advisory services relating to substantially all aspects of our investments and operations, including real estate acquisitions, asset management, dispositions and other operational matters. In exchange for these services, our Advisor is entitled to receive certain fees from us.

The current advisory agreement continues through April 7, 2016, and thereafter may be extended annually upon mutual consent of the parties. Our independent directors are required to review and approve the terms of our advisory agreement at least annually.

For additional information on our Advisor and Property Manager, as well as the fees and reimbursements we pay, see Item 8. “Financial Statements and Supplementary Data.”

Our Tax Status

We elected to be taxed as a REIT under Sections 856(c) of the Code commencing with our taxable year ended December 31, 2010. In order to be taxed as a REIT, we are subject to a number of organizational and operational requirements, including the requirement to make distributions to our stockholders each year of at least 90 percent of our REIT taxable income (excluding any net capital gain). As a REIT, we generally will not be subject to U.S. federal corporate income tax on income we distribute to our stockholders. If we fail to qualify for taxation as a REIT in any year, our income for that year will be taxed at regular corporate rates, and we may be precluded from qualifying for treatment as a REIT for the four years following the year of our failure to qualify as a REIT.

As a REIT, we may be subject to certain state and local taxes on our income and property, and federal income and excise taxes on our undistributed income. We may also be subject to foreign taxes on investments outside of the U.S. based on the jurisdictions in which we conduct business.

Our Available Information

Our Sponsor maintains a website at www.IncomeTrust.com containing additional information about our business, and a link to the Securities and Exchange Commission (the “SEC” or “Commission”) website (www.sec.gov), but the contents of the website are not incorporated by reference in, or otherwise a part of, this report.

We make information available free of charge through our website, as soon as practicable after we file it with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, definitive proxy statements on Form 14A and if applicable, amendments to these reports.

Item 1A.

RISK FACTORS

The risks and uncertainties described below represent those risks and uncertainties that we believe are material to investors. Our stockholders or potential investors may be referred to as “you” or “your” in this Item 1A. “Risk Factors” section.

Company Related Risks

There is no public market for our shares; it may be difficult for you to liquidate your investment.

Our shares are not listed and there is no public market for shares of our common stock. We have no obligation to list our shares on any public securities market or provide any other type of liquidity to our stockholders. Even if you are able to sell your shares, the price received for any shares will likely be less than what you paid or less than your proportionate value of the net assets we own.

Additionally, as a result of the termination of our distribution reinvestment plan and the close of our Offering in April 2013, our board of directors suspended our stock redemption plan effective April 10, 2013 and we are no longer accepting redemption requests. Therefore, it may be difficult for you to sell your shares promptly or at all, including in the event of an emergency and, if you are able to sell your shares, you may have to sell them at a substantial discount from the price that you paid for your shares. Our board of directors began to consider various exit strategies in 2014, however our articles of incorporation do not require that we consummate a transaction to provide liquidity to stockholders on any certain date or at all.

Our board of directors has determined our estimated net asset value per share as of December 31, 2014 and in doing so, we primarily relied upon a valuation of our portfolio of properties as of December 31, 2014. Valuations and appraisals of our properties are estimates of fair value and may not necessarily correspond to realizable value upon the sale of such properties; therefore, our estimated net asset value per share may not reflect the amount that would be realized upon a sale of each of our properties or that the estimated per share value will equal or not be substantially less than the per share amount paid by investors in our public offerings.

For the purposes of calculating our estimated net asset value per share, we retained an independent valuation firm to determine the value of our properties and a range of estimated net asset values for our shares of common stock as of December 31, 2014. The valuation methodologies used to estimate the net asset value of our shares, as well as the value of our properties, involved certain subjective judgments, including but not limited to, estimated future cash flows for properties recently developed or currently under development for which we have limited or no operating history, respectively. Ultimate realization of the value of an asset depends to a great extent on economic and other conditions beyond our control and the control of our Advisor and the independent valuation firm. Further, valuations do not necessarily represent the price at which an asset would sell, since market prices of assets can only be determined by negotiation between a willing buyer and seller. In addition, as permitted by the recommendations in the IPA Valuation Guidelines, the determination of the estimated value of our properties used in the calculation of our estimated net asset value did not include deductions for estimated disposition fees or other selling expenses of our assets. Therefore, the valuations of our properties and our investments in real estate related assets may not correspond to the realizable value upon a sale of those assets or if you sell your shares. Further, there is no guarantee that the estimated per share value will equal or not be substantially less than the per share amount paid by investors in our public offerings.

Because we rely on affiliates of CNL for advisory and property management, if these affiliates or their executive officers and other key personnel are unable to meet their obligations to us, we may be required to find alternative providers of these services, which could disrupt our business.

CNL, through one or more of its affiliates or subsidiaries, owns and controls our Advisor and our Property Manager, as well as one of the sub-advisors and sub-property managers. In the event that any of these affiliates or related parties are unable to meet their obligations to us, we might be required to find alternative service providers, which could disrupt our business by causing delays and/or increasing our costs.

Further, our success depends to a significant degree upon the continued contributions of certain executive officers and other key personnel of our Advisor, its affiliates and related parties, each of whom would be difficult to replace. We do not have employment agreements with our executive officers, and we cannot guarantee that they will remain

affiliated with us or our Advisor. Although several of our executive officers and other key employees of affiliates of our Advisor have entered into employment agreements with affiliates of our Advisor, these agreements are terminable at will, and we cannot guarantee that such persons will remain employed by our Advisor or its affiliates. We do not maintain key person life insurance on any of our executive officers.

Although our Advisor has begun to explore possible strategic alternatives and our board of directors has formed a Special Committee, there is no assurance we will have a liquidity event in the near term or that, in the event of a transaction, that we will be able to meet our investment objectives.

With the completion of our Offering, our Advisor has begun to explore possible strategic alternatives, and our board of directors has formed a Special Committee. Although the Special Committee has engaged STRH to assist with the exploration and consummation of a liquidity event for us, we are not obligated to enter into any particular transaction. In addition, the timing of when we may pursue a potential liquidity event, is subject to various items beyond the control of our Advisor or our board of directors, including real estate and market conditions, in general. Therefore, although we have begun the process of exploring strategic alternatives, there is no specific date by which we must have a liquidity event and there is no assurance we will have a liquidity event in the near term or that, in the event of a transaction, we will be able to meet our investment objectives or provide a return to stockholders that equals or exceeds the price per share paid for shares of our common stock.

We have limited capital resources and liquidity.

With the close of our Offering, our sources of capital and liquidity are limited. Although our Advisor and our board of directors began exploring strategic alternatives in 2014, our articles of incorporation do not require that we consummate a transaction to provide liquidity to stockholders on any certain date or at all. Therefore, our sources of capital and liquidity could remain limited for the long term, which could adversely impact our results of operations and our ability to meet our investment objectives.

In addition, we consider capital reserves on a property-by-property basis, as we deem appropriate to pay operating expenses to the extent that the property does not generate operating cash flow to fund anticipated capital improvements. If we do not have sufficient capital reserves to supply needed funds for capital improvements throughout the life of our investment in a property and there is insufficient cash available from our operations or from other sources, we may be required to defer necessary improvements to a property. This may result in decreased cash flow and reductions in property values. If our reserves are insufficient to meet our cash needs, we may have to obtain financing from either affiliated or unaffiliated sources to fund our cash requirements. Additionally, due to the volatility and uncertainty experienced in recent years by domestic and international financial markets, liquidity has tightened in financial markets, including the investment grade debt and equity capital markets. Consequently, there is greater uncertainty regarding our ability to access credit markets in order to obtain financing on reasonable terms or at all. Although we expect to use leverage with respect to our investments, there can be no guarantee that sources will be available to use. Accordingly, in the event that we develop a need for additional capital in the future for the maintenance or improvement of our properties, or for any other reason, we have not identified any established sources for such funding other than as described above and in our existing mortgage loans. Although our Advisor has relationships with various lenders, we cannot assure you that sources of funding will be available to us for potential capital needs in the future. If our capital resources, or those of our Advisor (to the extent it advances amounts to us or on our behalf), are insufficient to support our operations, we will not achieve our investment objectives.

Geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in the real estate markets of those areas or natural disasters in those areas.

As a result of the concentration of our portfolio in Texas and Florida, our operating results and/or the value of our properties are likely to be impacted by economic changes affecting the real estate markets in those areas. Geographic concentration also exposes us to risks of oversupply and competition in these markets. Significant increases in the supply of certain property types, without corresponding increases in demand could have a material adverse effect on our financial condition, results of operations, our ability to pay distributions and the value of our portfolio.

Because we hold a small number of properties, we have higher fixed operating expenses as a percentage of gross income. In addition, our operating results and amounts available for distributions to stockholders are at greater risk of being affected by, and the value of your investment will vary more widely with, the performance of any one or more of the properties in our portfolio.

Stockholders have limited control over changes in our policies and operations.

Our board of directors determines our investment policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of our stockholders. Under our articles of incorporation and Maryland general corporation law, our stockholders currently have a right to vote only on the following matters:

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the election or removal of directors;

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any amendment of our articles of incorporation, except that our board of directors may amend our articles of incorporation without stockholder approval to change our name, increase or decrease the aggregate number of our shares and of any class or series that we have the authority to issue, or classify or reclassify any unissued shares by setting or changing the preferences, conversion or other rights, restrictions, limitations as to distributions, qualifications or terms and conditions of redemption of such shares;

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effect stock splits and reverse stock splits;

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our termination, liquidation and dissolution;

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our reorganization;

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modification or elimination of our investment limitations as set forth in our articles of incorporation; and

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our being a party to any merger, consolidation, sale or other disposition of substantially all of our assets (notwithstanding that Maryland law may not require stockholder approval).

All other matters are subject to the discretion of our board of directors. Although stockholders have the right to vote on amendments to our articles of incorporation in the manner described above, under Maryland general corporation law, an amendment to our articles of incorporation must be found to be advisable by our board of directors. That requirement has the effect of limiting stockholders’ control over our articles of incorporation. In addition, our board of directors has the authority to amend, without stockholder approval, the terms of both our advisory agreement and our property management agreement, which, in either case, could result in less favorable terms to our investors.

We may be restricted in our ability to replace our Property Manager under certain circumstances.

Our ability to replace our Property Manager may be limited. Under the terms of our property management agreement, we may terminate the agreement (i) in the event of our Property Manager’s voluntary or involuntary bankruptcy or a similar insolvency event, or (ii) for “cause.” In this case, “cause” means a material breach of the property management agreement of any nature by the Property Manager relating to all or substantially all of the properties being managed under the agreement that is not cured within 30 days after notice to the Property Manager. We may amend the property management agreement from time to time to remove a particular property from the pool of properties managed by our Property Manager (i) if the property is sold to a bona fide unaffiliated purchaser, or (ii) for “cause.” In this case, “cause” means a material breach of the property management agreement of any nature by the Property Manager relating to that particular property that is not cured within 30 days after notice to the Property Manager. Our board of directors may find the performance of our Property Manager to be unsatisfactory. However, unsatisfactory performance by the Property Manager may not constitute “cause.” As a result, we may be unable to terminate the property management agreement even if our board concludes that doing so is in our best interest.

We are dependent upon net operating income from our properties and the positive impact of the Expense Support Agreement with our Advisor.

We generally anticipate that we will meet future cash needs from net operating income from our properties. Cash from operations during 2014, 2013 and 2012 was positively impacted by an Expense Support Agreement with our Advisor. Under the Amended and Restated Expense Support Agreement, our Advisor may terminate its expense support obligation upon 120 days’ notice to us. If our Advisor terminates the Amended and Restated Expense Support Agreement, our results from operations, cash from operations and FFO would all be negatively impacted.

We have not had sufficient GAAP net cash provided by operating activities or funds from operations, and therefore, approximately 47% of our cumulative distributions calculated on a quarterly basis through December 31, 2014 are considered funded from other sources. Such distributions reduced the amounts otherwise available for investment in assets and may have negatively impacted the value of your investment.

We have not had significant net cash provided by operating activities for U.S. generally accepted accounting principles (“GAAP”) purposes or distributable earnings since inception. As of December 31, 2014, we have had cumulative net losses of $17.8 million and our accumulated distributions totaled $14.9 million. During the same period, we have had ten quarters of positive net cash provided by operating activities and nine quarters of positive FFO, which totaled $8.0 million and $8.5 million, respectively. Both net cash provided by operating activities and FFO were negatively impacted by acquisition fees and expenses that are expensed for GAAP purposes but funded with Offering proceeds. Therefore, even though we have had positive net cash provided by operating activities for GAAP purposes for certain quarters, including the negative impact of expensing acquisition fees and expenses, the sum of such amounts only equaled approximately 53.4% of our cumulative distributions. As a result, 46.6% of our cumulative distributions declared to our stockholders calculated on a quarterly basis through December 31, 2014 are considered funded from other sources for GAAP purposes. Because we funded a significant portion of our cash distributions from Offering proceeds, we had less capital available to invest in properties and other real estate-related assets, and the book value per share of our common stock declined.

We disclose funds from operations, or FFO, and modified funds from operations, or MFFO, which are non-GAAP financial measures, in documents filed with the SEC; however, FFO and MFFO are not equivalent to our net income or loss as determined under GAAP, and you should consider GAAP measures to be more relevant to our operating performance.

We use and disclose to investors FFO and MFFO, which are non-GAAP financial measures. FFO and MFFO are not equivalent to our net income or loss as determined in accordance with GAAP, and investors should consider GAAP measures to be more relevant to evaluating our operating performance. FFO and GAAP net income differ because FFO excludes gains or losses from sales of property and asset impairment write-downs, depreciation and amortization. MFFO and GAAP net income differ because MFFO represents FFO with further adjustments to exclude acquisition-related expenses, amortization of above- and below-market leases, fair value adjustments of derivative financial instruments, realized gains and losses from early extinguishment of debt, adjustments related to contingent purchase price consideration and straight-line rent adjustments.

Because of the differences with GAAP net income or loss, neither FFO nor MFFO may be an accurate indicator of our operating performance, especially during periods in which we were acquiring properties. In addition, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs; and investors should not consider FFO or MFFO as an alternative to cash flows from operations, as an indication of our liquidity, or as indicative of funds available to fund our cash needs.

Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate MFFO. Also, because not all companies calculate MFFO the same way, comparisons with other companies may not be meaningful.

We have experienced losses in the past and may experience similar losses in the future.

We incurred net operating losses for the three years ended December 31, 2014. Our losses can be attributed, in part, to acquisition fees and expenses funded from Offering proceeds, as well as depreciation and amortization expense, which substantially reduced our income. Our operating expenses to date have been partially funded with proceeds of our Offering, which terminated on April 23, 2013, as well as partially deferred by our Advisor in accordance with the Expense Support Agreement (described in “Results of Operations – Expense Support”). We cannot assure you we will be profitable in the future, our properties will produce sufficient income to fund all of our operating expenses, or that our Advisor will continue to provide expense support.

Changes in accounting pronouncements could adversely impact our or our tenants’ reported financial performance.

Accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. From time to time, the Financial Accounting Standards Board (“FASB”) and the SEC, entities that

create and interpret appropriate accounting standards, may change the financial accounting and reporting standards or their interpretation and application of these standards that govern the preparation of our financial statements. These changes could have a material impact on our reported financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in restating prior period financial statements. Specifically, FASB is currently considering changes to accounting standards for accounting for leases. Due to the fact that such standards impact how we account for our properties, as well as revenues and expenses relating to our leases, changes to the current standards could have a material impact to our financial conditions or results of operations. Similarly, these changes could have a material impact on our tenants’ reported financial condition or results of operations and affect their preferences regarding leasing real estate. In such event, tenants may determine not to lease properties from us, or, if applicable, not to exercise their option to renew their leases with us. This in turn could make it more difficult for us to enter into new leases or renewals on terms we find favorable and impact the distributions to stockholders.

Cyber security risks and cyber incidents could adversely affect our business and disrupt operations.

Cyber incidents can result from deliberate attacks or unintentional events. These incidents can include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. The result of these incidents could include, but are not limited to, disrupted operations, misstated financial data, liability for stolen assets or information, increased cyber security protection costs, litigation and reputational damage adversely affecting customer or investor confidence.

Risks Related to Conflicts of Interest and Our Relationships with Our Advisor, Its Affiliates and Other Related Parties

We are subject to conflicts of interest arising out of our relationships with our Advisor, its affiliates and other related parties, including the material conflicts discussed below.

Our Advisor, Property Manager and other entities affiliated with CNL that conduct our day-to-day operations will face competing demands on their time.

We rely upon our Advisor, including its investment committee, our Property Manager and the executive officers and employees of entities affiliated with CNL, to conduct our day-to-day operations. Certain of these persons also conduct the day-to-day operations of other real estate and alternative investment programs sponsored by CNL or our Sponsor, and they may have other business interests as well. One of our directors, James M. Seneff, Jr., is also a director of other real estate investment programs sponsored by CNL or our Sponsor. We have the same executive officers in common with CNL Growth Properties, Inc. Additionally, our Advisor and the advisor to CNL Growth Properties, Inc. have the same managers, executive officers and investment committee members in common. We anticipate that our executive officers and the executive officers of our Advisor, as well as, the managers of our Advisor and the Advisor’s representatives on its investment committee will devote the time necessary to fulfill their respective duties to us and our Advisor. However, because these persons have competing interests on their time and resources, they may find it difficult to allocate their time between our business and these other activities. During times of intense activity in other programs and ventures, they may devote less time and resources to our business than is necessary or appropriate.

Our Advisor and its affiliates, including all of our executive officers and our affiliated director, will face conflicts of interest as a result of their compensation arrangements with us, which could result in actions that are not in the best interest of our stockholders.

Except as limited by the Expense Support Agreement, we pay substantial fees to our Advisor (including its sub-advisors) and affiliates, and our Property Manager. These fees could influence their advice to us, as well as the judgment of affiliates of our Advisor performing services for us. Among other matters, these compensation arrangements could affect their judgment with respect to:

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the continuation, renewal or enforcement of our agreements with our Advisor, its affiliates and other related parties;

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property sales, which may entitle our Advisor to real estate commissions;

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additional property acquisitions from third parties, which entitle our Advisor to investment management and asset services fees;

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borrowings to acquire additional assets, which increase the investment services fees and asset management fees payable to our Advisor;

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refinancing debt, which may entitle our Advisor or its affiliates to receive a financing coordination fee in connection with assisting in obtaining such financing;

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whether we seek to internalize our management functions, which could result in our retaining some of our Advisor’s and its affiliates’ key officers and employees for compensation that is greater than that which they currently earn or which could require additional payments to our Advisor or its affiliates to purchase the assets and operations of our Advisor, its affiliates and other related parties performing services for us;

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the listing of, or other liquidity event with respect to, our shares, which may entitle our Advisor to a subordinated incentive fee;

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a sale of assets, which may entitle our Advisor to a subordinated share of net sales proceeds; and

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whether and when we seek to sell our operating partnership or its assets, which sale could entitle our Advisor to additional fees.

The fees our Advisor receives in connection with transactions involving the purchase and management of our assets are not necessarily based on the quality of the investment or the quality of the services rendered to us. The basis upon which fees are calculated may influence our Advisor to recommend riskier transactions to us.

Conversely, the Expense Support Agreement has precluded the payment of any asset management fees and personnel reimbursements to the Advisor since April 2012, and the absence of any such payment may, itself, influence the behavior of our Advisor.

None of the agreements with our Advisor, Property Manager or any other affiliates and related parties were negotiated at arm’s length.

Agreements with our Advisor, Property Manager or any other affiliates and related parties may contain terms that are not in our best interest and would not otherwise apply if we entered into agreements negotiated at arm’s length with third parties.

Risks Related to Our Business

The returns we earn on our real estate assets will be affected by economic and regulatory changes that have an adverse impact on the real estate market in general, and we cannot assure you that we will be profitable or that we will realize growth in the value of our real estate properties.

The returns we earn on our real estate assets will be impacted by risks generally incident to the ownership of real estate, including:

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changes in local conditions, including oversupply of space or reduced demand for real estate assets of the type we own;

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inflation and other increases in operating costs, including insurance premiums, utilities and real estate taxes;

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changes in supply of, or demand for, similar or competing properties in a geographic area;

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an inability to refinance, if applicable, properties on favorable terms;

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changes in interest rates and availability of permanent mortgage funds that may render the sale of a property difficult or unattractive;

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the illiquidity of real estate investments generally;

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changes in tax, real estate, environmental, land use and zoning laws;

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vacancies or inability to rent space on favorable terms;

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acts of God, such as earthquakes, floods and hurricanes;

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inability to collect rents from tenants;

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discretionary consumer spending and changing consumer tastes; and

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periods of high interest rates and negative capital market conditions.

Additionally, the return on our real estate assets also may be affected by any continued or exacerbated general economic slowdown experienced by the U.S. as a whole or by the local economies where our properties are located, including:

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poor economic conditions may result in defaults by tenants of our properties;

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job transfers and layoffs may cause tenant vacancies to increase; and

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increasing concessions, reduced rental rates or capital improvements may be required to maintain occupancy levels.

Economic, inflation or budget deficit issues could increase capital costs, which could lead to increases in capitalization rates and a potential decline in the value of our investments.

Economic and real estate factors could lead to an increase in capitalization rates. If capitalization rates increase, we would anticipate declines in the pricing of assets upon sale. If we were required to sell investments in such markets, we could experience a decrease in the value of our investments.

Continued market disruptions may adversely affect our operating results.

In the recent past, the global financial markets experienced pervasive and fundamental disruptions. A disruption in the financial markets or the financial stability of a country often results in a significant negative impact on the financial markets globally. Such disruptions had and may continue to have an adverse impact on the availability of credit to businesses, generally, and have resulted in and could lead to further weakening of the U.S. economy. Our business may be affected by market and economic challenges experienced by the U.S. economy or real estate industry generally or by the local economic conditions in the jurisdictions in which our properties are located, including dislocations in the credit markets and general global economic recession. Availability of debt financing secured by commercial real estate has been significantly restricted, as a result of tightened underwriting standards. Continued declines in the financial markets may materially affect the value of our investment properties, the availability or the terms of financing that we have or may anticipate utilizing, and our ability to make principal and interest payments on, or refinance, any outstanding debt when due. Such challenging economic conditions may also negatively impact the ability of our tenants to enter into new leasing transactions or satisfy rental payments under existing leases.

Our operating results could be negatively impacted during periods of rising inflation or during periods of deflation.

Inflationary expectations or periods of rising inflation could also be accompanied by rising prices of commodities that are critical to the maintenance of real estate assets or to the return expected with respect to such assets. During periods of high inflation, capital tends to move to other assets, such as (historically) gold, which may adversely affect the prices at which we are able to sell our investments. There may be limited cash available for distribution from real estate assets with fixed income streams. The market value of such investments may decline in value in times of higher inflation rates.

During periods of deflation, the demand for assets in which we have invested could fall, reducing the revenues generated by, and therefore the value of, such investments, resulting in reduced returns to us and our stockholders. Where the operating costs and expenses associated with any such investments do not fall by a corresponding amount, the rate of return to us and our stockholders could be further reduced. As a result, it may be more difficult for leveraged assets to meet or service their debt obligations. Periods of deflation are often characterized by a tightening of money supply and credit, which could limit the amounts available to us with which to refinance our investments, which would affect the rate of return to us and our stockholders. Such economic constraints could also make the real estate assets in which we invest more illiquid, preventing us from divesting such assets efficiently and so reducing the return to us and our stockholders from such investments.

We depend on tenants for all of our revenue from real property investments, and lease terminations or the exercise of any co-tenancy rights could have an adverse effect.

Defaults on lease payment obligations by our tenants would cause us to lose the revenue associated with that lease and require us to find an alternative source of revenue to pay our mortgage indebtedness and prevent a foreclosure action. If a tenant defaults or declares bankruptcy, we may experience delays in enforcing our rights as a landlord and may be unable to collect sums due under related leases. If a tenant, or a guarantor of a tenant’s lease obligations, is subject to a bankruptcy proceeding, our efforts to collect pre-bankruptcy debts from these entities or their properties may be barred. If a lease is rejected by a tenant in bankruptcy, we may not be entitled to any further payments under the lease. In addition, if a tenant at one of our single-user facilities, which are properties designed or built primarily for a particular tenant or a specific type of use, fails to renew its lease or defaults on its lease obligations, we may not be able to readily market a single-user facility to a new tenant without making substantial capital improvements or incurring other significant re-leasing costs.

We may be unable to renew leases, or re-lease space as leases expire, on favorable terms or at all, which could have a material adverse effect on our financial condition, results of operations, cash flow and our ability to satisfy our debt service obligations.

Because we compete with a number of real estate operators in connection with the leasing of our properties, the possibility exists that one or more of our tenants will extend or renew its lease with us when the lease term expires on terms that are less favorable to us than the terms of the then-expiring lease, or that such tenant or tenants will not renew at all. Because we depend on rental payments from our tenants, if one or more tenants renews its lease on terms less favorable to us, does not renew its lease or we do not re-lease a significant portion of the space made available, our financial condition, results of operations, cash flow and ability to satisfy our debt service obligations could be materially adversely affected.

We rely significantly on three tenants and, therefore, are subject to tenant credit concentrations that make us more susceptible to adverse events with respect to those tenants.

For the year ended December 31, 2014, more than 96% of our rental income was derived from three tenants, and rents from these tenants in 2015 are expected to continue to be significant. Therefore, the financial failure of or our loss of one or more of these significant tenants could have a material adverse effect on our results of operations and our financial condition, until such time as we are able to lease such property to a new tenant. In addition, the value of our investment is historically driven by the credit quality of the underlying tenant, and an adverse change in a significant tenant’s financial condition may result in a decline in the value of our investments and have a material adverse effect on our results from operations.

Increasing vacancy rates for certain classes of real estate assets resulting from disruptions in the financial markets and deteriorating economic conditions could adversely affect the value of assets we own.

We depend upon tenants for all of our revenue from real property investments. Disruptions in the financial markets and deteriorating economic conditions could increase vacancy rates for certain classes of commercial property, including office and retail properties, due to increased tenant delinquencies and/or defaults under leases, generally lower demand for rentable space, as well as potential oversupply of rentable space. Disruptions in the financial markets and deteriorating economic conditions could impact certain of the real estate we have acquired and such real estate could experience higher levels of vacancy. The value of our real estate investments could decrease below the amounts we paid for the investments. Revenues from properties could decrease due to lower occupancy rates, reduced rental rates and potential increases in uncollectible rent. We will incur expenses, such as for maintenance costs, insurance costs and property taxes, even though a property is vacant. The longer the period of significant vacancies for a property, the greater the potential negative impact on our revenues and results of operations.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage may adversely affect our business.

The nature of the activities at certain properties we own will expose us and our tenants to potential liability for personal injuries and, in certain instances, property damage claims. In addition, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters that may be uninsurable or not economical to insure, or may be insured subject to limitations such as large deductibles or co-payments. Insurance risks associated with potential terrorist acts could sharply increase the premiums we pay for coverage against property and casualty claims. Mortgage lenders generally require property owners to purchase specific coverage insuring against terrorism as a condition for providing mortgage, bridge or mezzanine loans. These policies may or may not be available at a reasonable cost, if at all, which could inhibit our ability to refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We cannot assure you that we will have adequate coverage for such losses. In the event that any of our properties incurs a casualty loss that is not fully covered by insurance, the value of the particular asset will likely be reduced by the uninsured loss. In addition, we cannot assure you that we will be able to fund any uninsured losses.

Property tax increases may reduce the income from our properties.

The amount we pay in property taxes may increase from time to time due to rising real estate values and adjustments in assessments. Increases in real estate values or assessment rate adjustments will result in higher taxes. We may not be able to pass these increases on to our tenants.

We may have difficulty selling real estate investments, and our ability to distribute all or a portion of the net proceeds from such sale to our stockholders may be limited.

Equity real estate investments are relatively illiquid. We will have a limited ability to vary our portfolio in response to changes in economic or other conditions. We will also have a limited ability to sell assets in order to fund working capital and similar capital needs. When we sell any of our properties, we may not realize a gain on such sale or the amount of our taxable gain could exceed the cash proceeds we receive from such sale. We may determine to not distribute any proceeds from the sale of properties to our stockholders; for example, we may use such proceeds to:

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repay debt;

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fund distributions;

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create working capital reserves; or

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make repairs, maintenance, tenant improvements or other capital improvements or expenditures to our other properties.

Our ability to sell our properties may also be limited by our need to avoid a 100% penalty tax that is imposed on gain recognized by a REIT from the sale of property characterized as dealer property. In order to avoid such characterization and to take advantage of certain safe harbors under the Code, we may determine to hold our properties for a minimum period of time, generally two years.

Financing Related Risks

Mortgage indebtedness and other borrowings will increase our business risks.

We have obtained mortgage financing in connection with the acquisition of our properties. We may incur or increase our mortgage debt by obtaining loans secured by some or all of our assets to fund capital improvements, or for other corporate purposes. If necessary, we also may borrow funds to satisfy the requirement that we distribute at least 90% of our annual “REIT taxable income,” or otherwise as is necessary or advisable to assure that we maintain our qualification as a REIT for federal income tax purposes.

Although our articles of incorporation impose limits on our total indebtedness, there is no limit on the amount we may invest in any single property or other asset or on the amount we can borrow to purchase any individual property or other investment. Further, we may exceed the limits set forth in our articles if approved by a majority of our independent directors.

In addition to the limitations in our articles of incorporation, our board of directors has adopted a policy to generally limit our aggregate borrowings to not exceed approximately 75% of the aggregate value of our assets, unless substantial justification exists that borrowing a greater amount is in our best interest. Our policy limitation, however, will not apply to individual real estate assets. As a result, we may borrow more than 75% of the contract purchase price of a real estate asset we acquire to the extent our board of directors determines that borrowing these amounts is reasonable.

Principal and interest payments reduce cash that would otherwise be available for other purposes. Further, incurring mortgage debt increases the risk of loss because defaults on indebtedness secured by a property may result in foreclosure actions initiated by lenders and our loss of the property securing the loan that is in default. For tax purposes, a foreclosure is treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds. We also may provide full or partial guarantees to lenders of mortgage debt to the entities that own our properties. In this case, we will be responsible to the lender for satisfaction of the debt if it is not paid by the entity. If any mortgages contain cross-collateralization or cross-default provisions, there is a risk that more than one real property may be affected by a default.

Instability in the credit markets and real estate markets could have a material adverse effect on our results of operations and financial condition.

Domestic and international financial markets have, in the recent past, experienced unusual volatility and uncertainty. If this volatility and uncertainty persists, our ability to borrow monies to refinance the debt on our properties, if deemed advisable, or other activities related to real estate assets, if any, will be significantly impacted. Additionally, the reduction in equity and debt capital resulting from turmoil in the capital markets may result in fewer buyers seeking to acquire commercial properties leading to lower property values and the continuation of these conditions could adversely impact our timing and ability to sell our properties.

In addition to volatility in the credit markets, the real estate market is subject to fluctuation and can be impacted by factors such as general economic conditions, supply and demand, availability of financing and interest rates. To the extent we purchase real estate in an unstable market, we are subject to the risk that if the real estate market ceases to attract the same level of capital investment in the future that it attracted at the time of our purchases, or the number of parties seeking to acquire properties decreases, the value of our investments may not appreciate or may decrease significantly below the amount we paid for our investments.

Rising interest rates negatively affect our ability pay existing debt obligations and refinance our properties.

We may be unable to refinance or sell properties collateralized by debt that is maturing on acceptable terms and conditions, if at all. This risk may be greater in the case of interest-only loans or balloon payment loans where no or little payments on the principal amount of the loan have been made. If interest rates are higher at the time we intend to refinance, if any, we may not be able to refinance the properties at reasonable rates and our net income could be reduced. In addition, we may incur indebtedness that bears interest at a variable rate. Increases in interest rates on variable rate loans would increase our interest costs, which could have an adverse effect on our operating cash flow. Increased interest rates either on refinancing of properties or on variable rate loans could increase the amount of our debt payments and reduce cash flow. In addition, if rising interest rates cause us to need additional capital to repay indebtedness, we may need to borrow more money or to liquidate one or more of our investments at inopportune times that may not permit realization of the maximum return on such investments.

