CMRF 10-K Annual Report Dec. 31, 2018

CIM REAL ESTATE FINANCE TRUST, INC.

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10-K 1 ccptiv1231201810k.htm CCPT IV 12.31.2018 10-K Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K



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

		For the fiscal year ended December 31, 2018

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

		For the transition period from to

Commission file number 000-54939

COLE CREDIT PROPERTY TRUST IV, INC.

(Exact name of registrant as specified in its charter)



Maryland		27-3148022
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
2325 East Camelback Road, 10 ^th Floor Phoenix, Arizona 85016 (Address of principal executive offices; zip code)		(602) 778-8700 (Registrant’s telephone number, including area code)

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



Title of Each Class		Name of Exchange on Which Registered
None		None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o 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 o 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 o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	o	Accelerated filer	o	Non-accelerated filer	x

Smaller reporting company	o	Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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 o No x

There is no established market for the registrant’s shares of common stock. As of June 29, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, there were approximately 311.1 million shares of common stock held by non-affiliates, for an aggregate market value of $2.9 billion , assuming a market value as of that date of $9.37 per share, the most recent estimated per share net asset value of the registrant’s common stock established by the registrant’s board of directors at that time. Effective March 26, 2019, the estimated per share net asset value of the registrant’s common stock as of December 31, 2018 is $8.65 per share.

As of March 14, 2019 , there were approximately 311.3 million shares of common stock, par value per share of $0.01, of Cole Credit Property Trust IV, Inc. outstanding.

Documents Incorporated by Reference:

The Registrant incorporates by reference portions of the Cole Credit Property Trust IV, Inc. Definitive Proxy Statement for the 2019 Annual Meeting of Stockholders (into Items 10, 11, 12, 13 and 14 of Part III).

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TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		2

PART I
ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	18
ITEM 1B.	UNRESOLVED STAFF COMMENTS	49
ITEM 2.	PROPERTIES	49
ITEM 3.	LEGAL PROCEEDINGS	49
ITEM 4.	MINE SAFETY DISCLOSURES	49

PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	50
ITEM 6.	SELECTED FINANCIAL DATA	54
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANLYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	55
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	69
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	70
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	70
ITEM 9A.	CONTROLS AND PROCEDURES	70
ITEM 9B.	OTHER INFORMATION	71

PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	72
ITEM 11.	EXECUTIVE COMPENSATION	72
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	72
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	72
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	72

PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	73
ITEM 16.	FORM 10-K SUMMARY	73

SIGNATURES		74
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Annual Report on Form 10-K of Cole Credit Property Trust IV, Inc., other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable by law. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “would,” “could,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We caution readers not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date this Annual Report on Form 10-K is filed with the U.S. Securities and Exchange Commission (the “SEC”). Additionally, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.

The following are some, but not all, of the assumptions, risks, uncertainties and other factors that could cause our actual results to differ materially from those presented in our forward-looking statements:


•	We may be unable to renew leases, lease vacant space or re-lease space as leases expire on favorable terms or at all.


•	We are subject to risks associated with tenant, geographic and industry concentrations with respect to our properties.


•	Our properties, intangible assets and other assets may be subject to impairment charges.


•	We could be subject to unexpected costs or unexpected liabilities that may arise from potential dispositions.


•	We are subject to competition in the acquisition and disposition of properties and in the leasing of our properties and we may be unable to acquire, dispose of, or lease properties on advantageous terms.


•	We could be subject to risks associated with bankruptcies or insolvencies of tenants or from tenant defaults generally.


•	We have substantial indebtedness, which may affect our ability to pay distributions, and expose us to interest rate fluctuation risk and the risk of default under our debt obligations.


•	We may be affected by the incurrence of additional secured or unsecured debt.


•	We may not be able to maintain profitability.


•	We may not generate cash flows sufficient to pay our distributions to stockholders or meet our debt service obligations.


•	We may be affected by risks resulting from losses in excess of insured limits.


•	We may fail to remain qualified as a real estate investment trust (“REIT”) for U.S. federal income tax purposes.


•	Our advisor has the right to terminate the advisory agreement upon 60 days’ written notice without cause or penalty.

All forward-looking statements should be read in light of the risks identified in Part I, Item 1A. Risk Factors within this Annual Report on Form 10-K.

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Definitions

We use certain defined terms throughout this Annual Report on Form 10-K that have the following meanings:

The phrase “annualized rental income” refers to the straight-line rental revenue under our leases on operating properties owned as of the respective reporting date, which includes the effect of rent escalations and any tenant concessions, such as free rent, and excludes any bad debt allowances and any contingent rent, such as percentage rent. Management uses annualized rental income as a basis for tenant, industry and geographic concentrations and other metrics within the portfolio. Annualized rental income is not indicative of future performance.

Under a “net lease,” the tenant occupying the leased property (usually as a single tenant) does so in much the same manner as if the tenant were the owner of the property. The tenant generally agrees that it will either have no ability or only limited ability to terminate the lease or abate rent prior to the expiration of the term of the lease as a result of real estate driven events such as casualty, condemnation or failure by the landlord to fulfill its obligations under the lease. There are various forms of net leases, most typically classified as either triple-net or double-net. Triple-net leases typically require the tenant to pay all expenses associated with the property ( e.g. , real estate taxes, insurance, maintenance and repairs, including roof, structure and parking lot). Double-net leases typically hold the landlord responsible for the capital expenditures for the roof and structure, while the tenant is responsible for all lease payments and remaining operating expenses associated with the property ( e.g. , real estate taxes, insurance and maintenance).

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PART I


ITEM 1.	BUSINESS

General Description of the Business and Operations

Cole Credit Property Trust IV, Inc. (the “Company,” “we,” “our” or “us”) is a non-exchange traded REIT formed as a Maryland corporation on July 27, 2010. We elected to be taxed, and currently qualify, as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2012. We have primarily acquired core commercial real estate assets consisting of necessity retail properties located throughout the United States. We use the term “core” to describe existing properties currently operating and generating income that are leased to creditworthy tenants under long-term net leases and are strategically located. As of December 31, 2018 , we owned 890 properties, which includes nine properties owned through a consolidated joint venture arrangement (the “Consolidated Joint Venture”), comprising 26.5 million rentable square feet of commercial space located in 45 states. As of December 31, 2018 , the rentable space at these properties was 96.2% leased, including month-to-month agreements, if any.

In addition to core commercial real estate assets, we intend to also focus on originating, acquiring, financing and managing commercial mortgage loans and other commercial real estate debt investments, commercial mortgage‑backed securities (“CMBS”), corporate credit investments, and other commercial real estate investments in the U.S. As of December 31, 2018, our loan portfolio consisted of four loans with a net book value of $89.8 million . Over the next 12-24 months, we expect, subject to market conditions, to sell a portion of our anchored shopping center portfolio and certain single tenant properties and redeploy the proceeds from those sales into commercial mortgage loans and other credit investments in which our sponsor and its affiliates have expertise.

Substantially all of our business is conducted through our operating partnership, Cole Operating Partnership IV, LP, a Delaware limited partnership (“CR IV OP”), of which we are the sole general partner and own, directly or indirectly, 100% of the partnership interests.

We are externally managed by Cole REIT Management IV, LLC (“CR IV Management”) (formerly known as Cole REIT Advisors IV, LLC), an affiliate of CIM Group, LLC (“CIM”), a vertically-integrated owner and operator of real assets with multidisciplinary expertise and in-house research, acquisition, credit analysis, development, finance, leasing, and asset management capabilities headquartered in Los Angeles, California with offices in Oakland, California; Bethesda, Maryland; Dallas, Texas; New York, New York; Chicago, Illinois; and Phoenix, Arizona. We have no paid employees and rely upon our advisor and its affiliates to provide substantially all of our day-to-day management. Pursuant to an advisory agreement with us, CR IV Management is responsible for managing our affairs on a day-to-day basis and for identifying and making acquisitions and investments on our behalf. Pursuant to the advisory agreement, CR IV Management has fiduciary obligations to us and our stockholders. Our advisory agreement with CR IV Management is for a one-year term and is considered for renewal on an annual basis by our board of directors (our “Board”).

On February 1, 2018, CIM acquired CCO Group, LLC and its subsidiaries (collectively, “CCO Group”) from VEREIT Operating Partnership, L.P. (“VEREIT OP”), a subsidiary of VEREIT, Inc. (“VEREIT”) (the “Transaction”). CCO Group, LLC owns and controls CR IV Management, our advisor, and is the indirect owner of CCO Capital, LLC (“CCO Capital”), our dealer manager, and CREI Advisors, LLC (“CREI Advisors”), our property manager. CCO Group serves as our sponsor and as a sponsor to Cole Credit Property Trust V, Inc. (“CCPT V”), Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”), Cole Office & Industrial REIT (CCIT III), Inc. (“CCIT III”), and CIM Income NAV, Inc. (formerly known as Cole Real Estate Income Strategy (Daily NAV), Inc.) (“CIM Income NAV”).

As part of the Transaction, VEREIT OP and CCO Group, LLC entered into a services agreement (the “Services Agreement”) pursuant to which VEREIT OP is obligated to provide certain services to CCO Group and to us through March 31, 2019 (or, if later, the date of the last government filing other than a tax filing made by us, CCPT V, CCIT II, CCIT III and/or CIM Income NAV with respect to its 2018 fiscal year) (the “Initial Services Term”) and is obligated to provide consulting and research services through December 31, 2023 as requested by CCO Group, LLC. The services provided by VEREIT OP during the Initial Services Term, including but not limited to any advisory, dealer manager and property management services, have been, or by March 31, 2019, will be, transitioned to, and will be provided directly by, our sponsor, advisor, dealer manager or an affiliate thereof.

On January 26, 2012, we commenced our initial public offering on a “best efforts” basis of up to a maximum of $2.975 billion in shares of common stock (the “Offering”). On November 25, 2013 , we reallocated $400.0 million in shares from our distribution reinvestment plan (the “DRIP”) portion of the Offering to the primary offering, and on February 18, 2014 , we reallocated an additional $23.0 million in shares from the DRIP portion of the Offering to the primary offering. As a result of these reallocations, the Offering offered up to a maximum of approximately 292.3 million shares of our common stock at a

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price of $10.00 per share, and up to approximately 5.5 million additional shares pursuant to the DRIP under which our stockholders could have elected to have distributions reinvested in additional shares of common stock at a price of $9.50 per share.

We terminated the Offering on April 4, 2014. At the completion of the Offering, a total of approximately 297.4 million shares of common stock had been issued, including approximately 292.3 million shares of common stock sold to the public pursuant to the primary portion of the Offering and approximately 5.1 million shares of common stock sold pursuant to the DRIP portion of the Offering. The remaining approximately 404,000 unsold shares from the Offering were deregistered.

In addition, we registered $247.0 million in shares of common stock under the DRIP (the “Initial DRIP Offering”) on December 19, 2013. We ceased issuing shares under the Initial DRIP Offering effective as of June 30, 2016. At the completion of the Initial DRIP Offering, a total of approximately $241.7 million of common stock had been issued. The remaining $5.3 million of unsold shares from the Initial DRIP Offering were deregistered.

We registered an additional $600.0 million of shares of common stock under the DRIP (the “Secondary DRIP Offering,” and together with the Initial DRIP Offering, the “DRIP Offerings,” and the DRIP Offerings collectively with the Offering, the “Offerings”), on August 2, 2016. We have issued and will continue to issue shares of common stock under the Secondary DRIP Offering.

As of December 31, 2018 , we had issued approximately 348.8 million shares of our common stock in the Offerings, including 50.5 million shares issued in the DRIP Offerings, for gross offering proceeds of $3.5 billion before organization and offering costs, selling commissions and dealer manager fees of $306.0 million .

The Board establishes an estimated per share net asset value (“NAV”) of the Company’s common stock for purposes of assisting broker-dealers that participated in the Offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340. The following table summarizes the estimated per share NAV of our common stock for the periods indicated below:



Valuation Date	Period Commencing	Period Ending	NAV per Share
August 31, 2015	October 1, 2015	November 13, 2016	$	9.70
September 30, 2016	November 14, 2016	March 27, 2017	$	9.92
December 31, 2016	March 28, 2017	March 28, 2018	$	10.08
December 31, 2017	March 29, 2018	March 19, 2019	$	9.37
December 31, 2018	March 26, 2019	—	$	8.65

Distributions are reinvested in shares of our common stock under the DRIP at the most recent estimated per share NAV as determined by our Board. Commencing on March 26, 2019, following our Board’s determination of an updated estimated per share NAV, distributions will be reinvested in shares of our common stock under the DRIP at a price of $8.65 per share, the estimated per share NAV as of December 31, 2018, as determined by our Board. Additionally, $8.65 per share will serve as the most recent estimated per share NAV for purposes of the share redemption program.

Investment Strategy and Objectives

Our primary investment objectives are:


•	to acquire quality commercial real estate properties, net leased under long-term leases to creditworthy tenants, which provide current operating cash flow;


•	to originate and acquire credit investments, including real estate debt investments, CMBS and corporate credit investments;


•	to provide reasonably stable, current income for stockholders through the payment of cash distributions; and


•	to provide the opportunity to participate in capital appreciation in the value of our investments.

Acquisition and Investment Policies

Our charter requires that our independent directors review our investment policies, described below, at least annually to determine that our policies are in the best interests of our stockholders. Except to the extent that investment policies and limitations are included in our charter, our Board may revise our investment policies without the approval of our stockholders. Investment policies that are provided in our charter may only be amended by a vote of stockholders holding a majority of our outstanding shares, unless the amendments do not adversely affect the rights, preferences and privileges of our stockholders.

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Types of Investments — Real Estate Properties

We have acquired income-producing necessity retail properties that are primarily single-tenant properties or anchored shopping centers, which are leased to creditworthy tenants under long-term net leases, and are strategically located throughout the United States. We consider necessity retail properties to be properties leased to retail tenants that attract consumers for everyday needs, such as pharmacies, home improvement stores, national superstores, restaurants and regional retailers. Anchored shopping centers are multi-tenant properties that are anchored by one or more large national, regional or local retailers.

We have and may continue to acquire other income-producing properties, such as office and industrial properties, which may share certain core characteristics with our retail investments, such as a principal creditworthy tenant, a long-term net lease, and a strategic location. We believe acquisitions of these types of office and industrial properties, which are essential to the business operations of the tenant, are consistent with our goal of providing stockholders with a stable stream of current income and an opportunity for capital appreciation.

Many of our properties are, and we anticipate that future properties will be, leased to tenants in the chain or franchise retail industry, including, but not limited to, convenience stores, drug stores and restaurant properties, as well as leased to large national retailers as standalone properties or as part of anchored shopping centers, which are anchored by national, regional and local retailers. CR IV Management monitors industry trends and identifies properties on our behalf that serve to provide a favorable return balanced with risk. Our management primarily targets regional or national name brand retail businesses with established track records. We generally intend to hold each property for a period in excess of five years.

By acquiring a large number of properties, we believe that lower than expected results of operations from one or a few investments will not necessarily preclude our ability to realize our investment objective of cash flow from our overall portfolio. In addition, we believe that properties under long-term triple-net and double-net leases offer a distinct investment advantage since these properties generally require less management and operating capital, have less recurring tenant turnover and, with respect to single-tenant properties, often offer superior locations that are less dependent on the financial stability of adjoining tenants. Since we acquire properties that are geographically diverse, we expect to minimize the potential adverse impact of economic slowdowns or downturns in local markets.

To the extent feasible, we seek to achieve a well-balanced portfolio diversified by geographic location, age and lease maturities of the various properties. We pursue properties leased to tenants representing a variety of retail industries to avoid concentration in any one industry. We also are diversified between national, regional and local brands. We generally target properties with lease terms in excess of ten years. We have acquired and may continue to acquire properties with shorter lease terms if the property is in an attractive location, if the property is difficult to replace, or if the property has other significant favorable attributes. We expect that these acquisitions will provide long-term value by virtue of their size, location, quality and condition, and lease characteristics.

There is no limitation on the number, size or type of properties that we may acquire, or on the percentage of net proceeds of the Offerings that may be used to acquire a single property. The number and mix of properties comprising our portfolio will depend upon real estate market conditions and other circumstances existing at the time we acquire properties, and the amount of capital we have available for acquisitions. We will not forgo acquiring a high-quality asset because it does not precisely fit our expected portfolio composition. See “— Other Possible Investments” below for a description of other types of real estate and real estate-related investments we may make.

We incur debt to acquire properties when CR IV Management determines that incurring such debt is in our best interests and in the best interests of our stockholders. In addition, from time to time, we have acquired and may continue to acquire some properties without financing and later incur mortgage debt secured by one or more of such properties if favorable financing terms are available. We use the proceeds from these loans to acquire additional properties. See “— Borrowing Policies” below for a more detailed description of our borrowing intentions and limitations.

Types of Investments — Credit Investments

Although we have acquired primarily real estate assets, we have acquired, and expect to continue to acquire, certain credit investments, including real estate-related assets, such as mortgage, mezzanine, bridge and other loans and securities related to real estate assets, frequently, but not necessarily always, in the corporate sector. We will evaluate our assets to ensure that any such investments do not cause us to lose our REIT status or cause us or any of our subsidiaries to be an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Thus, to the extent that CR IV Management presents us with high quality investment opportunities that allow us to meet the REIT requirements under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and do not cause us, our operating partnership or

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any other subsidiaries to meet the definition of an “investment company” under the Investment Company Act, we expect our portfolio composition will include such credit investments.

Investing in and Originating Loans. The criteria that CR IV Management will use in making or investing in loans on our behalf are substantially the same as those involved in acquiring properties for our portfolio. We do not intend to make loans to other persons or to underwrite securities of other issuers. However, unlike our property acquisitions, which we expect to hold in excess of five years, we expect that the average duration of loans will typically be one to five years.

We will not make or invest in mortgage loans on any one property if the aggregate amount of all mortgage loans outstanding on the property, including our loan, would exceed an amount equal to 85% of the appraised value of the property, as determined by an independent third-party appraiser, unless we find substantial justification due to other underwriting criteria. We may find such justification in connection with the purchase of loans in cases in which we believe there is a high probability of our foreclosure upon the property in order to acquire the underlying assets and in which the cost of the loan investment does not exceed the fair market value of the underlying property. We will not invest in or make loans unless an appraisal has been obtained concerning the underlying property, except for those loans insured or guaranteed by a government or government agency. In cases in which a majority of our independent directors so determine, and in the event the transaction is with CCO Group, CR IV Management, any of our directors or their respective affiliates, the appraisal will be obtained from a certified independent appraiser in order to support its determination of fair market value.

We may invest in first, second and third mortgage loans, mezzanine loans, bridge loans, wraparound mortgage loans, construction mortgage loans on real property and loans on leasehold interest mortgages. However, we will not make or invest in any loans that are subordinate to any mortgage or equity interest of CCO Group, CR IV Management, any of our directors or any of their or our affiliates. We also may invest in participations in mortgage loans. A mezzanine loan is a loan made in respect of certain real property but is secured by a lien on the ownership interests of the entity that, directly or indirectly, owns the real property. A bridge loan is short-term financing for an individual or business, until permanent or the next stage of financing can be obtained. Second mortgage and wraparound loans are secured by second or wraparound deeds of trust on real property that is already subject to prior mortgage indebtedness. A wraparound loan is one or more junior mortgage loans having a principal amount equal to the outstanding balance under the existing mortgage loan, plus the amount actually to be advanced under the wraparound mortgage loan. Under a wraparound loan, we would generally make principal and interest payments on behalf of the borrower to the holders of the prior mortgage loans. Third mortgage loans are secured by third deeds of trust on real property that is already subject to prior first and second mortgage indebtedness. Construction loans are loans made for either original development or renovation of property. Construction loans in which we would generally consider an investment would be secured by first deeds of trust on real property for terms of six months to two years. Loans on leasehold interests are secured by an assignment of the borrower’s leasehold interest in the particular real property. These loans are generally for terms of six months to 15 years. The leasehold interest loans are either amortized over a period that is shorter than the lease term or have a maturity date prior to the date the lease terminates. These loans would generally permit us to cure any default under the lease. Participations in mortgage loans are investments in partial interests of mortgages of the type described above that are made and administered by third-party mortgage lenders.

In evaluating prospective loan investments, CR IV Management will consider factors such as the following:

• the ratio of the investment amount to the underlying property’s value;

• the property’s potential for capital appreciation;

• expected levels of rental and occupancy rates;

• the condition and use of the property;

• current and projected cash flow of the property;

• potential for rent increases;

• the degree of liquidity of the investment;

• the property’s income-producing capacity;

• the quality, experience and creditworthiness of the borrower;

• general economic conditions in the area where the property is located;

• in the case of mezzanine loans, the ability to acquire the underlying real property; and

• other factors that CR IV Management believes are relevant.

In addition, we will seek to obtain a customary lender’s title insurance policy or commitment as to the priority of the mortgage or condition of the title. Because the factors considered, including the specific weight we place on each factor, will

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vary for each prospective loan investment, we do not, and are not able to, assign a specific weight or level of importance to any particular factor.

We may originate loans from mortgage brokers or personal solicitations of suitable borrowers, or may purchase existing loans that were originated by other lenders. CR IV Management will evaluate all potential loan investments to determine if the security for the loan and the loan-to-value ratio meets our investment criteria and objectives. Most loans that we will consider for investment would provide for monthly payments of interest and some may also provide for principal amortization, although many loans of the nature that we will consider provide for payments of interest only and a payment of principal in full at the end of the loan term. We will not originate loans with negative amortization provisions.

We do not have any policies directing the portion of our assets that may be invested in construction loans, mezzanine loans, bridge loans, loans secured by leasehold interests and second, third and wraparound mortgage loans. However, we recognize that these types of loans are more subject to risk than first deeds of trust or first priority mortgages on income-producing, fee-simple properties, and we expect to minimize the amount of these types of loans in our portfolio, to the extent that we make or invest in loans at all. CR IV Management will evaluate the fact that these types of loans are riskier in determining the rate of interest on the loans. We do not have any policy that limits the amount that we may invest in any single loan or the amount we may invest in loans to any one borrower. We are not limited as to the amount of gross offering proceeds that we may use to invest in or originate loans.

Our loan investments may be subject to regulation by federal, state and local authorities and subject to various laws and judicial and administrative decisions imposing various requirements and restrictions, including among other things, regulating credit granting activities, establishing maximum interest rates and finance charges, requiring disclosures to customers, governing secured transactions and setting collection, repossession and claims handling procedures and other trade practices. In addition, certain states have enacted legislation requiring the licensing of mortgage bankers or other lenders and these requirements may affect our ability to effectuate our proposed investments in loans. Commencement of operations in these or other jurisdictions may be dependent upon a finding of our financial responsibility, character and fitness. We may determine not to make loans in any jurisdiction in which the regulatory authority determines that we have not complied in all material respects with applicable requirements.

Investment in Other Real Estate-Related Securities. Subject to the limitations set forth in our charter, we may invest in real estate-related assets, including CMBS, mortgage, mezzanine, bridge and other loans and securities related to real estate assets. We may also invest in common and preferred real estate-related equity securities of both publicly traded and private real estate companies, which are generally unsecured and also may be subordinated to other obligations of the issuer. We would invest in equity securities that are not listed on a national securities exchange or traded in an over-the-counter market only if a majority of our directors (including a majority of our independent directors) not otherwise interested in the transaction approve such investment as being fair, competitive and commercially reasonable. Our investments in other real estate-related securities will involve special risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer.

Investments in Corporate Loans. We may also invest in or originate certain corporate loans, including first lien and senior secured instruments. Our investments in corporate loans will involve special risks relating to the particular issuer of the loans, including the financial condition and business outlook of the issuer.

Real Estate Underwriting Process

In evaluating potential property acquisitions consistent with our investment objectives, CR IV Management applies a well-established underwriting process to determine the creditworthiness of potential tenants. We consider a tenant to be creditworthy if we believe that the tenant has sufficient assets, cash flow generation and stability of operations to meet its obligations under the lease. Similarly, CR IV Management applies credit underwriting criteria to possible new tenants when we are leasing properties in our portfolio. Many of the tenants of our properties are, and we expect will continue to be, national or regional retail chains that are creditworthy entities having high net worth and operating income. CR IV Management’s underwriting process includes analyzing the financial data and other available information about the tenant, such as income statements, balance sheets, net worth, cash flow, business plans, data provided by industry credit rating services, and/or other information CR IV Management may deem relevant. Generally, these tenants must have a proven track record in order to meet the credit tests applied by CR IV Management. In addition, we may obtain guarantees of leases by the corporate parent of the tenant, in which case CR IV Management will analyze the creditworthiness of the guarantor. In many instances, especially in sale-leaseback situations where we are acquiring a property from a company and simultaneously leasing it back to the company under a long-term lease, we will meet with such company’s senior management to discuss the company’s business plan and strategy.

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When using debt rating agencies, a tenant typically will be considered creditworthy when the tenant has an “investment grade” debt rating by Moody’s Investors Service (“Moody’s”) of Baa3 or better, credit rating by Standard & Poor’s Financial Services LLC (“Standard & Poor’s”) of BBB- or better, or its payments are guaranteed by a company with such rating. Changes in tenant credit ratings, coupled with future acquisition and disposition activity, may increase or decrease our concentration of creditworthy tenants in the future.

Moody’s ratings are forward-looking opinions of future relative creditworthiness, which consider, but are not limited to, franchise value, financial statement analysis and management quality. The rating given to a debt obligation describes the level of risk associated with receiving full and timely payment of principal and interest on that specific debt obligation and how that risk compares with that of all other debt obligations. The rating, therefore, provides one measure of the ability of a company to generate cash in the future.

A Moody’s debt rating of Baa3, which is the lowest investment grade rating given by Moody’s, is assigned to companies which, in Moody’s opinion, are subject to moderate credit risk and, as such, may possess certain speculative characteristics. A Moody’s debt rating of AAA, which is the highest investment grade rating given by Moody’s, is assigned to companies which, in Moody’s opinion, are of the highest quality and subject to the lowest level of credit risk.

Standard & Poor’s assigns a credit rating to companies and to each issuance or class of debt issued by a rated company. A Standard & Poor’s credit rating of BBB-, which is the lowest investment grade rating given by Standard & Poor’s, is assigned to companies that, in Standard & Poor’s opinion, exhibit adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the company to meet its financial commitments. A Standard & Poor’s credit rating of AAA+, which is the highest investment grade rating given by Standard & Poor’s, is assigned to companies that, in Standard & Poor’s opinion, have extremely strong capacities to meet their financial commitments.

While we will utilize ratings by Moody’s and Standard & Poor’s as one factor in determining whether a tenant is creditworthy, CR IV Management also considers other factors in determining whether a tenant is creditworthy for the purpose of meeting our investment objectives. CR IV Management’s underwriting process considers information provided by third-party analytical services, along with CR IV Management’s own analysis of the financial condition of the tenant and/or the guarantor, the operating history of the property with the tenant, the tenant’s market share and track record within the tenant’s industry segment, the general health and outlook of the tenant’s industry segment, the strength of the tenant’s management team and the terms and length of the lease at the time of the acquisition.

Description of Leases

We expect, in most instances, to continue to acquire properties with existing double-net or triple-net leases. “Net” leases mean leases that typically require tenants to pay all or a majority of the operating expenses, including real estate taxes, special assessments and sales and use taxes, utilities, maintenance, insurance and building repairs related to the property, in addition to the lease payments. Triple-net leases typically require the tenant to pay all costs associated with a property (e.g., real estate taxes, insurance, maintenance and repairs, including roof, structure and parking lot). Double-net leases typically hold the landlord responsible for the capital expenditures for the roof and structure, while the tenant is responsible for all lease payments and remaining operating expenses associated with the property (e.g., real estate taxes, insurance and maintenance). We expect that double-net and triple-net leases will help ensure the predictability and stability of our expenses, which we believe will result in greater predictability and stability of our cash distributions to stockholders. Not all of our properties are, or will be subject to, net leases. In respect of anchored shopping centers, we expect to continue to have a variety of lease arrangements with the tenants of these properties. Since each lease is an individually negotiated contract between two or more parties, each lease will have different obligations of both the landlord and tenant. Many large national tenants have standard lease forms that generally do not vary from property to property. We will have limited ability to revise the terms of leases to those tenants. We have acquired and may continue to acquire properties with tenants subject to “gross” leases. “Gross” leases means leases that typically require the tenant to pay a flat rental amount and we would pay for all property charges regularly incurred as a result of our owning the property. When spaces in a property become vacant, existing leases expire, or we acquire properties under development or requiring substantial refurbishment or renovation, we generally expect to enter into net leases.

We generally expect to enter into long-term leases that have terms of ten years or more; however, certain leases may have a shorter term. We may continue to acquire properties under which the lease term has partially expired. We also may acquire properties with shorter lease terms if the property is in an attractive location, if the property is difficult to replace, or if the property has other significant favorable real estate attributes. Under most commercial leases, tenants are obligated to pay a predetermined annual base rent. Some of the leases also contain provisions that increase the amount of base rent payable at points during the lease term. We expect that many of our leases will continue to contain periodic rent increases. Generally, the leases require each tenant to procure, at its own expense, commercial general liability insurance, as well as property insurance

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covering the building for the full replacement value and naming the ownership entity and the lender, if applicable, as the additional insured on the policy. Tenants will be required to provide proof of insurance by furnishing evidence of insurance to CR IV Management on an annual basis. The evidence of insurance will be tracked and reviewed for compliance by CR IV Management personnel responsible for property and risk management. As a precautionary measure, we may obtain, to the extent available, secondary liability insurance, as well as loss of rents insurance that will typically cover one year of annual rent in the event of a rental loss.

Some leases may require that we procure insurance for both commercial general liability and property damage; however, generally the premiums are fully reimbursable from the tenant. In such instances, the policy will list us as the named insured and the tenant as the additional insured.

We do not expect to allow leases to be assigned or subleased without our prior written consent. If we do consent to an assignment or sublease, we generally expect the terms of such consent to provide that the original tenant remains fully liable under the lease unless we release that original tenant from its obligations.

We have entered, and may in the future enter, into sale-leaseback transactions, pursuant to which we purchase properties and lease them back to the sellers of such properties. While we intend to use our best efforts to structure any such sale-leaseback transaction so that the lease will be characterized as a “true lease” and so that we are treated as the owner of the property for federal income tax purposes, the Internal Revenue Service (the “IRS”) could challenge this characterization. In the event that any sale-leaseback transaction is re-characterized as a financing transaction for federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed, and in certain circumstances, we could lose our REIT status.

Acquisition Decisions

CR IV Management has substantial discretion with respect to the selection of our specific acquisitions, subject to our investment and borrowing policies, which are approved by our Board. In pursuing our investment objectives and making investment decisions on our behalf, CR IV Management evaluates the proposed terms of the acquisition against all aspects of the transaction, including the condition and financial performance of the asset, the terms of existing leases and the creditworthiness of the tenant, and property location and characteristics. Because the factors considered, including the specific weight we place on each factor, vary for each potential acquisition, we do not, and are not able to, assign a specific weight or level of importance to any particular factor.

CR IV Management procures and reviews an independent valuation estimate on each and every proposed acquisition. In addition, CR IV Management, to the extent such information is available, considers the following:


•	tenant rolls and tenant creditworthiness;


•	a property condition report;


•	unit level store performance;


•	property location, visibility and access;


•	age of the property, physical condition and curb appeal;


•	neighboring property uses;


•	local market conditions including vacancy rates and market rents;


•	area demographics, including trade area population and average household income;


•	neighborhood growth patterns and economic conditions;


•	presence of nearby properties that may positively or negatively impact store sales at the subject property; and


•	lease terms, including length of lease term, scope of landlord responsibilities, presence and frequency of contractual rental increases, renewal option provisions, exclusive and permitted use provisions, co-tenancy requirements and termination options.

CR IV Management also reviews the terms of each existing lease by considering various factors, including:

• rent escalations;

• remaining lease term;

• renewal option terms;

• tenant purchase options;

• termination options;

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• scope of the landlord’s maintenance, repair and replacement requirements;

• projected net cash flow yield; and

• projected internal rates of return.

The Board has adopted a policy to prohibit acquisitions from affiliates of CR IV Management unless a majority of our directors (including a majority of our independent directors) not otherwise interested in the transaction determine that the transaction is fair and reasonable to us and certain other conditions are met. See the section captioned “— Acquisition of Properties from Affiliates of CR IV Management” below.

Conditions to Closing Our Acquisitions

Generally, we condition our obligation to close the purchase of any acquisition on the delivery and verification of certain documents from the seller or developer, including, where appropriate:


•	plans and specifications;


•	surveys;


•	evidence that title to the property can be freely sold or otherwise transferred to us, subject to such liens and encumbrances as are acceptable to CR IV Management;


•	financial statements covering recent operations of properties, if available;


•	title and liability insurance policies; and


•	certificates of the tenant attesting that the tenant believes that, among other things, the lease is valid and enforceable.

In addition, we will take such steps as we deem necessary with respect to potential environmental matters. See the section captioned “Environmental Matters” below.

We have and may continue to enter into purchase and sale arrangements with a seller or developer of a suitable property under development or construction. In such cases, we are obligated to purchase the property at the completion of construction, provided that the construction conforms to definitive plans, specifications, and costs approved by us in advance. In such cases, prior to our acquiring the property, we generally receive a certificate of an architect, engineer or other appropriate party, stating that the property complies with all plans and specifications. If renovation or remodeling is required prior to the purchase of a property, we expect to pay a negotiated maximum amount to the seller upon completion.

In determining whether to purchase a particular property, we may, in accordance with customary practices, obtain an option to purchase such property. The amount paid for an option, if any, normally is forfeited if the property is not purchased and credited against the purchase price if the property is purchased.

In the purchasing, leasing and development of properties, we are subject to risks generally incident to the ownership of real estate. Refer to Part I, Item 1A. Risk Factors — General Risks Related to Real Estate Assets in this Annual Report on Form 10-K.

Ownership Structure

Our real estate acquisitions generally take the form of holding fee title or a long-term leasehold estate. We have acquired, and expect to continue to acquire, such interests either directly through our operating partnership or indirectly through limited liability companies, limited partnerships or other entities owned and/or controlled by us or our operating partnership. We have acquired and may continue to acquire properties by acquiring the entity that holds the desired properties. We also have acquired and may continue to acquire properties through investments in joint ventures, partnerships, co-tenancies or other co-ownership arrangements with third parties, including the developers of the properties or affiliates of CR IV Management. See the section captioned “— Joint Ventures” below.

Joint Ventures

We have entered, and may continue to enter into, joint ventures, partnerships, co-tenancies and other co-ownership arrangements with affiliated entities of CR IV Management, including other real estate programs sponsored or operated by CCO Group, or other affiliates of CR IV Management, and other third parties for the acquisition, development or improvement of properties or the acquisition of other real estate-related assets. We may also enter into such arrangements with real estate developers, owners and other unaffiliated third parties for the purpose of developing, owning and operating real properties. In determining whether to participate in a particular joint venture, CR IV Management will evaluate the underlying real property or other real estate-related asset using the same criteria described above in “— Acquisition Decisions.” CR IV Management

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also will evaluate the joint venture or co-ownership partner and the proposed terms of the joint venture or a co-ownership arrangement.

Our general policy is to invest in joint ventures only when we will have an option or contract to purchase, or a right of first refusal to purchase, the property held by the joint venture or the co-venturer’s interest in the joint venture if the co-venturer elects to sell such interest. In the event that the co-venturer elects to sell all or a portion of the interests held in any such joint venture, however, we may not have sufficient funds to exercise our right of first refusal to buy the other co-venturer’s interest in the joint venture. In the event that any joint venture with an affiliated entity holds interests in more than one asset, the interest in each such asset may be specially allocated between us and the joint venture partner based upon the respective proportion of funds deemed contributed by each co-venturer in each such asset.

In the event we enter into a joint venture or other co-ownership arrangements with CIM or its affiliates or another real estate program sponsored or operated by CCO Group, CR IV Management’s officers, key persons and affiliates may have conflicts of interest. The co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. In addition, CR IV Management’s officers and key persons may face a conflict in structuring the terms of the relationship between our interests and the interests of any affiliated co-venturer and in managing the joint venture. Since some or all of CR IV Management’s officers and key persons may also advise the affiliated co-venturer, agreements and transactions between us and CIM or any other real estate programs sponsored or operated by CCO Group would not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers, which may result in the co-venturer receiving benefits greater than the benefits that we receive. In addition, we may assume liabilities related to the joint venture that exceed the percentage of our contribution to the joint venture.

We may enter into joint ventures with CIM, other real estate programs sponsored or operated by CCO Group, CR IV Management, one or more of our directors, or any of their respective affiliates, but only if a majority of our directors (including a majority of our independent directors) not otherwise interested in the transaction approve the transaction as being fair and reasonable to us and on substantially the same terms and conditions as those received by unaffiliated joint venturers, and the cost of our investment must be supported by a current third-party appraisal of the asset.

Development and Construction of Properties

We have acquired and may continue to acquire properties on which improvements are to be constructed or completed or which require substantial renovation or refurbishment. We expect that joint ventures would be the exclusive vehicle through which we would invest in build-to-suit property projects. Our general policy is to structure them as follows:


•	we may enter into a joint venture with third parties who have an executed lease with the developer who has an executed lease in place with the future tenant whereby we will provide a portion of the equity or debt financing;


•	we would accrue a preferred return during construction on any equity investment;


•	the properties would be developed by third parties; and


•	consistent with our general policy regarding joint ventures, we would have an option or contract to purchase, or a right of first refusal to purchase, the property or the co-investor’s interest.

It is possible that joint venture partners may resist granting us a right of first refusal or may insist on a different methodology for unwinding the joint venture if one of the parties wishes to liquidate its interest.

In the event that we elect to engage in development or construction projects, in order to help ensure performance by the builders of properties that are under construction, completion of such properties will be guaranteed at the contracted price by a completion guaranty, completion bond or performance bond. CR IV Management may rely upon the substantial net worth of the contractor or developer or a personal guarantee accompanied by financial statements showing a substantial net worth provided by an affiliate of the person entering into the construction or development contract as an alternative to a completion bond or performance bond. Development of real estate properties is subject to risks relating to a builder’s ability to control construction costs or to build in conformity with plans, specifications and timetables. Refer to Part I, Item 1A. Risk Factors — General Risks Related to Real Estate Assets in this Annual Report on Form 10-K.

We have and may continue to make periodic progress payments or other cash advances to developers and builders of our properties prior to completion of construction, but only upon receipt of an architect’s certification as to the percentage of the project then completed and as to the dollar amount of the construction then completed. We intend to use such additional controls on disbursements to builders and developers as we deem necessary or prudent. We have and may continue to directly employ one or more project managers, including CR IV Management or an affiliate of CR IV Management, to plan, supervise and implement the development of any unimproved properties that we may acquire. Such persons would be compensated directly by us or through an affiliate of CR IV Management and reimbursed by us. In either event, the compensation would

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reduce the amount of any construction fee, development fee or acquisition fee that we would otherwise pay to CR IV Management or its affiliate.

In addition, we have and may continue to acquire unimproved properties, provided that we will not invest more than 10% of our total assets in unimproved properties or invest in mortgage loans secured by such properties. We will consider a property to be an unimproved property if it was not acquired for the purpose of producing rental or other operating cash flows, has no development or construction in process at the time of acquisition and no development or construction is planned to commence within one year of the acquisition.

Borrowing Policies

CR IV Management believes that utilizing borrowings to make acquisitions is consistent with our investment objective of maximizing the return to stockholders. By operating on a leveraged basis, we have more funds available for acquiring properties. This allows us to make more investments than would otherwise be possible, potentially resulting in a more diversified portfolio.

At the same time, CR IV Management believes in utilizing leverage in a moderate fashion. While there is no limitation on the amount we may borrow against any single improved property, our charter limits our aggregate borrowings to 75% of the cost of our gross assets (or 300% of net assets) (before deducting depreciation or other non-cash reserves) unless excess borrowing is approved by a majority of the independent directors and disclosed to our stockholders in the next quarterly report along with the justification for such excess borrowing. Consistent with CR IV Management’s approach toward the moderate use of leverage, our Board has adopted a policy to further limit our borrowings to 60% of the greater of cost (before deducting depreciation or other non-cash reserves) or fair market value of our gross assets, unless excess borrowing is approved by a majority of the independent directors and disclosed to our stockholders in the next quarterly report along with a justification for such excess borrowing. Fair market value is based on the estimated market value of our real estate assets as of December 31, 2017 used to determine our estimated per share NAV as of such date, and for those assets acquired from January 1, 2018 through December 31, 2018 , is based on the purchase price. Gross assets consist of total gross real estate assets net of gross intangible lease liabilities. As of December 31, 2018 , our ratio of debt to total gross assets net of gross intangible lease liabilities was 50.3% ( 50.1% including adjustments to debt for cash and cash equivalents), and our ratio of debt to the fair market value of our gross assets was 46.5% .

CR IV Management uses its best efforts to obtain financing on the most favorable terms available to us. CR IV Management has substantial discretion with respect to the financing we obtain, subject to our borrowing policies, which have been approved by our Board. Lenders may have recourse to assets not securing the repayment of the indebtedness. CR IV Management may elect to refinance properties during the term of a loan, but we expect this would occur only in limited circumstances, such as when a decline in interest rates makes it beneficial to prepay an existing mortgage, when an existing mortgage matures or if an attractive asset becomes available and the proceeds from the refinancing can be used to purchase such asset. The benefits of the refinancing may include increased cash flow resulting from reduced debt service requirements and an increase in property ownership if some refinancing proceeds are reinvested in real estate.

Our ability to increase our diversification through borrowing may be adversely impacted if banks and other lending institutions reduce the amount of funds available for loans secured by real estate. When interest rates on mortgage loans are high or financing is otherwise unavailable on a timely basis, we have purchased, and may continue to purchase, properties for cash with the intention of obtaining a mortgage loan for a portion of the purchase price at a later time. To the extent that we do not obtain mortgage loans on our properties, our ability to acquire additional properties will be restricted and we may not be able to adequately diversify our portfolio. Refer to Part I, Item 1A. Risk Factors — Risks Associated with Debt Financing in this Annual Report on Form 10-K.

We may not borrow money from any of our directors, CCO Group, CR IV Management or any of their affiliates unless such loan is approved by a majority of the directors (including a majority of the independent directors) not otherwise interested in the transaction as fair, competitive and commercially reasonable and no less favorable to us than a comparable loan between unaffiliated parties.

Disposition Policies

We generally intend to hold each property we acquire for an extended period, generally in excess of five years. Holding periods for other real estate-related assets may vary. Regardless of intended holding periods, circumstances might arise that could cause us to determine to sell an asset before the end of the expected holding period if we believe the sale of the asset would be in the best interests of our stockholders. The determination of whether a particular asset should be sold or otherwise disposed of will be made after consideration of relevant factors, including prevailing and projected economic conditions, current tenant rolls and tenant creditworthiness, whether we could apply the proceeds from the sale of the asset to acquire other

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assets, whether disposition of the asset would increase cash flow, and whether the sale of the asset would be a prohibited transaction under the Internal Revenue Code or otherwise impact our status as a REIT for federal income tax purposes. The selling price of a property that is net leased will be determined in large part by the amount of rent payable under the lease. If a tenant has a repurchase option at a formula price, we may be limited in realizing any appreciation. In connection with our sales of properties, we may lend the purchaser all or a portion of the purchase price. In these instances, our taxable income may exceed the cash received in the sale. During the year ended December 31, 2018 , we sold 21 properties for an aggregate gross sales price of $66.6 million , resulting in net cash proceeds of $49.1 million and a gain of $6.3 million .

Acquisition of Properties from Affiliates of CR IV Management

We may acquire properties or interests in properties from, or in co-ownership arrangements with, entities affiliated with CR IV Management, including properties acquired from affiliates of CR IV Management engaged in construction and development of commercial real properties. We will not acquire any property from an affiliate of CR IV Management unless a majority of our directors (including a majority of our independent directors) not otherwise interested in the transaction determine that the transaction is fair and reasonable to us. The purchase price that we will pay for any property we acquire from affiliates of CR IV Management, including property developed by an affiliate of CR IV Management as well as property held by such an affiliate that has already been developed, will not exceed the current appraised value of the property. In addition, the price of the property we acquire from an affiliate of CR IV Management may not exceed the cost of the property to the affiliate, unless a majority of our directors (including a majority of our independent directors) determine that substantial justification for the excess exists and the excess is reasonable. During the year ended December 31, 2018 , we did not purchase any properties from affiliates of our advisor.

Conflicts of Interest

We are subject to various conflicts of interest arising out of our relationship with CR IV Management and its affiliates, including conflicts related to the arrangements pursuant to which we will compensate CR IV Management and its affiliates. Certain conflict resolution procedures are set forth in our charter.

The officers and affiliates of CR IV Management will try to balance our interests with the interests of CIM and its affiliates and other programs sponsored or operated by CCO Group to whom they owe duties. However, to the extent that these persons take actions that are more favorable to other entities than to us, these actions could have a negative impact on our financial performance and, consequently, on distributions to our stockholders and the value of their investments.

Our independent directors have an obligation to act on our behalf and on behalf of our stockholders in all situations in which a conflict of interest may arise.

As a result of the Services Agreement between VEREIT OP and CCO Group, until the end of the Initial Services Term, we are also subject to conflicts of interest arising out of our contractual relationship with VEREIT (NYSE: VER), the publicly-traded parent company of VEREIT OP, which also has investment objectives and targeted assets similar to ours. Conflicts of interest will also exist to the extent that we may acquire, or seek to acquire, properties in the same geographic areas where CIM or its affiliates own properties. In addition, our directors and our officers may engage for their own account in business activities of the types conducted or to be conducted by our subsidiaries and us.

Interests in Other Real Estate Programs and Other Concurrent Offerings

Richard S. Ressler, the chairman of our Board, chief executive officer and president, who is also a founder and principal of CIM and an officer/director of certain of its affiliates, is the chairman of the board, chief executive officer and president of CCIT III and CIM Income NAV, and a director of CCPT V and CCIT II. Avraham Shemesh, one of our directors, who is also a founder and principal of CIM and an officer/director of certain of its affiliates, serves as the chairman of the board, chief executive officer and president of CCIT II and CCPT V and as a director of CCIT III and CIM Income NAV. One of our independent directors, W. Brian Kretzmer, also serves as an independent director of CCIT III and CIM Income NAV. Nathan D. DeBacker, our chief financial officer and treasurer, is the chief financial officer and treasurer of CCIT II, CCIT III, CCPT V and CIM Income NAV, and also serves as an officer for various affiliates of CCO Group. In addition, affiliates of CR IV Management act as advisors to CCPT V, CCIT II, CCIT III and/or CIM Income NAV, all of which are public, non-listed REITs sponsored by our sponsor, CCO Group. In addition, all of these programs primarily focus on the acquisition and management of commercial properties subject to long-term net leases to creditworthy tenants and have acquired or may acquire assets similar to ours. CCPT V, like us, focuses primarily on the retail sector, while CCIT II and CCIT III focus primarily on the office and industrial sectors and CIM Income NAV focuses primarily on commercial properties in the retail, office and industrial sectors. Nevertheless, the investment strategy used by each REIT would permit them to purchase certain properties that may also be suitable for our portfolio.

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CCIT II’s initial public offering of up to $2.975 billion in shares of common stock was declared effective by the SEC on September 17, 2013. CIM Income NAV’s offerings of up to $4.0 billion in shares of common stock were declared effective by the SEC on December 6, 2011, August 26, 2013 and February 10, 2017. CCPT V’s initial public offering of up to $2.975 billion in shares of common stock was declared effective by the SEC on March 17, 2014 and terminated on August 1, 2017. CCPT V’s follow-on offering of up to $1.5 billion in shares of common stock was declared effective by the SEC on August 1, 2017. CCIT III’s initial public offering of up to $3.5 billion in shares of common stock of two classes was declared effective by the SEC on September 22, 2016. CCIT II, CCPT V and CCIT III are no longer offering shares for investment to the public as of the date of this Annual Report on Form 10-K.

Other real estate programs sponsored or operated by CIM or CCO Group, including other real estate offerings in registration, could compete with us in the sale or operation of our assets. We will seek to achieve any operating efficiencies or similar savings that may result from affiliated management of competitive assets. However, to the extent such programs own or acquire property that is adjacent, or in close proximity, to a property we own, our property may compete with such other program’s property for tenants or purchasers.

During the Initial Services Term of the Services Agreement, VEREIT OP is obligated to provide property acquisition services to us and CCO Group, and property acquisitions will be allocated among VEREIT and the real estate programs sponsored by CCO Group pursuant to an asset allocation policy and in accordance with the terms of the Services Agreement. During this period, in the event that an acquisition opportunity has been identified that may be suitable for more than one of us, VEREIT or one or more other programs sponsored by CCO Group, and for which more than one of such entities has sufficient funds, then an allocation committee, which is comprised of employees of VEREIT and employees of CIM, CCO Group or their respective affiliates (the “Allocation Committee”), will examine the following factors, among others, in determining the entity for which the acquisition opportunity is most appropriate:

• the investment objective of each entity;

• the anticipated operating cash flows of each entity and the cash requirements of each entity;


•	the effect of the acquisition both on diversification of each entity’s investments by type of property, geographic area and tenant concentration;

• the amount of funds available to each program and the length of time such funds have been available to deploy;

• the policy of each entity relating to leverage of properties;

• the income tax effects of the purchase to each entity; and

• the size of the investment.

If, in the judgment of the Allocation Committee, the acquisition opportunity may be equally appropriate for more than one program, then the entity that has had the longest period of time elapse since it was allocated an acquisition opportunity of a similar size and type ( e.g ., office, industrial or retail properties) will be allocated such acquisition opportunity.

If a subsequent development, such as a delay in the closing of the acquisition or a delay in the construction of a property, causes any such acquisition opportunity, in the opinion of the Allocation Committee, to be more appropriate for an entity other than the entity that committed to make the acquisition opportunity, the Allocation Committee may determine that VEREIT or another program sponsored by CCO Group will be allocated the acquisition opportunity. The Board has a duty to ensure that the method used for the allocation of the acquisition of properties by VEREIT or by other programs sponsored by CCO Group seeking to acquire similar types of properties is applied fairly to us.

On March 19, 2019, our Board approved amendments to the asset allocation policies to remove VEREIT as a participant under the policies. Pursuant to the amended asset allocation policies, effective April 1, 2019, the Allocation Committee will consist entirely of employees of CCO Group and its affiliates, and will allocate investment opportunities among us and other real estate programs sponsored by CCO Group by examining the same factors and applying the same process as described above. Accordingly, CCO Group and its affiliates may face similar conflicts of interest as those described above with respect to VEREIT OP during the Initial Services Term of the Services Agreement.

Although our Board has adopted a policy limiting the types of transactions that we may enter into with CR IV Management and its affiliates, including other real estate programs sponsored by CCO Group, we may still enter into certain such transactions, which are subject to inherent conflicts of interest. Similarly, joint ventures involving affiliates of CR IV Management also give rise to conflicts of interest. In addition, our Board may encounter conflicts of interest in enforcing our rights against any affiliate of CR IV Management in the event of a default by or disagreement with an affiliate or in invoking powers, rights or options pursuant to any agreement between us and CR IV Management, any of its affiliates or another real estate program sponsored by CCO Group.

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Other Activities of CR IV Management and Its Affiliates

We rely on our advisor, CR IV Management, for the day-to-day operation of our business. As a result of the interests of certain members of these entities’ management in CIM or its affiliates, or other real estate programs sponsored by CCO Group, and the fact that such persons also are engaged, and will continue to engage, in other business activities, CIM, our advisor and their respective officers, key persons and affiliates may have conflicts of interest in allocating their time and resources among us, CIM, their respective affiliates and other real estate programs sponsored by CCO Group, as applicable. However, our advisor believes that it, CIM and their respective affiliates, have sufficient personnel to discharge fully their responsibilities to all of the other programs sponsored or operated by CIM, CCO Group or their respective affiliates, and the other ventures in which they are involved.

Richard S. Ressler, the chairman of our Board, chief executive officer, and president, who is also a founder and principal of CIM and an officer/director of certain of its affiliates, as well as the chairman of the board, chief executive officer and president of CCIT III and CIM Income NAV, and a director of CCPT V and CCIT II, is vice president of CR IV Management. Avraham Shemesh, one of our directors, who is also founder and principal of CIM and an officer/director of certain of its affiliates, and serves as a director of CCIT III and CIM Income NAV, as well as chairman of the board, chief executive officer and president of CCIT II and CCPT V, is president and treasurer of CR IV Management. In addition, our chief financial officer and treasurer, Nathan D. DeBacker, who is also an officer of other real estate programs sponsored by CCO Group, is vice president of CR IV Management. As a result, Messrs. Ressler and DeBacker may owe duties to these other entities and their stockholders or equity owners, as applicable, which may from time to time conflict with the duties that they owe to us and our stockholders.

