As filed with the Securities and Exchange Commission on July 5, 2011

Registration No. 333-172205

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

 

PRE-EFFECTIVE AMENDMENT NO. 5
TO

Form S-11

FOR REGISTRATION UNDER THE
SECURITIES ACT OF 1933 OF SECURITIES
OF CERTAIN REAL ESTATE COMPANIES

 

AMERICAN REALTY CAPITAL PROPERTIES, INC.

(Exact name of registrant as specified in its governing instruments)

405 Park Avenue
New York, New York 10022
(212) 415-6500

(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)

 

Nicholas S. Schorsch
Chief Executive Officer
American Realty Capital Properties, Inc.
405 Park Avenue
New York, New York 10022
(212) 415-6500

(Name, address, including zip code, and telephone number,
including area code, of agent for service)

 

Copies to:

Peter M. Fass, Esq.
Steven L. Lichtenfeld, Esq.
Proskauer Rose LLP
Eleven Times Square
New York, New York
10036-8299
Tel: (212) 969-3000
Fax: (212) 969-2900

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. o

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

Large accelerated filer o		Accelerated filer o		Non-accelerated filer x		Smaller reporting company o
(Do not check if a smaller reporting company)

 

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CALCULATION OF REGISTRATION FEE

Title of securities to be registered		Proposed maximum aggregate offering price (1)				Amount of registration fee (2)
Common stock, par value $0.01 per share		$	110,000,000			$	14,687

(1)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) of the Securities Act of 1933, as amended.

(2)

Previously paid.

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

		Per share				Minimum Offering				Maximum Offering
Public offering price of common stock		$	12.50			$	67,500,000			$	110,000,000
Selling commissions and dealer manager fees		$	1.00			$	5,400,000			$	8,800,000
Proceeds, before expenses, to us		$	11.50			$	62,100,000			$	101,200,000

We estimate the total expenses of this offering, excluding the selling commissions and the dealer manager fees, will be approximately $1,225,000 assuming we sell the minimum number of shares of common stock in this offering and approximately $1,550,000 assuming we sell the maximum number of shares of common stock in this offering. Realty Capital Securities, LLC and Ladenburg Thalmann & Co. Inc., the co-dealer managers of this offering, are not required to sell any specific number or dollar amount of our common stock but will use their reasonable best efforts to arrange for the sale of all shares of common stock offered. Reasonable best efforts means our dealer managers must use their good faith efforts and reasonable diligence to sell shares of our common stock but are not otherwise obligated to purchase any specific number or dollar amount of such shares.

This offering will end no later than     , 2011, which is 60 days from the effective date of this offering (irrespective of whether we sell the maximum number of shares of common stock in this offering). We will deposit subscription payments in an escrow account held by the escrow agent, UMB Bank, National Association, in trust for the subscriber’s benefit, pending release to us. 5,400,000 shares of common stock must be sold within 60 days following commencement of this offering and our common stock must be listed on NASDAQ at such time or we will terminate this offering and promptly return your subscription payments with your pro rata share of the interest earned on these funds in accordance with the provisions of the escrow agreement.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The shares of our common stock sold in this offering will be ready for delivery on or about         , 2011.

The date of this prospectus is     , 2011.

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You should rely only on the information contained in this prospectus and any free writing prospectus provided or approved by us. We have not, and the dealer managers have not, authorized anyone to provide you with additional information or information different from that contained in this prospectus and any free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus and any free writing prospectus is accurate only as of the respective dates, regardless of the time of delivery of this prospectus or any free writing prospectus or of any sale of shares of our common stock.

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PROSPECTUS SUMMARY			1
RISK FACTORS			30
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			61
USE OF PROCEEDS			62
CAPITALIZATION			64
DILUTION			65
DISTRIBUTION POLICY			67
SELECTED FINANCIAL DATA			70
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			73
BUSINESS AND PROPERTIES			89
MANAGEMENT			114
OUR MANAGER AND ARC			126
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			137
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES			142
STRUCTURE AND FORMATION OF OUR COMPANY			145
PRINCIPAL STOCKHOLDERS			150
DESCRIPTION OF STOCK			151
MATERIAL PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS			157
DESCRIPTION OF THE PARTNERSHIP AGREEMENT OF ARC PROPERTIES OPERATING PARTNERSHIP, L.P.			163
SHARES ELIGIBLE FOR FUTURE SALE			167
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS			170
CERTAIN ERISA CONSIDERATIONS			188
PLAN OF DISTRIBUTION			189
LEGAL MATTERS			193
EXPERTS			193
WHERE YOU CAN FIND MORE INFORMATION			193
PART II — INFORMATION NOT REQUIRED IN PROSPECTUS			II-1

 

We use market data and industry forecasts and projections throughout this prospectus, including data from publicly available information and industry publications. The forecasts and projections are based on industry surveys and the preparers’ experience in the industry and there can be no assurance that any of the projections will be achieved. We believe that the surveys and market research others have performed are reliable, but we have not independently verified this information.