Lenders may require us to comply with restrictive covenants.

In connection with obtaining financing, a lender could impose restrictions on us that affect our ability to incur additional debt and our distribution and operating policies. In general, we expect our loan agreements to restrict our ability to encumber or otherwise transfer our interest in the applicable property without the prior consent of the lender. Loan documents we enter into may contain other customary negative covenants that may limit our ability to further mortgage the property, discontinue insurance coverage, replace our Advisor or impose other limitations.

To hedge against interest rate fluctuations, we may use derivative financial instruments. Using derivative financial instruments may be costly and ineffective.

We may engage in hedging transactions to manage the risk of changes in interest rates, price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, by us. We may use derivative financial instruments for this purpose, collateralized by our assets and investments. Derivative instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. Our actual hedging decisions will be determined in light of the facts and circumstances existing at the time of the hedge and may differ from time to time.

To the extent that we use derivative financial instruments to hedge against interest rate fluctuations, we will have additional REIT tax compliance requirements and we will be exposed to credit risk, basis risk and legal enforceability risks. In this context, credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. Basis risk occurs when the index upon which the contract is based is more or less variable than the index upon which the hedged asset or liability is based, thereby making the hedge less effective. Finally, legal enforceability risks encompass general contractual risks, including the risk that the counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract. We may be unable to manage these risks effectively.

Federal Income Tax Risks

Failure to qualify as a REIT would adversely affect our operations.

We elected to be treated as a REIT in connection with the filing of our tax return for the taxable year ended December 31, 2010. We believe that, commencing with such year, we have been organized, have operated, and are continuing to operate in a manner so as to qualify as a REIT for U.S. federal income tax purposes. However, our qualification and taxation as a REIT depends upon our ability to meet, on a continuing basis, and through actual operating results, requirements regarding composition of our assets, and other tests imposed by the Code. Qualification as a REIT is governed by highly technical and complex provisions for which there are only limited judicial or administrative interpretations. Accordingly, there is no assurance that we have operated or will continue to operate in a manner so as to qualify or remain qualified as a REIT.

If we fail to qualify as a REIT for any taxable year, (i) we will be subject to federal income tax, including any applicable alternative minimum tax, on our taxable income for that year at regular corporate rates, (ii) unless entitled to relief under relevant statutory provisions, we will be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status, and (iii) we will not be allowed a deduction for distributions made to stockholders in computing our taxable income. Losing our REIT status would reduce our net earnings available for distribution to stockholders because of the additional tax liability, and we would no longer be required to pay any particular amount of distributions to stockholders. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.

Our investment strategy may cause us to incur penalty taxes, lose our REIT status, or own and sell properties through TRSs, each of which would diminish the return to our stockholders.

The sale of one or more of our properties may be considered prohibited transactions under the Code. Any “inventory-like” sales would almost certainly be considered such a prohibited transaction. If we are deemed to have engaged in a “prohibited transaction” (i.e., we sell a property held by us primarily for sale in the ordinary course of our trade or business), all taxable gain we derive from such sale would be subject to a 100% penalty federal tax. The Code sets forth a safe harbor for REITs that wish to sell property without risking the imposition of the 100% penalty federal tax. The principal requirements of the safe harbor are that: (i) the REIT must hold the applicable property for not less than two years for the production of rental income prior to its sale; (ii) the aggregate expenditures made by the REIT, or any partner of the REIT, during the two-year period preceding the date of sale which are includible in the basis of the property do not exceed 30% of the net selling price of the property; and (iii) the REIT does not make more than seven sales of property during the taxable year, the aggregate adjusted bases of property sold during the taxable year does not exceed 10% of the aggregate bases of all of the REIT’s assets as of the beginning of the taxable year or the fair market value of property sold during the taxable year does not exceed 10% of the fair market value of all of the REIT’s assets as of the beginning of the taxable year. Given our investment strategy, the sale of one or more of our properties may not fall within the prohibited transaction safe harbor.

If we desire to sell a property pursuant to a transaction that does not fall within the safe harbor, we may be able to mitigate the 100% penalty federal tax if we acquired the property through a taxable REIT subsidiary (a “TRS”), or acquired the property and transferred it to a TRS for a non-tax business purpose prior to the sale (i.e., for a reason other than the avoidance of taxes). However, there may be circumstances that prevent us from using a TRS in a transaction that does not qualify for the safe harbor. Additionally, even if it is possible to effect a property disposition through a TRS, we may decide to forego the use of a TRS in a transaction that does not meet the safe harbor based on our own internal analysis, the opinion of counsel or the opinion of other tax advisors. In cases where a property disposition does not satisfy the safe harbor rules, the Internal Revenue Service could successfully assert that the disposition constitutes a prohibited transaction, in which event all of the net taxable gain from the sale of such property will be payable as a tax and thereby reducing the amount of cash available for investment by us or distribution to stockholders.

If a property is acquired by or subsequently transferred to a TRS, the taxable income, including gain, will be subject to federal corporate tax, and potentially state and local income taxes. This tax obligation would diminish the amount of the proceeds from the sale of such property that would be distributable to our stockholders. As a result, the amount available for distribution to our stockholders would be substantially less than if the REIT had not operated and sold such property through the TRS and such transaction was not successfully characterized as a prohibited transaction.

As a REIT, the value of our investment in all of our TRSs may not exceed 25% of the value of all of our assets at the end of any calendar quarter. If the Internal Revenue Service were to determine that the value of our interests in all of our TRSs exceeded 25% of the value of our total assets at the end of any calendar quarter, then we would fail to qualify as a REIT. If we determine it to be in our best interest to own a substantial number of our properties through one or more TRSs, then it is possible that the Internal Revenue Service may conclude that the value of our interests in our TRSs exceeds 25% of the value of our total assets at the end of any calendar quarter and therefore cause us to fail to qualify as a REIT. Additionally, as a REIT, no more than 25% of our gross income with respect to any year may be from sources other than investments relating to real property or mortgages on real property and from certain other specified sources. Distributions paid to us from a TRS are considered to be non-qualifying income for purposes of satisfying the 75% gross income test required for REIT qualification. Therefore, we may fail to qualify as a REIT if distributions from all of our TRSs, when aggregated with all other non-real estate income with respect to any one year, are more than 25% of our gross income with respect to such year.

Certain fees paid to us may affect our REIT status.

Income received in the nature of rental subsidies or rent guarantees, in some cases, may not qualify as rental income from real estate and could be characterized by the Internal Revenue Service as non-qualifying income for purposes of satisfying the 75% and 95% gross income tests required for REIT qualification. If the aggregate of non-qualifying income in any taxable year ever exceeded 5% of our gross revenues for such year, we could lose our REIT status for that taxable year and the four taxable years following the year of losing our REIT status.

If our operating partnership fails to maintain its status as a partnership, its income may be subject to taxation, which would reduce the cash available to us for distribution to our stockholders.

We intend to maintain the status of our operating partnership as either a disregarded entity or an entity taxable as a partnership for federal income tax purposes. However, if the Internal Revenue Service were to successfully challenge the status of the operating partnership as a disregarded entity or an entity taxable as a partnership, our operating partnership would be taxable as a corporation. In such event, this would reduce the amount of distributions that the operating partnership could make to us. This could also result in our losing REIT status, and becoming subject to a corporate level tax on our income. This would substantially reduce the cash available to us to pay distributions and the return on your investment. In addition, if any of the partnerships or limited liability companies through which our operating partnership owns its properties, in whole or in part, loses its characterization as a partnership or disregarded entity for federal income tax purposes, it would be subject to taxation as a corporation, thereby reducing distributions to our operating partnership. Such a recharacterization of an underlying property owner could also threaten our ability to maintain REIT status.

In certain circumstances, we may be subject to federal and state taxes on income as a REIT, which would reduce our cash available for distribution to our stockholders.

As a REIT, we may become subject to federal income taxes and related state taxes. For example, if we have gain from a “prohibited transaction,” such gain will be subject to the 100% penalty federal tax. We may not be able to make sufficient distributions to avoid excise taxes applicable to REITs. We may also decide to retain income we earn from the sale or other disposition of our assets and pay income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. We may also be subject to state and local taxes on our income or property, either directly or at the level of our operating partnership or at the level of the other entities through which we indirectly own our assets.

Non-U.S. income or other taxes, and a requirement to withhold any non-U.S. taxes, may apply, and, if so, the amount of cash distributions payable to you will be reduced.

We have acquired real property located outside the United States and may invest in stock or other securities of entities owning real property or other real estate-related assets located outside the United States. As a result, we may be subject to foreign (i.e., non-U.S.) income taxes, trade taxes, value-added taxes, stamp taxes, real property conveyance taxes, withholding taxes and other foreign taxes or similar impositions in connection with our ownership of foreign real property or foreign securities. The country in which the real property is located may impose such taxes regardless of whether we are profitable and in addition to any U.S. income tax or other U.S. taxes imposed on profits from our investments in such real property or securities. If a foreign country imposes income taxes on profits from our investment in foreign real property or foreign securities, we and you will not be eligible to claim a foreign tax credit on our and your U.S. federal income tax returns to offset the income taxes with the taxes paid to the foreign country, and the imposition of any foreign taxes in connection with our ownership and operation of foreign real property or our investment in securities of foreign entities will reduce the amounts distributable to you. Similarly, the imposition of withholding taxes by a foreign country will reduce the amounts distributable to you. We expect the organizational costs associated with non-U.S. investments, including costs to structure the investments so as to minimize the impact of foreign taxes, will be higher than those associated with U.S. investments. Moreover, we may be required to file income tax or other information returns in foreign jurisdictions as a result of our investments made outside of the United States. Any organizational costs and reporting requirements will increase our administrative expenses.

Complying with REIT requirements may limit our ability to hedge risk effectively.

The REIT provisions of the Code may limit our ability to hedge the risks inherent to our operations. Except to the extent permitted by the Code and Treasury Regulations, any income we derive from a hedging transaction which is clearly identified as such as specified in the Code, including gain from the sale or disposition of such a transaction, will not constitute gross income for purposes of the 75% and 95% gross income tests, and therefore will be exempt from these tests, but only to the extent that the transaction hedges (i) indebtedness incurred or to be incurred by us to acquire or carry real estate assets or (ii) currency fluctuations with respect to any item of income that would qualify under the 75% or 95% gross income tests. To the extent that we do not properly identify such transactions as hedges, hedge with other types of financial instruments, or hedge other types of indebtedness, the income from those transactions is not likely to be treated as qualifying income for purposes of the gross income tests. As a result of these rules, we may have to limit the use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.

Legislative or regulatory action could adversely affect us or your investment in us.

In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of the federal income tax laws applicable to investments similar to an investment in shares of our common stock. Additional changes to the tax laws are likely to continue to occur, and we cannot assure you that any such changes will not adversely affect the taxation of our stockholders. Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. You are urged to consult with your own tax advisor with respect to the impact of recent legislation on your investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares. You also should note that our counsel’s tax opinion is based upon our representations and existing law and Treasury Regulations, applicable as of the date of its opinion, all of which are subject to change, either prospectively or retroactively.

Although REITs continue to receive more favorable tax treatment than entities taxed as corporations (a deduction for dividends paid is afforded REITs), it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be taxed for U.S. federal income tax purposes as a corporation. As a result, our articles of incorporation provide our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a corporation, without the vote of our stockholders. Our board of directors has fiduciary duties to us and our stockholders in accordance with the Maryland General Corporation Law and could only cause such changes in our tax treatment if it determines in good faith that such changes are in the best interest of our stockholders.

Equity participation in mortgage, bridge, mezzanine or other loans may result in taxable income and gains from these properties that could adversely impact our REIT status.

If we participate under a loan in any appreciation of the properties securing the mortgage loan or its cash flow and the Internal Revenue Service characterizes this participation as “equity” or as a “shared appreciation mortgage,” we might have to recognize income, gains and other items from the property as if an equity investor for federal income tax purposes. This could affect our ability to qualify as a REIT.

Excessive non-real estate asset values may jeopardize our REIT status.

In order to qualify as a REIT, among other requirements, at least 75% of the value of our assets must consist of investments in real estate, investments in other REITs, cash and cash equivalents and government securities. Accordingly, the value of any other property that is not considered a real estate asset for federal income tax purposes must represent in the aggregate not more than 25% of our total assets. In addition, under federal income tax law, we may not own securities in, or make loans to, any one company (other than a REIT, a qualified REIT subsidiary or a TRS) which represent in excess of 10% of the voting securities or 10% of the value of all securities of that company (other than certain specified securities), or which have, in the aggregate, a value in excess of 5% of our total assets, and we may not own securities of one or more TRSs which have, in the aggregate, a value in excess of 25% of our total assets.

The 75%, 25%, 10% and 5% REIT qualification tests are determined at the end of each calendar quarter. If we fail to meet any such test at the end of any calendar quarter, and such failure is not remedied within 30 days after the close of such quarter, we will cease to qualify as a REIT, unless certain requirements are satisfied.

We may have to borrow funds or sell assets to meet our distribution requirements.

Subject to some adjustments that are unique to REITs, a REIT generally must distribute 90% of its taxable income (excluding net capital gains) to its stockholders. For the purpose of determining taxable income, we may be required to accrue interest, rent and other items treated as earned for tax purposes, but that we have not yet received. In addition, we may be required not to accrue as expenses for tax purposes some items which actually have been paid, or some of our deductions might be subject to certain disallowance rules under the Code. As a result, we could have taxable income in excess of cash available for distribution. If this occurs, we may have to borrow funds or liquidate some of our assets in order to meet the distribution requirements applicable to a REIT.

Despite our REIT status, we remain subject to various taxes which would reduce operating cash flow if and to the extent certain liabilities are incurred.

Even if we remain qualified as a REIT, we are subject to some federal, foreign and state and local taxes on our income and property that could reduce operating cash flow, including but not limited to: (i) tax on any undistributed real estate investment trust taxable income; (ii) “alternative minimum tax” on our items of tax preference; (iii) certain state income and franchise taxes (because not all states treat REITs the same as they are treated for federal income tax purposes); (iv) a tax equal to 100% of net gain from “prohibited transactions;” (v) tax on gains from the sale of certain “foreclosure property;” (vi) tax on gains of sale of certain “built-in gain” properties; and (vii) certain taxes and penalties if we fail to comply with one or more REIT qualification requirements, but nevertheless qualify to maintain our status as a REIT. Foreclosure property includes property with respect to which we acquire ownership by reason of a borrower’s default on a loan or possession by reason of a tenant’s default on a lease. We may elect to treat certain qualifying property as “foreclosure property,” in which case, the income from such property will be treated as qualifying income under the 75% and 95% gross income tests for three years following such acquisition. To qualify for such treatment, we must satisfy additional requirements, including that we operate

the property through an independent contractor after a short grace period. We will be subject to tax on our net income from foreclosure property. Such net income generally means the excess of any gain from the sale or other disposition of foreclosure property and income derived from foreclosure property that otherwise does not qualify for the 75% gross income test, over the allowable deductions that relate to the production of such income. Any such tax incurred will reduce the amount of cash available for distribution.

Item 1B.

UNRESOLVED STAFF COMMENTS

None.

Item 2.

PROPERTIES:

As of December 31, 2014, we had invested in nine real estate investment properties through wholly owned subsidiaries. In general, our properties are held subject to encumbrances, as described in “Schedule III – Real Estate and Accumulated Depreciation” of Item 15. “Exhibits and Financial Statement Schedules” of this Annual Report. The following table sets forth details about each of our properties:


Property Name and Location	Type	Date Acquired ⁽¹⁾	Contract Purchase Price ⁽²⁾ (in millions)			Encumbrances (in millions)			Leasable Square Feet		Monthly Gross Rent per Square Foot ⁽³⁾			% Leased			Major Tenant	Lease Expiration (Renewal Options)

Properties:
Austin Property Pflugerville, Texas ⁽⁴⁾	Light Industrial Building	06/08/11	$	4.5		$	—			51,189	$	0.69			100	%	FedEx Ground Package System, Inc.	4/14/2016

Heritage Commons III Fort Worth, Texas	Office Building	06/28/11	$	18.8		$	11.4			119,001	$	1.53			100	%	DynCorp International LLC	12/31/2018 (with two 5-year renewal options)

Heritage Commons IV Fort Worth, Texas	Office Building	10/27/11	$	31.0		$	19.4			164,333	$	1.95			100	%	Mercedes-Benz Financial Services USA, LLC	9/30/2018 (with two 5-year renewal options)

Jacksonville Distribution Center Jacksonville, Florida	Industrial Distribution Facility	10/12/12	$	42.5		$	25.3			817,680	$	0.38			100	%	Samsonite, LLC	11/30/2024 (with two 5-year renewal options)

Held for Sale:
Giessen Retail Center Giessen, Germany ⁽⁵⁾	Value Retail Center	03/08/12	$	5.2	⁽⁶⁾	$	2.7	⁽⁷⁾		34,704	$	1.23	⁽⁷⁾		100	%	⁽⁸⁾	2017-2019 (with 3- to 5-year renewal options)

Worms Retail Center Worms, Germany ⁽⁵⁾	Value Retail Center	09/27/12	$	5.8	⁽⁶⁾	$	3.4	⁽⁷⁾		41,944	$	1.19	⁽⁷⁾		100	%	⁽⁸⁾	2016-2019 (with 2- to 5-year renewal options)

Gütersloh Retail Center Gütersloh, Germany ⁽⁵⁾	Value Retail Center	09/27/12	$	3.6	⁽⁶⁾	$	2.1	⁽⁷⁾		19,375	$	1.54	⁽⁷⁾		100	%	⁽⁸⁾	5/13/2022 (with five 3-year renewal options)
Bremerhaven Retail Center Bremerhaven, Germany ⁽⁵⁾	Value Retail Center	11/30/12	$	3.8	⁽⁶⁾	$	2.0	⁽⁷⁾		33,121	$	0.95	⁽⁷⁾		92	%	⁽⁸⁾	2016-2023 (with 3- to 5-year renewal options)

Hannover Retail Center Hannover, Germany ⁽⁵⁾	Value Retail Center	12/21/12	$	5.4	⁽⁶⁾	$	3.0	⁽⁷⁾		26,855	$	1.60	⁽⁷⁾		100	%	⁽⁸⁾	2015-2022 (with 3- to 5-year renewal options)


			$	120.6		$	69.3			1,308,202

FOOTNOTES:

⁽¹⁾

The date reflected for international acquisitions is the date funds were wired to the seller to close the transaction. Depending on the timing of the wire and the time zone in the jurisdiction of the location of the property, the actual transfer of title may occur on the funding date or the next business day (U.S. time).

⁽²⁾	Purchase price excludes closing costs and acquisition fees and expenses, including the investment services fees payable to our Advisor.

⁽³⁾	Represents the base rent in effect as of December 31, 2014, including the impact of rent abatements, concessions or rent credits, divided by available square footage for the respective property. Excludes tenant reimbursements, straight-line rent adjustments and amortization of above-market leases.

⁽⁴⁾

In February 2015, we committed to a plan to sell this property and, during the year ended December 31, 2014, we recorded an impairment provision of approximately $1.3 million related to the Austin Property. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Impairments” for additional information. In addition, under the terms of its current lease, the tenant holds a 5-year extension option; however, the tenant has notified us that it does not intend to exercise its option or renew the lease.

⁽⁵⁾

These properties are classified as “Held for Sale” as of December 31, 2014 and, during the year ended December 31, 2014, we recorded an impairment provision of approximately $0.5 million in order to write-down the carrying value of the German portfolio to an amount equal to the sales proceeds, less transaction costs, received in January 2015.

⁽⁶⁾	Amounts converted from Euro to U.S. dollars at exchange rates applicable on the dates of acquisition.

⁽⁷⁾	Amounts converted from Euro to U.S. dollars at $1.22 per Euro, the exchange rate as of December 31, 2014.

⁽⁸⁾	Properties are leased to a variety of retail establishments, each of which occupies less than 5% of our total leasable square feet for all properties.

Leases

As of February 28, 2015, our real estate portfolio was 100% leased, with a weighted average remaining lease term of 6.0 years based on annualized base rents as of December 31, 2014 (excluding properties held for sale). Each lease was assumed by us in conjunction with the acquisition of the applicable property. Generally, the leases are non-cancelable and provide for annual base rents, payable monthly, with periodic increases throughout the lease terms. In addition, the tenants are generally responsible for the payment of some, and in two cases substantially all, of the operating expenses of the property. Each tenant generally has the option to extend the lease term for an additional period (generally ranging from two to five years).

In February 2014, we executed a lease amendment with the tenant at our Jacksonville Distribution Center, which included an extension of the lease term from February 2018 to November 2024. Pursuant to the terms of the amendment, the tenant will generally pay monthly base rents ranging from approximately $0.3 million to $0.4 million over the life of the lease term with the exception of certain “free rent” periods negotiated with the lease extension. More specifically, the tenant was entitled to four months of “free rent” in 2014 and will be entitled to an additional nine months of “free rent” in 2024. The lease amendment further provides the tenant with two 5-year renewal options that provide for a reset of base rents at fair market value subject to a monthly base rent floor of approximately $0.4 million. Management believes that the longer term lease as provided by the lease amendment will increase the potential value of the property.

The following is a schedule of future minimum lease payments to be received for each of the next five years and thereafter, in the aggregate, under non-cancellable operating leases as of December 31, 2014 (excluding properties held for sale):


2015	$	10,232,777
2016		9,996,497
2017		9,985,713
2018		9,062,490
2019		3,931,325
Thereafter		16,814,991

	$	60,023,793

The following table lists, on an aggregate basis, scheduled lease expirations for each year ending December 31, 2015 through December 31, 2024 and thereafter for our properties owned as of December 31, 2014 (excluding properties held for sale). The table shows the annualized base rent and percentage of annualized base rent represented by the leases at their expiration dates (excluding properties held for sale):


Year of Expiration ⁽¹⁾	Number of Expiring Leases		Expiring Leased Area (in square feet)		Percentage of Total Leased Area			Annualized Base Rent of Expiring Leases ⁽²⁾		Percentage of Annualized Base Rent

2015		—		—		0.0	%	$	—		0.0	%
2016		1		51,189		4.4	%		421,769		4.1	%
2017		—		—		0.0	%		—		0.0	%
2018		2		283,334		24.6	%		6,033,084		58.9	%
2019		—		—		0.0	%		—		0.0	%
2020		—		—		0.0	%		—		0.0	%
2021		—		—		0.0	%		—		0.0	%
2022		—		—		0.0	%		—		0.0	%
2023		—		—		0.0	%		—		0.0	%
2024		1		817,680		71.0	%		3,781,044		37.0	%
Thereafter		—		—		0.0	%		—		0.0	%

Total		4		1,152,203		100.0	%	$	10,235,897		100.0	%

FOOTNOTES:

⁽¹⁾	Represents current lease expiration and does not take into consideration lease renewals available under existing leases at the option of the tenants.

⁽²⁾	Represents the base rent, excluding tenant reimbursements, in the final month prior to expiration multiplied times 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges.

Item 3.

LEGAL PROCEEDINGS

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

Item 4.

MINE SAFETY DISCLOSURE

None.

PART II

Item 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

There is no established public trading market for our common stock; therefore, there is a risk that a stockholder may not be able to sell our stock at a time or price acceptable to the stockholder, or at all. Unless and until our shares are listed on a national securities exchange, it is not expected that a public market for the shares will develop.

In October 2014, we adopted a valuation policy (“Valuation Policy”) consistent with the Investment Program Association (“IPA”) Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, which was issued by the IPA April 2013 (“IPA Guidelines”).

The valuation process used by the valuation committee and the board to determine the 2014 estimated net asset value per share was designed to follow recommendations in the IPA Guidelines and our Valuation Policy. In accordance with our Valuation Policy and in order to assist brokers in providing information on customer account statements consistent with the requirements of NASD Notice 01-08 and Financial Industry Regulatory Authority (“FINRA”) Rule 2340, we, based on the recommendation of the valuation committee and the approval of the board of directors, engaged CBRE Cap to assist it and the board in determining the estimated net asset value per share of our common stock as of December 31, 2014 (“December 31, 2014 NAV”). The valuation committee and the board deemed it to be in our best interest and the best interests of our stockholders to engage CBRE Cap to provide the valuation analysis, based upon CBRE Cap’s familiarity with our business model and portfolio of assets.

On April 23, 2010, we commenced our Offering pursuant to a registration statement on Form S-11 under the Securities Act. As of April 23, 2013, the Offering closed and we had received aggregate offering proceeds of approximately $83.7 million since inception, including proceeds received through our DRP. In January 2015, our board of directors determined our December 31, 2014 NAV per share, as of December 31, 2014 to be $7.43, as described below.

Valuation Methodologies

In preparation of the 2014 valuation report, CBRE Cap conducted property level and aggregate valuation analyses as of December 31, 2014 and provided a range for our estimated December 31, 2014 NAV per share. In preparation of the 2014 valuation report, CBRE Cap considered the IPA Guidelines and utilized operating information and financial materials and projections prepared by our senior management, our Advisor, and/or our joint venture partners.

CBRE Cap relied on the following sources in determining the major assumptions in the 2014 valuation report:

•

reviewed financial and operating information requested from or provided by senior management of the Company’s Advisor;

•

reviewed and discussed with senior management of the Advisor the historical and anticipated future financial performance of our properties, including forecasts prepared by the senior management of the Advisor;

•

commissioned restricted use appraisals which contained analysis on each of our U.S. real property assets;

•

reviewed the Share Purchase Agreement for the German assets, as disclosed on Current Report on Form 8-K filed January 2, 2015; and

•

reviewed our reports filed with the Commission.

Refer to our Form 8-K filed on January 13, 2015 for additional details on the December 31, 2014 NAV, valuation methodologies, material assumptions, limitations and engagement of CBRE Cap.

Recent Sales of Unregistered Securities

For the year ended December 31, 2014, we are aware of transfers of 1,380 shares by investors. The shares were transferred at a sales price of $6.50 per share. We are not aware of any transfers of shares by investors for the years ended December 31, 2013 and 2012 and we are not aware of any other trades of our shares, other than previous purchases made in our public offerings and redemptions of shares by us.

Securities Authorized for Issuance under Equity Compensation Plans

None.

Redemption Plan

As a result of the termination of our distribution reinvestment plan and the close of our Offering in April 2013, our board of directors suspended our stock redemption plan effective April 10, 2013. During the year ended December 31, 2013, we processed and paid all eligible redemption requests totaling 130,215 shares of common stock at an average price of $9.37 per share, for a total of approximately $1.2 million. We are no longer accepting redemption requests.

Amounts redeemed during the year ended December 31, 2013 were funded with proceeds from the issuance of shares pursuant to our distribution reinvestment plan and proceeds from our Offering. During the year ended December 31, 2012, we received requests for the redemption of an aggregate of 32,064 shares of common stock, all of which were approved for redemption at an average price of $9.69 per share or approximately $0.3 million. Such redemptions were funded with proceeds from our Offering, including amounts received through our distribution reinvestment plan.

Distributions

In order to qualify as a REIT, we are required to distribute 90% of our annual REIT taxable income (excluding net capital gains) to our stockholders. During the first three quarters of 2014 and prior to the second quarter of 2013, we had insufficient cash flows from operating activities or funds from operations to fund a significant portion of our distributions; therefore, such amounts were substantially funded from proceeds of our Offering. Our board of directors has authorized a daily distribution of $0.0017808 per share of common stock to all common stockholders of record as of the close of business on each day, payable monthly, until terminated or amended.

The payment of distributions is a significant use of cash. Our primary source of capital for the payment of distributions is expected to be net operating income generated by our leases, net of our general and administrative expenses, debt service payments and other operating expenses. Our ability to sustain the current distribution rate is therefore highly dependent upon our tenants paying their rent as contractually due, our ability to keep our properties leased, and reducing our general and administrative expenses, including the continuance of the Amended and Restated Expense Support Agreement. See Item 7. “Management’s Discussion and Analysis of Financial Condition – Liquidity and Capital Resources – Expense Support Agreement” for additional information relating to the Amended and Restated Expense Support Agreement.

In addition, as a result of the termination of our DRP on April 10, 2013, the amount of cash required to fund distributions is no longer offset by additional offering proceeds from DRP shares. Our objective is to maintain a reasonable level of cash reserves to provide for continued distributions at their current level in the event that we have insufficient cash from operating activities, but there is no assurance that our cash reserves will be sufficient to maintain that level in the event of a tenant defaulting on their obligations and/or our Advisor terminating the Amended and Restated Expense Support Agreement. In the event we do not generate sufficient cash from operations, regardless of the amount of reserves we may have, our board of directors may determine to revise our current distribution policy.

The table in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presents total cash distributions declared and issued, including distributions reinvested in additional shares through our DRP, net cash provided by (used in) operating activities, and FFO for each quarter in the years ended December 31, 2014, 2013 and 2012.

Generally, distributions up to the amount of our current or accumulated earnings and profits will be taxable to the recipient stockholders as ordinary income. We currently intend to continue to pay distributions to our stockholders on a monthly basis, although our board of directors reserves the right to change the per share distribution amount or otherwise amend or terminate our distribution policy. Our board of directors considers a number of factors in its determination of the amount and basis of distributions it declares, including expected and actual net cash flow from operations, FFO, our overall financial condition, our Advisor’s determination in regards to providing expense support to us, our objective of qualifying as a REIT for U.S. federal income tax purposes, the determination of reinvestment versus distribution following the sale or refinancing of an asset, as well as other factors, including an objective of maintenance of stable and predictable distributions regardless of the composition.

For GAAP purposes, our cumulative net losses and accumulated distributions as of December 31, 2014 were approximately $17.8 million and $14.9 million, respectively. Our net losses and distributions were approximately $4.6 million and $5.4 million, respectively, for the year ended December 31, 2014, approximately $2.4 million and $5.2 million, respectively, for the year ended December 31, 2013 and approximately $6.2 million and $3.2 million, respectively, for the year ended December 31, 2012.

Many of the factors that can affect the availability and timing of cash distributions to stockholders are beyond our control, and a change in any one factor could adversely affect our ability to pay future distributions. There can be no assurance that future cash flow will support distributions at the rate that such distributions are paid in any particular distribution period. See Item 1. “Business — Our Distribution Policies” and Item 1A. “Risk Factors — Company Related Risks.” There can be no assurance that we will be able to achieve anticipated cash flows necessary to maintain distributions at any particular level, or that distributions, if any, will increase over time.

Use of Proceeds from Registered Securities

On April 23, 2010, our Registration Statement (File No. 333-158478), covering a public offering of up to $1.5 billion (150 million shares) of common stock, was declared effective by the SEC, and the Offering closed on April 23, 2013.

We have used the net proceeds of our Offering primarily to invest in a portfolio of income-oriented commercial real estate. The use of proceeds from our Offering and borrowings were as follows as of December 31, 2014:


	Total			Payments to Affiliates ⁽¹⁾			Payments to Others
Shares registered		150,000,000
Aggregate price of offering amount registered	$	1,500,000,000

Shares sold ⁽²⁾		8,397,467
Aggregate offering price of amount sold	$	83,748,071
Offering expenses ⁽³⁾		(12,265,815	)	$	(8,016,528	)	$	(4,249,287	)

Net offering proceeds to the issuer after deducting Offering expenses		71,482,256
Proceeds from borrowings, net of loan costs		54,022,299

Total net offering proceeds and borrowings		125,504,555
Purchases of and additions to real estate assets		(93,832,285	)		—			(98,832,285	)
Principal payments of debt ⁽⁴⁾		(9,037,308	)		—			(9,037,308	)
Distributions to stockholders ^{(4) (5)}		(8,658,956	)		(68,109	)		(8,590,847	)
Payment of acquisition fees and expenses ⁽⁵⁾		(4,867,082	)		(2,226,784	)		(2,640,298	)
Redemptions of shares		(1,529,670	)		—			(1,529,670	)
Payment of operating expenses ^{(4) (5)}		(846,794	)		(608,528	)		(238,266	)
Payment of lease costs		(15,927	)		—			(15,927	)

Unused Offering proceeds ⁽⁶⁾	$	6,716,533

FOOTNOTES:

⁽¹⁾	For purposes of this table, “Payments to Affiliates” represents direct or indirect payments to directors, officers or general partners of the issuer or their associates; to persons owning 10% or more of any class of equity securities of the issuer; and to affiliates of the issuer.