Dealer Manager

Because CCO Capital, the dealer manager for the Offering, is an affiliate of CR IV Management, we did not have the benefit of an independent due diligence review and investigation of the type normally performed by an unaffiliated, independent underwriter in connection with the Offering.

Property Manager

Our properties are, and we anticipate that substantially all properties we acquire in the future will be, managed and leased by our property manager, CREI Advisors, an affiliate of our advisor, pursuant to property management and leasing agreements with our subsidiaries that hold title to our properties. We expect CREI Advisors to also serve as property manager for properties owned by other real estate programs sponsored by CCO Group, some of which may be in competition with our properties.

Receipt of Fees and Other Compensation by CR IV Management and Its Affiliates

We have incurred, and expect to continue to incur, fees and expenses payable to CR IV Management and its affiliates in connection with the acquisition and management of our assets, including acquisition and advisory fees, acquisition expenses and operating expenses.

A transaction involving the purchase or sale of properties, or the purchase or sale of any other real estate-related asset will likely result in the receipt of fees and other compensation by CR IV Management and its affiliates, including acquisition and advisory fees, disposition fees and the possibility of subordinated performance fees. Subject to oversight by our Board, CR IV Management will continue to have considerable discretion with respect to all decisions relating to the terms and timing of all transactions. Therefore, CR IV Management may have conflicts of interest concerning certain actions taken on our behalf, particularly due to the fact that acquisition fees will generally be based on the cost of the acquisition and payable to CR IV Management and its affiliates regardless of the quality of the properties acquired. The advisory fees are based on the estimated value of our assets which were acquired prior to the “as of” date of the most recent estimated per share NAV and are based on the costs of the assets acquired subsequent to the date of the most recent estimated per share NAV. Basing acquisition fees and advisory fees on the cost or estimated value of our assets may influence CR IV Management’s decisions relating to property acquisitions.

Employees

We have no direct employees. The employees of CR IV Management and its affiliates provide services to us related to acquisitions and dispositions, property management, asset management, financing, accounting, stockholder relations and administration. The employees of CCO Capital, the dealer manager for the Offering, provided wholesale brokerage services during the Offering.

We are dependent on CR IV Management and its affiliates for services that are essential to us, including the sale of shares of our common stock, asset acquisition decisions, property management and other general administrative responsibilities. In the

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event that these companies are unable to provide these services to us, we would be required to obtain such services from other sources.

We reimburse CR IV Management and its affiliates for expenses incurred in connection with its provision of administrative, acquisition, property management, asset management, financing, accounting and stockholder relations services, including personnel costs, subject to certain limitations. During the years ended December 31, 2018 , 2017 and 2016 , $11.2 million , $10.0 million and $9.7 million , respectively, were recorded for reimbursement of services provided by CR IV Management and its affiliates in connection with the acquisition, management, operating and financing of our assets. No amounts were recorded for the reimbursement of certain third-party and personnel costs allocated in connection with the issuance of shares pursuant to the Offering during the years ended December 31, 2018 , 2017 , and 2016 .

Competition

As we purchase properties, we are in competition with other potential buyers for the same properties and may have to pay more to purchase the property than if there were no other potential acquirers or we may have to locate another property that meets our acquisition criteria. Regarding the leasing efforts of our owned properties, the leasing of real estate is highly competitive in the current market, and we may continue to experience competition for tenants from owners and managers of competing projects. As a result, we may have to provide free rent, incur charges for tenant improvements, or offer other inducements, or we might not be able to timely lease the space, all of which may have an adverse impact on our results of operations. At the time we elect to dispose of our properties, we may also be in competition with sellers of similar properties to locate suitable purchasers for our properties. See the section captioned “— Conflicts of Interest” above.

Property Concentrations

As of December 31, 2018 , no single tenant or geographic location accounted for greater than 10% of our 2018 annualized rental income. As of December 31, 2018 , we have certain industry concentrations in our property holdings. In particular, we have tenants in the discount store and pharmacy industries, which comprised 15% and 10% , respectively, of our 2018 annualized rental income. See Part I, Item 2. Properties of this Annual Report on Form 10-K for additional information regarding the geographic concentration of our properties.

Environmental Matters

We generally will not purchase any property unless and until we also obtain what is generally referred to as a “Phase I” environmental site assessment and are generally satisfied with the environmental status of the property. However, we may purchase a property without obtaining such assessment if our advisor determines the assessment is not necessary because there exists a recent Phase I environmental site assessment that we deem satisfactory. A Phase I environmental site assessment generally consists of a visual survey of the building and the property in an attempt to identify areas of potential environmental concerns, visually observing neighboring properties to assess surface conditions or activities that may have an adverse environmental impact on the property, interviewing the key site manager and/or property owner, contacting local governmental agency personnel and performing an environmental regulatory database search in an attempt to determine any known environmental concerns in, and in the immediate vicinity of, the property. A Phase I environmental site assessment does not generally include any sampling or testing of soil, ground water or building materials from the property and may not reveal all environmental hazards on a property.

In the event the Phase I environmental site assessment uncovers potential environmental problems with a property, our advisor will determine whether we will pursue the acquisition opportunity and whether we will have a “Phase II” environmental site assessment performed. The factors we may consider in determining whether to conduct a Phase II environmental site assessment include, but are not limited to, (1) the types of operations conducted on the property and surrounding properties, (2) the time, duration and materials used during such operations, (3) the waste handling practices of any tenants or property owners, (4) the potential for hazardous substances to be released into the environment, (5) any history of environmental law violations on the subject property and surrounding properties, (6) any documented environmental releases, (7) any observations from the consultant that conducted the Phase I environmental site assessment, and (8) whether any party

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(e.g., surrounding property owners, prior owners or tenants) may be responsible for addressing the environmental conditions. We will determine whether to conduct a Phase II environmental site assessment on a case by case basis.

We have acquired and we expect that some of the properties that we acquire in the future may contain, at the time of our acquisition, or may have contained prior to our acquisition, storage tanks for the storage of petroleum products and other hazardous or toxic substances. All of these operations create a potential for the release of petroleum products or other hazardous or toxic substances. Some of the properties that we acquire may be adjacent to or near other properties that have contained or contain storage tanks used to store petroleum products or other hazardous or toxic substances. In addition, certain of the properties that we acquire may be on, or adjacent to or near other properties upon which others, including former owners or tenants of our properties, have engaged, or may in the future engage, in activities that may release petroleum products or other hazardous or toxic substances.

From time to time, we may acquire properties, or interests in properties, with known adverse environmental conditions where we believe that the environmental liabilities associated with these conditions are significant and quantifiable but that the acquisition will yield a superior risk-adjusted return. In such an instance, we will estimate the costs of environmental investigation, clean-up and monitoring in determining the purchase price. Further, in connection with property dispositions, we may agree to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties.

We are not aware of any environmental matters which we believe are reasonably likely to have a material effect on our results of operations, financial condition or liquidity.

Available Information

We electronically file our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports with the SEC. We also file registration statements, amendments to our registration statements, and/or supplements to our prospectus in connection with any of our offerings with the SEC. Copies of our filings with the SEC are available on our sponsor’s website, http://www.cimgroup.com , free of charge. The information on our sponsor’s website is not incorporated by reference into this Annual Report on Form 10-K. Copies of our filings with the SEC may also be obtained from the SEC’s website, at http://www.sec.gov . Access to these filings is free of charge.


ITEM 1A.	RISK FACTORS

Stockholders should carefully consider the following factors, together with all the other information included in this Annual Report on Form 10-K, in evaluating the Company and our business. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected, and stockholders may lose all or part of their investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks Related to Our Business

We currently have not identified all of the properties or real estate-related assets we intend to purchase. For this and other reasons, an investment in our shares is speculative.

We currently have not identified all of the properties or real estate-related assets that we may purchase. We have established policies relating to the types of assets we will acquire and the creditworthiness of tenants of our properties, but our advisor has wide discretion in implementing these policies, subject to the oversight of our Board. Additionally, our advisor has discretion to determine the location, number and size of our acquisitions and the percentage of net proceeds we may dedicate to a single asset. As a result, you will not be able to evaluate the economic merit of our future acquisitions until after such acquisitions have been made. Therefore, an investment in our shares is speculative.

Our stockholders should consider our prospects in light of the risks, uncertainties and difficulties frequently encountered by companies that, like us, have not identified all properties or real estate-related assets that they intend to purchase. To be successful in this market, we and our advisor must, among other things:


•	identify and acquire assets that further our investment objectives;


•	rely on our advisor and its affiliates to attract, integrate, motivate and retain qualified personnel to manage our day-to-day operations;


•	respond to competition for our targeted real estate and other assets;


•	rely on our advisor and its affiliates to continue to build and expand our operations structure to support our business; and

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•	be continuously aware of, and interpret, marketing trends and conditions.

We may not succeed in achieving these goals, and our failure to do so could cause our stockholders to lose all or a portion of their investment.

Our shares have limited liquidity and we are not required, through our charter or otherwise, to provide for a liquidity event. There is no public trading market for our shares and there may never be one; therefore, it will be difficult for our stockholders to sell their shares. Our stockholders should view our shares only as a long-term investment.

There is no public market for our common stock and there may never be one. In addition, although we presently intend to consider alternatives for providing liquidity for our stockholders beginning five to seven years following the termination of our initial public offering, we do not have a fixed date or method for providing stockholders with liquidity. We expect that our Board will make that determination in the future based, in part, upon advice from our advisor. If our stockholders are able to find a buyer for their shares, our stockholders will likely have to sell them at a substantial discount to their purchase price. It also is likely that our stockholders’ shares would not be accepted as the primary collateral for a loan. Therefore, shares of our common stock should be considered illiquid and a long-term investment, and our stockholders must be prepared to hold their shares of our common stock for an indefinite length of time.

Our stockholders are limited in their ability to sell their shares pursuant to our share redemption program and may have to hold their shares for an indefinite period of time.

Our share redemption program includes numerous restrictions that limit our stockholders’ ability to sell their shares. Subject to funds being available, we will generally limit the number of shares redeemed pursuant to our share redemption program to no more than 5% of the weighted average number of shares outstanding during the trailing 12 months prior to the end of the fiscal quarter for which the redemption is being paid. In addition, we intend to limit quarterly redemptions to approximately 1.25% of the weighted average number of shares outstanding during the trailing 12-month period ending on the last day of the fiscal quarter, and funding for redemptions for each quarter generally will be limited to the net proceeds we receive from the sale of shares in the respective quarter under the DRIP. Any of the foregoing limits might prevent us from accommodating all redemption requests made in any fiscal quarter or in any 12-month period. For the past eleven quarters, quarterly redemptions have been honored on a pro rata basis, as requests for redemption have exceeded the quarterly redemption limits described above. The Board may amend the terms of, suspend, or terminate our share redemption program without stockholder approval upon 30 days’ prior notice, and our management may reject any request for redemption. These restrictions severely limit our stockholders’ ability to sell their shares should they require liquidity, and limit our stockholders’ ability to recover the value they invested or the fair market value of their shares.

Our estimated per share NAV is an estimate as of a given point in time and likely will not represent the amount of net proceeds that would result if we were liquidated or dissolved or completed a merger or other sale of the Company.

Based on the recommendation from the valuation committee of our Board, which is comprised solely of independent directors, our Board, including all of its independent directors, approves and establishes at least annually an estimated per share NAV of the Company’s common stock, which is based on an estimated market value of the Company’s assets less the estimated market value of the Company’s liabilities, divided by the number of shares outstanding. The Company provides this estimated per share NAV to assist broker-dealers that participated in the Company’s public offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Rule 2340.

As with any valuation methodology, the methodology used by our Board in reaching an estimate of the per share NAV of our shares is based upon a number of estimates, assumptions, judgments and opinions that may, or may not, prove to be correct. The use of different estimates, assumptions, judgments or opinions may have resulted in significantly different estimates of the per share NAV of our shares. In addition, our Board’s estimate of per share NAV is not based on the book values of the Company’s real estate, as determined by generally accepted accounting principles, as the Company’s book value for most real estate is based on the amortized cost of the property, subject to certain adjustments. Furthermore, in reaching an estimate of the per share NAV of the Company’s shares, our Board did not include, among other things, a discount for debt that may include a prepayment obligation or a provision precluding assumption of the debt by a third party. As a result, there can be no assurance that:


•	stockholders will be able to realize the estimated per share NAV upon attempting to sell their shares; or


•	the Company will be able to achieve, for its stockholders, the estimated per share NAV upon a listing of the Company’s shares of common stock on a national securities exchange, a merger of the Company, or a sale of the Company’s portfolio.

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When determining the estimated per share NAV, there are currently no SEC, federal or state rules that establish requirements specifying the methodology to employ in determining an estimated per share NAV. However, pursuant to rules of the Financial Industry Regulatory Authority (“FINRA”), the determination of the estimated per share NAV must be conducted by, or with the material assistance or confirmation of, a third-party valuation expert and must be derived from a methodology that conforms to standard industry practice.

The estimated per share NAV is an estimate as of a given point in time and likely does not represent the amount of net proceeds that would result from an immediate sale of our assets, or in the event that we are liquidated or dissolved or completed a merger or other sale of the Company. The estimated per share NAV of the Company’s shares will fluctuate over time as a result of, among other things, developments related to individual assets and changes in the real estate and capital markets.

We may be unable to pay or maintain cash distributions or increase distributions over time.

There are many factors that can affect the availability and timing of cash distributions to our stockholders. Distributions are based primarily on cash flow from operations. The amount of cash available for distributions is affected by many factors, such as the performance of our advisor in selecting acquisitions for us to make, selecting tenants for our properties and securing financing arrangements, our ability to buy properties, the amount of rental income from our properties, and our operating expense levels, as well as many other variables. We may not always be in a position to pay distributions to our stockholders and any distributions we do make may not increase over time. In addition, our actual results may differ significantly from the assumptions used by our Board in establishing the distribution rate to our stockholders. There also is a risk that we may not have sufficient cash flow from operations to fund distributions required to maintain our REIT status.

We have paid, and may continue to pay, some of our distributions from sources other than cash flows from operations, including borrowings and proceeds from asset sales, which may reduce the amount of capital we ultimately deploy in our real estate operations and may negatively impact the value of our common stock.

To the extent that cash flow from operations has been or is insufficient to fully cover our distributions to our stockholders, we have paid, and may continue to pay, some of our distributions from sources other than cash flow from operations. Such sources may include borrowings, proceeds from asset sales or the sale of our securities. We have no limits on the amounts we may use to pay distributions from sources other than cash flow from operations. The payment of distributions from sources other than cash provided by operating activities may reduce the amount of proceeds available for acquisitions and operations or cause us to incur additional interest expense as a result of borrowed funds, and may cause subsequent holders of our common stock to experience dilution. This may negatively impact the value of our common stock.

The following table presents distributions and the source of distributions for the periods indicated below (dollar amounts in thousands):



	Year Ended December 31,
	2018				2017
	Amount		Percent		Amount		Percent
Distributions paid in cash	$	102,822	53	%	$	93,310	48	%
Distributions reinvested	91,764		47	%	101,344		52	%
Total distributions	$	194,586	100	%	$	194,654	100	%
Source of distributions:
Net cash provided by operating activities ⁽¹⁾	$	194,586	100	%	$	194,654	100	%

____________________________________


(1)	Net cash provided by operating activities for the years ended December 31, 2018 and 2017 was $205.8 million and $198.9 million , respectively.

Because we have in the past paid, and may in the future pay, distributions from sources other than our cash flows from operations, distributions at any point in time may not reflect the current performance of our properties or our current operating cash flow.

We may make distributions from any source, including the sources described in the risk factor above. Because the amount we pay in distributions may exceed our earnings and our cash flow from operations, distributions may not reflect the current performance of our properties or our current operating cash flow. To the extent distributions exceed cash flow from operations, distributions may be treated as a return of our stockholders’ investment and could reduce their basis in our common stock. A reduction in a stockholder’s basis in our common stock could result in the stockholder recognizing more gain upon the disposition of his or her shares, which, in turn, could result in greater taxable income to such stockholder.

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We have experienced losses in the past, and we may experience additional losses in the future.

We have experienced net losses in the past (calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”)) and we may not be profitable or realize growth in the value of our assets. Many of our losses can be attributed to start-up costs, depreciation and amortization, as well as acquisition expenses incurred in connection with purchasing properties or making other investments. Our ability to sustain profitability is uncertain and depends on the demand for, and value of, our portfolio of properties. For a further discussion of our operational history and the factors affecting our losses, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K and our accompanying consolidated financial statements and notes thereto.

We may suffer from delays in locating suitable acquisitions, which could adversely affect our ability to pay distributions to our stockholders and the value of their investment.

We could suffer from delays in locating suitable acquisitions. Delays we encounter in the selection and/or acquisition of income-producing properties could adversely affect our ability to pay distributions to our stockholders and/or the value of their overall returns. Competition from other real estate investors increases the risk of delays in investing our net offering proceeds. If our advisor is unable to identify suitable acquisitions, we will hold the proceeds we raise or raised in the Offerings in an interest-bearing account or invest the proceeds in short-term, investment-grade investments, which would provide a significantly lower return to us than the return we expect from our real estate assets.

It may be difficult to accurately reflect material events that may impact the estimated per share NAV between valuations and, accordingly, we may be selling shares in our DRIP and repurchasing shares at too high or too low a price.

Our independent valuation firm calculated estimates of the market value of our principal real estate and real estate-related assets, and our Board determined the net value of our real estate and real estate-related assets and liabilities taking into consideration such estimate provided by the independent valuation firm. The Board is ultimately responsible for determining the estimated per share NAV. Since our Board will determine our estimated per share NAV at least annually, there may be changes in the value of our properties that are not fully reflected in the most recent estimated per share NAV. As a result, the published estimated per share NAV may not fully reflect changes in value that may have occurred since the prior valuation.

Furthermore, our advisor will monitor our portfolio, but it may be difficult to reflect changing market conditions or material events that may impact the value of our portfolio between valuations, or to obtain timely or complete information regarding any such events. Therefore, the estimated per share NAV published before the announcement of an extraordinary event may differ significantly from our actual per share NAV until such time as sufficient information is available and analyzed, the financial impact is fully evaluated, and the appropriate adjustment is made to our estimated per share NAV, as determined by our Board. Any resulting disparity may be to the detriment of a purchaser of our shares or a stockholder selling shares pursuant to our share redemption program.

Our future success depends to a significant degree upon certain key personnel of our advisor. If our advisor loses or is unable to attract and retain key personnel, our ability to achieve our investment objectives could be delayed or hindered, which could adversely affect our ability to pay distributions to our stockholders and the value of their investment.

Our success depends to a significant degree upon the contributions of certain executive officers and other key personnel of CCO Group and our advisor. We cannot guarantee that all of these key personnel, or any particular person, will remain affiliated with us, CCO Group and/or our advisor. If any of our key personnel were to cease their affiliation with our advisor, our operating results could suffer. We believe that our future success depends, in large part, upon our advisor’s ability to hire and retain highly skilled managerial, operational and marketing personnel. Competition for such personnel is intense, and we cannot assure our stockholders that CCO Group or our advisor will be successful in attracting and retaining such skilled personnel. If our advisor loses or is unable to obtain the services of key personnel, our ability to implement our investment strategies could be delayed or hindered, and the value of our stockholders’ investment may decline.

If we seek to internalize our management functions in connection with a listing of our shares of common stock on an exchange or other liquidity event, and such internalization is approved by our stockholders, our stockholders’ interest in us could be diluted, and we could incur other significant costs associated with being self-managed.

In the future, we may undertake a listing of our common stock on an exchange or other liquidity event that may involve internalizing our management functions. If our Board determines that it is in our best interest to internalize our management functions, and such internalization is approved by our stockholders, we may negotiate to acquire our advisor’s assets and personnel. At this time, we cannot be sure of the form or amount of consideration or other terms relating to any such acquisition. Such consideration could take many forms, including cash payments, promissory notes and shares of our common

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stock. The payment of such consideration could result in dilution of our stockholders’ interests as a stockholder and could reduce the net income per share attributable to their investment.

Internalization transactions involving the acquisition of advisors affiliated with entity sponsors have also, in some cases, been the subject of litigation. Even if these claims are without merit, we could be forced to spend significant amounts of money defending claims, which would reduce the amount of funds available to operate our business and to pay distributions.

In addition, while we would no longer bear the costs of the various fees and expenses we expect to pay to our advisor under the advisory agreement, our direct expenses would include general and administrative costs, including legal, accounting, and other expenses related to corporate governance, including SEC reporting and compliance. We would also incur the compensation and benefits costs of our officers and other employees and consultants that we now expect will be paid by our advisor or its affiliates. If the expenses we assume as a result of an internalization are higher than the expenses we avoid paying to our advisor, our net income per share would be lower as a result of the internalization than it otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders and the value of our shares.

If we internalize our management functions, we could have difficulty integrating these functions as a stand-alone entity and we may fail to properly identify the appropriate mix of personnel and capital needed to operate as a stand-alone entity. Additionally, upon any internalization of our advisor, certain key personnel may not remain with our advisor, but will instead remain employees of CCO Group.

Our participation in a co-ownership arrangement may subject us to risks that otherwise may not be present in other real estate assets.

We may enter into co-ownership arrangements with respect to a portion of the properties we acquire. Co-ownership arrangements involve risks generally not otherwise present with an investment in other real estate assets, such as the following:


•	the risk that a co-owner may at any time have economic or business interests or goals that are or become inconsistent with our business interests or goals;


•	the risk that a co-owner may be in a position to take action contrary to our instructions or requests or contrary to our policies, objectives or status as a REIT;

•

the possibility that an individual co-owner might become insolvent or bankrupt, or otherwise default under the applicable mortgage loan financing documents, which may constitute an event of default under all of the applicable mortgage loan financing documents, result in a foreclosure and the loss of all or a substantial portion of the investment made by the co-owner, or allow the bankruptcy court to reject the agreements entered into by the co-owners owning interests in the property;

•

the possibility that a co-owner might not have adequate liquid assets to make cash advances that may be required in order to fund operations, maintenance and other expenses related to the property, which could result in the loss of current or prospective tenants and may otherwise adversely affect the operation and maintenance of the property, and could cause a default under the applicable mortgage loan financing documents and may result in late charges, penalties and interest, and may lead to the exercise of foreclosure and other remedies by the lender;


•	the risk that a co-owner could breach agreements related to the property, which may cause a default under, and possibly result in personal liability in connection with, any mortgage loan financing documents applicable to the property, violate applicable securities laws, result in a foreclosure or otherwise adversely affect the property and the co-ownership arrangement;


•	the risk that we could have limited control and rights, with management decisions made entirely by a third party; and


•	the possibility that we will not have the right to sell the property at a time that otherwise could result in the property being sold for its maximum value.

In the event that our interests become adverse to those of the other co-owners, we may not have the contractual right to purchase the co-ownership interests from the other co-owners. Even if we are given the opportunity to purchase such co-ownership interests in the future, we cannot guarantee that we will have sufficient funds available at the time to purchase co-ownership interests from the co-owners.

We might want to sell our co-ownership interests in a given property at a time when the other co-owners in such property do not desire to sell their interests. Therefore, because we anticipate that it will be much more difficult to find a willing buyer for our co-ownership interests in a property than it would be to find a buyer for a property we owned outright, we may not be able to sell our co-ownership interest in a property at the time we would like to sell.

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Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results, damage our reputation, cause us to incur substantial additional costs or lead to litigation.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our tenant and stockholder relationships. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those we have outsourced. We have implemented processes, procedures and internal controls to help mitigate cyber incidents, but these measures do not guarantee that a cyber incident will not occur or that attempted security breaches or disruptions would not be successful or damaging. A cyber incident could materially adversely impact our business, financial condition, results of operations, cash flow, or our ability to satisfy our debt service obligations or to maintain our level of distributions on common stock. Additionally, a cyber incident could result in additional costs to repair or replace our networks or information systems and possible legal liability, including government enforcement actions and private litigation.

Our commercial construction lending may expose us to increased lending risks.

Our commercial construction lending may expose us to increased lending risks. Construction loans generally expose a lender to greater risk of non‑payment and loss than permanent commercial mortgage loans because repayment of the loans often depends on the borrower’s ability to secure permanent take‑out financing, which requires the successful completion of construction and stabilization of the project, or operation of the property with an income stream sufficient to meet operating expenses, including debt service on such replacement financing. For construction loans, increased risks include the accuracy of the estimate of the property’s value at completion of construction and the estimated cost of construction, all of which may be affected by unanticipated construction delays and cost over‑runs. Such loans typically involve an expectation that the borrower’s sponsors will contribute sufficient equity funds in order to keep the loan in balance, and the sponsors’ failure or inability to meet this obligation could result in delays in construction or an inability to complete construction. Commercial construction loans also expose the lender to additional risks of contractor non‑performance, or borrower disputes with contractors resulting in mechanic’s or materialmen’s liens on the property and possible further delay in construction. In addition, since such loans generally entail greater risk than mortgage loans on income producing property, we may need to increase our allowance for loan losses in the future to account for the likely increase in probable incurred credit losses associated with such loans. Further, as the lender under a construction loan, we may be obligated to fund all or a significant portion of the loan at one or more future dates. We may not have the funds available at such future date(s) to meet our funding obligations under the loan. In that event, we would likely be in breach of the loan unless we are able to raise the funds from alternative sources, which we may not be able to achieve on favorable terms or at all. In addition, many of our construction loans have multiple lenders and if another lender fails to fund we could be faced with the choice of either funding for that defaulting lender or suffering a delay or protracted interruption in the progress of construction.

Our mezzanine loans involve greater risks of loss than senior loans secured by income‑producing properties.

During the fourth quarter of 2018, we originated $89.8 million of mezzanine loans, and may continue to invest in mezzanine loans, which sometimes take the form of subordinated loans secured by second mortgages on the underlying property or more commonly take the form of loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity that owns the interest in the entity owning the property. These types of assets involve a higher degree of risk than long‑term senior mortgage lending secured by income‑producing real property because the loan may become unsecured as a result of foreclosure by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt. As a result, we may not recover some or all of our investment. In addition, mezzanine loans may have higher loan‑to‑value ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal. Significant losses related to our mezzanine loans would result in operating losses for us and may limit our ability to make distributions to our stockholders.

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Risks Related to Conflicts of Interest

We are subject to conflicts of interest arising out of our relationships with our advisor and its affiliates, including the material conflicts discussed below. The “Conflicts of Interest” section of Part I, Item 1 of this Annual Report on Form 10-K provides a more detailed discussion of the conflicts of interest between us and our advisor and its affiliates, and our policies to reduce or eliminate certain potential conflicts.

Our advisor and its affiliates face conflicts of interest caused by their compensation arrangements with us, including significant compensation that may be required to be paid to our advisor if our advisor is terminated, which could result in actions that are not in the long-term best interests of our stockholders.

Our advisor and its affiliates are entitled to substantial fees from us under the terms of the advisory agreement. These fees could influence the judgment of our advisor and its affiliates in performing services for us. Among other matters, these compensation arrangements could affect their judgment with respect to:


•	the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the advisory agreement;


•	property acquisitions from other real estate programs sponsored or operated by CCO Group, which might entitle affiliates of our advisor to real estate commissions and possible success-based sale fees in connection with its services for the seller;


•	property acquisitions from third parties, which entitle our advisor to acquisition fees and advisory fees;


•	property or asset dispositions, which may entitle our advisor or its affiliates to disposition fees;


•	borrowings to acquire properties, which borrowings will increase the acquisition and advisory fees payable to our advisor; and


•	how and when to recommend to our Board a proposed strategy to provide our stockholders with liquidity, which proposed strategy, if implemented, could entitle our advisor to the payment of significant fees.

The acquisition fee payable to our advisor is principally based on the cost of our acquisitions and not on performance, which could result in our advisor taking actions that are not necessarily in the long-term best interests of our stockholders.

The acquisition fee we pay to our advisor is based on the cost of our acquisitions. As a result, our advisor receives this fee regardless of the quality of such acquisitions, the performance of such acquisitions or the quality of our advisor’s services rendered to us in connection with such acquisitions. This creates a potential conflict of interest between us and our advisor, as the interests of our advisor in receiving the acquisition fee may not be aligned with our interest of acquiring real estate that is likely to produce the maximum risk adjusted returns.

Our advisor faces conflicts of interest relating to the incentive fee structure under our advisory agreement, which could result in actions that are not necessarily in the long-term best interests of our stockholders.

Pursuant to the terms of our advisory agreement, our advisor is entitled to a subordinated performance fee that is structured in a manner intended to provide incentives to our advisor to perform in our best interests and in the best interests of our stockholders. However, because our advisor does not maintain a significant equity interest in us and is entitled to receive certain fees regardless of performance, our advisor’s interests are not wholly aligned with those of our stockholders. Furthermore, our advisor could be motivated to recommend riskier or more speculative acquisitions in order for us to generate the specified levels of performance or sales proceeds that would entitle our advisor to performance-based fees. In addition, our advisor will have substantial influence with respect to how and when our Board elects to provide liquidity to our stockholders, and these performance-based fees could influence our advisor’s recommendations to us in this regard. Our advisor also has the right to terminate the advisory agreement upon 60 days’ written notice without cause or penalty which, under certain circumstances, could result in our advisor earning a performance fee. This could have the effect of delaying, deferring or preventing a change of control.

Other real estate programs sponsored by CCO Group, as well as CIM and certain of its affiliates use investment strategies that are similar to ours; therefore, our executive officers and the officers and key personnel of our advisor and its affiliates may face conflicts of interest relating to the purchase and leasing of properties, and such conflicts may not be resolved in our favor.

CCPT V, CCIT II, CCIT III, CIM Income NAV, and CIM and its affiliates may have characteristics, including targeted asset types, investment objectives and criteria substantially similar to ours. As a result, we may be seeking to acquire properties and real estate-related assets at the same time as CIM or its affiliates, or one or more of the other real estate programs sponsored by CCO Group or its affiliates and managed by officers and key personnel of our advisor and/or its affiliates, and these other

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programs may use investment strategies and have investment objectives and criteria substantially similar to ours. Certain of our executive officers and certain officers of our advisor also are executive officers of CIM or its affiliates and other programs sponsored by CCO Group or its affiliates, the general partners of other private investment programs sponsored by CCO Group or its affiliates and/or the advisors or fiduciaries of other real estate programs sponsored by CCO Group or its affiliates. Accordingly, there is a risk that the allocation of acquisition opportunities may result in our acquiring a property that provides lower returns to us than a property purchased by another real estate program sponsored by CCO Group or its affiliates.

In addition, we have acquired, and may continue to acquire, properties in geographic areas where CIM or its affiliates, or other real estate programs sponsored by CCO Group own properties. If one of these other real estate programs attracts a tenant that we are competing for, we could suffer a loss of revenue due to delays in locating another suitable tenant. Similar conflicts of interest may arise if our advisor recommends that we make or purchase mortgage loans or participations in mortgage loans, since CIM or its affiliates or other real estate programs sponsored by CCO Group may be competing with us for these assets.

Our officers, certain of our directors and our advisor, including its key personnel and officers, face conflicts of interest related to the positions they hold with affiliated and unaffiliated entities, which could hinder our ability to successfully implement our business strategy and to generate returns to our stockholders.

Richard S. Ressler, the chairman of our Board, chief executive officer and president, who is also a founder and principal of CIM and certain of its affiliates, is the chairman of the board, chief executive officer and president of CCIT III and CIM Income NAV, and a director of CCPT V and CCIT II. Furthermore, Avraham Shemesh, one of our directors, is also a founder and principal of CIM and certain of its affiliates, and is the chairman of the board, chief executive officer and president of CCIT II and CCPT V and is a director of CCIT III and CIM Income NAV, and W. Brian Kretzmer, one of our independent directors, also serves as a director of CCIT III and CIM Income NAV. In addition, our chief financial officer and treasurer, Nathan D. DeBacker, is also an officer of certain affiliates of CIM and other real estate programs sponsored by CCO Group. Also, our advisor and its key personnel are or may be key personnel of other current or future real estate programs that have investment objectives, targeted assets, and legal and financial obligations substantially similar to ours, and/or key personnel of the advisor to such programs, and they may have other business interests as well. As a result, Messrs. Ressler, Kretzmer and DeBacker, and certain key personnel of our advisor, may owe fiduciary duties to these other entities and their stockholders or equity owners, as applicable, which may from time to time conflict with the duties that they owe to us and our stockholders.

Conflicts with our business and interests are most likely to arise from involvement in activities related to (1) allocation of new acquisition opportunities, management time and operational expertise among us and the other entities, (2) our purchase of properties from, or sale of properties to, affiliated entities, (3) the timing and terms of the acquisition or sale of an asset, (4) development of our properties by affiliates, (5) investments with affiliates of our advisor, (6) compensation to our advisor and its affiliates, and (7) our relationship with, and compensation to, our dealer manager. Even if these persons do not violate their duties to us and our stockholders, they will have competing demands on their time and resources and may have conflicts of interest in allocating their time and resources among us and these other entities and persons. Should such persons devote insufficient time or resources to our business, returns on our investments may suffer.

Our charter permits us to acquire assets and borrow funds from affiliates of our advisor, and sell or lease our assets to affiliates of our advisor, and any such transaction could result in conflicts of interest.

Under our charter, we are permitted to acquire properties from affiliates of our advisor, provided that any and all acquisitions from affiliates of our advisor must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in such transaction as being fair and reasonable to us and at a price to us that is no greater than the cost of the property to the affiliate of our advisor, unless a majority of our directors, including a majority of our independent directors, not otherwise interested in such transaction determines that there is substantial justification for any amount that exceeds such cost and that the difference is reasonable. In no event will we acquire a property from an affiliate of our advisor if the cost to us would exceed the property’s current appraised value as determined by an independent appraiser. In the event that we acquire a property from an affiliate of our advisor, we may be foregoing an opportunity to acquire a different property that might be more advantageous to us. In addition, under our charter, we are permitted to borrow funds from affiliates of our advisor, including our sponsor, provided that any such loans from affiliates of our advisor must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in such transaction as fair, competitive and commercially reasonable, and no less favorable to us than comparable loans between unaffiliated parties. Under our charter, we are also permitted to sell and lease our assets to affiliates of our advisor, and we have not established a policy that specifically addresses how we will determine the sale or lease price in any such transaction. Any such sale or lease transaction must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in such transaction as being fair and reasonable to us. To the extent that we acquire any properties from affiliates of our advisor, borrow funds from affiliates of our advisor or sell or lease our assets to affiliates of our advisor, such transactions could result in a conflict of interest.

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Our advisor faces conflicts of interest relating to joint ventures or other co-ownership arrangements that we may enter into with CIM or its affiliates, or another real estate program sponsored or operated by CCO Group, which could result in a disproportionate benefit to CIM or its affiliates, or another real estate program sponsored by CCO Group.

We may enter into joint ventures or co-ownership arrangements (including co-investment transactions) with CIM or its affiliates, or another real estate program sponsored or operated by CCO Group for the acquisition, development or improvement of properties, as well as the acquisition of real estate-related assets. Since one or more of the officers of our advisor are officers of CIM or its affiliates, including CCO Group and/or the advisors to other real estate programs sponsored by CCO Group, our advisor may face conflicts of interest in determining which real estate program should enter into any particular joint venture or co-ownership arrangement. These persons also may have a conflict in structuring the terms of the relationship between us and any affiliated co-venturer or co-owner, as well as conflicts of interests in managing the joint venture, which may result in the co-venturer or co-owner receiving benefits greater than the benefits that we receive.

In the event we enter into joint venture or other co-ownership arrangements with CIM or its affiliates, or another real estate program sponsored by CCO Group, our advisor and its affiliates may have a conflict of interest when determining when and whether to buy or sell a particular property, or to make or dispose of another real estate-related asset. In addition, if we become listed for trading on a national securities exchange, we may develop more divergent goals and objectives from any affiliated co-venturer or co-owner that is not listed for trading. In the event we enter into a joint venture or other co-ownership arrangement with another real estate program sponsored by CIM or its affiliates, or another real estate investment program sponsored by CCO Group that has a term shorter than ours, the joint venture may be required to sell its properties earlier than we may desire to sell the properties. Even if the terms of any joint venture or other co-ownership agreement between us and CIM or its affiliates, or another real estate program sponsored by CCO Group grants us the right of first refusal to buy such properties, we may not have sufficient funds or borrowing capacity to exercise our right of first refusal under these circumstances. We have adopted certain procedures for dealing with potential conflicts of interest as further described in Part I, Item 1. Business — Conflicts of Interest in this Annual Report on Form 10-K.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results.

An effective system of internal control over financial reporting is necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. As part of our ongoing monitoring of internal controls, we may discover material weaknesses or significant deficiencies in our internal controls that we believe require remediation. If we discover such weaknesses, we will make efforts to improve our internal controls in a timely manner. Any system of internal controls, however well designed and operated, is based in part on certain assumptions and can only provide reasonable, not absolute, assurance that the objectives of the system are met. Any failure to maintain effective internal controls, or implement any necessary improvements in a timely manner, could have a material adverse effect on our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our common stock, or cause us to not meet our reporting obligations. Ineffective internal controls could also cause holders of our securities to lose confidence in our reported financial information, which would likely have a negative effect on our business.

Risks Related to Our Corporate Structure

Our charter permits our Board to issue stock with terms that may subordinate the rights of common stockholders or discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders.

Our charter permits our Board to issue up to 500,000,000 shares of stock, of which 490,000,000 shares are classified as common stock and 10,000,000 shares are classified as preferred stock. In addition, our Board, without any action by our stockholders, may amend our charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series of stock that we have authority to issue. The Board may classify or reclassify any unissued common stock or preferred stock into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption of any such stock. Shares of our common stock shall be subject to the express terms of any series of our preferred stock. Thus, if also approved by a majority of our independent directors not otherwise interested in the transaction, our Board could authorize the issuance of preferred stock with terms and conditions that have a priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Preferred stock could also have the effect of delaying, deferring or preventing the removal of incumbent management or a change of control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium to the purchase price of our common stock for our stockholders.

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Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired and may limit our stockholders’ ability to dispose of their shares.

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:


•	any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock; or


•	an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation.

A person is not an interested stockholder under the statute if our Board approved in advance the transaction by which the person otherwise would have become an interested stockholder. However, in approving a transaction, our Board may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by our Board.

After the five-year prohibition, any such business combination between the Maryland corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:


•	80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and


•	two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. The business combination statute permits various exemptions from its provisions, including business combinations that are exempted by our Board prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, our Board has exempted any business combination involving our advisor or any affiliate of our advisor. As a result, our advisor and any affiliate of our advisor may be able to enter into business combinations with us that may not be in the best interest of our stockholders, without compliance with the super-majority vote requirements and the other provisions of the statute. The business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.

Maryland law also limits the ability of a third party to buy a large percentage of our outstanding shares and exercise voting control in electing directors.

Under its Control Share Acquisition Act, Maryland law also provides that a holder of “control shares” of a Maryland corporation acquired in a “control share acquisition” has no voting rights with respect to such shares except to the extent approved by the corporation’s disinterested stockholders by a vote of two-thirds of the votes entitled to be cast on the matter. Shares of stock owned by interested stockholders, that is, by the acquirer, or officers of the corporation or employees of the corporation who are directors of the corporation, are excluded from shares entitled to vote on the matter. “Control shares” are voting shares of stock that would entitle the acquirer, except solely by virtue of a revocable proxy, to exercise voting control in electing directors within specified ranges of voting control. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of control shares. The control share acquisition statute does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation. Our bylaws contain a provision exempting from the Control Share Acquisition Act any acquisition of shares of our stock by CCO Group, LLC or any affiliate of CCO Group, LLC. This provision may be amended or eliminated at any time in the future. If this provision were amended or eliminated, this statute could have the effect of discouraging offers from third parties to acquire us and increasing the difficulty of successfully completing this type of offer by anyone other than our advisor or any of its affiliates.

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Our charter includes a provision that may discourage a stockholder from launching a tender offer for our shares.

Our charter requires that any tender offer, including any “mini-tender” offer, must comply with most of the requirements of Regulation 14D of the Exchange Act. The offering person must provide us notice of the tender offer at least ten business days before initiating the tender offer. If the offering person does not comply with these requirements, our stockholders will be prohibited from transferring any shares to such non-complying person unless they first offered such shares to us at the tender offer price offered by the non-complying person. In addition, the non-complying person shall be responsible for all of our expenses in connection with that person’s noncompliance. This provision of our charter may discourage a person from initiating a tender offer for our shares and prevent our stockholders from receiving a premium to the purchase price for their shares in such a transaction.

If we are required to register as an investment company under the Investment Company Act, we could not continue our current business plan, which may significantly reduce the value of our stockholders’ investment.

We intend to conduct our operations, and the operations of our operating partnership and any other subsidiaries, so that no such entity meets the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act. Under the Investment Company Act, in relevant part, a company is an “investment company” if:


•	pursuant to Section 3(a)(1)(A), it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or

•

pursuant to Section 3(a)(1)(C), it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the 40% test). “Investment securities” exclude U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

We intend to monitor our operations and our assets on an ongoing basis in order to ensure that neither we, nor any of our subsidiaries, meet the definition of “investment company” under Section 3(a)(1) of the Investment Company Act. If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act imposing, among other things:


•	limitations on capital structure;


•	restrictions on specified investments;


•	prohibitions on transactions with affiliates;


•	compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly change our operations; and


•	potentially, compliance with daily valuation requirements.

In order for us to not meet the definition of an “investment company” and avoid regulation under the Investment Company Act, we must engage primarily in the business of buying real estate, and these investments must be made within one year after the end of the Offering. To avoid meeting the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. Similarly, we may have to acquire additional income or loss generating assets that we might not otherwise have acquired or may have to forgo opportunities to acquire interests in companies that we would otherwise want to acquire and would be important to our investment strategy. Accordingly, our Board may not be able to change our investment policies as they may deem appropriate if such change would cause us to meet the definition of an “investment company.” In addition, a change in the value of any of our assets could negatively affect our ability to avoid being required to register as an investment company. If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court were to require enforcement, and a court could appoint a receiver to take control of us and liquidate our business.

The Board may change certain of our policies without stockholder approval, which could alter the nature of our stockholders’ investment. If our stockholders do not agree with the decisions of our Board, they only have limited control over changes in our policies and operations and may not be able to change such policies and operations.

The Board determines our major policies, including our policies regarding investments, financing, growth, debt capitalization, REIT qualification and distributions. The Board may amend or revise these and other policies without a vote of

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our stockholders. As a result, the nature of our stockholders’ investment could change without their consent. Under the Maryland General Corporation Law and our charter, our stockholders generally have a right to vote only on the following:


•	the election or removal of directors;

•

an amendment of our charter, except that our Board may amend our charter without stockholder approval to increase or decrease the aggregate number of our shares or the number of our shares of any class or series that we have the authority to issue, to change our name, to change the name or other designation or the par value of any class or series of our stock and the aggregate par value of our stock or to effect certain reverse stock splits; provided, however, that any such amendment does not adversely affect the rights, preferences and privileges of the stockholders;


•	our dissolution; and


•	a merger or consolidation, a statutory share exchange or the sale or other disposition of all or substantially all of our assets.

In addition, pursuant to our charter, we will submit any other proposed liquidity event or transaction to our stockholders for approval if the transaction involves (a) the internalization of our management functions through our acquisition of our advisor or an affiliate of our advisor or (b) the payment of consideration to our advisor or an affiliate of our advisor other than pursuant to the terms of the advisory or dealer manager agreements or where the advisor or its affiliate receives consideration in its capacity as a stockholder on the same terms as our other stockholders.

All other matters are subject to the discretion of our Board.

The power of our Board to revoke our REIT election without stockholder approval may cause adverse consequences to our stockholders.

Our organizational documents permit our Board to revoke or otherwise terminate our REIT election, without the approval of our stockholders, if our Board determines that it is no longer in our best interest to continue to qualify as a REIT. In such a case, we would become subject to U.S. federal, state and local income tax on our net taxable income and we would no longer be required to distribute most of our net taxable income to our stockholders, which could have adverse consequences on the total return to holders of our common stock.

Our rights and the rights of our stockholders to recover claims against our officers, directors and our advisor are limited, which could reduce our stockholders’ and our recovery against them if they cause us to incur losses.

The Maryland General Corporation Law provides that a director has no liability in such capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter, in the case of our directors and officers, and our charter and the advisory agreement, in the case of our advisor and its affiliates, require us, subject to certain exceptions, to indemnify and advance expenses to our directors, our officers, and our advisor and its affiliates. Our charter permits us to provide such indemnification and advance for expenses to our employees and agents. Additionally, our charter limits, subject to certain exceptions, the liability of our directors and officers to us and our stockholders for monetary damages. Although our charter does not allow us to indemnify our directors or our advisor and its affiliates for any liability or loss suffered by them or hold harmless our directors or our advisor and its affiliates for any loss or liability suffered by us to a greater extent than permitted under Maryland law, we and our stockholders may have more limited rights against our directors, officers, employees and agents, and our advisor and its affiliates, than might otherwise exist under common law, which could reduce our stockholders’ and our recovery against them. In addition, our advisor is not required to retain cash to pay potential liabilities and it may not have sufficient cash available to pay liabilities if they arise. If our advisor is held liable for a breach of its fiduciary duty to us, or a breach of its contractual obligations to us, we may not be able to collect the full amount of any claims we may have against our advisor. In addition, we may be obligated to fund the defense costs incurred by our directors, officers, employees and agents or our advisor in some cases, which would decrease the cash otherwise available for distribution to our stockholders.

Our stockholders’ interest in us will be diluted if we issue additional shares.

Our stockholders do not have preemptive rights to any shares issued by us in the future. Our charter authorizes 500,000,000 shares of stock, of which 490,000,000 shares are classified as common stock and 10,000,000 shares are classified as preferred stock. Subject to any limitations set forth under Maryland law, our Board may amend our charter from time to time to increase the number of authorized shares of stock, increase or decrease the number of shares of any class or series of stock that we have authority to issue, or classify or reclassify any unissued shares into other classes or series of stock without the necessity of obtaining stockholder approval. All of such shares may be issued in the discretion of our Board, except that the issuance of preferred stock must also be approved by a majority of our independent directors not otherwise interested in the

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transaction. Our stockholders likely will suffer dilution of their equity investment in us, in the event that we (1) continue to issue shares pursuant to our Secondary DRIP Offering, (2) sell securities that are convertible into shares of our common stock, (3) issue shares of our common stock in a private offering of securities to institutional investors, (4) issue shares of our common stock to our advisor, its successors or assigns, in payment of an outstanding fee obligation as set forth under our advisory agreement or (5) issue shares of our common stock to sellers of properties acquired by us in connection with an exchange of limited partnership interests of our operating partnership. In addition, the partnership agreement of our operating partnership contains provisions that would allow, under certain circumstances, other entities, including other real estate programs sponsored or operated by CCO Group, to merge into or cause the exchange or conversion of their interest in that entity for interests of our operating partnership. Because the limited partnership interests of our operating partnership may, in the discretion of our Board, be exchanged for shares of our common stock, any merger, exchange or conversion between our operating partnership and another entity ultimately could result in the issuance of a substantial number of shares of our common stock, thereby diluting the percentage ownership interest of other stockholders.

Our UPREIT structure may result in potential conflicts of interest with limited partners in our operating partnership whose interests may not be aligned with those of our stockholders.

Our directors and officers have duties to our corporation and our stockholders under Maryland law in connection with their management of the corporation. At the same time, we, as general partner, have fiduciary duties under Delaware law to our operating partnership and to the limited partners in connection with the management of our operating partnership. If we admit outside limited partners to our operating partnership, our duties as general partner of our operating partnership and its partners may come into conflict with the duties of our directors and officers to the corporation and our stockholders. Under Delaware law, a general partner of a Delaware limited partnership owes its limited partners the duties of good faith and fair dealing. Other duties, including fiduciary duties, may be modified or eliminated in the partnership’s partnership agreement. The partnership agreement of our operating partnership provides that, for so long as we own a controlling interest in our operating partnership, any conflict that cannot be resolved in a manner not adverse to either our stockholders or the limited partners will be resolved in favor of our stockholders.

Additionally, the partnership agreement expressly limits our liability by providing that we and our officers, directors, agents and employees, will not be liable or accountable to our operating partnership for losses sustained, liabilities incurred or benefits not derived if we or our officers, directors, agents or employees acted in good faith. In addition, our operating partnership is required to indemnify us and our officers, directors, employees, agents and designees to the extent permitted by applicable law from and against any and all claims arising from operations of our operating partnership, unless it is established that: (1) the act or omission was committed in bad faith, was fraudulent or was the result of active and deliberate dishonesty; (2) the indemnified party received an improper personal benefit in money, property or services; or (3) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that the act or omission was unlawful.

The provisions of Delaware law that allow the fiduciary duties of a general partner to be modified by a partnership agreement have not been tested in a court of law, and we have not obtained an opinion of counsel covering the provisions set forth in the partnership agreement that purport to waive or restrict our fiduciary duties.

General Risks Related to Real Estate Assets

Adverse economic, regulatory and geographic conditions that have an impact on the real estate market in general may prevent us from being profitable or from realizing growth in the value of our real estate properties.

Our operating results will be subject to risks generally incident to the ownership of real estate, including:


•	changes in international, national or local economic or geographic conditions;


•	changes in supply of or demand for similar or competing properties in an area;


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


•	the illiquidity of real estate assets generally;


•	changes in tax, real estate, environmental and zoning laws; and


•	periods of high interest rates and tight money supply.

These risks and other factors may prevent us from being profitable, or from maintaining or growing the value of our real estate properties.

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We are primarily dependent on single-tenant leases for our revenue and, accordingly, if we are unable to renew leases, lease vacant space, including vacant space resulting from tenant defaults, or re-lease space as leases expire on favorable terms or at all, our financial condition could be adversely affected.

We focus our investment activities on ownership of primarily freestanding, single-tenant commercial properties that are net leased to a single tenant. Therefore, the financial failure of, or other default by, a significant tenant or multiple tenants could cause a material reduction in our revenues and operating cash flows. In addition, to the extent that we enter into a master lease with a particular tenant, the termination of such master lease could affect each property subject to the master lease, resulting in the loss of revenue from all such properties.

We cannot assure our stockholders that our leases will be renewed or that we will be able to lease or re-lease the properties on favorable terms, or at all, or that lease terminations will not cause us to sell the properties at a loss. Any of our properties that become vacant could be difficult to re-lease or sell. We have and may continue to experience vacancies either by the default of a tenant under its lease or the expiration of one of our leases. We typically must incur all of the costs of ownership for a property that is vacant. Upon or pending the expiration of leases at our properties, we may be required to make rent or other concessions to tenants, or accommodate requests for renovations, remodeling and other improvements, in order to retain and attract tenants. Certain of our properties may be specifically suited to the particular needs of a tenant ( e.g. , a restaurant) and major renovations and expenditures may be required in order for us to re-lease the space for other uses. If the vacancies continue for a long period of time, we may suffer reduced revenues and increased costs, resulting in less cash available for distribution to our stockholders and unitholders. If we are unable to renew leases, lease vacant space, including vacant space resulting from tenant defaults, or re-lease space as leases expire on favorable terms or at all, our financial condition could be adversely affected.

We are subject to industry concentrations that make us more susceptible to adverse events with respect to certain industries.

As of December 31, 2018 , we had derived approximately:


•	15% and 10% of our 2018 annualized rental income from tenants in the discount store and pharmacy industries, respectively.

Any adverse change in the financial condition of a tenant with whom we may have a significant credit concentration now or in the future, or any downturn of the economy in any state or industry in which we may have a significant credit concentration now or in the future, could result in a material reduction of our cash flows or material losses to us.

If a major tenant declares bankruptcy, we may be unable to collect balances due under relevant leases, which could have a material adverse effect on our financial condition and ability to pay distributions to our stockholders.

The bankruptcy or insolvency of our tenants may adversely affect the income produced by our properties. Under bankruptcy law, a tenant cannot be evicted solely because of its bankruptcy and has the option to assume or reject any unexpired lease. If the tenant rejects the lease, any resulting claim we have for breach of the lease (excluding collateral securing the claim) will be treated as a general unsecured claim. Our claim against the bankrupt tenant for unpaid and future rent will be subject to a statutory cap that might be substantially less than the remaining rent actually owed under the lease, and it is unlikely that a bankrupt tenant that rejects its lease would pay in full amounts it owes us under the lease. Even if a lease is assumed and brought current, we still run the risk that a tenant could condition lease assumption on a restructuring of certain terms, including rent, that would have an adverse impact on us. Any shortfall resulting from the bankruptcy of one or more of our tenants could adversely affect our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our common stock.