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and routine maintenance in addition to the base rent. Double net leases typically require the tenant to pay all the costs as triple net leases, but hold the landlord responsible for capital expenditures, including the repair or replacement of specific structural and/or bearing components of a property, such as the roof or structure of the building. Accordingly, the owner receives the rent “net” of these expenses, rendering the cash flow associated with the lease predictable for the term of the lease. Under a net lease, the tenant generally agrees to lease the property for a significant term and agrees that it will have either 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. Historically, our predecessor’s participation in net lease transactions has included investing in net leased properties where a significant portion of the terms of the leases have lapsed, leaving remaining lease terms of typically three to eight years, on average.

We will be externally managed and advised by ARC Properties Advisors, LLC, or our Manager, pursuant to the terms of a management agreement. We will also be relying on American Realty Capital II, LLC, our sponsor, for certain acquisition and debt capital services, pursuant to the terms of an acquisition and capital services agreement. Our Manager is controlled by Nicholas S. Schorsch, our chairman and chief executive officer, William M. Kahane, our president, chief operating officer and one of our directors, Peter M. Budko, our executive vice president and chief investment officer, Brian S. Block, our executive vice president and chief financial officer, and Edward M. Weil, Jr., our executive vice president and secretary. Our Manager is an affiliate of ARC, a privately held vertically integrated real estate company founded and controlled by Messrs. Schorsch and Kahane. Since its inception in 2006, and through March 31, 2011, ARC has originated, structured and closed over $1.9 billion in net lease transactions, involving more than 450 properties with more than 50 credit tenants. When we refer to a “credit tenant,” we mean a tenant that has entered into a lease and that we determine is creditworthy and may include tenants with an investment grade or below investment grade credit rating or unrated tenants. To the extent we determine that a tenant is a “credit tenant” even though it does not have an investment grade credit rating, we do so based on ARC’s reasonable determination that a tenant should have the financial wherewithal to honor its obligations under its lease with us. This reasonable determination is based on ARC’s substantial experience closing net lease transactions and is made after evaluating all tenant due diligence materials that are made available to us, including financial statements and operating data.

We focus on investing in properties that are net leased to (i) credit tenants, which are generally large public companies with investment grade or below investment grade ratings and (ii) governmental, quasi-governmental and not-for-profit entities. Our historical net lease investments include investments leased to tenants such as Citizens Bank and Home Depot. We intend to invest in the future in properties with tenants that reflect a diversity of industries, geographies, and sizes (although our current portfolio does not reflect a diversity of tenants or industries). A significant majority of our net lease investments have been and will continue to be in properties net leased to investment grade tenants, although at any particular time our portfolio may not reflect this. As of March 31, 2011, 100% of our continuing properties were leased to companies that we believe are “credit tenants” based on the criteria described above and 75% of our tenants (based on average annual rent from our continuing properties) have an investment grade credit rating, as determined by major credit rating agencies.

As of March 31, 2011, our portfolio consisted of 63 single tenant, freestanding properties, located in 10 states and containing an aggregate of approximately 768,730 leasable square feet. Our continuing properties are 100% occupied and our overall portfolio is 99.1% occupied (based on total leasable square footage). Our continuing properties are subject to triple-net leases that, as of March 31, 2011, have a weighted average remaining lease term of 9.6 years (a weighed average lease term of 6.9 years with respect to our continuing properties leased to Citizens Bank and a lease term of 18.7 years with respect to our continuing property leased to Home Depot) to two different credit tenants. None of our leases on our continuing properties are scheduled to expire before July 2016. Both of our TRS properties are unoccupied and we are evaluating strategic alternatives, including re-leasing or selling the properties, to maximize their value to us. To date, there have been no delinquencies in rent payment on any of these net lease transactions since the ARC Predecessor Companies have owned the properties. To our knowledge, we will be one of the few public REITs that are traded on a national securities exchange, if not the only public REIT that is traded on a

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national securities exchange, focused on investing in single tenant, freestanding commercial real estate that is net leased on a medium-term basis, primarily to investment grade credit rated and other credit worthy tenants.