⁽²⁾	Excludes unregistered shares issued to our Advisor.

⁽³⁾

Offering expenses paid to affiliates include selling commissions and marketing support fees paid to the managing dealer of our Offering (all or a portion of which were paid to unaffiliated participating brokers by the managing dealer). Reimbursements to our Advisor of expenses of the Offering that it incurred on our behalf from unrelated parties such as legal fees, printing costs, and registration fees are included in Payments to Others for purposes of this table. This table does not include amounts incurred by our Advisor in excess of the 15% limitation on total offering expenses (including selling commissions and marketing support fees) that were paid by our Advisor and for which we are not obligated to repay, or amounts deferred under the expense support agreements as described in “Related Party Arrangements” in the accompanying consolidated financial statements in Item 8. “Financial Statements and Supplementary Data” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

⁽⁴⁾	We may pay distributions, debt service and/or operating expenses from the remaining amount of our net proceeds of our Offering. The amounts presented above represent the net proceeds used for such purposes as of December 31, 2014.

⁽⁵⁾

We funded acquisition fees and expenses, including investment services fees, from net proceeds of our Offering. However, for GAAP purposes, such amounts are treated as an expense in calculating our net income (loss) and as a deduction in calculating our net cash provided by (used in) operating activities. For GAAP purposes, we are required to report distributions in excess of net cash provided by operating activities as funded from other sources (i.e., Offering proceeds), regardless of whether amounts included in the calculation of net cash provided by operating activities were funded from other sources. Offering proceeds used to fund distributions to stockholders, as presented in the table above, represents amounts we consider used for such purposes, after taking into account items, such as acquisition fees and expenses, being paid from Offering proceeds.

⁽⁶⁾	The remaining unused Offering proceeds as of December 31, 2014 represents approximately 8.0% of aggregate Offering proceeds.

Item 6.

SELECTED FINANCIAL DATA

The following selected financial data for Global Income Trust, Inc. should be read in conjunction with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8. “Financial Statements and Supplementary Data.”


	Year Ended December 31,
	2014			2013			2012			2011			2010 ⁽¹⁾
Operating Data:
Revenues	$	10,997,716		$	11,233,036		$	8,346,181		$	2,468,101		$	—
Operating income (loss)⁽²⁾		(786,274	)		936,220			(1,023,144	)		(2,624,156	)		(928,951	)
Net loss:
Loss from continuing operations ⁽²⁾		(4,335,726	)		(2,852,272	)		(4,473,502	)		(3,635,477	)		(928,951	)
Income (loss) from discontinued operations ⁽³⁾		(269,312	)		459,426			(1,761,086	)		—			—

	$	(4,605,038	)	$	(2,392,846	)	$	(6,234,588	)	$	(3,635,477	)	$	(928,951	)


Net income (loss) per share (basic and diluted):
From continuing operations ⁽²⁾	$	(0.53	)	$	(0.36	)	$	(0.91	)	$	(2.08	)	$	(1.78	)
From discontinued operations ⁽³⁾		(0.03	)		0.06			(0.36	)		—			—

	$	(0.56	)	$	(0.30	)	$	(1.27	)	$	(2.08	)	$	(1.78	)

Weighted average number of shares outstanding (basic and diluted) ⁽¹⁾		8,257,410			7,931,165			4,908,673			1,744,849			520,975
Distributions declared ⁽⁴⁾	$	5,367,243		$	5,155,770		$	3,199,577		$	1,134,137		$	83,379
Distributions declared per share ⁽⁴⁾	$	0.65		$	0.65		$	0.65		$	0.65		$	0.16
Net cash provided by (used in) operating activities	$	3,698,619		$	4,629,744		$	(945,936	)	$	(1,657,332	)	$	(62,517	)
Net cash used in investing activities	$	(444,066	)	$	(601,708	)	$	(40,357,200	)	$	(54,859,312	)	$	—
Net cash provided by (used in) financing activities	$	(6,739,054	)	$	4,175,848		$	37,892,489		$	54,813,083		$	6,994,805

Other Data:
Funds from operations (“FFO”)⁽⁵⁾		3,747,356			4,622,736			(1,769,907	)		(2,546,342	)		(928,951	)
FFO per share	$	0.45		$	0.58		$	(0.36	)	$	(1.46	)	$	(1.78	)
Modified funds from operations (“MFFO”)⁽⁵⁾		3,075,659			4,572,244			1,147,866			(993,485	)		(928,951	)
MFFO per share	$	0.37		$	0.58		$	0.23		$	(0.57	)	$	(1.78	)
Properties owned at the end of year		9			9			9			3			—


	As of December 31,
	2014		2013		2012		2011		2010
Balance Sheet Data:
Real estate investment properties, net	$	63,263,152	$	66,631,039	$	68,972,323	$	39,491,392	$	—
Assets held for sale	$	20,868,983	$	24,949,185	$	24,552,063	$	—	$	—
Lease intangibles, net	$	13,872,453	$	18,178,099	$	22,289,496	$	13,697,749	$	—
Cash and cash equivalents	$	6,716,533	$	10,282,179	$	2,037,120	$	5,429,114	$	7,132,675
Total assets	$	109,752,407	$	123,894,032	$	121,250,852	$	60,561,490	$	7,211,670
Mortgage notes payable	$	56,095,907	$	57,467,718	$	56,367,967	$	39,538,879	$	—
Liabilities associated with assets held for sale	$	13,742,627	$	15,382,632	$	21,767,497	$	—	$	—
Total liabilities	$	72,911,380	$	75,956,167	$	81,811,077	$	41,841,967	$	1,064,820
Stockholders’ equity	$	36,841,027	$	47,937,865	$	39,439,775	$	18,719,523	$	6,146,850

FOOTNOTES:

⁽¹⁾

Significant operations commenced on October 8, 2010 when we received the minimum offering proceeds and the funds were released from escrow. The results of operations for the year ended December 31, 2010 include only organizational costs incurred on our behalf by our Advisor, and general and administrative expenses. Weighted average number of shares outstanding is presented for the period we were operational.

⁽²⁾

As described above in Item 8. “Financial Statements and Supplementary Data” – Note 2. “Summary of Significant Accounting policies,” we evaluate our properties on an ongoing basis to determine whether the value of our real estate properties (including any related amortizable intangible assets or liabilities) may be impaired. During the year ended December 31, 2014, we determined that the carrying value of our Austin property was not recoverable based on our expected holding period and recorded an impairment provision of approximately $1.3 million for the year ended December 31, 2014. We did not record any impairments for the years ended December 31, 2013, 2012, 2011 and 2010, respectively. Refer to Item 8. “Financial Statements and Supplementary Data” – Note 4. “Real Estate Investment Properties, Net” for additional information.

⁽³⁾

We evaluated the German portfolio for impairment and determined that the carrying value was not recoverable based on an analysis comparing the sales proceeds, less transaction costs, received in January 2015 to the carrying value of 94.9% of our equity interest in the entities that own our German properties, including cumulative translation adjustments related to foreign currency exchange, as of December 31, 2014. Therefore, we recognized an impairment provision of approximately $0.5 million for the year ended December 31, 2014.

⁽⁴⁾

Distributions are declared by the board of directors and generally are based on various factors, including actual and future expected net cash from operations, FFO and our overall financial condition, among others. For the year ended December 31, 2014, 2013 and 2012, approximately 64%, 83% and 9%, respectively, of distributions declared to stockholders were considered to be funded with cash provided by operations, calculated on a quarterly basis, and approximately 36%, 17% and 91% of distributions, respectively, were considered to be funded from other sources (i.e. Offering proceeds) for GAAP purposes. For the years ended December 31, 2014, 2013 and 2012, approximately 93%, 72% and 100%, respectively, of distributions were considered a return of capital and 7%, 28% and 0%, respectively, were considered taxable for federal income tax purposes. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”” for additional information on distributions declared for the years ended December 31, 2014, 2013 and 2012.

⁽⁵⁾

FFO is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance. We use FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property, asset impairment write-downs, depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures, as one measure to evaluate our operating performance. FFO was developed by NAREIT as a relative measure of performance of an equity REIT in order to recognize that income-producing real estate has historically not depreciated on the basis determined under GAAP.

We define MFFO, a non-GAAP measure, consistent with the Investment Program Association (“IPA”), an industry trade group, Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, and the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for various items, as applicable, included in the determination of GAAP net income or loss including: acquisition fees and expenses, amortization of above- and below-market leases, fair value adjustments of derivative financial instruments, realized gains and losses from early extinguishment of debt, adjustments related to contingent purchase price consideration and straight-line rent adjustments. FFO and MFFO are not necessarily indicative of cash flows available to fund cash needs and should not be considered (i) as an alternative to net income or loss, or net income or loss from continuing operations, as an indication of our performance, (ii) as an alternative to cash flows from operations as an indication of our liquidity, or (iii) as indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should not be construed as more relevant or accurate than the current GAAP methodology in calculating net income or loss and its applicability in evaluating our operating performance.

See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Funds from Operations and Modified Funds from Operations” for additional disclosures relating to FFO and MFFO.

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We were organized as a Maryland corporation on March 4, 2009 and have elected to be taxed, and currently qualify as a REIT for federal income tax purposes.

Our Advisor and Property Manager

Our Advisor and our Property Manager are each wholly owned by affiliates of our Sponsor, which is an affiliate of CNL, a leading private investment management firm providing global real estate and alternative investments. The Advisor is responsible for managing our affairs on a day-to-day basis and for identifying, recommending and executing acquisitions and dispositions on our behalf pursuant to an advisory agreement.

Substantially all of our acquisition, operating, administrative and property management services are provided by sub-advisors to the Advisor and by sub-property managers to the Property Manager, including an affiliate of BlackRock, Inc. (NYSE: BLK), who provides services with respect to our assets held in Germany. In addition, certain unrelated sub-property managers have been engaged to provide certain property management services. This network of sub-advisors and sub-property managers offers us access to professionals experienced in making and managing real estate and real estate-related investments in various regions around the world.

Our Common Stock Offering

In April 2010, we commenced our Offering, the net proceeds of which were used primarily to fund our acquisitions of real estate. We commenced operations on October 8, 2010, when the minimum required offering proceeds were received and funds were released to us from escrow. On April 23, 2013, the Offering closed and, as of such date, we had received aggregate offering proceeds of approximately $83.7 million (8.4 million shares), including approximately $1.9 million (0.2 million shares) through our distribution reinvestment plan.

Our Real Estate Portfolio

We were formed primarily to acquire and operate a diverse portfolio of income-oriented commercial real estate and real estate-related assets on a global basis. During 2011, we acquired our first three properties: a distribution center outside of Austin in Pflugerville, Texas and two office buildings in Fort Worth, Texas. During 2012, we completed the purchase of five value-retail centers across Germany, as well as a distribution center in Jacksonville, Florida. We focused on assets that we believed would provide a steady income stream and we made investments in select suburban markets that we believed offered investors attractive risk-adjusted returns. Our initial focus on U.S. properties was based on the relative ease with which we could conduct due diligence and acquire assets of relatively small dollar investments and the demographics of the markets we selected. In addition to sound property-level attributes, we carefully reviewed relevant demographic and economic factors that we expect to affect each property location.

As part of our “Exit Strategy” described below, in January 2015, we sold 94.9% of our equity interest in the entities that own our five value-retail centers in Germany and retained a 5.1% non-controlling interest with limited protective rights. As of February 28, 2015, we owned four properties with approximately 1.2 million square feet of leasable space and our portfolio was 100% leased with a weighted average remaining lease term of 6.0 years. Our tenants include Mercedes-Benz Financial Services USA, LLC, DynCorp International, LLC, Samsonite, LLC, and FedEx Ground Package System, Inc. Refer to our “Exit Strategy” section below, for additional information on the Austin Property and our held for sale determination in February 2015.

Debt Financing

Through subsidiaries of our operating partnership that were formed to make our investments, we generally borrowed, on a non-recourse basis, amounts that we believed would maximize the return to our stockholders. The use of non-recourse financing allowed us to improve returns to our stockholders and to limit our exposure on an investment to the amount invested. Non-recourse indebtedness means the indebtedness of the borrower or its subsidiaries is collateralized only by the assets to which such indebtedness relates, without recourse to our assets, outside of the assets of the borrower, or any of its subsidiaries, other than in the case of customary carve-outs for which the borrower or its subsidiaries act as guarantor in connection with such indebtedness, such as fraud, misappropriation, misapplication of funds, environmental conditions and material misrepresentation.

Operating Performance

With the completion of our Offering and acquisition phase in 2013, our focus shifted towards building stockholder value. In connection therewith, as described in Item 8. “Financial Statements and Supplementary Data” – Note 6. “Operating Leases” in the accompanying consolidated financial statements, in February 2014, we executed a lease amendment with the tenant at our Jacksonville Distribution Center, which extended the lease term from February 2018 to November 2024. As an incentive for entering into the extended lease term, the tenant was granted four months of “free rent” in 2014, and an additional nine months of “free rent” at the end of the lease term in 2024. Although the lease amendment initially lowered our operating cash flow from this property, we believe the extended lease term increased the value of the property. We continue to pursue value creation opportunities relating to our properties including, but not limited to, seeking lease extensions with other tenants in advance of renewal option periods.

Expense Support from our Advisor

Pursuant to the advisory agreement with our Advisor, our Advisor is entitled to asset management fees and reimbursement of certain personnel-related expenses it incurs on our behalf. For the period April 1, 2012 through December 31, 2013, our Advisor agreed to defer and subordinate receipt of such fees and reimbursements to us meeting certain distribution coverage metrics pursuant to an expense support agreement. Effective January 1, 2014, our Advisor agreed to accept forfeitable restricted stock, in lieu of cash, as payment for such fees and reimbursements if certain distribution coverage metrics are not met, subject to an amended and restated expense support agreement. As a result, our cash from operations has been, and is expected to continue to be positively impacted by expense support provided by our Advisor until such time as the Amended and Restated Expense Support Agreement is terminated by the Advisor. In December 2014, the Advisor agreed to waive all unpaid asset management fees, acquisition fees, and disposition fees for the years ended December 31, 2013 and 2012 as well as the reimbursement of all unpaid expenses incurred by the Advisor for the periods then-ended. For additional information regarding expense support provided by the Advisor, see “Expense Support Agreements” further below.

Distributions

Through the end of 2014, we were able to focus on providing stockholders with attractive and stable cash distributions. Prior to 2013, our distributions were funded primarily with Offering proceeds. Although management believes that the lease amendment entered into for the Jacksonville Distribution Center increased the value of the property as the result of a longer term lease, cash from operations was negatively impacted during the first half of 2014 by a period of “free rent” that was negotiated by the tenant.

With the completion of our acquisition phase and the Amended and Restated Expense Support Agreement in place, cash from operations and FFO are currently expected to fund the majority of our distributions during 2015. Our Advisor could determine to terminate the Amended and Restated Expense Support Agreement upon 120 days’ notice to us, and we may have a number of other unforeseen circumstances that could cause us to have less cash available for distributions. As a result of the reduction in cash from operations in 2014, we funded a portion of our distributions with other sources (i.e., Offering proceeds). In addition, should we not have sufficient cash available from operations to maintain current distributions beyond 2014, we may continue to use other sources (i.e., Offering proceeds) to fund any such shortfalls and/or amend our current distribution policy.

In April 2013, our board of directors determined it was in our best interest to terminate our distribution reinvestment plan; therefore, all distributions paid, commencing in May 2013, have been paid in cash to stockholders. Prior to May 2013, approximately one-third of our monthly distributions were being reinvested in additional shares of common stock by participants of our distribution reinvestment plan. The termination of this plan results in more net cash being required to fund distributions on a monthly basis.

Exit Strategy

Although our board of directors is not required to review or recommend an exit strategy by any certain date, with the completion of our Offering, our Advisor began exploring possible strategic alternatives and our board formed a Special Committee. In connection therewith, in August 2013, the Special Committee engaged STRH as its financial advisor.

In conjunction with the work performed by STRH, in February 2014, we engaged JLL to identify potential strategic alternatives for our German portfolio. In June 2014, our Advisor and Special Committee of the board of directors committed to a plan to sell the German portfolio based on market feedback of potential buyers and ranges of prices for the properties. In December 2014, we entered into an agreement to sell 94.9% of our equity interest in the entities that own the German properties, and will retain a 5.1% non-controlling interest with limited protective rights (i.e. no significant continuing involvement). In connection therewith, as of December 31, 2014, we classified our entities that own the German properties as held for sale and the results of operations therefrom as discontinued operations in the accompanying consolidated financial statements for all periods presented. In January 2015, we completed the sale of 94.9% of our equity interest in the entities that own our German properties. We evaluated the German portfolio for impairment and determined that the carrying value was not recoverable based on an analysis comparing the sales proceeds, less transaction costs, received in January 2015 to the carrying value of the assets, including cumulative translation adjustments related to foreign currency exchange, as of December 31, 2014. Therefore, we recognized an impairment provision of approximately $0.5 million for the year ended December 31, 2014.

We have not determined how we will use the proceeds of the sale of our controlling interest in the entities that own the German portfolio, but expect to assess this in tandem with the continuing dialog among STRH, our Special Committee and management. Our options include a partial liquidating distribution or the reinvestment of such proceeds.

In February 2015, we committed to a plan to sell our Austin Property in Pflugerville, Texas as part of our continuous evaluation of strategic alternatives. We evaluated the Austin Property for impairment and determined that the carrying value was not recoverable based on an analysis comparing estimated and current projected undiscounted cash flows, including estimated net sales proceeds, of the property over its remaining useful life to the property’s carrying value as of December 31, 2014. Therefore, we recognized an impairment provision of approximately $1.3 million for the year ended December 31, 2014 in order to write-down the carrying value of the property to an amount equal to our estimated net sales proceeds less transaction costs.

Liquidity and Capital Resources

General

Since the close of our Offering in April 2013, our primary sources of capital to date have been unused proceeds from our Offering and debt financing.

Subsequent to April 2013, our principal demands for funds have been for:

•

the payment of operating expenses,

•

the payment of debt service on our outstanding indebtedness, and

•

the payment of distributions.

Equity and Debt Capital

As of December 31, 2014, we had unused Offering proceeds of approximately $6.7 million as compared with approximately $10.3 million of unused Offering proceeds as of December 31, 2013. During 2014, these amounts were primarily used to pay approximately $1.4 million of scheduled principal payments and cover the reduction in operating cash flows related to the approximate $1.2 million of “free rent” in connection with the Jacksonville Distribution Center lease extension in February 2014. We expect to use the remaining cash: (i) to pay operating expenses or debt service during any “free rent” periods granted in connection with extending existing lease terms and/or (ii) to establish a reserve for future working capital and other needs.

As a REIT, we are required to distribute at least 90% of our taxable income (excluding net capital gains); therefore, as with other REITs, we must obtain debt and/or equity capital in order to fund our growth.

Borrowings

The following table provides details of our indebtedness as of December 31, 2014 (excluding indebtedness included in liabilities associated with assets held for sale):


Property and Related Loan	Outstanding Principal Balance (in millions)		Interest Rate	Payment Terms	Maturity Date ⁽¹⁾

Jacksonville Distribution Center ⁽²⁾	$	25.3	6.1% per annum	$187,319 monthly principal and interest payments based on a 25-year amortization	9/1/2023

Heritage Commons III ⁽³⁾		11.4	4.7% per annum	$70,338 monthly principal and interest payments based on a 25-year amortization	7/1/2016

Heritage Commons IV ⁽³⁾		19.4	6.0% per annum	$132,307 monthly principal and interest payments based on a 25-year amortization	11/1/2016

Total	$	56.1

FOOTNOTES:

⁽¹⁾	Represents the initial maturity date, which may be extended beyond the date shown.

⁽²⁾	We assumed an existing secured non-recourse first mortgage loan on the Jacksonville Distribution Center. The existing mortgage may be prepaid, in full but not in part, subject to a reinvestment charge for any prepayment occurring sooner than six months before maturity.

⁽³⁾

The mortgage loans may be extended for an additional term not to exceed beyond December 1, 2018 and September 1, 2018 for Heritage Commons III and Heritage Commons IV, respectively, subject to the interest rate increasing to 9.7% per annum for Heritage Commons III and 11.0% per annum for Heritage Commons IV.

Although, in general, our articles of incorporation allow us to borrow up to 300% of our net assets and our board of directors has adopted a policy to permit aggregate borrowings of up to approximately 75% of the aggregate carrying value of our assets, our intent is to target our aggregate borrowings to between 50% and 60% of the aggregate carrying value of our assets. As of December 31, 2014, we had an aggregate debt leverage ratio of 63.1% of the aggregate carrying value of our assets, excluding our held for sale properties. However, if needed, our articles of incorporation and the borrowing policy limitation adopted by our board of directors permit borrowings up to the levels described above, and in certain circumstances, in excess of these levels if approved by the board of directors.

Generally, the loan agreements for our mortgage loans contain customary affirmative, negative and financial covenants, representations, warranties and borrowing conditions, as set forth in the loan agreements. The loan agreements also contain customary events of default and remedies for the lenders. The borrowers are normally direct or indirect subsidiaries of our operating partnership. As of December 31, 2014, we were in compliance with all of our debt covenants for our mortgage notes payable.

We may seek to refinance our properties, but in doing so may face difficulties if the remaining term of our tenant’s lease obligations is less than five years. For example, the senior loans entered into at the time of our purchase on two of our properties each have an expected maturity in 2016. While each such senior loan contains a provision through which the loan can be extended for approximately two years, the extension triggers a substantial increase in the interest rate. Therefore, unless a strategic exit event happens earlier, we expect to refinance the debt prior to its initial maturity. The terms of any refinancing could be less favorable than the current terms if the properties’ tenants have not exercised their options to extend, or we have not otherwise negotiated an extension of the leases.

We continue to seek opportunities to increase shareholder value through lease extensions. Lease extensions are likely to create an obligation to pay lease commissions and may also provide our tenants with some period of free or reduced rent. Some, but not all of our debt instruments require us to fund reserves that can be used to pay lease commissions but these growing reserves would not necessarily be sufficient to fund all such lease commissions. Therefore, we expect to retain a portion of the remaining unused net proceeds from our Offering for this purpose. Also, any amendment to the terms of existing leases could require approval by the lender providing the loan secured by the related property.

In the event unforeseen capital expenditures are necessary for which we do not have sufficient cash reserves to fund, we may be forced to defer making such improvements which could impact the ability for us to renew an existing lease or obtain a new lease on the property and could negatively impact the value of our property. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures or for temporary working capital in the event one or more of tenants experience financial difficulties and there is an interruption in their ability to make lease payments. However, there is no guarantee we would be able to obtain financing on favorable terms, or at all, and we may be forced to sell one or more properties at an unfavorable time to meet our obligations and to continue paying distributions.

Cash from Operating Activities

We generally expect to meet future cash needs for general and administrative expenses, debt service and distributions from the net operating income from our properties, which in general is rental income and tenant reimbursements less property operating expenses and property management fees (“NOI”). Due to the nature of our leases, the tenants are responsible for a portion, or in two cases, substantially all, of the property operating expenses; therefore, any increases in property expenses are generally reimbursed by the tenants. In addition, our portfolio had a weighted average remaining lease term of 6.0 years as of December 31, 2014, with approximately 95.9% of our rental revenues scheduled to expire in 2018 or later. Based on this, we do not expect lease turnover or any increase in property expenses to have a significant impact on our cash flow from operations in the near term. However, we are vulnerable to tenant and geographic concentrations because we will only have four leases remaining after the sale of our 94.9% equity interest in the entities that owned our German properties. As a result, a default or non-renewal by one of our significant tenants or economic downturns in certain geographic regions would have a negative impact on our results of operations and cash flow from operations. In addition, we executed a lease amendment for one of our properties, and continue to seek extensions of lease terms, which could result in periods of reduced and/or “free rent” to the tenants. Although we expect that any material modifications to leases could adversely impact our cash from operations in the near term, we anticipate any extensions of existing leases could increase the value of our properties.

We had net cash provided by operating activities for the year ended December 31, 2014 and 2013 of $3.7 million and $4.6 million, respectively, for GAAP purposes, and net cash used in operating activities of $0.9 million for the year ended December 31, 2012, respectively. The reduction in cash flows from operating activities between 2014 and 2013 was primarily the result of a net decrease of approximately $1.0 million in rental income received, which is primarily reflective of approximately $1.2 million used to fund the “free rent” period under the lease extension at the Jacksonville Distribution Center during the year ended December 31, 2014; offset by approximately $0.2 million in scheduled rent increases that occurred subsequent to December 31, 2013 on our other leases. During the years ended December 31, 2014, 2013 and 2012, our cash flows from operations were positively impacted by expense support provided by our Advisor, as described in “Results of Operations – General and Administrative Expenses, Asset Management Fees and Expense Support.”

As of December 31, 2014, the weighted average remaining lease term on our properties is 6.0 years and less than 4.1% of our annualized base rents are set to expire prior to 2018; therefore, we do not expect any significant lease turnover in the near term. However, net cash from operations and FFO will decrease in the future for reduced rents or “free rent” provided to tenants, if we experience increases in our operating expenses or should our Advisor terminate the Amended and Restated Expense Support Agreement (see “Results of Operations – Expense Support”).

Foreign Operations Held for Sale

Approximately 19.0% and 20.1% of our total assets as of December 31, 2014 and 2013, respectively, and 17.9% and 18.4% of our total revenues for the years ended December 31, 2014 and 2013, respectively, related to properties in Germany. We managed foreign currency exchange rate movements by generally placing both our debt obligation to the lender and the tenant’s rental obligation to us in the same currency. This reduced our overall foreign currency exposure to the equity invested and the equity portion of our cash flow. However, because we did not obtain a cash flow hedge, we were vulnerable to changes in exchange rates through completion of the sale in January 2015. During the years ended December 31, 2014 and 2013, we experienced a positive (negative) impact of approximately ($1.1) million and $0.4 million, respectively, relating to unrealized foreign currency translation adjustments.

As a result of the entities that own our German properties being classified as held for sale, the results of operations of these entities are presented as discontinued operations in the accompanying consolidated statements of operations for all periods presented. In January 2015, we completed the sale of 94.9% of our equity interest in the entities that own the German properties, which resulted in proceeds, net of closing costs, of approximately $8.1 million. We may determine to reinvest the net sales proceeds in additional assets, distribute all or a portion of such net sales proceeds to our investors or otherwise retain or use such amounts as determined by our board of directors. As noted above, for the year ended December 31, 2014, we were negatively impacted by movements in foreign currencies. Based on the subsequent sale of the German properties in January 2015, we determined that the carrying value was not recoverable based on an analysis comparing the sales proceeds, less transaction costs, received in January 2015 to the carrying value of the assets, including cumulative translation adjustments related to foreign currency exchange, as of December 31, 2014. Therefore, we recognized an impairment provision of approximately $0.5 million for the year ended December 31, 2014. Subsequent to January 2015, the impact of future movements in the exchange rate of Euro to U.S. dollars on our financial results is limited to our retained 5.1% non-controlling interest in the entities that own the German properties.

Working Capital

As of December 31, 2014, we had $6.7 million in cash and cash equivalents, primarily from unused net proceeds from our Offering. We will continue to seek opportunities to increase shareholder value through lease extensions. We may also incur customary leasing commissions with any lease extensions, which we would fund from our cash reserves. We intend to retain reserves for future working capital and other needs. Due to the fact that our Offering has closed, we expect to maintain a high level of working capital in the near term.

Repayment of Debt

The majority of our debt outstanding as of December 31, 2014 requires monthly repayment of a portion of the outstanding principal. During 2014, we repaid approximately $1.4 million of our mortgage notes payable. Our scheduled principal amortization in 2015 is approximately $1.4 million.

Distributions

In order to qualify as a REIT, we are required to distribute 90% of our annual REIT taxable income (excluding net capital gains) to our stockholders. For the first three quarters of 2014 and the first two quarters of 2013, we had insufficient cash flows from operating activities or funds from operations to fund a significant portion of our distributions; therefore, such amounts were substantially funded from proceeds of our Offering. Our board of directors has authorized a daily distribution of $0.0017808 per share of common stock to all common stockholders of record as of the close of business on each day, payable monthly, until terminated or amended.

The payment of distributions is a significant use of cash. Our primary sources of capital for the payment of distributions include net operating income generated by our leases, net of our general and administrative expenses, debt service payments and other operating expenses, and to a lesser extent, other sources (i.e. Offering Proceeds). Our ability to pay distributions is highly dependent upon our tenants paying their rent as contractually due, our ability to keep our properties leased, and minimizing our general and administrative expenses to the extent possible, including the continuance of the Amended and Restated Expense Support Agreement. As a result of the reduction in cash from operations in 2014, we funded a portion of our distributions with other sources (i.e., Offering proceeds). In addition, should we not have sufficient cash available from operations to pay distributions beyond 2014, we may continue to use other sources (i.e., Offering proceeds) to fund any such shortfalls and/or amend our current distribution policy. For additional information on the Amended and Restated Expense Support Agreement, see “Expense Support Agreements” below.

In addition, as a result of the termination of our DRP on April 10, 2013, the amount of cash required to fund distributions is no longer offset by additional Offering proceeds from the issuance of DRP shares. Our objective is to maintain a reasonable level of cash reserves to provide for continued distributions at the current level in the event we have insufficient cash from operating activities, but there is no assurance that our cash reserves will be sufficient to maintain that level in the event of a tenant defaulting on their obligations and/or our Advisor terminating the Amended and Restated Expense Support Agreement. In the event that we do not generate sufficient cash from operations, regardless of the amount of reserves we may have, we may have to revise our current distribution policy.

The following table presents total cash distributions declared and issued, including cash distributions reinvested in additional shares through our DRP, net cash provided by (used in) operating activities and FFO for each quarter of the years ended December 31, 2014, 2013 and 2012:


	Distributions Declared Daily Per Share		Total Cash Distributions Declared ⁽²⁾		Distributions Paid ⁽¹⁾				Net Cash Provided by (Used In) Operating Activities ⁽³⁾			FFO ⁽⁴⁾
	Distributions Declared Daily Per Share		Total Cash Distributions Declared ⁽²⁾		Cash		Reinvested via DRP		Net Cash Provided by (Used In) Operating Activities ⁽³⁾			FFO ⁽⁴⁾

2014 Quarters
First	$	0.0017808	$	1,323,429	$	1,323,429	$	—	$	82,503		$	1,146,472
Second		0.0017808		1,338,139		1,338,139		—		664,945			762,009
Third		0.0017808		1,352,836		1,352,836		—		1,328,560			964,520
Fourth		0.0017808		1,352,839		1,352,839		—		1,622,611			874,355

Total			$	5,367,243	$	5,367,243	$	—	$	3,698,619		$	3,747,356


2013 Quarters
First	$	0.0017808	$	1,125,577	$	735,545	$	390,032	$	227,064		$	1,015,923
Second		0.0017808		1,324,515		1,324,515		—		1,470,115			1,136,884
Third		0.0017808		1,352,838		1,352,838		—		1,409,275			1,304,892
Fourth		0.0017808		1,352,840		1,352,840		—		1,523,290			1,165,037

Total			$	5,155,770	$	4,765,738	$	390,032	$	4,629,744		$	4,622,736


2012 Quarters

First	$	0.0017808	$	565,867	$	382,565	$	183,302	$	(447,482	)	$	(704,172	)
Second		0.0017808		741,419		493,213		248,206		142,943			25,158
Third		0.0017808		894,148		582,049		312,099		142,035			(442,171	)
Fourth		0.0017808		998,143		649,555		348,588		(783,432	)		(648,722	)

Total			$	3,199,577	$	2,107,382	$	1,092,195	$	(945,936	)	$	(1,769,907	)

FOOTNOTES:

⁽¹⁾	Represents the amount of cash used to fund distributions and the amount of distributions paid which were reinvested in additional shares through our DRP, including amounts paid and shares issued subsequent to the period reported.