In addition, the financial failure of, or other default by, one or more of the tenants to whom we have exposure could have an adverse effect on the results of our operations. While we evaluate the creditworthiness of our tenants by reviewing available financial and other pertinent information, there can be no assurance that any tenant will be able to make timely rental payments or avoid defaulting under its lease. If any of our tenants’ businesses experience significant adverse changes, they may fail to make rental payments when due, close a number of stores, exercise early termination rights (to the extent such rights are available to the tenant) or declare bankruptcy. A default by a significant tenant or multiple tenants could cause a material reduction in our revenues and operating cash flows. In addition, if a tenant defaults, we may incur substantial costs in protecting our asset.

If a sale-leaseback transaction is re-characterized in a tenant’s bankruptcy proceeding, our financial condition could be adversely affected.

We may enter into sale-leaseback transactions, whereby we would purchase a property and then lease the same property back to the person from whom we purchased it. In the event of the bankruptcy of a tenant, a transaction structured as a sale-

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leaseback might be re-characterized as either a financing or a joint venture, either of which outcomes could adversely affect our financial condition, cash flow and the amount available for distributions to our stockholders.

If the sale-leaseback were re-characterized as a financing, we would not be considered the owner of the property, and as a result would have the status of a creditor in relation to the tenant. In that event, we would no longer have the right to sell or encumber our ownership interest in the property. Instead, we would have a claim against the tenant for the amounts owed under the lease, with the claim arguably secured by the property. The tenant/debtor might have the ability to propose a plan restructuring the term, interest rate and amortization schedule of its outstanding balance. If confirmed by the bankruptcy court, we could be bound by the new terms, and prevented from foreclosing our lien on the property. If the sale-leaseback were re-characterized as a joint venture, we and our tenant could be treated as co-venturers with regard to the property. As a result, we could be held liable, under some circumstances, for debts incurred by the tenant relating to the property.

We have assumed, and in the future may assume, liabilities in connection with our property acquisitions, including unknown liabilities.

In connection with the acquisition of properties, we may assume existing liabilities, some of which may have been unknown or unquantifiable at the time of the transaction. Unknown liabilities might include liabilities for cleanup or remediation of undisclosed environmental conditions, claims of tenants or other persons dealing with the sellers prior to our acquisition of the properties, tax liabilities, and accrued but unpaid liabilities whether incurred in the ordinary course of business or otherwise. If the magnitude of such unknown liabilities is high, either singly or in the aggregate, it could adversely affect our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or maintain our level of distributions on our common stock.

Challenging economic conditions could adversely affect vacancy rates, which could have an adverse impact on our ability to make distributions and the value of an investment in our shares.

Challenging economic conditions, the availability and cost of credit, turmoil in the mortgage market, and declining real estate markets may contribute to increased vacancy rates in the commercial real estate sector. If we experience vacancy rates that are higher than historical vacancy rates, we may have to offer lower rental rates and greater tenant improvements or concessions than expected. Increased vacancies may have a greater impact on us, as compared to REITs with other investment strategies, as our investment approach relies on long-term leases in order to provide a relatively stable stream of income for our stockholders. As a result, increased vacancy rates could have the following negative effects on us:


•	the values of our commercial properties could decrease below the amount paid for such assets;


•	revenues from such properties could decrease due to low or no rental income during vacant periods, lower future rental rates and/or increase tenant improvement expenses or concessions;


•	ownership costs could increase;


•	revenues from such properties that secure loans could decrease, making it more difficult for us to meet our payment obligations; and/or


•	the resale value of such properties could decline.

All of these factors could impair our ability to make distributions and decrease the value of an investment in our shares.

Uninsured losses or losses in excess of our insurance coverage could materially adversely affect our financial condition and cash flows, and there can be no assurance as to future costs and the scope of coverage that may be available under insurance policies.

We carry comprehensive liability, fire, extended coverage, and rental loss insurance covering all of the properties in our portfolio under one or more blanket insurance policies with policy specifications, limits and deductibles customarily carried for similar properties. In addition, we carry professional liability and directors’ and officers’ insurance, and cyber liability insurance. While we select policy specifications and insured limits that we believe are appropriate and adequate given the relative risk of loss, insurance coverages provided by tenants, the cost of the coverage and industry practice, there can be no assurance that we will not experience a loss that is uninsured or that exceeds policy limits. In addition, we may reduce or discontinue terrorism, earthquake, flood or other insurance on some or all of our properties in the future if the cost of premiums for any of these policies exceeds, in our judgment, the value of the coverage discounted for the risk of loss. Our title insurance policies may not insure for the current aggregate market value of our portfolio, and we do not intend to increase our title insurance coverage as the market value of our portfolio increases.

Further, we do not carry insurance for certain losses, including, but not limited to, losses caused by riots or acts of war. Certain types of losses may be either uninsurable or not economically insurable, such as losses due to earthquakes, riots or acts

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of war. If we experience a loss that is uninsured or which exceeds policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged. In addition, we carry several different lines of insurance, placed with several large insurance carriers. If any one of these large insurance carriers were to become insolvent, we would be forced to replace the existing insurance coverage with another suitable carrier, and any outstanding claims would be at risk for collection. In such an event, we cannot be certain that we would be able to replace the coverage at similar or otherwise favorable terms. As a result of any of the situations described above, our financial condition and cash flows may be materially and adversely affected.

We may be unable to secure funds for future leasing commissions, tenant improvements or capital needs, which could adversely impact our ability to pay cash distributions to our stockholders.

When tenants do not renew their leases or otherwise vacate their space, it is usual that, in order to attract replacement tenants, we will be required to expend substantial funds for leasing commissions, tenant improvements and tenant refurbishments to the vacated space. In addition, although we expect that our leases with tenants will require tenants to pay routine property maintenance costs, we could be responsible for any major structural repairs, such as repairs to the foundation, exterior walls and rooftops. We will use substantially all of the net proceeds from the Offerings to buy real estate and real estate-related assets and to pay various fees and expenses. We intend to reserve only approximately 0.1% of the gross proceeds from the Offerings for future capital needs. Accordingly, if we need additional capital in the future to improve or maintain our properties or for any other reason, we will have to obtain funds from other sources, such as cash flow from operations, borrowings, property sales or future equity offerings. These sources of funding may not be available on attractive terms or at all. If we cannot procure additional funding for capital improvements, we may be required to defer necessary improvements to a property, which may cause that property to suffer from a greater risk of obsolescence or a decline in value, or a greater risk of decreased operating cash flows as a result of fewer potential tenants being attracted to the property. If this happens, our assets may generate lower cash flows or decline in value, or both.

We may be unable to successfully expand our operations into new markets.

Each of the risks described in the previous risk factors that are applicable to our ability to acquire and successfully integrate and operate properties in the markets in which our properties are located are also applicable to our ability to acquire and successfully integrate and operate properties in new markets. In addition to these risks, we may not possess the same level of familiarity with the dynamics and market conditions of certain new markets that we may enter, which could adversely affect our ability to expand into those markets. We may be unable to build a significant market share or achieve a desired return on our assets in new markets. If we are unsuccessful in expanding into new markets, it could have a material adverse effect on our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our common stock.

Our properties may be subject to impairment charges.

We routinely evaluate our real estate assets for impairment indicators. The judgment regarding the existence of impairment indicators is based on factors such as market conditions, tenant performance and lease structure. For example, the early termination of, or default under, a lease by a tenant may lead to an impairment charge. Since our investment focus is on properties net leased to a single tenant, the financial failure of, or other default by, a single tenant under its lease may result in a significant impairment loss. If we determine that an impairment has occurred, we would be required to make a downward adjustment to the net carrying value of the property, which could have a material adverse effect on our results of operations in the period in which the impairment charge is recorded. Management has recorded an impairment charge related to certain properties in the year ended December 31, 2018 , and may record future impairments based on actual results and changes in circumstances. Negative developments in the real estate market may cause management to reevaluate the business and macro-economic assumptions used in its impairment analysis. Changes in management’s assumptions based on actual results may have a material impact on the Company’s financial statements. See Note 3 — Fair Value Measurements to our consolidated financial statements for a discussion of our real estate impairment charge.

We may obtain only limited warranties when we purchase a property and typically have only limited recourse in the event our due diligence did not identify any issues that lower the value of our property.

The seller of a property often sells such property in its “as is” condition on a “where is” basis and “with all faults,” without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase agreements may contain only limited warranties, representations and indemnifications that will only survive for a limited period after the closing. The purchase of properties with limited warranties increases the risk that we may lose some or all of our invested capital in the property.

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We may be unable to sell a property if or when we decide to do so, including as a result of uncertain market conditions.

Real estate assets are, in general, relatively illiquid and may become even more illiquid during periods of economic downturn. As a result, we may not be able to sell our properties quickly or on favorable terms in response to changes in the economy or other conditions when it otherwise may be prudent to do so. In addition, certain significant expenditures generally do not change in response to economic or other conditions, including debt service obligations, real estate taxes, and operating and maintenance costs. This combination of variable revenue and relatively fixed expenditures may result, under certain market conditions, in reduced earnings. Further, as a result of the 100% prohibited transactions tax applicable to REITs, we intend to hold our properties for investment, rather than primarily for sale in the ordinary course of business, which may cause us to forgo or defer sales of properties that otherwise would be favorable. Therefore, we may be unable to adjust our portfolio promptly in response to economic, market or other conditions, which could adversely affect our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our common stock.

Some of our leases may not contain rental increases over time, or the rental increases may be less than the fair market rate at a future point in time. When that is the case, the value of the leased property to a potential purchaser may not increase over time, which may restrict our ability to sell that property, or if we are able to sell that property, may result in a sale price less than the price that we paid to purchase the property or the price that could be obtained if the rental was at the then-current market rate.

We expect to hold the various real properties we acquire until such time as we decide that a sale or other disposition is appropriate given our REIT status and business objectives. Our ability to dispose of properties on advantageous terms or at all depends on certain factors beyond our control, including competition from other sellers and the availability of attractive financing for potential buyers of our properties. We cannot predict the various market conditions affecting real estate assets which will exist at any particular time in the future. Due to the uncertainty of market conditions which may affect the disposition of our properties, we cannot assure our stockholders that we will be able to sell such properties at a profit or at all in the future. Accordingly, the extent to which our stockholders will receive cash distributions and realize potential appreciation on our real estate assets will depend upon fluctuating market conditions. Furthermore, we may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure our stockholders that we will have funds available to correct such defects or to make such improvements.

Our properties where the underlying tenant has a below investment grade credit rating, as determined by major credit rating agencies, or has an unrated tenant may have a greater risk of default.

As of December 31, 2018 , approximately 61.4% of our tenants were not rated or did not have an investment grade credit rating from a major ratings agency or were not affiliates of companies having an investment grade credit rating. Our properties with such tenants may have a greater risk of default and bankruptcy than properties leased exclusively to investment grade tenants. When we acquire properties where the tenant does not have a publicly available credit rating, we will use certain credit assessment tools as well as rely on our own estimates of the tenant’s credit rating which includes reviewing the tenant’s financial information ( e.g. , financial ratios, net worth, revenue, cash flows, leverage and liquidity, if applicable). If our ratings estimates are inaccurate, the default or bankruptcy risk for the subject tenant may be greater than anticipated. If our lender or a credit rating agency disagrees with our ratings estimates, we may not be able to obtain our desired level of leverage or our financing costs may exceed those that we projected. This outcome could have an adverse impact on our returns on that asset and hence our operating results.

We are exposed to risks related to increases in market lease rates and inflation, as income from long-term leases is the primary source of our cash flow from operations.

We are exposed to risks related to increases in market lease rates and inflation, as income from long-term leases is the primary source of our cash flow from operations. Leases of long-term duration or which include renewal options that specify a maximum rate increase may result in below-market lease rates over time if we do not accurately estimate inflation or market lease rates. Provisions of our leases designed to mitigate the risk of inflation and unexpected increases in market lease rates, such as periodic rental increases, may not adequately protect us from the impact of inflation or unexpected increases in market lease rates. If we are subject to below-market lease rates on a significant number of our properties pursuant to long-term leases and our operating and other expenses are increasing faster than anticipated, our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our common stock could be materially adversely affected.

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We may acquire or finance properties with lock-out provisions, which may prohibit us from selling a property or may require us to maintain specified debt levels for a period of years on some properties.

A lock-out provision is a provision that prohibits the prepayment of a loan during a specified period of time. Lock-out provisions may include terms that provide strong financial disincentives for borrowers to prepay their outstanding loan balance. If a property is subject to a lock-out provision, we may be materially restricted from or delayed in selling or otherwise disposing of or refinancing such property. Lock-out provisions may prohibit us from reducing the outstanding indebtedness with respect to any properties, refinancing such indebtedness at maturity, or increasing the amount of indebtedness with respect to such properties. Lock-out provisions could impair our ability to take other actions during the lock-out period that could be in the best interests of our stockholders and, therefore, may have an adverse impact on the value of our shares relative to the value that would result if the lock-out provisions did not exist. In particular, lock-out provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change of control even though that disposition or change of control might be in the best interests of our stockholders.

Increased operating expenses could reduce cash flow from operations and funds available to acquire properties or make distributions.

Our properties are subject to operating risks common to real estate in general, any or all of which may negatively affect us. If any property is not fully occupied or if rents are payable (or are being paid) in an amount that is insufficient to cover operating expenses that are the landlord’s responsibility under the lease, we could be required to expend funds in excess of such rents with respect to that property for operating expenses. Our properties are subject to increases in tax rates, utility costs, insurance costs, repairs and maintenance costs, administrative costs and other operating and ownership expenses. Some of our property leases may not require the tenants to pay all or a portion of these expenses, in which event we may be responsible for these costs. If we are unable to lease properties on terms that require the tenants to pay all or some of the properties’ operating expenses, if our tenants fail to pay these expenses as required or if expenses we are required to pay exceed our expectations, we could have less funds available for future acquisitions or cash available for distributions to our stockholders.

The market environment may adversely affect our operating results, financial condition and ability to pay distributions to our stockholders.

Any deterioration of domestic or international financial markets could impact the availability of credit or contribute to rising costs of obtaining credit and therefore, could have the potential to adversely affect the value of our assets, the availability or the terms of financing, our ability to make principal and interest payments on, or refinance, any indebtedness and/or, for our leased properties, the ability of our tenants to enter into new leasing transactions or satisfy their obligations, including the payment of rent, under existing leases. The market environment also could affect our operating results and financial condition as follows:


•	Debt Markets — The debt market is sensitive to the macro environment, such as Federal Reserve policy, market sentiment, or regulatory factors affecting the banking and CMBS industries. Should overall borrowing costs increase, due to either increases in index rates or increases in lender spreads, our operations may generate lower returns.

•

Real Estate Markets — While incremental demand growth has helped to reduce vacancy rates and support modest rental growth in recent years, and while improving fundamentals have resulted in gains in property values, in many markets property values, occupancy and rental rates continue to be below those previously experienced before the most recent economic downturn. If recent improvements in the economy reverse course, the properties we acquire could substantially decrease in value after we purchase them. Consequently, we may not be able to recover the carrying amount of our properties, which may require us to recognize an impairment charge or record a loss on sale in our earnings.

Real estate related taxes may increase, and if these increases are not passed on to tenants, our income will be reduced.

Local real property tax assessors may reassess our properties, which may result in increased taxes. Generally, property taxes increase as property values or assessment rates change, or for other reasons deemed relevant by property tax assessors. An increase in the assessed valuation of a property for real estate tax purposes will result in an increase in the related real estate taxes on that property. Although some tenant leases may permit us to pass through such tax increases to the tenants for payment, renewal leases or future leases may not be negotiated on the same basis. Tax increases not passed through to tenants could have a material adverse effect on our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our common stock.

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Covenants, conditions and restrictions may restrict our ability to operate a property.

Many of our properties are or will be subject to significant covenants, conditions and restrictions, known as “CC&Rs,” restricting their operation and any improvements on such properties. Compliance with CC&Rs may adversely affect the types of tenants we are able to attract to such properties, our operating costs and reduce the amount of funds that we have available to pay distributions to our stockholders.

Acquisitions of build-to-suit properties will be subject to additional risks related to properties under development.

We may engage in build-to-suit programs and the acquisition of properties under development. In connection with these acquisitions, we will enter into purchase and sale arrangements with sellers or developers of suitable properties under development or construction. In such cases, we are generally obligated to purchase the property at the completion of construction, provided that the construction conforms to definitive plans, specifications, and costs approved by us in advance. We may also engage in development and construction activities involving existing properties, including the expansion of existing facilities (typically at the request of a tenant) or the development or build-out of vacant space at retail properties. We may advance significant amounts in connection with certain development projects.

As a result, we are subject to potential development risks and construction delays and the resultant increased costs and risks, as well as the risk of loss of certain amounts that we have advanced should a development project not be completed. To the extent that we engage in development or construction projects, we may be subject to uncertainties associated with obtaining permits or re-zoning for development, environmental and land use concerns of governmental entities and/or community groups, and the builder’s ability to build in conformity with plans, specifications, budgeted costs and timetables. If a developer or builder fails to perform, we may terminate the purchase, modify the construction contract or resort to legal action to compel performance (or in certain cases, we may elect to take over the project and pursue completion of the project ourselves). A developer’s or builder’s performance may also be affected or delayed by conditions beyond that party’s control. Delays in obtaining permits or completion of construction could also give tenants the right to terminate preconstruction leases.

We may incur additional risks if we make periodic progress payments or other advances to builders before they complete construction. These and other such factors can result in increased project costs or the loss of our investment. Although we rarely engage in construction activities relating to space that is not already leased to one or more tenants, to the extent that we do so, we may be subject to normal lease-up risks relating to newly constructed projects. We also will rely on rental income and expense projections and estimates of the fair market value of the property upon completion of construction when agreeing upon a price at the time we acquire the property. If these projections are inaccurate, we may pay too much for a property and our return on our investment could suffer. If we contract with a development company for a newly developed property, there is a risk that money advanced to that development company for the project may not be fully recoverable if the developer fails to successfully complete the project.

Our operating results may be negatively affected by potential development and construction delays and the resultant increased costs and risks.

If we engage in development or construction projects, we will be subject to uncertainties associated with re-zoning for development, environmental and land use concerns of governmental entities and/or community groups, and our builder’s ability to build in conformity with plans, specifications, budgeted costs, and timetables. If a builder fails to perform, we may resort to legal action to rescind the breached agreements or to compel performance. A builder’s performance may also be affected or delayed by conditions beyond the builder’s control. Delays in completion of construction could also give tenants the right to terminate preconstruction leases. We may incur additional risks if we make periodic progress payments or other advances to builders before they complete construction. These and other such factors can result in increased costs of a project or loss of our asset. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. We also must rely on rental income and expense projections and estimates of the fair market value of property upon completion of construction when agreeing upon a price at the time we acquire the property. If our projections are inaccurate, we may pay too much for a property, and our return on our assets could suffer.

We may deploy capital in unimproved real property. Returns from development of unimproved properties are also subject to risks associated with re-zoning the land for development and environmental and land use concerns of governmental entities and/or community groups.

If we purchase an option to acquire a property but do not exercise the option, we likely would forfeit the amount we paid for such option, which would reduce the amount of cash we have available to make other acquisitions.

In determining whether to purchase a particular property, we may obtain an option to purchase such property. The amount paid for an option, if any, normally is forfeited if the property is not purchased and normally is credited against the purchase

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price if the property is purchased. If we purchase an option to acquire a property but do not exercise the option, we likely would forfeit the amount we paid for such option, which would reduce the amount of cash we have available to make other acquisitions.

Competition with third parties in acquiring, leasing or selling properties and other investments may reduce our profitability and the return on our stockholders’ investment.

We compete with many other entities engaged in real estate acquisition activities, including individuals, corporations, bank and insurance company investment accounts, other REITs, real estate limited partnerships, and other entities engaged in real estate acquisition activities, many of which have greater resources than we do. Larger competitors may enjoy significant advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable acquisitions may increase. Any such increase would result in increased demand for these assets and therefore increased prices paid for them. If we pay higher prices for properties and other assets as a result of competition with third parties without a corresponding increase in tenant lease rates, our profitability will be reduced, and our stockholders may experience a lower return on their investment.

We are also subject to competition in the leasing of our properties. Many of our competitors own properties similar to ours in the same markets in which our properties are located. If one of our properties is nearing the end of the lease term or becomes vacant and our competitors (which could include funds sponsored by affiliates of our advisor) offer space at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose existing or potential tenants and we may be pressured to reduce our rental rates below those we currently charge or to offer substantial rent concessions in order to retain tenants when such tenants’ leases expire or to attract new tenants.

In addition, if our competitors sell assets similar to assets we intend to sell in the same markets and/or at valuations below our valuations for comparable assets, we may be unable to dispose of our assets at all or at favorable pricing or on favorable terms. As a result of these actions by our competitors, our business, financial condition, liquidity and results of operations may be adversely affected.

Our properties face competition that may affect tenants’ ability to pay rent and the amount of rent paid to us may affect the cash available for distributions to our stockholders and the amount of distributions.

Many of our leases provide for increases in rent as a result of increases in the tenant’s sales volume. There likely will be numerous other retail properties within the market area of such properties that will compete with our tenants for customer business. In addition, traditional retailers face increasing competition from alternative retail channels, including internet-based retailers and other forms of e-commerce, factory outlet centers, wholesale clubs, mail order catalogs and television shopping networks, which could adversely impact our retail tenants’ sales volume. Such competition could negatively affect such tenants’ ability to pay rent or the amount of rent paid to us. This could result in decreased cash flow from tenants thus affecting cash available for distributions to our stockholders and the amount of distributions we pay.

Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect our operations.

From time to time, we may acquire multiple properties in a single transaction. Portfolio acquisitions are often more complex and expensive than single-property acquisitions, and the risk that a multiple-property acquisition does not close may be greater than in a single-property acquisition. Portfolio acquisitions may also result in us owning assets in geographically dispersed markets, placing additional demands on our ability to manage the properties in the portfolio. In addition, a seller may require that a group of properties be purchased as a package even though we may not want to purchase one or more properties in the portfolio. In these situations, if we are unable to identify another person or entity to acquire the unwanted properties, we will be required to either pass on the entire portfolio, including the desirable properties or acquire the entire portfolio and operate or attempt to dispose of the unwanted properties. To acquire multiple properties in a single transaction, we may be required to accumulate a large amount of cash. We would expect the returns that we earn on such cash to be less than the ultimate returns on real property, therefore accumulating such cash could reduce our funds available for distributions to our stockholders. Any of the foregoing events may have an adverse impact on our operations.

Terrorism and war could harm our operating results.

The strength and profitability of our business depends on demand for and the value of our properties. Future terrorist attacks in the United States, such as the attacks that occurred in New York and the District of Columbia on September 11, 2001 and in Boston on April 15, 2013, and other acts of terrorism or war may have a negative impact on our operations. Terrorist attacks in the United States and elsewhere may result in declining economic activity, which could harm the demand for and the value of our properties. In addition, the public perception that certain locations are at greater risk for attack, such as major airports, ports, and rail facilities, may decrease the demand for and the value of our properties near these sites. A decrease in

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demand could make it difficult for us to renew or re-lease our properties at these sites at lease rates equal to or above historical rates. Such terrorist attacks could have an adverse impact on our business even if they are not directed at our properties.

In addition, the terrorist attacks of September 11, 2001 have substantially affected the availability and price of insurance coverage for certain types of damages or occurrences, and our insurance policies for terrorism include large deductibles and co-payments. Although we maintain terrorism insurance coverage on our portfolio, the amount of our terrorism insurance coverage may not be sufficient to cover losses inflicted by terrorism and therefore could expose us to significant losses and have a negative impact on our operations.

Costs of complying with environmental laws and regulations may adversely affect our income and the cash available for any distributions.

All real property and the operations conducted on real property are subject to federal, state and local laws, ordinances and regulations relating to environmental protection and human health and safety. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of hazardous materials, and the remediation of any associated contamination. Some of these laws and regulations may impose joint and several liability on tenants, current or previous owners or operators for the costs of investigation or remediation of contaminated properties, regardless of fault or whether the acts causing the contamination were legal. This liability could be substantial. In addition, such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which the property may be used or businesses may be operated, and these restrictions may require substantial expenditures and/or adversely affect the value of the property. Environmental laws provide for sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous substances, and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with exposure to released hazardous substances. The presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell or rent such property or to use such property as collateral for future borrowing.

Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require material expenditures by us. Future laws, ordinances or regulations may impose material environmental liability. Additionally, our properties may be affected by our tenants’ operations, the existing condition of land when we buy it, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties. In addition, there are various local, state and federal fire, health, life-safety and similar regulations that we may be required to comply with, and that may subject us to liability in the form of fines or damages for noncompliance. Any material expenditures, fines, or damages we must pay will reduce our ability to make distributions to our stockholders and may reduce the value of their investment.

Some of these properties may contain at the time of acquisition, or may have contained prior to our acquisition, underground storage tanks for the storage of petroleum products and other hazardous or toxic substances. Certain of our properties may be adjacent to or near other properties upon which others have engaged, or may engage in the future, in activities that may release petroleum products or other hazardous or toxic substances.

From time to time, we may acquire properties, or interests in properties, with known adverse environmental conditions where we believe that the environmental liabilities associated with these conditions are quantifiable and that the acquisition will yield a superior risk-adjusted return. In such an instance, we will estimate the costs of environmental investigation, clean-up and monitoring in determining the purchase price. Further, in connection with property dispositions, we may agree to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties.

We may not obtain an independent third-party environmental assessment for every property we acquire. In addition, any such assessment that we do obtain may not reveal all environmental liabilities. The cost of defending against claims of liability, of compliance with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims would adversely affect our business, assets or results of operations and, consequently, amounts available for distribution to our stockholders.

If we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect our cash flow from operations.

In some instances, we may sell our properties by providing financing to purchasers. When we provide financing to purchasers, we will bear the risk that the purchaser may default on its obligations under the financing, which could negatively impact cash flow from operations. Even in the absence of a purchaser default, the distribution of sale proceeds or their reinvestment in other assets will be delayed until the promissory notes or other property we may accept upon the sale are

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actually paid, sold, refinanced or otherwise disposed of. In some cases, we may receive initial down payments in cash and other property in the year of sale in an amount less than the selling price, and subsequent payments will be spread over a number of years. If any purchaser defaults under a financing arrangement with us, it could negatively impact our ability to pay cash distributions to our stockholders.

Our net leases may require us to pay property-related expenses that are not the obligations of our tenants.

Under the terms of the majority of our net leases, in addition to satisfying their rent obligations, our tenants will be responsible for the payment or reimbursement of property expenses such as real estate taxes, insurance and ordinary maintenance and repairs. However, under the provisions of certain existing leases and leases that we may enter into in the future with our tenants, we may be required to pay some or all of the expenses of the property, such as the costs of environmental liabilities, roof and structural repairs, real estate taxes, insurance, certain non-structural repairs and maintenance. If our properties incur significant expenses that must be paid by us under the terms of our leases, our business, financial condition and results of operations may be adversely affected and the amount of cash available to meet expenses and to pay distributions to stockholders may be reduced.

Changes in U.S. accounting standards regarding operating leases may make the leasing of our properties less attractive to our potential tenants, which could reduce overall demand for our leasing services.

The Financial Accounting Standards Board (the “FASB”) and the International Accounting Standards Board conducted a joint project to re-evaluate lease accounting in order to address concerns raised by the SEC regarding the transparency of contractual lease obligations under the existing accounting standards for operating leases. In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (“ASU 2016-02”), which will require that a tenant recognize assets and liabilities on the balance sheet for all leases with a lease term of more than 12 months, with the result being the recognition of a right of use asset and a lease liability and the disclosure of key information about the entity’s leasing arrangements. These and other potential changes to the accounting guidance could affect both our accounting for leases as well as that of our current and potential tenants. These changes may affect how our real estate leasing business is conducted. For example, with the ASU 2016-02 revision, companies may be less willing to enter into leases in general or desire to enter into leases with shorter terms because the apparent benefits to their balance sheets under current practice could be reduced or eliminated. This impact in turn could make it more difficult for us to enter into leases on terms we find favorable. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We will adopt the new leasing standard effective on January 1, 2019.

Compliance with the Americans with Disabilities Act of 1990, as amended, and fire, safety and other regulations may require us to make unanticipated expenditures that could significantly reduce the cash available for distributions on our common stock.

Our properties are subject to regulation under federal laws, such as the Americans with Disabilities Act of 1990, as amended (the “ADA”), pursuant to which all public accommodations must meet federal requirements related to access and use by disabled persons. Although we believe that our properties substantially comply with present requirements of the ADA, we have not conducted an audit or investigation of all of our properties to determine our compliance. If one or more of our properties or future properties are not in compliance with the ADA, we might be required to take remedial action, which would require us to incur additional costs to bring the property into compliance. Noncompliance with the ADA could also result in imposition of fines or an award of damages to private litigants.

Additional federal, state and local laws also may require modifications to our properties or restrict our ability to renovate our properties. We cannot predict the ultimate amount of the cost of compliance with the ADA or other legislation.

In addition, our properties are subject to various federal, state and local regulatory requirements, such as state and local earthquake, fire and life safety requirements. If we were to fail to comply with these various requirements, we might incur governmental fines or private damage awards. If we incur substantial costs to comply with the ADA or any other regulatory requirements, our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our common stock could be materially adversely affected. Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers may restrict our use of our properties and may require us to obtain approval from local officials or community standards organizations at any time with respect to our properties, including prior to acquiring a property or when undertaking renovations of any of our existing properties.

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Risks Associated with Debt Financing

We have incurred mortgage indebtedness and other borrowings, which may increase our business risks, hinder our ability to make distributions, and decrease the value of our stockholders’ investment.

We have acquired real estate and other real estate-related assets by borrowing new funds. In addition, we have incurred mortgage debt and pledged some of our real properties as security for that debt to obtain funds to acquire additional real properties and other assets and to pay distributions to our stockholders. We may borrow additional funds if we need funds to satisfy the REIT tax qualification requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders. We may also borrow additional funds if we otherwise deem it necessary or advisable to assure that we maintain our qualification as a REIT for U.S. federal income tax purposes.

Our advisor believes that utilizing borrowing is consistent with our investment objective of maximizing the return to stockholders. There is no limitation on the amount we may borrow against any individual property or other asset. However, under our charter, we are required to limit our borrowings to 75% of the cost (before deducting depreciation or other non-cash reserves) of our gross assets, unless excess borrowing is approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report along with a justification for such excess borrowing. Moreover, our Board has adopted a policy to further limit our borrowings to 60% of the greater of cost (before deducting depreciation or other non-cash reserves) or fair market value of our gross assets, unless such excess borrowing is approved by a majority of our independent directors and disclosed to our stockholders in the next quarterly report along with a justification for such excess borrowing. Our borrowings will not exceed 300% of our net assets as of the date of any borrowing, which is the maximum level of indebtedness permitted under our charter; however, we may exceed that limit if approved by a majority of our independent directors and disclosed to our stockholders in our next quarterly report, along with a justification for such excess borrowing. These factors could limit the amount of cash we have available to distribute to our stockholders and could result in a decline in the value of our stockholders’ investment.

We do not intend to incur mortgage debt on a particular property unless we believe the property’s projected operating cash flows are sufficient to service the mortgage debt. However, if there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on a property, the amount available for distributions to our stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of our stockholders’ investments. For tax purposes, a foreclosure of any of our properties would be 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 from the foreclosure. In such event, we may be unable to pay the amount of distributions required in order to maintain our qualification as a REIT. We may give full or partial guarantees to lenders of recourse mortgage debt to the entities that own our properties. If we provide a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity and with respect to any such property that is vacant, potentially be responsible for any property-related costs such as real estate taxes, insurance and maintenance, which costs will likely increase if the lender does not timely exercise its remedies. If any mortgages contain cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our stockholders will be adversely affected, which could result in our losing our REIT status and would result in a decrease in the value of our stockholders’ investment.

We intend to rely on external sources of capital to fund future capital needs, and if we encounter difficulty in obtaining such capital, we may not be able to meet maturing obligations or make any additional acquisitions.

In order to maintain our qualification as a REIT under the Internal Revenue Code, we are required, among other things, to distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. Because of this dividend requirement, we may not be able to fund from cash retained from operations all of our future capital needs, including capital needed to refinance maturing obligations or make new acquisitions.

The capital and credit markets have experienced extreme volatility and disruption in recent years. Market volatility and disruption could hinder our ability to obtain new debt financing or refinance our maturing debt on favorable terms or at all or to raise debt and equity capital. Our access to capital will depend upon a number of factors, including:


•	general market conditions;


•	government action or regulation, including changes in tax law;

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•	the market’s perception of our future growth potential;


•	the extent of investor interest;


•	analyst reports about us and the REIT industry;


•	the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities, including securities issued by other real estate-based companies;


•	our financial performance and that of our tenants;


•	our current debt levels and changes in our credit ratings, if any;


•	our current and expected future earnings; and


•	our cash flow and cash distributions, including our ability to satisfy the dividend requirements applicable to REITs.

If we are unable to obtain needed capital on satisfactory terms or at all, we may not be able to meet our obligations and commitments as they mature or make any new acquisitions.

High interest rates may make it difficult for us to finance or refinance assets, which could reduce the number of properties we can acquire and the amount of cash distributions we can make.

We run the risk of being unable to finance or refinance our assets on favorable terms or at all. If interest rates are high when we desire to mortgage our assets or when existing loans come due and the assets need to be refinanced, we may not be able to, or may choose not to, finance the assets and we would be required to use cash to purchase or repay outstanding obligations. Our inability to use debt to finance or refinance our assets could reduce the number of assets we can acquire, which could reduce our operating cash flows and the amount of cash distributions we can make to our stockholders. Higher costs of capital also could negatively impact our operating cash flow and returns on our assets.

Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to pay distributions to our stockholders.

We have incurred indebtedness, and in the future may incur additional indebtedness, that bears interest at a variable rate. To the extent that we incur variable rate debt and do not hedge our exposure thereunder, increases in interest rates would increase the amounts payable under such indebtedness, which could reduce our operating cash flows and our ability to pay distributions to our stockholders. In addition, if our existing indebtedness matures or otherwise becomes payable during a period of rising interest rates, we could be required to liquidate one or more of our assets at times that may prevent realization of the maximum return on such assets.

We may not be able to generate sufficient cash flow to meet our debt service obligations.

Our ability to make payments on and to refinance our indebtedness, and to fund our operations, working capital and capital expenditures, depends on our ability to generate cash. To a certain extent, our cash flow is subject to general economic, industry, financial, competitive, operating, legislative, regulatory and other factors, many of which are beyond our control.

We cannot assure our stockholders that our business will generate sufficient cash flow from operations or that future sources of cash will be available to us in an amount sufficient to enable us to pay amounts due on our indebtedness or to fund our other liquidity needs.

Additionally, if we incur additional indebtedness in connection with any future deployment of capital or development projects or for any other purpose, our debt service obligations could increase. We may need to refinance all or a portion of our indebtedness before maturity. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things:


•	our financial condition and market conditions at the time;


•	restrictions in the agreements governing our indebtedness;


•	general economic and capital market conditions;


•	the availability of credit from banks or other lenders; and


•	our results of operations.

As a result, we may not be able to refinance our indebtedness on commercially reasonable terms, or at all. If we do not generate sufficient cash flow from operations, and additional borrowings or refinancings or proceeds of asset sales or other sources of cash are not available to us, we may not have sufficient cash to enable us to meet all of our obligations. Accordingly, if we cannot service our indebtedness, we may have to take actions such as seeking additional equity, or delaying any strategic acquisitions and alliances or capital expenditures, any of which could have a material adverse effect on our business, financial

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condition, results of operations, cash flow or our ability to satisfy our debt service obligations or maintain our level of distributions on our common stock.

Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.

In connection with providing us financing, a lender could impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. In general, our loan agreements restrict our ability to encumber or otherwise transfer our interest in the respective property without the prior consent of the lender. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property, discontinue insurance coverage or replace CR IV Management as our advisor. These or other limitations imposed by a lender may adversely affect our flexibility and our ability to pay distributions on our common stock.

Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to our stockholders.

We have financed some of our property acquisitions using interest-only mortgage indebtedness and may continue to do so. During the interest-only period, the amount of each scheduled payment will be less than that of a traditional amortizing mortgage loan. The principal balance of the mortgage loan will not be reduced (except in the case of prepayments) because there are no scheduled monthly payments of principal during this period. After the interest-only period, we will be required either to make scheduled payments of amortized principal and interest or to make a lump-sum or “balloon” payment at maturity. These required principal or balloon payments will increase the amount of our scheduled payments and may increase our risk of default under the related mortgage loan. If the mortgage loan has an adjustable interest rate, the amount of our scheduled payments also may increase at a time of rising interest rates. Increased payments and substantial principal or balloon maturity payments will reduce the funds available for distribution to our stockholders because cash otherwise available for distribution will be required to pay principal and interest associated with these mortgage loans.

Our ability to make a balloon payment at maturity is uncertain and may depend upon our ability to obtain additional financing or our ability to sell the property. At the time the balloon payment is due, we may or may not be able to refinance the loan on terms as favorable as the original loan or sell the property at a price sufficient to make the balloon payment. The effect of a refinancing or sale could affect the rate of return to stockholders and the projected time of disposition of our assets. In addition, payments of principal and interest made to service our debts may leave us with insufficient cash to pay the distributions that we are required to pay to maintain our qualification as a REIT. Any of these results would have a significant, negative impact on the value of our common stock.

To hedge against exchange rate and interest rate fluctuations, we have used, and may continue to use, derivative financial instruments that may be costly and ineffective and may reduce the overall returns on our stockholders’ investment.

We have used, and may continue to use, derivative financial instruments to hedge our exposure to changes in exchange rates and interest rates on loans secured by our assets and investments in CMBS. Derivative instruments may include interest rate swap contracts, interest rate caps or floor contracts, rate lock arrangements, 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 be exposed to credit risk, market 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. Market risk includes the adverse effect on the value of the financial instrument resulting from a change in interest rates. 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. If we are unable to manage these risks effectively, our results of operations, financial condition and ability to pay distributions to our stockholders will be adversely affected.

Risks Associated with Real Estate-Related Assets

Investing in mortgage, bridge or mezzanine loans could adversely affect our return on our loan investments.

We have invested, and may continue to invest, in mezzanine loans and may make or acquire mortgage or bridge loans, or participations in such loans, to the extent our advisor determines that it is advantageous for us to do so. However, if we make or invest in mortgage, bridge or mezzanine loans, we will be at risk of defaults on those loans caused by many conditions beyond

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our control, including local and other economic conditions affecting real estate values and interest rate levels. If there are defaults under these loans, we may not be able to repossess and sell quickly any properties securing such loans. An action to foreclose on a property securing a loan is regulated by state statutes and regulations and is subject to many of the delays and expenses of any lawsuit brought in connection with the foreclosure if the defendant raises defenses or counterclaims. In the event of default by a mortgagor, these restrictions, among other things, may impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us on the loan, which could reduce the value of our investment in the defaulted loan.

We are subject to risks relating to real estate-related securities, including CMBS.

Real estate-related securities are often unsecured and also may be subordinated to other obligations of the issuer. As a result, investments in real estate-related securities may be subject to risks of (1) limited liquidity in the secondary trading market in the case of unlisted or thinly traded securities, (2) substantial market price volatility resulting from changes in prevailing interest rates in the case of traded equity securities, (3) subordination to the prior claims of banks and other senior lenders to the issuer, (4) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause the issuer to reinvest redemption proceeds in lower yielding assets, (5) the possibility that earnings of the issuer or that income from collateral may be insufficient to meet debt service and distribution obligations and (6) the declining creditworthiness and potential for insolvency of the issuer during periods of rising interest rates and economic slowdown or downturn. These risks may adversely affect the value of outstanding real estate-related securities and the ability of the obliged parties to repay principal and interest or make distribution payments.

CMBS are securities that evidence interests in, or are secured by, a single commercial mortgage loan or a pool of commercial mortgage loans. Accordingly, these securities are subject to the risks above and all of the risks of the underlying mortgage loans. CMBS are issued by investment banks and non-regulated financial institutions, and are not insured or guaranteed by the U.S. government. The value of CMBS may change due to shifts in the market’s perception of issuers and regulatory or tax changes adversely affecting the mortgage securities market as a whole and may be negatively impacted by any dislocation in the mortgage-backed securities market in general.

CMBS are also subject to several risks created through the securitization process. Subordinate CMBS are paid interest only to the extent that there are funds available to make payments. To the extent the collateral pool includes delinquent loans, there is a risk that interest payments on subordinate CMBS will not be fully paid. Subordinate CMBS are also subject to greater credit risk than those CMBS that are more highly rated. In certain instances, third-party guarantees or other forms of credit support can reduce the credit risk.

U.S. Federal Income and Other Tax Risks

Failure to maintain our qualification as a REIT for U.S. federal income tax purposes would adversely affect our operations and our ability to make distributions.

We are currently taxed as a REIT under the Internal Revenue Code. Our ability to maintain our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Internal Revenue Code. Future legislative, judicial or administrative changes to the U.S. federal income tax laws could be applied retroactively, which could result in our disqualification as a REIT. If we fail to continue to qualify as a REIT for any taxable year, we will be subject to U.S. federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for the acquisition of assets or distribution to our stockholders because of the additional tax liability. In addition, distributions to our stockholders would no longer qualify for the dividends paid deduction, and we would no longer be required to make distributions. If we lose our REIT status, we might be required to borrow funds or liquidate some assets in order to pay the applicable tax. Our failure to continue to qualify as a REIT would adversely affect the return on our stockholders’ investment.

Re-characterization of sale-leaseback transactions may cause us to lose our REIT status.

We may purchase properties and lease them back to the sellers of such properties. We would characterize such a sale-leaseback transaction as a “true lease,” which treats the lessor as the owner of the property for U.S. federal income tax purposes. In the event that any sale-leaseback transaction is challenged by the IRS and re-characterized as a financing transaction or loan for U.S. federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. If a sale-leaseback transaction were so re-characterized, we might fail to satisfy the REIT qualification “asset tests” or the “income tests” and, consequently, lose our REIT status effective with the year of re-characterization.

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Alternatively, such a re-characterization could cause the amount of our REIT taxable income to be recalculated, which might also cause us to fail to meet the distribution requirement for a taxable year and thus lose our REIT status.

Our stockholders may have current tax liability on distributions they elect to reinvest in our common stock.

If our stockholders participate in our DRIP, they will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock that does not represent a return of capital. In addition, our stockholders may be treated, for tax purposes, as having received an additional distribution to the extent the shares are purchased at a discount from fair market value. Such an additional deemed distribution could cause our stockholders to be subject to additional income tax liability. Unless our stockholders are a tax-exempt entity, they may have to use funds from other sources to pay their tax liability arising as a result of the distributions reinvested in our shares.

Dividends payable by REITs generally do not qualify for the reduced tax rates available for some dividends.

Income from “qualified dividends” payable to U.S. stockholders that are individuals, trusts and estates are generally subject to tax at preferential rates. Dividends payable by REITs, however, generally are not eligible for the preferential tax rates applicable to qualified dividend income (but under the Tax Cuts and Jobs Act, U.S. stockholders that are individuals, trusts and estates generally may deduct 20% of ordinary dividends from a REIT for taxable years beginning after December 31, 2017, and before January 1, 2026). Although these rules do not adversely affect the taxation of REITs or dividends payable by REITs, to the extent that the preferential rates continue to apply to regular corporate qualified dividends, investors who are individuals, trusts and estates may perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could materially and adversely affect the value of the shares of REITs.

We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability or reduce our operating flexibility, including the recently passed Tax Cuts and Jobs Act.

In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of U.S. 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 our stockholders that any such changes will not adversely affect our taxation and our ability to continue to qualify as a REIT, or the taxation of a stockholder. 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. Our stockholders are urged to consult with their tax advisor with respect to the impact of recent legislation on their 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. Although REITs generally receive better tax treatment than entities taxed as regular corporations, 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 acquires real estate to elect to be treated for U.S. federal income tax purposes as a regular corporation. As a result, our charter provides our Board with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders. The Board has fiduciary duties to us and our stockholders 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.

In addition, the Tax Cuts and Jobs Act made significant changes to the U.S. federal income tax rules for taxation of individuals and businesses, generally effective for taxable years beginning after December 31, 2017. The Tax Cuts and Jobs Act made major changes to the Code, including a number of provisions of the Code that affect the taxation of REITs and their stockholders. Among the changes made by the Tax Cuts and Jobs Act are permanently reducing the generally applicable corporate tax rate, generally reducing the tax rate applicable to individuals and other noncorporate taxpayers for tax years beginning after December 31, 2017 and before January 1, 2026, eliminating or modifying certain previously allowed deductions (including substantially limiting interest deductibility and, for individuals, the deduction for non-business state and local taxes), and, for taxable years beginning after December 31, 2017 and before January 1, 2026, providing for preferential rates of taxation through a deduction of up to 20% (subject to certain limitations) on most ordinary REIT dividends and certain trade or business income of non-corporate taxpayers. The Tax Cuts and Jobs Act also imposes new limitations on the deduction of net operating losses and requires us to recognize income for tax purposes no later than when we take it into account on our financial statements, which may result in us having to make additional taxable distributions to our stockholders in order to comply with REIT distribution requirements or avoid taxes on retained income and gains. The Tax Cuts and Jobs Act also made numerous large and small changes to the tax rules that do not affect the REIT qualification rules directly but may otherwise affect us or our stockholders.

While the changes in the Tax Cuts and Jobs Act generally appear to be favorable with respect to REITs, the extensive changes to non-REIT provisions in the Internal Revenue Code may have unanticipated effects on us or our stockholders. Moreover, Congressional leaders have recognized that the process of adopting extensive tax legislation in a short amount of

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time without hearings and substantial time for review is likely to have led to drafting errors, issues needing clarification and unintended consequences that will have to be revisited in subsequent tax legislation. At this point, it is not clear if or when Congress will address these issues or when the IRS will issue administrative guidance on the changes made in the Tax Cuts and Jobs Act.

We urge our stockholders to consult with their own tax advisor with respect to the status of the Tax Cuts and Jobs Act and other legislative, regulatory or administrative developments and proposals and their potential effect on holding our common stock.

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

Even if we maintain our status as a REIT, we may be subject to certain federal, state and local taxes. For example, net income from the sale of properties that are “dealer” properties sold by a REIT (a “prohibited transaction” under the Internal Revenue Code) will be subject to a 100% excise tax. Additionally, if we are not able to make sufficient distributions to eliminate our REIT taxable income, we may be subject to tax as a corporation on our undistributed REIT taxable income. We may also decide to retain income we earn from the sale or other disposition of our property 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. However, stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability. 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. Any federal, state or local taxes we pay will reduce our cash available for distribution to our stockholders.

If our operating partnership or certain other subsidiaries fail to maintain their status as disregarded entities or partnerships, their income may be subject to taxation, which would reduce the cash available to us for distribution to our stockholders.

We intend to cause CR IV OP, our operating partnership, to maintain its current status as an entity separate from us (a disregarded entity), or in the alternative, a partnership for U.S. federal income tax purposes. Our operating partnership would lose its status as a disregarded entity for U.S. federal income tax purposes if it issues interests to any subsidiary we establish that is not a disregarded entity for tax purposes (a “regarded entity”) or a person other than us. If our operating partnership issues interests to any subsidiary we establish that is a regarded entity for tax purposes or a person other than us, we would characterize our operating partnership as a partnership for U.S. federal income tax purposes. As a disregarded entity or partnership, our operating partnership is not subject to U.S. federal income tax on its income. However, if the IRS were to successfully challenge the status of our operating partnership as a disregarded entity or partnership, CR IV OP 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 make distributions to our stockholders and the return on their investment.

In addition, if certain of our other subsidiaries through which CR IV OP owns its properties, in whole or in part, lose their status as disregarded entities or partnerships for U.S. federal income tax purposes, such subsidiaries would be subject to taxation as corporations, thereby reducing cash available for distributions to our operating partnership. Such a re-characterization of CR IV OP’s subsidiaries also could threaten our ability to maintain REIT status.

To maintain our qualification as a REIT we must meet annual distribution requirements, which may force us to forgo otherwise attractive opportunities or borrow funds during unfavorable market conditions. This could delay or hinder our ability to meet our investment objectives and reduce our stockholders’ overall return.

In order to maintain our qualification as a REIT, we must distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. We will be subject to U.S. federal income tax on our undistributed taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which dividends we pay with respect to any calendar year are less than the sum of (a) 85% of our ordinary income, (b) 95% of our capital gain net income and (c) 100% of our undistributed income from prior years.

Further, to maintain our qualification as a REIT, we must ensure that we meet the REIT gross income tests annually and that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and certain kinds of mortgage-related securities. The remainder of our investment in securities (other than government securities, qualified real estate assets and stock of a taxable REIT subsidiary (“TRS”)) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, qualified real estate assets and stock of a TRS) can consist of

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the securities of any one issuer, no more than 20% of the value of our total assets can be represented by securities of one or more TRSs and no more than 25% of the value of our total assets can be represented by certain debt securities of publicly offered REITs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate assets from our portfolio or not make otherwise attractive investments in order to maintain our qualification as a REIT. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

The foregoing requirements could cause us to distribute amounts that otherwise would be spent on real estate assets and it is possible that we might be required to borrow funds, possibly at unfavorable rates, or sell assets to fund these dividends or make taxable stock dividends. Although we intend to make distributions sufficient to meet the annual distribution requirements and to avoid U.S. federal income and excise taxes on our earnings, it is possible that we might not always be able to do so.

Our mezzanine loans may not qualify as real estate assets and could adversely affect our status as a REIT.

We have invested and may continue to invest in mezzanine loans, for which the IRS has provided a safe harbor, but not rules of substantive law. Pursuant to the safe harbor, if a mezzanine loan meets certain requirements, the IRS will treat the mezzanine loan as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% income test. To the extent that any mezzanine loans do not meet all of the requirements for reliance on the safe harbor, such loans may not be real estate assets and could adversely affect our qualification as a REIT.

Non-U.S. stockholders may be subject to U.S. federal withholding tax and may be subject to U.S. federal income tax upon the disposition of our shares.

Gain recognized by a non-U.S. stockholder upon the sale or exchange of our common stock generally will not be subject to U.S. federal income taxation unless such stock constitutes a “U.S. real property interest” (“USRPI”) under the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”). Our common stock will not constitute a USRPI so long as we are a “domestically-controlled qualified investment entity.” A domestically-controlled qualified investment entity includes a REIT if at all times during a specified testing period, less than 50% in value of such REIT’s stock is held directly or indirectly by non-U.S. stockholders. We believe that we are a domestically-controlled qualified investment entity. However, because our common stock is and will be freely transferable, no assurance can be given that we are or will be a domestically-controlled qualified investment entity.

Even if we do not qualify as a domestically-controlled qualified investment entity at the time a non-U.S. stockholder sells or exchanges our common stock, gain arising from such a sale or exchange would not be subject to U.S. taxation under FIRPTA as a sale of a USRPI if: (a) our common stock is “regularly traded,” as defined by applicable Treasury regulations, on an established securities market, and (b) such non-U.S. stockholder owned, actually or constructively, 10% or less of our common stock at any time during the five-year period ending on the date of the sale.

Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to incur tax liabilities.

The REIT provisions of the Internal Revenue Code may limit our ability to hedge our liabilities. Any income from a hedging transaction we enter into to manage risk of interest rate changes, price changes or currency fluctuations with respect to borrowings made or to be made to acquire or carry real estate assets or to offset certain other positions, if properly identified under applicable Treasury Regulations, does not constitute “gross income” for purposes of the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions will likely be treated as non-qualifying income for purposes of one or both of the gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRSs would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in a TRS generally will not provide any tax benefit, except for being carried forward against future taxable income of such TRS.

Investments outside the United States could present additional complications to our ability to satisfy the REIT qualification requirements and may subject us to additional taxes.

Operating in functional currencies other than the U.S. dollar and in environments in which real estate transactions are customarily structured differently than they are in the U.S. or are subject to different legal rules may complicate our ability to structure non-U.S. investments in a manner that enables us to satisfy the REIT qualification requirements. In addition, non-U.S. investments may subject us to various non-U.S. tax liabilities, including withholding taxes.

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Our property taxes could increase due to property tax rate changes or reassessment, which would impact our cash flows.

Even if we continue to qualify as a REIT for U.S. federal income tax purposes, we will be required to pay some state and local taxes on our properties. The real property taxes on our properties may increase as property tax rates change or as our properties are assessed or reassessed by taxing authorities. Therefore, the amount of property taxes we pay in the future may increase substantially. If the property taxes we pay increase and if any such increase is not reimbursable under the terms of our lease, then our cash flows will be impacted, which in turn could have a material adverse effect on our business, financial condition, results of operations, cash flow or our ability to satisfy our debt service obligations or to maintain our level of distributions on our common stock.

The share transfer and ownership restrictions applicable to REITs and contained in our charter may inhibit market activity in our shares of stock and restrict our business combination opportunities.

