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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2013

OR

For the transition period from                      to                     

Commission file number: 000-54684

Global Income Trust, Inc.

(Exact name of registrant as specified in its charter)

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

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

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 offering price of Global Income Trust, Inc.’s shares of common stock in its public offering that terminated on April 23, 2013, on June 30, 2013 (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 $82,351,880.

The number of shares of common stock outstanding as of February 28, 2014 was 8,257,410.

DOCUMENTS INCORPORATED BY REFERENCE

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Contents

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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, 2013 (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” and “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, estimated 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 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.

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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, asset management and other operational matters. Our Advisor has subcontracted with CNL Global Income Sub-Advisors, LLC (the “CNL Sub-Advisor”) and with, Macquarie Infrastructure and Real Assets, Inc. (“MIRA”) and an affiliate of Blackrock, Inc. (NYSE: BLK), who recently completed its acquisition of MGPA Limited, the previous parent company of one of our sub-advisors and sub-property managers, to perform substantially all of these functions as sub-advisors. We have also retained CNL Global Income Managers, LLC (the “Property Manager”) to manage our properties under a master property management agreement.

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.

Investment Objectives and Strategy

Our primary investment objectives are to:

There can be no assurance that we will be able to achieve our investment objectives.

Our investment strategy includes acquiring and operating a diverse portfolio of income-oriented commercial real estate and commercial real estate-related assets on a global basis.

Our strategy to realize our investment objectives has been driven by a disciplined approach to evaluating the important factors for each individual investment. We believe our Advisor and the sub-advisors it has engaged have the experience and ability to identify attractive assets, underwrite current operating performance, forecast potential changes to operating performance over time, and identify adequate exit strategies for our assets, as well as analyze the key metrics of the overall portfolio composition. By using this approach, we believe we were able to identify favorable acquisition targets and expect to effectively manage our assets in order to achieve our primary investment objectives.

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Real Estate Portfolio

As of February 28, 2014, we owned nine properties, with approximately 1.3 million square feet of leasable space and our portfolio was 99.8% leased with a weighted average remaining lease term of 6.7 years based on annualized base rents as of December 31, 2013. Our 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.

Our tenants include Mercedes-Benz Financial Services USA, LLC, DynCorp International, LLC, Samsonite, LLC, and FedEx Ground Package System, Inc., as well as a number of popular value retailers in Germany. Our top three tenants represented approximately 78.4% of our revenue for the year ended December 31, 2013 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.

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

Common Stock Offering

On April 23, 2010, we commenced a public offering of up to $1.5 billion of shares of common stock (150 million shares of common stock at $10.00 per share) (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 “Exit Strategy.”

Borrowings

We generally target our aggregate borrowings to between 50% to 60% of the aggregate 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 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, 2013, we had an aggregate debt leverage ratio of 58.5% of the aggregate net carrying value of our assets.

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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 or 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.

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. The daily distribution rate is equal to an annualized distribution rate of 6.5%, using our Offering price of $10.00 per share. Distributions pursuant to this policy began on October 7, 2010. Our board of directors intends to evaluate our distribution policy on a quarterly basis and reserves the right to change the per share distribution amount or otherwise amend or terminate this distribution policy.

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.

For the years ended December 31, 2013, 2012 and 2011, we declared cash distributions totaling approximately $5.2 million, $3.2 million and $1.1 million, respectively. Of these amounts, $0.4 million, $1.1 million and $0.4 million, respectively, were reinvested in additional shares of our common stock through our distribution reinvestment plan. In April 2013, our board of directors determined it was in our best interest to terminate our distribution reinvestment plan. Commencing in May 2013, all distributions 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.

Approximately 17%, 91% and 100% of total distributions declared for 2013, 2012 and 2011, respectively, exceeded net cash provided by operating activities calculated on a quarterly basis in accordance with generally accepted accounting principles (“GAAP”) and, therefore, were considered funded from other sources for GAAP purposes. Net cash provided by operating activities calculated in accordance with GAAP includes deductions for acquisition fees and expenses, which we funded from Offering proceeds, and, therefore, is only one metric our board of directors considers in determining distributions. See Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Distributions” for additional information on distributions declared, net cash provided by operating activities, our net losses and factors considered by our board of directors, and Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Use of Proceeds from Registered Securities” for additional information on how we have used proceeds received from the Offering, including amounts used to fund distributions since inception.

For the year ended December 31, 2013, approximately 28% of the distributions paid to stockholders were considered taxable income and 72% were considered a return of capital to stockholders for federal income tax purposes. For the years ended December 31, 2012 and 2011, 100% of distributions paid were considered a return of capital for federal income tax purposes.

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Significant Tenants

For the years ended December 31, 2013, 2012 and 2011, and as of December 31, 2013 and 2012, the following tenants individually accounted for 10% or more of our aggregate total revenues or leased more than 10% of our assets, respectively:

FOOTNOTES:

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 based on net book value and annualized base rent as of December 31, 2013, and revenues for the year ended December 31, 2013:

FOOTNOTES:

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The following table provides a summary of the industry diversification of our tenants based on net book value and annualized base rent as of December 31, 2013, and revenues for the year ended December 31, 2013:

FOOTNOTES:

Disposition Policies

As we have completed our offering, our Advisor has begun to consider strategic alternatives for providing liquidity to investors. See “Exit Strategy” below. In connection therewith, we may determine to sell one or more of our investments and may do so 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.

Exit Strategy

Although our board of directors is not required to review or recommend a liquidity 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 (the “Special Committee”).