⁽²⁾

Our net loss was approximately $4.6 million, $2.4 million and $6.2 million and cash distributions declared were approximately $5.4 million, $5.2 million and $3.2 million for the years ended December 31, 2014, 2013 and 2012, respectively. For the years ended December 31, 2014, 2013 and 2012, approximately 36%, 17%, and 91%, respectively, of distributions declared to stockholders were considered to be funded with other sources (i.e., Offering proceeds), as calculated on a quarterly basis, and 64%, 83% and 9%, respectively, were considered to be funded with cash provided by operations for GAAP purposes. For the years ended December 31, 2014, 2013 and 2012, approximately 93%, 72% and 100%, respectively, of distributions were considered a return of capital and 7%, 28% and 0%, respectively, were considered taxable for federal income tax purposes. Because we funded certain amounts from Offering proceeds that were deductions in calculating GAAP net cash from operating activities, such as acquisition fees and expenses, we have calculated the amount of Offering proceeds used to fund distributions after taking these items into account in the presentation of the use of proceeds from our Offering in Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Use of Proceeds from Registered Securities.”

⁽³⁾

Net cash provided by (used in) operating activities agrees with the consolidated statements of cash flows in our consolidated financial statements. Such amount generally represents net income or loss adjusted for items not using cash, such as depreciation and amortization expense, and items not providing cash, such as straight-line rent adjustments. It can also include cash that resulted from the collection of a receivable or the postponement of making a vendor payment and, alternatively, excludes cash earned that has not been collected or the payment of expenses accrued in the applicable period. Further, net cash provided by operating activities for GAAP purposes for the year ended December 31, 2014, includes deductions for straight-line rent adjustments of approximately $1.0 million that are non-recurring and relate to the “free rent” under the lease extension at the Jacksonville Distribution Center. Further, net cash provided by (used in) operating activities for GAAP purposes for the years ended December 31, 2013 and 2012, includes deductions for acquisition fees and expenses of approximately $0.05 million and $3.2 million, respectively, included in net loss but are non-recurring and we consider to be funded from Offering proceeds. No acquisition fees and expenses were incurred in 2014. In addition to net cash provided by (used in) operating activities, the board of directors considers other factors in determining distributions including expected and actual funds from operations and modified funds from operations, as well as other factors.

⁽⁴⁾	See reconciliation of funds from operations in Item 7. “Management Discussion and Analysis of Financial Condition and Results of Operations – Funds from Operations and Modified Funds from Operations.”

Generally, distributions up to the amount of our current or accumulated earnings and profits will be taxable to the recipient stockholders as ordinary income. We currently intend to continue to pay distributions to our stockholders on a monthly basis although our board of directors reserves the right to change the per share distribution amount or otherwise amend or terminate our distribution policy. Our board of directors considers a number of factors in its determination of the amount and basis of distributions it declares, including expected and actual net cash flow from operations, FFO, our overall financial condition, our Advisor’s determination in regards to providing expense support, our objective of qualifying as a REIT for U.S. federal income tax purposes, the determination of reinvestment versus distribution following the sale or refinancing of an asset, as well as, other factors, including an objective of stable and predictable distributions regardless of the composition.

Common Stock Redemptions

As a result of the termination of our DRP and the close of our Offering in April 2013, our board of directors suspended our stock redemption plan effective April 10, 2013. We are no longer accepting redemption requests. During the year ended December 31, 2013, we processed and paid all eligible redemption requests totaling 130,215 shares of common stock at an average price of $9.37 per share, for a total of approximately $1.2 million.

Expense Support Agreements

In March 2012, our board of directors approved an Expense Support and Conditional Reimbursement Agreement with our Advisor (the “Original Expense Support Agreement”) whereby, effective April 1, 2012, reimbursement of operating-related personnel expenses and asset management fees to our Advisor and its affiliates were deferred and subordinated until such time, if any, that (i) our cumulative modified funds from operations (as defined and revised in the Expense Support Agreement) for the period April 1, 2012 through the applicable determination date exceeds (ii) distributions declared to our stockholders for the same period. Such reimbursements and payments were further subordinated to our total operating expenses being within the 2%/25% guideline limitations as such terms are defined in the advisory agreement. For purposes of the above subordinations, all or a portion of the deferred amounts were payable only to the extent it did not cause the applicable performance measurement to not be met inclusive of the conditional reimbursement amount. The Expense Support Agreement was terminable by the Advisor, but not before December 31, 2013, as amended, and any deferrals were eligible for conditional reimbursement for a period of up to three years from the applicable determination date.

In December 2014, the Advisor agreed to waive all unpaid asset management fees, acquisition fees, and disposition fees for the years ended December 31, 2013 and 2012 as well as the reimbursement of all unpaid expenses incurred by the Advisor for the periods then-ended including approximately $2.8 million in contingent liabilities for amounts previously deferred as of December 31, 2013, under the conditional reimbursement provisions of the Original Expense Support Agreement for which recognition and payment were contingent on subordination conditions of certain performance metrics being met within three years of the applicable deferrals. In addition, the waiver of the unpaid reimbursable expenses prior to March 31, 2012 resulted in a reduction in general and administrative expenses of approximately $0.2 million for the year ended December 31, 2014.

In March 2014, we entered into an Amended and Restated Expense Support, Conditional Reimbursement and Restricted Stock Agreement (the “Amended and Restated Expense Support Agreement”) with our Advisor. Pursuant to the Amended and Restated Expense Support Agreement, effective January 1, 2014, our Advisor has agreed to accept forfeitable restricted shares of our common stock (the “Restricted Stock”) in lieu of cash in payment for up to the full amount of asset management fees and operating-related personnel expenses owed by us to the Advisor under the advisory agreement for services rendered after December 31, 2013. The amount of such expense support will be equal to the positive excess, if any, of (a) aggregate stockholder cash distributions declared in the applicable quarter, over (b) our aggregate modified funds from operations (as defined and revised in the Amended and Restated Expense Support Agreement) for such quarter, determined each calendar quarter on a non-cumulative basis (the “New Expense Support Amount”). The number of shares of Restricted Stock to be issued to the Advisor under the Amended and Restated Expense Support Agreement will be determined by dividing (x) the Expense Support Amount for the applicable quarter, by (y) the most recent price per share of our common stock, or the most recent estimated NAV per share.

Generally, Restricted Stock will vest immediately prior to or upon the occurrence of a listing of our common stock, a merger or other Liquidity Event (as defined in the advisory agreement) or a sale of substantially all of our assets (hereinafter, an “Exit Event”) that results in the value of our common stock, plus total distributions received by our stockholders since inception and to be received as a result of the Exit Event, exceeding an amount equal to 100% of invested capital plus a cumulative 6% priority return on investment (the “Vesting Threshold”).

Restricted Stock will also vest immediately in the event the advisory agreement is terminated without cause by us before the occurrence of an Exit Event (the “Restricted Period”), provided that the most recently reported estimated NAV of our common stock plus total distributions received by stockholders prior to such termination of the advisory agreement equals or exceeds the Vesting Threshold. Restricted Stock shall be immediately and permanently forfeited under various circumstances, including certain circumstances relating to a termination of the advisory agreement.

During the year ended December 31, 2014, approximately $1.2 million in asset management fees (of which $0.2 million related to discontinued operations) and $0.5 million in operating-related personnel expenses were forgone in accordance with the terms of the Amended and Restated Expense Support Agreement and for which Restricted Stock was issued in lieu of cash. In accordance therewith, we determined that approximately 0.18 million shares of Restricted Stock were issuable to the Advisor related to the year ended December 31, 2014, including 0.06 million shares related to the quarter ended December 31, 2014, which will be issued by March 31, 2015. The number of restricted stock shares for the quarter ended December 31, 2014 was determined based on NAV; whereas previously, the number of restricted stock shares was determined based on the public offering price of $10.00 per share.

During the year ended December 31, 2014, we had declared to our Advisor approximately $32,000, in the form of cash distributions related to the Restricted Stock which was recognized as compensation expense and included in general and administrative expense in the accompanying consolidated statements of operations for the year ended December 31, 2014.

The Amended and Restated Expense Support Agreement was effective beginning January 1, 2014 and continues until terminated by the Advisor in writing with 120 days’ notice.

We are not aware of any material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on other capital resources or the revenues or income derived from our properties, other than those disclosed in this Annual Report, including those referred to in the risk factors identified in the “Risk Factors.”

Subsequent Event – Austin Property Held for Sale

In February 2015, we committed to a plan to sell our Austin Property in Pflugerville, Texas as part of our continuous evaluation of strategic alternatives. We evaluated the Austin Property for impairment and determined that the carrying value was not recoverable based on an analysis comparing estimated and current projected undiscounted cash flows, including estimated net sales proceeds, of the property over its remaining useful life to the property’s carrying value as of December 31, 2014. Therefore, we recognized an impairment provision as of approximately $1.3 million for the year ended December 31, 2014 as discussed further in “Results of Operations – Impairment provisions.” In March 2015, we entered into a purchase and sale agreement to sell our Austin Property for approximately $2.7 million.

Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and the notes thereto. As described above, in December 2014, we entered into an agreement to sell 94.9% of our equity interest in the entities that own our properties located in Germany and, as such, the results of operations for these properties are included in income (loss) from discontinued operations in the accompanying statement of operations for all periods presented. We sold 94.9% of our equity interest in January 2015, as described in Item 8. “Financial Statements and Supplementary Data” – Note 16. “Subsequent Events.”

As of December 31, 2014, we owned four real estate investment properties (excluding our properties held for sale) and our continuing operations portfolio was 100% leased under operating leases. For more information on our properties and leases see Item 2. “Properties.”

In understanding our operating results in the accompanying financial statements and our expectations about 2015 and beyond, it is important to understand how the purchase of our German assets in 2012 and the subsequent sale in 2015 will impact our results. The chart below illustrates our net losses and property-level NOI for the years ended December 31, 2014, 2013 and 2012, and the amount invested in properties as of December 31, 2014, 2013 and 2012 (in millions):


	December 31,			December 31,			December 31,
	2014			2013			2012
Total revenues	$	11.0		$	11.3		$	8.3
Less:
Property operating expenses		2.8			2.6			2.6
Property management fees		0.3			0.3			0.2

NOI		7.9			8.4			5.5
Less:
General and administrative expenses		1.2			1.6			1.8
Acquisition fees and expenses		—			—			0.9
Asset management fees		—			1.0			0.6
Depreciation and amortization		6.2			6.2			4.2
Adjustment to contingent purchase price consideration		—			0.1			—
Impairment provision		1.3			—			—
Expense support		—			(1.5	)		(1.0	)
Other expenses, net of other income		3.4			3.8			3.3
Income tax expense		0.1			0.1			—

Loss from continuing operations		(4.3	)		(2.9	)		(4.3	)
Income (loss) from discontinued operations		(0.3	)		0.5			(1.9	)

Net loss	$	(4.6	)	$	(2.4	)	$	(6.2	)

Invested in properties, end of period	$	120.6		$	120.6		$	120.6

Fiscal year ended December 31, 2014 as compared to fiscal year ended December 31, 2013

Revenues. Rental revenue and tenant reimbursements were approximately $9.6 million and $1.4 million, respectively, for the year ended December 31, 2014, as compared to approximately $10.0 million and $1.3 million, respectively, for the year ended December 31, 2013. Tenant reimbursement income represents amounts tenants are required to reimburse us in accordance with the lease agreements and are recognized in the period in which the related reimbursable expenses are incurred.

Revenues decreased during the year ended December 31, 2014 primarily as a result of the February 2014 amendment and extension of the lease for our Jacksonville Distribution Center as described in Item 8. “Financial Statements and Supplementary Data” – Note 6. “Operating Leases” in the accompanying financial statements. Although the amendment was entered into in connection with extending the lease term to increase the potential value of the property, it resulted in lower straight-lined rent recognized over the term of the lease for GAAP purposes.

Property Operating Expenses. Property operating expenses for the year ended December 31, 2014 were approximately $2.8 million, as compared to approximately $2.6 million for the year ended December 31, 2013. These expenses include property taxes, utilities and other costs that we are responsible for paying to operate our properties, some of which are reimbursable by the tenants with reimbursed amounts included in revenues. In general, as property operating expenses increase, tenant reimbursement income will increase as a result of the tenants’ obligations to pay such amounts. However, in some cases we may not be able to pass the full amount of any such increase to our tenants. Two of our properties are leased on either a triple-net or net basis whereby the tenants are responsible for procuring and paying third parties directly for certain property operating expenses, including real estate taxes, insurance, utilities and other property operating expenses. Property operating expenses incurred and paid directly to third parties by these tenants are not included in our property operating expenses due to these amounts being the obligations of our tenants. In the event these tenants fail to meet their obligations to pay these expenses, we would be responsible for certain of these expenses such as, real estate taxes of approximately $0.7 million per year. Accordingly, in such event, property operating expenses would increase.

General and Administrative Expenses. During the year ended December 31, 2014, general and administrative expenses totaled $1.9 million. However, approximately $0.5 million of such amounts were foregone in accordance with the Amended and Restated Expense Support Agreement coupled with an additional reduction of approximately $0.2 million reduction related to the Advisor waiving unpaid reimbursable expenses, described above, for the year ended December 31, 2014. As described above, the Restricted Stock was valued at zero during the year ended December 31, 2014, and as such, only the net amount of approximately $1.2 million was recognized as general and administrative expenses for accounting purposes. General and administrative expenses are comprised primarily of reimbursable personnel expenses of affiliates of our Advisor, directors’ and officers’ insurance, accounting and legal fees, and board of directors’ fees. See “Expense Support” above for additional information on the Amended and Restated Expense Support Agreement.

We incurred approximately $1.6 million in general and administrative expenses during the year ended December 31, 2013. Under the Original Expense Support Agreement, approximately $0.5 million, was deferred and subordinated to us meeting certain performance metrics. These charges were included in general and administrative expenses and the deferral of such amounts were included in the expense support credit in the accompanying statements of operations.

Asset Management Fees. During the year ended December 31, 2014, asset management fees totaled $1.0 million. We incur asset management fees at an annual rate of approximately 1% of the amount of our real estate assets under management. However, all of the asset management fees were foregone in accordance with the Amended and Restated Expense Support Agreement, described above. As described in above, the Restricted Stock was valued at zero during the year end December 31, 2014, and as such, no asset management fee expense was recognized.

We incurred approximately $1.0 million asset management fees payable to our Advisor during the year ended December 31, 2013. Under the Original Expense Support Agreement, all of the asset management fees for the period April 1, 2012 through December 31, 2013, were deferred and subordinated to us meeting certain performance metrics. These charges were included in asset management fee expense and the deferral of such amounts was included in the expense support credit in the accompanying statements of operations. In December 2014, the Advisor agreed to waive all unpaid asset management fees, acquisition fees, and disposition fees for the years ended December 31, 2013 and 2012.

As a result of our January 2015 sale of 94.9% of our equity interest in the entities that own our German properties, we anticipate a reduction in 2015 of asset management fees incurred. We currently anticipate all or a significant portion of asset management fees for 2015 will be paid in the form of Restricted Stock in accordance with the terms of the Amended and Restated Expense Support Agreement, thereby resulting in the continued reduction of asset management fees expense in our financial results. See “Expense Support Agreements” above for additional information relating to the Amended and Restated Expense Support Agreement.

Property Management Fees. We incurred approximately $0.3 million in property management fees payable to our Property Manager and sub-property managers during each of the years ended December 31, 2014 and 2013, for services in managing our property operations. Property management fees generally range from 1.5% to 4.5% of property revenues.

Impairment Provision. In February 2015, we committed to a plan to sell our Austin Property in Pflugerville, Texas as part of our continuous evaluation of strategic alternatives. We evaluated the Austin Property for impairment and determined that the carrying value was not recoverable based on an analysis comparing estimated and current projected undiscounted cash flows, including estimated net sales proceeds, of the property over its remaining useful life to the property’s carrying value as of December 31, 2014. Therefore, we recognized an impairment provision of approximately $1.3 million for the year ended December 31, 2014. There was no such impairment for the year ended December 31, 2013.

Depreciation and Amortization. Depreciation and amortization for each of the years ended December 31, 2014 and 2013 was approximately $6.2 million.

Expense Support. For the year ended December 31, 2013, approximately $1.0 million and $0.5 million in asset management fees and operating-related personnel expenses, respectively, were deferred and subordinated in accordance with the terms of the Original Expense Support Agreement. In 2014, the Original Expense Support Agreement was amended and restated. See “Expense Support Agreements” above for additional information relating to the Amended and Restated Expense Support Agreement. In December 2014, the Advisor agreed to waive all unpaid asset management fees, acquisition fees, and disposition fees for the years ended December 31, 2013 and 2012 as well as the reimbursement of all unpaid expenses incurred by the Advisor for the periods then-ended including approximately $2.8 million in contingent liabilities for amounts deferred and subordinated under the Original Expense Support Agreement.

Interest Expense and Loan Cost Amortization. Interest expense and loan cost amortization for the year ended December 31, 2014 was approximately $3.5 million, as compared to approximately $3.8 million for the year ended December 31, 2013. The decrease in our weighted average interest rate was primarily the result of repaying our $4.0 million mezzanine loan in March 2013 relating to one of our properties, which bore interest at a rate of 11% per annum, and repaying our credit facility balance of $0.8 million in January 2013.

Provision for Income Taxes. During each of the years ended December 31, 2014 and 2013, we recognized state income tax expenses related to our properties in Texas, resulting in a net tax expense of approximately $0.1 million.

Analysis of Discontinued Operations. During the year ended December 31, 2014, we established our intent to sell our five German properties. We entered into a share purchase agreement for the sale of 94.9% of our equity interest in the entities that own our German properties, as described above in “Foreign Operations Held for Sale.” As a result, we accounted for the revenues and expenses associated with the entities that own our German properties as discontinued operations for all periods presented in accordance with GAAP. In addition, we discontinued recording depreciation and amortization expense on these properties with the determination in June 2014 to seek the sale of the assets of these entities.

We completed the sale of 94.9% of our equity interest in these entities in January 2015 and, as of December 31, 2014, we evaluated the German portfolio for impairment and determined that the carrying value was not recoverable based on an analysis comparing the sales proceeds, less transaction costs, received in January 2015 to the carrying value of the assets, including all cumulative translation adjustments on foreign currency exchange. Therefore, we recognized an impairment provision of approximately $0.5 million for the year ended December 31, 2014.

Income (loss) from discontinued operations net of tax was ($0.3) million and $0.5 million during the years ended December 31, 2014 and 2013, respectively. During the years ended December 31, 2014 and 2013, we recognized approximately $0.4 million and $4,000, respectively, of income tax expense. Income tax expense for the German operations was higher in 2014, because during the second quarter of 2014, it was deemed more likely than not that the deferred tax assets related to our German operations will not be realized due to our current and foreseeable operations and a full valuation was recognized.

Fiscal year ended December 31, 2013 as compared to fiscal year ended December 31, 2012

Revenues. Rental revenue and tenant reimbursements were approximately $10.0 million and $1.3 million, respectively, for the year ended December 31, 2013, as compared to approximately $7.1 million and $1.2 million, respectively, for the year ended December 31, 2012. Tenant reimbursement income represents amounts tenants are required to reimburse us in accordance with the lease agreements and are recognized in the period in which the related reimbursable expenses are incurred. The increase in rental revenues and tenant reimbursements was due to the properties purchased during 2012 being operational for the full year in 2013.

Property Operating Expenses. Property operating expenses for the years ended December 31, 2013 and 2012 were approximately $2.6 million. These expenses include property taxes, utilities and other costs that we are responsible for paying to operate our properties, some of which are reimbursable by the tenants with reimbursed amounts included in revenues.

General and Administrative Expenses. General and administrative expenses for each of the year ended December 31, 2013 were approximately $1.6 million, as compared to $1.8 million for the year ended December 31, 2012. General and administrative expenses were comprised primarily of reimbursable personnel expenses of affiliates of our Advisor, directors’ and officers’ insurance, accounting and legal fees, and board of directors’ fees. Under the Expense Support Agreement, described below, all of the reimbursable operating-related personnel expenses of affiliates of our Advisor for the period April 1, 2012 through December 31, 2013, were deferred and subordinated to our achieving certain performance metrics. For the years ended December 31, 2013 and 2012, we deferred approximately $0.5 million and $0.5 million, respectively, of operating-related personnel expenses in accordance with this agreement. These charges are included in general and administrative expenses and the deferral of such amounts is included in the expense support credit in the accompanying statement of operations. See “Expense Support” below.

Acquisition Fees and Expenses. Acquisition fees and expenses were approximately $0.9 million for the year ended December 31, 2012 and consisted primarily of investment services fees paid to our Advisor and acquisition expenses, such as legal and other closing costs in connection with our property acquisitions. There were no such expenses incurred for the year ended December 31, 2013.

Asset Management Fees. We incurred approximately $1.0 million and $0.6 million in asset management fees payable to our Advisor or sub-advisors during the years ended December 31, 2013 and 2012, respectively. We incur asset management fees at an annual rate of approximately 1% of the amount of our real estate assets under management; therefore, these fees increased due to the properties acquired during 2012 being operational for a full year. Under the Expense Support Agreement, all of the asset management fees for the period April 1, 2012 through December 31, 2013, were deferred and subordinated to certain performance metrics in accordance with the Expense Support Agreement. See “Expense Support” below.

Property Management Fees. We incurred approximately $0.3 million in property management fees payable to our Property Manager and sub-property managers during the year ended December 31, 2013, as compared to $0.2 million during the year ended December 31, 2012, for services in managing our property operations. Property management fees generally range from 1.5% to 4.5% of property revenues, and increased during 2013 as a result of the increase in rental revenues and tenant reimbursements.

Depreciation and Amortization. Depreciation and amortization for the year ended December 31, 2013 was approximately $6.2 million, as compared to approximately $4.2 million for the year ended December 31, 2012. The increase in expense was primarily the result of our buildings, improvements and in-place leases of our properties placed in service in 2012 being operational for a full year in 2013.

Expense Support. For the years ended December 31, 2013 and 2012, approximately $1.0 million and $0.6 million, respectively, in asset management fees and $0.5 million and $0.4 million, respectively, in operating-related personnel expenses were deferred and subordinated in accordance with the terms of the Original Expense Support Agreement. These contingently deferred and subordinated amounts were waived in December 2014.

Interest Expense and Loan Cost Amortization. Interest expense and loan cost amortization for the year ended December 31, 2013 was approximately $3.8 million, as compared to approximately $3.3 million for the year ended December 31, 2012. Our average debt outstanding during the year ended December 31, 2013 increased to $58.1 million from $45.7 million during 2012, resulting in an approximately $0.5 million increase in interest expense and loan cost amortization.

Adjustment of Contingent Purchase Price Consideration. At the time we acquired our Jacksonville Distribution Center, approximately $1.0 million of the purchase price was placed in an escrow account as contingent purchase price consideration in the event of non-renewal of the property lease through 2023 by the tenant. At that time, although we believed a tenant renewal was likely, an asset of $0.1 million was recorded to reflect what we viewed as a probability-based reduction in the purchase price. During the year ended December 31, 2013, based on then-current discussions with the tenant and a high probability that the tenant renewal will be likely, we determined that the $1.0 million purchase price placed in escrow will be released to the seller. As a result, we reduced the fair value of the asset by $0.1 million and recognized a contingent purchase price consideration adjustment on the Jacksonville Distribution Center of approximately $0.1 million, which is included as an expense in the accompanying consolidated statements of operations. In February 2014, we executed a lease amendment with the tenant at our Jacksonville Distribution Center, which extended the lease term from February 2018 to November 2024.

Provision for Income Taxes. During the year ended December 31, 2013 and 2012, we recognized state income tax expenses related to our properties in Texas, resulting in a net tax expense of approximately $0.06 million and $0.05 million, respectively.

Analysis of Discontinued Operations. As noted above, we accounted for the revenues and expenses associated with our entities that own our German properties, as discontinued operations for all periods presented. Income (loss) from discontinued operations, net of tax was approximately $0.5 million and $(1.9) million for the years ended December 31, 2013 and 2012, respectively, and fluctuation across periods resulted primarily from approximately $2.3 million acquisition fees and expenses, such as legal and other closing costs, and investment services fees paid to our Advisor in connection with our acquisition of the German properties in 2012.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies discussed below, the National Association of Real Estate Investment Trusts (“NAREIT”) promulgated a measure known as FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a real estate investment trust, or REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to net income or loss as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the “White Paper.” The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property, real estate asset impairment write-downs, depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Our FFO calculation complies with NAREIT’s policy described above.

We may, in the future, make other adjustments to net loss in arriving at FFO as identified above at the time that any such other adjustments become applicable to our results of operations. FFO, for example, may exclude impairment charges of real estate-related investments. Because GAAP impairments represent non-cash charges that are not allowed to be reversed if the underlying fair values improve or because the timing of impairment charges may lag the onset of certain operating consequences, we believe FFO provides useful supplemental information related to current consequences, benefits and sustainability related to rental rates, occupancy and other core operating fundamentals. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance. While impairment charges may be excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. In addition, FFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO.

Notwithstanding the widespread reporting of FFO, changes in accounting and reporting rules under GAAP that were adopted after NAREIT’s definition of FFO have prompted a significant increase in the magnitude of non-operating items included in FFO. For example, acquisition fees and expenses, which we have funded from the proceeds of our Offering and which we do not view as an operating expense of a property, are now deducted as expenses in the determination of GAAP net income. As a result, the Investment Program Association (“IPA”), an industry trade group, has standardized a measure known as modified FFO, or MFFO, which the IPA has recommended as a supplemental measure for publicly registered, non-traded REITs and which we believe to be another additional supplemental measure to reflect the operating performance of a non-traded REIT. Under IPA Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs (“IPA Guideline”), MFFO excludes from FFO additional non-cash or non-recurring items, including the following:

•

acquisition fees and expenses which have been deducted as expenses in the determination of GAAP net income;

•

non-cash amounts related to straight-line rent;

•

amortization of above or below market intangible lease assets and liabilities;

•

accretion of discounts and amortization of premiums on debt investments;

•

impairments of loans receivable, and equity and debt investments;

•

realized gains or losses from the early extinguishment of debt;

•

realized gains or losses on the extinguishment or sales of hedges, foreign exchange, securities and other derivatives holdings except where the trading of such instruments is a fundamental attribute of our operations;

•

unrealized gains or losses related to fair value adjustments for derivatives not qualifying for hedge accounting, including interest rate and foreign exchange derivatives;

•

unrealized gains or losses related to consolidation from, or deconsolidation to, equity accounting;

•

adjustments related to contingent purchase price obligations where such adjustments have been included in the derivation of GAAP net income; and

•

adjustments related to the above items for unconsolidated entities in the application of equity accounting.

We consider MFFO as a supplemental measure when assessing our operating performance. We have calculated MFFO in accordance with the IPA Guideline. For the years ended December 31, 2014, 2013 and 2012, our MFFO is FFO, excluding acquisition fees and expenses, straight-line rent adjustments, the amortization of above- and below-market leases, realized gains or losses from the early extinguishment of debt and adjustments related to contingent purchase price considerations, which we believe is helpful in evaluating our results of operations for the reasons discussed below.

•

Acquisition fees and expenses. In evaluating investments in real estate, management’s investment models and analyses differentiate between costs to acquire the investment and the operating results derived from the investment. Acquisition fees and expenses have been funded from the proceeds of our Offering and other financing sources and not from operations. We believe by excluding acquisition fees and expenses, MFFO provides useful supplemental information that is comparable between differing reporting periods for each type of our real estate investments and is more indicative of future operating results from our investments as consistent with management’s analysis of the investing and operating performance of our properties. The exclusion of acquisition fees and expenses has been the most significant adjustment to us to date, as we have been in our offering and acquisition stages. However, if earnings from the operations of our properties or net sales proceeds from the future disposition of our properties are not sufficient enough to overcome the acquisition costs and fees incurred, then such fees and expenses will have a dilutive impact on our returns.

•

Amortization of above- and below-market leases. Under GAAP, certain intangibles are assumed to diminish predictably in value over time and are amortized, similar to depreciation and amortization of other real estate-related assets that are excluded from FFO. However, because real estate values and market lease rates historically rise or fall with market conditions, we believe that by excluding charges relating to amortization of these intangibles, MFFO provides useful supplemental information on the performance of the real estate.

•

Straight-line rent adjustments. Under GAAP, rental receipts are allocated to periods using various methodologies. This may result in income recognition that is significantly different than underlying contract terms. By adjusting for these items (to restate such payments from a GAAP accrual basis to a cash basis), MFFO provides useful supplemental information on the realized economic impact of lease terms, providing insight on the contractual cash flows of such lease terms, and aligns results with management’s analysis of operating performance.

•

Realized gains or losses from the early extinguishment of debt. Management believes that adjusting for gains or losses on the early extinguishment of debt is appropriate because they are non-recurring, non-cash adjustments that may not be reflective of our ongoing operating performance.

•

Adjustment related to contingent purchase price consideration. Management believes that the elimination of the adjustment related to a contingent purchase price consideration that was expensed for GAAP purposes is appropriate because the adjustment is a non-recurring, non-cash adjustment that is not reflective of our ongoing operating performance and aligns results with management’s analysis of operating performance.

We may, in the future, make other adjustments to FFO and MFFO as identified above at the time that any such other adjustments become applicable to our results of operations. MFFO, for example may exclude gains or losses related to fair value adjustments for derivatives not qualifying for hedge accounting. These items relate to a fair value adjustment, which is based on the impact of current market fluctuations and underlying assessments of general market conditions and specific performance of the holding, which may not be directly attributable to our current operating performance. As these gains or losses relate to underlying long-term assets and liabilities, where we are not speculating or trading assets, management believes MFFO provides useful supplemental information by focusing on the changes in our core operating fundamentals rather than changes that may reflect anticipated gains or losses. We believe MFFO provides useful supplemental information related to current consequences, benefits and sustainability related to rental rates, occupancy and other core operating fundamentals.

We believe that MFFO is helpful in assisting management to assess the sustainability of our distribution and operating performance in future periods, particularly for periods after our offering and acquisition stages are completed, because MFFO excludes acquisition fees and expenses that affect property operations only in the period in which a property is acquired; however, MFFO should only be used by investors to assess the sustainability of our operating performance for periods after the completion of our Offering and the acquisition of our properties. Acquisition fees and expenses have a negative effect on our cash flows from operating activities during the periods in which properties are acquired.

Presentation of MFFO also is intended to provide useful information to investors as they compare the operating performance of different non-traded REITs, although it should be noted that not all REITs calculate MFFO the same way, so comparisons with other REITs may not be meaningful. Neither the Securities and Exchange Commission, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate MFFO. Furthermore, FFO and MFFO are not necessarily indicative of cash flows available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should not be construed as historic performance measures or as more relevant or accurate than the current GAAP methodology in calculating net income (loss) and its applicability in evaluating our operating performance.