In order to continue to qualify as a REIT, five or fewer individuals, as defined in the Internal Revenue Code, may not own, actually or constructively, more than 50% in value of our issued and outstanding shares of stock at any time during the last half of each taxable year, other than the first year for which a REIT election is made. Attribution rules in the Internal Revenue Code determine if any individual or entity actually or constructively owns our shares of stock under this requirement. Additionally, at least 100 persons must beneficially own our shares of stock during at least 335 days of a taxable year for each taxable year, other than the first year for which a REIT election is made. To help ensure that we meet these tests, among other purposes, our charter restricts the acquisition and ownership of our shares of stock.

Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. Unless exempted by our Board, for so long as we continue to qualify as a REIT, our charter prohibits, among other limitations on ownership and transfer of shares of our stock, any person from beneficially or constructively owning (applying certain attribution rules under the Internal Revenue Code) more than 9.8% in value of the aggregate of our outstanding shares of stock and more than 9.8% (in value or in number of shares, whichever is more restrictive) of any class or series of our shares of stock. The Board, in its sole discretion and upon receipt of certain representations and undertakings, may exempt a person (prospectively or retrospectively) from the ownership limits. However, our Board may not, among other limitations, grant an exemption from these ownership restrictions to any proposed transferee whose ownership, direct or indirect, in excess of the 9.8% ownership limit would result in the termination of our qualification as a REIT. These restrictions on transferability and ownership will not apply, however, if our Board determines that it is no longer in our best interest to continue to qualify as a REIT or that compliance with the restrictions is no longer required in order for us to continue to so qualify as a REIT.

These ownership limits could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders.

If we elect to treat one or more of our subsidiaries as a TRS, it will be subject to corporate-level taxes, and our dealings with our TRSs may be subject to a 100% excise tax.

A REIT may own up to 100% of the stock of one or more TRSs. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A TRS will be subject to applicable U.S. federal, state, local and foreign income tax on its taxable income, including corporate income tax on the TRS’s income, and is, as a result, less tax efficient than with respect to income we earn directly. The after-tax net income of our TRSs would be available for distribution to us. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT, including gross income from operations pursuant to management contracts. In addition, the rules, which are applicable to us as a REIT, as described in the preceding risk factors, also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. For example, to the extent that the rent paid by one of our TRSs exceeds an arm’s-length rental amount, such amount would be potentially subject to a 100% excise tax. While we intend that all transactions between us and our TRSs would be conducted on an arm’s-length basis, and therefore, any amounts paid by our TRSs to us would not be subject to the excise tax, no assurance can be given that the IRS would not disagree with such conclusion and levy an excise tax on such transactions.

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If a stockholder that is an employee benefit plan, individual retirement account (“IRA”), annuity described in Sections 403(a) or (b) of the Internal Revenue Code, Archer Medical Savings Account, health savings account, Coverdell education savings account, or other arrangement that is subject to the Employee Retirement Income Securities Act (“ERISA”) or Section 4975 of the Internal Revenue Code (referred to generally as “Benefit Plans and IRAs”) fails to meet the fiduciary and other standards under ERISA or the Internal Revenue Code as a result of an investment in shares of our common stock, such stockholder could be subject to civil and criminal, if the failure is willful, penalties.

There are special considerations that apply to Benefit Plans and IRAs investing in shares of our common stock. Stockholders that are Benefit Plans and IRAs should consider:


•	whether their investment is consistent with the applicable provisions of ERISA and the Internal Revenue Code, or any other applicable governing authority in the case of a plan not subject to ERISA or the Internal Revenue Code;


•	whether their investment is made in accordance with the documents and instruments governing the Benefit Plan or IRA, including any investment policy;


•	whether their investment satisfies the prudence, diversification and other requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA or any similar rule under other applicable laws or regulations;


•	whether their investment will impair the liquidity needs, the minimum and other distribution requirements, or the tax withholding requirements that may be applicable to such Benefit Plan or IRA;


•	whether their investment will constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code or any similar rule under other applicable laws or regulations;


•	whether their investment will produce or result in unrelated business taxable income , as defined in Sections 511 through 514 of the Internal Revenue Code, to the Benefit Plan or IRA;


•	whether their investment will impair the Benefit Plan’s or IRA’s need to value its assets annually (or more frequently) in accordance with ERISA, the Internal Revenue Code and the applicable provisions of the Benefit Plan or IRA; and


•	whether their investment will cause our assets to be treated as “plan assets” of the Benefit Plan or IRA.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA, the Internal Revenue Code, or other applicable statutory or common law may result in the imposition of civil and criminal (if the violation is willful) penalties, and can subject the fiduciary to equitable remedies. In addition, if an investment in our common stock constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the “party-in-interest” (within the meaning of ERISA) or “disqualified person” (within the meaning of the Internal Revenue Code) who authorized or directed the investment may have to compensate the plan for any losses the plan suffered as a result of the transaction or restore to the plan any profits made by such person as a result of the transaction, or may be subject to excise taxes with respect to the amount involved. In the case of a prohibited transaction involving an IRA, the IRA may be disqualified and all of the assets of the IRA may be deemed distributed and subject to tax.

In addition to considering their fiduciary responsibilities under ERISA and the prohibited transaction rules of ERISA and the Internal Revenue Code, stockholders that are Benefit Plans and IRAs should consider the effect of the plan assets regulation, U.S. Department of Labor Regulation Section 2510.3-101, as modified by ERISA Section 3(42). To avoid our assets from being considered “plan assets” under the plan assets regulation, our Charter prohibits “benefit plan investors” from owning 25% or more of the shares of our common stock prior to the time that the common stock qualifies as a class of publicly-offered securities, within the meaning of the plan assets regulation. However, we cannot assure our stockholders that those provisions in our Charter will be effective in limiting benefit plan investors’ ownership to less than the 25% limit. For example, the limit could be unintentionally exceeded if a benefit plan investor misrepresents its status as a benefit plan investor. If our underlying assets were to be considered “plan assets” of a benefit plan investor subject to ERISA, (i) we would be an ERISA fiduciary and subject to certain fiduciary requirements of ERISA with which it would be difficult for us to comply and (ii) we could be restricted from entering into favorable transactions if the transaction, absent an exemption, would constitute a prohibited transaction under ERISA or the Internal Revenue Code. Even if our assets are not considered to be “plan assets,” a prohibited transaction could occur if we or any of our affiliates is a fiduciary (within the meaning of ERISA) of a Benefit Plan or IRA stockholder.

Due to the complexity of these rules and the potential penalties that may be imposed, it is important that stockholders that are Benefit Plans and IRAs consult with their own advisors regarding the potential applicability of ERISA, the Internal Revenue Code and any similar applicable law.

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Stockholders that are Benefit Plans and IRAs may be limited in their ability to withdraw required minimum distributions as a result of an investment in shares of our common stock.

If Benefit Plans or IRAs invest in our common stock, the Internal Revenue Code may require such plan or IRA to withdraw required minimum distributions in the future. Our common stock will be highly illiquid, and our share repurchase program only offers limited liquidity. If a Benefit Plan or IRA requires liquidity, it may generally sell its shares, but such sale may be at a price less than the price at which such plan or IRA initially purchased its shares of our common stock. If a Benefit Plan or IRA fails to make required minimum distributions, it may be subject to certain taxes and tax penalties.

Specific rules apply to foreign, governmental and church plans.

As a general rule, certain employee benefit plans, including foreign pension plans, governmental plans established or maintained in the United States (as defined in Section 3(32) of ERISA), and certain church plans (as defined in Section 3(33) of ERISA), are not subject to ERISA’s requirements and are not “benefit plan investors” within the meaning of the plan assets regulation. Any such plan that is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code may nonetheless be subject to the prohibited transaction rules set forth in Section 503 of the Internal Revenue Code and, under certain circumstances in the case of church plans, Section 4975 of the Internal Revenue Code. Also, some foreign plans and governmental plans may be subject to foreign, state, or local laws which are, to a material extent, similar to the provisions of ERISA or Section 4975 of the Internal Revenue Code. Each fiduciary of a plan subject to any such similar law should make its own determination as to the need for, and the availability of, any exemption relief.

Our investments in construction loans require us to make estimates about the fair value of land improvements that may be challenged by the IRS.

We have invested, and may continue to invest in construction loans, the interest from which is qualifying income for purposes of the REIT income tests, provided that the loan value of the real property securing the construction loan is equal to or greater than the highest outstanding principal amount of the construction loan during any taxable year. For purposes of construction loans, the loan value of the real property is the fair value of the land plus the reasonably estimated cost of the improvements or developments (other than personal property) that secure the loan and that are to be constructed from the proceeds of the loan. There can be no assurance that the IRS would not challenge our estimate of the loan value of the real property.


ITEM 1B.	UNRESOLVED STAFF COMMENTS

None.


ITEM 2.	PROPERTIES

See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Portfolio Information for a discussion of the properties we hold for rental operations and Part IV, Item 15. Exhibits, Financial Statement Schedules — Schedule III — Real Estate and Accumulated Depreciation of this Annual Report on Form 10-K for a detailed listing of such properties.


ITEM 3.	LEGAL PROCEEDINGS

In the ordinary course of business, we may become subject to litigation or claims. We are not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or to which our properties are the subject.


ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.

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PART II


ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

As of March 14, 2019 , we had approximately 311.3 million shares of common stock outstanding, held by a total of 59,535 stockholders of record. The number of stockholders is based on the records of DST Systems, Inc., which serves as our registrar and transfer agent.

There is no established 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, we do not expect that a public market for the shares will develop. Pursuant to the DRIP Offerings, we issue shares of our common stock at the most recently disclosed estimated per share NAV as determined by our Board. As of December 31, 2018, the most recent estimated per share NAV was $9.37 per share, which was established on March 28, 2018 using a valuation date of December 31, 2017.

To assist fiduciaries of tax-qualified pension, stock bonus or profit-sharing plans, employee benefit plans and annuities described in Section 403(a) or (b) of the Internal Revenue Code or an individual retirement account or annuity described in Section 408 of the Internal Revenue Code subject to the annual reporting requirements of ERISA and IRA trustees or custodians in preparation of reports relating to an investment in the shares, we will publicly disclose and provide reports, as requested, of the per share estimated value of our common stock to those fiduciaries who request such reports. Furthermore, in order for FINRA members and their associated persons to participate in the Offering, we are required pursuant to FINRA Rule 5110 to disclose in each annual report distributed to stockholders a per share estimated value of the shares, the method by which it was developed and the date of the data used to develop the estimated value. In addition, pursuant to National Association of Securities Dealers Conduct Rule 2340, which took effect on April 11, 2016, we are required to publish an updated estimated per share NAV on at least an annual basis. The Board will make decisions regarding the valuation methodology to be employed, who will perform valuations of our assets and the frequency of such valuations; provided, however, that the determination of the estimated per share NAV must be conducted by, or with the material assistance or confirmation of, a third-party valuation expert and must be derived from a methodology that conforms to standard industry practice. The Board established an estimated per share NAV on March 20, 2019 of $8.65 per share using a valuation date of December 31, 2018, using a methodology that conformed to standard industry practice. However, as set forth above, there is no public trading market for the shares at this time and stockholders may not receive $8.65 per share if a market did exist.

In determining the estimated per share NAVs as of December 31, 2017 and December 31, 2018, our Board considered information and analysis, including valuation materials that were provided by Duff & Phelps, LLC (“Duff & Phelps”), information provided by CR IV Management, LLC, and the estimated per share NAV recommendation made by the valuation, compensation and affiliate transactions committee of our Board, which committee is comprised of all of our independent directors. See our Current Reports on Form 8-K, filed with the SEC on March 30, 2018 and March 26, 2019, for additional information regarding Duff & Phelps and its valuation materials.

Share Redemption Program

The Board has adopted a share redemption program that enables our stockholders to sell their shares to us in limited circumstances. Our share redemption program permits stockholders to sell their shares back to us, subject to the conditions and limitations described below.

Our common stock is currently not listed on a national securities exchange, and we will not seek to list our stock unless and until such time as our independent directors believe that the listing of our stock would be in the best interest of our stockholders. In order to provide stockholders with the benefit of interim liquidity, stockholders who have held their shares for at least one year may present all or a portion of their shares consisting of at least the lesser of (1) 25% of the stockholder’s shares; or (2) a number of shares with an aggregate redemption price of at least $2,500 , to us for redemption at any time in accordance with the procedures outlined below. At that time, we may, subject to the conditions and limitations described below, redeem the shares presented for redemption for cash to the extent that we have sufficient funds available to us to fund such redemption. We will not pay to our advisor or its affiliates any fees to complete any transactions under our share redemption program.

The per share redemption price (other than for shares purchased pursuant to our DRIP and as provided below for redemptions due to a stockholder’s death) depends on the length of time the stockholder has held such shares as follows: after two years from the purchase date, 97.5% of the most recently determined estimated per share NAV; and after three years from

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the purchase date, 100% of the most recently determined estimated per share NAV. During this time period, the redemption price for shares purchased pursuant to our DRIP will be 100% of the most recently determined estimated per share NAV. In each case, the redemption price will be adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to our common stock. The estimated per share NAV for purposes of our share redemption program as of December 31, 2018 was $9.37 per share, which estimated per share NAV was determined by our Board on March 28, 2018 using a valuation date of December 31, 2017. As a result of our Board’s determination of an updated estimated per share NAV of our shares of common stock on March 20, 2019, the estimated per share NAV of $8.65 as of December 31, 2018 will serve as the most recent estimated per share NAV for purposes of the share redemption program, effective March 26, 2019, until such time as the board of directors determines a new estimated per share NAV.

In determining the redemption price, we consider shares to have been redeemed from a stockholder’s account on a first-in, first-out basis. The Board will announce any redemption price adjustment and the time period of its effectiveness as a part of its regular communications with our stockholders. If we have sold a property and have made one or more special distributions to our stockholders of all or a portion of the net proceeds from such sales, the per share redemption price will be reduced by the net sale proceeds per share distributed to stockholders prior to the redemption date. The Board will, in its sole discretion, determine which distributions, if any, constitute a special distribution. While our Board does not have specific criteria for determining a special distribution, we expect that a special distribution will only occur upon the sale of a property and the subsequent distribution of the net sale proceeds.

Upon receipt of a request for redemption, we may conduct a Uniform Commercial Code (“UCC”) search to ensure that no liens are held against the shares. Any costs for conducting the UCC search will be borne by us.

In the event of the death of a stockholder, we must receive notice from the stockholder’s estate within 270 days after the stockholder’s death. Shares redeemed in connection with a stockholder’s death will be redeemed at a purchase price per share equal to 100% of the estimated per share NAV.

In the event that a stockholder requests a redemption of all of their shares, and such stockholder is participating in our DRIP, the stockholder will be deemed to have notified us, at the time they submit their redemption request, that such stockholder is terminating its participation in our DRIP, and has elected to receive future distributions in cash. This election will continue in effect even if less than all of such stockholder’s shares are redeemed unless they notify us that they wish to resume their participation in our DRIP.

We will limit the number of shares redeemed pursuant to our share redemption program as follows: (1) we will not redeem in excess of 5% of the weighted average number of shares outstanding during the trailing 12 months prior to the end of the fiscal quarter for which the redemptions are being paid; and (2) funding for the redemption of shares will be limited, among other things, to the net proceeds we receive from the sale of shares under our DRIP, net of shares redeemed to date. In an effort to accommodate redemption requests throughout the calendar year, we intend to limit quarterly redemptions to approximately 1.25% of the weighted average number of shares outstanding during the trailing 12 -month period ending on the last day of the fiscal quarter, and funding for redemptions for each quarter generally will be limited, among other things, to the net proceeds we receive from the sale of shares in the respective quarter under our DRIP; however, our management may waive these quarterly limitations in its sole discretion, subject to the 5% cap on the number of shares we may redeem during the respective trailing 12 -month period. Any of the foregoing limits might prevent us from accommodating all redemption requests made in any quarter, in which case quarterly redemptions will be made pro rata, except as described below. Our management also reserves the right, in its sole discretion at any time, and from time to time, to reject any request for redemption for any reason.

We will redeem our shares no later than the end of the month following the end of each fiscal quarter. Requests for redemption must be received on or prior to the end of the fiscal quarter in order for us to repurchase the shares in the month following the end of that fiscal quarter. A stockholder may withdraw their request to have shares redeemed, but all such requests generally must be submitted prior to the last business day of the applicable fiscal quarter. Any redemption capacity that is not used as a result of the withdrawal or rejection of redemption requests may be used to satisfy the redemption requests of other stockholders received for that fiscal quarter, and such redemption payments may be made at a later time than when that quarter’s redemption payments are made.

We will determine whether we have sufficient funds and/or shares available as soon as practicable after the end of each fiscal quarter, but in any event prior to the applicable payment date. If we cannot purchase all shares presented for redemption in any fiscal quarter, based upon insufficient cash available and/or the limit on the number of shares we may redeem during any quarter or year, we will give priority to the redemption of deceased stockholders’ shares. While deceased stockholders’ shares will be included in calculating the maximum number of shares that may be redeemed in any annual or quarterly period, they will not be subject to the annual or quarterly percentage caps; therefore, if the volume of requests to redeem deceased stockholders’ shares in a particular quarter were large enough to cause the annual or quarterly percentage caps to be exceeded,

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even if no other redemption requests were processed, the redemptions of deceased stockholders’ shares would be completed in full, assuming sufficient proceeds from the sale of shares under our DRIP, net of shares redeemed to date, were available. If sufficient proceeds from the sale of shares under our DRIP, net of shares redeemed to date, were not available to pay all such redemptions in full, the requests to redeem deceased stockholders’ shares would be honored on a pro rata basis. We next will give priority to requests for full redemption of accounts with a balance of 250 shares or less at the time we receive the request, in order to reduce the expense of maintaining small accounts. Thereafter, we will honor the remaining redemption requests on a pro rata basis. Following such quarterly redemption period, if a stockholder would like to resubmit the unsatisfied portion of the prior request for redemption, such stockholder must submit a new request for redemption of such shares prior to the last day of the new quarter. Unfulfilled requests for redemption will not be carried over automatically to subsequent redemption periods.

The Board may choose to amend, suspend or terminate our share redemption program at any time upon 30 days’ notice to our stockholders. Additionally, we will be required to discontinue sales of shares under our Secondary DRIP Offering on the date we sell all of the shares registered for sale under the Secondary DRIP Offering, unless we register additional DRIP shares to be offered pursuant to an effective registration statement with the SEC and applicable states. Because the redemption of shares will be funded with the net proceeds we receive from the sale of shares under our Secondary DRIP Offering, net of shares redeemed to date, the discontinuance or termination of our Secondary DRIP Offering will adversely affect our ability to redeem shares under the share redemption program. We will notify our stockholders of such developments (1) in our next annual or quarterly report or (2) by means of a separate mailing, accompanied by disclosure in a current or periodic report under the Exchange Act.

Our share redemption program is only intended to provide interim liquidity for stockholders until a liquidity event occurs, which may include the sale of the Company, the sale of all or substantially all of our assets, a merger or similar transaction, an

alternative strategy that will result in a significant increase in opportunities for stockholders to redeem their shares or the listing of the shares of our common stock for trading on a national securities exchange. We cannot guarantee that a liquidity event will occur.

The shares we redeem under our share redemption program are canceled and returned to the status of authorized but unissued shares. We do not intend to resell such shares to the public unless they are first registered with the SEC under the Securities Act and under appropriate state securities laws or otherwise sold in compliance with such laws.

We received redemption requests for approximately 16.1 million shares (or $150.4 million ) in excess of the net proceeds we received from issuance of shares under the DRIP Offerings during the three months ended December 31, 2018 . Management, in its discretion, limited the amount of shares redeemed for the three months ended December 31, 2018 to an amount equal to net proceeds we received from the sale of shares pursuant to the DRIP Offerings during the period. During the year ended December 31, 2018 , we received valid redemption requests under our share redemption program totaling approximately 68.2 million shares, of which we redeemed approximately 7.4 million shares as of December 31, 2018 for $69.5 million (at an average redemption price of $9.37 per share) and approximately 2.3 million shares subsequent to December 31, 2018 for $21.7 million (at an average redemption price of $9.37 per share). The remaining redemption requests relating to approximately 58.5 million shares went unfulfilled. During the year ended December 31, 2017 , we received valid redemption requests under our share redemption program totaling approximately 44.2 million shares, of which we redeemed approximately 7.6 million shares as of December 31, 2017 for $76.6 million (at an average redemption price of $10.08 per share) and approximately 2.4 million shares subsequent to December 31, 2017 for $24.3 million (at an average redemption price of $10.08 per share). The remaining redemption requests relating to approximately 34.2 million shares went unfulfilled. A valid redemption request is one that complies with the applicable requirements and guidelines of our current share redemption program set forth above. We funded such redemptions with proceeds from our DRIP Offerings. During the years ended December 31, 2018 and 2017 , we issued approximately 9.6 million and 10.1 million shares of common stock, respectively, under the DRIP Offerings, for proceeds of $91.8 million and $101.3 million , respectively, which were recorded as redeemable common stock on the consolidated balance sheets, net of any redemptions paid.

In general, we redeem shares on a quarterly basis. During the three-month period ended December 31, 2018 , we redeemed shares, including those redeemable due to death, as follows:



Period	Total Number of Shares Redeemed	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
October 1, 2018 - October 31, 2018	—	$	—	—	(1)
November 1, 2018 - November 30, 2018	2,410,604	$	9.37	2,410,604	(1)
December 1, 2018 - December 31, 2018	2,688	$	9.37	2,688	(1)
Total	2,413,292			2,413,292	(1)

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____________________________________


(1)	A description of the maximum number of shares that may be purchased under our share redemption program is included in the narrative preceding this table.

See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Share Redemptions in this Annual Report on Form 10-K, and Note 13 — Stockholders’ Equity to our consolidated financial statements in this Annual Report on Form 10-K for additional share redemption information.

Distributions

We elected to be taxed, and currently qualify, as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2012. As a REIT, we have made, and intend to continue to make, distributions each taxable year equal to at least 90% of our taxable income (computed without regard to the dividends paid deduction and excluding net capital gains). One of our primary goals is to pay regular (monthly) distributions to our stockholders.

See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Distributions in this Annual Report on Form 10-K for additional information on distributions.

For federal income tax purposes, distributions to common stockholders are characterized as ordinary dividends, capital gain distributions, or nondividend distributions. To the extent that we make a distribution in excess of our current or accumulated earnings and profits, the distribution will be a nontaxable return of capital, reducing the tax basis in each U.S. stockholder’s shares. In addition, the amount of distributions in excess of U.S. stockholders’ tax basis in their shares will be taxable as a capital gain realized from the sale of those shares. See Note 14 — Income Taxes to our consolidated financial statements in this Annual Report on Form 10-K for the character of the distributions paid during the years ended December 31, 2018 , 2017 and 2016 .

The following table shows the distributions declared on a per share basis during the years ended December 31, 2018 , 2017 and 2016 (in thousands, except per share data):



Year Ending December 31,	Total Distributions Declared		Distributions Declared per Common Share
Year Ending December 31,	Total Distributions Declared		Distributions Declared per Common Share
2018	$	194,573	$	0.625
2017	$	194,687	$	0.625
2016	$	194,834	$	0.625

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ITEM 6.	SELECTED FINANCIAL DATA

The following data should be read in conjunction with our consolidated financial statements and the notes thereto and Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K. Certain amounts presented below have been reclassified to conform to the current period presentation. See Note 2 — Summary of Significant Policies to our consolidated financial statements in this Annual Report on Form 10-K for a discussion of the various reclassifications. The selected financial data (in thousands, except share and per share amounts) presented below was derived from our consolidated financial statements.



	Year Ended December 31,
	2018			2017			2016			2015			2014
Balance Sheet Data:
Total real estate and related assets, net	$	4,401,153		$	4,627,546		$	4,534,010		$	4,484,326		$	3,923,840
Cash and cash equivalents	$	10,533		$	4,745		$	9,754		$	26,316		$	55,287
Total assets	$	4,617,371		$	4,728,689		$	4,624,335		$	4,582,199		$	4,031,468
Notes payable and credit facility, net	$	2,516,914		$	2,471,763		$	2,246,259		$	2,066,563		$	1,458,828
Intangible lease liabilities, net	$	36,418		$	45,572		$	49,075		$	53,822		$	55,535
Total liabilities	$	2,616,274		$	2,572,024		$	2,357,566		$	2,195,084		$	1,583,090
Redeemable common stock and noncontrolling interest	$	184,247		$	186,453		$	188,938		$	190,561		$	121,972
Total stockholders’ equity	$	1,816,850		$	1,970,212		$	2,077,831		$	2,196,554		$	2,326,406
Operating Data:
Total revenues	$	431,276		$	424,095		$	407,451		$	367,731		$	256,282
Total operating expenses	$	302,246		$	270,900		$	258,267		$	243,531		$	210,852
Gain (loss) on disposition of real estate, net	$	6,299		$	17,044		$	2,907		$	(108	)	$	(157	)
Operating income	$	135,329		$	170,239		$	152,091		$	124,092		$	45,273
Net income attributable to the Company	$	37,278		$	79,420		$	71,842		$	64,771		$	11,190
Cash Flow Data:
Net cash provided by operating activities	$	205,835		$	198,925		$	192,296		$	182,885		$	89,086
Net cash used in investing activities	$	(43,892	)	$	(223,386	)	$	(187,746	)	$	(673,009	)	$	(1,743,988	)
Net cash (used in) provided by financing activities	$	(156,112	)	$	20,510		$	(21,346	)	$	464,867		$	1,405,982
Per Share Data:
Net income - basic and diluted	$	0.12		$	0.25		$	0.23		$	0.21		$	0.04
Distributions declared per common share	$	0.625		$	0.625		$	0.625		$	0.625		$	0.625
Weighted average shares outstanding - basic and diluted	311,478,665			311,677,149			311,863,844			309,263,576			292,072,088

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Part II, Item 6. Selected Financial Data in this Annual Report on Form 10-K and our accompanying consolidated financial statements and notes thereto. See also the Cautionary Note Regarding Forward-Looking Statements section preceding Part I of this Annual Report on Form 10-K.

Overview

We were formed on July 27, 2010, and we elected to be taxed, and currently qualify, as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2012. We commenced our principal operations on April 13, 2012, when we satisfied the conditions of our escrow agreement regarding the minimum offering and issued approximately 308,000 shares of our common stock. We have no paid employees and are externally advised and managed by CR IV Management. On February 1, 2018, the Transaction, as discussed in Part I, Item 1. Business — Formation, was completed. As a result of the Transaction, CIM indirectly owns and/or controls CR IV Management; our dealer manager, CCO Capital; our property manager, CREI Advisors; and CCO Group.

As part of the Transaction, pursuant to the Services Agreement, VEREIT OP is obligated to provide certain services to CCO Group and to us, including operational real estate support. VEREIT OP is obligated to provide such services through March 31, 2019 (or, if later, the date of the last government filing other than a tax filing made by us, CCPT V, CCIT II, CCIT III and/or CIM Income NAV with respect to its 2018 fiscal year) and is obligated to provide consulting and research services through December 31, 2023 as requested by CCO Group, LLC. The services provided by VEREIT OP during the Initial Services Term, including but not limited to any advisory, dealer manager and property management services, have been, or by March 31, 2019, will be, transitioned to, and will be provided directly by, our sponsor, advisor, dealer manager or an affiliate thereof.

We ceased issuing shares in our Offering on April 4, 2014 and in the Initial DRIP Offering effective as of June 30, 2016, but will continue to issue shares of common stock under the Secondary DRIP Offering until certain liquidity events occur, such as the listing of our shares on a national securities exchange or the sale of our company, or the Secondary DRIP Offering is otherwise terminated by our Board. We expect that property acquisitions in 2019 and future periods will be funded by proceeds from financing of the acquired properties, cash flows from operations and the strategic sale of properties and other asset acquisitions.

Our operating results and cash flows are primarily influenced by rental income from our commercial properties, interest expense on our indebtedness and acquisition and operating expenses. Rental and other property income accounted for 86% and 88% of our total revenue for the years ended December 31, 2018 and 2017 , respectively. As 96.2% of our rentable square feet was under lease, including any month-to-month agreements, as of December 31, 2018 with a weighted average remaining lease term of 9.1 years, we believe our exposure to changes in commercial rental rates on our portfolio is substantially mitigated, except for vacancies caused by tenant bankruptcies or other factors. CR IV Management regularly monitors the creditworthiness of our tenants by reviewing each tenant’s financial results, any available credit rating agency reports on the tenant or guarantor, the operating history of the property with such tenant, the tenant’s market share and track record within its industry segment, the general health and outlook of the tenant’s industry segment and other information for changes and possible trends. If CR IV Management identifies significant changes or trends that may adversely affect the creditworthiness of a tenant, it will gather a more in-depth knowledge of the tenant’s financial condition and, if necessary, attempt to mitigate the tenant credit risk by evaluating the possible sale of the property or identifying a possible replacement tenant should the current tenant fail to perform on the lease.

We have primarily acquired core commercial real estate assets primarily consisting of necessity retail properties located throughout the United States. As of December 31, 2018 , we owned 890 properties, which includes nine properties owned through a consolidated joint venture arrangement (the “Consolidated Joint Venture”), comprising 26.5 million rentable square feet of commercial space located in 45 states.

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Critical Accounting Policies and Significant Accounting Estimates

Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Management believes that we have made these estimates and assumptions in an appropriate manner and in a way that accurately reflects our financial condition. We continually test and evaluate these estimates and assumptions using our historical knowledge of the business, as well as other factors, to ensure that they are reasonable for reporting purposes. However, actual results may differ from these estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses. We believe the following critical accounting policies govern the significant judgments and estimates used in the preparation of our financial statements, which should be read in conjunction with the more complete discussion of our accounting policies and procedures included in Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements in this Annual Report on Form 10-K.

Recoverability of Real Estate Assets

We acquire real estate assets and subsequently monitor those assets quarterly for impairment, including the review of real estate properties subject to direct financing leases, if applicable. Additionally, we record depreciation and amortization related to our assets. The risks and uncertainties involved in applying the principles related to real estate assets include, but are not limited to, the following:


•	The estimated useful lives of our depreciable assets affects the amount of depreciation and amortization recognized on our assets;


•	The review of impairment indicators and subsequent determination of the undiscounted future cash flows could require us to reduce the value of assets and recognize an impairment loss;


•	The fair value of held for sale assets is estimated by management. This estimated value could result in a reduction of the carrying value of the asset; and


•	Changes in assumptions based on actual results may have a material impact on our financial results.

Allocation of Purchase Price of Real Estate Assets

In connection with our acquisition of properties, we allocate the purchase price to the tangible and intangible assets and liabilities acquired based on their respective estimated fair values. Tangible assets consist of land, buildings, fixtures and tenant improvements. Intangible assets consist of above- and below-market lease values and the value of in-place leases. Our purchase price allocations are developed utilizing third-party appraisal reports, industry standards and management experience. The risks and uncertainties involved in applying the principles related to purchase price allocations include, but are not limited to, the following:


•	The value allocated to land, as opposed to buildings, fixtures and tenant improvements, affects the amount of depreciation expense we record. If more value is attributed to land, depreciation expense is lower than if more value is attributed to buildings, fixtures and tenant improvements;


•	Intangible lease assets and liabilities can be significantly affected by estimates including market rent, lease terms including renewal options at rental rates below estimated market rental rates, carrying costs of the property during a hypothetical expected lease-up period, and current market conditions and costs, including tenant improvement allowances and rent concessions; and


•	We determine whether any financing assumed is above- or below-market based upon comparison to similar financing terms for similar types of debt financing with similar maturities.

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements are described in Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements in this Annual Report on Form 10-K.

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Operating Highlights and Key Performance Indicators

2018 Activity


•	Acquired one property for an aggregate purchase price of $11.9 million .


•	Originated four junior mezzanine loans to fund the construction costs for renovation of four condominium properties, secured by a pledge of the equity interests in the portfolio of four condominium properties with a principal balance of $89.3 million.


•	Disposed of 21 properties, consisting of 19 retail properties and two anchored shopping centers, excluding a related outparcel of land, for an aggregate sales price of $66.6 million .


•	Total debt increased by $40.8 million , from $2.49 billion to $2.53 billion .

Portfolio Information

As of December 31, 2018 , we owned 890 properties located in 45 states, the gross rentable square feet of which was 96.2% leased, including any month-to-month agreements, with a weighted average lease term remaining of 9.1 years. During the year ended December 31, 2018 , we disposed of 21 properties, for an aggregate gross sales price of $66.6 million .

The following table shows the property statistics of our real estate assets, which exclude uncompleted development projects and any properties owned through unconsolidated joint ventures, as of December 31, 2018 , 2017 and 2016 :



	Year Ended December 31,
	2018		2017		2016
Number of commercial properties	890		909		882
Rentable square feet (in thousands) ⁽¹⁾	26,516		26,888		26,548
Percentage of rentable square feet leased	96.2	%	97.5	%	98.2	%
Percentage of investment-grade tenants ⁽²⁾	38.6	%	33.9	%	35.5	%

____________________________________


(1)	Includes square feet of buildings on land parcels subject to ground leases.

(2)

Investment-grade tenants are those with a credit rating of BBB- or higher by Standard & Poor’s or a credit rating of Baa3 or higher by Moody’s. The ratings may reflect those assigned by Standard & Poor’s or Moody’s to the lease guarantor or the parent company, as applicable. The weighted average credit rating is weighted based on annualized rental income and is for only those tenants rated by Standard & Poor’s.

The following table summarizes our real estate acquisition activity during the years ended December 31, 2018 , 2017 and 2016 :



	Year Ended December 31,
	2018		2017		2016
Commercial properties acquired ⁽¹⁾	1		42		15
Purchase price of acquired properties (in thousands) ⁽¹⁾	$	11,905	$	307,385	$	216,652
Rentable square feet (in thousands) ^{(1) (2)}	71		1,407		1,268

____________________________________


(1)	Excludes a property owned through an unconsolidated joint venture that was consolidated during the year ended December 31, 2016.


(2)	Includes square feet of buildings on land parcels subject to ground leases.

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The following table shows the tenant diversification of our real estate portfolio, based on annualized rental income, as of December 31, 2018 :



			2018		2018		Percentage of
	Total	Leased	Annualized		Annualized		2018
	Number	Square Feet	Rental Income		Rental Income		Annualized
Tenant	of Leases ⁽¹⁾	(in thousands) ⁽²⁾	(in thousands)		per Square Foot ⁽²⁾		Rental Income
Walgreens - pharmacy	64	938	$	22,931	$	24.45	6	%
Dollar General - discount store	167	1,619	16,429		10.15		5	%
Family Dollar - discount store	31	1,121	14,039		12.52		4	%
United Oil - gas and convenience	4	72	13,342		185.31		4	%
Lowe’s - home and garden	15	1,898	13,256		6.98		4	%
Academy Sports - sporting goods	8	2,098	13,211		6.30		4	%
CVS - pharmacy	46	576	12,884		22.37		4	%
PetSmart - pet supply	39	753	11,322		15.04		3	%
LA Fitness - entertainment and recreation	11	502	9,240		18.41		2	%
Dick’s Sporting Goods - sporting goods	16	724	8,358		11.54		2	%
Other	1,128	15,202	226,284		14.89		62	%
	1,529	25,503	$	361,296	$	14.17	100	%

____________________________________


(1)	Includes leases which are master lease agreements.


(2)	Includes square feet of the buildings on land parcels subject to ground leases.

The following table shows the tenant industry diversification of our real estate portfolio, based on annualized rental income, as of December 31, 2018 :



			2018		2018		Percentage of
	Total	Leased	Annualized		Annualized		2018
	Number	Square Feet	Rental Income		Rental Income		Annualized
Industry	of Leases ⁽¹⁾	(in thousands) ⁽²⁾	(in thousands)		per Square Foot ⁽²⁾		Rental Income
Discount store	292	5,159	$	53,218	$	10.32	15	%
Pharmacy	111	1,525	35,998		23.61		10	%
Sporting goods	38	3,574	32,244		9.02		9	%
Home and garden	55	3,293	31,177		9.47		9	%
Grocery	55	2,156	27,046		12.54		7	%
Gas and convenience	34	279	26,864		96.29		7	%
Restaurants - casual dining	112	605	17,553		29.01		5	%
Pet supply	55	963	14,650		15.21		4	%
Entertainment and recreation	26	735	14,280		19.43		4	%
Apparel and jewelry	94	813	12,766		15.70		4	%
Other	657	6,401	95,500		14.92		26	%
	1,529	25,503	$	361,296	$	14.17	100	%

____________________________________


(1)	Includes leases which are master lease agreements.


(2)	Includes square feet of the buildings on land parcels subject to ground leases.

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The following table shows the geographic diversification of our real estate portfolio, based on annualized rental income, as of December 31, 2018 :



			2018		2018		Percentage of
	Total	Rentable	Annualized		Annualized		2018
	Number of	Square Feet	Rental Income		Rental Income		Annualized
Location	Properties	(in thousands) ⁽¹⁾	(in thousands)		per Square Foot ⁽¹⁾		Rental Income
California	77	1,034	$	33,425	$	32.33	9	%
Texas	96	1,985	29,974		15.10		8	%
Georgia	39	2,273	27,535		12.11		8	%
Ohio	62	2,122	24,119		11.37		7	%
Florida	56	1,692	20,591		12.17		6	%
Alabama	66	1,541	19,158		12.43		5	%
Illinois	27	1,284	16,250		12.66		4	%
North Carolina	31	1,182	14,485		12.25		4	%
New York	12	372	13,960		37.53		4	%
Indiana	25	1,040	13,546		13.03		4	%
Other	399	11,991	148,253		12.36		41	%
	890	26,516	$	361,296	$	13.63	100	%

____________________________________


(1)	Includes square feet of the buildings on land parcels subject to ground leases.

The following table shows the property type diversification of our real estate portfolio, based on annualized rental income, as of December 31, 2018 :



			2018		2018		Percentage of
	Total	Rentable	Annualized		Annualized		2018
	Number of	Square Feet	Rental Income		Rental Income		Annualized
Property Type	Properties	(in thousands) ⁽¹⁾	(in thousands)		per Square Foot ⁽¹⁾		Rental Income
Retail	814	14,234	$	212,090	$	14.90	59	%
Anchored shopping centers	72	10,629	140,744		13.24		39	%
Industrial and distribution	4	1,653	8,462		5.12		2	%
	890	26,516	$	361,296	$	13.63	100	%

____________________________________


(1)	Includes square feet of the buildings on land parcels subject to ground leases.

Leases

Although there are variations in the specific terms of the leases of our properties, the following is a summary of the general structure of our current leases. Generally, the leases of the properties acquired provide for initial terms of ten or more years and

provide the tenant with one or more multi-year renewal options, subject to generally the same terms and conditions as the initial lease term. Certain leases also provide that in the event we wish to sell the property subject to that lease, we first must offer the lessee the right to purchase the property on the same terms and conditions as any offer which we intend to accept for the sale of the property. The properties are generally leased under net leases pursuant to which the tenant bears responsibility for substantially all property costs and expenses associated with ongoing maintenance and operation, including utilities, property taxes and insurance, while certain of the leases require us to maintain the roof, structure and parking areas of the building. Additionally, certain leases provide for increases in rent as a result of fixed increases, increases in the consumer price index, and/or increases in the tenant’s sales volume. The leases of the properties provide for annual rental payments (payable in monthly installments) ranging from $6,000 to $8.0 million (average of $210,000 ). Certain leases provide for limited increases in rent as a result of fixed increases or increases in the consumer price index.

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The following table shows lease expirations of our real estate portfolio, as of December 31, 2018 , during each of the next ten years and thereafter, assuming no exercise of renewal options:



			2018
	Total	Leased	Annualized		2018		Percentage of
	Number	Square Feet	Rental Income		Annualized		2018
	of Leases	Expiring	Expiring		Rental Income		Annualized
Year of Lease Expiration	Expiring ⁽¹⁾	(in thousands) ⁽²⁾	(in thousands)		per Square Foot ⁽²⁾		Rental Income
2019	96	524	$	7,168	$	13.68	2	%
2020	141	979	15,468		15.80		4	%
2021	137	1,183	16,936		14.32		5	%
2022	131	1,648	18,949		11.50		5	%
2023	186	2,528	33,636		13.31		9	%
2024	129	2,455	33,152		13.50		9	%
2025	61	1,915	21,256		11.10		6	%
2026	74	1,264	18,807		14.88		5	%
2027	82	1,608	17,416		10.83		5	%
2028	161	2,318	31,415		13.55		9	%
Thereafter	331	9,081	147,093		16.20		41	%
	1,529	25,503	$	361,296	$	14.17	100	%

____________________________________


(1)	Includes leases which are master lease agreements.


(2)	Includes square feet of the buildings on land parcels subject to ground leases.

The following table shows the economic metrics of our real estate assets as of and for the years ended December 31, 2018 , 2017 and 2016 :



	2018	2017	2016
Economic Metrics
Weighted-average lease term (in years) ⁽¹⁾	9.1	9.6	9.9
Lease rollover ⁽¹⁾⁽²⁾ :
Annual average	5.1%	4.2%	4.0%
Maximum for a single year	9.3%	5.2%	5.3%

____________________________________


(1)	Based on annualized rental income of our real estate portfolio as of December 31, 2018 , 2017 and 2016 .


(2)	Through the end of the next five years as of the respective reporting date.

Results of Operations

Overview

We are not aware of any material trends or uncertainties, other than national economic conditions affecting real estate in general, that may reasonably be expected to have a material impact on our results from the acquisition, management and operations of properties other than those listed in Part I, Item 1A — Risk Factors.

Same Store Analysis

Our results of operations are influenced by the timing of acquisitions and the operating performance of our real estate assets. We review our stabilized operating results, measured by net operating income (“NOI”), from properties that we owned for the entirety of both the current and prior year reporting periods, referred to as “same store” properties, and we believe that the presentation of operating results for same store properties provides useful information to stockholders. Net operating income is a supplemental non-GAAP financial measure of a real estate company’s operating performance. Net operating income is considered by management to be a helpful supplemental performance measure, as it enables management to evaluate the impact of occupancy, rents, leasing activity, and other controllable property operating results at our real estate properties, and it provides a consistent method for the comparison of our properties. We define NOI as operating revenues less operating expenses, which exclude (i) depreciation and amortization, (ii) interest expense and other non-property related revenue and expenses items such as (a) general and administrative expenses, (b) advisory fees, (c) transaction-related expenses and (d)

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interest income. Our NOI may not be comparable to that of other REITs and should not be considered to be more relevant or accurate in evaluating our operating performance than the current GAAP methodology used in calculating net income (loss). In determining the same store property pool, we include all properties that were owned for the entirety of both the current and prior reporting periods, except for properties during the current or prior year that were under development or redevelopment.

Comparison of the Years Ended December 31, 2018 and 2017

A total of 846 properties were acquired before January 1, 2017 and represent our “same store” properties during the years ended December 31, 2018 and 2017 . “Non-same store” properties, for purposes of the table below, includes properties acquired on or after January 1, 2017 . The following table details the components of net operating income broken out between same store and non-same store properties (dollar amounts in thousands):



	Total									Same Store							Non-Same Store ⁽¹⁾
	For the Year Ended December 31,									For the Year Ended December 31,							For the Year Ended December 31,
	2018			2017			Change			2018		2017		Change			2018		2017		Change
Rental income	$	371,235		$	371,929		$	(694	)	$	343,023	$	349,221	$	(6,198	)	$	28,212	$	22,708	$	5,504
Tenant reimbursement income	58,401			52,166			6,235			54,970		49,445		5,525			3,431		2,721		710
Total property-related income	429,636			424,095			5,541			397,993		398,666		(673		)	31,643		25,429		6,214

Property operating expenses	30,267			29,777			490			28,490		28,610		(120		)	1,777		1,167		610
Real estate tax expenses	37,898			37,489			409			36,149		35,658		491			1,749		1,831		(82		)
Total property operating expenses	68,165			67,266			899			64,639		64,268		371			3,526		2,998		528

Net operating income	$	361,471		$	356,829		$	4,642		$	333,354	$	334,398	$	(1,044	)	$	28,117	$	22,431	$	5,686

Interest income	$	1,640		$	—		$	1,640
General and administrative expenses	(14,127		)	(13,716		)	(411		)
Advisory fees and expenses	(43,399		)	(44,072		)	673
Transaction-related expenses	(2,601		)	(1,599		)	(1,002		)
Depreciation and amortization	(140,979		)	(141,392		)	413
Impairment	(32,975		)	(2,855		)	(30,120		)
Gain on disposition of real estate, net	6,299			17,044			(10,745		)
Interest expense and other, net	(97,917		)	(90,688		)	(7,229		)
Net income	$	37,412		$	79,551		$	(42,139	)

______________________


(1)	Includes income from properties disposed of during the period.

Net Operating Income

Same store property net operating income decreased $1.0 million during the year ended December 31, 2018 , as compared to the same period in 2017 . The decrease was primarily due to the decrease in same store occupancy to 96.0% from 97.4% as of December 31, 2018 and 2017 , respectively. Additionally, tenant bankruptcies at 18 same store properties account for $5.3 million of the net decrease in rental income for the year ended December 31, 2018 .

Non-same store property net operating income increased $5.7 million during 2018, as compared to the same period in 2017 . The increase is primarily due to recognizing a full period of net operating income for the 42 properties acquired during the year ended December 31, 2017 , offset by the disposition of 21 properties during the year ended December 31, 2018 .

General and Administrative Expenses

The primary general and administrative expense items are operating expense reimbursements to our advisor, escrow and trustee fees, state franchise and income taxes, office expenses and accounting fees.

The increase in general and administrative expenses of $411,000 for the year ended December 31, 2018 , compared to the same period in 2017 , was primarily due to increases in operating expense reimbursements to our advisor, offset by decreases in unused credit facility fees and office expenses.

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Advisory Fees and Expenses

Pursuant to the advisory agreement with CR IV Management and based upon the amount of our current invested assets, we are required to pay to CR IV Management a monthly advisory fee equal to one-twelfth of 0.75% of the average invested assets up to $2.0 billion, one-twelfth of 0.70% of the average invested assets over $2.0 billion up to $4.0 billion and one-twelfth of 0.65% of the average invested assets over $4.0 billion. Additionally, we may be required to reimburse certain expenses incurred by CR IV Management in providing advisory services, subject to limitations as set forth in the advisory agreement.

The decrease in advisory fees and expenses of $673,000 during the year ended December 31, 2018 , as compared to the same period in 2017 , was due to a decrease in our average invested assets to $5.4 billion over the year ended December 31, 2018 , compared to $5.5 billion over the year ended December 31, 2017 .

Transaction-Related Expenses

We pay CR IV Management or its affiliates acquisition fees of up to 2.0% of: (1) the contract purchase price of each property or asset we acquire; (2) the amount paid in respect of the development, construction or improvement of each asset we acquire; (3) the purchase price of any loan we acquire; and (4) the principal amount of any loan we originate. We also reimburse CR IV Management or its affiliates for transaction-related expenses incurred in the process of acquiring a property or the origination or acquisition of a loan, so long as the total acquisition fees and expenses relating to the transaction do not exceed 6.0% of the contract purchase price, unless otherwise approved by a majority of our Board, including a majority of our independent directors, as commercially competitive, fair and reasonable to us. In April 2017, we adopted ASU 2017-01, which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Our acquisitions made after the adoption of ASU 2017-01 qualify as asset acquisitions, and as such, acquisition-related fees and certain acquisition-related expenses related to these asset acquisitions are capitalized. Prior to the adoption of ASU 2017-01 in April 2017, all of our costs related to property acquisitions, including acquisition fees described below, were expensed as incurred, and all of our acquisitions were accounted for as business combinations. Prior to April 2017, acquisition-related expenses primarily consisted of legal, deed transfer and other costs related to real estate purchase transactions, including costs incurred for deals that were not consummated.

The increase in transaction-related expenses of $1.0 million during the year ended December 31, 2018 , as compared to the same period in 2017 , was primarily due to acquisition fees paid to the advisor related to the origination of $89.3 million of loans held-for-investment during the year ended December 31, 2018 . The increase was offset by the acquisition of four properties prior to the adoption of ASU 2017-01 which were accounted for as business combinations during the year ended December 31, 2017 . Acquisitions made during the year ended December 31, 2018 were all accounted for as asset acquisitions in accordance with ASU 2017-01, and as such, transaction-related costs were capitalized.

Depreciation and Amortization

The decrease in depreciation and amortization expenses of $413,000 during the year ended December 31, 2018 , as compared to the same period in 2017 , was primarily due to the disposition of 21 properties, offset by the acquisition of one additional rental income-producing property, subsequent to December 31, 2017, offset by recognizing a full period of depreciation and amortization expenses on the 42 properties acquired in 2017 .

Impairment

Impairments increased $30.1 million during the year ended December 31, 2018 , as compared to the same period in 2017 , due to 22 properties that were deemed to be impaired, resulting in impairment charges of $33.0 million during the year ended December 31, 2018 , compared to four properties that were deemed to be impaired, resulting in impairment charges of $2.9 million during the year ended December 31, 2017 .

Gain on Disposition of Real Estate, Net

The decrease in gain on disposition of real estate during the year ended December 31, 2018 , as compared to the same period in 2017 , was primarily due to the disposition of 21 properties for a gain of $6.3 million during the year ended December 31, 2018 compared to the disposition of 15 properties for a gain of $17.0 million during the year ended December 31, 2017 .

Interest Expense and Other, Net

Interest expense and other, net also includes amortization of deferred financing costs.

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The increase in interest expense and other, net, of $7.2 million for the year ended December 31, 2018 , as compared to the same period in 2017 , was primarily due to an increase in the average aggregate amount of debt outstanding from $2.4 billion during the year ended December 31, 2017 to $2.5 billion during the year ended December 31, 2018 , as well as an increase in the weighted average interest rate from 3.6% as of December 31, 2017 to 3.9% as of December 31, 2018 .

Comparison of the Years Ended December 31, 2017 and 2016

A total of 850 properties were acquired before January 1, 2016 and represent our “same store” properties during the years ended December 31, 2017 and 2016. “Non-same store” properties, for purposes of the table below, includes properties acquired on or after January 1, 2016. The following table details the components of net operating income broken out between same store and non-same store properties (dollar amounts in thousands):



	Total									Same Store							Non-Same Store ⁽¹⁾
	For the Year Ended December 31,									For the Year Ended December 31,							For the Year Ended December 31,
	2017			2016			Change			2017		2016		Change			2017		2016		Change
Rental income	$	371,929		$	356,126		$	15,803		$	335,585	$	339,477	$	(3,892	)	$	36,344	$	16,649	$	19,695
Tenant reimbursement income	52,166			51,325			841			45,614		49,343		(3,729		)	6,552		1,982		4,570
Total property-related income	424,095			407,451			16,644			381,199		388,820		(7,621		)	42,896		18,631		24,265

Property operating expenses	29,777			23,176			6,601			26,822		22,202		4,620			2,955		974		1,981
Real estate tax expenses	37,489			35,063			2,426			33,568		33,922		(354		)	3,921		1,141		2,780
Total property operating expenses	67,266			58,239			9,027			60,390		56,124		4,266			6,876		2,115		4,761

Net operating income	$	356,829		$	349,212		$	7,617		$	320,809	$	332,696	$	(11,887	)	$	36,020	$	16,516	$	19,504

General and administrative expenses	$	(13,716	)	$	(12,502	)	$	(1,214	)
Advisory fees and expenses	(44,072		)	(41,926		)	(2,146		)
Transaction-related expenses	(1,599		)	(4,191		)	2,592
Depreciation and amortization	(141,392		)	(134,672		)	(6,720		)
Impairment	(2,855		)	(6,737		)	3,882
Gain on disposition of real estate, net	17,044			2,907			14,137
Interest expense and other, net	(90,688		)	(79,465		)	(11,223		)
Loss recognized on equity interest remeasured to fair value	—			(647		)	647
Net income	$	79,551		$	71,979		$	7,572

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(1)	Includes income from properties disposed of during the period.

Net Operating Income

Same store property net operating income decreased $11.9 million during the year ended December 31, 2017, as compared to the same period in 2016. The decrease was primarily due to the decrease in same store occupancy to 97.4% from 98.2% as of December 31, 2017 and 2016, respectively. Additionally, tenant bankruptcies at 14 same store properties accounted for $2.6 million of the net decrease in rental income for the year ended December 31, 2017.

Non-same store property net operating income increased $19.5 million during 2017, as compared to the same period in 2016. The increase was primarily due to the acquisition of 42 additional rental income-producing properties subsequent to December 31, 2016 as well as recognizing a full year of net operating income on 15 properties acquired in 2016.

General and Administrative Expenses

The increase in general and administrative expenses of $1.2 million during the year ended December 31, 2017, as compared to the same period in 2016, was primarily due to increases in operating expense reimbursements to our advisor, as well as increases in state franchise and income taxes during the year ended December 31, 2017, primarily as a result of the acquisition of 42 rental income-producing properties subsequent to December 31, 2016 as well as recognizing a full year of general and administrative expenses on 15 properties acquired in 2016.