As part of the process of beginning to explore strategic alternatives available to us, in August 2013, the Special Committee engaged SunTrust Robinson Humphrey, Inc. (“STRH”) as its financial advisor. Under the terms of the engagement, STRH will provide various financial advisory services as requested by the Special Committee and as customary for an engagement in connection with exploring strategic alternatives.

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In connection with the engagement, we have agreed to pay STRH certain customary fees, including fees upon the consummation of a liquidity event.

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.

Possible strategic alternatives for liquidity may include the sale of either our Company or our assets, potential merger opportunities, the listing of our common shares on a national securities exchange, or a combination of various alternatives. The actual date of any liquidity event is at the discretion of the board of directors. Any potential transaction will be subject to our governing documents, and, in general, we anticipate that any potential transaction that is recommended by our board of directors will be presented to our stockholders for approval and will require approval of a majority of the shares of our common stock outstanding and entitled to vote.

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.

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.

Employees

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

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) who recently completed its acquisition of MGPA Limited, and continues to provide services with respect to our assets 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, 2015, 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.”

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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.

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.

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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 and there can be no assurance that one will develop.

Our shares are not listed and there is no current public market for shares of our common stock. There is no assurance that a market will develop. 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. We anticipate that our board of directors will begin to consider various exit strategies in 2014, but our articles of incorporation do not require that we consummate a transaction to provide liquidity to stockholders on any certain date or at all.

Until October 2014, which is 18 months after we completed our Offering, we expect to use the price paid to acquire a share of our common stock in our Offering as the estimated per share value of our shares. Even when determining the estimated per share value of our common stock from and after 18 months after completion of our Offering, the estimated per share value of our shares will be based upon a number of assumptions that may not be accurate or complete.

To assist Financial Industry Regulatory Authority (“FINRA”) members and their associated persons that participate in our Offering in providing information on customer account statements as provided by National Association of Securities Dealers (“NASD”) Rule 2340, we disclose in our annual reports an estimated per share value of our common stock, the method by which the estimated per share value of our common stock was developed and the date of the data used to develop the estimated per share value of our common stock. In addition, our Advisor will prepare annual statements of the estimated per share value of our common stock to assist fiduciaries of retirement plans subject to the annual reporting and valuation requirements of ERISA in the preparation of their reports relating to an investment in our shares. Our Advisor intends to use the most recent price paid to acquire a share of our common stock in our Offering (ignoring purchase price discounts for certain categories of purchasers) as the estimated per share value of our common stock until 18 months after the completion of our Offering, which terminated on April 23, 2013. Although this initial estimated per share value of our common stock will represent the most recent price at which most investors will have purchased our shares, this estimated per share value of our common stock will likely differ from the price at which a stockholder could resell his or her shares because there will be no public trading market for the shares at that time, and the estimated per share value of our common stock will not reflect, and will not be derived from, the fair market value of our assets, nor will it represent the amount of net proceeds that would result from an immediate liquidation of our assets.

When determining the estimated per share value of our common stock from and after 18 months after the completion of our Offering on April 23, 2013, our Advisor, or another firm chosen for that purpose, will estimate the per share value of our common stock based upon a number of assumptions that may not be accurate or complete, and our board of directors will approve such estimated per share value of our common stock. There is no guarantee that such estimated per share value will equal or exceed, or not be substantially less than, the per share amount paid by investors in our Offering.

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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, we expect our sources of capital and liquidity will be limited in the near term. Although our Advisor has begun to explore strategic alternatives for us, and our board of directors is expected to begin considering such 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, our ability to continue to pay distributions at current rates, or at all, 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.

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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 of December 31, 2013, we have invested in nine properties and approximately 52.4%, 28.4% and 19.2% of our annualized base rental income as of such date was generated by properties located in Texas, Florida and Germany, respectively. As a result of the concentration of our portfolio in certain geographic areas, 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 currently 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:

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.

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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 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 and we would have less cash available for distributions to stockholders. In such event, our board of directors may determine to decrease distributions paid to stockholders.

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.

There are many factors that can affect the type, availability and timing of distributions to stockholders. Cash distributions generally will be based upon such factors as the amount of cash available or anticipated to be available from real estate investments and other assets, current and projected cash requirements, anticipated and actual cash flow from operations, the estimated total return on our assets, our overall financial condition, our objective of qualifying as a REIT for 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. Because we may receive income from rents or interest at various times during our fiscal year, cash distributions declared may not reflect our income earned in that particular distribution period. The amount of cash available for distributions will be affected by many factors, such as the income from investments and yields on securities of other real estate programs that we invest in, if any, as well as our operating expense levels and many other variables. Actual amounts for distribution may vary substantially from estimates. We cannot assure you that:

Our actual results may differ significantly from the assumptions used by our board of directors in establishing the distribution rates to be paid on our shares.

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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 distributions. For instance:

In addition, subject to the applicable REIT rules, our board of directors, in its discretion, may retain any portion of our cash on hand for capital needs and other corporate purposes. We cannot assure you that we will generate or have sufficient amounts available to make cash distributions to you, to continue paying distributions to you, at any specified level, or that cash distributions we make may not be decreased or be eliminated in the future.

We have not had sufficient GAAP net cash provided by operating activities or funds from operations, and therefore, approximately 53% of our cumulative distributions calculated on a quarterly basis through December 31, 2013 are considered funded from other sources; and we may continue to make distributions from alternative sources. Such distributions have reduced the amounts otherwise available for investment in assets, and may negatively impact the value of your investment.