The following tables present a reconciliation of net loss to FFO and MFFO for the quarters ended:


	March 31, 2014			June 30, 2014			September 30, 2014			December 31, 2014			Total

Net loss	$	(575,502	)	$	(989,309	)	$	(589,145	)	$	(2,451,082	)	$	(4,605,038	)
Adjustments:
Impairment provisions: ⁽¹⁾
Continuing operations		—			—			—			1,253,688			1,253,688
Discontinued operations		—			—			—			514,867			514,867
Depreciation and amortization (including amortization of in place lease intangible assets):
Continuing operations		1,551,885			1,551,885			1,553,665			1,556,882			6,214,317
Discontinued operations		170,089			199,433			—			—			369,522

FFO		1,146,472			762,009			964,520			874,355			3,747,356
Amortization of above/below market lease intangible assets: ⁽²⁾
Continuing operations		70,756			70,757			70,757			70,757			283,027
Discontinued operations		6,231			11,322			—			—			17,553
Straight-line rent adjustments: ⁽³⁾
Continuing operations		(592,018	)		(538,235	)		85,700			85,699			(958,854	)
Discontinued operations		(4,862	)		(8,561	)		—			—			(13,423	)

MFFO	$	626,579		$	297,292		$	1,120,977		$	1,030,811		$	3,075,659

Weighted average number of shares of common stock outstanding (basic and diluted)		8,257,410			8,257,410			8,257,410			8,257,410			8,257,410

Net loss per share (basic and diluted)	$	(0.07	)	$	(0.12	)	$	(0.07	)	$	(0.30	)	$	(0.56	)

FFO per share (basic and diluted)	$	0.14		$	0.09		$	0.12		$	0.11		$	0.45

MFFO per share (basic and diluted)	$	0.08		$	0.04		$	0.14		$	0.12		$	0.37


	March 31, 2013			June 30, 2013			September 30, 2013			December 31, 2013			Total

Net loss	$	(747,293	)	$	(624,309	)	$	(459,594	)	$	(561,650	)	$	(2,392,846	)
Adjustments:
Depreciation and amortization (including amortization of in place lease intangible assets):
Continuing operations		1,550,905			1,551,301			1,551,537			1,551,537			6,205,280
Discontinued operations		212,311			209,893			212,949			175,149			810,302

FFO		1,015,923			1,136,885			1,304,892			1,165,036			4,622,736

Acquisition fees and expenses: ⁽⁴⁾
Continuing operations		193			2,777			—			(2,766	)		204
Discontinued operations		33,500			8,125			1,727			14,742			58,094
Amortization of above/below market lease intangible assets: ⁽²⁾
Continuing operations		70,756			70,757			70,757			70,757			283,027
Discontinued operations		1,502			1,484			1,506			45,246			49,738
Straight-line rent adjustments: ⁽³⁾
Continuing operations		(178,772	)		(178,770	)		(178,771	)		(75,652	)		(611,965	)
Discontinued operations		(23,490	)		803			6,337			(20,874	)		(37,224	)
Realized loss on early extinguishment of debt: ⁽⁵⁾
Continuing operations		99,134			—			—			—			99,134
Adjustment related to contingent purchase price consideration: ⁽⁶⁾
Continuing operations		—			—			—			108,500			108,500

MFFO	$	1,018,746		$	1,042,061		$	1,206,448		$	1,304,989		$	4,572,244

Weighted average number of shares of common stock outstanding (basic and diluted)		7,021,861			8,173,289			8,257,410			8,257,410			7,931,165

Net loss per share (basic and diluted)	$	(0.11	)	$	(0.08	)	$	(0.06	)	$	(0.07	)	$	(0.30	)

FFO per share (basic and diluted)	$	0.14		$	0.14		$	0.16		$	0.14		$	0.58

MFFO per share (basic and diluted)	$	0.15		$	0.13		$	0.15		$	0.16		$	0.58


	March 31, 2012			June 30, 2012			September 30, 2012			December 31, 2012			Total

Net loss	$	(1,607,899	)	$	(910,096	)	$	(1,376,890	)	$	(2,339,703	)	$	(6,234,588	)
Adjustments:
Depreciation and amortization (including amortization of in place lease intangible assets):
Continuing operations		887,460			887,447			887,447			1,550,758			4,213,112
Discontinued operations		16,267			47,807			47,272			140,223			251,569

FFO		(704,172	)		25,158			(442,171	)		(648,722	)		(1,769,907	)
Acquisition fees and expenses: ⁽⁴⁾
Continuing operations		9,966			23,586			64,892			824,231			922,675
Discontinued operations		569,135			172,153			818,464			724,263			2,284,015
Amortization of above/below market lease intangible assets: ⁽²⁾
Continuing operations		16,086			16,086			16,086			70,757			119,015
Discontinued operations		497			1,461			1,444			1,472			4,874
Straight-line rent adjustments: ⁽³⁾
Continuing operations		(81,834	)		(81,834	)		(81,834	)		(167,304	)		(412,806	)

MFFO	$	(190,322	)	$	156,610		$	376,881		$	804,697		$	1,147,866

Weighted average number of shares of common stock outstanding (basic and diluted)		3,491,865			4,572,840			5,456,976			6,094,775			4,908,673

Net loss per share (basic and diluted)	$	(0.46	)	$	(0.20	)	$	(0.25	)	$	(0.38	)	$	(1.27	)

FFO per share (basic and diluted)	$	(0.20	)	$	0.01		$	(0.08	)	$	(0.11	)	$	(0.36	)

MFFO per share (basic and diluted)	$	(0.05	)	$	0.03		$	0.07		$	0.13		$	0.23

FOOTNOTES:

⁽¹⁾	While impairment charges are excluded from the calculation of FFO, investors are cautioned that due to the fact that impairments are based on the relatively limited term of our operations, it could be difficult to recover any impairment charges.

⁽²⁾

Under GAAP, certain intangibles are accounted for at cost and reviewed at least annually for impairment, and certain intangibles are assumed to diminish predictably in value over time and are amortized, similar to depreciation and amortization of other real estate-related assets that are excluded from FFO. However, because real estate values and market lease rates historically rise or fall with market conditions, management believes that by excluding charges relating to amortization of these intangibles, MFFO provides useful supplemental information on the performance of the real estate.

⁽³⁾

Under GAAP, rental receipts are allocated to periods using various methodologies. This may result in income recognition that is significantly different than underlying contract terms. By adjusting for these items (to restate such payments from a GAAP accrual basis to a cash basis), MFFO provides useful supplemental information on the realized economic impact of lease terms, providing insight on the contractual cash flows of such lease terms, and aligns results with management’s analysis of operating performance.

⁽⁴⁾

In evaluating investments in real estate, management differentiates the costs to acquire the investment from the operations derived from the investment. Such information would be comparable only for non-traded REITs that have completed their acquisition activity and have other similar operating characteristics. By excluding expensed acquisition costs, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our Advisor or third parties. Acquisition fees and expenses under GAAP are considered operating expenses and as expenses included in the determination of net income and income from continuing operations, both of which are performance measures under GAAP. Acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property.

⁽⁵⁾

Management believes that adjusting for the realized loss on the early extinguishment of debt is appropriate because the write-off of unamortized loan costs is a non-recurring, non-cash adjustment that is not reflective of our ongoing operating performance and aligns results with management’s analysis of operating.

⁽⁶⁾

Management believes that the elimination of the adjustment related to contingent purchase price consideration expensed for GAAP purposes is appropriate because the adjustment is a non-recurring, non-cash adjustment that is not reflective of our ongoing operating performance and aligns results with management’s analysis of operating performance.

MFFO for the year ended December 31, 2014 was significantly impacted by both the lease extension at the Jacksonville Distribution Center and a valuation allowance recorded on the deferred tax assets related to our German properties:

•

In February 2014, we executed a lease amendment with the tenant at our Jacksonville Distribution Center, which extended the lease term from February 2018 to November 2024 and, among other things, granted “free rent” for the period from February 2014 through May 2014. Although the lease extension reduced our MFFO, we believe it enhanced the value of our property. Moreover, approximately $1.0 million for year ended December 31, 2014 has been recognized as non-cash revenues in the accompanying consolidated statements of operations, which is comprised of approximately $1.2 million in “free rent” offset by approximately $0.2 million in straight-line rent adjustments that have been deducted from MFFO as non-cash straight-line rent adjustments as compared to approximately $0.4 million for the year ended December 31, 2013 and $0.1 million for the year ended December 31, 2012.

•

During the year ended December 31, 2014, we recognized approximately $0.4 million of income tax expense when we determined the deferred tax assets related to our German operations were no longer more likely than not to be realized because of our intention to sell these properties. Although non-recurring in nature, MFFO for the year ended December 31, 2014, has not been adjusted for the resulting non-cash charge. Similarly, for the year ended December 31, 2012, we received an approximate $0.3 million income tax benefit which resulted from the deferred tax asset establishment for which we did not make an MFFO adjustment for the resulting non-cash charge.

Off Balance Sheet Arrangements

As of December 31, 2014, we had no off balance sheet arrangements.

Contractual Obligations

The following table presents our contractual obligations and the related payment periods as of December 31, 2014:


	For the Period Ending December 31,
	2015		2016-2017		2018-2019		Thereafter		Total
Mortgages and other notes payable (principal and interest) ⁽¹⁾	$	4,609,239	$	35,964,239	$	4,495,654	$	25,544,249	$	70,613,381

Total	$	4,609,239	$	35,964,239	$	4,495,654	$	25,544,249	$	70,613,381

FOOTNOTES:

⁽¹⁾	For the purpose of the contractual obligation table above, management assumed that the principal amounts outstanding on two of the mortgage notes payable are repaid at the anticipated repayment date, as defined in the respective loan agreements.

Related Party Arrangements

We have entered into agreements with our Advisor and its affiliates, whereby we agree to pay certain fees to, or reimburse certain expenses of, our Advisor or its affiliates for acquisition and advisory services, organization and offering costs, selling commissions, marketing support fees, asset and property management fees and reimbursement of operating costs. See Note 10, “Related Party Arrangements” in the accompanying consolidated financial statements in Item 8. “Financial Statements and Supplementary Data” and Item 13. “Certain Relationships and Related Transactions, and Director Independence” for a discussion of the various related party transactions, agreements and fees.

Critical Accounting Policies and Estimates

Below is a discussion of the accounting policies that management believes are critical to our operations. We consider these policies critical because they involve difficult management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. Our most sensitive estimates involve the allocation of the purchase price of acquired properties, evaluating our real estate-related investments for impairment, establishment of valuation allowances on deferred tax assets and the recognition of expenses deferred pursuant to the Expense Support Agreement.

Principles of Consolidation and Basis of Presentation

Our consolidated financial statements include our accounts and the accounts of our wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. For example, significant assumptions are made in the allocation of purchase price, analysis of real estate impairments, contingent assets and liabilities and the valuation of Restricted Stock issued to the Advisor. Actual results could differ from those estimates.

Real Estate

Upon acquisition of properties, we estimate the fair value of acquired tangible assets (consisting of land, building and improvements, and tenant improvements) and identifiable intangible assets (consisting of above- and below-market leases and in-place leases), and allocate the purchase price to assets acquired and liabilities assumed. In estimating the fair value of the tangible and intangible assets acquired, we consider information obtained about each property as a result of our Advisor’s due diligence and utilize various valuation methods, such as estimated cash flow projections using appropriate discount and capitalization rates, estimates of replacement costs net of depreciation and available market information.

The fair value of the tangible assets of an acquired leased property is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land, building and tenant improvements based on the determination of the fair values of these assets.

Above- and below-market lease values are recorded based on the present value of the difference between the contractual rents to be paid and management’s estimate of the fair market lease rates for each in-place lease. The purchase price is further allocated to in-place lease values based on management’s evaluation of the specific characteristics of the acquired lease. Factors considered include estimates of carrying costs during hypothetical expected lease up periods, including estimates of lost rental income during the expected lease up periods, and costs to execute similar leases such as leasing commissions, legal and other related expenses.

Real estate owned, as of December 31, 2014, is leased to tenants on a triple-net, net or modified gross basis, whereby the tenant is responsible for some or all of the operating expenses relating to the property, including property taxes, insurance, maintenance and repairs. The leases are accounted for as operating leases. Under the operating method, revenue is recognized as rentals are earned and expenses (including depreciation) are charged to operations as incurred. When scheduled rentals vary during the lease term, income is recognized on a straight-line basis so as to produce a constant periodic rent over the term of the lease.

Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations and replacements, which improve and extend the life of the asset, are capitalized.

Impairment of Real Estate Assets and Real Estate Held for Sale

Real estate assets and real estate held for sale are reviewed on an ongoing basis to determine whether there are any indicators, including property operating performance and general market conditions, that the value of the real estate properties (including any related amortizable intangible assets or liabilities) may be impaired. To assess if a property value is potentially impaired, management compares the estimated current and projected undiscounted cash flows, including estimated net sales proceeds, of the property over its remaining useful life, to the net carrying value of the property. Such cash flow projections consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. In the event that the carrying value exceeds the undiscounted operating cash flows, we would recognize an impairment provision to adjust the carrying value of the asset to the estimated fair value of the property.

In evaluating our real estate assets and real estate held for sale for impairment, management will make several estimates and assumptions, including, but not limited to, the projected date of disposition of the properties, the estimated future cash flows of the properties during our ownership and the projected sales price of each of the properties. If we used different estimates and assumptions, the carrying value might vary significantly, which could be material to our financial statements.

Intangible Assets

Amortization of intangible assets is computed using the straight-line method of accounting over the respective lease term or estimated useful life. Above-market or below-market lease intangibles are amortized to rental income over the estimated remaining term of the respective leases, including consideration of any renewal options on below-market leases. In-place lease intangibles are amortized over the remaining terms of the respective leases. If a lease were to be terminated prior to its scheduled expiration, all unamortized costs relating to that lease will be expensed. Intangible assets are evaluated for impairment on an annual basis or upon a triggering event.

Income Taxes

We elected to be taxed as a REIT starting with our taxable year ended December 31, 2010. As a REIT, we are subject to a number of organizational and operational requirements, including the requirement to make distributions, other than capital gain distributions, to our stockholders each year in the amount of at least 90 percent of our REIT taxable income (excluding net capital gains). A REIT generally will not be subject to U.S. federal corporate income tax to the extent we distribute our REIT taxable income to our stockholders. As a REIT, we are subject to certain foreign, state and local taxes on our income and property, federal income and excise taxes on our undistributed income.

If we fail to qualify as a REIT for any reason in a taxable year and applicable relief provisions do not apply, then we will be subject to tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. We also will be disqualified for the four taxable years following the year during which qualification was lost unless we are entitled to relief under specific statutory provisions. It is not possible to state whether we would be entitled to this statutory relief.

Deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year end, based on enacted tax laws and statutory tax rates applicable to the year in which the differences are expected to affect taxable income. Valuation allowances are established when it is deemed more likely than not that some portion or all of the deferred tax assets will not be realized. Our judgments regarding future profitability may change due to future market conditions and other factors. These changes, if any, may require adjustments to our deferred tax assets.

Recent Accounting Pronouncements

See Item 8. “Financial Statements and Supplementary Data” for information about the impact of recent accounting pronouncements.

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve our objectives, we borrow primarily at fixed rates or variable rates with the lowest margins available.

The following is a schedule of our fixed rate debt maturities (excluding indebtedness reflected in liabilities associated with assets held for sale) for each of the next five years, and thereafter (principal maturities only):


	2015		2016		2017		2018		2019		Thereafter		Total		Fair Value¹
Fixed rate debt	$	1,428,482	$	30,882,372	$	824,418	$	875,963	$	930,732	$	21,153,940	$	56,095,907	$	58,100,000

Total debt	$	1,428,482	$	30,882,372	$	824,418	$	875,963	$	930,732	$	21,153,940	$	56,095,907	$	58,100,000


	2015			2016			2017			2018			2019			Thereafter			Total
Weighted average fixed interest rates of maturities		5.79	%		5.54	%		6.08	%		6.08	%		6.08	%		6.08	%		5.78	%

FOOTNOTE:

⁽¹⁾	The fair market value of fixed rate debt was determined using discounted cash flows based on market interest rates as of December 31, 2014. We determined market rates through discussions with our existing lenders pricing our loans with similar terms and current rates and spreads.

During 2014 and through the sale of 94.9% of our equity interest in the entities that own our German properties in January 2015, we were exposed to risk from the effects of foreign currency exchange rate movements and were negatively impacted by movements in foreign currencies. As of December 31, 2014, we determined that the carrying value of our German portfolio was not recoverable based on an analysis comparing the sales proceeds, less transaction costs, received in January 2015 to the carrying value of the assets, including cumulative translation adjustments related to foreign currency exchange. Therefore, we recognized an impairment provision of approximately $0.5 million for the year ended December 31, 2014, which was primarily reflective of the approximate $0.6 million of accumulated other comprehensive loss recorded in the accompanying consolidated financial statements as of December 31, 2014. Subsequent to January 2015 and in future periods, our exposure to the impact of future movements in the exchange rate of Euro to U.S. dollars on our financial results is limited to our retained 5.1% non-controlling interest in the entities that own the German properties.

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


	Page

Report of Independent Registered Certified Public Accounting Firm		58

Financial Statements

Consolidated Balance Sheets		59

Consolidated Statements of Operations		60

Consolidated Statements of Comprehensive Loss		61

Consolidated Statements of Stockholders’ Equity		62

Consolidated Statements of Cash Flows		63

Notes to Consolidated Financial Statements		64

Report of Independent Registered Certified Public Accounting Firm

To the Board of Directors and Stockholders of Global Income Trust, Inc. and Subsidiaries:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Global Income Trust, Inc. and its subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion the financial statement schedules listed in the index under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Orlando, Florida

March 13, 2015

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	December 31,
	2014			2013
ASSETS

Real estate investment properties, net	$	63,263,152		$	66,631,039
Assets held for sale		20,868,983			24,949,185
Lease intangibles, net		13,872,453			18,178,099
Cash and cash equivalents		6,716,533			10,282,179
Restricted cash		2,231,728			1,877,461
Deferred rent		2,051,321			1,092,466
Loan costs, net		482,643			647,468
Other assets		265,594			236,135

Total assets	$	109,752,407		$	123,894,032


LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:
Mortgage notes payable	$	56,095,907		$	57,467,718
Liabilities associated with assets held for sale		13,742,627			15,382,632
Real estate taxes payable		1,030,510			1,030,510
Accounts payable and accrued expenses		826,606			573,440
Unearned rent		704,788			823,343
Other liabilities		455,848			455,848
Due to related parties		55,094			222,676

Total liabilities		72,911,380			75,956,167


Commitments and contingencies (Note 13)

Stockholders’ equity:
Preferred stock, $0.01 par value per share, authorized and unissued 200,000,000 shares		—			—
Common stock, $0.01 par value per share, 1,120,000,000 shares authorized; 8,419,689 shares issued and 8,257,410 shares outstanding		82,575			82,575
Capital in excess of par value		70,070,012			70,070,012
Accumulated distributions		(14,940,106	)		(9,572,863	)
Accumulated deficit		(17,796,900	)		(13,191,862	)
Accumulated other comprehensive income (loss)		(574,554	)		550,003

Total stockholders’ equity		36,841,027			47,937,865

Total liabilities and stockholders’ equity	$	109,752,407		$	123,894,032

See accompanying notes to consolidated financial statements.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


	Year Ended December 31,
	2014			2013			2012

Revenues:
Rental income from operating leases	$	9,606,008		$	9,973,130		$	7,107,385
Tenant reimbursement income		1,391,708			1,259,906			1,238,796

Total revenues		10,997,716			11,233,036			8,346,181


Expenses:
Property operating expenses		2,793,715			2,622,543			2,643,577
General and administrative		1,229,520			1,625,306			1,757,024
Acquisition fees and expenses		—			204			922,675
Asset management fees		—			968,077			613,882
Property management fees		292,750			293,241			227,118
Adjustment to contingent purchase price consideration		—			108,500			—
Impairment provision		1,253,688			—			—
Depreciation and amortization		6,214,317			6,205,280			4,213,113

Total expenses		11,783,990			11,823,151			10,377,389

Expense support		—			(1,526,335	)		(1,008,064	)


Net expenses		11,783,990			10,296,816			9,369,325


Operating income (loss)		(786,274	)		936,220			(1,023,144	)


Other income (expense):
Interest and other income (expense)		(25,864	)		51,194			4,743
Interest expense and loan cost amortization		(3,467,071	)		(3,783,963	)		(3,275,752	)

Total other expense		(3,492,935	)		(3,732,769	)		(3,271,009	)


Loss from continuing operations before income taxes		(4,279,209	)		(2,796,549	)		(4,294,153	)

Income tax expense		(56,517	)		(55,723	)		(45,030	)


Loss from continuing operations		(4,335,726	)		(2,852,272	)		(4,339,183	)

Income (loss) from discontinued operations, net of tax		(269,312	)		459,426			(1,895,405	)


Net loss	$	(4,605,038	)	$	(2,392,846	)	$	(6,234,588	)


Net income (loss) per share of common stock (basic and diluted):
Continuing operations	$	(0.53	)	$	(0.36	)	$	(0.88	)
Discontinued operations		(0.03	)		0.06			(0.39	)

	$	(0.56	)	$	(0.30	)	$	(1.27	)


Weighted average number of shares of common stock outstanding (basic and diluted)		8,257,410			7,931,165			4,908,673

See accompanying notes to consolidated financial statements

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


	Year Ended December 31,
	2014			2013			2012

Net loss	$	(4,605,038	)	$	(2,392,846	)	$	(6,234,588	)


Other comprehensive income (loss):
Unrealized foreign currency translation adjustments		(1,124,557	)		396,691			153,312

Total other comprehensive income (loss)		(1,124,557	)		396,691			153,312


Comprehensive loss	$	(5,729,595	)	$	(1,996,155	)	$	(6,081,276	)

See accompanying notes to consolidated financial statements.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012


	Common Stock						Capital in Excess of Par Value			Accumulated Distributions			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	Number of Shares			Par Value			Capital in Excess of Par Value			Accumulated Distributions			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance at January 1, 2012		2,879,077		$	28,791		$	24,472,676		$	(1,217,516	)	$	(4,564,428	)	$	—		$	18,719,523
Subscriptions received for common stock through public offering and distribution reinvestment plan		3,559,367			35,593			35,488,523			—			—			—			35,524,116
Redemptions of common stock		(32,064	)		(321	)		(309,773	)		—			—			—			(310,094	)
Stock issuance and offering costs		—			—			(5,212,917	)		—			—			—			(5,212,917	)
Net loss		—			—			—			—			(6,234,588	)		—			(6,234,588	)
Other comprehensive income		—			—			—			—			—			153,312			153,312
Distributions declared ($0.0017808 per share per day)		—			—			—			(3,199,577	)		—			—			(3,199,577	)

Balance at December 31, 2012		6,406,380			64,063			54,438,509			(4,417,093	)		(10,799,016	)		153,312			39,439,775
Subscriptions received for common stock through public offering and distribution reinvestment plan		1,981,245			19,814			19,709,534			—			—			—			19,729,348
Redemptions of common stock		(130,215	)		(1,302	)		(1,218,273	)		—			—			—			(1,219,575	)
Stock issuance and offering costs		—			—			(2,859,758	)		—			—			—			(2,859,758	)
Net loss		—			—			—			—			(2,392,846	)		—			(2,392,846	)
Other comprehensive income		—			—			—			—			—			396,691			396,691
Distributions declared ($0.0017808 per share per day)		—			—			—			(5,155,770	)		—			—			(5,155,770	)

Balance at December 31, 2013		8,257,410			82,575			70,070,012			(9,572,863	)		(13,191,862	)		550,003			47,937,865
Net loss		—			—			—			—			(4,605,038	)		—			(4,605,038	)
Other comprehensive loss		—			—			—			—			—			(1,124,557	)		(1,124,557	)
Distributions declared ($0.0017808 per share per day)		—			—			—			(5,367,243	)		—			—			(5,367,243	)

Balance at December 31, 2014		8,257,410		$	82,575		$	70,070,012		$	(14,940,106	)	$	(17,796,900	)	$	(574,554	)	$	36,841,027

See accompanying notes to consolidated financial statements.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year ended December 31,
	2014			2013			2012
Operating activities:
Net loss	$	(4,605,038	)	$	(2,392,846	)	$	(6,234,588	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		6,583,839			7,015,582			4,464,681
Amortization of above-market lease intangibles		300,580			332,765			123,889
Amortization of loan costs		200,111			239,192			358,437
Adjustment related to contingent purchase price consideration		—			108,500			—
Loss on early extinguishment of debt		—			99,134			132,539
Impairment provisions		1,768,555			—			—
Deferred income taxes		306,572			(41,521	)		(282,444	)
Straight-line rent adjustments		(972,277	)		(649,189	)		(412,806	)
Changes in operating assets and liabilities:
Other assets		(66,910	)		111,605			(345,232	)
Accounts payable and accrued expenses		445,612			(275,808	)		606,817
Due to related parties		(143,870	)		(611,516	)		262,974
Unearned rent		(118,555	)		240,514			215,438
Real estate taxes payable		—			453,332			164,359

Net cash provided by (used in) operating activities		3,698,619			4,629,744			(945,936	)

Investing activities:
Acquisition of properties		—			—			(39,585,536	)
Payment of lease costs		(15,927	)		—			—
Capital expenditures		(98,349	)		(35,052	)		(13,880	)
Changes in restricted cash		(329,790	)		(566,656	)		(757,784	)

Net cash used in investing activities		(444,066	)		(601,708	)		(40,357,200	)

Financing activities:
Subscriptions received for common stock through public offering and distribution reinvestment plan		—			19,729,348			35,524,116
Borrowings under credit facility		—			—			2,000,000
Repayments on credit facility		—			(820,000	)		(4,000,000	)
Proceeds from mortgage notes payable		—			—			14,156,637
Repayments of mortgage notes payable		(1,371,811	)		(5,266,608	)		(713,916	)
Payment of stock issuance and offering costs		—			(2,910,158	)		(5,230,141	)
Distributions to stockholders		(5,367,243	)		(5,049,499	)		(2,998,829	)
Redemptions of common stock		—			(1,266,272	)		(263,398	)
Payment of loan costs		—			(240,963	)		(581,980	)

Net cash provided by (used in) financing activities		(6,739,054	)		4,175,848			37,892,489

Effect of exchange rate fluctuation on cash		(81,145	)		41,175			18,653

Net increase (decrease) in cash and cash equivalents		(3,565,646	)		8,245,059			(3,391,994	)
Cash and cash equivalents at beginning of year		10,282,179			2,037,120			5,429,114

Cash and cash equivalents at end of year	$	6,716,533		$	10,282,179		$	2,037,120

Supplemental disclosure of cash flow information:
Cash paid for interest	$	3,779,119		$	3,697,320		$	2,787,665

Cash paid for taxes	$	88,190		$	56,396		$	28,292

Supplemental disclosure of non-cash investing and financing transactions:
Amounts incurred but not paid:
Loan costs	$	—		$	—		$	240,963

Lease costs	$	33,231		$	—		$	—

Stock issuance and offering costs	$	—		$	—		$	50,400

Distributions declared and unpaid	$	455,848		$	455,848		$	349,577

Redemptions	$	—		$	—		$	46,696

Assets acquired with assumption of debt with purchase of real estate	$	—		$	—		$	26,729,364

See accompanying notes to consolidated financial statements.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

1.	Business and Organization

Global Income Trust, Inc. was organized in Maryland on March 4, 2009. The term “Company” includes, unless the context otherwise requires, Global Income Trust, Inc., Global Income, LP, a Delaware limited partnership (“Operating Partnership”), Global Income GP, LLC and other subsidiaries of the Company. The Company operates, and has elected to be taxed, as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2010. The Company was formed to own and operate a portfolio of income-oriented commercial real estate and real estate-related assets on a global basis.

The Company is externally advised by CNL Global Income Advisors, LLC (“Advisor”) and its property manager is CNL Global Income Managers, LLC (“Property Manager”), each of which is a Delaware limited liability company and a wholly owned affiliate of CNL Financial Group, LLC, the Company’s sponsor (“Sponsor”). CNL Financial Group, LLC is an affiliate of CNL Financial Group, Inc. (“CNL”). The Advisor is responsible for managing the Company’s affairs on a day-to-day basis and for identifying, recommending and executing acquisitions and dispositions on behalf of the Company pursuant to an advisory agreement between the Company, the Operating Partnership and the Advisor.

Substantially all of the Company’s acquisition, operating, administrative and property management services are provided by sub-advisors to the Advisor and sub-property managers to the Property Manager. In addition, certain unrelated sub-property managers have been engaged by the Company or sub-property managers to provide certain property management services.

On April 23, 2010, the Company commenced its initial public offering (“Offering”) pursuant to a registration statement on Form S-11 under the Securities Act of 1933, as amended. The Offering expired and closed on April 23, 2013. As of April 23, 2013, the Company had received aggregate offering proceeds of approximately $83.7 million, including proceeds received through the Company’s distribution reinvestment plan.

The Company has completed its Offering and, given that it expects that its sources of capital and liquidity will be limited in the near term, has begun to explore strategic alternatives. Possible strategic alternatives may include the sale of either the Company or some or all of its assets, potential merger opportunities, or a combination of various alternatives. The financial statements have been prepared under the assumption that the Company has no immediate plans, other than disclosed, that would indicate a need to adjust the carrying value of its reported assets and liabilities or that affect the Company’s anticipated ability to meet its contractual obligations as they become due.

On January 20, 2015, the Company’s board of directors approved $7.43 as the estimated net asset value per share of the Company’s common stock as of December 31, 2014, exclusive of any portfolio premium and based on estimated year end balances.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

2.	Summary of Significant Accounting Policies

Basis of Presentation and Consolidation – The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Share Based Payments to Non-Employees – Pursuant to the amended and restated expense support, conditional reimbursement and restricted stock agreement (the “Amended and Restated Expense Support Agreement”) with the Advisor described in Note 6. “Related Party Arrangements,” effective January 1, 2014, the Advisor has agreed to accept forfeitable restricted shares of the Company’s common stock (the “Restricted Stock”) in lieu of cash in payment for up to the full amount of asset management fees and operating-related personnel expenses owed by the Company to the Advisor under the advisory agreement for services rendered after December 31, 2013. The Restricted Stock is subject to immediate and permanent forfeiture if, or to the extent that, it does not vest under the scenarios described in Note 6. “Related Party Arrangements.”

Upon issuance of Restricted Stock, the Company will measure the fair value at its then-current lowest aggregate fair value pursuant to FASB Accounting Standards Codification 505-50 “Equity-Based Payments to Non-Employees” (“ASC 505-50”). Since the vesting criteria is outside the control of the Advisor and involves both market conditions and counterparty performance conditions, the Restricted Stock is given no fair value recognition and the shares are treated as unissued for financial reporting purposes until the vesting criteria is met. On the date, if any, in which the Advisor satisfies the vesting criteria, the Company will re-measure the fair value of the Restricted Stock pursuant to ASC 505-50 and will recognize an expense equal to the difference between the original fair value and that of the re-measurement date. The Company will include the Restricted Stock in the calculation of diluted earnings per share to the extent their effect is dilutive and the vesting conditions have been satisfied as of the reporting date.

Pursuant to the Amended and Restated Expense Support Agreement, the Advisor will be the record owner of the Restricted Stock until sold or otherwise disposed of, or forfeited, and will be entitled to all rights of a stockholder of the Company including, without limitation, the right to vote such shares and receive dividends and other distributions paid with respect to such shares. Dividends or other distributions actually paid to the Advisor in connection with the Restricted Stock are not subject to forfeiture. The Company will recognize expense related to dividends and other distributions on the Restricted Stock as declared.

Use of Estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. For example, significant assumptions are made in the allocation of purchase price, analysis of real estate impairments, contingent assets and liabilities and the assessment of probability of repayments of expenses under the expense support agreement. Actual results could differ from those estimates.

Real Estate – Upon acquisition of properties, the Company estimates the fair value of acquired tangible assets (consisting of land, building and improvements, and tenant improvements) and identifiable intangible assets (consisting of above- and below-market leases and in-place leases) and allocates the purchase price to the assets acquired and liabilities assumed including debt. In estimating the fair value of the tangible and intangible assets acquired, the Company considers information obtained about each property as a result of its due diligence and utilizes various valuation methods, such as estimated cash flow projections using appropriate discount and capitalization rates, estimates of replacement costs net of depreciation and available market information.