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Advisory Fees and Expenses

The increase in advisory fees and expenses of $2.1 million during the year ended December 31, 2017, as compared to the same period in 2016, was primarily due to an increase in our average invested assets to $5.5 billion for the year ended December 31, 2017, compared to $5.2 billion for the year ended December 31, 2016.

Transaction-Related Expenses

The decrease in transaction-related expenses of $2.6 million during the year ended December 31, 2017, as compared to the same period in 2016, was primarily due to the acquisition of four commercial properties prior to the adoption of ASU 2017-01, for an aggregate purchase price of $55.4 million during the year ended December 31, 2017, compared to the acquisition of 15 commercial properties for an aggregate purchase price of $216.7 million during the year ended December 31, 2016. During the year ended December 31, 2016, transaction-related costs related to property acquisitions were expensed as incurred.

Depreciation and Amortization

The increase in depreciation and amortization expenses of $6.7 million during the year ended December 31, 2017, as compared to the same period in 2016, was primarily due to the acquisition of 42 additional rental income-producing properties subsequent to December 31, 2016 as well as recognizing a full year of depreciation and amortization expenses on 15 properties acquired in 2016.

Impairment

The decrease in impairments of $3.8 million during the year ended December 31, 2017, as compared to the same period in 2016, was due to four properties that were deemed to be impaired, resulting in impairment charges of $2.9 million during the year ended December 31, 2017, compared to three properties that were deemed to be impaired, resulting in impairment charges of $6.7 million during the year ended December 31, 2016.

Gain on Disposition of Real Estate, Net

The increase in gain on disposition of real estate, net of $14.1 million during the year ended December 31, 2017, as compared to the same period in 2016 was due to the disposition of 15 properties for a gain of $17.0 million during the year ended December 31, 2017 compared to the disposition of five properties for a gain of $2.9 million during the year ended December 31, 2016.

Interest Expense and Other, Net

The increase in interest expense and other, net of $11.2 million during the year ended December 31, 2017, as compared to the same period in 2016, was primarily due to an increase in the average aggregate amount of debt outstanding from $2.2 billion during the year ended December 31, 2016 to $2.4 billion during the year ended December 31, 2017.

Distributions

On a quarterly basis, our Board authorizes a daily distribution for the succeeding quarter. The Board authorized the following daily distribution amounts per share for the periods indicated below:



Period Commencing	Period Ending	Daily Distribution Amount
April 14, 2012	December 31, 2012	$0.001707848
January 1, 2013	December 31, 2015	$0.001712523
January 1, 2016	December 31, 2016	$0.001706776
January 1, 2017	June 30, 2019	$0.001711452

As of December 31, 2018 , we had distributions payable of $16.5 million .

The following table presents distributions and source of distributions for the periods indicated below (dollar amounts in thousands):

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	Year Ended December 31,
	2018				2017
	Amount		Percent		Amount		Percent
Distributions paid in cash	$	102,822	53	%	$	93,310	48	%
Distributions reinvested	91,764		47	%	101,344		52	%
Total distributions	$	194,586	100	%	$	194,654	100	%
Source of distributions:
Net cash provided by operating activities ⁽¹⁾	$	194,586	100	%	$	194,654	100	%

____________________________________


(1)	Net cash provided by operating activities for the years ended December 31, 2018 and 2017 was $205.8 million and $198.9 million , respectively.

Share Redemptions

Our share redemption program permits our stockholders to sell their shares of common stock back to us, subject to certain conditions and limitations. We will not redeem in excess of 5.0% of the weighted average number of shares outstanding during the trailing 12 months prior to the end of the fiscal quarter for which the redemptions are being paid. Funding for the redemption of shares will be limited to the cumulative net proceeds we receive from the sale of shares under the Secondary DRIP Offering, net of shares redeemed to date. In addition, we will generally limit quarterly redemptions to approximately 1.25% of the weighted average number of shares outstanding during the trailing 12 -month period ending on the last day of the fiscal quarter for which the redemptions are being paid, and to the net proceeds we receive from the sale of shares in the respective quarter under the Secondary DRIP Offering. Any of the foregoing limits might prevent us from accommodating all redemption requests made in any fiscal quarter or in any 12-month period. We received redemption requests of approximately 16.1 million shares for $150.4 million in excess of the net proceeds we received from the issuance of shares under the Secondary DRIP Offering during the three months ended December 31, 2018 . Management, in its discretion, limited the amount of shares redeemed for the three months ended December 31, 2018 to an amount equal to net proceeds we received from the sale of shares pursuant to the Secondary DRIP Offering during the respective period. During the year ended December 31, 2018 , we received valid redemption requests under our share redemption program totaling approximately 68.2 million shares, of which we redeemed approximately 7.4 million shares as of December 31, 2018 for $69.5 million (at an average redemption price of $9.37 per share) and approximately 2.3 million shares subsequent to December 31, 2018 for $21.7 million at an average redemption price of $9.37 per share. The remaining redemption requests relating to approximately 58.5 million shares went unfulfilled. During the year ended December 31, 2017, we received valid redemption requests under our share redemption program totaling approximately 44.2 million shares, of which we redeemed approximately 7.6 million shares as of December 31, 2017 for $76.6 million (at an average redemption price of $10.08 per share) and approximately 2.4 million shares subsequent to December 31, 2017 for $24.3 million at an average redemption price of $10.08 per share. The remaining redemption requests relating to approximately 34.2 million shares went unfulfilled. A valid redemption request is one that complies with the applicable requirements and guidelines of our share redemption program then in effect. The share redemptions were funded with proceeds from the Secondary DRIP Offering.

See the discussion of our share redemption program in Part II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Share Redemption Program in this Annual Report on Form 10-K.

Liquidity and Capital Resources

General

We expect to utilize funds from cash flow from operations and future proceeds from secured or unsecured financing to complete future property acquisitions and for general corporate uses. The sources of our operating cash flows will primarily be provided by the rental income received from current and future leased properties.

As of December 31, 2018 , we had an unsecured credit facility with JPMorgan Chase Bank, N.A., as administrative agent (the “Credit Facility”) that provided for borrowings of up to $1.40 billion , which includes a $1.05 billion unsecured term loan (the “Term Loan”) and up to $350.0 million in unsecured revolving loans (the “Revolving Loans”). As of December 31, 2018 , we had $67.2 million in unused capacity under the Credit Facility, subject to borrowing availability. As of December 31, 2018 , we also had cash and cash equivalents of $10.5 million .

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Short-term Liquidity and Capital Resources

On a short-term basis, our principal demands for funds will be for the acquisition of real estate and real estate-related assets and the payment of acquisition-related fees and expenses, operating expenses, distributions, redemptions and interest and principal on current and any future debt financings, including principal repayments of $49.8 million within the next 12 months. We expect to meet our short-term liquidity requirements through net cash provided by operations and proceeds from the Secondary DRIP Offering, as well as secured or unsecured borrowings from banks and other lenders to finance our future acquisitions and loan originations. Operating cash flows are expected to increase as additional properties are added to our portfolio. We believe that the resources stated above will be sufficient to satisfy our operating requirements for the foreseeable future, and we do not anticipate a need to raise funds from sources other than those described above within the next 12 months.

Long-term Liquidity and Capital Resources

On a long-term basis, our principal demands for funds will be for the acquisition of real estate and real estate-related assets and the payment of tenant improvements, acquisition-related fees and expenses, operating expenses, distributions and redemptions to stockholders and interest and principal on any current and future indebtedness. Generally, we expect to meet our long-term liquidity requirements through proceeds from cash flow from operations, borrowings on the Credit Facility, proceeds from secured or unsecured borrowings from banks and other lenders, and proceeds raised pursuant to the Secondary DRIP Offering.

We expect that substantially all net cash flows from operations will be used to pay distributions to our stockholders after certain capital expenditures, including tenant improvements and leasing commissions, are paid; however, we have used, and may continue to use, other sources to fund distributions, as necessary, including borrowings on the Credit Facility and/or future borrowings on our unencumbered assets. To the extent that cash flows from operations are lower due to fewer properties being acquired or lower than expected returns on the properties, distributions paid to our stockholders may be lower. We expect that substantially all net cash flows from the Offerings or debt financings will be used to fund acquisitions, loan originations, certain capital expenditures, repayments of outstanding debt or distributions and redemptions to our stockholders.

Contractual Obligations

As of December 31, 2018 , we had debt outstanding with a carrying value of $2.5 billion with a weighted average interest rate of 3.9% . See Note 8 — Notes Payable and Credit Facility to our consolidated financial statements in this Annual Report on Form 10-K for certain terms of our debt outstanding.

Our contractual obligations as of December 31, 2018 were as follows (in thousands):



	Payments due by period ⁽¹⁾
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Principal payments — fixed rate debt ⁽²⁾	$	1,178,166	$	49,799	$	398,317	$	533,840	$	196,210
Interest payments — fixed rate debt ⁽³⁾	167,794		45,915		69,479		45,660		6,740
Principal payments — variable rate debt	20,500		—		20,500		—		—
Interest payments — variable rate debt ⁽⁴⁾	1,324		1,145		179		—		—
Principal payments — credit facility	1,331,000		—		281,000		1,050,000		—
Interest payments — credit facility ⁽⁵⁾	156,840		52,511		96,046		8,283		—
Total	$	2,855,624	$	149,370	$	865,521	$	1,637,783	$	202,950

____________________________________


(1)	The table does not include amounts due to CR IV Management or its affiliates pursuant to our advisory agreement because such amounts are not fixed and determinable.


(2)	Principal payment amounts reflect actual payments based on the face amount of notes payable secured by our wholly-owned properties, which excludes the fair value adjustment, net of amortization, of mortgage notes assumed of $331,000 as of December 31, 2018 .


(3)	As of December 31, 2018 , we had $178.4 million of variable rate debt effectively fixed through the use of interest rate swap agreements. We used the effective interest rates fixed under our interest rate swap agreements to calculate the debt payment obligations in future periods.


(4)	As of December 31, 2018 , we had variable rate debt outstanding of $20.5 million with a weighted average interest rate of 5.6% . We used the weighted average interest rate to calculate the debt payment obligations in future periods.

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(5)

As of December 31, 2018 , the Term Loan outstanding totaled $1.05 billion , $811.7 million of which is subject to interest rate swap agreements (the “Swapped Term Loan”). As of December 31, 2018 , the weighted average all-in interest rate for the Swapped Term Loan was 3.8% . The remaining $519.3 million outstanding under the Credit Facility had a weighted average interest rate of 4.2% as of December 31, 2018 .

We expect to incur additional borrowings in the future to acquire additional properties and other real estate-related assets. There is no limitation on the amount we may borrow against any single improved property. Our borrowings will not exceed 75% of the cost of our gross assets (or 300% of net assets) as of the date of any borrowing, which is the maximum level of indebtedness permitted under our charter; however, we may exceed that limit if approved by a majority of our independent directors and disclosed to our stockholders in the next quarterly report along with justification for such excess borrowing. As of December 31, 2018 , our ratio of debt to total gross assets net of gross intangible lease liabilities was 50.3% and our ratio of debt to the fair market value of our gross assets was 46.5% . Fair market value is based on the estimated market value of our real estate assets as of December 31, 2017 that were used to determine our estimated per share NAV, and for those assets acquired from January 1, 2018 through December 31, 2018 is based on the purchase price.

Our management reviews net debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage, and we therefore believe that the presentation of net debt provides useful information to stockholders. Net debt is a non-GAAP measure used to show our outstanding principal debt balance, excluding certain GAAP adjustments, such as premiums or discounts, financing and issuance costs, and related accumulated amortization, less all cash and cash equivalents. As of December 31, 2018 , our net debt leverage ratio, which is the ratio of net debt to total gross real estate and related assets net of gross intangible lease liabilities, was 50.1% . The following table provides a reconciliation of the notes payable and credit facility, net balance, as reported on our consolidated balance sheet, to net debt as of December 31, 2018 (dollar amounts in thousands):



	Balance as of December 31, 2018
Notes payable and credit facility, net	$	2,516,914
Deferred costs and net premiums ⁽¹⁾	12,752
Less: Cash and cash equivalents	(10,533		)
Net debt	$	2,519,133

Gross real estate and related assets, net ⁽²⁾	$	5,025,198
Net debt leverage ratio	50.1		%

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(1) Deferred costs relate to mortgage notes payable and the term portion of the Credit Facility.

(2) Net of gross intangible lease liabilities. Includes loans held-for-investment principal balance of $89.7 million .

Cash Flow Analysis

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Operating Activities. Net cash provided by operating activities increased by $6.9 million for the year ended December 31, 2018 , as compared to the same period in 2017 . The change was primarily due to a decrease in non-cash adjustments to net income, including decreased gain on dispositions of $10.7 million and working capital accounts of $7.7 million and an increase in impairment charges of $30.1 million during the year ended December 31, 2018 , compared to the same period in 2017 . These changes were offset by a decrease in net income after non-cash adjustments for depreciation and amortization, net, of $42.1 million due to the disposition of 21 properties, partially offset by the acquisition of one additional rental income-producing property subsequent to December 31, 2017 . See “— Results of Operations” for a more complete discussion of the factors impacting our operating performance.

Investing Activities. Net cash used in investing activities decreased by $179.5 million for the year ended December 31, 2018 , as compared to the same period in 2017 . The decrease was primarily due to decreased investment in real estate assets of $301.5 million , offset by a decrease in proceeds from the disposition of real estate assets of $34.8 million as well as the origination and purchase of four junior mezzanine loans for an aggregate cost of $89.1 million during the year ended December 31, 2018 , compared to the same period in 2017 .

Financing Activities. Net cash used in financing activities was $156.1 million for the year ended December 31, 2018 , compared to net cash provided by financing activities of $20.5 million for the year ended December 31, 2017 . The decrease of net cash provided by financing activities of $176.6 million was primarily due to a decrease in net proceeds from the borrowing

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facilities and notes payable of $190.3 million , offset by a decrease in deferred financing costs paid of $13.2 million as a result of the amended and restated Credit Facility that was entered into during the year ended December 31, 2017 .

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

Operating Activities. During the year ended December 31, 2017, net cash provided by operating activities increased by $6.6 million to $198.9 million compared to net cash provided by operating activities of $192.3 million for the year ended December 31, 2016. The change was primarily due to the acquisition of 42 properties subsequent to December 31, 2016, resulting in an increase in net income after non-cash adjustments for depreciation and amortization, net, of $13.3 million. Additionally, net cash provided by operating activities increased due to a net increase in working capital accounts of $6.3 million, offset by an increase in gain on dispositions of real estate assets, net, of $14.1 million. See “— Results of Operations” for a more complete discussion of the factors impacting our operating performance.

Investing Activities. Net cash used in investing activities increased by $35.7 million to $223.4 million for the year ended December 31, 2017, compared to $187.7 million for the year ended December 31, 2016. The increase was primarily due to the acquisition of 42 commercial properties for an aggregate purchase price of $307.4 million during the year ended December 31, 2017, compared to 15 commercial properties for an aggregate purchase price of $216.7 million during the year ended December 31, 2016. Additionally, net cash used in investing activities increased due to a net increase in capital expenditures of $10.5 million, offset by the disposal of 15 properties for an aggregate gross sales price of $100.6 million during the year ended December 31, 2017, compared to the disposal of five properties for an aggregate gross sales price of $31.6 million during the year ended December 31, 2016.

Financing Activities. Net cash provided by financing activities was $20.5 million for the year ended December 31, 2017, compared to net cash used in financing activities of $21.3 million for the year ended December 31, 2016. The increase of net cash provided by financing activities of $41.8 million was primarily due to an increase in net proceeds from the borrowing facilities and notes payable of $51.1 million, offset by an increase in deferred financing costs paid of $9.9 million.

Election as a REIT

We elected to be taxed, and currently qualify, as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2012. To maintain our qualification as a REIT, we must continue to meet certain requirements relating to our organization, sources of income, nature of assets, distributions of income to our stockholders and recordkeeping. As a REIT, we generally are not subject to federal income tax on taxable income that we distribute to our stockholders so long as we distribute at least 90% of our annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains).

If we fail to maintain our qualification as a REIT for any reason in a taxable year and applicable relief provisions do not apply, we will be subject to tax on our taxable income at regular corporate rates. We will not be able to deduct distributions paid to our stockholders in any year in which we fail to maintain our qualification as a REIT. We also will be disqualified for the four taxable years following the year during which qualification was lost, unless we are entitled to relief under specific statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe that we are organized and operate in such a manner as to maintain our qualification as a REIT for federal income tax purposes. No provision for federal income taxes has been made in our accompanying consolidated financial statements. We are subject to certain state and local taxes related to the operations of properties in certain locations, which have been provided for in our accompanying consolidated financial statements.

Inflation

We are exposed to inflation risk as income from long-term leases is the primary source of our cash flows from operations. There are, and we expect that there will continue to be, provisions in many of our tenant leases that are intended to protect us from, and mitigate the risk of, the impact of inflation. These provisions include rent steps and clauses enabling us to receive payment of additional rent calculated as a percentage of the tenant’s gross sales above pre-determined thresholds. In addition, most of our leases require the tenant to pay all or a majority of the property’s operating expenses, including real estate taxes, special assessments and sales and use taxes, utilities, insurance and building repairs. However, because of the long-term nature of leases for real property, such leases may not reset frequently enough to adequately offset the effects of inflation.

Related-Party Transactions and Agreements

We have entered into agreements with CR IV Management or its affiliates whereby we agree to pay certain fees to, or reimburse certain expenses of, CR IV Management or its affiliates such as acquisition and advisory fees and expenses, organization and offering costs, leasing fees and reimbursement of certain operating costs. See Note 11— Related-Party

Transactions and Arrangements to our consolidated financial statements in this Annual Report on Form 10-K for a discussion of the various related-party transactions, agreements and fees.

Conflicts of Interest

Richard S. Ressler, the chairman of our Board, chief executive officer and president, who is also a founder and principal of CIM and is an officer/director of certain of its affiliates, is the chairman of the board, chief executive officer and president of CCIT III and CIM Income NAV, a director of CCPT V and CCIT II, and vice president of CR IV Management. One of our directors, Avraham Shemesh, who is also a founder and principal of CIM and is an officer/director of certain of its affiliates, serves as the chairman of the board of CCIT II and CCPT V and as a director of CCIT III and CIM Income NAV, and is president and treasurer of CR IV Management. One of our independent directors, W. Brian Kretzmer, also serves as an independent director of CCIT III and CIM Income NAV. Nathan D. DeBacker, our chief financial officer and treasurer, who is also an officer of other real estate programs sponsored by CCO Group, is vice president of CR IV Management. In addition, affiliates of CR IV Management act an advisor to CCPT V, CCIT II, CCIT III and CIM Income NAV, all of which are public, non-listed REITs sponsored or operated by CCO Group. As such, there are conflicts of interest where CR IV Management or its affiliates, while serving in the capacity as sponsor, general partner, officer, director, key personnel and/or advisor for CIM or another real estate program sponsored or operated by CIM or CCO Group, including other real estate offerings in registration, may be in conflict with us in connection with providing services to other real estate-related programs related to property acquisitions, property dispositions, and property management, among others. The compensation arrangements between affiliates of CR IV Management and CIM and these other real estate programs sponsored or operated by CCO Group could influence the advice provided to us. See Part I, Item 1. Business — Conflicts of Interest of this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

As of December 31, 2018 and 2017 , we had no material off-balance sheet arrangements that had or are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity or capital resources.


ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

The market risk associated with financial instruments and derivative financial instruments is the risk of loss from adverse changes in market prices or interest rates. Our market risk arises primarily from interest rate risk relating to variable rate borrowings. To meet our short and long-term liquidity requirements, we borrow funds at a combination of fixed and variable rates. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to manage our overall borrowing costs. To achieve these objectives, from time to time, we may enter into interest rate hedge contracts such as swaps, collars and treasury lock agreements in order to mitigate our interest rate risk with respect to various debt instruments. We do not intend to hold or issue these derivative contracts for trading or speculative purposes. We do not have any foreign operations and thus we are not exposed to foreign currency fluctuations.

Interest Rate Risk

As of December 31, 2018 , we had variable rate debt of $539.8 million , excluding any debt subject to interest rate swap agreements, and therefore, we are exposed to interest rate changes in the London Interbank Offered Rate. As of December 31, 2018 , an increase or decrease of 50 basis points in interest rates would result in an increase or decrease in interest expense of $2.7 million per year.

As of December 31, 2018 , we had seven interest rate swap agreements outstanding, which mature on various dates from March 2019 through July 2021 , with an aggregate notional amount of $990.1 million and an aggregate fair value of the net derivative asset of $11.0 million . The fair value of these interest rate swap agreements is dependent upon existing market interest rates and swap spreads. As of December 31, 2018 , an increase of 50 basis points in interest rates would result in a change of $9.6 million to the fair value of the net derivative asset, resulting in a net derivative asset of $20.6 million . A decrease of 50 basis points in interest rates would result in a $9.7 million change to the fair value of the net derivative asset, resulting in a net derivative asset of $1.3 million .

As the information presented above includes only those exposures that existed as of December 31, 2018 , it does not consider exposures or positions arising after that date. The information presented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.

These amounts were determined by considering the impact of hypothetical interest rate changes on our borrowing costs and assume no other changes in our capital structure.

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Credit Risk

Concentrations of credit risk arise when a number of tenants are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to us, to be similarly affected by changes in economic conditions. We are subject to tenant, geographic and industry concentrations. Any downturn of the economic conditions in one or more of these tenants, states or industries could result in a material reduction of our cash flows or material losses to us.

The factors considered in determining the credit risk of our tenants include, but are not limited to: payment history; credit status and change in status (credit ratings for public companies are used as a primary metric); change in tenant space needs ( i.e. , expansion/downsize); tenant financial performance; economic conditions in a specific geographic region; and industry specific credit considerations. We believe that the credit risk of our portfolio is reduced by the high quality of our existing tenant base, reviews of prospective tenants’ risk profiles prior to lease execution and consistent monitoring of our portfolio to identify potential problem tenants and mitigation options.


ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data filed as part of this report are set forth beginning on page F-1 in this Annual Report on Form 10-K.


ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no changes in or disagreements with our independent registered public accountants during the year ended December 31, 2018 .

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that no controls and procedures, no matter how well designed and operated, can provide absolute assurance of achieving the desired control objectives.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of December 31, 2018 was conducted under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures, as of December 31, 2018 , were effective at a reasonable assurance level.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2018 .

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Changes in Internal Control Over Financial Reporting

No change occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


ITEM 9B.	OTHER INFORMATION

None.

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PART III


ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item will be presented in our definitive proxy statement for our 2019 annual meeting of stockholders, which is expected to be filed with the SEC within 120 days after December 31, 2018 , and is incorporated herein by reference.


ITEM 11.	EXECUTIVE COMPENSATION


ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE


ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

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PART IV


ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statements

The list of the consolidated financial statements contained herein is set forth on page F-1 hereof.

Financial Statement Schedules

Schedule III – Real Estate Assets and Accumulated Depreciation is set forth beginning on page S-1 hereof.

Schedule IV – Mortgage Loans on Real Estate is set forth beginning on page S-27 hereof.

All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are not applicable and therefore have been omitted.

Exhibits

The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K for the year ended December 31, 2018 (and are numbered in accordance with Item 601 of Regulation S-K).



Exhibit No.		Description

3.1		First Articles of Amendment and Restatement of Cole Credit Property Trust IV, Inc. (Incorporated by reference to Exhibit 3.4 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (File No. 333-169533), filed January 24, 2012).
3.2		Certificate of Correction to the First Articles of Amendment and Restatement of Cole Credit Property Trust IV, Inc. (Incorporated by reference to Exhibit 3.6 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (File No. 333-169533), filed January 24, 2012).
3.3		Articles of Amendment of First Articles of Amendment and Restatement of Cole Credit Property Trust IV, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 000-54939), filed February 27, 2012).
3.4		Certificate of Correction to First Articles of Amendment and Restatement (Incorporated by reference to Exhibit 3.6 to the Company’s Annual Report on Form 10-K (File No. 000-54939), filed March 29, 2013).
3.5		Second Articles of Amendment of First Articles of Amendment and Restatement of Cole Credit Property Trust IV, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 000-54939), filed June 2, 2014).
3.6		Bylaws of Cole Credit Property Trust IV, Inc. (Incorporated by reference to Exhibit 3.5 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (File No. 333-169533), filed January 24, 2012).
3.7		First Amendment to the Bylaws of Cole Credit Property Trust IV, Inc. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 000-54939), filed June 27, 2012).
4.1		Distribution Reinvestment Plan (Incorporated by reference to Exhibit 4.9 to the Company’s Registration Statement on Form S-3 (File No. 333-212832), filed August 2, 2016).
10.1		Advisory Agreement by and between Cole Credit Property Trust IV, Inc. and Cole REIT Advisors IV, LLC, dated January 20, 2012 (Incorporated by reference to Exhibit 10.1 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (File No. 333-169533), filed January 24, 2012).
10.2		Amended and Restated Agreement of Limited Partnership of Cole Operating Partnership IV, LP, by and between Cole Credit Property Trust IV, Inc. and the limited partners thereto (Incorporated by reference to Exhibit 10.2 to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (File No. 333-169533), filed January 24, 2012).
10.3		First Amendment of Advisory Agreement by and between Cole Credit Property Trust IV, Inc. and Cole REIT Advisors IV, LLC, dated February 23, 2012 (Incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q (File No. 000-54939), filed May 15, 2012).
10.4		Second Amended and Restated Credit Agreement, dated March 15, 2017, by and between Cole Operating Partnership IV, LP and JPMorgan Chase Bank, N.A. as administrative agent, and other lending institutions (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-54939), filed March 20, 2017).
10.5		Cole Credit Property Trust IV, Inc. 2018 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 000-54939), filed November 13, 2018.
21.1*		Subsidiaries of the Registrant.
23.1*		Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
31.1*		Certifications of the Principal Executive Officer of the Company pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certifications of the Principal Financial Officer of the Company pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certifications of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*		XBRL Instance Document.
101.SCH*		XBRL Taxonomy Extension Schema Document.
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.

____________________________________



*	Filed herewith.
**	In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.


ITEM 16.	FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized this 27 ^th day of March, 2019.



		Cole Credit Property Trust IV, Inc.

	By:	/s/ NATHAN D. DEBACKER
		Nathan D. DeBacker
		Chief Financial Officer and Treasurer
		(Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.




Signature	Title	Date


/s/ RICHARD S. RESSLER	Chairman of the Board of Directors, Chief Executive Officer and President	March 27, 2019
Richard S. Ressler	(Principal Executive Officer)

/s/ NATHAN D. DEBACKER	Chief Financial Officer and Treasurer	March 27, 2019
Nathan D. DeBacker	(Principal Financial Officer)

/s/ JEFFREY R. SMITH	Vice President of Accounting	March 27, 2019
Jeffrey R. Smith	(Principal Accounting Officer)

/s/ T. PATRICK DUNCAN	Independent Director	March 27, 2019
T. Patrick Duncan	Independent Director

/s/ LAWRENCE S. JONES	Independent Director	March 27, 2019
Lawrence S. Jones

/s/ ALICIA K. HARRISON	Independent Director	March 27, 2019
Alicia K. Harrison

/s/ W. BRIAN KRETZMER	Independent Director	March 27, 2019
W. Brian Kretzmer

/s/ AVRAHAM SHEMESH	Director	March 27, 2019
Avraham Shemesh

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Financial Statements		Page

Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2018 and 2017		F-3
Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016		F-4
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2018, 2017 and 2016		F-5
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018, 2017 and 2016		F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016		F-7
Notes to Consolidated Financial Statements		F-8
Schedule III - Real Estate Assets and Accumulated Depreciation		S-1
Schedule IV - Mortgage Loans on Real Estate		S-27

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Cole Credit Property Trust IV, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cole Credit Property Trust IV, Inc. and subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Phoenix, Arizona

March 27, 2019

We have served as the Company’s auditor since 2010.

F-2

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COLE CREDIT PROPERTY TRUST IV, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)



	December 31, 2018			December 31, 2017
ASSETS
Real estate assets:
Land	$	1,172,449		$	1,193,029
Buildings, fixtures and improvements	3,271,592			3,371,563
Intangible lease assets	554,868			589,930
Total real estate assets, at cost	4,998,909			5,154,522
Less: accumulated depreciation and amortization	(597,756		)	(526,976		)
Total real estate assets, net	4,401,153			4,627,546
Loans held-for-investment, net	89,762			—
Cash and cash equivalents	10,533			4,745
Restricted cash	9,141			9,098
Rents and tenant receivables, net	81,686			71,859
Due from affiliates	—			56
Derivative assets, revenue bonds, prepaid expenses and other assets	16,229			12,351
Deferred costs, net	2,087			3,034
Assets held for sale	6,780			—
Total assets	$	4,617,371		$	4,728,689

LIABILITIES AND STOCKHOLDERS’ EQUITY
Notes payable and credit facility, net	$	2,516,914		$	2,471,763
Accounts payable and accrued expenses	25,014			24,635
Due to affiliates	5,156			1,984
Intangible lease liabilities, net	36,418			45,572
Distributions payable	16,518			16,531
Deferred rental income and other liabilities	16,254			11,539
Total liabilities	2,616,274			2,572,024
Commitments and contingencies
Redeemable common stock and noncontrolling interest	184,247			186,453
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding	—			—
Common stock, $0.01 par value per share; 490,000,000 shares authorized, 311,381,396 and 311,582,319 shares issued and outstanding as of December 31, 2018 and 2017, respectively	3,114			3,116
Capital in excess of par value	2,607,330			2,607,300
Accumulated distributions in excess of earnings	(804,617		)	(646,834		)
Accumulated other comprehensive income	11,023			6,630
Total stockholders’ equity	1,816,850			1,970,212
Total liabilities, redeemable common stock, noncontrolling interest and stockholders’ equity	$	4,617,371		$	4,728,689

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

F-3

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COLE CREDIT PROPERTY TRUST IV, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)



	Year Ended December 31,
	2018			2017			2016
Revenues:
Rental income	$	371,235		$	371,929		$	356,126
Tenant reimbursement income	58,401			52,166			51,325
Interest income	1,640			—			—
Total revenues	431,276			424,095			407,451
Operating expenses:
General and administrative	14,127			13,716			12,502
Property operating	30,267			29,777			23,176
Real estate tax	37,898			37,489			35,063
Advisory fees and expenses	43,399			44,072			41,926
Transaction-related	2,601			1,599			4,191
Depreciation and amortization	140,979			141,392			134,672
Impairment	32,975			2,855			6,737
Total operating expenses	302,246			270,900			258,267
Gain on disposition of real estate, net	6,299			17,044			2,907
Operating income	135,329			170,239			152,091
Other income (expense):
Interest expense and other, net	(97,917		)	(90,688		)	(79,465		)
Loss recognized on equity interest remeasured to fair value	—			—			(647		)
Total other income (expense)	(97,917		)	(90,688		)	(80,112		)
Net income	37,412			79,551			71,979
Net income allocated to noncontrolling interest	134			131			137
Net income attributable to the Company	$	37,278		$	79,420		$	71,842
Weighted average number of common shares outstanding:
Basic and diluted	311,478,665			311,677,149			311,863,844
Net income per common share:
Basic and diluted	$	0.12		$	0.25		$	0.23

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

F-4

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COLE CREDIT PROPERTY TRUST IV, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)



	Year Ended December 31,
	2018			2017		2016
Net income	$	37,412		$	79,551	$	71,979
Other comprehensive income:
Unrealized gain (loss) on interest rate swaps	8,210			4,551		(4,422		)
Amount of (gain) loss reclassified from other comprehensive income into income as interest expense and other, net	(4,305		)	3,103		8,757
Total other comprehensive income	3,905			7,654		4,335

Comprehensive income	41,317			87,205		76,314
Comprehensive income allocated to noncontrolling interest	134			131		137
Comprehensive income attributable to the Company	$	41,183		$	87,074	$	76,177

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

F-5

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COLE CREDIT PROPERTY TRUST IV, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)



	Common Stock					Capital in Excess of Par Value			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive Income			Total Stockholders’ Equity
	Number of Shares		Par Value			Capital in Excess of Par Value			Accumulated Distributions in Excess of Earnings			Accumulated Other Comprehensive Income			Total Stockholders’ Equity
Balance, January 1, 2016	312,093,211		$	3,121		$	2,607,367		$	(408,575	)	$	(5,359	)	$	2,196,554
Issuance of common stock	11,234,006		112			109,054			—			—			109,166
Distributions declared on common stock — $0.625 per common share	—		—			—			(194,834		)	—			(194,834		)
Offering costs related to DRIP Offerings	—		—			(68		)	—			—			(68		)
Redemptions of common stock	(11,510,213	)	(115		)	(110,540		)	—			—			(110,655		)
Changes in redeemable common stock	—		—			1,491			—			—			1,491
Comprehensive income	—		—			—			71,842			4,335			76,177
Balance, December 31, 2016	311,817,004		$	3,118		$	2,607,304		$	(531,567	)	$	(1,024	)	$	2,077,831
Issuance of common stock	10,095,437		101			101,243			—			—			101,344
Distributions declared on common stock — $0.625 per common share	—		—			—			(194,687		)	—			(194,687		)
Redemptions of common stock	(10,330,122	)	(103		)	(103,572		)	—			—			(103,675		)
Changes in redeemable common stock	—		—			2,325			—			—			2,325
Comprehensive income	—		—			—			79,420			7,654			87,074
Balance, December 31, 2017	311,582,319		$	3,116		$	2,607,300		$	(646,834	)	$	6,630		$	1,970,212
Cumulative effect of accounting changes	—		—			—			(488		)	488			—
Issuance of common stock	9,615,850		96			91,668			—			—			91,764
Equity-based compensation	14,008		—			33			—			—			33
Distributions declared on common stock — $0.625 per common share	—		—			—			(194,573		)	—			(194,573		)
Redemptions of common stock	(9,830,781	)	(98		)	(93,732		)	—			—			(93,830		)
Changes in redeemable common stock	—		—			2,061			—			—			2,061
Comprehensive income	—		—			—			37,278			3,905			41,183
Balance, December 31, 2018	311,381,396		$	3,114		$	2,607,330		$	(804,617	)	$	11,023		$	1,816,850

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

F-6

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COLE CREDIT PROPERTY TRUST IV, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



	Year Ended December 31,
	2018			2017			2016
Cash flows from operating activities:
Net income	$	37,412		$	79,551		$	71,979
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, net	139,330			139,253			133,549
Amortization of deferred financing costs	5,351			5,313			5,711
Amortization of fair value adjustments of mortgage notes payable assumed	(88		)	(86		)	(84		)
Amortization and (accretion) on deferred loan fees	(268		)	—			—
Equity-based compensation	33			—			—
Straight-line rental income	(8,077		)	(10,082		)	(11,555		)
Bad debt expense	522			1,908			9
Equity in income of unconsolidated joint venture	—			—			(615		)
Return on investment from unconsolidated joint venture	—			—			615
Gain on disposition of real estate assets, net	(6,299		)	(17,044		)	(2,907		)
Impairment of real estate assets	32,975			2,855			6,737
Fair value adjustment to contingent consideration	—			(337		)	(2,667		)
Ineffectiveness of interest rate swaps	—			(488		)	—
Write-off of deferred financing costs	46			896			—
Loss recognized on equity interest remeasured to fair value	—			—			647
Changes in assets and liabilities:
Rents and tenant receivables	(2,432		)	862			(4,023		)
Prepaid expenses and other assets	(833		)	(67		)	(884		)
Accounts payable and accrued expenses	14			(192		)	958
Deferred rental income and other liabilities	4,921			(70		)	(4,883		)
Due from affiliates	56			2			(11		)
Due to affiliates	3,172			(3,349		)	(280		)
Net cash provided by operating activities	205,835			198,925			192,296
Cash flows from investing activities:
Investment in real estate assets and capital expenditures	(19,202		)	(320,700		)	(219,502		)
Origination of loans held-for-investment	(89,295		)	—			—
Origination fees received on loans held-for-investment	185			—			—
Investment in revenue bonds	—			(2,081		)	—
Return of investment in unconsolidated joint venture	—			—			1,033
Acquisition of unconsolidated joint venture partner’s interest	—			—			(1,626		)
Net proceeds from disposition of real estate assets	64,180			99,013			30,811
Payment of property escrow deposits	(1,100		)	(11,472		)	(5,854		)
Refund of property escrow deposits	1,100			11,722			6,604
Proceeds from the settlement of insurance claims	240			132			788
Net cash used in investing activities	(43,892		)	(223,386		)	(187,746		)
Cash flows from financing activities:
Redemptions of common stock	(93,830		)	(103,675		)	(110,655		)
Offering costs related to DRIP Offerings	—			—			(68		)
Distributions to stockholders	(102,822		)	(93,310		)	(85,740		)
Proceeds from notes payable and credit facility	268,000			1,572,706			493,420
Repayments of notes payable and credit facility, net of swap termination payments received	(227,181		)	(1,341,617		)	(313,426		)
Payment of loan deposits	—			(1,139		)	(3,378		)
Refund of loan deposits	—			1,064			3,378
Deferred financing costs paid	—			(13,228		)	(3,344		)
Distributions to noncontrolling interest	(279		)	(291		)	(269		)
Earnout liability paid	—			—			(1,264		)
Net cash (used in) provided by financing activities	(156,112		)	20,510			(21,346		)
Net increase (decrease) in cash and cash equivalents and restricted cash	5,831			(3,951		)	(16,796		)
Cash and cash equivalents and restricted cash, beginning of period	13,843			17,794			34,590
Cash and cash equivalents and restricted cash, end of period	$	19,674		$	13,843		$	17,794
Reconciliation of cash and cash equivalents and restricted cash to the consolidated balance sheets:
Cash and cash equivalents	$	10,533		$	4,745		$	9,754
Restricted cash	9,141			9,098			8,040
Total cash and cash equivalents and restricted cash	$	19,674		$	13,843		$	17,794

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

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COLE CREDIT PROPERTY TRUST IV, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — ORGANIZATION AND BUSINESS

Cole Credit Property Trust IV, Inc. (the “Company”) is a non-exchange traded real estate investment trust (“REIT”) formed as a Maryland corporation, incorporated on July 27, 2010, that elected to be taxed, and currently qualifies, as a REIT for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2012.

Substantially all of the Company’s business is conducted through Cole Operating Partnership IV, LP, a Delaware limited partnership, of which the Company is the sole general partner and owns, directly or indirectly, 100% of the partnership interests.

The Company is externally managed by Cole REIT Management IV, LLC, a Delaware limited liability company (“CR IV Management”) (formerly known as Cole REIT Advisors IV, LLC), an affiliate of CIM Group, LLC (“CIM”), a vertically-integrated owner and operator of real assets with multidisciplinary expertise and in-house research, acquisition, credit analysis, development, finance, leasing, and asset management capabilities headquartered in Los Angeles, California with offices in Oakland, California; Bethesda, Maryland; Dallas, Texas; New York, New York; Chicago, Illinois; and Phoenix, Arizona.

On February 1, 2018, CIM acquired CCO Group, LLC and its subsidiaries (collectively, “CCO Group”) from VEREIT Operating Partnership, L.P. (“VEREIT OP”), a subsidiary of VEREIT, Inc. (“VEREIT”) (the “Transaction”). CCO Group, LLC owns and controls CR IV Management, the Company’s advisor, and is the indirect owner of CCO Capital, LLC (“CCO Capital”), the Company’s dealer manager, and CREI Advisors, LLC (“CREI Advisors”), the Company’s property manager. CCO Group serves as the Company’s sponsor and as a sponsor to Cole Credit Property Trust V, Inc. (“CCPT V”), Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”), Cole Office & Industrial REIT (CCIT III), Inc. (“CCIT III”), and CIM Income NAV, Inc. (formerly known as Cole Real Estate Income Strategy (Daily NAV), Inc.).

On January 26, 2012 , the Company commenced its initial public offering on a “best efforts” basis of up to a maximum of $2.975 billion in shares of common stock (the “Offering”). The Company ceased issuing shares in the Offering on April 4, 2014.

The Company registered $247.0 million of shares of common stock under the distribution reinvestment plan (the “DRIP”) (the “Initial DRIP Offering”), which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on December 19, 2013 and automatically became effective with the SEC upon filing. The Company ceased issuing shares under the Initial DRIP Offering effective as of June 30, 2016.

The Company registered an additional $600.0 million of shares of common stock under the DRIP (the “Secondary DRIP Offering,” and together with the Initial DRIP Offering, the “DRIP Offerings,” and the DRIP Offerings collectively with the Offering, the “Offerings”), which was filed with the SEC on August 2, 2016 and automatically became effective with the SEC upon filing. The Company began to issue shares under the Secondary DRIP Offering on August 2, 2016 and will continue to issue shares under the Secondary DRIP Offering.

The Company’s board of directors (the “Board”) establishes an updated estimated per share net asset value (“NAV”) of the Company’s common stock for purposes of assisting broker-dealers that participated in the Offering in meeting their customer account reporting obligations under National Association of Securities Dealers Conduct Rule 2340. Distributions are reinvested in shares of the Company’s common stock under the DRIP at the estimated per share NAV as determined by the Board. Additionally, the estimated per share NAV as determined by the Board serves as the per share NAV for purposes of the share redemption program. As of December 31, 2018, the estimated per share NAV was $9.37 per share, which was established on March 28, 2018 using a valuation date of December 31, 2017. On March 20, 2019, the Board established an updated estimated per share NAV of the Company’s common stock, using a valuation date of December 31, 2018, of $8.65 per share. Commencing on March 26, 2019, distributions are reinvested in shares of the Company’s common stock under the DRIP at a price of $8.65 per share. The Board establishes an updated per share NAV of the Company’s common stock on an annual basis, having previously established a per share NAV as of August 31, 2015, September 30, 2016, December 31, 2016 and December 31, 2017. The Company’s estimated per share NAVs are not audited or reviewed by its independent registered public accounting firm.

As of December 31, 2018 , the Company had issued approximately 348.8 million shares of its common stock in the Offerings, including 50.5 million shares issued in the DRIP Offerings, for gross offering proceeds of $3.5 billion before organization and offering costs, selling commissions and dealer manager fees of $306.0 million . As of December 31, 2018 , the Company owned 890 properties, including nine properties owned through a consolidated joint venture arrangement (the “Consolidated Joint Venture”), comprising 26.5 million rentable square feet of commercial space located in 45 states. As of

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Table of Contents

COLE CREDIT PROPERTY TRUST IV, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

December 31, 2018 , the rentable square feet at these properties was 96.2% leased, including month-to-month agreements, if any.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”), in all material respects, and have been consistently applied in preparing the accompanying consolidated financial statements.

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and the Consolidated Joint Venture in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation.

The Company evaluates its relationships and investments to determine if it has variable interests. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns. If the Company determines that it has a variable interest in an entity, it evaluates whether such interest is in a variable interest entity (“VIE”). VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one of the following characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity. The Company consolidates any VIEs when it is determined to be the primary beneficiary of the VIE’s operations.

For legal entities being evaluated for consolidation, the Company must first determine whether the interests that it holds and fees it receives qualify as variable interests in the entity. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns. The Company’s evaluation includes consideration of fees paid to the Company where the Company acts as a decision maker or service provider to the entity being evaluated. If the Company determines that it holds a variable interest in an entity, it evaluates whether that entity is a VIE.

A VIE must be consolidated by its primary beneficiary, which is generally defined as the party who has a controlling financial interest in the VIE. The Company qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors include, but are not limited to, the Company’s ability to direct the activities that most significantly impact the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant to the VIE. The Company consolidates any VIEs when the Company is determined to be the primary beneficiary of the VIE and the difference between consolidating the VIE and accounting for it using the equity method could be material to the Company’s consolidated financial statements. The Company continually evaluates the need to consolidate any VIEs based on standards set forth in GAAP as described above.

As of December 31, 2018 and 2017 , the Company determined that it had a controlling interest in the Consolidated Joint Venture and therefore met the GAAP requirements for consolidation.

Reclassifications

In November 2018, the SEC finalized the Disclosure Update Simplification Project, which eliminated Rule 3-15(a)(1) reporting of Gain or Loss on Sale of Properties by REITs. To conform with Accounting Standards Codification (“ASC”) 360, Property, Plant, and Equipment and the SEC rule change, the Company has classified the gain on dispositions of real estate assets, net in operating income in the Company’s consolidated statements of operations. This change resulted in an increase in operating income of $17.0 million and $2.9 million during the years ended December 31, 2017 and 2016, respectively.

The Company adopted ASU 2017-12, as defined in “Recent Accounting Pronouncements,” during the first quarter of fiscal year 2018. Accordingly, for the year ended December 31, 2018, the Company recorded a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of accumulated distributions in excess of earnings of $488,000 .

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COLE CREDIT PROPERTY TRUST IV, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Real Estate Assets

Real estate assets are stated at cost, less accumulated depreciation and amortization. The Company considers the period of future benefit of each respective asset to determine the appropriate useful life. The estimated useful lives of the Company’s real estate assets by class are generally as follows:



Buildings	40 years
Site improvements	15 years
Tenant improvements	Lesser of useful life or lease term
Intangible lease assets	Lease term

Recoverability of Real Estate Assets

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to: bankruptcy or other credit concerns of a property’s major tenant, such as a history of late payments, rental concessions and other factors; a significant decrease in a property’s revenues due to lease terminations; vacancies; co-tenancy clauses; reduced lease rates; changes in anticipated holding periods; or other circumstances. When indicators of potential impairment are present, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate assets to their respective fair values and recognize an impairment loss. Generally, fair value is determined using a discounted cash flow analysis and recent comparable sales transactions. During the year ended December 31, 2018 , as part of the Company’s quarterly impairment review procedures, the Company recorded impairment charges of $33.0 million related to 20 properties with revised expected holding periods and two properties with vacancies. The Company’s assessment of impairment as of December 31, 2018 was based on the most current information available to the Company, including expected holding periods. If the Company’s expected holding period for assets change, subsequent tests for impairment could result in additional impairment charges in the future. The Company can provide no assurance that material impairment charges with respect to the Company’s real estate assets will not occur in 2019 or future periods. During the year ended December 31, 2017 , the Company recorded impairment charges of $2.9 million related to four properties as a result of delinquent rental payments and two tenants who had previously filed for bankruptcy. During the year ended December 31, 2016 , two tenants filed for bankruptcy, and collectively, these tenants occupied 100% of three of the Company’s properties. The Company recorded impairment charges of $6.7 million related to the three properties during the year ended December 31, 2016 . The assumptions and uncertainties utilized in the evaluation of the impairment of real estate assets are discussed in detail in Note 3 — Fair Value Measurements. See also Note 4 — Real Estate Assets for further discussion regarding real estate investment activity. Over the next 12-24 months, the Company expects to sell a portion of its anchored shopping center portfolio and certain single tenant properties. These will be sold in pools or on a standalone basis. As of December 31, 2018 , the Company intended to sell properties with a net book value of at least $2.0 billion , subject to market conditions.

Assets Held for Sale

When a real estate asset is identified by the Company as held for sale, the Company will cease recording depreciation and amortization of the assets related to the property and estimate its fair value, net of selling costs. If, in management’s opinion, the fair value, net of selling costs, of the asset is less than the carrying amount of the asset, an adjustment to the carrying amount is then recorded to reflect the estimated fair value of the property, net of selling costs. As of December 31, 2018 , the Company identified one property with a carrying value of $6.8 million as held for sale, which was sold subsequent to December 31, 2018 , as discussed in Note 17 — Subsequent Events. There were no assets identified as held for sale as of December 31, 2017 .

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COLE CREDIT PROPERTY TRUST IV, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Disposition of Real Estate Assets

Gains and losses from dispositions are recognized once the various criteria relating to the terms of sale and any subsequent involvement by the Company with the asset sold are met. A discontinued operation includes only the disposal of a component of an entity and represents a strategic shift that has (or will have) a major effect on an entity’s financial results. The disposition of the Company’s individual properties did not qualify for discontinued operations presentation, and thus, the results of the properties that have been sold remain in operating income, and any associated gains or losses from the disposition are included in gain on disposition of real estate, net.

Allocation of Purchase Price of Real Estate Assets

Upon the acquisition of real properties, the Company allocates the purchase price to acquired tangible assets, consisting of land, buildings and improvements, and to identified intangible assets and liabilities, consisting of the value of above- and below-market leases and the value of in-place leases and other intangibles, based in each case on their respective fair values. The Company utilizes independent appraisals to assist in the determination of the fair values of the tangible assets of an acquired property (which includes land and buildings). The information in the appraisal, along with any additional information available to the Company’s management, is used in estimating the amount of the purchase price that is allocated to land. Other information in the appraisal, such as building value and market rents, may be used by the Company’s management in estimating the allocation of purchase price to the building and to intangible lease assets and liabilities. The appraisal firm has no involvement in management’s allocation decisions other than providing this market information.

The fair values of above- and below-market lease intangibles are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (1) the contractual amounts to be paid pursuant to the in-place leases and (2) an estimate of fair market lease rates for the corresponding in-place leases, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease including, for below-market leases, any bargain renewal periods. The above- and below-market lease intangibles are capitalized as intangible lease assets or liabilities, respectively. Above-market leases are amortized as a reduction to rental income over the remaining terms of the respective leases. Below-market leases are amortized as an increase to rental income over the remaining terms of the respective leases, including any bargain renewal periods. In considering whether or not the Company expects a tenant to execute a bargain renewal option, the Company evaluates economic factors and certain qualitative factors at the time of acquisition, such as the financial strength of the tenant, the remaining lease term, the tenant mix of the leased property, the Company’s relationship with the tenant and the availability of competing tenant space. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above- or below-market lease intangibles relating to that lease would be recorded as an adjustment to rental income.

The fair values of in-place leases include estimates of direct costs associated with obtaining a new tenant and opportunity costs associated with lost rental and other property income, which are avoided by acquiring a property with an in-place lease. Direct costs associated with obtaining a new tenant include leasing commissions, legal and other related expenses and are estimated in part by utilizing information obtained from independent appraisals and management’s consideration of current market costs to execute a similar lease. The intangible values of opportunity costs, which are calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease, are capitalized as intangible lease assets and are amortized to expense over the remaining term of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.

The Company has acquired, and may continue to acquire, certain properties subject to contingent consideration arrangements that may obligate the Company to pay additional consideration to the seller based on the outcome of future events (the “Contingent Payments”). Additionally, the Company may acquire certain properties for which it funds certain contingent consideration amounts into an escrow account pending the outcome of certain future events. The outcome may result in the release of all or a portion of the escrowed funds to the Company or the seller or a combination thereof. Prior to the adoption of ASU 2017-01 (as defined below) in April 2017, contingent consideration arrangements, including amounts funded through an escrow account, were recorded upon acquisition of the respective property at their estimated fair value, and any changes to the estimated fair value subsequent to acquisition were reflected in the accompanying consolidated statements of operations in acquisition-related fees and expenses. Upon adoption of ASU 2017-01 in April 2017, contingent consideration arrangements for asset acquisitions are recognized when the contingency is resolved. The determination of the amount of contingent consideration arrangements is based on the probability of several possible outcomes as identified by management.

The Company estimates the fair value of assumed mortgage notes payable based upon indications of current market pricing for similar types of debt financing with similar maturities. Assumed mortgage notes payable are initially recorded at their

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COLE CREDIT PROPERTY TRUST IV, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

estimated fair value as of the assumption date, and any difference between such estimated fair value and the mortgage note’s outstanding principal balance is amortized or accreted to interest expense over the term of the respective mortgage note payable.

The determination of the fair values of the real estate assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The use of alternative estimates may result in a different allocation of the Company’s purchase price, which could materially impact the Company’s results of operations.

In April 2017, the Company elected to early adopt Accounting Standards Update (“ASU”) No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), which clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Beginning in April 2017, all real estate acquisitions qualified as asset acquisitions, and as such, acquisition-related fees and certain acquisition-related expenses related to these asset acquisitions are now capitalized and allocated to tangible and intangible assets and liabilities as described above. Other acquisition-related expenses, such as advisor reimbursements, continue to be expensed as incurred and are included in transaction-related expenses on the accompanying consolidated statements of operations. Prior to the adoption of ASU 2017-01 in April 2017, all of the Company’s real estate acquisitions were accounted for as business combinations and, as such, acquisition-related expenses related to these business combination acquisitions were expensed as incurred. Prior to April 2017, acquisition-related expenses included within transaction-related expenses in the Company’s consolidated statements of operations primarily consisted of legal, deed transfer and other costs related to real estate purchase transactions, including costs incurred for deals that were not consummated. The Company expects its future acquisitions to qualify as asset acquisitions and, as such, the Company will allocate the purchase price to acquired tangible assets and identified intangible assets and liabilities on a relative fair value basis.