We have not had significant net cash provided by operating activities for GAAP purposes or distributable earnings since inception. As of December 31, 2013, we have had cumulative net losses of $13.2 million and our accumulated distributions totaled $9.6 million. During the same period, we have had six quarters of positive net cash provided by operating activities and FFO which totaled $4.9 million and $4.6 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 47% of our cumulative distributions. As a result, 53% of our cumulative distributions declared to our stockholders calculated on a quarterly basis through December 31, 2013 are considered funded from other sources for GAAP purposes. Although in recent quarters we have generated positive cash flow from operations sufficient to cover the current distribution rate, there is no assurance we will have sufficient cash from operations in future periods, in which case, we may determine to pay lower distributions, or to fund all or a portion of our future distributions from other sources. Because we have funded a significant portion of our cash distributions from Offering proceeds, we have had less capital available to invest in properties and other real estate-related assets, and the book value per share of our common stock has declined. If we utilize borrowings for the purpose of funding all or a portion of our distributions in the future, we will incur additional interest expense.

Our organizational documents permit us to make distributions from any source, including but not limited to, the proceeds of our Offering, cash resulting from a deferral or waiver of asset management fees or expense reimbursements, and borrowings, which may be unsecured or secured by our assets. We have not established any

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limit on the extent to which we may use such alternate sources, except that, in accordance with Maryland law and our organizational documents, generally we may not make distributions that would: (i) cause us to be unable to pay our debts as they become due in the usual course of business, (ii) cause our total assets to be less than the sum of our total liabilities, or (iii) jeopardize our ability to maintain our qualification as a REIT. Distributions that exceed cash flow from operations or funds from operations may not be sustainable at current levels, or at all. The actual amount and timing of distributions are determined by our board of directors in its sole discretion and typically will depend on the amount of funds available for distribution, our financial condition, current and projected capital expenditure requirements, tax considerations and annual distribution requirements needed to maintain our qualification as a REIT. As a result, our distribution rate and payment frequency may vary from time to time; and we can provide no assurance that we will be able to continue current distribution rates, or pay any subsequent distributions.

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 are 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, including our ability to make distributions to our stockholders.

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, 2013. 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, our Advisor will continue to provide expense support or we will maintain our current level of distributions to stockholders.

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

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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 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.

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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:

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. and Germany, as a whole or by the local economies where our properties are located, including:

Economic, inflation or budget deficit issues could increase capital costs or prolong the U.S. economic slowdown 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.

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International investments create additional risks.

We have purchased real property outside of the United States. As of December 31, 2013, approximately 22.2% of our investments, based on net book value, were in assets located in The Federal Republic of Germany. Our German investments are subject to many of the same risks as our U.S. properties, as well as, additional risks such as:

Adverse political, economic, social, diplomatic developments and adverse changes in laws or regulations, particularly in Germany and Europe, may adversely affect our investments and the rates of return we are able to achieve on those investments. Our financial results may be adversely affected by uncertainties such as political economic or social instability, diplomatic developments and changes in laws or regulations in other countries, including in the areas of taxation, bankruptcy and ownership of assets located outside the United States, particularly if such developments were to occur in Germany or other parts of Europe. Actions or inaction by the governments of such countries could have a significant effect on, among other things, the local economic conditions, and could adversely affect local real estate markets.

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Lack of compliance with the United States Foreign Corrupt Practices Act, or “FCPA,” could subject us to penalties and other adverse consequences.

We are subject to the FCPA, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including potential competitors, are not subject to these prohibitions. Fraudulent practices, including corruption, extortion, bribery, pay-offs, theft and others, occur from time-to-time in countries in which we may do business. If people acting on our behalf or at our request are found to have engaged in such practices, severe penalties and other consequences could be imposed on us, which may have a material adverse effect on our business, results of operations, cash flows and financial condition and our ability to make distributions to our stockholders and the value of their investment.

Continued market disruptions may adversely affect our operating results.

In recent years, the global financial markets have 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 have 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. and German economies. Our business may be affected by market and economic challenges experienced by the U.S. and German economies or real estate industry generally or by the local economic conditions in the jurisdictions in which our properties are located, including the current 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, and may affect our ability to pay distributions, 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 acquire or refinance our investments, which would limit the number and size of investments that we may make and 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

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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.

Further, with respect to our retail properties, we may enter into leases containing co-tenancy provisions. Co-tenancy provisions may allow a tenant to exercise certain rights if, among other things, another tenant fails to open for business, delays its opening or ceases to operate, or if a percentage of the property’s gross leasable space or a particular portion of the property is not leased or subsequently becomes vacant. A tenant exercising co-tenancy rights may be able to abate minimum rent, reduce its share or the amount of its payment of common area operating expenses and property taxes or cancel its lease.

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, cash available for distributions 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, cash available for distributions 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, 2013, more than 78% of our rental income was derived from three tenants, and rents from these tenants in 2014 are expected to continue to be significant. Therefore, the financial failure 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.

Certain of our retail properties depend on anchor tenants to attract shoppers, and could be adversely affected by the loss of a key anchor tenant.

We own retail properties, that like other properties, are subject to the risk that tenants may be unable to make their lease payments or may decline to extend a lease upon its expiration. Our retail properties have one or more tenants, each of whom occupies a significant portion of the property’s leasable space, commonly referred to as an anchor tenant. If any one of these anchor tenants defaults on its lease, this may reduce the property’s income and overall value. Additionally, anchor tenant closures may result in decreased customer traffic, which could lead to decreased sales at other stores. In the event of default by an anchor tenant or other tenants, we may experience delays and costs in enforcing our rights as landlord to recover amounts due to us under the terms of our agreements with those parties.

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,

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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:

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.