Although we are focused on acquiring single tenant, freestanding properties that are net leased on a medium-term basis, we are acquiring in the formation transactions a warehouse facility leased to Home Depot. The Home Depot property has a remaining lease term of 18.7 years, which is substantially longer than our target lease term range of three to eight years, on average. In making the decision to acquire this property, we balanced the long remaining lease duration against the fact that the property fits our target property profile, as it is a recently constructed property and is leased to a tenant that we believe is a “credit tenant”. In addition, the Home Depot property increases our initial portfolio geographic and tenant diversification. The properties being contributed to us in the formation transactions, including the Home Depot property, are the only properties owned and controlled entirely by our principals other than six properties leased to Tractor Supply Company, or the Tractor Supply portfolio, with respect to which we hold a 10-year right of first offer. See “Business and Properties — Excluded Properties.” Accordingly, balancing the Home Depot property benefits with the fact that the remaining lease duration exceeds our target, our management determined to include the Home Depot property in the formation transactions.

We are a Maryland corporation that was formed on December 2, 2010. We conduct all of our business activities through our operating partnership, of which we are the sole general partner. We will commence operations upon the closing of this offering. We intend to elect and qualify to be taxed as a REIT for U.S. federal income tax purposes, commencing with our taxable year ending December 31, 2011.

Our Manager and ARC

We will be externally managed and advised by our Manager. We expect to benefit from the personnel of our Manager and ARC and the relationships and experience of our Manager’s and ARC’s management team and other personnel. Pursuant to the terms of a management agreement between our Manager and us, our Manager will provide us with our management team and appropriate support personnel. Pursuant to an acquisition and capital services agreement between us and ARC, we will have access to the personnel and resources of ARC necessary for the implementation and execution of our business and growth strategies.

Our Manager is an affiliate of ARC, a privately held real estate firm founded and controlled by Messrs. Schorsch and Kahane. ARC is almost exclusively focused on investing in single tenant properties net leased to credit tenants. Since its inception in 2006, and through March 31, 2011, ARC has invested over $1 billion in equity in over 450 net leased properties, with more than 50 credit tenants (representing approximately $1.9 billion in assets). As of March 31, 2011, ARC had approximately $1.7 billion of net leased properties under management. ARC also acts as advisor to nine other publicly-offered direct investment programs, eight of which are REITs whose shares do not trade on any exchange, which we refer to as a “non-traded REIT,” that also may invest generally in net leased real estate assets, but not primarily in our target assets, of which seven are currently selling securities to the public.

Prospective investors are advised that Mr. Schorsch previously was president, chief executive officer and vice chairman, and Mr. Kahane previously was a trustee, of American Financial Realty Trust, Inc., or AFRT, a NYSE listed REIT. AFRT maintained a leveraged balance sheet. Net total debt to total real estate investments as of December 31, 2006 was approximately 55%, with $233.9 million of variable rate debt. As of June 30, 2007, according to published information provided by the National Association of Real Estate Investment Trusts, Inc., or NAREIT, the debt ratio of all office REITs covered by the NAREIT’s REIT WATCH was approximately 44%. The amount of indebtedness had the potential of adversely affecting AFRT’s ability to repay debt through refinancings. If it was unable to refinance indebtedness on acceptable terms, or at all, it may have been forced to dispose of one or more of its properties on unfavorable terms, which may have resulted in losses to it and which may have adversely affected cash available for distributions to shareholders. If prevailing interest rates or other factors at the time of refinancing resulted in higher interest rates on refinancing, interest expense would increase, which could have had a material adverse effect on its operating results and financial condition and its ability to pay dividends to shareholders at historical levels or at all. Additionally, a number of other investment programs sponsored by ARC, including American Realty Capital Trust, Inc., or ARCT, American Realty Capital New York Recovery REIT, Inc., or NYRR, ARC Income Properties, LLC, ARC Income Properties II, LLC, ARC Income Properties III, LLC, ARC Income Properties

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IV, LLC and ARC Growth Fund, LLC, each had incurred net losses that were primarily attributable to non-cash items and acquisition expenses incurred for the purchases of properties, which are not ongoing expenses for the operation of the properties and not the impairment of the entities’ real estate assets. See “Our Manager and ARC — Adverse Business Developments and Conditions” for additional details regarding these adverse business developments and conditions.