Redeemable Noncontrolling Interest in Consolidated Joint Venture

On June 27, 2014 , the Company completed the formation of the Consolidated Joint Venture. Pursuant to the joint venture agreement, the joint venture partner has a right to exercise an option (the “Option”), which became effective on June 27, 2016, whereby the Company will be required to purchase the ownership interest of the joint venture partner at fair market value. As of December 31, 2018 , the Option has not been exercised. The Company determined it had a controlling interest in the Consolidated Joint Venture and, therefore, met the GAAP requirements for consolidation. The Company recorded net income of $134,000 and paid distributions of $279,000 related to the noncontrolling interest during the year ended December 31, 2018 . The Company recorded the noncontrolling interest of $2.3 million and $2.4 million as of December 31, 2018 and December 31, 2017 , respectively, as temporary equity in the mezzanine section of the consolidated balance sheets, due to the ability to exercise the Option being outside the control of the Company.

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash in bank accounts, as well as investments in highly-liquid money market funds. The Company deposits cash with several high quality financial institutions. These deposits are guaranteed by the Federal Deposit Insurance Company (“FDIC”) up to an insurance limit of $250,000. At times, the Company’s cash and cash equivalents may exceed federally insured levels. Although the Company bears risk on amounts in excess of those insured by the FDIC, it has not experienced and does not anticipate any losses due to the high quality of the institutions where the deposits are held.

The Company had $9.1 million in restricted cash as of both December 31, 2018 and 2017 . Included in restricted cash was $3.4 million and $3.7 million held by lenders in lockbox accounts, as of December 31, 2018 and 2017 , respectively. As part of certain debt agreements, rents from certain encumbered properties are deposited directly into a lockbox account, from which the monthly debt service payment is disbursed to the lender and the excess is disbursed to the Company. Also included in restricted cash was $5.7 million and $5.4 million held by lenders in escrow accounts for real estate taxes and other lender reserves for certain properties, in accordance with the associated lender’s loan agreement as of December 31, 2018 and 2017 , respectively.

Loans Held-for-Investment

The Company has acquired, and may continue to acquire loans related to real estate assets. The Company may acquire first, second and third mortgage loans, mezzanine loans, bridge loans, wraparound mortgage loans, construction mortgage loans on real property and loans on leasehold interest mortgages. The Company intends to hold the loans held-for-investment for the foreseeable future or until maturity. Loans held-for-investment are carried on the Company’s consolidated balance sheets at amortized cost, net of any allowance for loans receivable losses. Discounts or premiums and origination fees are amortized as a component of interest income using the effective interest method over the life of the respective loans. Loan acquisition fees paid

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COLE CREDIT PROPERTY TRUST IV, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

to CR IV Management or its affiliates are expensed as incurred and are included in transaction-related expenses on the accompanying consolidated statements of operations.

Generally, an allowance for loan losses is provided when management determines that the Company will be unable to collect any remaining amounts due under the loan agreement. The Company evaluates the collectability of its loans held-for-investment at least quarterly. The evaluation of collectability involves judgment, estimates, and a review of the ability of the borrower to make principal and interest payments and the underlying collateral. For the year ended December 31, 2018 , the Company recorded no impairment on its loans held-for-investment.

Deferred Financing Costs

Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing. These costs are amortized to interest expense over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are written off when the associated debt is refinanced or repaid before maturity. The presentation of all deferred financing costs, other than those associated with the revolving loan portion of the credit facility, are classified such that the debt issuance costs related to a recognized debt liability are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the related debt liability rather than as an asset. Debt issuance costs related to securing a revolving line of credit are presented as an asset and amortized ratably over the term of the line of credit arrangement. As such, the Company’s current and corresponding prior period total deferred costs, net in the accompanying consolidated balance sheets relate only to the revolving loan portion of the credit facility and the historical presentation, amortization and treatment of unamortized costs are still applicable. As of December 31, 2018 and 2017 , the Company had $2.1 million and $3.0 million , respectively, of deferred financing costs, net of accumulated amortization, related to the revolving loan portion of the credit facility. Costs incurred in seeking financing transactions that do not close are expensed in the period in which it is determined the financing will not close.

Due to Affiliates

CR IV Management, and certain of its affiliates, received and will continue to receive, fees, reimbursements and compensation in connection with services provided relating to the Offerings and the acquisition, management, financing and leasing of the properties of the Company.

Derivative Instruments and Hedging Activities

The Company accounts for its derivative instruments at fair value. Accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative instrument and the designation of the derivative instrument. The change in fair value of the derivative instrument that is designated as a hedge is recorded as other comprehensive income. The changes in fair value for derivative instruments that are not designated as hedges or that do not meet the hedge accounting criteria are recorded as a gain or loss to operations.

Redeemable Common Stock

Under the Company’s share redemption program, the Company’s obligation to redeem shares of its outstanding common stock is limited, among other things, to the net proceeds received by the Company from the sale of shares under the DRIP, net of shares redeemed to date. The Company records the maximum amount that is redeemable under the share redemption program as redeemable common stock outside of permanent equity in its consolidated balance sheets. Changes in the amount of redeemable common stock from period to period are recorded as an adjustment to capital in excess of par value.

Revenue Recognition

Revenue from leasing activities

Certain properties have leases where minimum rental payments increase during the term of the lease. The Company records rental income for the full term of each lease on a straight-line basis when earned and collectability is reasonably assured. When the Company acquires a property, the terms of existing leases are considered to commence as of the acquisition date for the purpose of this calculation. The Company defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Expected reimbursements from tenants for recoverable real estate taxes and operating expenses are included in tenant reimbursement income in the period when such costs are incurred. Effective January 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition, Accounting Standards Codification Topic 605 and requires an entity to recognize revenue in a way that depicts the transfer of promised

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COLE CREDIT PROPERTY TRUST IV, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company records revenue for real estate taxes and insurance reimbursed by its tenants on the leased properties, with offsetting expenses in real estate taxes and property operating expenses, respectively, within the consolidated statements of operations as the Company has concluded it is the primary obligor. The Company has identified its revenue streams as rental income from leasing arrangements and tenant reimbursement income, which are outside of the scope of Topic 606. The Company adopted ASU 2014-09 using the modified retrospective approach and determined it did not have a material impact on the Company’s consolidated financial statements.

The Company continually reviews receivables related to rent, including any straight-line rent, and current and future operating expense reimbursements from tenants, and determines their collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is uncertain, the Company will record an increase in the allowance for uncollectible accounts. As of December 31, 2018 and December 31, 2017 , the Company had an allowance for uncollectible accounts of $931,000 and $1.5 million , respectively.

Revenue from lending activities

Interest income is comprised of interest earned on loans and the accretion and amortization of net loan origination fees and discounts. Interest income on loans is accrued as earned.

Income Taxes

The Company elected to be taxed, and currently qualifies, as a REIT for federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2012. The Company will generally not be subject to federal corporate income tax to the extent it distributes its taxable income to its stockholders, and so long as it, among other things, distributes at least 90% of its annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains). REITs are subject to a number of other organizational and operational requirements. Even if the Company maintains its qualification for taxation as a REIT, it or its subsidiaries may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.

Earnings (Loss) and Distributions Per Share

Earnings (loss) per share are calculated based on the weighted average number of common shares outstanding during each period presented. Diluted income (loss) per share considers the effect of any potentially dilutive share equivalents, of which the Company had none for each of the years ended December 31, 2018 , 2017 or 2016 . Distributions per share are calculated based on the authorized daily distribution rate.

Reportable Segment

The Company’s commercial real estate assets consist of income-producing necessity retail properties that are primarily single-tenant or anchored shopping centers, which are leased to creditworthy tenants under long-term net leases. The commercial properties are geographically diversified throughout the United States and have similar economic characteristics. The Company’s management evaluates operating performance on an overall portfolio level; therefore, the Company’s properties are one reportable segment.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by various standard setting bodies that may have an impact on the Company’s accounting and reporting. Except as otherwise stated below, the Company is currently evaluating the effect that certain new accounting requirements may have on the Company’s accounting and related reporting and disclosures in the Company’s consolidated financial statements.

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The amendments in this update require that most lease obligations be recognized as a right of use asset with a corresponding liability on the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The FASB has subsequently issued other related ASU, which amend ASU 2016-02 to provide transition practical expedients that an entity may elect to apply and other guidance. In July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements, which

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provides companies with an additional transition option that would permit the application of ASU 2016-02 as of the adoption date rather than to all periods presented. The Company will use this transition option upon adoption of the new standard on January 1, 2019 and use the effective date as the date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The Company has finalized its assessment of its inventory of leases that will be impacted by adoption of the new guidance. The Company will elect the “package of practical expedients,” which permits the Company to not reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs. The accounting for lease components will largely be unchanged from existing GAAP and the Company will elect the practical expedient to not separate non-lease components from lease components. The Company does not expect the adoption of ASU 2016-02 to have a material impact on the accounting treatment and disclosure of the Company’s net leases, which are the primary source of the Company’s revenues. The Company does not have material leases where it is the lessee.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 is intended to improve financial reporting requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology under current GAAP. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently evaluating the impact this amendment will have on its consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). The targeted amendments in this ASU are designed to help simplify certain aspects of hedge accounting and result in a more accurate portrayal of the economics of an entity’s risk management activities in its financial statements. ASU 2017-12 applies to the Company’s interest rate swaps designated as cash flow hedges. ASU 2017-12 requires all changes in the fair value of highly effective cash flow hedges to be recorded in accumulated other comprehensive income. Under GAAP, the ineffective portion of the change in fair value of cash flow hedges is recognized directly in earnings. This eliminates the requirement to separately measure and disclose ineffectiveness for qualifying cash flow hedges. ASU 2017-12 is effective for public entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. ASU 2017-12 is required to be adopted using a modified retrospective approach with early adoption permitted. The Company early adopted ASU 2017-12 during the first quarter of fiscal year 2018. Accordingly, during the year ended December 31, 2018 , the Company recorded a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of accumulated distributions in excess of earnings of $488,000 .

In August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements. ASU 2018-13 also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The provisions of ASU 2018-13 are effective January 1, 2020 using a prospective transition method for amendments effecting changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and narrative description on uncertainty of measurements. The remaining provisions of the ASU are to be applied retrospectively, and early adoption is permitted. The Company is evaluating the impact of this ASU’s adoption, and does not believe this ASU will have a material impact on its consolidated financial statements.

In October 2018, the FASB issued ASU No. 2018-16, Inclusion of the Secured Overnight Financing Rate (“SOFR”) Overnight Index Swap (“OIS”) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (“ASU 2018-16”). The amendments in this ASU permit the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes. The SOFR is a volume-weighted median interest rate that is calculated daily based on overnight transactions from the prior day’s activity in specified segments of the U.S. Treasury repo market. It has been selected as the preferred replacement for the U.S. dollar London Interbank Offered Rate (“LIBOR”), which will be phased out by the end of 2021. ASU 2018-16 is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASU 2018-16 is required to be adopted on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after the date of adoption. The Company currently uses LIBOR as its benchmark interest rate in the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Company’s interest rate swaps associated with the Company’s LIBOR-based variable rate borrowings. The Company has not entered into any new or redesignated hedging relationships on or after the date of adoption of ASU 2018-16; as such, the Company is currently evaluating the potential effect this new benchmark interest rate option will have on its consolidated financial statements.

NOTE 3 — FAIR VALUE MEASUREMENTS

GAAP defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. GAAP emphasizes that fair value is intended to be a market-based measurement, as opposed to a transaction-specific measurement.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Assets and liabilities are measured using inputs from three levels of the fair value hierarchy, as follows:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).

Level 3 — Unobservable inputs, which are only used to the extent that observable inputs are not available, reflect the Company’s assumptions about the pricing of an asset or liability.

The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities:

Notes payable and credit facility — The fair value is estimated by discounting the expected cash flows based on estimated borrowing rates available to the Company as of the measurement date. Current and prior period liabilities’ carrying and fair values exclude net deferred financing costs. These financial instruments are valued using Level 2 inputs. As of December 31, 2018 , the estimated fair value of the Company’s debt was $2.46 billion , compared to the carrying value of $2.53 billion . The estimated fair value of the Company’s debt as of December 31, 2017 was $2.48 billion , compared to the carrying value of $2.49 billion .

Derivative instruments — The Company’s derivative instruments are comprised of interest rate swaps. All derivative instruments are carried at fair value and are valued using Level 2 inputs. The fair value of these instruments is determined using interest rate market pricing models. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the respective counterparties.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. However, as of December 31, 2018 and 2017 , the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Contingent consideration arrangements — The contingent consideration arrangements are carried at fair value and are valued using Level 3 inputs. The fair value of additional consideration paid in connection with the acquisition of properties subject to contingent consideration arrangements is determined based on key assumptions, including, but not limited to, rental rates, discount rates and the estimated timing and probability of successfully leasing vacant space subsequent to the Company’s acquisition of certain properties.

Revenue bonds — The Company’s revenue bonds were acquired in connection with the purchase of an anchored shopping center. The bonds have a 9.0% interest rate and mature on November 1, 2044. These investments are initially recognized in derivative assets, revenue bonds, prepaid expenses and other assets on the consolidated balance sheets and are subsequently

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

measured using amortized cost. The fair value estimates of the Company’s revenue bonds are based on assumptions that management believes market participants would use in pricing, using widely accepted valuation techniques including discounted cash flow analysis. This analysis reflects the contractual terms of the bonds, including the period to maturity, and uses unobservable market-based inputs, including discount rates ranging from 7.75% to 9.0% . As a result, the Company has determined that its revenue bonds are classified in Level 3 of the fair value hierarchy. As of December 31, 2018 , the estimated fair value of the Company’s revenue bonds was $2.0 million . The Company has these investments classified as held-to-maturity securities. The Company’s investments in revenue bonds are reviewed for impairment, including the evaluation of changes in events or circumstances that may indicate that the carrying amount of the investment may not be recoverable.

Loans held-for-investment — The Company’s loans held-for-investment are recorded at cost upon origination and adjusted by net loan origination fees and discounts. The Company estimates the fair value of its loans held-for-investment by performing a present value analysis for the anticipated future cash flows using an appropriate market discount rate taking into consideration the credit risk. As a result, the Company has determined that its loans held-for-investment are classified in Level 3 of the fair value hierarchy. As of December 31, 2018 , the Company determined that the estimated fair value of its loans held-for-investment was equal to its carrying value given that the loan was originated during the fourth quarter of 2018.

Other financial instruments — The Company considers the carrying values of its cash and cash equivalents, restricted cash, tenant receivables, accounts payable and accrued expenses, other liabilities, due to affiliates and distributions payable to approximate their fair values because of the short period of time between their origination and their expected realization as well as their highly-liquid nature. Due to the short-term maturities of these instruments, Level 1 inputs are utilized to estimate the fair value of these financial instruments.

Considerable judgment is necessary to develop estimated fair values of financial assets and liabilities. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize, or be liable for, upon disposition of the financial assets and liabilities. As of December 31, 2018 and 2017 , there have been no transfers of financial assets or liabilities between fair value hierarchy levels.

Items Measured at Fair Value on a Recurring Basis

In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis as of December 31, 2018 and 2017 (in thousands):



	Balance as of December 31, 2018			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial assets:
Interest rate swaps	$	10,993		$	—	$	10,993		$	—
Total financial assets	$	10,993		$	—	$	10,993		$	—


	Balance as of December 31, 2017			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial assets:
Interest rate swaps	$	7,324		$	—	$	7,324		$	—
Total financial assets	$	7,324		$	—	$	7,324		$	—
Financial liabilities:
Interest rate swaps	$	(206	)	$	—	$	(206	)	$	—
Total financial liabilities	$	(206	)	$	—	$	(206	)	$	—

The following are reconciliations of the changes in assets and liabilities with Level 3 inputs in the fair value hierarchy for the years ended December 31, 2018 and 2017 (in thousands):



	Revenue Bonds
Beginning Balance, December 31, 2017	$	2,067
Payments received	(23		)
Ending Balance, December 31, 2018	$	2,044

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



	Revenue Bonds			Contingent Consideration Arrangements
Beginning Balance, December 31, 2016	$	—		$	(337	)
Purchases, fair value adjustments and payments made:
Purchases	2,081			—
Fair value adjustments	—			337
Payments received	(14		)	—
Ending Balance, December 31, 2017	$	2,067		$	—

Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges)

Certain financial and nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The Company’s process for identifying and recording impairment related to real estate assets and intangible assets is discussed in Note 2 — Summary of Significant Accounting Policies.

As discussed in Note 4 — Real Estate Assets, during the year ended December 31, 2018 , real estate assets related to 22 properties totaling approximately 2.3 million square feet were deemed to be impaired and their carrying values were reduced to an estimated fair value of $332.4 million , resulting in impairment charges of $33.0 million . During the year ended December 31, 2017 , real estate assets related to four properties totaling approximately 33,000 square feet were deemed to be impaired and their carrying values were reduced to an estimated fair value of $4.3 million , resulting in impairment charges of $2.9 million . During the year ended December 31, 2016 , real estate assets related to three properties totaling approximately 24,000 square feet were deemed to be impaired and their carrying values were reduced to an estimated fair value of $4.7 million , resulting in impairment charges of $6.7 million . The Company estimates fair values using Level 3 inputs and using a combined income and market approach, specifically using discounted cash flow analysis and recent comparable sales transactions. The evaluation of real estate assets for potential impairment requires the Company’s management to exercise significant judgment and to make certain key assumptions, including, but not limited to, the following: (1) terminal capitalization; (2) discount rates; (3) the number of years the property will be held; (4) property operating expenses; and (5) re-leasing assumptions, including the number of months to re-lease, market rental income and required tenant improvements. There are inherent uncertainties in making these estimates such as market conditions and the future performance and sustainability of the Company’s tenants.

The following table presents the impairment charges by asset class recorded during the years ended December 31, 2018 , 2017 and 2016 (in thousands):



	Year Ended December 31,
	2018			2017		2016
Asset class impaired:
Land	$	6,436		$	725	$	1,775
Buildings, fixtures and improvements	25,299			1,734		4,678
Intangible lease assets	1,385			396		284
Intangible lease liabilities	(145		)	—		—
Total impairment loss	$	32,975		$	2,855	$	6,737

NOTE 4 — REAL ESTATE ASSETS

2018 Property Acquisition

During the year ended December 31, 2018 , the Company acquired a 100% interest in one commercial property for an aggregate purchase price of $11.9 million (the “ 2018 Acquisition”), which includes $277,000 of external acquisition-related expenses that were capitalized in accordance with ASU 2017-01. Prior to the adoption of ASU 2017-01, costs related to property acquisitions were expensed as incurred. The Company funded the 2018 Asset Acquisition with net cash provided by operations and available borrowings.

The following table summarizes the consideration transferred for the property purchased during the year ended December 31, 2018 (in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



	2018 Asset Acquisition
Land	$	2,107
Buildings, fixtures and improvements	9,044
Acquired in-place leases and other intangibles ⁽¹⁾	1,392
Intangible lease liabilities ⁽²⁾	(638		)
Total purchase price	$	11,905

______________________


(1)	The amortization period for acquired in-place leases and other intangibles is 19.0 years.


(2)	The amortization period for acquired intangible lease liabilities is 19.0 years.

2018 Property Dispositions

During the year ended December 31, 2018 , the Company disposed of 21 properties, consisting of 19 retail properties and two anchored shopping centers, excluding a related outparcel of land, for an aggregate gross sales price of $66.6 million , resulting in net proceeds of $49.1 million after closing costs and the repayment of the $15.0 million variable rate debt secured by one of the disposed properties and a gain of $6.3 million . During the year ended December 31, 2018 , $478,000 was incurred for disposition fees to CR IV Management or its affiliates in connection with the sale of the properties and the Company has no continuing involvement with these properties. The gain on sale of real estate is included in gain on disposition of real estate, net in the consolidated statements of operations. The disposition of these properties did not qualify to be reported as discontinued operations since the disposition did not represent a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the operating results of these disposed properties are reflected in the Company’s results from continuing operations for all periods presented through their respective date of disposition.

2018 Impairment of Properties

The Company performs quarterly impairment review procedures, primarily through continuous monitoring of events and changes in circumstances that could indicate that the carrying value of certain of its real estate assets may not be recoverable. See Note 2 — Summary of Significant Accounting Policies for a discussion of the Company’s accounting policies regarding impairment of real estate assets.

During the year ended December 31, 2018 , 22 properties with a carrying value of $365.4 million were deemed to be impaired and their carrying values were reduced to an estimated fair value of $332.4 million , resulting in impairment charges of $33.0 million , which were recorded in the consolidated statements of operations. See Note 3 — Fair Value Measurements for a further discussion regarding these impairment charges.

2017 Property Acquisitions

During the year ended December 31, 2017 , the Company acquired 42 commercial properties for an aggregate purchase price of $307.4 million (the “ 2017 Acquisitions”), of which 38 were determined to be asset acquisitions and four were accounted for as business combinations as they were acquired prior to the Company’s adoption of ASU 2017-01 in April 2017. The Company funded the 2017 Acquisitions with net cash provided by operations and available borrowings.

The following table summarizes the consideration transferred for the properties purchased during the year ended December 31, 2017 (in thousands):



	2017 Acquisitions
Real estate assets:
Purchase price of asset acquisitions	$	251,999
Purchase price of business combinations	55,386
Total purchase price of real estate assets acquired ⁽¹⁾	$	307,385

____________________________________


(1)	The weighted average amortization period for the 2017 Acquisitions was 16.9 years for acquired in-place leases and other intangibles, 13.6 years for acquired above-market leases and 8.5 years for acquired intangible lease liabilities.

During the year ended December 31, 2017 , the Company acquired a 100% interest in 38 commercial properties for an aggregate purchase price of $252.0 million , which were accounted for as asset acquisitions (the “2017 Asset Acquisitions”).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The aggregate purchase price includes $6.1 million of external acquisition-related expenses that were capitalized in accordance with ASU 2017-01. Prior to the adoption of ASU 2017-01, costs related to property acquisitions were expensed as incurred. The following table summarizes the purchase price allocation for the 2017 Asset Acquisitions purchased during the year ended December 31, 2017 (in thousands):



	2017 Asset Acquisitions
Land	$	32,919
Buildings, fixtures and improvements	177,682
Acquired in-place leases and other intangibles	39,257
Acquired above-market leases	3,624
Revenue bonds	2,081
Intangible lease liabilities	(3,564		)
Total purchase price	$	251,999

During the year ended December 31, 2017 , the Company acquired a 100% interest in four commercial properties for an aggregate purchase price of $55.4 million , which were accounted for as business combinations (the “2017 Business Combination Acquisitions”). The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocations for the 2017 Business Combination Acquisitions purchased during the year ended December 31, 2017 (in thousands):



	2017 Business Combination Acquisitions
Land	$	9,873
Buildings, fixtures and improvements	41,186
Acquired in-place leases and other intangibles	5,974
Acquired above-market leases	988
Intangible lease liabilities	(2,635		)
Total purchase price	$	55,386

The Company recorded revenue for the year ended December 31, 2017 of $5.1 million and net income for the year ended December 31, 2017 of $708,000 related to the 2017 Business Combination Acquisitions. In addition, the Company recorded $1.3 million of acquisition-related expenses for the year ended December 31, 2017 , which is included in transaction-related expenses on the consolidated statements of operations.

The following table summarizes selected financial information of the Company as if all of the 2017 Business Combination Acquisitions were completed on January 1, 2016 for each period presented below. The table below presents the Company’s estimated revenue and net income, on a pro forma basis, for the years ended December 31, 2017 and 2016 (in thousands):



	Year Ended December 31,
	2017		2016
Pro forma basis (unaudited):
Revenue	$	424,416	$	412,883
Net income	$	80,912	$	71,301

The unaudited pro forma information for the year ended December 31, 2017 was adjusted to exclude $1.3 million of acquisition-related fees and expenses recorded during the year ended December 31, 2017 related to the 2017 Business Combination Acquisitions. Accordingly, these costs were instead recognized in the unaudited pro forma information for the year ended December 31, 2016.

The unaudited pro forma information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of 2016, nor does it purport to represent the results of future operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

2017 Property Dispositions

During the year ended December 31, 2017 , the Company disposed of 14 retail properties and one industrial property for an aggregate gross sales price of $100.6 million , resulting in net proceeds of $65.9 million after closing costs and the repayment of the $33.0 million variable rate debt secured by one of the disposed properties and a gain of $17.0 million . No disposition fees were paid to CR IV Management or its affiliates in connection with the sale of the properties and the Company has no continuing involvement with these properties. The gain on sale of real estate is included in gain (loss) on disposition of real estate, net in the consolidated statements of operations. The disposition of these properties did not qualify to be reported as discontinued operations since the disposition did not represent a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the operating results of these disposed properties are reflected in the Company’s results from continuing operations for all periods presented through their respective date of disposition.

2017 Impairment of Properties

During the year ended December 31, 2017 , four properties with a carrying value of $7.2 million were deemed to be impaired and their carrying values were reduced to an estimated fair value of $4.3 million , resulting in impairment charges of $2.9 million , which were recorded in the consolidated statements of operations. See Note 3 — Fair Value Measurements for a further discussion regarding these impairment charges.

2016 Property Acquisitions and Unconsolidated Joint Venture

During the year ended December 31, 2016 , the Company acquired 15 commercial properties for an aggregate purchase price of $216.7 million (the “2016 Acquisitions”). The 2016 Acquisitions were accounted for as business combinations. The Company funded the 2016 Acquisitions with net proceeds from the DRIP Offerings and available borrowings. The Company allocated the purchase price of these properties to the fair value of the assets acquired and liabilities assumed. The following table summarizes the purchase price allocations for the 2016 Acquisitions (in thousands):



	2016 Acquisitions
Land	$	48,317
Buildings, fixtures and improvements	149,859
Acquired in-place leases and other intangibles ⁽¹⁾	18,100
Acquired above-market leases ⁽²⁾	3,764
Intangible lease liabilities ⁽³⁾	(3,388		)
Total purchase price	$	216,652

____________________________________


(1)	The weighted average amortization period for acquired in-place leases and other intangibles was 7.6 years.


(2)	The weighted average amortization period for acquired above-market leases was 6.0 years.


(3)	The weighted average amortization period for acquired intangible lease liabilities was 6.4 years.

During the year ended December 31, 2016 , the Company acquired the joint venture partner’s (the “Unconsolidated Joint Venture Partner”) approximately 10% interest in a multi-tenant property comprising 176,000 rentable square feet of commercial space (the “Unconsolidated Joint Venture”). The Company has determined that this transaction qualified as a business combination to be accounted for under the acquisition method. Accordingly, the assets and liabilities of this transaction were recorded in the Company’s consolidated balance sheets at their estimated fair value as of the acquisition date. The fair value of the assets acquired, liabilities assumed and equity interests were estimated using significant assumptions consistent with the Company’s policy concerning the allocation of the purchase price of real estate assets, including current market rental rates, rental growth rates, capitalization and discount rates, interest rates and other variables. The results of this transaction are included in the Company’s consolidated statements of operations beginning September 22, 2016.

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COLE CREDIT PROPERTY TRUST IV, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table summarizes the transaction related to the business combination, including the amounts recognized for assets acquired and liabilities assumed, as indicated (in thousands):



	September 22, 2016
Carrying value of the Company’s equity interest before business combination ⁽¹⁾	$	18,952
Fair value of amounts recognized for assets acquired and liabilities assumed:
Land	4,535
Buildings, fixtures and improvements	11,826
Acquired in-place leases and other intangibles	1,296
Acquired above-market leases	1,130
Intangible lease liabilities	(597		)
Other assets and liabilities	115
Total net assets	18,305
Loss recognized on equity interest remeasured to fair value	$	(647	)

____________________________________

(1) Includes $1.6 million of cash paid to the Unconsolidated Joint Venture Partner.

The Company recorded revenue for the year ended December 31, 2016 of $10.7 million and a net loss for the year ended December 31, 2016 of $1.4 million related to the 2016 Acquisitions, as well as the acquisition of the Unconsolidated Joint Venture Partner’s approximately 10% interest in the Unconsolidated Joint Venture.

The following table summarizes selected financial information of the Company as if all of the 2016 Acquisitions, as well as the acquisitions of the Unconsolidated Joint Venture Partner’s approximately 10% interest in the Unconsolidated Joint Venture, were completed on January 1, 2015 for each period presented below. The table below presents the Company’s estimated revenue and net income, on a pro forma basis, for the years ended December 31, 2016 and 2015 (in thousands):



	Year Ended December 31,
	2016		2015
Pro forma basis (unaudited):
Revenue	$	418,798	$	389,780
Net income	$	74,052	$	64,662

The unaudited pro forma information for the year ended December 31, 2016 was adjusted to exclude $4.2 million of acquisition-related fees and expenses recorded during the year ended December 31, 2016 . Accordingly, these costs were instead recognized in the unaudited pro forma information for the year ended December 31, 2015 .

The unaudited pro forma information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred at the beginning of 2015 , nor does it purport to represent the results of future operations.

2016 Property Dispositions

During the year ended December 31, 2016 , the Company disposed of four retail properties and one anchored shopping center for an aggregate gross sales price of $31.6 million , resulting in net proceeds of $30.8 million after closing costs and a gain of $2.9 million . No disposition fees were paid to CR IV Management or its affiliates in connection with the sale of the properties and the Company has no continuing involvement with these properties. The gain on sale of real estate is included in gain (loss) on disposition of real estate, net in the consolidated statements of operations for all periods presented. The disposition of these properties did not qualify to be reported as discontinued operations since the disposition did not represent a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, the operating results of these disposed properties are reflected in the Company’s results from continuing operations for all periods presented through their respective date of disposition.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

2016 Impairment of Properties

During the year ended December 31, 2016 , three properties with a carrying value of $11.4 million were deemed to be impaired and their carrying values were reduced to an estimated fair value of $4.7 million , resulting in impairment charges of $6.7 million , which were recorded in the consolidated statement of operations. See Note 3 — Fair Value Measurements for a further discussion on these impairment charges.

Consolidated Joint Venture

As of December 31, 2018 , the Company had an interest in a Consolidated Joint Venture that owns and manages nine properties, with total assets of $50.9 million , which included $9.3 million of land, $42.0 million of buildings and improvements, and $5.6 million of intangible lease assets, net of accumulated depreciation and amortization of $6.9 million , and total liabilities of $789,000 . The Consolidated Joint Venture does not have any debt outstanding as of December 31, 2018 . The Company has the ability to control operating and financial policies of the Consolidated Joint Venture. There are restrictions on the use of these assets as the Company would generally be required to obtain the partner’s (the “Consolidated Joint Venture Partner”) approval in accordance with the joint venture agreement for any major transactions. The Company and the Consolidated Joint Venture Partner are subject to the provisions of the joint venture agreement, which includes provisions for when additional contributions may be required to fund certain cash shortfalls.

NOTE 5 — INTANGIBLE LEASE ASSETS AND LIABILITIES

Intangible lease assets and liabilities consisted of the following as of December 31, 2018 and 2017 (in thousands, except weighted average life remaining):



		As of December 31,
		2018		2017
Intangible lease assets:
In-place leases and other intangibles, net of accumulated amortization of $184,532 and
	$166,874, respectively (with a weighted average life remaining of 10.1 years
	and 10.5 years, respectively)	$	307,895	$	355,683
Acquired above-market leases, net of accumulated amortization of $27,979 and
	$25,626, respectively (with a weighted average life remaining of 8.4 years and
	8.7 years, respectively)	34,462		41,747
Total intangible lease assets, net		$	342,357	$	397,430
Intangible lease liabilities:
Acquired below-market leases, net of accumulated amortization of $34,732 and
	$31,330, respectively (with a weighted average life remaining of 7.2 years
	and 7.5 years, respectively)	$	36,418	$	45,572

Amortization of the above-market leases is recorded as a reduction to rental revenue, and amortization expense for the in-place leases and other intangibles is included in depreciation and amortization in the accompanying consolidated statements of operations. Amortization of below-market leases is recorded as an increase to rental revenue in the accompanying consolidated statements of operations. The following table summarizes the amortization related to the intangible lease assets and liabilities for the years ended December 31, 2018 , 2017 , and 2016 (in thousands):



	Year Ended December 31,
	2018		2017		2016
In-place lease and other intangible amortization	$	45,559	$	46,602	$	45,944
Above-market lease amortization	$	6,740	$	7,304	$	6,638
Below-market lease amortization	$	8,448	$	9,503	$	7,821

As of December 31, 2018 , the estimated amortization relating to the intangible lease assets and liabilities for each of the five succeeding fiscal years is as follows (in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



	Amortization
Year Ending December 31,	In-Place Leases and Other Intangibles		Above-Market Leases		Below-Market Leases
2019	$	37,322	$	4,981	$	7,316
2020	$	35,164	$	4,451	$	6,501
2021	$	31,862	$	3,835	$	4,398
2022	$	29,990	$	3,590	$	3,710
2023	$	26,868	$	3,221	$	2,899

NOTE 6 — LOANS HELD-FOR-INVESTMENT

During the year ended December 31, 2018 , the Company originated four junior mezzanine loans to fund the repayment of existing construction loans, as well as additional construction costs for renovation of four condominium properties, secured by a pledge of the equity interests in the portfolio of four condominium properties (the “Junior Mezzanine Loans”). The following table details overall statistics for the Company’s loans held-for-investment as of December 31, 2018 (dollar amounts in thousands):



	As of December 31,
	2018
Number of loans	4
Principal balance	$	89,679
Net book value	$	89,762
Weighted-average interest rate ⁽¹⁾	17.2		%
Weighted-average maximum years to maturity ⁽²⁾	2.4

____________________________________


(1)	As of December 31, 2018 , the Junior Mezzanine Loans were indexed to one-month LIBOR plus an interest rate spread of 14.85% .


(2)	Maximum maturity assumes all extension options are exercised by the borrower, however the Company’s loans may be repaid prior to such date.

Activity relating to the Company’s loans held-for-investment portfolio was as follows (dollar amounts in thousands):



	Principal Balance		Deferred Fees / Other Items ⁽¹⁾			Net Book Value
Beginning Balance, December 31, 2017	$	—	$	—		$	—
Loan fundings	89,295		—			89,295
Capitalized interest ⁽²⁾	384		—			384
Deferred fees and other items	—		(185		)	(185		)
Accretion (amortization) of fees and other items	—		268			268
Ending Balance, December 31, 2018	$	89,679	$	83		$	89,762

____________________________________


(1)	Other items primarily consist of purchase discounts or premiums, exit fees and deferred origination expenses.


(2)	Represents accrued interest on loans whose terms do not require a current cash payment of interest.

NOTE 7 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, the Company uses certain types of derivative instruments for the purpose of managing or hedging its interest rate risk. During the year ended December 31, 2018 , three of the Company’s interest rate swap agreements matured. In addition, one of the Company’s interest rate swap agreements was terminated prior to its maturity date due to the disposition of the underlying multi-tenant property. As of December 31, 2018 , the Company had seven executed interest rate swap agreements. The following table summarizes the terms of the Company’s executed interest rate swap agreements designated as hedging instruments as of December 31, 2018 and 2017 (dollar amounts in thousands):

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COLE CREDIT PROPERTY TRUST IV, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Outstanding Notional

Fair Value of Assets

Balance Sheet

Amount as of

Interest

Effective

Maturity

December 31,

Location

December 31, 2018

Rates ⁽¹⁾

Dates

2018

2017

Interest Rate Swaps

Derivative assets, revenue bonds, prepaid expenses and other assets

(2)

990,066

2.55% to 3.91%

10/1/2015 to 8/15/2018

3/1/2019 to 7/1/2021

10,993

7,324

____________________________________


(1)	The interest rates consist of the underlying index swapped to a fixed rate and the applicable interest rate spread as of December 31, 2018 .


(2)	As of December 31, 2017, two of the interest rate swaps, with an aggregate outstanding notional amount of $38.7 million , were in a liability position with an aggregate fair value balance of $206,000 and are included in deferred rental income and other liabilities in the accompanying consolidated balance sheets.

Additional disclosures related to the fair value of the Company’s derivative instruments are included in Note 3 — Fair Value Measurements. The notional amount under the interest rate swap agreements is an indication of the extent of the Company’s involvement in each instrument, but does not represent exposure to credit, interest rate or market risks.

Accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. The Company designated the interest rate swaps as cash flow hedges in order to hedge the variability of the anticipated cash flows on its variable rate debt. The change in fair value of the derivative instruments that are designated as hedges is recorded in other comprehensive income, with a portion of the amount subsequently reclassified to interest expense as interest payments are made on the Company’s variable rate debt. For the years ended December 31, 2018 , 2017 , and 2016 , the amounts reclassified were a gain of $4.3 million , and losses of $3.1 million and $8.8 million , respectively. During the next 12 months, the Company estimates that an additional $5.9 million will be reclassified from other comprehensive income as a decrease to interest expense. The Company includes cash flows from interest rate swap agreements in cash flows provided by operating activities on its consolidated statements of cash flows, as the Company’s accounting policy is to present cash flows from hedging instruments in the same category in its consolidated statements of cash flows as the category for cash flows from the hedged items.

The Company has agreements with each of its derivative counterparties that contain provisions whereby if the Company defaults on certain of its unsecured indebtedness, the Company could also be declared in default on its derivative obligations, resulting in an acceleration of payment. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value, inclusive of interest payments and accrued interest. As of December 31, 2018 , all derivatives were in an asset position. Therefore, there was no termination value as of December 31, 2018 . In addition, the Company is exposed to credit risk in the event of non-performance by its derivative counterparties. The Company believes it mitigates its credit risk by entering into agreements with creditworthy counterparties. The Company records credit risk valuation adjustments on its interest rate swaps based on the credit quality of the Company and the respective counterparty. There were no termination events or events of default related to the interest rate swaps as of December 31, 2018 .

NOTE 8 — NOTES PAYABLE AND CREDIT FACILITY

As of December 31, 2018 , the Company had $2.5 billion of debt outstanding, including net deferred financing costs, with a weighted average years to maturity of 3.2 years and a weighted average interest rate of 3.9% . The weighted average years to maturity is computed using the scheduled repayment date as specified in each loan agreement where applicable. The weighted average interest rate is computed using the interest rate in effect until the scheduled repayment date. Should a loan not be repaid by its scheduled repayment date, the applicable interest rate will increase as specified in the respective loan agreement. The following table summarizes the debt balances as of December 31, 2018 and 2017 , and the debt activity for the year ended December 31, 2018 (in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



				During the Year Ended December 31, 2018
	Balance as of December 31, 2017			Debt Issuances and Assumptions ⁽¹⁾		Repayments and Modifications			Accretion and (Amortization)			Balance as of December 31, 2018
Fixed rate debt	$	1,217,377		$	—	$	(39,211	)	$	—		$	1,178,166
Variable rate debt	20,500			—		—			—			20,500
Credit facility	1,251,000			268,000		(188,000		)	—			1,331,000
Total debt	2,488,877			268,000		(227,211		)	—			2,529,666
Net premiums ⁽²⁾	419			—		—			(88		)	331
Deferred costs - credit facility ⁽³⁾	(8,828		)	—		—			2,097			(6,731		)
Deferred costs - fixed rate debt	(8,705		)	—		46			2,307			(6,352		)
Total debt, net	$	2,471,763		$	268,000	$	(227,165	)	$	4,316		$	2,516,914

____________________________________


(1)	Includes deferred financing costs incurred during the period.


(2)	Net premiums on mortgage notes payable were recorded upon the assumption of the respective debt instruments. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective debt instruments using the effective-interest method.


(3)	Deferred costs relate to the term portion of the Credit Facility (as defined below).

As of December 31, 2018 , the fixed rate debt outstanding of $1.2 billion included $178.4 million of variable rate debt that is fixed through interest rate swap agreements, which has the effect of fixing the variable interest rates per annum through the maturity date of the variable rate debt. The fixed rate debt has interest rates ranging from 2.6% to 5.0% per annum. The fixed rate debt outstanding matures on various dates from September 1, 2019 through October 1, 2025 . The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the fixed rate debt outstanding was $2.1 billion as of December 31, 2018 . Each of the mortgage notes payable, comprising the fixed rate debt, is secured by the respective properties on which the debt was placed. As of December 31, 2018 , the variable rate debt outstanding of $20.5 million had a weighted average interest rate of 5.6% . The variable rate debt outstanding matures on February 26, 2020 . With respect to the Company’s $49.8 million of debt maturing within the next year, the Company expects to use borrowings available under the Credit Facility or enter into new financing arrangements in order to meet its debt obligations. The aggregate balance of gross real estate assets, net of gross intangible lease liabilities, securing the variable rate debt outstanding was $40.8 million as of December 31, 2018 .

Credit Facility

The Company has a second amended and restated unsecured credit agreement (the “Second Amended and Restated Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent (“JPMorgan Chase”), and the other lenders party thereto that provides for borrowings of up to $1.40 billion , which includes a $1.05 billion unsecured term loan (the “Term Loan”) and up to $350.0 million in unsecured revolving loans (the “Revolving Loans” and collectively, with the Term Loan, the “Credit Facility”). The Term Loan matures on March 15, 2022 and the Revolving Loans mature on March 15, 2021 ; however, the Company has the right to extend the maturity date of the Revolving Loans to March 15, 2022 .

Depending upon the type of loan specified and overall leverage ratio, the Credit Facility bears interest at (i) the one-month, two-month, three-month or six-month LIBOR multiplied by the statutory reserve rate (the “Eurodollar Rate”) plus an interest rate spread ranging from 1.65% to 2.25% or (ii) a base rate, ranging from 0.65% to 1.25% , plus the greater of: (a) JPMorgan Chase’s Prime Rate; (b) the Federal Funds Effective Rate (as defined in the Second Amended and Restated Credit Agreement) plus 0.50% ; or (c) the one-month LIBOR multiplied by the statutory reserve rate plus 1.00% . As of December 31, 2018 , the Revolving Loans outstanding totaled $281.0 million at a weighted average interest rate of 4.2% . As of December 31, 2018 , the Term Loan outstanding totaled $1.05 billion , $811.7 million of which is subject to interest rate swap agreements (the “Swapped Term Loan”). The interest rate swap agreements had the effect of fixing the Eurodollar Rate per annum of the Swapped Term Loan at an all-in rate of 3.8% . As of December 31, 2018 , the Company had $1.33 billion outstanding under the Credit Facility at a weighted average interest rate of 4.0% and $67.2 million in unused capacity, subject to borrowing availability.

The Second Amended and Restated Credit Agreement contains provisions with respect to covenants, events of default and remedies customary for facilities of this nature. In particular, the Second Amended and Restated Credit Agreement requires the Company to maintain a minimum consolidated net worth greater than or equal to the sum of (i) $2.0 billion plus (ii) 75% of the equity issued minus (iii) the aggregate amount of any redemptions or similar transaction from the date of the Second Amended and Restated Credit Agreement, a leverage ratio less than or equal to 60% , a fixed charge coverage ratio greater than 1.50 , an

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

unsecured debt to unencumbered asset value ratio equal to or less than 60% , an unsecured debt service coverage ratio greater than 1.75 , a secured debt ratio equal to or less than 40% and the amount of secured debt that is recourse debt at no greater than 15% of total asset value. The Company believes it was in compliance with the financial covenants under the Second Amended and Restated Credit Agreement, as well as the financial covenants under the Company’s various fixed and variable rate debt agreements, as of December 31, 2018 .

Maturities

The following table summarizes the scheduled aggregate principal repayments for the Company’s outstanding debt as of December 31, 2018 for each of the five succeeding fiscal years and the period thereafter (in thousands):



Year Ending December 31,	Principal Repayments
2019	$	49,799
2020	318,215
2021	381,603
2022	1,092,464
2023	491,375
Thereafter	196,210
Total	$	2,529,666

NOTE 9 — SUPPLEMENTAL CASH FLOW DISCLOSURES

Supplemental cash flow disclosures for the years ended December 31, 2018 , 2017 and 2016 are as follows (in thousands):



	Year Ended December 31,
	2018		2017		2016
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
Distributions declared and unpaid	$	16,518	$	16,531	$	16,498
Accrued capital expenditures	$	557	$	192	$	675
Common stock issued through distribution reinvestment plan	$	91,764	$	101,344	$	109,166
Change in fair value of interest rate swaps	$	3,875	$	7,654	$	4,335
Contingent consideration recorded upon property acquisitions	$	—	$	—	$	332
Consolidation of real estate joint venture	$	—	$	—	$	18,305
Supplemental Cash Flow Disclosures:
Interest paid	$	93,424	$	85,140	$	74,034
Cash paid for income taxes	$	1,475	$	1,555	$	1,887

NOTE 10 — COMMITMENTS AND CONTINGENCIES

Litigation

In the ordinary course of business, the Company may become subject to litigation and claims. The Company is not aware of any material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company is a party or of which the Company’s properties are the subject.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. In addition, the Company may own or acquire certain properties that are subject to environmental remediation. Generally, the seller of the property, the tenant of the property and/or another third party is responsible for environmental remediation costs related to a property. Additionally, in connection with the purchase of certain properties, the respective sellers and/or tenants may agree to indemnify the Company against future remediation costs. The Company also carries environmental liability insurance on its properties that provides limited coverage for any remediation

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

liability and/or pollution liability for third-party bodily injury and/or property damage claims for which the Company may be liable. The Company is not aware of any environmental matters which it believes are reasonably likely to have a material effect on its results of operations, financial condition or liquidity.

NOTE 11 — RELATED-PARTY TRANSACTIONS AND ARRANGEMENTS

The Company has incurred fees and expenses payable to CR IV Management and certain of its affiliates in connection with the acquisition, management and disposition of its assets.

Acquisition fees and expenses

The Company pays CR IV Management or its affiliates acquisition fees of up to 2.0% of: (1) the contract purchase price of each property or asset the Company acquires; (2) the amount paid in respect of the development, construction or improvement of each asset the Company acquires; (3) the purchase price of any loan the Company acquires; and (4) the principal amount of any loan the Company originates. In addition, the Company reimburses CR IV Management or its affiliates for acquisition-related expenses incurred in the process of acquiring properties, so long as the total acquisition fees and expenses relating to the transaction do not exceed 6.0% of the contract purchase price, unless otherwise approved by a majority of the Board, including a majority of the Company’s independent directors, as commercially competitive, fair and reasonable to the Company.

Advisory fees and expenses

The Company pays CR IV Management a monthly advisory fee based upon the Company’s monthly average invested assets, which, effective January 1, 2018, is based on the estimated market value of such assets used to determine the Company’s estimated per share NAV as of December 31, 2017, as discussed in Note 1 — Organization and Business, and for those assets acquired subsequent to December 31, 2017, is based on the purchase price. The monthly advisory fee is equal to the following amounts: (1) an annualized rate of 0.75% paid on the Company’s average invested assets that are between $0 and $2.0 billion ; (2) an annualized rate of 0.70% paid on the Company’s average invested assets that are between $2.0 billion and $4.0 billion ; and (3) an annualized rate of 0.65% paid on the Company’s average invested assets that are over $4.0 billion .

Operating expenses

The Company reimburses CR IV Management or its affiliates for certain expenses CR IV Management or its affiliates paid or incurred in connection with the services provided to the Company, subject to the limitation that the Company will not reimburse CR IV Management or its affiliates for any amount by which the operating expenses (including the advisory fee) at the end of the four preceding fiscal quarters exceed the greater of: (1) 2.0% of average invested assets, or (2) 25.0% of net income excluding any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of assets for that period. The Company will not reimburse CR IV Management or its affiliates for the salaries and benefits paid to personnel in connection with the services for which CR IV Management receives acquisition fees, and the Company will not reimburse CR IV Management for salaries and benefits paid to the Company’s executive officers.

Disposition fees

If CR IV Management or its affiliates provide a substantial amount of services (as determined by a majority of the Company’s independent directors) in connection with the sale of one or more properties (or the Company’s entire portfolio), the Company will pay CR IV Management or its affiliates a disposition fee in an amount equal to up to one-half of the real estate or brokerage commission paid by the Company to third parties on the sale of such property, not to exceed 1.0% of the contract price of the property sold; provided, however, in no event may the total disposition fees paid to CR IV Management, its affiliates and unaffiliated third parties exceed the lesser of the customary competitive real estate commission or an amount equal to 6.0% of the contract sales price.

Subordinated performance fees

If the Company is sold or its assets are liquidated, CR IV Management will be entitled to receive a subordinated performance fee equal to 15.0% of the net sale proceeds remaining after stockholders have received, from regular distributions plus special distributions paid from proceeds of such sale, a return of their net capital invested and an 8.0% annual cumulative, non-compounded return. Alternatively, if the Company’s shares are listed on a national securities exchange, CR IV Management will be entitled to a subordinated performance fee equal to 15.0% of the amount by which the market value of the Company’s outstanding stock plus all distributions paid by the Company prior to listing, exceeds the sum of the total amount of capital raised from stockholders and the amount of distributions necessary to generate an 8.0% annual cumulative, non-compounded return to stockholders. As an additional alternative, upon termination of the advisory agreement, CR IV

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Management may be entitled to a subordinated performance fee similar to the fee to which CR IV Management would have been entitled had the portfolio been liquidated (based on an independent appraised value of the portfolio) on the date of termination. During each of the years ended December 31, 2018 , 2017 and 2016 , no subordinated performance fees were incurred related to any such events.

The Company recorded fees and expense reimbursements as shown in the table below for services provided by CR IV Management or its affiliates related to the services described above during the periods indicated (in thousands):



	Year Ended December 31,
	2018		2017		2016
Acquisition fees and expenses	$	2,749	$	6,532	$	4,960
Disposition fees	$	478	$	—	$	—
Advisory fees and expenses	$	43,399	$	44,072	$	41,926
Operating expenses	$	5,163	$	4,494	$	4,119

Of the amounts shown above, $5.2 million and $2.0 million had been incurred, but not yet paid, for services provided by CR IV Management or its affiliates in connection with the acquisition, disposition and operations activities during the years ended December 31, 2018 and 2017 , respectively, and such amounts were recorded as liabilities of the Company as of such dates.

Due to/from Affiliates

As of December 31, 2018 and 2017 , $5.2 million and $2.0 million , respectively, had been incurred primarily for advisory fees and operating expenses by CR IV Management or its affiliates, but had not yet been reimbursed by the Company. These amounts were included in due to affiliates in the consolidated balance sheets for such periods.

As of December 31, 2017 , $56,000 was due from CR IV Management or its affiliates related to amounts received by affiliates of the advisor which were due to the Company. No such amounts were due to the Company as of December 31, 2018 .

NOTE 12 — ECONOMIC DEPENDENCY

Under various agreements, the Company has engaged and may in the future engage CR IV Management or its affiliates to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company, asset acquisition and disposition decisions, as well as other administrative responsibilities for the Company including accounting services and stockholder relations. As a result of these relationships, the Company is dependent upon CR IV Management or its affiliates. In the event that these companies are unable to provide the Company with these services, the Company would be required to find alternative providers of these services.

Services Agreement

VEREIT OP, a former affiliated entity of the Company’s sponsor, is obligated to provide certain services to CCO Group and to the Company, including operational real estate support (the “Services Agreement”) through March 31, 2019 (or, if later, the date of the last government filing other than a tax filing made by the Company, CCPT V, CCIT II, CCIT III and/or CIM Income NAV with respect to its 2018 fiscal year) (the “Initial Services Term”), and is obligated to provide consulting and research services through December 31, 2023 as requested by CCO Group, LLC. The services provided by VEREIT OP during the Initial Services Term, including but not limited to any advisory, dealer manager and property management services, have been, or by March 31, 2019, will be, transitioned to, and will be provided directly by, our sponsor, advisor, dealer manager or an affiliate thereof.

NOTE 13 — STOCKHOLDERS’ EQUITY

As of December 31, 2018, 2017 and 2016, the Company was authorized to issue $600.0 million of shares of common stock under the Secondary DRIP Offering. All shares of such stock have a par value of $0.01 per share. The par value of stockholder proceeds raised from the DRIP Offerings is classified as common stock, with the remainder allocated to capital in excess of par value.

On August 11, 2010, the Company sold 20,000 shares of common stock, at $10.00 per share, to Cole Holdings Corporation (“CHC”). On April 5, 2013, the ownership of such shares was transferred to CREInvestments, LLC (“CREI”), an affiliate of CR IV Management. On February 7, 2014, the ownership of such shares was transferred to VEREIT OP. Upon completion of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

the Transaction on February 1, 2018, the ownership of such shares was transferred by VEREIT OP to CR IV Management. Pursuant to the Company’s charter, CR IV Management is prohibited from selling the 20,000 shares of the common stock that represents the initial investment in the Company for so long as CCO Group remains the Company’s sponsor; provided, however, that CR IV Management may transfer ownership of all or a portion of these 20,000 shares of the Company’s common stock to other affiliates of the Company’s sponsor.

Distribution Reinvestment Plan

Pursuant to the DRIP, the Company allows stockholders to elect to have their distributions reinvested in additional shares of the Company’s common stock at the most recent estimated per share NAV as determined by the Board. The Board may terminate or amend the Secondary DRIP Offering at the Company’s discretion at any time upon ten days’ prior written notice to the stockholders. During the years ended December 31, 2018 , 2017 and 2016 , approximately 9.6 million , 10.1 million and 11.2 million shares were purchased under the DRIP Offerings for approximately $91.8 million , $101.3 million and $109.2 million , respectively, which were recorded as redeemable common stock on the consolidated balance sheets.