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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 obtain funds to acquire additional investments, fund capital improvements, to pay distributions to our stockholders, 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, financial condition and ability to pay distributions to you.

Domestic and international financial markets have, in the past five years, 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 to acquire properties, 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

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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 foreign exchange rate and 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 exchange rate and 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 and our ability to pay distributions to you.

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.

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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.

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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.

We could be subject to changes in foreign tax or other laws, as well as to changes in U.S. tax laws, and such changes could negatively impact our returns from any particular investment.

As of December 31, 2013, approximately 22.2% of our investments, based on net book value, are in real estate located outside of the United States. Such investments are structured to minimize non-U.S. taxes. Our ownership, operation and disposition strategy with respect to non-U.S. investments will take into account foreign tax considerations. For example, it is typically advantageous from a tax perspective in non-U.S. jurisdictions to sell interests in a holding company that owns real estate rather than the real estate itself. Buyers of such entities, however, will often discount their purchase price by any inherent or expected tax in such entity. Additionally, the pool of buyers for interests in such holding companies is typically more limited than buyers of direct interests in real estate, and we may be forced to dispose of real estate directly, thus potentially incurring higher foreign taxes and negatively affecting the return on the investment.

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Foreign investments are subject to changes in foreign tax or other laws. Any such law changes may require us to modify or abandon a particular holding structure. Such changes may also lead to higher tax rates on our foreign investments than we anticipated, regardless of structuring modifications. Additionally, U.S. tax laws with respect to foreign investments are subject to change, and such changes could negatively impact our returns from any particular investment.

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.

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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.

None

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As of December 31, 2013, 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:

FOOTNOTES:

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Leases

As of February 28, 2014, our real estate portfolio was 99.8% leased, with a weighted average remaining lease term of 6.7 years based on annualized base rents as of December 31, 2013. 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 ten 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 is entitled to four months of free rent in 2014 and 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, based on an exchange rate of $1.33 per Euro for our foreign properties, as of December 31, 2013 (adjusted for the aforementioned lease amendment):

The following table lists, on an aggregate basis, scheduled lease expirations for each year ending December 31, 2014 through December 31, 2023 for our properties owned as of December 31, 2013 (adjusted for the aforementioned lease amendment). The table shows the annualized base rent and percentage of annualized base rent represented by the leases at their expiration dates.

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FOOTNOTES:

For discussion regarding legal proceedings, see Note 12, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

None.

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PART II

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.

On April 23, 2010, we commenced our Offering of up to $1.5 billion of shares of common stock (150 million shares of common stock at $10.00 per share) 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 distribution reinvestment plan (“DRP”).

In order to assist FINRA members and their associated persons that participated in our Offering, we disclose in each annual report distributed to stockholders a per share estimated value of our common shares, the method by which it was developed, and the date of the data used to develop the estimated value. For these purposes, the estimated value of our shares was deemed to be $10.00 per share as of December 31, 2013. The basis for this valuation is the fact that, as of December 31, 2013, this was the most recent offering price for our common shares. However, since there is no established public trading market for the shares at this time, there can be no assurance that our stockholders could receive $10.00 per share if such a market did exist and they sold their shares of our common stock, or that they will be able to receive such amount for their shares of our common stock in the future. Moreover, the offering price for shares of our common stock offered in the Offering was not based on appraisals for any assets we own or may own. Therefore, the Offering price does not necessarily represent the amount stockholders would receive if our assets were sold and the proceeds distributed to our stockholders in a liquidation, which amount may be less than $10.00 per share.

We will continue to use the most recent offering price as the estimated per share value until approximately October 2014, which is 18 months following completion of our Offering. Following such 18-month period, the estimated per share value will be based upon a valuation. Such valuation may be performed by our management or a person independent of us and of the Advisor or a combination of both. Such valuation may be based upon a number of assumptions that may prove to be inaccurate or incomplete. See Item 1A. “Risk Factors – Company Related Risks. Until October 2014, which is 18 months after we completed our Offering, we expect to use the price paid to acquire a share of our common stock in our Offering as the estimated per share value of our shares. Even when determining the estimated per share value of our common stock from and after 18 months after completion of our offering stage, the estimated per share value of our shares will be based upon a number of assumptions that may not be accurate or complete.”

Recent Sales of Unregistered Securities

There were no other sales of unregistered securities in the past three years.

Securities Authorized for Issuance under Equity Compensation Plans

None.

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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. For the year ended December 31, 2011, we did not receive any requests eligible for redemption under our redemption 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. 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 (which is equal to an annualized distribution rate of 6.5% based on a 365 days calendar year) 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, 2013, 2012 and 2011.

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.

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For GAAP purposes, our cumulative net losses and accumulated distributions as of December 31, 2013 were approximately $13.2 million and $9.6 million, respectively. Our net losses and distributions were approximately $2.4 million and $5.2 million, respectively, for the year ended December 31, 2013, $6.2 million and $3.2 million, respectively, for the year ended December 31, 2012 and $3.6 million and $1.1 million, respectively, for the year ended December 31, 2011.

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 – Distribution Policy” 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, 2013:

FOOTNOTES:

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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.”

FOOTNOTES:

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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.

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Overview

We were organized as a Maryland corporation on March 4, 2009 and have elected to be taxed, and currently qualify as a real estate investment trust (“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, 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. As of February 28, 2014, we owned nine properties with approximately 1.3 million square feet of leasable space and our portfolio was 99.8% leased with a weighted average remaining lease term of 6.7 years. Our tenants include Mercedes-Benz Financial Services USA, LLC, DynCorp International, LLC, Samsonite, LLC, and FedEx Ground Package System, Inc., as well as a number of popular value retailers in Germany.