The fair value of the tangible assets of an acquired leased property is determined by estimating the value of the property as if it were vacant, and the “as-if-vacant” value is then allocated to land, building and improvements based on the determination of the fair values of these assets.

Above- and below-market lease intangibles are recorded based on the present value of the difference between the contractual amounts to be paid pursuant to the lease and management’s estimate of the fair market lease rates for each in-place lease. The purchase price is further allocated to in-place lease intangibles based on management’s evaluation of the specific characteristics of the acquired lease. Factors considered include estimates of carrying costs during hypothetical expected lease up periods, including estimates of lost rental income during the expected lease up periods, and costs to execute similar leases such as leasing commissions, legal and other related expenses.

Buildings and improvements are depreciated on the straight-line method over their estimated useful lives, which generally are 39 and 15 years, respectively. Tenant improvements are depreciated on the straight-line method over the shorter of the asset life or the respective lease term. Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations and replacements, which improve and extend the life of the asset, are capitalized.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

2.	Summary of Significant Accounting Policies (continued)

Assets and Associated Liabilities Held For Sale – Assets and liabilities that are classified as held for sale are recorded at the lower of their carrying value or fair value less costs to dispose. The Company classifies assets and liabilities as held for sale once management has the authority to approve and commits to a plan to sell, the assets and liabilities are available for immediate sale, an active program to locate a buyer and the sale of the assets and liabilities are probable and transfer of the assets and liabilities are expected to occur within one year. Upon the determination of the assets and liabilities classified as held for sale or sold, the depreciation and amortization of the assets and liabilities will terminate. The related results from operations of assets and associated liabilities held for sale are reported as discontinued if such operations and cash flows can be clearly distinguished both operationally and financially from the ongoing operations, if such operations and cash flows will be eliminated from ongoing operations once the disposal occurs, and if the Company will not have any significant continuing involvement subsequent to the sale.

Intangible Assets – Amortization of intangible assets is computed using the straight-line method of accounting over the respective lease term or estimated useful life, including renewal periods for below-market leases. Above-market or below-market lease intangibles are amortized to rental income over the estimated remaining terms of the respective leases. In-place lease intangibles are amortized over the remaining terms of the respective leases and charged to depreciation and amortization. If a lease were to be terminated prior to its scheduled expiration, all unamortized amounts related to the lease would be written off. Intangible assets are evaluated for impairment on an annual basis or upon a triggering event.

Impairment of Real Estate Assets – Real estate assets are reviewed on an ongoing basis to determine whether there are any indicators, including property operating performance and general market conditions, that the value of the real estate properties (including any related amortizable intangible assets or liabilities) may be impaired. To assess if a property’s asset group is potentially impaired, management compares the estimated current and projected undiscounted operating cash flows, including estimated net sales proceeds, of the property over its expected holding period to the net carrying value of the property. Such cash flow projections consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. In the event that the carrying value exceeds the undiscounted operating cash flows, the Company would recognize an impairment provision to adjust the carrying value of the asset to the estimated fair value of the property.

Cash and Cash Equivalents – Cash and cash equivalents consist of cash on hand and highly liquid investments purchased with original maturities of three months or less.

As of December 31, 2014, certain of the Company’s cash deposits exceeded federally insured amounts. However, the Company continues to monitor the third-party depository institutions that hold the Company’s cash and cash equivalents, primarily with the goal of safety of principal. The Company attempts to limit cash investments to financial institutions with high credit standing; therefore, the Company believes it is not exposed to any significant credit risk on cash.

Restricted Cash – Certain amounts of cash are deposited in a lockbox with the lender or are restricted to fund future expenditures for the Company’s real estate properties. Such amounts have been classified as restricted cash on the consolidated balance sheets.

Foreign Currency Translation – The accounting records for the Company’s consolidated subsidiaries that own the properties in Germany are maintained in the functional currency (Euro), and revenues and expenses are translated using the average exchange rates during the applicable period presented. Assets and liabilities are translated to U.S. dollars using the exchange rate in effect at the applicable balance sheet date. The resulting translation adjustments are reflected in other comprehensive income (loss) in the statements of stockholders’ equity as a cumulative foreign currency translation adjustment. Any gains and losses from foreign currency transactions are included in the accompanying consolidated statements of operations.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

2.	Summary of Significant Accounting Policies (continued)

Fair Value Measurements – Fair value assumptions are based on the framework established in the fair value accounting guidance under GAAP. The framework specifies a hierarchy of valuation inputs which was established to increase consistency, clarity and comparability in fair value measurements and related disclosures. The guidance describes a fair value hierarchy based upon three levels of inputs that may be used to measure fair value, two of which are considered observable and one that is considered unobservable. The following describes the three levels of fair value inputs:

•

Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

•

Level 2 — Inputs, other than quoted prices included in Level 1, that are observable for the asset or liability either directly or indirectly; such as, quoted prices for similar assets or liabilities or other inputs that can be corroborated by observable market data.

•

Level 3 — Unobservable inputs for the asset or liability, which are typically based on the Company’s own assumptions, as there is little, if any, related market activity.

When market data inputs are unobservable, the Company utilizes inputs that it believes reflects the Company’s best estimate of the assumptions market participants would use in pricing the asset or liability. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

Revenue Recognition – Real estate owned as of December 31, 2014 is leased to tenants, whereby the tenant is responsible for some or, in the case of the Company’s triple-net-leased properties, all of the operating expenses relating to the property, including property taxes, insurance, maintenance and repairs. The leases are accounted for using the operating method. Under the operating method, revenue is recognized as rentals are earned and expenses (including depreciation) are charged to operations as incurred. Rental revenue from leases is recorded on the straight-line basis over the terms of the leases. Tenant reimbursement income represents amounts tenants are required to reimburse the Company in accordance with the terms of the leases and are recognized in the period in which the related reimbursable expenses are incurred.

Mortgages and Other Notes Payable – Mortgages and other notes payable acquired are recorded at the stated principal amount and are collateralized by the Company’s properties. Mortgages and other notes payable assumed in connection with an acquisition are recorded at fair market value as of the date of the acquisition.

Loan Costs – Financing costs paid in connection with obtaining debt are deferred and amortized over the estimated life of the debt using the effective interest rate method. As of December 31, 2014 and 2013, accumulated amortization of loan costs were approximately $0.7 million and $1.0 million, respectively.

Acquisition Fees and Expenses – Acquisition fees, including investment services fees, and expenses associated with transactions deemed to be business combinations are expensed as incurred.

Redemptions – Under the Company’s stock redemption plan that was suspended in April 2013, a stockholder’s shares were deemed to be redeemed as of the date that the Company accepted the stockholder’s request for redemption. From and after such date, the stockholder, by virtue of such redemption, was no longer entitled to any rights as a stockholder in the Company. Shares redeemed were retired and not available for reissue.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

2.	Summary of Significant Accounting Policies (continued)

Income Taxes – The Company has elected and qualified as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and related regulations beginning with the year ended December 31, 2010. As a REIT, the Company generally is not subject to federal corporate income taxes provided it continues to distribute at least 90% of its REIT taxable income and capital gains and meets certain other requirements for qualifying as a REIT.

As a REIT, the Company may be subject to certain state and foreign income taxes. These state and foreign income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and respective tax bases and operating losses and tax-credit carry forwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Net Loss Per Share – Net loss per share is calculated based upon the weighted average number of shares of common stock outstanding during the periods.

Reclassifications – Certain amounts in the prior year’s consolidated financial statements have been reclassified to conform to current year presentation with no effect on previously reported net loss or equity. See Note 5. “Assets and Associated Liabilities Held for Sale” for additional information.

Segment Information – Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company has determined that it operates in one business segment, real estate ownership. Accordingly, the Company does not report more than one segment.

Adopted Accounting Pronouncements – In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This update affects entities that cease to hold a controlling financial interest (as described in subtopic 810-10) in a subsidiary or group of assets within a foreign entity when the subsidiary or group of assets is a business and there is a cumulative translation adjustment balance associated with that foreign entity. The update also affects entities that lose a controlling financial interest in an investment in a foreign entity (by sale or other transfer event) and those that acquire a business in stages (sometimes also referred to as a step acquisition) by increasing an investment in a foreign entity from one accounted for under the equity method to one accounted for as a consolidated investment. Effective January 1, 2014, the Company adopted this ASU. The adoption of this update did not have a material impact on the Company’s financial position, results of operations or cash flows.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

2.	Summary of Significant Accounting Policies (continued)

In July 2013, the FASB issued ASU No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” This update clarified the guidance in subtopic 740 and requires entities to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward to the extent one is available. The unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. Effective January 1, 2014, the Company adopted this ASU. The adoption of this update did not have a material impact on the Company’s financial position, results of operations or cash flows.

Recent Accounting Pronouncements – In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” This update changes the criteria for reporting discontinued operations where only disposals representing a strategic shift, such as a major line of business or geographical area, should be presented as a discontinued operation. This ASU is effective prospectively for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014 with early adoption permitted. The Company will adopt ASU No. 2014-08 commencing January 1, 2015. This ASU is expected to impact the determination of which future property disposals qualify as discontinued operations, as well as, require additional disclosures about discontinued operations.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” as a new ASC topic (Topic 606). The core principle of this amendment is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard further provides guidance for any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, lease contracts). This ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, with earlier adoption not permitted. ASU 2014-09 can be adopted using one of two retrospective application methods: i) retrospectively to each prior reporting period presented or ii) as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating ASU 2014-09; however, this amendment could potentially have a significant effect on the Company’s consolidated financial position, results of operations or cash flows.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

3.	Acquisitions

There were no acquisitions during the years ended December 31, 2014 and 2013. During the year ended December 31, 2012, the Company acquired the following real estate investment properties:

Name and Location

Date
Acquired

Description

Leasable
Square
Footage
(unaudited)

Initial
Purchase Price ⁽¹⁾

Giessen Retail Center

Giessen, Germany

3/8/2012

Value Retail Center

34,700

5,244,136

Worms Retail Center

Worms, Germany

9/27/2012

Value Retail Center

41,944

5,834,110

Gutersloh Retail Center

Gutersloh, Germany

9/27/2012

Value Retail Center

19,375

3,596,095

Jacksonville Distribution Center

Jacksonville, Florida

10/12/2012

Distribution Facility

817,632

42,500,000

Bremerhaven Retail Center

Bremerhaven, Germany

11/30/2012

Value Retail Center

33,121

3,770,000

Hannover Retail Center

Hannover, Germany

12/21/2012

Value Retail Center

26,784

5,370,559

Total

66,314,900

FOOTNOTE:

⁽¹⁾	Where applicable, amounts translated from Euro to U.S. dollars at exchange rate for the respective acquisition date.

The following summarizes the allocation of the purchase prices for the 2012 acquisitions and the estimated fair values of the assets acquired and liabilities assumed:


	2012
Assets
Land and land improvements	$	11,548,728
Building and improvements		40,402,525
Tenant improvements		425,600
Lease intangibles ⁽¹⁾		13,829,547
Other assets		108,500
Liabilities
Assumed mortgage note payable		(26,729,364	)

Net assets acquired	$	39,585,536

FOOTNOTE:

⁽¹⁾	At the acquisition date, the weighted-average amortization period on the acquired lease intangibles was approximately 6.3 years.

The revenues and net losses attributable to the 2012 acquisitions included in the Company’s consolidated statement of operations were approximately $1.5 million and $(3.1) million, respectively.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

3.	Acquisitions (continued)

The following presents the unaudited pro forma revenues and net loss of the Company as if the properties purchased during 2012 had each been acquired as of January 1, 2012:


	Year Ended December 31, 2012
	(Unaudited)
Revenues	$	13,203,572

Net loss ⁽¹⁾	$	(2,243,137	)

Net loss per share of common stock (basic and diluted)	$	(0.39	)

Weighted average number of shares of common stock outstanding (basic and diluted) ⁽²⁾		5,825,660

FOOTNOTE:

⁽¹⁾	The pro forma results, for the year ended December 31, 2012, were adjusted to exclude approximately $2.3 million of acquisition related expenses incurred in 2012.

⁽²⁾

As a result of these properties being treated as operational since January 1, 2012, the Company assumed approximately 2.9 million additional shares of common stock had been issued as of January 1, 2012. Consequently, the weighted average number of shares outstanding was adjusted to reflect the pro forma amount of the additional shares being issued as of January 1, 2012 instead of the actual dates issued, and such shares were treated as outstanding for the full period.

4.	Real Estate Investment Properties, net

As of December 31, 2014 and 2013, real estate investment properties consisted of the following:


	December 31, 2014			December 31, 2013

Land and land improvements	$	13,754,351		$	13,746,451
Building and improvements		51,497,741			52,557,179
Tenant improvements		4,918,600			4,918,600
Equipment		83,801			14,202
Less: accumulated depreciation		(6,991,341	)		(4,605,393	)

	$	63,263,152		$	66,631,039

Depreciation expense on the Company’s real estate investment properties was approximately $2.4 million for each of the years ended December 31, 2014 and 2013, and $1.8 million for the year ended December 31, 2012.

The Company evaluates its properties on an ongoing basis, including operating performance of its properties or plans to dispose of assets, to determine if the carrying value is recoverable. The Company determined that the carrying value of the Austin Property was not recoverable based upon the third-party appraisal obtained in connection with the Company’s net asset valuation as of December 31, 2014, which included both discounted cash flows and residual values expected from this property, coupled with the Company’s expected holding period. In February 2015, the Company committed to a plan to sell its Austin property. As such, the Company recorded an impairment of approximately $1.3 million as of December 31, 2014 to write-down the carrying value of this property to its net realizable value (a portion of which related to the in-place lease intangibles). There were no impairments for the years ended December 31, 2013 and 2012.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

5.	Assets and Associated Liabilities Held for Sale

During 2014, in connection with the Company’s evaluation of potential strategic alternatives for the Company as a whole, the Company committed to a plan to sell its German properties. In December 2014, the Company entered into a share purchase agreement for the sale of 94.9% of its equity interest in the entities that own the German properties, thereby retaining a non-controlling 5.1% interest with limited protective rights. All assets and liabilities of these entities have been classified as assets held for sale and liabilities associated with assets held for sale, respectively, on the consolidated balance sheets as of December 31, 2014 and 2013 and all operating results relating to these properties have been treated as discontinued operations for all periods presented. The financial statements reflect reclassifications of rental income, property expenses, interest expense and other income and expenses from continuing operations to income (loss) from discontinued operations.

The Company evaluated the German portfolio for impairment and determined that the carrying value was not recoverable based on an analysis comparing the sales proceeds, less transaction costs, received in January 2015 to the carrying value of 94.9% of the Company’s equity interest in the entities that own the German properties, including all cumulative translation adjustments related to foreign currency exchange, as of December 31, 2014. Therefore, the Company recognized an impairment provision of approximately $0.5 million for the year ended December 31, 2014. Refer to Note 16. “Subsequent Events” for additional information on the sale.

As of December 31, 2014 and 2013, assets held for sale consisted of the following:


	December 31, 2014			December 31, 2013
Land and land improvements	$	4,785,552		$	5,557,315
Building and improvements		14,450,480			16,761,170
Less: accumulated depreciation		(688,372	)		(564,769	)

Operating real estate held for sale		18,547,660			21,753,716
Lease intangibles, net		1,799,349			2,266,710
Deferred rent		45,208			40,969
Restricted cash		182,345			206,822
Loan costs, net		130,632			184,117
Other assets		163,789			157,636
Deferred tax asset, net		—			339,215

Total assets held for sale	$	20,868,983		$	24,949,185

As of December 31, 2014 and 2013, the liabilities associated with assets held for sale consisted of the following:


	December 31, 2014		December 31, 2013
Mortgage notes payable	$	13,228,159	$	14,982,338
Unearned rent		6,139		11,411
Accounts payable and accrued expenses		453,041		357,307
Due to related party		55,288		31,576

Total liabilities associated with assets held for sale	$	13,742,627	$	15,382,632

These balance sheet amounts have been converted from Euro to U.S. dollars at an exchange rate of $1.22 per Euro and $1.38 per Euro as of December 31, 2014 and 2013, respectively.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

5.	Assets and Associated Liabilities Held for Sale (continued)

The following is a summary of the income (loss) from discontinued operations for the years ended December 31, 2014, 2013 and 2012:


	Years Ended December 31,
	2014			2013			2012
Revenues	$	2,410,671		$	2,488,724		$	706,610
Expenses		(930,685	)		(956,428	)		(2,532,773	)
Depreciation and amortization		(369,522	)		(810,302	)		(251,568	)
Impairment provision		(514,867	)		—			—
Expense support		—			238,039			65,920

Operating income (loss)		595,597			960,033			(2,011,811	)
Interest expense		(489,524	)		(496,371	)		(153,799	)

Income (loss) from discontinued operations before income tax expense		106,073			463,662			(2,165,610	)
Income tax benefit (expense)		(375,385	)		(4,236	)		270,205

Income (loss) from discontinued operations	$	(269,312	)	$	459,426		$	(1,895,405	)

These statements of operations amounts have been converted from Euro to U.S. dollars at the exchange rate of $1.33 per Euro, $1.33 per Euro and $1.32 per Euro for the years ended December 31, 2014, 2013 and 2012, respectively. The income tax expense for the year ended December 31, 2014 is primarily attributable to the Company’s determination the deferred tax assets will not more likely than not be realizable and recorded a full valuation allowance.

6.	Operating Leases

The Company owned four properties, exclusive of properties held for sale, during the year ended December 31, 2014, leased to tenants on a triple-net, net or modified gross basis, and accounted for as operating leases. As of December 31, 2014, the Company’s continuing operating leases had a weighted average remaining lease term of 6.0 years, based on annualized base rents, with terms expiring between 2016 and 2024, subject to the tenants’ options to extend the lease periods ranging from two to five years.

In accordance with the lease terms for two of the Company’s properties, substantially all of the property expenses are required to be paid directly by the tenants, including real estate taxes which the tenant pays directly to the taxing authorities. In the event the tenants failed to pay such taxes, the Company would be obligated to pay such amounts. The total annualized property taxes assessed on these properties as of December 31, 2014 was approximately $0.7 million.

The following is a schedule of future minimum lease payments (excluding properties held for sale) to be received for each of the next five years and thereafter, in the aggregate, under non-cancellable operating leases as of December 31, 2014:


2015	$	10,232,777
2016		9,996,497
2017		9,985,713
2018		9,062,490
2019		3,931,325
Thereafter		16,814,991

	$	60,023,793

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

6.	Operating Leases (continued)

The above future minimum lease payments to be received excludes tenant reimbursements, straight-line rent adjustments, amortization of above-market lease intangibles, base rent attributable to any renewal options exercised by the tenants in the future and base rent attributable to properties classified as held for sale as of December 31, 2014.

7.	Lease Intangibles, net

The gross carrying amount and accumulated amortization of the Company’s intangible assets (excluding properties held for sale) as of December 31, 2014 and 2013 are as follows:


	December 31, 2014			December 31, 2013
In-place leases	$	23,675,450		$	23,869,700
Above-market leases		1,634,300			1,634,300

Gross carrying amount		25,309,750			25,504,000
Accumulated amortization		(11,437,297	)		(7,325,901	)

Net book value	$	13,872,453		$	18,178,099

Amortization expense on the Company’s intangible assets for the years ended December 31, 2014, 2013 and 2012 was approximately $4.1 million, $4.1 million and $2.5 million, respectively, of which approximately $0.3 million, $0.3 million and $0.1 million, respectively, was treated as a reduction of rental revenue, and $3.8 million, $3.8 million and $2.4 million, respectively, was included in depreciation and amortization expense.

The estimated future amortization for the Company’s intangible assets, excluding amounts classified as held for sale, for each of the next five years and thereafter, in the aggregate, as of December 31, 2014 was as follows:


	In place leases		Above-market leases		Total
2015	$	3,695,169	$	283,026	$	3,978,195
2016		3,695,169		283,026		3,978,195
2017		3,695,169		283,026		3,978,195
2018		1,859,439		78,429		1,937,868
2019		—		—		—
Thereafter		—		—		—

	$	12,944,946	$	927,507	$	13,872,453

As of December 31, 2014 and 2013, the weighted average useful lives of in-place leases were 3.6 years and 4.5 years, respectively, and the weighted average useful lives of above market leases were 3.6 years and 4.6 years, respectively.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

8.	Contingent Purchase Price Consideration

In connection with the acquisition of the Jacksonville Distribution Center, the Company required that approximately $1.0 million of the purchase price be placed in an escrow account as contingent purchase consideration in the event of non-renewal by the tenant through 2023. At the time of acquisition, the probability of renewal by the tenant was assessed and approximately $0.1 million of the purchase price was allocated and recorded as an Other Asset in the accompanying consolidated balance sheet as of December 31, 2012. During the year ended December 31, 2013, based on then-current discussions with the tenant and a high probability that the tenant will renew, the Company determined that the $1 million purchase price placed in escrow will be released to the seller. As a result, the Company reduced the fair value of the asset by $0.1 million and recorded it as an expense in the accompanying consolidated statements of operations for the year ended December 31, 2013. In February 2014, the Company executed a lease amendment with the tenant at its Jacksonville Distribution Center, which extended the lease term from February 2018 to November 2024.

The following table provides a roll-forward of the fair value of the contingent purchase price consideration for the years ended December 31, 2014, 2013 and 2012:


	Year Ended December 31,
	2014		2013			2012
Beginning balance	$	—	$	108,500		$	—
Issuance of contingent consideration in connection with acquisition		—		—			108,500
Change in fair value		—		(108,500	)		—

Ending balance	$	—	$	—		$	108,500

The fair value was based on the then-current lease renewal probability, for each period presented, that a market participant would expect to obtain for similar leases. Since this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair value related to the Company’s contingent purchase price consideration is categorized as Level 3 on the three-level fair value hierarchy.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

9.	Indebtedness

The following table provides details of the Company’s indebtedness as of December 31, 2014 and 2013 (excluding liabilities associated with assets held for sale):

Property and Related Loan

Outstanding
Balance as of
December 31,
2014
(in millions)

Outstanding
Balance as of
December 31,
2013
(in millions)

Interest
Rate

Payment Terms

Maturity
Date ⁽¹⁾

Jacksonville Distribution Center, mortgage loan ⁽²⁾

25.3

26.0

6.1% per annum

$187,319 monthly principal and interest payments based on a 25-year amortization

9/1/2023

Heritage Commons III; mortgage loan ⁽³⁾

11.4

11.7

4.7% per annum

$70,338 monthly principal and interest payments based on a 25-year amortization

7/1/2016

Heritage Commons IV; mortgage loan ⁽³⁾

19.4

19.8

6.0% per annum

$132,307 monthly principal and interest payments based on a 25-year amortization

11/1/2016

Total

56.1

57.5

FOOTNOTES:

⁽¹⁾	Represents the initial maturity date, which may be extended beyond the date shown.

⁽²⁾	The Company assumed an existing secured first mortgage on the Jacksonville Distribution Center. The existing mortgage may be prepaid, in full but not in part, subject to a reinvestment charge for any prepayment occurring sooner than six months before maturity.

⁽³⁾

The loans may be extended for an additional term not to exceed beyond December 1, 2018 and September 1, 2018 for Heritage Commons III and Heritage Commons IV, respectively, subject to the interest rate increasing to 9.7% per annum for Heritage Commons III and 11.018% per annum for Heritage Commons IV.

During the year ended December 31, 2013, the Company extinguished the outstanding balance of $0.8 million of its credit facility prior to its scheduled expiration, and in addition, extinguished the outstanding balance of $4.0 million of its mezzanine loan that bore interest at a rate of 11% prior to its scheduled expiration. In connection therewith, the Company wrote-off approximately $0.1 million in unamortized loan costs which are included in the accompanying consolidated statement of operations for the year ended December 31, 2013 as interest expense and loan cost amortization and as a loss on the early extinguishment of debt in the accompanying consolidated statement of cash flows for the year ended December 31, 2013.

The Company’s debt contains customary covenants, agreements, representations and warranties and events of default, all as set forth in the respective loan documents. Additionally, some of the Company’s agreements contain certain financial covenants, including (but not limited to) the following: minimum debt service coverage ratios and limitations on the incurrence of additional indebtedness. As of December 31, 2014, the Company was in compliance with these covenants.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

9.	Indebtedness (continued)

Maturities of indebtedness for the next five years and thereafter, in aggregate, as of December 31, 2014 (excluding liabilities associated with assets held for sale) are:


2015	$	1,428,482
2016⁽¹⁾		30,882,372
2017		824,418
2018		875,963
2019		930,732
Thereafter		21,153,940

	$	56,095,907

FOOTNOTE:

(1)	For the purposes of the five year maturity table above, management assumed that the principal amounts outstanding on two of the mortgage notes payable are repaid at the anticipated repayment date, as defined in the respective loan agreements.

The estimated fair market value and carrying value of the Company’s mortgage notes payable were approximately $58.1 million and $56.1 million, respectively, as of December 31, 2014 and $54.1 million and $57.5 million, respectively, as of December 31, 2013, based on then-current rates and spreads the Company would expect to obtain for similar borrowings on properties with similar lease terms. Because this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to the Company’s mortgage and other notes payable is categorized as Level 3 on the three-level valuation hierarchy used for GAAP. The estimated fair value of accounts payable and accrued expenses approximates the carrying value as of December 31, 2014 because of the relatively short maturities of the obligations.

10.	Related Party Arrangements

The Company is externally advised and has no direct employees. In addition, certain directors and officers hold similar positions with CNL Securities Corp., the managing dealer of the Offering and a wholly owned subsidiary of CNL (“Managing Dealer”), the Advisor and their affiliates. In connection with services provided to the Company, affiliates are entitled to fees, which are consistent with market rates for such services and commensurate with the effort required to perform such services, as follows:

Managing Dealer - While equity was being raised in the Company’s Offering, the Managing Dealer received selling commissions and marketing support fees of up to 7% and 3%, respectively, of gross offering proceeds for shares sold, excluding shares sold pursuant to the Company’s distribution reinvestment plan, all or a portion of which were paid to participating broker dealers by the Managing Dealer.

Advisor – Subject to the Expense Support Agreements described below, the Advisor and certain affiliates are entitled to receive fees and compensation in connection with the acquisition, management and sale of the Company’s assets, as well as, the refinancing of debt obligations of the Company or its subsidiaries. In addition, the Advisor and its affiliates are entitled to reimbursement of actual costs incurred on behalf of the Company in connection with the Company’s operating activities.

Pursuant to the advisory agreement, the Advisor receives investment services fees equal to 1.85% of the purchase price of properties for services rendered in connection with the selection, evaluation, structure and purchase of assets. In addition, the Advisor is entitled to receive a monthly asset management fee of 0.08334% of the real estate asset value (as defined in the advisory agreement) of the Company’s properties as of the end of the preceding month.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

10.	Related Party Arrangements (continued)

The Advisor is also entitled to receive a financing coordination fee for services rendered with respect to refinancing any debt obligations of the Company or its subsidiaries equal to 1.0% of the gross amount of the refinancing.

The Company will pay the Advisor a disposition fee in an amount equal to (i) in the case of the sale of real property, the lesser of (a) one-half of a competitive real estate commission, or (b) 1% of the sales price of such property, (ii) in the case of the sale of any asset other than real property or securities, 1% of the sales price of such asset, and (iii) in the case of the sale of loans, 1% of the contract price of any loan. The Company will not pay the Advisor a disposition fee in connection with the sale of investments that are securities; however, a disposition fee in the form of a usual and customary brokerage fee may be paid to an affiliate or related party of the Advisor if such entity is properly licensed.

Under the advisory agreement and the Company’s articles of incorporation, the Advisor will be entitled to receive certain subordinated incentive fees upon (a) sales of assets and/or (b) a listing (which would also include the receipt by the Company’s stockholders of securities that are approved for trading on a national securities exchange in exchange for shares of the Company’s common stock as a result of a merger, share acquisition or similar transaction). However, if a listing occurs, the Advisor will not be entitled to receive an incentive fee on subsequent sales of assets. The incentive fees are calculated pursuant to formulas set forth in both the advisory agreement and the Company’s articles of incorporation. All incentive fees payable to the Advisor are subordinated to the return to investors of invested capital plus a 6% cumulative, noncompounded annual return on invested capital. Upon termination or non-renewal of the advisory agreement by the Advisor for good reason (as defined in the advisory agreement) or by the Company other than for cause (as defined in the advisory agreement), a listing or sale of assets after such termination or non-renewal will entitle the Advisor to receive a pro-rated portion of the applicable subordinated incentive fee.

In addition, the Advisor or its affiliates may be entitled to receive fees that are usual and customary for comparable services in connection with the financing, development, construction or renovation of a property, subject to approval of the Company’s board of directors, including a majority of its independent directors.

Property Manager – Pursuant to a master property management agreement, the Property Manager and/or sub-property managers receive property management fees of up to 4.5% of gross revenues for management of the Company’s properties.

CNL Capital Markets Corp – CNL Capital Markets Corp., an affiliate of CNL, received an initial set-up fee of $4.57 per investor and receives an annual maintenance fee for providing certain administrative services to the Company pursuant to a services agreement. For the years ended December 31, 2013 and 2012, the annual maintenance fee was approximately $0.04 million and $0.03 million, respectively, and is included in the expense reimbursement amounts presented in the table below.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

10.	Related Party Arrangements (continued)

For the years ended December 31, 2014, 2013 and 2012, the Company incurred the following fees and reimbursable expenses due to the Managing Dealer of the Company’s Offering, an affiliate of the Company’s Advisor, the Advisor, its affiliates and other related parties:


	Year ended December 31,
	2014		2013			2012
Offering fees:
Selling commissions ⁽¹⁾	$	—	$	1,299,186		$	2,405,147
Marketing support fees ⁽¹⁾		—		571,295			1,030,777

		—		1,870,481			3,435,924


Reimbursable expenses:
Offering costs ⁽¹⁾		—		989,277			1,776,993
Operating expenses ^(2) (3)		575,974		727,280			1,121,334
Acquisition fees and expenses		—		154			50,119

		575,974		1,716,711			2,948,446

Investment services fees		—		—			1,222,234
Asset management fees ^{(3) (4)}		1,206,116		1,206,116			679,802
Property management fees ^{(4) (5)}		396,555		404,543			255,616
Expense support adjustment ⁽⁶⁾		—		(1,764,373	)		(1,073,984	)

	$	2,178,645	$	3,433,478		$	7,468,038

FOOTNOTES:

⁽¹⁾	Amounts are recorded as stock issuance and offering costs in the accompanying consolidated statements of stockholders’ equity.

⁽²⁾	In general, amounts are recorded as general and administrative expenses in the accompanying consolidated statements of operations.

⁽³⁾

For the year ended December 31, 2014, the Company incurred $1.2 million in asset management fees and $0.5 million in operating-related personnel expenses for which the Advisor agreed to receive Restricted Stock in lieu of cash pursuant to the terms of the Amended and Restated Expense Support Agreement. Since the vesting conditions were not met, no fair value was assigned to the Restricted Stock, and as a result, during the year ended December 31, 2014, asset management fees and operating expenses were reduced by $1.2 million and $0.5 million, respectively. In addition, for the year ended December 31, 2014, the Company recorded an approximate $0.2 million reduction in operating expenses as the Advisor agreed to waive all unpaid reimbursable operating expenses from prior periods on December 30, 2014.

⁽⁴⁾	Asset management fees and property management fees, as well as the expense support adjustment related to the Company’s entities classified as held for sale, are included in income from discontinued operations for each period presented.

⁽⁵⁾	Includes amounts paid directly by subsidiaries of the Company to a sub-advisor of the Advisor for the year ended December 31, 2013. Prior to its acquisition by BlackRock, Inc., (NYSE:BLK), the sub-advisor was indirectly affiliated with one of the Company’s former directors.