Share Redemption Program

The Company’s share redemption program permits its stockholders to sell their shares back to the Company after they have held them for at least one year, subject to the significant conditions and limitations described below.

The share redemption program provides that the Company will redeem shares of its common stock from requesting stockholders, subject to the terms and conditions of the share redemption program. The Company will limit the number of shares redeemed pursuant to the share redemption program as follows: (1) the Company will not redeem in excess of 5% of the weighted average number of shares outstanding during the trailing 12 months prior to the end of the fiscal quarter for which the redemptions are being paid; and (2) funding for the redemption of shares will be limited, among other things, to the net proceeds the Company receives from the sale of shares under the DRIP Offerings, net of shares redeemed to date. In an effort to accommodate redemption requests throughout the calendar year, the Company intends to limit quarterly redemptions to approximately 1.25% of the weighted average number of shares outstanding during the trailing 12 -month period ending on the last day of the fiscal quarter, and funding for redemptions for each quarter generally will be limited to the net proceeds the Company receives from the sale of shares in the respective quarter under the DRIP Offerings.

In accordance with the Company’s share redemption program, the per share redemption price (other than for shares purchased pursuant to the DRIP portion of the Offering and the DRIP Offerings) will depend on the length of time the redeeming stockholder has held such shares as follows: after two years from the purchase date, 97.5% of the most recent estimated value of each share; and after three years from the purchase date, 100% of the most recent estimated value of each share. During this time period, the redemption price for shares purchased pursuant to the DRIP portion of the Offering and the DRIP Offerings will be 100% of the most recent estimated value of each share, as determined by the Board. See the discussion of the updated estimated per share NAV of the Company’s common stock effective March 26, 2019 in Note 17 — Subsequent Events.

Upon receipt of a request for redemption, the Company may conduct a Uniform Commercial Code search to ensure that no liens are held against the shares. If the Company cannot purchase all shares presented for redemption in any fiscal quarter, based upon insufficient cash available and/or the limit on the number of shares the Company may redeem during any quarter or year, the Company will give priority to the redemption of deceased stockholders’ shares. The Company next will give priority to requests for full redemption of accounts with a balance of 250 shares or less at the time the Company receives the request, in order to reduce the expense of maintaining small accounts. Thereafter, the Company will honor the remaining quarterly redemption requests on a pro rata basis. Following such quarterly redemption period, the unsatisfied portion of the prior redemption request must be resubmitted, prior to the last day of the new quarter. Unfulfilled requests for redemption will not be carried over automatically to subsequent redemption periods.

The Company redeems shares no later than the end of the month following the end of each fiscal quarter. Requests for redemption must be received on or prior to the end of the fiscal quarter in order for the Company to repurchase the shares in the month following the end of that fiscal quarter. The Board may amend, suspend or terminate the share redemption program at any time upon 30 days’ prior written notice to the stockholders. During the years ended December 31, 2018 , 2017 and 2016 , the Company redeemed approximately 9.8 million , 10.3 million and 11.5 million shares, respectively, under the share redemption program for $93.8 million , $103.7 million and $110.7 million , respectively. During the year ended December 31, 2018 , redemption requests relating to approximately 58.5 million shares went unfulfilled.

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COLE CREDIT PROPERTY TRUST IV, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Distributions Payable and Distribution Policy

The Board authorized a daily distribution, based on 365 days in the calendar year, of $0.001711452 per share for stockholders of record as of the close of business on each day of the period commencing on January 1, 2018 and ending on June 30, 2019 . As of December 31, 2018 , the Company had distributions payable of $16.5 million .

Equity-Based Compensation

On August 10, 2018, the Board approved the adoption of the Cole Credit Property Trust IV, Inc. 2018 Equity Incentive Plan (the “Plan”), under which 400,000 of the Company’s common shares were reserved for issuance and share awards of 386,000 are available for future grant at December 31, 2018. Under the Plan, the Board or a committee designated by the Board has the authority to grant restricted stock awards or deferred stock awards to non-employee directors of the Company, which will further align such directors’ interests with the interests of the Company’s stockholders. The Board or committee also has the authority to determine the terms of any award granted pursuant to the Plan, including vesting schedules, restrictions and acceleration of any restrictions. The Plan may be amended or terminated by the Board at any time. The Plan expires on August 9, 2028.

On October 1, 2018, the Company granted awards of approximately 3,500 restricted shares to each of the independent members of the Board (approximately 14,000 restricted shares in aggregate) under the Plan, which fully vest on October 1, 2019 based on one year of continuous service. As of December 31, 2018, none of the restricted shares had vested or been forfeited. The fair value of the Company’s share awards is determined using the Company’s NAV per share on the date of grant. Compensation expense related to these restricted shares is recognized over the vesting period. The Company recorded compensation expense of $33,000 for the year ended December 31, 2018 related to these restricted shares included in general and administrative expenses on the accompanying consolidated statement of operations.

As of December 31, 2018, there was $98,000 of total unrecognized compensation expense related to shares which will be recognized ratably over the remaining period of service prior to October 1, 2019.

NOTE 14 — INCOME TAXES

For federal income tax purposes, distributions to stockholders are characterized as ordinary dividends, capital gain distributions, or nondividend distributions. Nondividend distributions will reduce U.S stockholders’ basis (but not below zero) in their shares. The following table shows the character of the distributions the Company paid on a percentage basis for the years ended December 31, 2018 , 2017 and 2016 :



	Year Ended December 31,
Character of Distributions:	2018		2017		2016
Ordinary dividends	52	%	51	%	53	%
Nondividend distributions	48	%	42	%	46	%
Capital gain distributions	—	%	7	%	1	%
Total	100	%	100	%	100	%

During the years ended December 31, 2018 , 2017 and 2016 , the Company incurred state and local income and franchise taxes of $1.4 million , $1.6 million , and $1.2 million , respectively, which were recorded in general and administrative expenses in the consolidated statements of operations.

The Company had no unrecognized tax benefits as of or during the years ended December 31, 2018 and 2017 . Any interest and penalties related to unrecognized tax benefits would be recognized within the provision for income taxes in the accompanying consolidated statements of operations. The Company files income tax returns in the U.S. federal jurisdiction, as well as various state jurisdictions, and is subject to routine examinations by the respective tax authorities.

NOTE 15 — OPERATING LEASES

The Company’s real estate assets are leased to tenants under operating leases for which the terms and expirations vary. As of December 31, 2018 , the leases had a weighted-average remaining term of 9.1 years. Certain leases include provisions to extend the lease agreements, options for early termination after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other negotiated terms and conditions. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants.

F-31

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COLE CREDIT PROPERTY TRUST IV, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

As of December 31, 2018 , the future minimum rental income from the Company’s real estate assets under non-cancelable operating leases, assuming no exercise of renewal options for the succeeding five fiscal years and thereafter, was as follows (in thousands):



Year Ending December 31,	Future Minimum Rental Income
2019	$	352,699
2020	343,991
2021	327,661
2022	311,858
2023	284,510
Thereafter	1,718,650
Total	$	3,339,369

A certain amount of the Company’s rental income is from tenants with leases which are subject to contingent rent provisions. These contingent rents are subject to the tenant achieving periodic revenues in excess of specified levels. For the years ended December 31, 2018 , 2017 and 2016 , the amount of the contingent rent earned by the Company was not significant.

NOTE 16 — QUARTERLY RESULTS (UNAUDITED)

Presented below is a summary of the unaudited quarterly financial information for the years ended December 31, 2018 and 2017 (in thousands, except for per share amounts). In the opinion of management, the information for the interim periods presented includes all adjustments which are of a normal and recurring nature, necessary to present a fair presentation of the results for each period.



	December 31, 2018
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Revenues	$	109,503	$	107,395	$	105,705	$	108,673
Net income (loss)	$	19,073	$	17,825	$	14,905	$	(14,391	)
Net income (loss) attributable to the Company	$	19,039	$	17,792	$	14,872	$	(14,425	)
Basic and diluted net income (loss) per common share ⁽¹⁾	$	0.06	$	0.06	$	0.05	$	(0.05	)

____________________________________


(1)	The Company calculates net income per share based on the weighted-average number of outstanding shares of common stock during the reporting period. The average number of shares fluctuates throughout the year and can therefore produce a full year result that does not agree to the sum of the individual quarters.



	December 31, 2017
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Revenues	$	104,780	$	104,504	$	107,024	$	107,787
Net income	$	16,251	$	18,107	$	29,769	$	15,424
Net income attributable to the Company	$	16,217	$	18,075	$	29,736	$	15,392
Basic and diluted net income per common share ⁽¹⁾	$	0.05	$	0.06	$	0.10	$	0.05

____________________________________


(1)	The Company calculates net income per share based on the weighted-average number of outstanding shares of common stock during the reporting period. The average number of shares fluctuates throughout the year and can therefore produce a full year result that does not agree to the sum of the individual quarters.

NOTE 17 — SUBSEQUENT EVENTS

The following events occurred subsequent to December 31, 2018 :

Redemption of Shares of Common Stock

Subsequent to December 31, 2018 , the Company redeemed approximately 2.3 million shares pursuant to the Company’s share redemption program for $21.7 million (at an average price per share of $9.37 ). Management, in its discretion, limited the amount of shares redeemed for the three months ended December 31, 2018 to an amount equal to net proceeds the Company

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COLE CREDIT PROPERTY TRUST IV, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

received from the sale of shares in the DRIP Offerings during the respective period. The remaining redemption requests received during the three months ended December 31, 2018 totaling approximately 16.1 million shares went unfulfilled.

Property Disposition

Subsequent to December 31, 2018 , the Company disposed of 33 commercial real estate property for a gross sales price of $109.1 million , resulting in proceeds of $105.8 million after closing costs and a gain of $5.0 million . In addition, $534,000 was incurred for disposition fees to CR IV Management or its affiliates in connection with the sale of the property and the Company has no continuing involvement with this property.

Estimated Per Share NAV

On March 20, 2019, the Board established an estimated per share NAV of the Company’s common stock as of December 31, 2018 , of $8.65 per share. Commencing on March 26, 2019, distributions will be reinvested in shares of the Company’s common stock under the Secondary DRIP Offering at a price of $8.65 per share. Pursuant to the terms of the Company’s share redemption program, commencing on March 26, 2019, the updated estimated per share NAV of $8.65 , as of December 31, 2018 , will serve as the most recent estimated value for purposes of the share redemption program going forward, until such time as the Board determines a new estimated per share NAV.

F-33

COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION

(in thousands)



				Initial Costs to Company						Gross Amount at
						Buildings,		Total		Which Carried		Accumulated
						Fixtures and		Adjustment		At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)		(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Real Estate Held for Investment:
10Box Cost-Plus:
	Conway, AR	$	—	$	733	$	1,654	$	—	$	2,387	$	67	9/5/2017	1989
	Russellville, AR	—		990		1,470		—		2,460		83		3/20/2017	1989
24 Hour Fitness:
	Beaverton, OR	(h)		2,609		9,974		—		12,583		1,070		9/30/2014	2009
	Fort Worth, TX	(h)		1,519		7,449		—		8,968		1,041		9/27/2013	2008
Aaron’s:
	Hillsboro, OH	(h)		279		829		—		1,108		145		8/26/2013	2013
	Mountain Home, AR	(h)		183		872		—		1,055		72		10/1/2015	2015
	Wilmington, OH	(h)		249		1,134		—		1,383		132		2/26/2015	2014
Academy Sports:
	Clarksville, TN	(h)		1,811		6,603		—		8,414		814		6/17/2014	2014
	Cookeville, TN	49,300		—		23,847		73,371		97,218		7,274		9/30/2014	2015
	Douglasville, GA	(h)		1,360		8,593		—		9,953		1,046		6/12/2014	2014
	Flowood, MS	(h)		1,534		7,864		—		9,398		1,025		6/27/2014	2014
	Greenville, NC	(h)		1,968		7,054		—		9,022		419		1/12/2017	2016
	McDonough, GA	(h)		1,846		5,626		—		7,472		735		4/24/2014	2010
	Valdosta, GA	5,838		2,482		5,922		—		8,404		991		5/10/2013	2012
Advance Auto:
	Corydon, IN	(h)		190		1,219		—		1,409		206		10/26/2012	2012
	Dearborn Heights, MI	(h)		385		1,090		—		1,475		146		8/30/2013	2013
	Decatur, GA	(h)		606		1,053		—		1,659		147		12/20/2013	2012
	Lake Geneva, WI	1,062		381		1,181		—		1,562		181		2/6/2013	2012
	Lawton, OK	(h)		387		1,000		—		1,387		97		6/12/2015	2005
	Mattoon, IL	(h)		261		1,063		—		1,324		81		12/4/2015	2015
	Mt. Pleasant, IA	(h)		122		1,069		—		1,191		153		4/29/2014	2013
	North Ridgeville, OH	(h)		218		1,284		—		1,502		219		4/13/2012	2008
	Rutherfordton, NC	(h)		220		944		—		1,164		131		10/22/2013	2013
	Starkville, MS	(h)		447		756		—		1,203		140		6/29/2012	2011
	Willmar, MN	(h)		200		1,279		—		1,479		123		3/25/2015	2014
Albany Square:
	Albany, GA	4,600		1,606		7,113		373		9,092		1,153		2/26/2014	2013
Almeda Crossing:
	Houston, TX	(h)		4,738		26,245		375		31,358		3,155		8/7/2014	2006
Applebee’s:
	Lithonia, GA	(h)		1,234		2,613		—		3,847		313		3/28/2014	2002
	Savannah, GA	(h)		818		1,686		—		2,504		204		5/22/2014	2006
At Home:
	Kissimmee, FL	(h)		2,512		5,594		—		8,106		429		9/9/2016	1992
AutoZone:
	Philipsburg, PA	(h)		152		1,304		—		1,456		224		7/30/2012	2010
	Poughkeepsie, NY	(h)		699		1,356		—		2,055		123		8/20/2015	2005
	Sheffield, OH	—		815		—		770		1,585		74		10/15/2014	2014
Bass Pro Shops:
	Tallahassee, FL	(h)		945		5,713		—		6,658		867		8/20/2013	2013
Beavercreek Shopping Center:
	Beavercreek, OH	17,200		5,504		25,178		538		31,220		3,704		10/31/2013	2013

S-1

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)



				Initial Costs to Company							Gross Amount at
						Buildings,		Total			Which Carried		Accumulated
						Fixtures and		Adjustment			At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)			(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Bed Bath & Beyond/Golfsmith:
	Schaumburg, IL	$	7,300	$	4,786	$	6,149	$	(1,372	)	$	9,563	$	—	3/8/2013	1997
Benihana:
	Golden Valley, MN	(h)		1,510		2,934		—			4,444		486		8/21/2012	1980
	Lauderdale by the Sea, FL	(h)		2,181		2,014		—			4,195		342		8/21/2012	1971
	Lombard, IL	(h)		1,390		2,343		—			3,733		464		8/21/2012	1984
	Woodlands, TX	(h)		1,151		968		—			2,119		167		8/21/2012	2001
Big Lots:
	San Angelo, TX	(h)		1,043		1,947		—			2,990		465		12/19/2012	2012
	Waco, TX	(h)		1,069		1,326		124			2,519		347		12/10/2012	2012
Biolife Plasma Services:
	Bellingham, WA	—		2,397		6,264		—			8,661		758		11/21/2014	2014
	Grandville, MI	—		959		4,791		—			5,750		537		11/21/2014	2014
	Loveland, CO	—		651		5,645		—			6,296		620		11/21/2014	2014
	Bloomington, IN	—		696		3,900		—			4,596		464		6/26/2014	2014
	Fort Wayne, IN	—		660		3,749		—			4,409		446		6/26/2014	2013
	St. Cloud, MN	—		889		3,633		—			4,522		474		6/26/2014	2013
	St. George, UT	—		1,195		5,561		—			6,756		564		3/12/2015	2014
	Waterloo, IA	—		489		3,380		—			3,869		448		6/26/2014	2013
	West Fargo, ND	—		1,379		5,052		—			6,431		540		3/12/2015	2014
Bob Evans:
	Akron, OH	—		447		1,537		—			1,984		81		4/28/2017	2007
	Anderson, IN	—		912		1,455		—			2,367		78		4/28/2017	1984
	Austintown, OH	—		305		1,426		—			1,731		81		4/28/2017	1995
	Birch Run, MI	—		733		1,192		—			1,925		66		4/28/2017	2008
	Blue Ash, OH	—		628		1,429		—			2,057		88		4/28/2017	1994
	Chardon, OH	—		333		682		—			1,015		41		4/28/2017	2003
	Chillicothe, OH	—		557		1,524		—			2,081		84		4/28/2017	1998
	Columbus, OH	—		523		1,376		—			1,899		78		4/28/2017	2003
	Dayton, OH	—		325		1,438		—			1,763		84		4/28/2017	1998
	Eldersburg, MD	—		557		876		—			1,433		47		4/28/2017	2000
	Florence, KY	—		496		1,876		—			2,372		107		4/28/2017	1991
	Holland, MI	—		314		1,367		—			1,681		77		4/28/2017	2004
	Huntersville, NC	—		751		657		—			1,408		36		4/28/2017	2008
	Hurricane, WV	—		297		1,654		—			1,951		85		4/28/2017	1993
	Milford, OH	—		271		1,498		—			1,769		86		4/28/2017	1987
	Monroeville, PA	—		1,340		848		—			2,188		44		4/28/2017	1995
	Nicholasville, KY	—		731		693		—			1,424		37		4/28/2017	1989
	North Canton, OH	—		859		1,393		—			2,252		79		4/28/2017	2006
	Ripley, WV	—		269		1,304		—			1,573		72		4/28/2017	1988
	Tipp City, OH	—		554		1,120		—			1,674		66		4/28/2017	1989
	Warsaw, IN	—		684		1,222		—			1,906		67		4/28/2017	1993
Bojangles:
	Pelham, AL	(h)		219		1,216		—			1,435		149		6/30/2014	2010
Boston Commons:
	Springfield, MA	5,400		3,101		7,042		280			10,423		877		8/19/2014	2004

S-2

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)



				Initial Costs to Company						Gross Amount at
						Buildings,		Total		Which Carried		Accumulated
						Fixtures and		Adjustment		At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)		(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Bottom Dollar Grocery:
	Ambridge, PA	$	—	$	519	$	2,985	$	—	$	3,504	$	394	11/5/2013	2012
Brownsville Plaza:
	Baldwin, PA	—		627		2,702		—		3,329		375		2/28/2014	2012
Bryan Crossing:
	Kodak, TN	4,958		863		6,523		—		7,386		756		9/9/2014	2008
Buffalo Wild Wings:
	Idaho Falls, ID	(h)		712		1,336		—		2,048		151		7/29/2014	2008
	Warrenville, IL	(h)		1,208		1,420		—		2,628		275		3/28/2013	2004
	Woodridge, IL	(h)		1,139		1,484		—		2,623		285		3/28/2013	2005
Cabela’s:
	Acworth, GA	(h)		4,979		18,775		—		23,754		665		9/25/2017	2014
	Avon, OH	(h)		2,755		10,751		—		13,506		387		9/25/2017	2016
	La Vista, NE	(h)		3,260		16,923		—		20,183		576		9/25/2017	2006
	Sun Prairie, WI	(h)		3,373		14,058		—		17,431		525		9/25/2017	2015
Caliber Collision Center:
	Frisco, TX	(h)		1,484		2,038		—		3,522		252		9/16/2014	2014
	Las Cruces, NM	(h)		673		1,949		—		2,622		236		3/21/2014	2014
	Midwest City, OK	(h)		259		1,165		—		1,424		147		2/21/2014	2013
	Denver, CO	(h)		855		658		—		1,513		77		6/25/2014	1975
	San Antonio, TX	(h)		622		832		—		1,454		97		6/4/2014	2014
	Wylie, TX	(h)		816		2,690		—		3,506		299		2/10/2015	2014
Camping World:
	Pensacola, FL	(h)		2,152		3,831		—		5,983		491		4/29/2014	2014
Canton Marketplace:
	Canton, GA	32,000		8,310		48,667		930		57,907		9,251		3/28/2013	2009
Carlisle Crossing:
	Carlisle, PA	—		4,491		15,817		—		20,308		2,114		9/18/2014	2006
Canarsie Plaza:
	Brooklyn, NY	75,000		37,970		71,267		790		110,027		10,988		12/5/2012	2011
Century Plaza:
	Orlando, FL	(h)		3,094		6,178		797		10,069		1,095		7/21/2014	2008
Chase:
	Hanover Township, NJ	(h)		2,192		—		—		2,192		—		12/18/2013	2012
Chestnut Square:
	Brevard, NC	3,727		425		5,037		92		5,554		757		6/7/2013	2008
Chili’s:
	Forest City, NC	(h)		233		1,936		—		2,169		210		9/3/2014	2003
Coosa Town Center:
	Gadsden, AL	(h)		3,246		7,799		—		11,045		1,135		12/20/2013	2004
Cost Plus World Market:
	Kansas City, MO	(h)		1,378		2,396		42		3,816		536		11/13/2012	2001
Costco:
	Tallahassee, FL	5,146		9,497		—		—		9,497		—		12/11/2012	2006
Cottonwood Commons:
	Albuquerque, NM	19,250		4,986		28,881		196		34,063		4,168		7/19/2013	2013
Coventry Crossing:
	Coventry, RI	6,000		3,462		5,899		59		9,420		901		9/12/2013	2008

S-3

Table of Contents

COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)



				Initial Costs to Company							Gross Amount at
						Buildings,		Total			Which Carried		Accumulated
						Fixtures and		Adjustment			At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)			(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Crosspoint:
	Hagerstown, MD	(h)		$	12,285	$	14,359	$	(1,024	)	$	25,620	$	2,049	9/30/2014	2000
Crossroads Annex:
	Lafayette, LA	(h)		1,659		7,091		—			8,750		1,025		12/4/2013	2013
Crossroads Commons:
	Plover, WI	(h)		1,000		4,515		75			5,590		764		12/10/2013	2012
CVS:
	Arnold, MO	(h)		2,043		2,367		—			4,410		307		12/13/2013	2013
	Asheville, NC	(h)		1,108		1,084		—			2,192		191		4/26/2012	1998
	Austin, TX	(h)		1,076		3,475		—			4,551		448		12/13/2013	2013
	Bainbridge, GA	(h)		444		1,682		47			2,173		292		6/27/2012	1998
	Bloomington, IN	(h)		1,620		2,957		—			4,577		384		12/13/2013	2012
	Blue Springs, MO	(h)		395		2,722		—			3,117		353		12/13/2013	2013
	Bridgeton, MO	(h)		2,056		2,362		—			4,418		306		12/13/2013	2013
	Cartersville, GA	(h)		2,547		—		—			2,547		—		10/22/2012	2009
	Charleston, SC	(h)		869		1,009		—			1,878		179		4/26/2012	1998
	Chesapeake, VA	(h)		1,044		3,053		—			4,097		404		12/13/2013	2013
	Chicago, IL	(h)		1,832		4,255		—			6,087		616		3/20/2013	2008
	Cicero, IN	(h)		487		3,099		—			3,586		401		12/13/2013	2013
	Corpus Christi, TX	(h)		648		2,557		—			3,205		436		4/19/2012	1998
	Danville, IN	(h)		424		2,105		76			2,605		253		7/16/2014	1998
	Eminence, KY	(h)		872		2,511		—			3,383		322		12/13/2013	2013
	Florence, AL	$	1,735	1,030		1,446		—			2,476		218		3/27/2013	2000
	Goose Creek, SC	(h)		1,022		1,980		—			3,002		254		12/13/2013	2013
	Greenwood, IN	(h)		912		3,549		61			4,522		489		7/11/2013	1999
	Hanover Township, NJ	(h)		4,746		—		—			4,746		—		12/18/2013	2012
	Hazlet, NJ	(h)		3,047		3,610		—			6,657		466		12/13/2013	2013
	Honesdale, PA	(h)		1,206		3,342		—			4,548		444		12/13/2013	2013
	Independence, MO	(h)		359		2,242		—			2,601		292		12/13/2013	2013
	Indianapolis, IN	(h)		1,110		2,484		—			3,594		322		12/13/2013	2013
	Irving, TX	(h)		745		3,034		—			3,779		484		10/5/2012	2000
	Jacksonville, FL	(h)		2,182		3,817		—			5,999		438		7/16/2014	2004
	Janesville, WI	(h)		736		2,545		—			3,281		330		12/13/2013	2013
	Katy, TX	(h)		1,149		2,462		—			3,611		312		12/13/2013	2013
	Lincoln, NE	(h)		2,534		3,014		—			5,548		389		12/13/2013	2013
	London, KY	(h)		1,445		2,661		—			4,106		362		9/10/2013	2013
	Middletown, NY	(h)		665		5,483		—			6,148		701		12/13/2013	2013
	North Wilkesboro, NC	(h)		332		2,369		—			2,701		312		10/25/2013	1999
	Poplar Bluff, MO	(h)		1,861		2,211		—			4,072		288		12/13/2013	2013
	Salem, NH	(h)		3,456		2,351		—			5,807		303		11/18/2013	2013
	San Antonio, TX	(h)		1,893		1,848		—			3,741		243		12/13/2013	2013
	Sand Springs, OK	(h)		1,765		2,283		—			4,048		298		12/13/2013	2013
	Santa Fe, NM	(h)		2,243		4,619		—			6,862		589		12/13/2013	2013
	Sedalia, MO	(h)		466		2,318		—			2,784		301		12/13/2013	2013
	St. John, MO	(h)		1,546		2,601		—			4,147		337		12/13/2013	2013
	Temple Hills, MD	(h)		1,817		2,989		—			4,806		400		9/30/2013	2001

S-4

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company							Gross Amount at
						Buildings,		Total			Which Carried		Accumulated
						Fixtures and		Adjustment			At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)			(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
CVS (continued):
	Vineland, NJ	(h)		$	813	$	2,926	$	—		$	3,739	$	391	12/13/2013	2010
	Waynesboro, VA	(h)		986		2,708		—			3,694		351		12/13/2013	2013
	West Monroe, LA	(h)		1,738		2,136		—			3,874		279		12/13/2013	2013
Darien Towne Center:
	Darien, IL	$	12,200	6,718		11,951		915			19,584		2,263		12/17/2013	1994
DaVita:
	Riverview, MI	(h)		199		2,322		—			2,521		315		9/4/2014	2012
Decatur Commons:
	Decatur, AL	7,000		2,478		9,333		848			12,659		1,479		7/10/2013	2004
Deltona Commons:
	Deltona, FL	4,767		1,424		7,760		32			9,216		1,100		6/18/2013	2007
Dick’s PetSmart Center:
	Oshkosh, WI	(h)		1,445		6,599		(696		)	7,348		—		9/23/2016	2015
Dick’s Sporting Goods:
	Oklahoma City, OK	(h)		1,198		7,838		—			9,036		1,352		12/21/2012	2012
	Oklahoma City, OK	5,858		685		10,587		—			11,272		1,782		12/31/2012	2012
Dollar General:
	Abbeville, AL	(h)		294		1,302		—			1,596		148		10/3/2014	2014
	Akron, AL	(h)		69		771		—			840		113		8/6/2013	2013
	Akron, OH	(h)		112		1,099		—			1,211		159		11/1/2013	2013
	Alliance, NE	(h)		97		812		—			909		136		4/9/2013	2013
	Alton, TX	(h)		94		922		—			1,016		106		9/5/2014	2014
	Arapahoe, NE	(h)		44		873		—			917		102		9/5/2014	2014
	Asheville, NC	(h)		379		753		—			1,132		124		6/17/2013	2013
	Ashville, AL	—		255		678		—			933		123		12/21/2012	2012
	Atmore, AL	(h)		243		858		—			1,101		113		2/25/2014	2014
	Bainbridge, OH	(h)		106		1,175		—			1,281		182		9/13/2013	2013
	Belle, MO	(h)		51		880		—			931		102		9/5/2014	2014
	Berry, AL	(h)		104		1,196		—			1,300		139		9/26/2014	2014
	Bessemer, AL	(h)		142		941		—			1,083		135		9/27/2013	2013
	Bloomfield, NE	(h)		50		845		—			895		92		12/16/2014	2014
	Blue Rapids, KS	(h)		52		880		—			932		101		10/22/2014	2014
	Bluefield, WV	(h)		337		686		—			1,023		77		10/15/2014	2014
	Bokchito, OK	(h)		59		859		—			918		148		2/27/2013	2013
	Botkins, OH	(h)		130		991		—			1,121		150		9/27/2013	2013
	Brandon, SD	(h)		292		871		—			1,163		100		10/31/2014	2014
	Breaux Bridge, LA	—		225		1,007		—			1,232		166		11/30/2012	2012
	Broken Bow, NE	(h)		91		878		—			969		116		11/1/2013	2013
	Brownsville, TX	—		264		943		—			1,207		147		11/30/2012	2012
	Buffalo, NY	(h)		122		1,099		—			1,221		118		12/5/2014	2014
	Clay, AL	—		305		768		—			1,073		135		2/8/2013	2012
	Cleveland, TX	—		158		856		—			1,014		133		11/30/2012	2012
	Columbus, OH	(h)		279		1,248		—			1,527		181		11/7/2013	2013
	Conroe, TX	—		167		946		—			1,113		148		12/18/2012	2012

S-5

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company						Gross Amount at
						Buildings,		Total		Which Carried		Accumulated
						Fixtures and		Adjustment		At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)		(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Dollar General (continued):
	Crystal Springs, MS	(h)		$	463	$	3,027	$	—	$	3,490	$	350	8/6/2014	2013
	Cullman, AL	(h)		159		824		—		983		98		8/4/2014	2014
	Decatur, IL	(h)		133		986		—		1,119		117		6/18/2014	2014
	Decatur, IL	(h)		219		964		—		1,183		108		9/8/2014	2014
	Delcambre, LA	(h)		169		1,025		—		1,194		145		9/27/2013	2013
	Delhi, LA	(h)		301		1,033		—		1,334		148		8/9/2013	2013
	Deridder, LA	(h)		135		923		—		1,058		131		9/27/2013	2013
	Deridder, LA	(h)		176		905		—		1,081		130		8/9/2013	2013
	Des Moines, IA	(h)		166		943		—		1,109		137		8/9/2013	2012
	Dora, AL	(h)		124		935		—		1,059		108		9/26/2014	2014
	Dundee, MI	(h)		296		1,047		—		1,343		138		11/26/2013	2013
	Edinburg, TX	(h)		146		809		—		955		98		7/31/2014	2014
	Eight Mile, AL	(h)		110		865		—		975		106		6/23/2014	2014
	Elk Point, SD	(h)		97		839		—		936		99		9/22/2014	2014
	Ellerslie, GA	(h)		247		797		—		1,044		102		4/17/2014	2014
	Eufaula, AL	(h)		300		930		—		1,230		112		7/22/2014	2014
	Farmington, NM	(h)		175		919		—		1,094		106		8/22/2014	2014
	Fort Valley, GA	(h)		514		2,436		—		2,950		381		7/9/2013	2013
	Fred, TX	(h)		93		929		—		1,022		126		12/19/2013	2013
	Fruitport, MI	(h)		100		968		—		1,068		112		6/25/2014	2014
	Geneva, AL	$	—	204		815		—		1,019		146		12/21/2012	2012
	Geraldine, AL	(h)		220		1,146		—		1,366		144		5/30/2014	2014
	Greenwell Springs, LA	—		444		841		—		1,285		141		11/30/2012	2012
	Groveport, OH	—		416		813		—		1,229		137		3/15/2013	2013
	Hamilton, AL	(h)		208		1,024		—		1,232		116		10/16/2014	2014
	Hanceville, AL	—		1,232		1,488		—		2,720		280		11/21/2012	2012
	Harlingen, TX	(h)		144		853		—		997		105		6/20/2014	2014
	Harvest, AL	—		261		691		—		952		126		12/21/2012	2012
	Harviell, MO	(h)		50		818		—		868		107		3/31/2014	2014
	Hastings, NE	(h)		177		850		—		1,027		98		10/22/2014	2014
	Hayneville, AL	(h)		249		1,181		—		1,430		141		8/15/2014	2014
	Hillsboro, OH	(h)		262		956		—		1,218		105		9/25/2014	2014
	Hinton, WV	(h)		199		1,367		—		1,566		152		8/18/2014	2014
	Homeworth, OH	(h)		110		1,057		—		1,167		142		10/18/2013	2013
	Houston, TX	—		311		1,102		—		1,413		172		12/18/2012	2012
	Houston, TX	(h)		255		1,393		—		1,648		187		10/18/2013	2013
	Huntsville, AL	—		177		847		—		1,024		151		12/21/2012	2012
	Independence, MO	—		170		1,072		—		1,242		174		12/18/2012	2012
	Kansas City, MO	(h)		283		1,068		—		1,351		149		10/18/2013	2013
	Kansas City, MO	(h)		233		1,054		—		1,287		145		11/1/2013	2013
	Kasson, MN	(h)		138		888		—		1,026		112		8/15/2014	2014
	Kearney, NE	(h)		141		851		—		992		118		11/20/2013	2013
	Kinston, AL	—		170		718		—		888		131		12/21/2012	2012
	Kolona, IA	(h)		81		868		—		949		102		8/15/2014	2014

S-6

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company						Gross Amount at
						Buildings,		Total		Which Carried		Accumulated
						Fixtures and		Adjustment		At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)		(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Dollar General (continued):
	Lake Charles, LA	(h)		$	146	$	989	$	—	$	1,135	$	142	8/9/2013	2013
	Lamesa, TX	(h)		75		803		—		878		97		7/31/2014	2014
	Lansing, MI	(h)		232		939		—		1,171		109		6/25/2014	2014
	Lebanon, TN	(h)		177		882		—		1,059		103		6/30/2014	2012
	Leicester, NC	(h)		134		800		—		934		121		6/17/2013	2013
	Lima, OH	$	—	156		1,040		—		1,196		164		11/30/2012	2012
	Linden, AL	(h)		317		746		—		1,063		112		7/11/2013	2013
	Lone Jack, MO	(h)		152		960		—		1,112		120		5/16/2014	2014
	Los Fresnos, TX	(h)		55		867		—		922		100		9/19/2014	2014
	Los Lunas, NM	(h)		113		857		—		970		108		5/14/2014	2014
	Louisburg, KS	(h)		324		936		—		1,260		115		6/25/2014	2014
	Loveland, OH	(h)		241		1,065		—		1,306		155		12/12/2013	2013
	Lubbock, TX	—		468		641		—		1,109		107		12/18/2012	2012
	Manhattan, KS	(h)		194		921		—		1,115		129		11/20/2013	2013
	Mansfield, OH	(h)		72		1,226		—		1,298		158		12/12/2013	2013
	Maple Lake, MN	(h)		92		893		—		985		108		10/10/2014	2014
	Maynardville, TN	—		238		754		—		992		139		11/30/2012	2012
	Millbrook, AL	(h)		320		1,175		—		1,495		142		7/22/2014	2014
	Mission, TX	(h)		182		858		—		1,040		99		9/5/2014	2014
	Mobile, AL	(h)		139		1,005		—		1,144		142		10/18/2013	2013
	Mobile, AL	(h)		410		1,059		—		1,469		161		6/17/2013	2013
	Monroeville, OH	(h)		131		1,069		—		1,200		143		10/4/2013	2013
	Montgomery, AL	(h)		140		909		—		1,049		103		10/24/2014	2014
	Moose Lake, MN	(h)		140		937		—		1,077		113		10/10/2014	2014
	Moroa, IL	(h)		111		921		—		1,032		109		6/26/2014	2014
	Mt. Vernon, IL	(h)		177		985		—		1,162		119		5/30/2014	2014
	Nashville, GA	—		215		2,533		—		2,748		420		3/1/2013	2013
	Nashville, MI	(h)		103		1,255		—		1,358		156		1/24/2014	2013
	Navarre, OH	(h)		153		1,005		—		1,158		137		9/27/2013	2013
	Neoga, IL	(h)		94		860		—		954		97		8/8/2014	2010
	Ness City, KS	(h)		21		860		—		881		113		3/20/2014	2014
	New Philadelphia, OH	(h)		129		1,100		—		1,229		149		9/27/2013	2013
	New Washington, OH	(h)		99		975		—		1,074		148		9/13/2013	2013
	Newark, OH	—		222		946		—		1,168		159		3/15/2013	2013
	Nitro, WV	(h)		451		1,034		—		1,485		120		6/30/2014	2013
	Nixa, MO	(h)		235		806		—		1,041		103		4/3/2014	2014
	North Lewisburg, OH	(h)		59		1,008		—		1,067		148		11/22/2013	2013
	Onawa, IA	(h)		176		842		—		1,018		104		6/26/2014	2014
	Opelousas, LA	(h)		92		947		—		1,039		132		10/4/2013	2013
	Ortonville, MN	(h)		113		907		—		1,020		112		9/5/2014	2014
	Osceola, NE	(h)		194		835		—		1,029		84		4/2/2015	2014
	Oxford, AL	(h)		465		783		—		1,248		113		10/18/2013	2013
	Palestine, IL	(h)		155		893		—		1,048		106		6/26/2014	2014
	Parchment, MI	(h)		168		1,162		—		1,330		134		6/25/2014	2014

S-7

Table of Contents

COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company						Gross Amount at
						Buildings,		Total		Which Carried		Accumulated
						Fixtures and		Adjustment		At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)		(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Dollar General (continued):
	Park Hill, OK	(h)		$	91	$	887	$	—	$	978	$	143	1/4/2013	2012
	Parsons, TN	(h)		166		1,136		—		1,302		139		7/16/2014	2013
	Phenix City, AL	(h)		331		718		—		1,049		110		6/17/2013	2013
	Piedmont, AL	$	—	1,037		1,579		—		2,616		299		11/21/2012	2012
	Pike Road, AL	(h)		477		772		—		1,249		114		8/21/2013	2013
	Plain City, OH	(h)		187		1,097		—		1,284		144		11/26/2013	2013
	Port Clinton, OH	(h)		120		1,070		—		1,190		141		11/22/2013	2013
	Princeton, MO	(h)		155		1,159		—		1,314		132		10/10/2014	2014
	Pueblo, CO	(h)		144		909		—		1,053		140		1/4/2013	2012
	Ragley, LA	(h)		196		877		—		1,073		128		8/9/2013	2013
	Rainsville, AL	(h)		290		1,267		—		1,557		149		8/13/2014	2014
	Ravenna, MI	(h)		199		958		—		1,157		119		1/24/2014	2013
	Rayne, LA	—		125		910		—		1,035		149		12/18/2012	2012
	Roanoke, IL	(h)		93		846		—		939		103		5/16/2014	2014
	Romney, IN	(h)		87		827		—		914		94		7/7/2014	2011
	Romulus, MI	(h)		274		1,171		—		1,445		144		3/7/2014	2013
	Russell, KS	(h)		54		899		—		953		107		8/5/2014	2014
	San Carlos, TX	(h)		70		1,063		—		1,133		129		6/20/2014	2014
	Seale, AL	(h)		259		767		—		1,026		110		10/28/2013	2013
	Seminole, AL	(h)		175		829		—		1,004		124		7/15/2013	2013
	Shelby, MI	(h)		128		1,033		—		1,161		128		1/24/2014	2013
	Slocomb, AL	(h)		124		918		—		1,042		121		2/25/2014	2014
	Snead, AL	(h)		126		1,137		—		1,263		132		9/26/2014	2014
	South Bay, FL	(h)		258		1,262		—		1,520		151		5/7/2014	2013
	Spring, TX	(h)		277		1,132		—		1,409		154		9/30/2013	2013
	Springfield, IL	(h)		205		934		—		1,139		105		9/17/2014	2014
	Springfield, NE	(h)		172		864		—		1,036		108		5/12/2014	2014
	Springfield, OH	(h)		125		1,000		—		1,125		142		9/27/2013	2013
	St. Louis, MO	(h)		229		1,102		—		1,331		148		12/31/2013	2013
	St. Louis, MO	(h)		240		1,118		—		1,358		148		1/15/2014	2013
	Superior, NE	(h)		230		917		—		1,147		127		11/26/2013	2013
	Temple, GA	(h)		200		917		—		1,117		139		5/15/2013	2013
	Theodore, AL	(h)		248		763		—		1,011		118		5/15/2013	2013
	Thibodaux, LA	(h)		211		1,083		—		1,294		153		9/27/2013	2013
	Toney, AL	—		86		792		—		878		137		3/21/2013	2012
	Topeka, KS	(h)		159		873		—		1,032		93		2/25/2015	2014
	Urbana, OH	(h)		133		1,051		—		1,184		132		5/29/2014	2013
	Volga, SD	(h)		51		784		—		835		92		9/5/2014	2014
	Wagener, SC	(h)		477		1,169		—		1,646		128		9/16/2014	2014
	Wakefield, KS	(h)		78		929		—		1,007		133		9/30/2013	2013
	Waterloo, IA	(h)		330		908		—		1,238		101		11/5/2014	2014

S-8

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company							Gross Amount at
						Buildings,		Total			Which Carried		Accumulated
						Fixtures and		Adjustment			At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)			(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Dollar General (continued):
	Weslaco, TX	(h)		$	141	$	848	$	—		$	989	$	98	9/5/2014	2014
	Weston, MO	(h)		117		1,012		—			1,129		148		7/17/2013	2013
	Wetumpka, AL	(h)		290		779		—			1,069		99		5/29/2014	2014
	Whitehouse, OH	(h)		134		1,144		—			1,278		153		10/18/2013	2013
	Whitwell, TN	$	—	159		1,035		—			1,194		190		11/30/2012	2012
	Wilmer, AL	(h)		99		775		—			874		114		8/5/2013	2013
	Winsted, MN	(h)		152		841		—			993		105		9/29/2014	2014
	Wisner, NE	(h)		37		773		—			810		97		5/12/2014	2014
	Woodville, OH	—		169		1,009		—			1,178		169		2/8/2013	2013
	Yatesville, GA	—		120		797		—			917		138		3/25/2013	2013
Dollar Tree/Petco:
	Humble, TX	(h)		720		2,543		—			3,263		403		2/11/2013	2011
Earth Fare:
	Huntersville, NC	3,183		1,439		2,973		—			4,412		488		2/28/2013	2011
East Manchester Village Center:
	Manchester, PA	8,300		2,517		12,672		183			15,372		1,773		12/19/2013	2009
East West Commons:
	Austell, GA	13,000		10,094		16,034		3,844			29,972		2,251		9/30/2014	2002
Emerald Place:
	Greenwood, SC	6,250		2,042		9,942		—			11,984		1,471		6/28/2013	2012
Evergreen Marketplace:
	Evergreen Park, IL	(h)		2,823		6,239		—			9,062		1,079		9/6/2013	2013
Family Center:
	Riverdale, UT	(h)		21,716		29,454		(709		)	50,461		4,391		2/28/2014	2008
Family Dollar:
	Adelanto, GA	(h)		463		1,711		—			2,174		185		11/14/2014	2014
	Aguila, AZ	(h)		129		1,290		—			1,419		128		2/13/2015	2014
	Albany, GA	—		347		925		—			1,272		101		11/7/2014	2014
	Apple Springs, TX	—		91		804		—			895		89		11/14/2014	2014
	Arkadelphia, AR	(h)		113		738		—			851		75		2/12/2015	2014
	Auburn, ME	(h)		217		1,261		—			1,478		140		4/15/2015	2014
	Bagley, MN	(h)		95		1,114		—			1,209		142		6/27/2014	2014
	Benavides, TX	(h)		27		1,065		—			1,092		148		2/26/2014	2013
	Berry, AL	—		122		880		—			1,002		98		11/14/2014	2014
	Bessemer, AL	(h)		201		1,043		—			1,244		140		12/27/2013	2013
	Broadway, VA	—		213		1,153		—			1,366		132		11/7/2014	2014
	Birmingham, AL	(h)		500		831		—			1,331		114		12/27/2013	2013
	Brooksville, FL	(h)		206		791		—			997		107		12/18/2013	2013
	Cascade, ID	(h)		267		1,147		—			1,414		140		2/4/2014	2013
	Cass Lake, MN	(h)		157		1,107		—			1,264		141		6/27/2014	2013
	Cathedral City, CA	(h)		658		1,908		—			2,566		215		9/19/2014	2014
	Charlotte, TX	(h)		118		970		—			1,088		136		2/26/2014	2014

S-9

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company						Gross Amount at
						Buildings,		Total		Which Carried		Accumulated
						Fixtures and		Adjustment		At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)		(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Family Dollar (continued):
	Cheyenne, WY	(h)		$	148	$	986	$	—	$	1,134	$	124	4/23/2014	2014
	Coachella, CA	(h)		450		1,634		—		2,084		208		2/19/2014	2013
	Colmesneil, TX	(h)		172		858		—		1,030		105		2/4/2014	2013
	Comanche, TX	(h)		176		1,145		—		1,321		133		8/6/2014	2014
	Cordes Lakes, AZ	(h)		380		1,421		—		1,801		156		9/19/2014	2014
	Davenport, FL	(h)		298		964		—		1,262		104		12/5/2014	2014
	Davenport, IA	(h)		167		918		—		1,085		101		11/25/2014	2014
	Dawson, TX	$	—	41		799		—		840		89		11/14/2014	2014
	Deadwood, SD	(h)		132		1,139		—		1,271		128		9/18/2014	2014
	Des Moines, IA	(h)		290		1,126		—		1,416		123		11/25/2014	2014
	East Millinocket, ME	(h)		161		1,004		—		1,165		121		2/26/2015	2014
	Eden, TX	(h)		82		903		—		985		118		2/26/2014	2013
	Elizabethtown, NY	(h)		107		671		—		778		83		1/31/2014	2008
	Eloy, AZ	(h)		86		1,587		—		1,673		170		10/24/2014	2014
	Empire, CA	(h)		239		1,527		—		1,766		181		6/27/2014	2014
	Erwinville, LA	(h)		146		765		—		911		76		7/7/2015	2015
	Evans, CO	(h)		201		817		—		1,018		91		9/29/2014	2014
	Findlay, OH	(h)		326		1,271		—		1,597		173		2/26/2014	2013
	Ft. Lauderdale, FL	(h)		443		1,361		—		1,804		175		12/18/2013	2013
	Fort Thomas, AZ	(h)		49		1,173		—		1,222		146		2/26/2014	2013
	Fort Worth, TX	(h)		532		1,346		—		1,878		153		9/5/2014	2014
	Franklin, NH	(h)		307		1,214		—		1,521		117		10/15/2015	2014
	Frederica, DE	(h)		392		1,164		—		1,556		113		3/6/2015	2014
	Fresno, CA	(h)		488		1,553		—		2,041		200		2/19/2014	2013
	Garrison, TX	(h)		61		1,306		—		1,367		136		12/18/2014	2014
	Georgetown, KY	(h)		607		905		—		1,512		101		11/21/2014	2014
	Gering, NE	(h)		244		913		—		1,157		106		9/26/2014	2014
	Greene, ME	(h)		251		940		—		1,191		112		3/25/2015	2014
	Greenwood, WI	(h)		154		920		—		1,074		109		6/27/2014	2013
	Hawkins, TX	(h)		49		1,288		—		1,337		147		9/5/2014	2014
	Hempstead, TX	(h)		219		943		—		1,162		99		12/18/2014	2014
	Hettinger, ND	(h)		214		1,077		—		1,291		148		2/26/2014	2013
	Hodgenville, KY	(h)		202		783		—		985		91		9/19/2014	2014
	Holtville, CA	(h)		317		1,609		—		1,926		205		2/19/2014	2013
	Homestead, FL	(h)		325		1,001		—		1,326		107		12/12/2014	2014
	Homosassa, FL	(h)		575		1,470		—		2,045		122		12/9/2015	2014
	Immokalee, FL	(h)		458		1,248		—		1,706		142		11/4/2014	2014
	Indio, CA	(h)		393		1,636		—		2,029		194		6/25/2014	2014
	Irvington, AL	(h)		217		814		—		1,031		112		12/27/2013	2013
	Jacksonville, FL	—		134		1,157		—		1,291		126		11/7/2014	2014

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company						Gross Amount at
						Buildings,		Total		Which Carried		Accumulated
						Fixtures and		Adjustment		At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)		(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Family Dollar (continued):
	Jay, FL	(h)		$	190	$	1,002	$	—	$	1,192	$	139	2/25/2014	2013
	Jonesboro, GA	(h)		297		1,098		—		1,395		143		2/14/2014	2013
	Keller, TX	(h)		749		1,550		—		2,299		192		4/14/2014	2014
	Kersey, CO	(h)		238		904		—		1,142		112		5/29/2014	2014
	Kiowa, OK	(h)		193		947		—		1,140		110		9/5/2014	2014
	Kissimmee, FL	(h)		622		1,226		—		1,848		145		8/27/2014	2014
	La Salle, CO	(h)		239		890		—		1,129		99		11/4/2014	2013
	LaBelle, FL	(h)		268		1,037		—		1,305		141		2/28/2014	2014
	Lake Elsinor, CA	(h)		417		1,682		—		2,099		210		3/3/2014	2013
	Lakeland, FL	(h)		353		937		—		1,290		116		6/30/2014	2014
	Laredo, TX	(h)		302		1,039		—		1,341		117		10/3/2014	2013
	Levelland, TX	(h)		264		952		—		1,216		110		9/30/2014	2014
	Little Rock, CA	(h)		499		1,730		—		2,229		176		2/19/2015	2014
	Lorain, OH	(h)		320		995		—		1,315		122		6/27/2014	2014
	Louisville, KY	(h)		578		919		—		1,497		119		3/26/2014	2013
	Louisville, KY	(h)		480		934		—		1,414		115		6/4/2014	2014
	Mansfield, TX	(h)		849		1,189		—		2,038		155		2/26/2014	2013
	Melbourne, FL	(h)		362		883		—		1,245		115		2/28/2014	2014
	Mertzon, TX	(h)		149		995		—		1,144		124		9/19/2014	2014
	Mesa, AZ	(h)		627		1,468		—		2,095		179		3/31/2014	2014
	Miami, FL	(h)		584		1,490		—		2,074		144		2/25/2015	2014
	Milo, ME	(h)		138		1,122		—		1,260		130		3/19/2015	2014
	Monroe, UT	$	—	272		985		—		1,257		110		10/24/2014	2013
	Moore Haven, FL	(h)		348		1,016		—		1,364		132		5/29/2014	2014
	Moulton, TX	(h)		102		973		—		1,075		136		2/26/2014	2014
	Naubinway, MI	(h)		47		1,180		—		1,227		144		2/4/2014	2013
	New Summerfield, TX	(h)		230		851		—		1,081		104		6/6/2014	2014
	Nicholasville, KY	(h)		464		826		—		1,290		107		3/26/2014	2013
	North Charleston, SC	—		386		997		—		1,383		109		11/14/2014	2014
	Omaha, NE	(h)		86		1,427		—		1,513		143		3/2/2015	2014
	Ordway, CO	(h)		81		993		—		1,074		112		10/30/2014	2014
	Oshkosh, WI	(h)		361		815		—		1,176		107		2/25/2014	2013
	Ossineke, MI	(h)		85		898		—		983		108		3/14/2014	2014
	Palmdale, CA	(h)		372		1,822		—		2,194		180		3/30/2015	2014
	Penitas, TX	(h)		182		1,053		—		1,235		135		3/26/2014	2014
	Pensacola, FL	(h)		509		791		—		1,300		104		3/27/2014	2014
	Pine Lake, GA	(h)		639		897		—		1,536		108		8/26/2014	2014
	Pittsfield, ME	(h)		334		1,258		—		1,592		130		8/12/2015	2014
	Plainview, NE	(h)		112		774		—		886		100		4/25/2014	2014
	Poinciana, FL	(h)		501		1,186		—		1,687		135		9/19/2014	2014
	Pojoaque, NM	(h)		545		909		41		1,495		105		8/25/2014	2013
	Posen, MI	(h)		101		896		—		997		107		3/14/2014	2014
	Preston, MN	(h)		161		1,159		—		1,320		147		6/27/2014	2014