We have focused on assets that we believe will provide a steady income stream. In evaluating investment opportunities, we considered relevant real property and financial factors in selecting properties, including the condition and location of the property, its income-producing capacity and its prospects for appreciation. In considering a property’s income-producing capacity, we evaluated a variety of criteria, including cap rates. A cap rate is a ratio used to estimate the value of income producing properties. Generally, a cap rate is computed by taking the net operating income (meaning, rental income less property operating expenses and property management fees) and dividing it by either the sales price or fair market value of the property. During our investment phase, while cap rates were pushing down in major urban areas, we made investments in select suburban markets that we believe offer 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.

Internationally, we focused on the stronger economies in Europe. While the European debt crisis followed closely behind disruptions in the U.S economy, it also created potential income acquisition opportunities in key markets in the more stable countries. We targeted properties in Germany, a region where our sub-advisor has local offices. In particular, we saw positive investment characteristics in German value retail, which tends to be more resistant to economic decline.

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Debt Financing

In connection with our acquisitions, we sought to strategically leverage our real properties and use debt as a means of providing additional funds for the acquisition of properties and the diversification of our portfolio. We, through subsidiaries of our operating partnership that were formed to make our investments, generally have borrowed, on a non-recourse basis, amounts that we believe will maximize the return to our stockholders. The use of non-recourse financing allows 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 the Company’s 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, our focus has shifted towards our tenants and assessing their current and future needs. As we look for ways to increase our cash flows and build value, we are contemplating a number of value creation opportunities relating to our properties including, but not limited to, seeking lease extensions with tenants in advance of renewal option periods. In general, we expect the operating cash flows from our properties to increase over time as scheduled rent increases become due on certain properties; however, as we seek lease extensions with certain tenants, we may determine to adjust scheduled rent increases and/or offer “free rent” periods to tenants on one or more of our leases. See Item 2. “Properties – Leases” for information regarding a lease amendment for the Jacksonville Distribution Center entered into in February 2014.

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 has 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 until such time as the Amended and Restated Expense Support Agreement is terminated by the Advisor, positively impacted by expense support provided by our Advisor. For additional information regarding expense support provided by the Advisor, see “Expense Support Agreements” further below.

Distributions

We continue 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 will increase the value of the property as the result of a longer term lease, cash from operations is expected to be negatively impacted during the first half of 2014 due to 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 substantially all of our distributions at the current rate during the second half of 2014. 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 expected reduction in cash from operations for the first half of 2014, we currently expect that we will fund a portion of our distributions in the near term with uninvested Offering proceeds. In addition, should we not have sufficient cash available from operations for distributions beyond the first half of 2014, we may continue to use uninvested Offering proceeds to fund any such shortfalls and/or have to 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, are 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.

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Exit Strategy

Although our board of directors is not required to review or recommend a liquidity event by any certain date, with the completion of our Offering, our Advisor has begun to explore possible strategic alternatives and our board has formed a Special Committee. As part of the process of beginning to explore strategic alternatives available to us, in August 2013, the Special Committee engaged STRH as its financial advisor. Under the terms of the engagement, STRH will provide various financial advisory services, as requested by the Special Committee and as customary for an engagement in connection with exploring strategic alternatives. In connection with the engagement, we have agreed to pay STRH certain customary fees, including fees upon the consummation of a liquidity event.

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, that 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. Possible strategic alternatives for liquidity may include the sale of either our Company or our assets, potential merger opportunities, the listing of our common shares on a national securities exchange or a combination of various alternatives. In addition, in anticipation of a liquidity event, we may determine to sell one or more of our properties if our board of directors determined it to be in the best interests of our stockholders. The actual date of any liquidity event is at the discretion of the board of directors, and would be subject to our governing documents.

Liquidity and Capital Resources

General

Through April 2013, we were in our offering and acquisition phase and, therefore, our primary sources of capital to date have been proceeds from our Offering and debt financing.

To date, our principal demands for funds have been for:

Equity and Debt Capital

During the year ended December 31, 2013, we received proceeds from our Offering, net of stock issuance and offering costs, of approximately $16.8 million. These amounts, as well as cash available as of December 31, 2012, were used to repay in full the outstanding debt on two loans totaling $4.8 million, to pay approximately $1.3 million of scheduled principal payments on other debt and to pay approximately $1.3 million in redemption requests, leaving a balance of approximately $10.3 million of unused Offering proceeds as of December 31, 2013. We expect to use the remaining cash: (i) to make select capital improvements at certain of our existing properties and pay operating expenses and debt service during any “free rent” periods, either or both of which may be done in connection with extending certain existing lease terms, (ii) to establish a reserve for future working capital and other needs, and/or (iii) to invest in additional real estate or other permitted investments.

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. As our Offering closed in April 2013, we will have limited capital to make acquisitions in the near term. Our board of directors may consider strategic alternatives in 2014 for providing liquidity to investors, some of which could provide liquidity to us such as listing our shares on a national exchange and/or accessing equity capital markets; however, there is no guarantee we will do so.

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Borrowings

The following table provides details of our indebtedness as of December 31, 2013:

FOOTNOTES:

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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 value of our assets, our intent is to target our aggregate borrowings to between 50% and 60% of the aggregate value of our assets. As of December 31, 2013, we had an aggregate debt leverage ratio of 58.5% of the aggregate net book value of our assets. 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, 2013, 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 are currently considering capital improvements to several of our properties in connection with negotiating extended lease terms and enhancing the asset values of certain properties. 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 capital improvements and lease commissions, but these growing reserves would not necessarily be sufficient to fund all such capital improvements and 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 6.7 years as of February 28, 2014, with approximately 90.7% 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, whereby 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 recently executed a lease amendment for one of our properties, and are currently in discussions with several other tenants regarding lease amendments, in connection with obtaining extensions of the terms which could result in periods of reduced and/or free rent to the tenants. Although we expect the lease amendment for our Jacksonville Distribution Center will, and any other material modifications to other 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 and leases.