⁽⁶⁾

For the years ended December 31, 2013 and 2012, approximately $1.2 million and $0.5 million, respectively, in asset management fees and approximately $0.6 million and $0.5 million, respectively, in operating-related personnel expenses were deferred and subordinated in accordance with the terms of the Original Expense Support Agreement.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

10.	Related Party Arrangements (continued)

Amounts due to related parties for fees and reimbursable costs and expenses described above were as follows as of December 31:


	2014		2013
Due to Managing Dealer:
Selling commissions	$	—	$	—
Marketing support fees		—		—

		—		—

Due to Property Manager:
Property management fees		89,818		62,748

		89,818		62,748

Due to the Advisor and its affiliates:
Reimbursable offering costs		—		—
Reimbursable operating expenses		20,564		191,504
Investment services fees		—		—

		20,564		191,504

	$	110,382	$	254,252

In March 2012, the Company’s board of directors approved an Expense Support and Conditional Reimbursement Agreement with its Advisor (“Original Expense Support Agreement”) whereby, effective April 1, 2012, reimbursement of operating-related personnel expenses and asset management fees to the Advisor and its affiliates was deferred and subordinated until such time, if any, that (i) cumulative modified funds from operations (as defined in the Original Expense Support Agreement) for the period April 1, 2012 through the applicable determination date exceeds (ii) distributions declared to stockholders for the same period. Such reimbursements and payments were further subordinated to the Company’s total operating expenses being within the 2%/25% guideline limitations as such terms are defined in the advisory agreement. For purposes of the above subordinations, all or a portion of the deferred amounts may be paid only to the extent it does not cause the applicable performance measurement to not be met inclusive of the conditional reimbursement amount. The Original Expense Support Agreement was terminable by the Advisor, but not before December 31, 2013, as amended, and any deferrals are eligible for conditional reimbursement for a period of up to three years from the applicable determination date. In December 2014, the Advisor agreed to waive all unpaid asset management fees, acquisition fees, and disposition fees for the years ended December 31, 2013 and 2012 as well as the reimbursement of all unpaid expenses incurred by the Advisor for the periods then-ended including approximately $2.8 million in contingent liabilities for amounts deferred and subordinated under the Original Expense Support Agreement. In addition, the waiver of the unpaid reimbursable expenses prior to March 31, 2012 resulted in a reduction in general and administrative expenses of approximately $0.2 million for the year ended December 31, 2014.

In March 2014, the Company entered into the Amended and Restated Expense Support Agreement with its Advisor. Pursuant to the Amended and Restated Expense Support Agreement, effective January 1, 2014, the Advisor agreed to accept Restricted Stock in lieu of cash in payment for up to the full amount of asset management fees and operating-related personnel expenses owed by the Company to the Advisor under the advisory agreement for services rendered after December 31, 2013. The amount of such expense support is equal to the positive excess, if any, of (i) aggregate stockholder cash distributions declared in the applicable quarter, over (ii) the Company’s aggregate modified funds from operations (as defined and revised in the Amended and Restated Expense Support Agreement) for such quarter, determined each calendar quarter on a non-cumulative basis (“Expense Support Amount”). The number of shares of Restricted Stock to be issued to the Advisor in a given quarter is determined by dividing (x) the Expense Support Amount for the applicable quarter, by (y) the most recent price per share of the Company’s common stock, or the most recent estimated net asset value (“NAV”) per share of its common stock.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

10.	Related Party Arrangements (continued)

Generally, Restricted Stock will vest immediately prior to or upon the occurrence of a listing of the Company’s common stock, a merger, a sale of all or substantially all of the Company’s assets, or another liquidity or exit event, as described in the Amended and Restated Expense Support Agreement (“Exit Event”). In order for the Restricted Stock to vest upon the occurrence of an Exit Event, however, the consideration or other value attributable to the Company’s common stock as a result of the Exit Event, plus total distributions received by the Company’s stockholders since inception, excluding distributions received by the Advisor, must exceed, and only to the extent that it exceeds, an amount equal to 100% of the stockholder’s invested capital, excluding the Advisor’s invested capital, plus a cumulative 6% priority return on investment (“Vesting Threshold”).

The Restricted Stock will also vest immediately in the event the advisory agreement is terminated without cause by the Company before the occurrence of an Exit Event, provided that the most recent NAV, plus total distributions received by stockholders, other than the Advisor, prior to such termination of the advisory agreement exceeds, and only to the extent that it exceeds, the Vesting Threshold. Restricted Stock shall be immediately and permanently forfeited under various circumstances, including certain circumstances relating to a termination of the advisory agreement. The Amended and Restated Expense Support Agreement was effective beginning January 1, 2014 and continues until terminated by the Advisor in writing with 120 days’ notice.

For the year ended December 31, 2014, approximately $1.2 million in asset management fees and $0.5 million in operating-related personnel expenses were forgone as payable in cash in accordance with the terms of the Amended and Restated Expense Support Agreement. In accordance therewith, the Company determined that approximately 0.18 million shares of Restricted Stock were issuable to the Advisor related to the year ended December 31, 2014 including 0.06 million shares related to the quarter ended December 31, 2014 to be issued by March 31, 2015. The number of restricted stock shares for the quarter ended December 31, 2014 was determined based on the December 31, 2014 NAV of $7.43 per share; whereas previously, the number of restricted stock shares was determined based on the initial offering price of $10.00 per share. Since the vesting conditions were not met during the year ended December 31, 2014, no fair value was assigned to the Restricted Stock accepted by the Advisor in exchange for providing asset management fees and operating-related personnel expenses as the shares were valued at zero, which represents the lowest possible value estimated at vesting. As a result, for the year ended December 31, 2014, asset management fees and operating expenses were reduced by $1.2 million and $0.5 million, respectively, as a result of the expense support provided under the Amended and Restated Expense Support Agreement (a portion of which is included in income (loss) from discontinued operations, net of tax in the accompanying consolidated statements of operations).

For the year ended December 31, 2014, the Company recorded approximately $32,000 in the form of cash distributions to the Advisor related to Restricted Stock shares issued through December 31, 2014. Such amounts were recognized as compensation expense and included in general and administrative expense in the accompanying consolidated statements of operations for the year ended December 31, 2014.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

10.	Related Party Arrangements (continued)

The Company incurs operating expenses which, in general, are expenses relating to administration of the Company on an ongoing basis. Pursuant to the advisory agreement, the Advisor shall reimburse the Company the amount by which the total operating expenses paid or incurred by the Company exceed, in any four consecutive fiscal quarters (“Expense Year”) commencing with the Expense Year ended March 31, 2012, the greater of 2% of average invested assets or 25% of net income (as defined in the advisory agreement) (“Limitation”), unless a majority of its independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. For the Expense Years ended December 31, 2014 and 2013, the Company did not incur expenses in excess of the Limitation. For the Expense Year ended December 31, 2012, total operating expenses in excess of the Limitation were $1.1 million, all of which related to the Expense Year ended March 31, 2012. The Company’s independent directors determined that operating expenses in excess of the Limitation were justified based on a number of factors. These factors included how quickly new equity capital was raised and invested and the relationship of these investments to the Company’s operating expenses, many of which were necessary as a result of being a public company.

11.	Stockholders’ Equity

Public Offering – The Company’s Offering closed on April 23, 2013. Through April 23, 2013, the Company received aggregate offering proceeds of approximately $83.7 million, including proceeds of approximately $1.9 million from shares sold through its distribution reinvestment plan (“DRP”).

Stock Issuance and Offering Costs – The Company incurred costs in connection with the offering and issuance of shares, including selling commissions, marketing support fees, filing fees, legal, accounting, printing and due diligence expense reimbursements, which are recorded as stock issuance and offering costs and deducted from stockholders’ equity.

In accordance with the Company’s articles of incorporation, the total amount of selling commissions, marketing support fees, and other organizational and offering costs to be paid by the Company may not exceed 15% of the aggregate gross offering proceeds. Offering costs are generally funded by the Company’s Advisor and subsequently reimbursed by the Company subject to this limitation.

No stock issuance and offering costs were incurred for the year ended December 31, 2014. For the years ended December 31, 2013 and 2012, the Company incurred approximately $2.9 million and $5.2 million, respectively, in stock issuance and offering costs, as described in the discussion of selling commissions and marketing support fees and offering expenses in Note 10. “Related Party Arrangements.”

Distributions – The Company’s board of directors has authorized a daily distribution of $0.0017808 per share of common stock to all common stockholders of record as of the close of business on each day, payable monthly, until terminated or amended by the Company’s board of directors.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

11.	Stockholders’ Equity (continued)

During the years ended December 31, 2014, 2013 and 2012, cash distributions totaling approximately $5.4 million, $5.2 million and $3.2 million, respectively, were declared payable to stockholders (including approximately $0.5 million, $0.5 million and $0.3 million declared but unpaid as of December 31, 2014, 2013 and 2012, respectively, which were paid in January 2015, 2014 and 2013, respectively). In addition, approximately 7% and 28% of the cash distributions paid to stockholders were considered taxable income and 93% and 72% were considered a return of capital to stockholders for federal income tax purposes for the years ended December 31, 2014 and 2013, respectively; whereas, 100% of distributions for the year ended December 31, 2012 were considered a return of capital for federal income tax purposes.

Redemption Plan – The Company’s board of directors approved the suspension of the Company’s stock redemption plan (“Redemption Plan”) effective April 10, 2013. The Company no longer accepts redemption requests. During the year ended December 31, 2013, the Company processed and paid all eligible redemption requests totaling 130,215 shares of common stock at an average price of $9.37 per share, for a total of approximately $1.2 million.

For the year ended December 31, 2012, the Company received and accepted redemptions requests for 32,064 shares for approximately $0.3 million under its redemption plan, of which approximately $0.05 million was paid in January 2013.

12.	Income Taxes

The components of the provision for income taxes from continuing operations for the years ended December 31, 2014, 2013 and 2012 were as follows:


	Year Ended December 31,
	2014		2013		2012
Current income tax expense:
State tax expense	$	50,636	$	51,548	$	43,004
International tax expense		5,881		4,175		2,026

	$	56,517	$	55,723	$	45,030

See Note 5. “Assets and Associated Liabilities Held for Sale” for disclosure of income taxes for discontinued operations.

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred tax assets and liabilities were as follows as of:


	December 31,
	2014			2013
Deferred tax assets relating to:
Fixed assets	$	395,529		$	350,824
Net operating loss carryforwards		144,283			51,161

Total deferred tax assets		539,812			401,985
Valuation allowance		(519,469	)		(39,509	)

Net deferred tax assets		20,343			362,476
Deferred tax liabilities relating to:
Accruals		(20,343	)		(23,261	)

Total deferred tax liabilities		(20,343	)		(23,261	)

Total deferred tax assets, net	$	—		$	339,215

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

12.	Income Taxes (continued)

As of December 31, 2014, the Company recorded a full valuation allowance against all net deferred tax assets. In connection with the Company’s determination to sell its German portfolio, it recorded a full valuation allowance of $0.4 million against the net deferred tax assets attributable to the Luxembourg operations and the German properties as it was deemed more likely than not that the Company would not be able to realize future tax benefits. As of December 31, 2013, the Company had recorded deferred tax assets of approximately $0.36 million, of which approximately $0.05 million related to net operating losses generated in Luxembourg. The Company recorded a full valuation allowance against the net deferred tax asset in Luxembourg as it was deemed more likely than not that future taxable income would be insufficient to realize future tax benefits. The net operating losses in Luxembourg can be carried forward indefinitely.

The Company’s U.S. and foreign losses from continuing operations before income taxes were as follows:


	Year ended December 31,
	2014			2013			2012
U.S. loss	$	(4,181,645	)	$	(2,730,203	)	$	(4,076,999	)
Foreign loss		(97,564	)		(66,346	)		(217,154	)

Total	$	(4,279,209	)	$	(2,796,549	)	$	(4,294,153	)

A reconciliation of taxes computed at the statutory federal tax rate on income from continuing operations before income taxes to the provision (benefit) for income taxes is as follows:


	Year ended December 31,
	2014					2013					2012
Tax benefit computed at federal statutory rate	$	(1,497,723	)	(35.00	%)	$	(978,792	)	(35.00	%)	$	(1,502,954	)	(35.00	%)
Impact of REIT election		1,497,723		35.00	%		978,792		35.00	%		1,502,954		35.00	%
State income tax provision, net		50,636		1.18	%		51,548		1.84	%		43,004		1.00	%
Foreign income tax expense		5,881		0.14	%		4,175		0.15	%		2,026		0.05	%

Income tax expense	$	56,517		1.32	%	$	55,723		1.99	%	$	45,030		1.05	%

The tax years 2010 through 2014 remain subject to examination by taxing authorities in Germany, Luxembourg and the United States.

As a REIT and to the extent it distributes all its taxable income, the Company will not have federal income tax liability. As of December 31, 2014, the Company had cumulative net operating losses of approximately $1.3 million which will begin to expire in 2030. The Company does not believe it will be able to realize these federal net operating loss carryforwards in the future.

The Company analyzed its material tax positions and determined that it has not taken any uncertain tax positions.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

13.	Commitments and Contingencies

When the Company acquired assets in Germany during the second half of 2012, the Company’s property inspections identified several potential defects, and the Company’s purchase and sale agreement caused the seller to set aside funds in an escrow account until the potential defects could be resolved. The Company is undergoing an assessment and current estimates suggest the repairs could approximate $0.2 million, most of which the Company believes to be recoverable from the amounts held by the seller in escrow. Refer to Note 16. “Subsequent Events,” for additional information.

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

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

See Note 10. “Related Party Arrangements” for information on contingent restricted stock shares due to the Company’s Advisor in connection with the Expense Support Agreement.

14.	Concentration of Risk

For the years ended December 31, 2014, 2013 and 2012, the Company had the following tenants that individually accounted for 10% or more of its aggregate total revenues or leased more than 10% of the Company’s total assets as of the end of such periods (excluding the properties held for sale):


	Percentage of Total Revenues ⁽¹⁾									Percentage of Total Assets ⁽²⁾
Tenant	2014			2013			2012			2014			2013

Mercedes-Benz Financial Services USA, LLC (“Mercedes”)		40.2	%		38.6	%		52.6	%		31.6	%		31.7	%

DynCorp International, LLC (“DynCorp”)		25.0	%		23.8	%		32.3	%		19.5	%		19.1	%

Samsonite, LLC (“Samsonite”)		30.9	%		33.7	%		9.9	%		45.9	%		44.7	%

FOOTNOTES:

⁽¹⁾	Includes contractual rental income, tenant reimbursements, straight-line rent adjustments and amortization of above market lease intangibles.

⁽²⁾	Represents net book value of total assets associated with the property leased by the tenant as of the end of the period presented.

Failure of any of these tenants to pay contractual lease payments could significantly impact the Company’s results of operations and cash flow from operations which, in turn would impact its ability to pay debt service and make distributions to stockholders.

During the year-end December 31, 2014, the Company had operations in Germany that were classified as held for sale in the accompanying consolidated financial statements and were sold in January 2015; refer to Note 16. “Subsequent Events” for additional information. Subsequent to January 2015, the Company’s exposure to geographical risk in its financial results is limited to the retained 5.1% non-controlling interest in the entities that own the German properties.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2014

15.	Selected Quarterly Financial Data (Unaudited)

The following tables present selected unaudited quarterly financial data for the years ended December 31, 2014 and 2013:


2014 Quarters	First			Second			Third			Fourth			Year
Revenues from continuing operations	$	2,753,148		$	2,773,820		$	2,775,071		$	2,695,677		$	10,997,716
Operating income (loss) from continuing operations		153,524			100,041			57,302			(1,097,141	)		(786,274	)
Loss from continuing operations		(722,577	)		(780,513	)		(821,446	)		(2,011,190	)		(4,335,726	)
Discontinued operations		147,075			(208,796	)		232,301			(439,892	)		(269,312	)

Net loss	$	(575,502	)	$	(989,309	)	$	(589,145	)	$	(2,451,082	)	$	(4,605,038	)

Net income (loss) per share of common stock (basic and diluted):
Continuing operations	$	(0.09	)	$	(0.09	)	$	(0.10	)	$	(0.24	)	$	(0.53	)

Discontinued operations	$	0.02		$	(0.03	)	$	0.03		$	(0.05	)	$	(0.03	)

Weighted average number of shares outstanding (basic and diluted)		8,257,410			8,257,410			8,257,410			8,257,410			8,257,410


2013 Quarters	First			Second			Third			Fourth			Year
Revenues from continuing operations	$	2,831,426		$	2,838,174		$	2,803,617		$	2,759,819		$	11,233,036
Operating income from continuing operations		256,477			223,390			294,107			162,246			936,220
Loss from continuing operations		(874,902	)		(682,643	)		(593,581	)		(701,146	)		(2,852,272	)
Discontinued operations		127,609			58,334			133,987			139,496			459,426

Net loss	$	(747,293	)	$	(624,309	)	$	(459,594	)	$	(561,650	)	$	(2,392,846	)

Net income (loss) per share of common stock (basic and diluted):
Continuing operations	$	(0.12	)	$	(0.08	)	$	(0.07	)	$	(0.09	)	$	(0.36	)

Discontinued operations	$	0.02		$	0.01		$	0.01		$	0.02		$	0.06

Weighted average number of shares outstanding (basic and diluted)		7,021,861			8,173,289			8,257,410			8,257,410			7,931,165

16.	Subsequent Events

Sale of 94.9% Equity Interest in German Portfolio

In January 2015, pursuant to the share purchase agreement dated December 29, 2014, the Company sold 94.9% of its equity interest in the entities that own the German properties for approximately $8.1 million, net of transaction costs. The Advisor waived its rights to any disposition fee related to the sale of the 94.9% equity interest in the entities that own the German properties. In addition, the Company retained a 5.1% non-controlling interest of approximately $0.4 million, which represents 5.1% of the net carrying value of the German portfolio as of the disposition date. As discussed above in Note 13. “Commitments and Contingencies,” the buyer has assumed the obligation to repair the approximate $0.2 million of defects noted upon our acquisition of the German portfolio in 2012, and therefore, we are no longer contingently liable for such amounts. However, the Company still believes most of the $0.2 million to be recoverable from the amounts held by the previous seller in escrow.

Austin Property – Held for Sale

In February 2015, the Company committed to a plan to sell the Austin Property in Pflugerville, Texas as part of its continuous evaluation of strategic alternatives. In March 2015, the Company entered into a purchase and sale agreement to sell the Austin Property for approximately $2.7 million.

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Exchange Act, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on management’s assessment, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control Integrated Framework (2013)”.

Pursuant to rules established by the Securities and Exchange Commission, this annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.

Changes in Internal Control over Financial Reporting

During the most recent fiscal quarter, there was no change in our internal controls over financial reporting (as defined under Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B.

OTHER INFORMATION

None.

PART III

Item 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

Our directors and executive officers as of February 28, 2015 were as follows:


Name	Age	Position
James M. Seneff, Jr.	68	Chairman of the Board and Director
Douglas N. Benham	57	Independent Director
James P. Dietz	50	Independent Director
Stephen J. LaMontagne	53	Independent Director
Thomas K. Sittema	56	Chief Executive Officer and President
Tammy J. Tipton	54	Chief Financial Officer and Treasurer
Scott C. Hall	50	Senior Vice President of Operations
Holly J. Greer	43	General Counsel, Senior Vice President and Secretary
Ixchell C. Duarte	48	Senior Vice President and Chief Accounting Officer
John F. Starr	40	Chief Portfolio Management Officer

James M. Seneff, Jr. Chairman of the Board and Director. Mr. Seneff has served as chairman of the Company’s Board since April 2009, as a director since the Company’s inception in March 2009, and as a member of the board of managers of the Company’s Advisor since its inception in December 2008. Mr. Seneff has served as chairman of the board and a director of CNL Growth Properties, Inc., a public, non-traded REIT, since August 2009 and December 2008, respectively, and has served as a manager of its advisor, CNL Global Growth Advisors, LLC, since December 2008. He is the sole member of CNL Holdings, LLC (“CNL Holdings”) and has served as chairman, chief executive officer and/or president of several of CNL Holdings’ subsidiaries, including chief executive officer and president (2008 to present) of CNL Financial Group, LLC, the Company’s sponsor; and as executive chairman (January 2011 to present), chairman (1988 to January 2011), chief executive officer (1995 to January 2011) and president (1980 to 1995) of CNL Financial Group, Inc. (“CNL”), a diversified real estate company. Mr. Seneff serves or has served on the board of directors of the following CNL Holdings’ affiliates: CNL Healthcare Properties, Inc., a public, non-traded REIT, and its advisor, CNL Healthcare Corp. (June 2010 to present); CNL Lifestyle Properties, Inc., a public, non-traded REIT (2003 to present), the managing member of its former advisor, CNL Lifestyle Company, LLC (2003 to December 2010) and its current advisor, CNL Lifestyle Advisor Corporation (December 2010 to present); CNL Hotels & Resorts, Inc., a public, non-traded REIT (1996 to April 2007), and its advisor, CNL Hospitality Corp. (1997 to June 2006 (became self-advised)); CNL Retirement Properties, Inc., a public, non-traded REIT, and its advisor, CNL Retirement Corp. (1997 to October 2006); CNL Restaurant Properties, Inc., a public, non-traded REIT, and its advisor (1994 to 2005 (became self-advised)); Trustreet Properties, Inc. (“Trustreet”), a publicly traded REIT (2005 to February 2007); National Retail Properties, Inc., a publicly traded REIT (1994 to 2005); CNL Securities Corp., a FINRA-registered broker-dealer and the managing dealer of the Company’s offering (1979 to present); and CNL Capital Markets Corp. (1990 to present). Mr. Seneff is also the chairman and a principal stockholder of CNLBancshares, Inc. (1999 to present), which owns CNLBank. Mr. Seneff received his degree in business administration from Florida State University.

Douglas N. Benham. Independent Director. Mr. Benham has served as an Independent Director since November 2009. Since April 2006, Mr. Benham has been the president and chief executive officer of DNB Advisors, LLC, a restaurant industry consulting firm. From January 2004 until April 2006, Mr. Benham served as president and chief executive officer of Arby’s Restaurant Group, a quick service restaurant company and subsidiary of Triarc Company (NYSE: TRY). From August 2003 until January 2004, Mr. Benham was president and chief executive officer of DNB Advisors, LLC. From January 1989 until August 2003, Mr. Benham served as chief financial officer, and from 1997 until 2003 also served as a member of the board of directors of RTM Restaurant Group, Inc., an Arby’s franchisee, that was later acquired by Triarc Company in July 2005. Prior to January 1989, Mr. Benham held various positions including at Deloitte & Touche, Bell Atlantic Corp., and Cox Enterprises. Mr. Benham served as a director of the restaurant operator O’Charley’s Inc. (NASDAQ:CHUX) from March 2008 to May 2012 and as a director of drive-thru restaurant chain operator Sonic Corp. (NASDAQ:SONC) from August 2009 to January 2014. In January 2012, he joined the board of directors of the restaurant chain operator Quiznos’, in May 2012 he joined the board of directors of American Residential Properties, Inc. (NASDAQ:ARPI), a fully integrated and internally managed real estate investment company which acquires, renovates, leases and manages single-family properties in select communities in the Southwestern and Southeastern U.S.; and in October 2014 he joined the board of directors of Bob Evans Farms, Inc. (NASDAQ:BOBE) a restaurant chain operator and food manufacturer. Mr. Benham earned a B.A. in accounting from the University of West Florida in 1978.

James P. Dietz. Independent Director. Mr. Dietz has served as an Independent Director since November 2009. He has also served as an independent director of CNL Growth Properties, Inc. since September 1, 2014. . Mr. Dietz currently operates his own chief financial officer services and project consulting business and is presently serving as acting chief financial officer for a private health plan. From November 2013 to August 2014, Mr. Dietz served as executive vice president, chief financial officer and secretary of Health Insurance Innovations, Inc. (NASDAQ: HIIQ), a developer and administrator of web-based individual health insurance plans and ancillary products. Mr. Dietz previously served Health Insurance Innovations as its senior vice president of finance and business development from April to November 2013, and as a consultant during March and April 2013. Mr. Dietz served as president and chief executive officer of NanoScale Corporation, a non-public manufacturer of specialty materials, from May 2012 until December 2012, in connection with that company’s turnaround efforts. Prior to joining NanoScale, Mr. Dietz served as chief financial officer from July 2011 to April 2012, and served as vice president of finance and accounting from May 2010 to July 2011 for Parabel, Inc. (formerly known as PetroAlgae Inc.) (OTCQB:PALG), a provider of technology and solutions that utilize biomass derived from micro-crops. From January 2008 through April 2010, Mr. Dietz served as chief financial officer of companies engaged in start-up or turn-around efforts in the real estate industry, including positions as chief financial officer of U.S. Capital Holdings, LLC, an international private equity investor and developer, from May 2009 to April 2010, vice president of finance and business development of PACT, LLC, a real estate development company, from May 2008 to May 2009, and chief financial officer of American Leisure Group, a real estate investor and timeshare developer, from January 2008 to April 2008. From 1995 until December 2007, Mr. Dietz served as chief financial officer of residential community developer, WCI Communities, Inc. (NYSE: WCI), and various predecessor firms. From 1993 to 1995, Mr. Dietz managed asset-backed financing originations for GTE Leasing Corporation (a subsidiary of GTE, a predecessor to Verizon Communications). He began his professional career with Arthur Andersen & Co where he worked for six years in positions of increasing seniority. Mr. Dietz earned a B.A. in accounting and economics from the University of South Florida in 1986. Mr. Dietz is a certified public accountant.

Stephen J. LaMontagne. Independent Director and Audit Committee Financial Expert. Mr. LaMontagne has served as an independent director and our audit committee financial expert since November 2009. Mr. LaMontagne is partner-in-charge of the real estate practice of Moore Colson, an Atlanta-based accounting and consulting firm, having joined the firm in December 2007. Prior to joining Moore Colson, Mr. LaMontagne held various positions with KPMG LLP beginning in May 1983 until December 2007, including serving over ten years as an assurance partner and southeast real estate practice leader, as well as serving on several of the firm’s national committees. While at KPMG and currently at Moore Colson, his focus includes real estate finance, financial accounting and reporting, mergers and acquisitions and audit matters. Mr. LaMontagne received a B.S. degree in accounting and a minor in finance from Florida State University in 1983. Mr. LaMontagne is a certified public accountant.

Thomas K. Sittema. Chief Executive Officer and President. Mr. Sittema has served as the Company’s chief executive officer and president and as chief executive officer and president of the Company’s Advisor since September 1, 2014. Mr. Sittema has also served as chief executive officer and president of CNL Growth Properties, Inc., a public, non-traded REIT, and its advisor since September 1, 2014. Mr. Sittema has served as chief executive officer (January 2011 to present) and vice president (February 2010 to January 2011) of CNL. Since April 2012, Mr. Sittema has served as vice chairman of the board of directors and a director of each of CNL Lifestyle Properties, Inc. and CNL Healthcare Properties, Inc., public, non-traded REITs. He served as chief executive officer of CNL Lifestyle Properties, Inc. from September 2011 to April 2012 and has served as chief executive officer of its advisor since September 2011. Mr. Sittema served as CNL Healthcare Properties, Inc.’s chief executive officer from September 2011 to April 2012, and has served as chief executive officer of its advisor since September 2011. Mr. Sittema has served as chairman of the board of directors and a director of Corporate Capital Trust, Inc., a non-diversified, closed-end management investment company that has elected to be regulated as a business development company since October 2010. Mr. Sittema has also served as Corporate Capital Trust, Inc.’s chief executive officer since September 1, 2014. Mr. Sittema holds various other offices with other CNL affiliates. Mr. Sittema has served in various roles with Bank of America Corporation and predecessors, including NationsBank, NCNB and affiliate successors (1982 to October 2009). Most recently, while at Bank of America Corporation Merrill Lynch, he served as managing director of real estate, gaming, and lodging investment banking. Mr. Sittema joined the real estate investment banking division of Banc of America Securities at its formation in 1994 and initially assisted in the establishment and build-out of the company’s securitization/permanent loan programs. He also assumed a corporate finance role with the responsibility for mergers and acquisitions, or M&A, advisory and equity and debt capital raising for his client base. Throughout his career, Mr. Sittema has led numerous M&A transactions, equity offerings and debt transactions including high grade and high-yield offerings, commercial paper and commercial mortgage-backed security conduit originations and loan syndications. Mr. Sittema is a member, since February, 2013, of the board of directors of Crescent Holdings, LLC. Mr. Sittema has been named chair-elect for 2015 of the Investment Program Association and will become chairman of the Investment Program Association in 2016. Mr. Sittema received his B.A. in business administration from Dordt College, and an M.B.A. with a concentration in finance from Indiana University.

Tammy J. Tipton. Chief Financial Officer and Treasurer. Ms. Tipton has served as the Company’s chief financial officer and treasurer since September 1, 2014. She has also served as chief financial officer and treasurer of CNL Growth Properties, Inc., a public, non-traded REIT, since September 1, 2014. She has served as senior vice president since October 2011 and group chief financial officer since January 2014 of CNL Financial Group Investment Management, LLC where she oversees the strategic finance, accounting, reporting, budgeting, payroll and purchasing functions for CNL and its affiliates. Ms. Tipton also holds various other offices with other CNL affiliates. She previously served as senior vice president of CNL from 2002 to December 2011. Ms. Tipton has served in various other financial roles since joining CNL in 1987. These roles include regulatory reporting for 20 public entities and the accounting, reporting and servicing for approximately 30 public and private real estate programs. Ms. Tipton earned a B. S. in accounting from the University of Central Florida. She is also a certified public accountant.

Scott C. Hall. Senior Vice President of Operations. Mr. Hall has served as the Company’s senior vice president of operations since December 2012. He has served as a senior vice president since March 2013 and as a manager since April 2014, of the Company’s Advisor. Mr. Hall also serves as senior vice president of operations for CNL Growth Properties, Inc. effective December 2012. He has also served as a senior vice president since March 2013 and as a manager since April 2014, of its advisor. Mr. Hall is the president and owner of a private consulting firm based in Orlando, Florida that serves various real estate investment and development projects. Prior to his appointment as senior vice president of operations, he served from May 2011 to December 2012 as a consultant to the Company’s Advisor, and to the advisors of other CNL affiliates, including CNL Growth Properties, Inc., CNL Lifestyle Properties, Inc., CNL Healthcare Properties, Inc., each a public, non-traded REIT, and Corporate Capital Trust, Inc., a public, non-traded business development company. From September 2005 to February 2010, Mr. Hall was senior vice president and led the Florida office of The Pizzuti Companies, a nationally recognized real estate investor and developer based in Columbus, Ohio. He also held various positions with a number of CNL affiliates from May 2002 to September 2005. Previously, from 1995 to 2001, Mr. Hall was an associate at Lake Nona, a 7,000-acre mixed-use real estate development in Orlando, Florida, owned by Tavistock Group, an international private investment company. Mr. Hall earned a B.A. in English from Ohio Wesleyan University, and an M.B.A. with honors from Rollins College.