Our ability to make investments in our target assets is governed by our acquisition and capital services agreement with ARC. Our acquisition and capital services agreement with ARC provides that no entity controlled by ARC or its affiliates, including its principals, will sponsor or manage any public or private U.S. investment vehicle that has as its principal investment strategy to invest in net leased properties that are subject to leases that have remaining terms of less than 10 years but not less than three years other than us for so long as either Mr. Schorsch or Mr. Kahane are affiliated with our Manager and our management agreement is in effect.

Our Manager will be able to draw upon the experience and expertise of ARC’s team of over 50 professionals and support personnel. Our Manager will also benefit from ARC’s dedicated asset management group and portfolio management, finance and administration functions, which address legal, compliance, investor relations and operational matters, asset valuation, risk management and information technologies in connection with the performance of our Manager’s duties.

We have structured the company’s arrangements with our Manager and ARC in a manner that we believe provides significant benefits to our stockholders. Our company will not be burdened by the high administrative expenses associated with employing our own management team and instead will rely on our Manager to provide these services in exchange for a management fee. In addition, these arrangements provide us access to a team of management, investment, capital markets and administrative personnel that, because we are newly formed, hold limited assets and have only a limited ability to pay substantial salaries and benefits, we believe is likely to be more capable and diverse than we would otherwise be able to attract. Through our acquisition and capital services agreement with ARC, we will be able to leverage off of ARC’s extensive net leased properties operating platform in order to execute our business and growth strategies. ARC has a successful track record in acquiring and financing net leased properties, as evidenced by the fact that none of the nearly 500 net leased properties acquired and financed by ARC since its inception have ever been lost to foreclosure or a deed-in-lieu of foreclosure or suffered a default in the payment of rent. We will continue to be able to access ARC’s network of industry relationships in order to source and underwrite acquisition candidates in our target properties and ARC’s debt capital markets expertise in order to achieve an efficient execution of our financing and refinancing needs.

We will not have any employees. Our Manager and ARC will at all times be subject to the supervision and oversight of our board of directors and will have only such functions and authority as we delegate to each of them pursuant to the management agreement and acquisition and capital services agreement, respectively.

Market Opportunity

We believe that there is a significant market opportunity to earn attractive risk-adjusted returns by investing in the medium-term lease duration net lease market. Corporations and many other users of real estate utilize single tenant properties for a variety of purposes, including office buildings for corporate headquarters and regional operations, industrial facilities for the storage and distribution of goods, and freestanding retail stores such as major discount stores, drug stores, gas stations and convenience stores, casual dining and quick-service restaurants, automotive maintenance and repair, big box retail and home improvement stores. While investments in credit tenant net lease properties are subject to the same credit risk as unsecured bond obligations (the failure of the underlying tenant or bond issuer), we believe the yields on credit tenant net lease properties generally exceed the yields on comparably rated bonds. In addition, unlike unsecured bond obligations, the value of the real estate underlying a credit tenant and lease may increase recovery in any tenant bankruptcy or default, thereby providing an overall lower risk investment.

The U.S. net lease market is comprised of a wide range of property types and tenant operations and includes virtually every geographic market in the country. We will target properties net leased to investment grade and other credit worthy tenants, which are typically larger companies operating at multiple locations. The market overview below focuses on ten of the larger market segments (by annual sales) that we encounter

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when evaluating acquisition opportunities. We estimate that the combined total value of real estate used in these selected industries is approximately $1.2 trillion. We will target the acquisition of these net leased properties as the terms of the existing leases have been reduced to three to eight years. During 2010, members of our Manager’s management team underwrote approximately $1.75 billion of potential net lease property acquisitions and closed on approximately $544 million of those properties. Based on this sample size, we estimate that of the total real estate in the table below, approximately 20 – 30% are operated or guaranteed by investment grade companies, or operators that we would consider credit tenants, which represents a total target market for us of approximately $245 billion to $367 billion. Further, we estimate that, based on the 2010 net leased acquisition opportunities that our Manager’s management team was exposed to, the typical initial lease duration for these types of properties is 15 to 25 years, with an average initial lease duration of 20 years and that approximately 20 – 30% of these properties have a remaining lease duration that matches our target remaining lease duration of three to eight years. Assuming the sample size of the net leased acquisition opportunities that were made available to our Manager’s management team in 2010 is representative of the entire market, we believe that there are approximately $49 billion to $110 billion of net leased properties that have credit tenants and have remaining lease terms of three to eight years that currently exist in the market. Not all of these properties will be available for purchase or suitable for us. In addition, we will evaluate acquisition opportunities in many other market segments in addition to those described below.