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We had net cash provided by operating activities for the year ended December 31, 2013 of $4.6 million for GAAP purposes, as compared to net cash used in operating activities of $0.9 million and $1.7 million for the years ended December 31, 2012 and 2011, respectively. The positive trend of operating cash flows was primarily the result of the following:

Net cash provided by operating activities for the year ended December 31, 2013 is net of approximately $0.5 million in acquisition fees and expenses paid during the year, including amounts payable as of December 31, 2012. Since we have substantially completed our acquisition phase, we do not expect to incur significant acquisition fees and expenses in the future and generally expect a stable to positive trend in cash from operations in future periods relating to our properties. However, as a result of the lease amendment for the Jacksonville Distribution Center and in the event we determine it is in our best interests to modify other leases in connection with early lease renewals or otherwise extend the terms of our leases, our net cash provided by operating activities will be negatively impacted in the near term.

During the year ended December 31, 2013, our cash from operations was positively impacted by the Expense Support Agreement (as described in “Results of Operations – Expense Support”) which we entered into with our Advisor commencing in April 2012, pursuant to which our Advisor agreed to defer and subordinate up to 100% of its asset management fees and reimbursements of personnel-related operating expenses to the extent that our modified funds from operations (as defined and revised in the Amended and Restated Expense Support Agreement) was less than distributions declared to stockholders. As a result of the original Expense Support Agreement, our Advisor deferred approximately $1.8 million in such fees and expenses during the year ended December 31, 2013, in addition to approximately $1.1 million in similar fees and expenses deferred for the year ended December 31, 2012. Our Advisor has agreed to provide expense support under the Amended and Restated Expense Support Agreement; whereby the Advisor will receive forfeitable restricted stock, subject to certain performance-based vesting provisions, in lieu of cash, as payment for up to 100% of asset management fees and operating-related personnel expenses if certain distribution coverage metrics are not met. See “Expense Support Agreements” below for additional information on the terms of the Amended and Restated Expense Support Agreement. The asset management fees and reimbursements of personnel-related operating expenses that were deferred through December 31, 2013 are subject to reimbursement if we achieve certain performance hurdles within three years of the applicable deferrals. As of December 31, 2013, we did not believe it was probable that the performance hurdles would be achieved within the prescribed reimbursement period due to the cumulative nature of such metrics; therefore, we have not recognized any expense for the amounts deferred to date.

We expect cash from operating activities may improve further as we explore opportunities for investing our remaining unused Offering proceeds in portfolio enhancements and tenant improvements that optimize our rental revenues through extended lease terms. As of February 28, 2014, the weighted average remaining lease term on our properties is 6.7 years and less than 10% 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”).

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Foreign Operations

Approximately 21.9% of our aggregate net real estate assets as of December 31, 2013 and 18.1% of our total revenues for the year ended December 31, 2013 related to properties in Germany. We manage 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 reduces our overall foreign currency exposure to the equity that we have invested and the equity portion of our cash flow. However, because we have not obtained a cash flow hedge, we are vulnerable to changes in exchange rates. To date, we have experienced a positive impact of approximately $0.5 million relating to unrealized foreign currency translation adjustments. However, future movements in the exchange rate of Euros to U.S. dollars could materially impact our financial results and we may sell our assets in Germany at a time when the exchange rates are less favorable to us.

Our income outside the U.S. is subject to foreign income taxes; thereby, reducing our effective yield on our foreign assets. Generally, excess cash held in foreign subsidiaries is available for our use to fund domestic operations.

Working Capital

As of December 31, 2013, we had $10.3 million in unrestricted cash from unused net proceeds from our Offering. We are currently contemplating investments in select capital improvements in connection with improving our properties or extending existing lease terms. While these capital improvements were not completed by the end of 2013, we are committed to taking advantage of opportunities such as these where we can find incentives for our tenants to extend their lease terms while creating value to our stockholders. 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 and we do not have other readily available sources of capital at this time, we expect to maintain a higher level of working capital in the near term.

Repayment of Debt

The majority of our debt outstanding at December 31, 2013 requires monthly repayment of a portion of the outstanding principal. During 2013, we repaid approximately $5.3 million of our mortgage notes payable, including approximately $4 million related to the mezzanine loan that was extinguished prior to its maturity. In addition, we repaid $0.8 million, the full outstanding balance of our credit facility during 2013. Our scheduled principal amortization in 2014 is approximately $1.3 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. 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 (which is equal to an annualized distribution rate of 6.5% based on a 365 days calendar year) 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 cash 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 minimizing our general and administrative expenses to the extent possible, including continued expense support from our Advisor under the Amended and Restated Expense Support Agreement. 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.

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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, 2013, 2012 and 2011:

FOOTNOTES:

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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 maintenance 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. 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.

Expense Support Agreements

In March 2012, our board of directors approved an Expense Support and Conditional Reimbursement Agreement with our Advisor (the “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 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 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. Any amounts deferred that have not met the conditions of reimbursement within the time period established in the Expense Support Agreement will be permanently waived by the Advisor and we will have no obligation to pay such amounts.

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 public offering price per share of our common stock, unless and until such time as we determine an estimated net asset value (“NAV”) per share of our common stock, at which time the most recent NAV per share shall be used.