Holly J. Greer. General Counsel, Senior Vice President and Secretary. Ms. Greer has served as the Company’s general counsel, senior vice president and secretary since August 2011. Ms. Greer has also served as senior vice president and secretary of the Company’s Advisor since August 2011. Ms. Greer also has served as general counsel, senior vice president and secretary of CNL Growth Properties, Inc., a public, non-traded REIT, and as senior vice president and secretary of its advisor since August 2011. Ms. Greer served as associate general counsel and vice president of CNL Healthcare Properties, Inc., a public, non-traded REIT, from inception in June 2010 until March 2011, and has served as general counsel, senior vice president and secretary since March 2011. Ms. Greer also served as associate general counsel and vice president of its advisor (June 2010 until April 2011) and senior vice president, legal affairs of its advisor (April 2011 until November 2013) and has served as senior vice president since November 2013. Ms. Greer joined CNL Lifestyle Properties, Inc., a public, non-traded REIT, in August 2006, where she initially served as acquisition counsel for its former advisor, CNL Lifestyle Company, LLC, until April 2007. From April 2007 until November 2009, Ms. Greer served as counsel to CNL Lifestyle Properties, Inc. and its former advisor, overseeing real estate and general corporate legal matters. She served as assistant general counsel of its former advisor (November 2009 to January 2010) and served as associate general counsel and vice president (January 2010 until April 2011). Ms. Greer served as associate general counsel (January 2010 until March 2011) and vice president (December 2009 until March 2011) of CNL Lifestyle Properties, Inc. Effective March 2011, Ms. Greer has served as general counsel, senior vice president and secretary of CNL Lifestyle Properties, Inc. She has also served as senior vice president of its current advisor, CNL Lifestyle Advisor Corporation, since November 2013 and previously served as assistant general counsel and vice president (December 2010 to April 2011) and senior vice president, legal affairs (April 2011 to November 2013). Prior to joining CNL Lifestyle Properties, Inc., Ms. Greer spent seven

years in private legal practice, primarily at the law firm of Lowndes, Drosdick, Doster, Kantor & Reed, P.A., in Orlando, Florida. Ms. Greer is licensed to practice law in Florida and is a member of the Florida Bar Association and the Association of Corporate Counsel. She received a B.S. in communications and political science from Florida State University and her J.D. from the University of Florida.

Ixchell C. Duarte. Senior Vice President and Chief Accounting Officer. Ms. Duarte has served as a senior vice president and the Company’s chief accounting officer since June 2012, and has served as a senior vice president of the Company’s Advisor since November 2013. She also has served as a senior vice president and chief accounting officer of CNL Growth Properties, Inc., a public non-traded REIT, since June 2012, and has served as a senior vice president of its advisor since November 2013. Ms. Duarte has also served as a senior vice president and chief accounting officer of CNL Healthcare Properties, Inc., a public, non-traded REIT, since March 2012, and was previously a vice president with CNL Healthcare Properties, Inc. from February 2012 to March 2012. She also has served as a senior vice president and chief accounting officer of its advisor since November 2013. Ms. Duarte has served as senior vice president and chief accounting officer since March 2012 of CNL Lifestyle Properties, Inc., a public, non-traded REIT, and was previously its vice president from February 2012 to March 2012. She also has served as senior vice president and chief accounting officer of its advisor since November 2013. Ms. Duarte served as controller at GE Capital, Franchise Finance, from February 2007 through January 2012 as a result of GE Capital’s acquisition of Trustreet, a publicly traded REIT. Prior to that, Ms. Duarte served as senior vice president and chief accounting officer of Trustreet and served as senior vice president and controller of its predecessor CNL companies (2002 to February 2007). Ms. Duarte also served as senior vice president, chief financial officer, secretary and treasurer of CNL Restaurant Investments, Inc. (2000 to 2002) and as a director of accounting and then vice president and controller of CNL Fund Advisors, Inc. and other CNL affiliates (1995 to 2000). Prior to that, Ms. Duarte served as an audit senior and then as audit manager in the Orlando, Florida office of Coopers & Lybrand where she serviced several CNL entities (1990 to 1995), and as audit staff in the New York office of KPMG (1988 to 1990). Ms. Duarte is a certified public accountant. She received a B.S. in accounting from the Wharton School of the University of Pennsylvania.

John F. Starr. Chief Portfolio Management Officer. Mr. Starr has served as the Company’s chief portfolio management officer since December 2012 and as a senior vice president of the Company’s Advisor since March 2013. Mr. Starr also serves as chief portfolio management officer of CNL Growth Properties, Inc. effective December 2012 and as a senior vice president of its advisor since March 2013. He has served as a senior vice president of CNL Healthcare Properties, Inc. and its advisor since March 2013. Since 2002, Mr. Starr has held various positions with multiple CNL affiliates. From October 2011 until his appointment as the Company’s chief portfolio management officer, Mr. Starr served as senior vice president of portfolio management at CNL Financial Group Investment Management, LLC responsible for developing and implementing strategies to maximize the financial performance of CNL’s real estate portfolios. He also served as a senior vice president of CNL Private Equity Corp. from December 2010 until his appointment as the Company’s chief portfolio management officer. Between June 2009 and December 2010, he served as CNL Private Equity Corp.’s senior vice president of asset management, responsible for the oversight and day-to-day management of all real estate assets from origination to disposition. At CNL Management Corp., Mr. Starr served as senior vice president of asset management, from June 2007 to December 2010. Between January 2004 and February 2005, Mr. Starr served as vice president of real estate portfolio management at Trustreet, and from February 2005 to February 2007, he served as Trustreet’s vice president of special servicing, and as president of a Trustreet affiliate, where he was responsible for the resolution and value optimization of distressed leases and loans. From February 2007 to May 2007, following the sale of Trustreet to GE Capital, he served as GE Capital, Franchise Finance’s vice president of special servicing, before rejoining CNL affiliates in June 2007. Between May 2002 and January 2004, Mr. Starr was assistant vice president of special servicing at CNL Restaurant Properties, Inc. Prior to joining CNL’s affiliates, Mr. Starr served in various positions in the credit products management group at Wachovia Bank, Orlando, Florida, from December 1997 to May 2002. Mr. Starr received a B.S. in business and an M.B.A. from the University of Florida in 1997 and 2007, respectively.

Board Independence

For the year ended December 31, 2014, each of Douglas N. Benham, James Dietz and Stephen LaMontagne served as independent directors. Although our shares are not listed on the New York Stock Exchange, we apply the exchange’s standards of independence to our own outside directors and for the year ended December 31, 2014, each of Messrs. Benham, Dietz and LaMontagne met the definition of “independent” under Section 303A.02 of the New York Stock Exchange listing standards.

Committees of the Board of Directors

We have a standing audit committee, the members of which are selected by our board of directors each year. During 2014, our audit committee was comprised of Douglas N. Benham, James P. Dietz and Stephen J. LaMontagne, each of whom was determined to be “independent” under the listing standards of the New York Stock Exchange referenced above.

The audit committee has determined that Mr. LaMontagne, the chairman of our audit committee and an independent director, is an “audit committee financial expert” under the rules and regulations of the Commission for purposes of Section 407 of the Sarbanes-Oxley Act of 2002.

Currently, we do not have a nominating committee, and therefore, do not have a nominating committee charter. Our board of directors is of the view that it is not necessary to have a nominating committee at this time because the board is composed of only four members, including three “independent directors” (as defined under the New York Stock Exchange listing standards), and each director is responsible for identifying and recommending qualified board candidates. The board does not have a formal policy regarding diversity. The board considers many factors with regard to each candidate, including judgment, integrity, diversity, prior professional experience, background, the interplay of the candidate’s experience with the experience of other board members, the extent to which the candidate would be desirable as a member of the audit committee, and the candidate’s willingness to devote substantial time and effort to board responsibilities.

Currently, we do not have a compensation committee because we do not have any employees and do not separately compensate our executive officers for their services as officers. At such time, if any, as our shares of common stock are listed on a national securities exchange such as the New York Stock Exchange or the NASDAQ Stock Market, or have employees whom we directly provide compensation, we will form a compensation committee, the members of which will be selected by the full board each year.

Our board has formed a valuation committee comprised of our independent directors who are responsible for the oversight of the determination of the net asset value per share of the Company’s stock by an independent third-party firm. The valuations are being done with the methodologies recommended by the Investment Program Association Practice Guideline (the “IPA”). The independent third-party firm is approved by the board and the valuation committee.

Although our board of directors is not required to review or recommend a strategic event by any certain date, with the completion of our Offering in April 2013, our Advisor has begun to explore possible liquidity options for us and our board has formed a special committee comprised of our independent directors.

Corporate Governance

Our board of directors adopted a Code of Business Conduct that applies to all or our directors and officers, as well as, all directors, officers and employees of our Advisor. The Code of Business Conduct sets forth the basic principles to guide their day-to-day activities. In addition, we have adopted a Whistleblower Policy that applies to us and all employees of our Advisor, and establishes procedures for the anonymous submission of employee complaints or concerns regarding financial statement disclosures, accounting, internal accounting controls or auditing matters. Our Code of Business Conduct and Whistleblower Policy are available on our website at http://www.incometrust.com/Investor%20Relations/corporate_governance.stml.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our officers, directors and persons who own more than 10% of our equity securities that are registered under the Exchange Act, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Commission (such persons hereinafter referred to as “Reporting Persons”). Reporting Persons are required by the Commission’s regulations to furnish us with copies of all Forms 3, 4 and 5 that they file.

We do not have any stockholders who own more than 10% of our outstanding common stock. We believe, based upon a review of our records and reports filed with the Commission with respect to 2014 that our Reporting Persons complied with all Section 16(a) filing requirements during 2014.

Item 11.

EXECUTIVE COMPENSATION

Board of Directors Report on Compensation

The following report of the board of directors does not constitute “soliciting material” and should not be deemed “filed” with the Commission or incorporated by reference into any other filing the Company makes under the Securities Act or the Exchange Act except to the extent we specifically incorporate this report by reference therein.

Our board of directors reviewed and discussed with management the Compensation Discussion and Analysis (“CD&A”). Based on the board’s review of the CD&A and the board’s discussions of the CD&A with management, the board approved including the CD&A in this Annual Report on Form 10-K for filing with the Commission.


		The Board of Directors:

		James M. Seneff, Jr.
		Douglas N. Benham
		James P. Dietz
		Stephen J. LaMontagne

Compensation Discussion and Analysis

We have no employees and all of our executive officers are officers of our Advisor and/or one or more of our Advisor’s affiliates and are compensated by those entities, in part, for their services rendered to us. We do not separately compensate our executive officers for their service as officers. We did not pay any annual salary or bonus or long-term compensation to our executive officers for services rendered in all capacities to us during the year ended December 31, 2014. See “Certain Relationships and Related Transactions” for a description of the fees paid and expenses reimbursed to our Advisor and its affiliates.

If we determine to compensate named executive officers in the future, our board of directors will review all forms of compensation and approve all stock option grants, warrants, stock appreciation rights and other current or deferred compensation payable with respect to the current or future value of our shares.

Compensation of Independent Directors

During the year ended December 31, 2014, each independent director received a $30,000 annual fee for services, as well as, $2,000 per Board meeting attended, whether they participated by telephone or in person. Each independent director serving on the audit committee or a special committee received $2,000 per committee meeting attended, whether they participated by telephone or in person. The audit committee chair received an annual retainer of $10,000 in addition to audit committee meeting fees and fees for meeting with the independent accountants as a representative of the audit committee. No additional compensation is paid for attendance at annual stockholder meetings.

The following table sets forth the compensation earned or paid to our directors during the year ended December 31, 2014 for their services on our board of directors, audit committee and special committees (where applicable):


Name	Fees Earned or Paid in Cash		Total
James M. Seneff, Jr.		None		None
Douglas N. Benham	$	56,000	$	56,000
James P. Dietz	$	56,000	$	56,000
Stephen J. LaMontagne	$	66,000	$	66,000

Currently, we do not have a compensation committee because we do not have any employees and do not separately compensate our executive officers for their services as officers. For additional information, see Item 10. “Directors, Executive Officers and Corporate Governance – Committees of the Board of Director.”

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth as of February 28, 2015, the number and percentage of outstanding shares of our common stock beneficially owned by (i) all persons known by us to own beneficially more than 5% of our common stock, (ii) each director and executive officer, and (iii) all executive officers and directors as a group, based upon information furnished by such persons. Fractional shares are rounded to the nearest whole number. Except as noted below, the address of the named officers and directors is CNL Center at City Commons, 450 South Orange Avenue, Orlando, Florida 32801.


Name of Beneficial Owner	Number of Shares Beneficially Owned		Percent of Shares
James M. Seneff, Jr. ⁽¹⁾		143,396			⁽²⁾
Douglas N. Benham		—		—
James P. Dietz		—		—
Stephen J. LaMontagne		—		—
Thomas K. Sittema		—			⁽²⁾
Tammy J. Tipton		—		—
Scott C. Hall		—			⁽²⁾
Holly J. Greer		597			⁽²⁾
Ixchell C. Duarte		—		—
John F. Starr		777			⁽²⁾

All directors and executive officers as a group (10 persons)		144,770			⁽²⁾

(1)	All of the shares beneficially owned by Mr. Seneff are held of record by CNL Global Income Advisors, LLC, our Advisor, which is indirectly wholly owned by Mr. Seneff.

(2)	Represents less than 1%.

Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; DIRECTOR INDEPENDENCE

We are externally advised and have no direct employees. In addition, certain directors and officers hold similar positions with CNL Securities Corp., the managing dealer of our Offering and a wholly owned subsidiary of CNL, our Advisor and their affiliates. In connection with services provided to us, affiliates are entitled to certain fees as described in Note 10. “Related Party Arrangements” in Item 8. “Financial Statements and Supplementary Data.”

Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Auditor Fees

PricewaterhouseCoopers serves as our principal accounting firm and audited our consolidated financial statements for the years ended December 31, 2014 and 2013. The following table sets forth the aggregate fees billed by PricewaterhouseCoopers for 2014 and 2013 for audit and non-audit services (as well as, all “out-of-pocket” costs incurred in connection with these services) and are categorized as Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees. The nature of the services provided in each such category is described following the table.


	2014		2013
Audit fees	$	298,332	$	187,025
Audit-related fees		—		33,500
Tax fees ⁽¹⁾		249,815		160,572
All other fees		—		—

Total fees	$	548,147	$	381,097

(1)	This amount includes approximately €0.1 million and €0.1 million of invoices denominated in Euro that have been converted to U.S. dollars at an exchange rate of $1.33 per Euro, the average exchange rate for the years ended December 31, 2014 and 2013, respectively.

Audit Fees – Consists of professional services rendered in connection with the annual audit of our consolidated financial statements included in our annual reports on Form 10-K and quarterly reviews of our interim financial statements included in our quarterly reports on Form 10-Q. Audit fees also include fees for services performed by PricewaterhouseCoopers that are closely related to the audit and in many cases could only be provided by our independent auditors. Such services include consents related to our registration statements, assistance with and review of other documents filed with the Commission and accounting advice on completed transactions.

Audit-Related Fees – Consists of services related to audits of properties acquired, due diligence services related to contemplated property acquisitions and accounting consultations.

Tax Fees – Consists of services related to corporate tax compliance, including preparation and/or review of corporate tax returns, review of the tax treatments for certain expenses, tax due diligence relating to acquisitions, VAT services, REIT compliance and earnings and profit review.

All Other Fees – There were no professional services rendered by PricewaterhouseCoopers that would be classified as other fees during the years ended December 31, 2014 and 2013.

Pre-Approval of Audit and Non-Audit Services

Under our audit committee charter, the audit committee must pre-approve all audit and non-audit services provided by the independent auditors in order to assure that the provisions of such services do not impair the auditor’s independence. The policy, as described below and set forth in the audit committee charter sets forth conditions and procedures for such pre-approval of services to be performed by the independent auditor and utilizes both a framework of general pre-approval for certain specified services and specific pre-approval for all other services.

The annual audit services, as well as all audit-related services (assurance and related services that are reasonably related to the performance of the auditor’s review of the financial statements or that are traditionally performed by the independent auditor), requires the specific pre-approval of the audit committee. The audit committee may, however, grant general pre-approval for other audit services, which are those services that only the independent auditor reasonably can provide (such as comfort letters or consents). The audit committee has pre-approved all tax services and may grant general pre-approval for those permissible non-audit services that it has classified as “all other services” because it believes such services are routine and recurring services, and would not impair the independence of the auditor.

The fee amounts for all services to be provided by the independent auditor are established annually by the audit committee, and any proposed service fees exceeding approved levels will require specific pre-approval by the audit committee. Requests to provide services that require specific approval by the audit committee are submitted to the audit committee by the independent auditor, the chief financial officer and the chief executive officer, and must include a joint statement as to whether, in their view, the request is consistent with the Commission’s rules on auditor independence.

PART IV

Item 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	List of Documents Filed

(1)

Report of Independent Registered Certified Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2014 and 2013

Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2014, 2013 and 2012

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2014, 2013 and 2012

Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012

Notes to Consolidated Financial Statements

(2)

Index to Financial Statement Schedules

Schedule II – Valuation and Qualifying Accounts

Schedule III – Real Estate and Accumulated Depreciation as of December 31, 2014

(3)

Index to Exhibits – Reference is made to the Exhibit Index beginning on page 102 for a list of all exhibits filed as a part of this report.

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

SCHEDULE II—Valuation and Qualifying Accounts

Years ended December 31, 2014, 2013 and 2012


Year	Description	Balance at Beginning of Year			Charged to Costs and Expenses			Charged to Other Accounts			Balance at End of Year

2012	Deferred tax asset valuation allowance	$	—		$	—		$	(85,778	)	$	(85,778	)

		$	—		$	—		$	(85,778	)	$	(85,778	)


2013	Deferred tax asset valuation allowance	$	(85,778	)	$	31,880		$	14,389		$	(39,509	)

		$	(85,778	)	$	31,880		$	14,389		$	(39,509	)


2014	Deferred tax asset valuation allowance	$	(39,509	)	$	(479,407	)	$	(553	)	$	(519,469	)

		$	(39,509	)	$	(479,407	)	$	(553	)	$	(519,469	)

GLOBAL INCOME TRUST, INC. AND SUBSIDIARIES

SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

As of December 31, 2014 (in thousands)


Property/Location	Encum- brances		Initial Costs						Costs Capitalized Subsequent to Acquisition		Gross Amounts at which Carried at Close of Period ⁽¹⁾
Property/Location	Encum- brances		Land & Land Improve- ments		Buildings & Building Improve- ments		Tenant Improve- ments		Improve- ments		Land & Land Improve- ments		Buildings & Building Improve- ments		Tenant Improve- ments		Total		Accumu- lated Depre- ciation			Date of Con- struction		Date Acquired		Life on which depreciation in latest income statement is computed

Austin Property-Industrial Building Pflugerville, Texas ⁽²⁾	$	—	$	1,819	$	2,102	$	53	$	—	$	1,819	$	953	$	53	$	2,825	$	(359	)		2000		06/08/11		(3)

Heritage Commons III-Office Building Fort Worth, Texas		11,442		2,608		10,086		414		—		2,608		10,086		414		13,108		(1,316	)		2006		06/28/11		(3)

Heritage Commons IV-Office Building Fort Worth, Texas		19,363		3,015		15,900		4,026		8		3,023		15,914		4,026		22,963		(3,553	)		2008		10/27/11		(3)

Samsonite – Industrial Distribution Facility Jacksonville, Florida		25,291		6,284		24,545		426		20		6,304		24,545		426		31,275		(1,764	)		2008		10/12/12		(3)

Giessen - Retail Center Giessen, Germany ⁽⁴⁾		2,674		795		3,803		—		—		714		3,420		—		4,134		(210	)		2008		03/08/12		(3)

Worms – Retail Center Worms, Germany ⁽⁴⁾		3,416		1,064		4,320		—		—		956		3,884		—		4,840		(178	)		2007		09/27/12		(3)
Gutersloh –Retail Center Gutersloh, Germany ⁽⁴⁾		2,130		1,102		2,230		—		—		990		2,006		—		2,996		(92	)		2007		09/27/12		(3)
Bremerhaven - Retail Center Bremerhaven, Germany ⁽⁴⁾		2,030		527		2,894		—		—		474		2,602		—		3,076		(108	)		2007		11/30/12		(3)
Hannover – Retail Center Hannover, Germany ⁽⁴⁾		2,978		1,840		2,823		—		—		1,653		2,539		—		4,192		(100	)		2005		12/21/12		(3)


	$	69,324	$	19,054	$	68,613	$	4,919	$	28	$	18,541	$	65,949	$	4,919	$	89,409	$	(7,680	)

A summary of transactions in real estate and accumulated depreciation as of December 31, 2014, 2013 and 2012 are as follows:


Balance at December 31, 2011	$	39,933
2012 Acquisitions		52,667

Balance at December 31, 2012 ⁽⁵⁾		92,600
2013 Improvements		20
2013 Effect of foreign currency translation adjustment		921

Balance at December 31, 2013 ⁽⁵⁾		93,541
2014 Improvements		8
2014 Impairment provisions		(1,527	)
2014 Effect of foreign currency translation adjustment		(2,613	)

Balance at December 31, 2014 ⁽⁵⁾	$	89,409


Balance at December 31, 2011	$	(442	)
2012 Depreciation		(1,916	)

Balance at December 31, 2012 ⁽⁵⁾		(2,358	)
2013 Depreciation		(2,812	)

Balance at December 31, 2013 ⁽⁵⁾		(5,170	)
2014 Depreciation		(2,510	)

Balance at December 31, 2014 ⁽⁵⁾	$	(7,680	)

FOOTNOTES:

⁽¹⁾	The aggregate cost for federal income tax purposes is approximately $123.9 million.

⁽²⁾	In February 2015, we committed to a plan to sell the Austin property and, during the year ended December 31, 2014, we recorded an impairment provision of which approximately $1.1 million was allocated to building and building improvements.

⁽³⁾	Buildings and building improvements are depreciated over 39 and 15 years, respectively. Tenant improvements are depreciated over the terms of their respective leases.

⁽⁴⁾

These properties are classified as “Held for Sale” as of December 31, 2014 and, during the year ended December 31, 2014, we recorded an impairment provision of which approximately $0.1 million and $0.4 million, respectively, was allocated to land and land improvements and building and building improvements.

⁽⁵⁾	Amounts translated on an average foreign currency exchange rate during the period.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 13th day of March, 2015.


GLOBAL INCOME TRUST, INC.

By:		/s/ Thomas K. Sittema
		THOMAS K. SITTEMA
		President and Chief Executive Officer
		(Principal Executive Officer)

By:		/s/ Tammy J. Tipton
		TAMMY J. TIPTON
		Chief Financial Officer
		(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


Signature	Title	Date

/s/ JAMES M. SENEFF, JR.	Chairman of the Board and Director	March 13, 2015
James M. Seneff, Jr.

/s/ DOUGLAS N. BENHAM	Independent Director	March 13, 2015
Douglas N. Benham

/s/ JAMES P. DIETZ	Independent Director	March 13, 2015
James P. Dietz

/s/ STEPHEN J. LAMONTAGNE	Independent Director	March 13, 2015
Stephen J. LaMontagne

/s/ THOMAS K. SITTEMA	President and Chief Executive Officer	March 13, 2015
Thomas K. Sittema

/s/ TAMMY J. TIPTON	Chief Financial Officer (Principal Financial Officer)	March 13, 2015
Tammy J. Tipton	Chief Financial Officer (Principal Financial Officer)

/s/ IXCHELL C. DUARTE	Chief Accounting Officer (Principal Accounting Officer)	March 13, 2015
Ixchell C. Duarte	Chief Accounting Officer (Principal Accounting Officer)

100

EXHIBIT INDEX


Exhibits:

3.1		Third Articles of Amendment and Restatement (Previously filed as Exhibit 3.1 to the Current Report on Form 8-K/A (File No. 000-54684) filed June 18, 2013, and incorporated herein by reference.)

3.2		Fourth Amended and Restated Bylaws (Previously filed as Exhibit 3.2 to the Current Report on Form 8-K/A (File No. 000-54684) filed June 18, 2013, and incorporated herein by reference.)

3.2.1		First Amendment to Fourth Amended & Restated Bylaws (Previously filed as Exhibit 3.3 to the Current Report on Form 8-K (File No. 000-54684) filed December 17, 2013, and incorporated herein by reference.)

3.3		Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (Previously filed as Exhibit 4.5 to the Pre-Effective Amendment 2 to the Registration Statement on Form S-11 (File No. 333-158478) filed November 12, 2009, and incorporated herein by reference.)

4.1		Form of Redemption Plan (Previously filed as Appendix D to the Post-Effective Amendment Three to the Registration Statement on Form S-11 (File No. 333-158478) filed September 7, 2011, and incorporated herein by reference.)

10.1		Third Amended and Restated Limited Partnership Agreement of Global Income, LP (Previously filed as Exhibit 10.1 to the Post-Effective Amendment Three to the Registration Statement on Form S-11 (File No. 333-158478) filed September 7, 2011, and incorporated herein by reference.)

10.2		Fourth Amended and Restated Advisory Agreement (Previously filed as Exhibit 10.3 to the Annual Report on Form 10-K filed March 14, 2012, and incorporated herein by reference.)

10.3		Third Amended and Restated Master Property Management Agreement (Previously filed as Exhibit 10.4.2 to the Annual Report on Form 10-K filed March 14, 2012, and incorporated herein by reference.)

10.4		Amended and Restated Expense Support, Conditional Reimbursement and Restricted Stock Agreement effective as of January 1, 2014 (Previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed March 18, 2014, and incorporated herein by reference.)

10.5		Form of Indemnification Agreement between Global Income Trust, Inc. and Andrew A. Hyltin dated March 2, 2011 and effective as of November 1, 2010; Holly J. Greer dated January 10, 2012 and effective as of August 11, 2011; Ixchell C. Duarte dated June 20, 2012; Andrew Wood dated August 14, 2012; James M. Seneff, Jr. dated December 10, 2012, and each of Steven D. Shackelford, Douglas N. Benham, James P. Dietz, Stephen J. LaMontagne, Kent Crittenden, Erin M. Gray, Scott C. Hall and John F. Starr dated December 11, 2012. (Previously filed as Exhibit 10.6 to the Annual report on Form 10-K filed March 7, 2011, and incorporated herein by reference.)

10.6		Purchase and Sale Agreement dated April 25, 2011 among Heritage Commons III, Ltd., Heritage Commons IV, Ltd, and Macquarie CNL Income, LP and amendments thereto. (Previously filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q filed August 15, 2011, and incorporated herein by reference.)

10.6.1		Partial Assignment of Purchase and Sale Agreement dated June 28, 2011 between Macquarie CNL Income, LP and IN-105 Heritage III, LLC. (Previously filed as Exhibit 10.1.1 to the Quarterly Report on Form 10-Q filed August 15, 2011, and incorporated herein by reference.)

10.7		Assignment and Assumption of Leases dated June 28, 2011 between Heritage Commons III, Ltd. and IN-105 Heritage III, LLC. (Previously filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q filed August 15, 2011, and incorporated herein by reference.)

10.8		Loan Agreement dated June 28, 2011 between IN-105 Heritage III, LLC and JPMorgan Chase Bank, National Association. (Previously filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q filed August 15, 2011, and incorporated herein by reference.)

10.8.1		Promissory Note ($12,400,000) dated June 28, 2011 by IN-105 Heritage III, LLC in favor of JPMorgan Chase Bank, National Association. (Previously filed as Exhibit 10.3.1 to the Quarterly Report on Form 10-Q filed August 15, 2011, and incorporated herein by reference.)

101



10.8.2		Limited Recourse Guaranty Agreement dated June 28, 2011 by Macquarie CNL Income, LP f/b/o JPMorgan Chase Bank, National Association. (Previously filed as Exhibit 10.3.2 to the Quarterly Report on Form 10-Q filed August 15, 2011, and incorporated herein by reference.)

10.9		Real Estate Purchase and Sale Contract dated the effective date of March 21, 2011 between Bay Investors, LLC and CNL Real Estate Services Corp. (d/b/a CNL Commercial Real Estate) and amendments thereto. (Previously filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q filed August 15, 2011, and incorporated herein by reference.)

10.9.1		Assignment and Assumption of Real Estate Purchase and Sale Contract dated March 28, 2011 between CNL Real Estate Services Corp. d/b/a CNL Commercial Real Estate and Macquarie CNL Income, L.P. (Previously filed as Exhibit 10.4.1 to the Quarterly Report on Form 10-Q filed August 15, 2011, and incorporated herein by reference.)

10.9.2		Assignment of Real Estate Purchase and Sale Contract dated June 8, 2011 between Macquarie CNL Income, L.P. and IN-104 Austin, LLC. (Previously filed as Exhibit 10.4.2 to the Quarterly Report on Form 10-Q filed August 15, 2011, and incorporated herein by reference.)

10.9.3		Assignment and Assumption of Lease dated June 8, 2011 between Bay Investors, LLC and IN-104 Austin, LLC. (Previously filed as Exhibit 10.5 to the Quarterly Report on Form 10-Q filed August 15, 2011, and incorporated herein by reference.)

10.10		Partial Assignment of Purchase and Sale Agreement dated October 27, 2011 between Global Income, LP and GIT Heritage IV TX, LLC. (Previously filed as Exhibit 10.1.1 to the Current Report on Form 8-K filed November 2, 2011, and incorporated herein by reference.)

10.11		Assignment and Assumption of Leases dated October 27, 2011 between Heritage Commons III, Ltd. and GIT Heritage IV TX, LLC. (Previously filed as Exhibit 10.2 to the Current Report on Form 8-K filed November 2, 2011, and incorporated herein by reference.)

10.12		Loan Agreement dated October 27, 2011 between GIT Heritage IV TX, LLC and JPMorgan Chase Bank, National Association. (Previously filed as Exhibit 10.3 to the Current Report on Form 8-K filed November 2, 2011, and incorporated herein by reference.)

10.12.1		Promissory Note ($20,500,000) dated October 27, 2011 by GIT Heritage IV TX, LLC in favor of JPMorgan Chase Bank, National Association. (Previously filed as Exhibit 10.3.1 to the Current Report on Form 8-K filed November 2, 2011, and incorporated herein by reference.)

10.12.2		Limited Recourse Guaranty Agreement dated October 27, 2011 by Global Income, LP f/b/o JPMorgan Chase Bank, National Association. (Previously filed as Exhibit 10.3.2 to the Current Report on Form 8-K filed November 2, 2011, and incorporated herein by reference.)

10.13		Purchase and Sale Agreement dated May 29, 2012 by and among Imeson West I, LLC and Global Income, LP. (Previously filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q filed August 14, 2012, and incorporated herein by reference.)

10.14		Assignment and Assumption of Lease by and between Imeson West I, LLC and GIT Imeson Park FL, LLC dated October 12, 2012 (Previously filed as Exhibit 10.2 to the Current Report on Form 8-K filed October 18, 2012, and incorporated herein by reference.)

10.15		Promissory Note by and between Imeson West I, LLC and Thrivent Financial for Lutherans dated August 27, 2007 (Previously filed as Exhibit 10.3 to the Current Report on Form 8-K filed October 18, 2012, and incorporated herein by reference.)

10.16		Note Modification Agreement by and between Imeson West I, LLC and Thrivent Financial for Lutherans dated as of November 18, 2008 (Previously filed as Exhibit 10.4 to the Current Report on Form 8-K filed October 18, 2012, and incorporated herein by reference.)

10.17		Construction/Permanent Mortgage and Security Agreement and Fixture Financing Statement between Imeson West I, LLC and Thrivent Financial for Lutherans dated as of August 27, 2007 (Previously filed as Exhibit 10.5 to the Current Report on Form 8-K filed October 18, 2012, and incorporated herein by reference.)

10.18		Assumption and Modification and Spreader Agreement by and among Imeson West I, LLC, GIT Imeson Park FL, LLC and Thrivent Financial for Lutherans dated as of October 12, 2012 (Previously filed as Exhibit 10.6 to the Current Report on Form 8-K filed October 18, 2012, and incorporated herein by reference.)

102



10.19		Escrow Agreement by and among Thrivent Financial for Lutherans, Imeson West I, LLC, GIT Imeson Park FL, LLC and Interlachen Portfolio Management Company, LLC dated as of October 12, 2012 (Previously filed as Exhibit 10.7 to the Current Report on Form 8-K filed October 18, 2012, and incorporated herein by reference.)

21.1		Subsidiaries of the Registrant (Filed herewith.)

31.1		Certification of the Chief Executive Officer, Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

31.2		Certification of the Chief Financial Officer, Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

32		Certification of the Chief Executive Officer and Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

101		The following materials from Global Income Trust, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2014, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statement of Comprehensive Loss, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

103

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company