S-11

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company						Gross Amount at
						Buildings,		Total		Which Carried		Accumulated
						Fixtures and		Adjustment		At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)		(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Family Dollar (continued):
	Punta Gorda, FL	(h)		$	345	$	1,018	$	—	$	1,363	$	83	12/17/2015	2014
	Radium Springs, NM	(h)		129		1,086		—		1,215		141		2/26/2014	2013
	Ramah, NM	(h)		217		1,105		—		1,322		135		2/4/2014	2013
	Rex, GA	$	—	294		1,393		—		1,687		151		11/7/2014	2014
	Richmond, ME	(h)		252		1,026		—		1,278		120		3/25/2015	2014
	Riverside, CA	(h)		736		1,558		—		2,294		192		4/4/2014	2014
	Robert Lee, TX	(h)		94		904		—		998		118		2/26/2014	2014
	Rushford, MN	(h)		163		844		—		1,007		112		6/27/2014	2014
	Saginaw, MI	(h)		240		956		—		1,196		108		10/30/2014	2014
	San Antonio, TX	—		421		951		—		1,372		113		11/14/2014	2014
	San Jacinto, CA	(h)		430		1,682		—		2,112		195		7/18/2014	2014
	Schuyler, NE	(h)		260		708		—		968		90		5/5/2014	2014
	Shreveport, LA	(h)		406		978		—		1,384		121		5/29/2014	2014
	Shreveport, LA	(h)		272		1,113		—		1,385		132		7/22/2014	2014
	Shreveport, LA	(h)		423		1,099		—		1,522		122		10/8/2014	2014
	South Paris, ME	(h)		173		1,240		—		1,413		144		2/25/2015	2014
	Spring Hill, FL	(h)		278		1,249		—		1,527		100		12/4/2015	2015
	Spurger, TX	(h)		86		905		—		991		106		9/18/2014	2014
	Statesboro, GA	(h)		347		800		—		1,147		107		2/14/2014	2013
	Sterling City, TX	(h)		78		889		—		967		117		2/26/2014	2013
	Stockton, CA	(h)		202		1,817		—		2,019		203		9/19/2014	2014
	Taft, CA	(h)		255		1,422		—		1,677		200		8/23/2013	2013
	Tampa, FL	(h)		563		737		—		1,300		101		12/18/2013	2013
	Tampa, FL	(h)		482		920		—		1,402		124		12/18/2013	2013
	Tampa, FL	(h)		568		1,137		—		1,705		141		7/2/2014	2014
	Terra Bella, CA	(h)		332		1,394		—		1,726		178		2/19/2014	2013
	Topeka, KS	(h)		419		1,327		—		1,746		165		4/17/2014	2014
	Tucson, AZ	(h)		399		1,599		—		1,998		166		1/27/2015	2014
	Tyler, MN	(h)		73		895		—		968		117		6/27/2014	2014
	Tuscaloosa, AL	(h)		534		817		—		1,351		113		12/27/2013	2013
	Valdosta, GA	(h)		424		849		—		1,273		111		2/26/2014	2014
	Vine Grove, KY	(h)		205		966		—		1,171		101		2/13/2015	2014
	Waelder, TX	(h)		136		788		—		924		98		6/4/2014	2014
	Waldoboro, ME	(h)		211		1,123		—		1,334		103		1/13/2016	2015
	Wayne, OK	(h)		37		937		—		974		115		6/27/2014	2014
	Wild Rose, WI	(h)		133		866		—		999		103		6/27/2014	2013
Fleet Pride:
	Birmingham, AL	(h)		376		2,607		—		2,983		311		8/3/2015	2014
Flower Foods:
	Orlando, FL	(h)		418		387		—		805		44		9/11/2014	2013
	Waldorf, MD	(h)		398		1,045		—		1,443		132		9/11/2014	2013
Food 4 Less:
	Atwater, CA	(h)		1,383		5,271		4		6,658		769		11/27/2013	2002

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company							Gross Amount at
						Buildings,		Total			Which Carried		Accumulated
						Fixtures and		Adjustment			At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)			(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Fountain Square:
	Brookfield, WI	$	—	$	6,508	$	28,634	$	—		$	35,142	$	1,827	1/17/2017	2006
Fourth Creek Landing:
	Statesville, NC	5,700		1,375		7,795		—			9,170		1,543		3/26/2013	2012
Fresenius Medical Care:
	West Plains, MI	(h)		557		3,097		—			3,654		359		7/2/2014	2014
Fresh Market Center:
	Glen Ellyn, IL	4,750		2,767		6,403		(1,863		)	7,307		—		9/30/2014	2014
Fresh Thyme:
	Indianapolis, IN	(h)		1,087		6,019		—			7,106		738		10/31/2014	2014
	Northville, MI	(h)		1,598		7,796		—			9,394		660		12/21/2015	2015
Fresh Thyme & DSW:
	Fort Wayne, IN	—		1,740		4,153		612			6,505		550		9/30/2014	1985
Gabe’s Hobby Lobby:
	Harrisonburg, VA	(h)		2,796		7,637		—			10,433		546		9/19/2016	1972
Giant Eagle:
	Seven Fields, PA	7,530		1,574		13,659		—			15,233		1,637		5/7/2014	2005
Gold's Gym:
	Corpus Christi, TX	(h)		1,498		6,346		—			7,844		996		3/6/2013	2006
Golden Corral:
	Garland, TX	(h)		1,255		2,435		—			3,690		414		9/21/2012	2012
	Houston, TX	(h)		1,375		2,350		—			3,725		388		12/12/2012	2012
	Victoria, TX	(h)		673		2,857		—			3,530		330		6/27/2014	2013
Goodyear:
	Pooler, GA	(h)		569		1,484		—			2,053		238		6/18/2013	2008
Harbor Town Center:
	Manitowoc, WI	9,750		3,568		13,209		(1,884		)	14,893		—		4/24/2015	2005
Harps Foods:
	Gentry, AR	—		224		2,680		—			2,904		104		10/12/2017	1994
	Green Forest, AR	—		96		3,163		—			3,259		98		12/14/2017	2017
	Lincoln, AR	—		329		3,668		—			3,997		159		7/6/2017	2017
	Noel, MO	—		78		885		—			963		34		9/7/2017	2014
	Pocahontas, AR	—		557		3,379		—			3,936		174		4/13/2017	2016
	Vilonia, AR	—		406		4,028		—			4,434		204		3/20/2017	2016
Haverty Furniture:
	Midland, TX	(h)		709		1,294		—			2,003		280		8/7/2013	2012
HEB Center:
	Waxahachie, TX	7,000		3,465		7,952		273			11,690		1,401		6/27/2012	1997
Hickory Flat Commons:
	Canton, GA	9,850		4,482		13,174		164			17,820		2,221		12/18/2012	2008

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company							Gross Amount at
						Buildings,		Total			Which Carried		Accumulated
						Fixtures and		Adjustment			At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)			(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Hobby Lobby:
	Burlington, IA	(h)		$	629	$	1,890	$	—		$	2,519	$	176	7/30/2015	1988
	Dickson City, PA	$	—	1,113		7,946		(1,728		)	7,331		166		6/30/2014	2013
	Lewisville, TX	(h)		2,184		8,977		—			11,161		1,264		11/26/2013	2013
	Mooresville, NC	(h)		869		4,249		—			5,118		907		11/30/2012	2012
Home Depot:
	Lincoln, NE	(h)		6,339		5,937		—			12,276		513		10/22/2015	1993
	North Canton, OH	7,234		2,203		12,012		—			14,215		1,958		12/20/2012	1998
	Plainwell, MI	(h)		521		11,905		—			12,426		1,705		5/16/2013	2002
IHOP:
	Rio Rancho, NM	(h)		599		2,314		—			2,913		277		3/28/2014	2011
Inglewood Plaza:
	Inglewood, CA	12,700		9,880		14,099		—			23,979		1,638		9/12/2014	2008
Jewel-Osco
	Plainfield, IL	(h)		2,107		9,044		—			11,151		34		11/14/2018	2001
Kirklands:
	Dothan, AL	(h)		486		946		—			1,432		145		8/5/2014	2014
	Jonesboro, AR	(h)		696		1,990		—			2,686		305		11/27/2012	2012
Kohl’s:
	Cedar Falls, IA	(h)		1,600		5,796		406			7,802		949		12/7/2012	2001
	Chartlottesville, VA	8,745		3,929		12,280		—			16,209		1,420		7/28/2014	2011
	Easton, MD	(h)		2,962		2,661		—			5,623		202		12/2/2015	1992
	Hutchinson, KS	(h)		3,290		—		—			3,290		—		10/19/2012	0
Kroger:
	Shelton, WA	(h)		1,180		11,040		7			12,227		1,509		4/30/2014	1994
	Whitehall, OH	4,066		581		6,628		224			7,433		971		12/16/2013	1994
Kum & Go:
	Bentonville, AR	(h)		916		1,864		—			2,780		276		5/3/2013	2011
	Conway, AR	(h)		510		2,577		—			3,087		297		6/13/2014	2014
	Fairfield, IA	(h)		422		1,913		—			2,335		285		5/3/2013	2011
	Mount Vernon, MO	(h)		708		1,756		—			2,464		261		5/3/2013	2010
	Urbandale, IA	(h)		722		1,658		—			2,380		248		5/3/2013	2010
LA Fitness:
	Bloomfield Township, MI	(h)		2,287		10,075		—			12,362		1,573		6/21/2013	2008
	Columbus, OH	(h)		1,013		6,734		—			7,747		688		4/29/2015	2014
	Garland, TX	(h)		2,005		6,861		—			8,866		907		12/20/2013	2013
	Houston, TX	(h)		5,764		5,994		—			11,758		843		9/30/2013	2013
	Mesa, AZ	(h)		1,353		7,730		20			9,103		1,222		5/8/2013	2010
	New Lenox, IL	(h)		1,965		6,257		—			8,222		497		12/21/2015	2015
	Ocoee, FL	(h)		1,173		6,876		231			8,280		1,029		8/8/2013	2008
	Riverside, CA	(h)		2,557		9,951		—			12,508		1,440		8/2/2013	2010
Lafayette Pavilions:
	Lafayette, IN	(h)		7,632		42,497		6,057			56,186		5,416		2/6/2015	2006

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company							Gross Amount at
						Buildings,		Total			Which Carried At		Accumulated
						Fixtures and		Adjustment			December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)			(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Logan’s Roadhouse:
	Bristol, VA	(h)		$	991	$	2,560	$	—		$	3,551	$	424	1/29/2013	2001
	Fort Wayne, IN	(h)		868		2,698		—			3,566		323		3/28/2014	2002
	Lancaster, TX	(h)		1,203		1,620		—			2,823		273		10/23/2012	2011
	Martinsburg, WV	(h)		925		2,183		—			3,108		289		10/29/2013	2010
	Opelika, AL	(h)		836		1,508		—			2,344		257		10/23/2012	2005
	Sanford, FL	(h)		1,031		1,807		—			2,838		306		10/23/2012	1999
	Troy, OH	(h)		992		1,577		(1,383		)	1,186		46		10/23/2012	2011
Longhorn Steakhouse:
	Chesterfield, VA	$	—	2,695		—		—			2,695		—		5/23/2013	2009
Lord Salisbury Center:
	Salisbury, MD	(h)		6,949		12,179		—			19,128		1,426		3/11/2016	2005
Lowe’s:
	Adrian, MI	(h)		2,604		5,036		30			7,670		922		9/27/2013	1996
	Alpharetta, GA	12,300		7,979		9,630		403			18,012		1,022		5/29/2015	1998
	Asheboro, NC	(h)		1,098		6,722		—			7,820		824		6/23/2014	1994
	Cincinnati, OH	(h)		14,092		—		—			14,092		—		2/10/2014	2001
	Columbia, SC	5,964		3,943		6,353		750			11,046		1,058		9/12/2013	1994
	Covington, LA	5,648		10,233		—		—			10,233		—		8/20/2014	2002
	Hilliard, OH	7,859		5,474		6,288		20			11,782		679		8/5/2015	1994
	Lilburn, GA	12,500		8,817		9,380		385			18,582		990		5/29/2015	1999
	Mansfield, OH	(h)		873		8,256		26			9,155		1,033		6/12/2014	1992
	Marietta, GA	11,000		7,471		8,404		392			16,267		900		5/29/2015	1997
	Oxford, AL	(h)		1,668		7,622		369			9,659		1,324		6/28/2013	1999
	Tuscaloosa, AL	(h)		4,908		4,786		9			9,703		712		10/29/2013	1993
	Woodstock, GA	11,200		7,316		8,879		392			16,587		949		5/29/2015	1997
	Zanesville, OH	(h)		2,161		8,375		298			10,834		1,159		12/11/2013	1995
Market Heights Shopping Center:
	Harker Heights, TX	47,000		12,888		64,105		641			77,634		10,214		11/25/2013	2012
Marketplace at the Lakes:
	West Covina, CA	11,300		10,020		8,664		12			18,696		2,403		9/30/2013	1994
Matteson Center:
	Matteson, IL	—		1,243		17,427		(2,736		)	15,934		—		11/22/2013	2003
Mattress Firm:
	Ashtabula, OH	—		301		1,965		—			2,266		159		3/23/2016	2015
	Augusta, ME	(h)		723		1,354		—			2,077		195		5/30/2014	2013
	Brunswick, GA	(h)		343		1,040		—			1,383		157		8/29/2013	2012
	Cincinnati, OH	(h)		323		966		—			1,289		115		7/17/2014	2013
	Huber Heights, OH	(h)		854		903		—			1,757		111		6/20/2014	2014
	Jonesboro, AR	(h)		729		1,194		—			1,923		252		10/5/2012	2012
	Lakeland, FL	(h)		259		1,107		—			1,366		144		7/16/2014	2014
	Martinsville, VA	(h)		259		1,510		—			1,769		154		9/17/2015	2014
	Middletown, OH	(h)		142		1,384		—			1,526		128		8/6/2015	2015
	New Bern, NC	(h)		340		1,436		—			1,776		164		9/25/2014	2014
	Pineville, NC	(h)		1,557		1,198		—			2,755		226		10/29/2012	2012

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SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company						Gross Amount at
						Buildings,		Total		Which Carried At		Accumulated
						Fixtures and		Adjustment		December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)		(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Mattress Firm (continued):
	Port Charlotte, FL	(h)		$	382	$	1,211	$	—	$	1,593	$	143	8/1/2014	2014
	Thomasville, GA	(h)		694		1,469		—		2,163		117		12/18/2015	2015
Mattress Firm & Aspen Dental:
	Vienna, WV	$	—	774		2,466		—		3,240		356		9/15/2014	2014
Mattress Firm & Five Guys:
	Muskegon, MI	(h)		813		1,766		—		2,579		205		8/29/2014	2014
McAlister’s Deli:
	Lawton, OK	(h)		805		1,057		—		1,862		136		5/1/2014	2013
	Port Arthur, TX	(h)		379		1,146		—		1,525		166		3/27/2014	2007
McGowin Park:
	Mobile, AL	42,765		2,243		69,357		—		71,600		3,775		4/26/2017	2016
Melody Mountain:
	Ashland, KY	7,376		1,286		9,879		—		11,165		871		9/1/2015	2013
Men’s Wearhouse:
	Ft. Wayne, IN	(h)		421		2,125		78		2,624		154		8/19/2016	2005
Merchants Tire & Auto:
	Wake Forest, NC	(h)		782		1,730		—		2,512		150		9/1/2015	2005
Michael’s:
	Bowling Green, KY	(h)		587		1,992		—		2,579		378		11/20/2012	2012
Mister Car Wash:
	Athens, AL	—		383		1,150		—		1,533		43		9/12/2017	2008
	Decatur, AL	—		257		559		—		816		23		9/12/2017	2005
	Decatur, AL	—		486		1,253		—		1,739		54		9/12/2017	2014
	Decatur, AL	—		359		1,152		—		1,511		49		9/12/2017	2007
	Hartselle, AL	—		360		569		—		929		24		9/12/2017	2007
	Madison, AL	—		562		1,139		—		1,701		49		9/12/2017	2012
Morganton Heights:
	Morganton, NC	22,800		7,032		29,763		30		36,825		4,393		4/29/2015	2013
National Tire & Battery:
	Cedar Hill, TX	(h)		469		1,951		—		2,420		302		12/18/2012	2006
	Cypress, TX	(h)		910		2,224		—		3,134		207		9/1/2015	2005
	Flower Mound, TX	(h)		779		2,449		—		3,228		218		9/1/2015	2005
	Fort Worth, TX	(h)		936		1,234		—		2,170		176		8/23/2013	2005
	Fort Worth, TX	—		730		2,309		—		3,039		206		9/1/2015	2005
	Frisco, TX	(h)		844		1,608		—		2,452		228		8/23/2013	2007
	Montgomery, IL	(h)		516		2,494		—		3,010		387		1/15/2013	2007
	North Richland Hills, TX	(h)		513		2,579		—		3,092		236		9/1/2015	2005
	Pasadena, TX	(h)		908		2,307		—		3,215		214		9/1/2015	2005
	Pearland, TX	(h)		1,016		2,040		—		3,056		185		9/1/2015	2005
	Plano, TX	(h)		1,292		2,197		—		3,489		199		9/1/2015	2005
	Tomball, TX	(h)		838		2,229		—		3,067		201		9/1/2015	2005
Native Wings:
	San Antonio, TX	(h)		821		2,682		—		3,503		318		8/4/2014	2014

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SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company								Gross Amount at
						Buildings,		Total				Which Carried At		Accumulated
						Fixtures and		Adjustment				December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)				(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Natural Grocers:
	Denton, TX	(h)		$	1,326	$	3,134	$	—			$	4,460	$	455	7/24/2013	2012
	Idaho Falls, ID	(h)		833		2,316		—				3,149		299		2/14/2014	2013
	Lubbock, TX	(h)		1,093		3,621		—				4,714		532		4/22/2013	2013
Nordstrom Rack:
	Tampa, FL	$	6,880	3,371		6,402		(980		)		8,793		317		4/16/2012	2010
North Logan Commons:
	Loganville, GA	—		4,535		11,826		28				16,389		1,124		9/22/2016	2009
Northwest Plaza:
	Tampa, FL	—		1,816		4,834		(6,650		)	(i)	—		—		8/20/2015	1994
O’Reilly Auto Parts:
	Brownfield, TX	(h)		22		835		—				857		148		5/8/2012	2012
	Clayton, GA	(h)		501		945		—				1,446		72		1/29/2016	2015
	Columbus, TX	(h)		260		757		—				1,017		127		5/8/2012	2011
	Lamesa, TX	(h)		64		608		—				672		63		12/10/2014	2006
	Stanley, ND	(h)		323		662		—				985		74		8/8/2014	2014
Owensboro Towne Center:
	Owensboro, KY	14,027		3,807		16,259		788				20,854		1,450		1/12/2016	1996
Park Place:
	Enterprise, AL	6,505		931		8,595		—				9,526		1,203		8/30/2013	2012
Parkway Centre South:
	Grove City, OH	14,250		7,027		18,223		(2,893		)		22,357		—		7/15/2016	2005
Pecanland Plaza:
	Monroe, LA	(h)		2,206		18,957		(2,410		)		18,753		—		10/13/2015	2008
Pep Boys:
	Clermont, FL	(h)		799		1,993		—				2,792		301		6/26/2013	2013
	Oviedo, FL	(h)		669		2,172		—				2,841		312		10/4/2013	2013
PetSmart:
	Baton Rouge, LA	2,509		651		2,968		113				3,732		568		10/11/2012	1999
	Commerce Township, MI	(h)		539		1,960		—				2,499		385		3/28/2013	1996
	East Peoria, IL	(h)		997		3,345		—				4,342		374		11/7/2014	2007
	Eden Prairie, MN	(h)		1,279		2,030		—				3,309		306		10/1/2013	2007
	Edmond, OK	(h)		816		3,266		—				4,082		518		1/23/2013	1998
	North Fayette Township, PA	(h)		1,615		1,503		—				3,118		254		6/7/2013	1997
	Overland Park, KS	(h)		2,025		2,181		—				4,206		309		10/1/2013	1996
	Taylor, MI	(h)		331		2,438		—				2,769		456		6/7/2013	1997
	Tucson, AZ	(h)		1,114		2,771		98				3,983		460		11/8/2013	2000
	Wilkesboro, NC	(h)		447		1,710		—				2,157		309		4/13/2012	2011
PetSmart/Old Navy:
	Reynoldsburg, OH	3,658		1,295		4,077		—				5,372		737		12/14/2012	2012

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company							Gross Amount at
						Buildings,		Total			Which Carried At		Accumulated
						Fixtures and		Adjustment			December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)			(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Pick ’n Save:
	Pewaukee, WI	(h)		$	1,323	$	6,761	$	—		$	8,084	$	894	8/13/2014	1999
	Sheboygan, WI	(h)		2,003		10,695		—			12,698		1,777		9/6/2012	2012
	South Milwaukee, WI	(h)		1,126		5,706		—			6,832		760		11/6/2013	2005
Plainfield Plaza:
	Plainfield, IL	(h)		3,167		14,788		(2,385		)	15,570		—		12/3/2015	2002
Plaza San Mateo:
	Albuquerque, NM	$	6,950	2,867		11,582		(1,913		)	12,536		—		5/2/2014	2014
Popeyes:
	Independence, MO	(h)		333		680		—			1,013		80		6/27/2014	2005
Poplar Springs Plaza:
	Duncan, SC	5,000		1,862		5,277		478			7,617		924		5/24/2013	1995
Price Chopper:
	Gardner, MA	(h)		858		12,171		—			13,029		1,346		9/26/2014	2012
Quick Chek:
	Kingston, NY	(h)		831		5,783		—			6,614		832		5/31/2013	2008
	Lake Katrine, NY	(h)		1,507		4,569		—			6,076		643		5/31/2013	2008
	Middletown, NY	(h)		1,335		5,732		—			7,067		824		5/31/2013	2008
	Middletown, NY	(h)		1,297		5,963		—			7,260		856		5/31/2013	2009
	Middletown, NY	(h)		1,437		4,656		—			6,093		673		5/31/2013	2007
	Sagerties, NY	(h)		1,242		5,372		—			6,614		774		5/31/2013	2009
Raising Cane’s:
	Beaumont, TX	(h)		839		1,288		—			2,127		155		7/31/2014	2013
	Phoenix, AZ	(h)		761		1,972		—			2,733		236		3/28/2014	2011
	Wichita Falls, TX	(h)		426		1,947		—			2,373		232		4/30/2014	2013
Rite Aid:
	Columbia, SC	(h)		854		2,281		—			3,135		310		12/3/2013	2008
	Jenison, MI	(h)		438		1,491		—			1,929		192		6/23/2014	1996
Rocky River Promenade:
	Mooresville, NC	3,989		2,446		3,159		—			5,605		381		8/18/2014	2008
Rolling Acres Plaza:
	Lady Lake, FL	21,930		7,540		26,839		(4,093		)	30,286		—		9/1/2016	2005
Ross:
	Fort Worth, TX	(h)		1,273		3,157		—			4,430		556		10/4/2012	1977
Rushmore Crossing:
	Rapid City, SD	23,067		7,066		33,019		229			40,314		5,589		1/2/2014	2012
	Rapid City, SD	(h)		883		4,128		—			5,011		776		1/2/2014	2012
Sherwin-Williams:
	Macon, GA	(h)		59		659		—			718		64		4/16/2015	2015
Shippensburg Market Place:
	Shippensburg, PA	(h)		1,917		9,263		(2,600		)	8,580		—		9/18/2014	2002

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company							Gross Amount at
						Buildings,		Total			Which Carried		Accumulated
						Fixtures and		Adjustment			At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)			(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Shopko:
	Ballard, UT	(h)		$	334	$	2,865	$	—		$	3,199	$	216	3/4/2016	2015
	Broken Bow, NE	(h)		244		1,733		—			1,977		231		6/19/2014	2007
	Cherokee, IA	(h)		217		3,326		—			3,543		264		12/23/2015	2015
	Cokato, MN	(h)		358		3,229		—			3,587		277		12/23/2015	2015
	Valentine, NE	(h)		395		3,549		—			3,944		475		6/30/2014	2014
	Webster City, IA	(h)		656		2,868		—			3,524		216		2/17/2016	2015
Shoppes at Lake Andrew:
	Melbourne, FL	(h)		3,924		16,840		21			20,785		2,539		12/31/2013	2003
Shoppes at Stroud:
	Stroud Township, PA	(h)		3,754		22,614		(2,620		)	23,748		—		10/29/2014	2007
Sleepy’s:
	Burlington, NC	(h)		393		1,648		—			2,041		159		3/31/2015	2014
	Joliet, IL	(h)		287		1,552		—			1,839		152		2/27/2015	2014
Southwest Plaza:
	Springfield, IL	(h)		2,992		48,935		(10,543		)	41,384		—		9/18/2014	2003
Spinx:
	Simpsonville, SC	(h)		591		969		—			1,560		145		1/24/2013	2012
Springfield Commons:
	Springfield, OH	$	11,250	3,745		15,049		187			18,981		1,635		5/5/2015	1995
Sprouts:
	Bixby, OK	(h)		1,320		7,117		—			8,437		1,000		7/26/2013	2013
Staples:
	Plainfield, IN	(h)		400		2,099		—			2,499		221		2/26/2015	2014
Stoneridge Village:
	Jefferson City, MO	6,500		1,830		9,351		—			11,181		1,321		6/30/2014	2012
Stop & Shop:
	Brockton, MA	11,241		4,259		13,285		—			17,544		1,477		7/27/2015	2003
Stripes:
	Brownsville, TX	(h)		210		2,386		—			2,596		445		8/30/2012	2007
	Brownwood, TX	(h)		484		3,086		—			3,570		555		8/30/2012	2005
	McAllen, TX	(h)		604		1,909		—			2,513		413		8/30/2012	2007
	Midland, TX	(h)		620		5,551		—			6,171		924		8/30/2012	2002
	Odessa, TX	(h)		569		4,940		—			5,509		818		8/30/2012	1998
Summerfield Crossing:
	Riverview, FL	7,310		6,130		6,753		—			12,883		1,022		7/12/2013	2013
Sunbelt Rentals:
	Canton, OH	(h)		147		1,679		—			1,826		299		10/24/2013	2013
	Houston, TX	(h)		535		1,664		—			2,199		202		3/31/2014	2000
Sunoco:
	Cocoa, FL	(h)		625		1,062		—			1,687		153		4/12/2013	1987
	Mangonia Park, FL	(h)		689		600		—			1,289		86		4/12/2013	1999
	Merritt Island, FL	(h)		610		1,123		—			1,733		161		4/12/2013	1986
	Palm Beach Gardens, FL	(h)		1,050		2,667		—			3,717		381		4/12/2013	2009

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company							Gross Amount at
						Buildings,		Total			Which Carried		Accumulated
						Fixtures and		Adjustment			At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)			(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Sunoco (continued):
	Palm City, FL	(h)		$	667	$	1,698	$	—		$	2,365	$	244	4/12/2013	2011
	Palm Springs, FL	(h)		580		1,907		—			2,487		273		4/12/2013	2011
	Sebastian, FL	(h)		490		2,128		—			2,618		305		4/12/2013	2009
	Titusville, FL	(h)		626		2,534		—			3,160		363		4/12/2013	2009
	West Palm Beach, FL	(h)		637		443		—			1,080		64		4/12/2013	1977
Sutters Creek:
	Rocky Mount, NC	$	—	1,458		2,616		282			4,356		427		1/31/2014	2012
Target Center:
	Columbia, SC	5,450		3,234		7,297		(1,026		)	9,505		—		3/31/2014	2012
Terrell Mill Village:
	Marietta, GA	7,500		3,079		11,185		—			14,264		1,606		1/31/2014	2012
TGI Friday’s:
	Chesapeake, VA	(h)		1,217		1,388		—			2,605		168		6/27/2014	2003
	Wilmington, DE	(h)		1,685		969		—			2,654		119		6/27/2014	1991
The Center at Hobbs Brook:
	Sturbridge, MA	21,500		11,241		29,152		918			41,311		2,614		6/29/2016	1999
The Market at Clifty Crossing:
	Columbus, IN	(h)		2,669		16,308		104			19,081		3,524		10/31/2014	1989
The Market at Polaris:
	Columbus, OH	(h)		11,828		41,702		(14,124		)	39,406		—		12/6/2013	2005
The Marquis:
	Williamsburg, VA	8,556		2,615		11,406		—			14,021		1,980		9/21/2012	2007
The Plant:
	San Jose, CA	123,000		67,596		108,203		401			176,200		18,402		4/15/2013	2008
The Ridge at Turtle Creek:
	Hattiesburg, MS	9,900		2,749		12,434		(2,974		)	12,209		—		2/27/2015	2011
Tilted Kilt:
	Killeen, TX	(h)		1,378		1,508		—			2,886		175		7/29/2014	2010
Tire Kingdom:
	Bluffton, SC	(h)		645		1,688		—			2,333		146		9/1/2015	2005
	Summerville, SC	(h)		1,208		1,233		—			2,441		111		9/1/2015	2005
	Tarpon Springs, FL	(h)		427		1,458		—			1,885		231		11/30/2012	2003
Tire Kingdom & Starbucks:
	Mount Pleasant, SC	2,400		1,291		3,149		(502		)	3,938		—		9/1/2015	2005
TJ Maxx/Dollar Tree:
	Oxford, OH	(h)		641		2,673		90			3,404		497		5/20/2013	2013
Tractor Supply:
	Ashland, VA	(h)		500		2,696		—			3,196		367		11/22/2013	2013
	Augusta, KS	(h)		407		2,315		—			2,722		306		1/10/2014	2013
	Cambridge, MN	(h)		807		1,272		—			2,079		259		5/14/2012	2012
	Canon City, CO	(h)		597		2,527		—			3,124		387		11/30/2012	2012
	Fortuna, CA	(h)		568		3,819		—			4,387		468		6/27/2014	2014

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SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company						Gross Amount at
						Buildings,		Total		Which Carried		Accumulated
						Fixtures and		Adjustment		At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)		(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Tractor Supply (continued):
	Lumberton, NC	(h)		$	611	$	2,007	$	—	$	2,618	$	323	5/24/2013	2013
	Marion, IN	(h)		1,536		1,099		—		2,635		157		2/19/2014	2004
	Monticello, FL	(h)		448		1,916		—		2,364		305		6/20/2013	2013
	Newnan, GA	(h)		1,182		1,950		—		3,132		325		11/6/2012	2009
	South Hill, VA	(h)		630		2,179		—		2,809		327		6/24/2013	2011
	Spencer, WV	$	1,659	455		2,188		—		2,643		384		11/20/2012	2012
	Stuttgart, AR	1,543		47		2,519		—		2,566		381		4/5/2013	2013
	Weaverville, NC	(h)		867		3,138		—		4,005		453		9/13/2013	2006
	Woodward, OK	(h)		446		1,973		—		2,419		289		11/19/2013	2013
Trader Joe’s:
	Asheville, NC	(h)		2,770		3,766		—		6,536		538		10/22/2013	2013
	Columbia, SC	(h)		2,308		2,597		—		4,905		441		3/28/2013	2012
	Wilmington, NC	(h)		2,016		2,519		—		4,535		463		6/27/2013	2012
Turfway Crossing:
	Florence, KY	8,480		2,261		10,323		418		13,002		1,520		5/27/2014	2002
Ulta Salon:
	Albany, GA	(h)		441		1,757		—		2,198		219		5/8/2014	2013
	Greeley, CO	(h)		596		2,035		—		2,631		206		3/31/2015	2014
United Oil:
	Alhambra, CA	2,032		3,026		751		—		3,777		81		9/30/2014	2005
	Bellflower, CA	755		1,312		576		—		1,888		62		9/30/2014	1999
	Bellflower, CA	(h)		1,246		788		—		2,034		85		9/30/2014	2001
	Brea, CA	(h)		2,393		658		—		3,051		71		9/30/2014	1984
	Burbank, CA	2,193		3,474		594		—		4,068		64		9/30/2014	2000
	Burbank, CA	1,484		1,750		574		—		2,324		62		9/30/2014	1998
	Chino, CA	1,167		1,449		730		—		2,179		79		9/30/2014	1984
	Compton, CA	805		992		460		—		1,452		50		9/30/2014	2002
	El Cajon, CA	(h)		1,533		568		—		2,101		61		9/30/2014	2008
	El Cajon, CA	(h)		1,225		368		—		1,593		40		9/30/2014	2000
	El Monte, CA	(h)		766		510		—		1,276		55		9/30/2014	1994
	Escondido, CA	1,107		678		470		—		1,148		51		9/30/2014	1984
	Escondido, CA	(h)		3,514		1,062		—		4,576		115		9/30/2014	2002
	Fountain Valley, CA	1,459		1,809		806		—		2,615		87		9/30/2014	1999
	Glendale, CA	(h)		4,871		795		—		5,666		86		9/30/2014	1999
	Inglewood, CA	(h)		1,809		878		—		2,687		95		9/30/2014	1997
	La Habra, CA	(h)		1,971		571		—		2,542		61		9/30/2014	2000
	Lawndale, CA	(h)		1,462		862		—		2,324		93		9/30/2014	2001
	Long Beach, CA	1,061		974		772		—		1,746		83		9/30/2014	2003
	Long Beach, CA	(h)		2,778		883		—		3,661		95		9/30/2014	1972
	Long Beach, CA	1,288		1,972		643		—		2,615		69		9/30/2014	2004
	Los Angeles, CA	(h)		2,334		717		—		3,051		77		9/30/2014	2002
	Los Angeles, CA	(h)		3,552		1,242		—		4,794		134		9/30/2014	2002
	Los Angeles, CA	(h)		2,745		669		—		3,414		72		9/30/2014	1998

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company							Gross Amount at
						Buildings,		Total			Which Carried		Accumulated
						Fixtures and		Adjustment			At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)			(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
United Oil (continued):
	Los Angeles, CA	$	2,923	$	3,823	$	825	$	—		$	4,648	$	89	9/30/2014	1997
	Los Angeles, CA	(h)		3,930		428		—			4,358		46		9/30/2014	2005
	Los Angeles, CA	1,590		1,710		905		—			2,615		98		9/30/2014	2002
	Los Angeles, CA	(h)		1,927		1,484		—			3,411		160		9/30/2014	2007
	Los Angeles, CA	(h)		2,182		701		—			2,883		76		9/30/2014	1964
	Lynwood, CA	1,640		2,386		737		—			3,123		79		9/30/2014	2002
	Menifee, CA	2,284		2,853		924		—			3,777		100		9/30/2014	1995
	Monrovia, CA	1,660		2,365		686		—			3,051		74		9/30/2014	1996
	Norco, CA	(h)		1,852		1,489		—			3,341		161		9/30/2014	1995
	Norco, CA	1,424		1,869		891		—			2,760		96		9/30/2014	2005
	North Hollywood, CA	2,998		4,663		858		—			5,521		92		9/30/2014	1999
	Oceanside, CA	2,264		2,163		1,248		—			3,411		135		9/30/2014	2011
	Paramount, CA	664		1,301		1,024		—			2,325		111		9/30/2014	1996
	Pomona, CA	1,273		1,740		730		—			2,470		79		9/30/2014	1997
	Poway, CA	(h)		3,072		705		—			3,777		76		9/30/2014	1960
	San Diego, CA	(h)		2,977		1,448		—			4,425		156		9/30/2014	1984
	San Diego, CA	(h)		1,877		883		—			2,760		95		9/30/2014	2006
	San Diego, CA	3,038		1,215		841		—			2,056		91		9/30/2014	2010
	San Diego, CA	(h)		1,824		382		—			2,206		42		9/30/2014	2006
	San Pedro, CA	1,655		2,086		675		—			2,761		73		9/30/2014	2000
	Santa Clarita, CA	(h)		4,787		733		—			5,520		79		9/30/2014	2001
	Sun City, CA	(h)		1,136		1,421		—			2,557		153		9/30/2014	1984
	Valley Center, CA	2,284		2,680		1,606		—			4,286		173		9/30/2014	2009
	Van Nuys, CA	2,284		2,439		902		—			3,341		97		9/30/2014	2005
	Van Nuys, CA	1,152		1,786		684		—			2,470		74		9/30/2014	1999
	Van Nuys, CA	2,681		3,980		741		—			4,721		80		9/30/2014	2002
	Vista, CA	(h)		2,063		334		—			2,397		36		9/30/2014	1986
	Vista, CA	(h)		2,028		418		—			2,446		45		9/30/2014	2010
	Whittier, CA	(h)		1,629		985		—			2,614		106		9/30/2014	1997
	Wilmington, CA	1,680		1,615		1,145		—			2,760		123		9/30/2014	2002
	Woodland Hills, CA	3,159		4,946		647		—			5,593		70		9/30/2014	2003
University Marketplace:
	Marion, IN	4,050		850		6,722		121			7,693		1,339		3/22/2013	2012
Vacant:
	Appleton, WI	(h)		895		1,026		—			1,921		97		11/18/2015	2015
	Danville, VA	(h)		274		1,514		(1,062		)	726		—		4/29/2014	2014
	Georgetown, KY	—		1,048		1,452		(1,800		)	700		—		6/11/2014	2004
	Greenville, SC	(h)		672		1,737		(1,405		)	1,004		21		6/27/2014	2004
	Nampa, ID	(h)		449		2,213		—			2,662		278		3/31/2014	1972
	St. Louis, MO	—		1,254		3,354		(3,409		)	1,199		22		3/28/2014	1988
	Waukesha, WI	(h)		3,408		12,918		—			16,326		1,402		9/29/2014	2007
Ventura Place:
	Albuquerque, NM	(h)		5,203		7,998		72			13,273		940		4/29/2015	2008
Village at Hereford Farms:
	Grovetown, GA	4,250		1,222		5,912		—			7,134		688		9/26/2014	2009

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COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company						Gross Amount at
						Buildings,		Total		Which Carried		Accumulated
						Fixtures and		Adjustment		At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)		(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Waite Park Center:
	Waite Park, MN	$	10,441	$	2,576	$	15,484	$	—	$	18,060	$	883	12/29/2016	1992
Wal-Mart:
	Anderson, SC	(h)		2,424		9,719		—		12,143		763		11/5/2015	2015
	Florence, SC	(h)		2,013		9,225		—		11,238		721		11/5/2015	2015
	Perry, GA	7,095		2,270		11,053		—		13,323		1,737		6/4/2013	1999
	Summerville, SC	4,300		2,410		2,098		—		4,508		193		9/18/2015	2015
	Tallahassee, FL	8,157		14,823		—		—		14,823		—		12/11/2012	2008
	York, SC	(h)		1,913		11,410		—		13,323		1,782		6/4/2013	1998
Walgreens:
	Andover, KS	(h)		630		3,057		9		3,696		469		10/18/2013	2001
	Arkadelphia, AR	4,225		787		4,626		—		5,413		483		11/26/2014	2007
	Austintown, OH	(h)		637		4,173		—		4,810		568		8/19/2013	2002
	Bartlett, TN	4,150		1,086		4,321		—		5,407		473		11/26/2014	1997
	Bartlett, TN	4,150		799		4,608		—		5,407		503		11/26/2014	2002
	Birmingham, AL	(h)		985		4,938		—		5,923		718		4/9/2013	2012
	Birmingham, AL	4,300		738		4,844		—		5,582		528		11/26/2014	2000
	Blair, NE	2,466		335		3,544		—		3,879		603		4/18/2012	2008
	Chicopee, MA	3,894		2,094		4,945		—		7,039		523		10/23/2014	2008
	Colerain Township, OH	4,200		1,991		3,470		—		5,461		369		11/26/2014	1998
	Connelly Springs, NC	(h)		1,349		3,628		—		4,977		506		8/27/2013	2012
	Cullman, AL	3,542		1,292		3,779		—		5,071		573		2/22/2013	2012
	Danville, VA	(h)		989		4,547		—		5,536		735		12/24/2012	2012
	Dearborn Heights, MI	(h)		2,236		3,411		—		5,647		481		7/9/2013	2008
	Decatur, AL	3,625		631		4,161		—		4,792		454		11/26/2014	2004
	Dyersburg, TN	(h)		555		4,088		—		4,643		480		6/30/2014	2011
	East Chicago, IN	(h)		331		5,242		—		5,573		576		8/8/2014	2005
	Enterprise, AL	3,575		839		3,844		—		4,683		422		11/26/2014	2004
	Evansville, IN	4,040		812		4,439		—		5,251		488		11/26/2014	2001
	Florence, KY	4,125		1,086		4,206		—		5,292		446		11/26/2014	2005
	Forrest City, AR	4,825		643		5,287		—		5,930		576		11/26/2014	2007
	Fort Madison, IA	(h)		514		3,723		—		4,237		508		9/20/2013	2008
	Franklin, TN	4,200		1,457		4,075		—		5,532		447		11/26/2014	2000
	Fraser, MI	(h)		518		4,525		—		5,043		544		5/19/2014	2004
	Hickory, NC	(h)		1,100		4,241		—		5,341		647		2/28/2013	2009
	Hobart, IN	3,875		594		4,526		—		5,120		492		11/26/2014	1998
	Huntsville, AL	3,273		1,931		2,457		—		4,388		394		3/15/2013	2001
	Kannapolis, NC	3,966		1,480		5,031		—		6,511		718		6/12/2013	2012
	Knoxville, TN	3,725		1,139		3,750		—		4,889		410		11/26/2014	1997
	Las Vegas, NV	(h)		2,325		3,262		70		5,657		453		9/26/2013	1999
	Lawton, OK	(h)		860		2,539		—		3,399		359		7/3/2013	1998
	Little Rock, AR	(h)		548		4,676		—		5,224		533		6/30/2014	2011
	Little Rock, AR	4,100		1,115		4,248		—		5,363		465		11/26/2014	2001
	Lubbock, TX	(h)		565		3,257		102		3,924		517		10/11/2012	2000
	Lubbock, TX	(h)		531		2,951		101		3,583		465		10/11/2012	1998

S-23

Table of Contents

COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company						Gross Amount at
						Buildings,		Total		Which Carried		Accumulated
						Fixtures and		Adjustment		At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)		(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Walgreens (continued):
	Malvern, AR	$	4,165	$	1,007	$	4,325	$	—	$	5,332	$	452	11/26/2014	2006
	Memphis, TN	3,775		776		4,166		—		4,942		455		11/26/2014	1999
	Metropolis, IL	(h)		284		4,991		—		5,275		548		8/8/2014	2009
	Michigan City, IN	3,200		567		3,615		—		4,182		401		11/26/2014	1999
	Mobile, AL	(h)		1,603		3,161		—		4,764		425		11/7/2013	2013
	Mount Washington, KY	4,125		545		4,825		—		5,370		525		11/26/2014	2005
	Oakland, TN	3,750		689		4,226		—		4,915		459		11/26/2014	2005
	Oklahoma City, OK	3,950		1,356		3,869		—		5,225		433		11/26/2014	1996
	Olathe, KS	4,230		1,266		4,047		—		5,313		441		11/26/2014	1997
	Phoenix, AZ	(h)		2,216		1,830		—		4,046		285		3/22/2013	2001
	Pine Bluff, AR	(h)		248		5,229		—		5,477		713		9/17/2013	2012
	Ralston, NE	4,265		967		4,620		—		5,587		504		11/26/2014	1999
	River Falls, WI	5,200		634		5,137		—		5,771		555		11/26/2014	2007
	Sacramento, CA	(h)		324		2,669		—		2,993		318		6/30/2014	2008
	Sioux Falls, SD	3,625		1,138		3,784		—		4,922		416		11/26/2014	2007
	Springdale, AR	(h)		1,172		4,509		—		5,681		599		10/7/2013	2012
	Springfield, IL	(h)		830		3,619		—		4,449		617		5/14/2012	2007
	St. Charles, MO	4,600		1,644		4,364		—		6,008		478		11/26/2014	1994
	St. Louis, MO	4,600		1,432		4,556		—		5,988		499		11/26/2014	1999
	St. Louis, MO	4,790		1,414		4,622		—		6,036		505		11/26/2014	1999
	Suffolk, VA	(h)		1,261		3,461		—		4,722		620		5/14/2012	2007
	Sun City, AZ	(h)		837		2,484		7		3,328		309		5/6/2014	2000
	Tarboro, NC	(h)		755		3,634		—		4,389		408		8/22/2014	2014
	Toledo, OH	4,325		1,993		3,445		—		5,438		383		11/26/2014	2001
	Troy, OH	(h)		547		4,076		—		4,623		457		7/28/2014	2002
	Tulsa, OK	3,350		1,078		3,453		—		4,531		381		11/26/2014	1993
Walgreens/KeyBank:
	Newburgh, NY	5,000		3,280		5,441		—		8,721		720		9/16/2013	2010
Wallace Commons:
	Salisbury, NC	7,590		3,265		8,058		—		11,323		1,271		12/21/2012	2009
Wallace Commons II:
	Salisbury, NC	6,012		2,231		8,479		—		10,710		1,162		2/28/2014	2013
Warrenton Highlands:
	Warrenton, OR	(h)		2,139		5,774		138		8,051		1,080		5/29/2013	2011
Waterford South Park:
	Clarksville, IN	7,200		2,946		8,564		45		11,555		1,565		4/12/2013	2006
Wawa:
	Cape May, NJ	(h)		1,576		5,790		—		7,366		955		8/29/2012	2005
	Galloway, NJ	(h)		1,724		6,105		—		7,829		1,005		8/29/2012	2005
Wendy's:
	Grafton, VA	(h)		539		894		—		1,433		106		6/27/2014	1985
	Westminster, CO	(h)		596		1,108		—		1,704		131		6/27/2014	1986
West Marine:
	Panama City, FL	(h)		676		2,219		—		2,895		259		4/24/2015	2014
	Pensacola, FL	(h)		1,107		3,398		—		4,505		392		2/27/2015	2015

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Table of Contents

COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)




				Initial Costs to Company							Gross Amount at
						Buildings,		Total			Which Carried		Accumulated
						Fixtures and		Adjustment			At December 31, 2018		Depreciation		Date	Date
	Description (a)	Encumbrances		Land		Improvements		to Basis (b)			(c) (d) (e)		(e) (f) (g)		Acquired	Constructed
Western Refining, Inc:
	Benson, AZ	$	566	$	186	$	510	$	—		$	696	$	50	1/16/2015	1990
	Bisbee, AZ	399		89		137		—			226		29		1/16/2015	1970
	Coolidge, AZ	472		578		283		—			861		45		1/16/2015	1997
	Douglas, AZ	913		136		1,080		—			1,216		107		1/16/2015	1985
	Douglas, AZ	718		89		385		—			474		54		1/16/2015	1997
	Florence, AZ	446		363		338		—			701		43		1/16/2015	1999
	Globe, AZ	1,264		572		311		—			883		59		1/16/2015	1994
	Hereford, AZ	1,531		303		879		—			1,182		93		1/16/2015	2013
	Marana, AZ	1,458		389		493		—			882		56		1/16/2015	2008
	Pearce, AZ	750		116		380		—			496		48		1/16/2015	1985
	Pima, AZ	1,196		372		362		—			734		53		1/16/2015	1994
	Safford, AZ	1,054		77		281		—			358		28		1/16/2015	1989
	Safford, AZ	1,169		204		299		—			503		38		1/16/2015	1996
	Safford, AZ	1,280		107		408		—			515		40		1/16/2015	1989
	Sierra Vista, AZ	488		87		723		—			810		80		1/16/2015	1977
	Thatcher, AZ	1,180		140		561		—			701		64		1/16/2015	2004
	Tucson, AZ	524		569		453		—			1,022		54		1/16/2015	1997
	Tucson, AZ	603		473		388		—			861		61		1/16/2015	1995
	Tucson, AZ	582		263		170		—			433		25		1/16/2015	1986
	Tucson, AZ	666		770		332		—			1,102		42		1/16/2015	2002
	Tucson, AZ	571		333		167		—			500		17		1/16/2015	1982
	Tucson, AZ	1,190		397		542		—			939		61		1/16/2015	1986
	Tucson, AZ	523		525		606		—			1,131		69		1/16/2015	2002
	Winkelman, AZ	953		287		403		—			690		50		1/16/2015	1999
Westover Market:
	San Antonio, TX	6,200		2,705		7,959		(1,985		)	8,679		—		7/10/2013	2013
Whole Foods Center:
	Fort Collins, CO	12,500		2,664		17,166		—			19,830		2,096		9/30/2014	2004
Winn-Dixie:
	Baton Rouge, LA	(h)		1,782		3,776		—			5,558		442		6/27/2014	2000
	Walker, LA	—		900		3,909		—			4,809		456		6/27/2014	1999
Woods Supermarket:
	Sunrise Beach, MO	(h)		1,044		5,005		—			6,049		682		9/13/2013	2013
		$	1,198,666	$	1,182,345	$	3,238,953	$	22,743		$	4,444,041	$	385,245

S-25

Table of Contents

COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE III – REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION – (Continued)

(in thousands)

____________________________________

(a) As of December 31, 2018 , the Company owned 814 retail properties, 72 anchored shopping centers and four industrial and distribution properties.

(b) Consists of capital expenditures and real estate development costs, and impairment charges.

(d) The following is a reconciliation of total real estate carrying value for the years ended December 31 (in thousands):



	2018		2017		2016
Balance, beginning of period	$	4,564,592	$	4,370,629	$	4,185,605
Additions
Acquisitions	11,151		261,660		198,176
Joint Venture Purchased	—		—		16,361
Improvements	6,135		13,708		3,827
Adjustment to basis	—		—		962
Total additions	$	17,286	$	275,368	$	219,326
Less: Deductions
Cost of real estate sold	61,891		78,700		27,144
Adjustment to basis	—		—		51
Other (including provisions for impairment of real estate assets)	75,946		2,705		7,107
Total deductions	137,837		81,405		34,302
Balance, end of period	$	4,444,041	$	4,564,592	$	4,370,629

(e) Gross intangible lease assets of $554.9 million and the associated accumulated amortization of $212.5 million are not reflected in the table above.

(f) The following is a reconciliation of accumulated depreciation for the years ended December 31 (in thousands):



	2018		2017		2016
Balance, beginning of period	$	334,476	$	245,425	$	158,805
Additions
Acquisitions - Depreciation expense for building, acquisitions costs and tenant improvements acquired	92,998		93,170		88,202
Improvements - Depreciation expense for tenant improvements and building equipment	2,481		1,679		586
Total additions	$	95,479	$	94,849	$	88,788
Deductions
Cost of real estate sold	6,901		5,552		1,514
Other (including provisions for impairment of real estate assets)	37,809		246		654
Total deductions	44,710		5,798		2,168
Balance, end of period	$	385,245	$	334,476	$	245,425

(g) The Company’s assets are depreciated or amortized using the straight-line method over the useful lives of the assets by class. Generally, buildings are depreciated over 40 years , site improvements are amortized over 15 years and tenant improvements are amortized over the remaining life of the lease or the useful life, whichever is shorter.

(h) Property is included in the Credit Facility’s borrowing base. As of December 31, 2018 , the Company had $1.33 billion outstanding under the Credit Facility.


(i)	Asset held for sale as of December 31, 2018.

S-26

Table of Contents

COLE CREDIT PROPERTY TRUST IV, INC.

SCHEDULE IV – MORTGAGE LOANS ON REAL ESTATE

(in thousands)

Principal

Amount of

Loans Subject

Final

Periodic

Face

Carrying

to Delinquent

Interest

Maturity

Payment

Prior

Amount of

Principal or

Description

Rate (a)

Date

Terms (b)

Liens

Mortgages

"Interest"

Junior Mezzanine Loans:

Astor — New York, New York

L + 14.85%

5/9/2021

P/I

N/A

38,756

38,915

—

88 Lex — New York, New York

L + 14.85%

5/9/2021

P/I

N/A

24,961

25,102

—

90 Lex — New York, New York

L + 14.85%

5/9/2021

P/I

N/A

15,440

15,523

—

Metro — New York, New York

L + 14.85%

5/9/2021

P/I

N/A

10,138

10,222

—

89,295

89,762

—

____________________________________

(a) L = one month LIBOR rate.

(b) P/I = principal and interest.

The following table reconciles mortgage loans on real estate for the years ended December 31 (in thousands):



	Year Ended December 31,
	2018
Balance, beginning of period	$	—
Additions during period:
New loans	89,295
Capitalized interest	384
Accretion of fees and other items	268
Total additions	$	89,947
Less: Deductions during period:
Deferred fees and other items	(185		)
Total deductions	(185		)
Balance, end of period	$	89,762

S-27

TABLE OF CONTENTS

Part I Item 1. Business Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties Item 3. Legal Proceedings Item 4. Mine Safety Disclosures Part II Item 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities Item 6. Selected Financial Data Item 7. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information Part III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions and Director Independence Item 14. Principal Accounting Fees and Services Part IV Item 15. Exhibits and Financial Statement Schedules Item 16. Form 10-k Summary Note 1 Organization and Business Note 2 Summary Of Significant Accounting Policies Note 3 Fair Value Measurements Note 4 Real Estate Assets Note 5 Intangible Lease Assets and Liabilities Note 6 Loans Held-for-investment Note 7 Derivative Instruments and Hedging Activities Note 8 Notes Payable and Credit Facility Note 9 Supplemental Cash Flow Disclosures Note 10 Commitments and Contingencies Note 11 Related-party Transactions and Arrangements Note 12 Economic Dependency Note 13 Stockholders Equity Note 14 Income Taxes Note 15 Operating Leases Note 16 Quarterly Results (unaudited)Note 17 Subsequent Events

Exhibits

CMRF 10-K Fiscal year ended Dec. 31, 2018

Exhibits