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”).

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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.

In addition, the conditional reimbursement provisions of the original Expense Support Agreement shall survive, and we continue to be obligated to repay amounts previously deferred as of December 31, 2013 of up to $2.8 million, contingent on the subordination conditions of certain performance metrics being met within three years of the applicable deferrals.

The Amended and Restated Expense Support Agreement is 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.”

Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and the notes thereto.

As of December 31, 2013, we owned nine real estate investment properties and our portfolio was 99.8% 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 2014 and beyond, it is important to understand how the growth in our assets has impacted our results. The chart below illustrates our net losses and property-level NOI (in millions) for the years ended December 31, 2013, 2012 and 2011, and the amount invested in properties (in millions) as of December 31, 2013, 2012 and 2011:

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

Revenues. Rental revenue and tenant reimbursements were approximately $12.3 million and $1.4 million, respectively, for the year ended December 31, 2013, as compared to approximately $7.8 million and $1.3 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. We generally expect revenues recognized under our current leases to remain fairly constant for 2014; however, with the recent amendment of the lease for our Jacksonville Distribution Center providing for free rent periods in the near term, we expect rental revenues will decrease. Although the amendment to the lease of the Jacksonville Distribution Center, as well as, any similar modifications to other leases, would be in connection with value creation opportunities, such an event may negatively impact future revenues.

Property Operating Expenses. Property operating expenses for the year ended December 31, 2013 were approximately $2.9 million, as compared to approximately $2.7 million for the year ended December 31, 2012. 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. The increase in property operating expenses was primarily due to expenses incurred on properties acquired in 2012 being operational for the full year in 2013.

In general, as property operating expenses increase, tenant reimbursement income will increase as a result of the tenants’ obligations to pay such amounts. Two of our properties are triple-net leased whereby the tenants are responsible for procuring and paying third parties directly for 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 $0.6 million per year. Accordingly, in such event, property operating expenses would increase.

General and Administrative Expenses. General and administrative expenses for each of the years ended December 31, 2013 and 2012 were approximately $1.9 million. 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 $0.6 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.

Although we expect total general and administrative expenses for our properties will remain consistent in 2014, we currently anticipate a portion of operating-related personnel expenses 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 a reduction in general and administrative expenses. See “Expense Support Agreements” above for additional information relating to the Amended and Restated Expense Support Agreement.

Acquisition Fees and Expenses. Acquisition fees and expenses were approximately $0.1 million and $3.2 million for the years ended December 31, 2013 and 2012, respectively, 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. We anticipate that we will incur additional acquisition fees and expenses to the extent we acquire an additional property or real estate-related assets with unused proceeds from our Offering. However, with the close of our Offering in April 2013, we do not expect to have significant near term acquisitions or to incur significant acquisition fees and expenses.

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Asset Management Fees. We incurred approximately $1.2 million and $0.7 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.

We currently anticipate all or a significant portion of asset management fees 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 a reduction in asset management fees expense. See “Expense Support Agreements” above for additional information relating to the Amended and Restated Expense Support Agreement.

Property Management Fees. We incurred approximately $0.4 million in property management fees payable to our Property Manager and sub-property managers during the year ended December 31, 2013, as compared to $0.3 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. These expenses may be impacted in future periods if our current leases are modified as described above in “Revenues.”

Depreciation and Amortization. Depreciation and amortization for the year ended December 31, 2013 was approximately $7.0 million, as compared to approximately $4.5 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 $1.2 million and $0.6 million, respectively, in asset management fees and $0.6 million and $0.5 million, respectively, in operating-related personnel expenses were deferred and subordinated in accordance with the terms of the Expense Support Agreement. We will record such amounts as operating expenses in future periods to the extent, if any, we determine these amounts are probable of being reimbursed to our Advisor. Assuming our Advisor does not terminate the Amended and Restated Expense Support Agreement, we expect the net impact to net income (loss) in 2014 from the Advisor providing expense support to not be materially different than expense support in 2013. However, due to the expected accounting of the issuance of Restricted Stock, we expect the amounts recorded as asset management fees and general and administrative expenses will decrease, and the credits to expense support will decrease in 2014. See “Expense Support Agreements” above for additional information relating to the Amended and Restated Expense Support Agreement that is effective January 1, 2014.

Interest Expense and Loan Cost Amortization. Interest expense and loan cost amortization for the year ended December 31, 2013 was approximately $4.3 million, as compared to approximately $3.4 million for the year ended December 31, 2012. Our average debt outstanding during the year ended December 31, 2013 increased to $75.2 million from $57.3 million during 2012, resulting in an approximately $1.4 million increase in interest expense and loan cost amortization. The increase in interest expense and loan cost amortization was partially offset by approximately $0.5 million as a result of our weighted average interest rate on our debt decreasing to 5.2% for the year ended December 31, 2013, as compared to 5.6% for the year ended December 31, 2012. The decrease in our weighted average interest rate was primarily the result of repaying our $4.0 million mezzanine loan relating to one of our properties, which bore interest at a rate of 11% per annum, and the debt on our German portfolio, most of which we acquired in the last half of 2012, having a lower rate of interest. In addition, during the year ended December 31, 2013, we had lower interest expense and loan cost amortization as a result of paying off our credit facility and mezzanine loan during January and March 2013, respectively; whereas, we incurred interest expense and loan cost amortization on the aforementioned outstanding debt financings during the full year ended December 31, 2012.

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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 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.

Provision for (Benefit from) Income Taxes. During the year ended December 31, 2013, we recognized state and foreign income tax expenses and benefits related to our properties in Texas and Germany, resulting in a net tax expense of approximately $0.1 million. During the year ended December 31, 2012, we recognized state and foreign income tax expenses and benefits related to our properties in Texas and Germany, resulting in a net tax benefit of approximately $0.2 million. The provision for income taxes may be impacted by valuation allowances on the German deferred tax assets in future periods of approximately $0.3 million in the event that, due to our foreseeable operations or the decision to proceed with a given strategic alternative, there is a change in judgment about our ability to realize the deferred tax assets.

Fiscal year ended December 31, 2012 as compared to fiscal year ended December 31, 2011

Revenues. Rental revenue and tenant reimbursements were approximately $7.8 million and $1.3 million, respectively, for the year ended December 31, 2012, as compared to approximately $2.0 million and $0.5 million, respectively, for the year ended December 31, 2011. The increase in rental revenues and tenant reimbursements was due to the purchase of six properties in 2012 and the properties purchased during 2011 being held for the full year in 2012.

Property Operating Expenses. Property operating expenses for the year ended December 31, 2012 were approximately $2.7 million, as compared to approximately $0.9 million for the year ended December 31, 2011. The increase in property operating expenses was due to the purchase of six properties in 2012 and the properties purchased during 2011 being held for the full year in 2012.

General and Administrative Expenses. General and administrative expenses for the year ended December 31, 2012 were approximately $1.9 million, as compared to $1.3 million for the year ended December 31, 2011. Our general and administrative expenses increased approximately $0.4 million primarily as a result of the additional legal, accounting and other professional services necessary to account and report on our growing portfolio of assets. In addition, our general and administrative expenses increased approximately $0.2 million due to additional governance and administrative expenses incurred in connection with our German properties.

Under the Expense Support Agreement, all of the reimbursable operating-related personnel expenses of affiliates of our Advisor for the period April 1, 2012 through December 31, 2012, were deferred and subordinated to certain performance metrics. For the year ended December 31, 2012, we deferred approximately $0.5 million of operating-related personnel expenses in accordance with this agreement.

Acquisition Fees and Expenses. Acquisition fees and expenses were approximately $3.2 million and $1.6 million for the years ended December 31, 2012 and 2011, respectively, and consisted primarily of investment services fees paid to our Advisor and acquisition expenses, such as legal and other closing costs in connection with the purchase of six properties in 2012 as compared with the purchase of three properties in 2011.

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Asset Management Fees. We incurred approximately $0.7 million and $0.2 million in asset management fees payable to our Advisor or sub-advisors during the years ended December 31, 2012 and 2011, respectively. Asset management fees increased due new acquisitions in 2012, as well as, the properties acquired during 2011 being operational for a full year. Under the Expense Support Agreement, all of asset management fees for the period April 1, 2012 through December 31, 2012, were deferred and subordinated to certain performance metrics in accordance with the Expense Support Agreement for a total of $0.6 million for the year ended December 31, 2012. 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, 2012, as compared to $0.1 million during the year ended December 31, 2011, for services in managing our property operations. Property management fees increased as a result of the increase in rental revenues and tenant reimbursements.

Depreciation and Amortization. Depreciation and amortization for the year ended December 31, 2012 was approximately $4.5 million, as compared to approximately $1.1 million for the year ended December 31, 2011, and was related to the buildings, improvements and in-place leases of our nine properties owned during year ended December 31, 2012, as compared to three properties owned during the year ended December 31, 2011.

Expense Support. For the year ended December 31, 2012, approximately $0.6 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 Expense Support Agreement. We will record such amounts as operating expenses in future periods to the extent, if any, we determine these amounts are probable of being reimbursed to our Advisor.

We incur operating expenses which, in general, are expenses relating to our administration on an ongoing basis. Pursuant to the advisory agreement, our Advisor shall reimburse us the amount by which the total operating expenses paid or incurred by us exceed, in any four consecutive fiscal quarters (an “Expense Year”) commencing with the year ended March 31, 2012, the greater of 2% of average invested assets or 25% of net income (as defined in the advisory agreement) (the “Limitation”), unless a majority of our independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. During 2012, total operating expenses exceeded the Limitation by $1.1 million, all of which related to the Expense Year ended March 31, 2012. Our 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 our operating expenses, many of which were necessary as a result of being a public company. There were no additional expenses in excess of the limitation incurred for the year ended December 31, 2012.

Interest Expense and Loan Cost Amortization. Interest expense and loan cost amortization for the year ended December 31, 2012 was approximately $3.4 million as compared to approximately $1.0 million for the year ended December 31, 2011. The increase was primarily the result of an increase in our average debt outstanding during 2012 and the fee on the unused portion of the credit facility. Included in interest expense and loan cost amortization for the year ended December 31, 2012, was approximately $0.1 million related to the write off of loan costs associated with the amendment to reduce the borrowing capacity under our credit facility in 2012.

Provision for (Benefit from) Income Taxes. During the year ended December 31, 2012, we recognized state and foreign income tax expenses and benefits related to our properties in Texas and Germany, resulting in a net tax benefit of approximately $0.2 million. During the year ended December 31, 2011, we recognized state income tax expense related to our properties in Texas of approximately $0.02 million.

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Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies discussed below, 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 IPA 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:

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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, 2013, 2012 and 2011, 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 consideration, which we believe is helpful in evaluating our results of operations for the reasons discussed below.

We may, in the future, make other adjustments to FFO 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.

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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 SEC, 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.

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The following table presents a reconciliation of net loss to FFO and MFFO for the years ended December 31,:

FOOTNOTES:

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