Segment		Annual Sales ($ Million) (1)				Number of Stores (1)				Average Square Feet per Store (1)				Estimated Value Per Square Foot (2)				Estimated Real Estate Value ($ Million) (3)
Banks		$	700,000				98,500	(4)			4,700	(5)		$	556			$	257,400
Warehouse Clubs and Superstores			360,000				4,000				150,000				236				141,600
Convenience Stores			350,000				120,000				2,500				600				180,000
Drugstores			220,000				20,000				12,000				349				83,760
Automobile Parts Wholesale-Retail			200,000				35,000				7,000				284				69,580
Fast Food and Quick Service Restaurants			155,000				200,000				3,000				602				361,200
Home Improvement			150,000				23,000				9,000				64				13,248
Discount Stores			130,000				5,000				100,000				99				49,500
Gas Stations			115,000				22,000				2,500				542				29,810
Dollar Stores			50,000				33,000				8,000				140				36,960
Total																		$	1,223,058

		Range ($ million)
Investment grade/Creditworthy portion of Estimated Real Estate Value			20% or $244,612				30% or $366,917
Medium-term lease portion of Estimated Real Estate Value			20% or $244,612				30% or $366,917
Estimated Target Market (6)			4% or  $48,922				9% or $110,075

Our primary business objective is to generate dependable monthly cash distributions from a consistent and predictable level of funds from operations, or FFO, per share and capital appreciation associated with extending expiring leases or repositioning our properties for lease to new credit tenants upon the expiration of a net lease. We believe that the acquisition of properties that are subject to remaining lease durations of between three and eight years, on average, will give us the best opportunity to meet our objectives by

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achieving recurring income and residual value. We expect to achieve these objectives by acquiring net leased properties that either (a) have in-place rental rates below current average asking rents in the applicable submarket and are located in submarkets with stable or improving market fundamentals, or (b) provide an essential location or infrastructure that is essential to the business operations of the tenant, which we believe will incent the existing tenant or a new credit tenant to re-lease the property at a higher rental rate upon the expiration of the existing lease. ARC has observed that the acquisition opportunities available in the net lease market are predominantly long term leases. Therefore, based on ARC’s experience, we believe that the market for net leased properties that are subject to leases with credit tenants and a medium-term remaining lease duration is both limited and fragmented. We believe this creates a unique buying opportunity for the company given its differentiated strategy to exclusively focus on these types of properties.

In the past two years, fundamental changes in the real estate capital markets, combined with the severe decline in the U.S. economy, have resulted in many holders of real estate (including holders of net leased properties) to become much more risk averse. As a result, many traditional institutional type holders of net leased properties, including insurance companies, finance companies and real estate fund managers have determined to reduce their exposure to net leased properties that are subject to leases expiring in the medium-term. At the same time, the number of purchasers who are interested in acquiring these types of properties is both limited and fragmented. To our knowledge, we will be one of the few public REITs that are traded on a national securities exchange, if not the only public REIT that is traded on a national securities exchange, focused on investing in single tenant, freestanding commercial real estate that is net leased on a medium-term basis, primarily to investment grade credit rated and other credit worthy tenants. We expect to capitalize on these market dislocations and capital void by acquiring net leased properties that have medium-term remaining lease durations with less competition than when the real estate capital debt markets were more liquid and at prices where we believe the profile of the investment has the potential to provide not only recurring income but capital appreciation as well. We also expect to capitalize on value opportunities resulting from ARC’s reputation for historically closing substantially all transactions contemplated under definitive purchase and sale agreements.

Our Competitive Strengths

We will benefit from the deep experience and significant expertise of our Manager’s and ARC’s management team, headed by Nicholas S. Schorsch, our chairman and chief executive officer, William M. Kahane, our president and chief operating officer, Peter M. Budko, our executive vice president and chief investment officer, Brian S. Block, our executive vice president and chief financial officer, and Edward M. Weil, Jr., our executive vice president and secretary. Each of our chief executive officer, president and chief investment officer has more than 20 years of real estate experience.

The team has a successful investment track record in net leased properties as demonstrated by ARC’s prior performance. We believe the team’s relevant experience in commercial net leased property acquisition, ownership and operation across all major industry sectors will enable us to better identify and underwrite investment opportunities.

We believe that our Manager’s and ARC’s competitive strengths will enable us to generate attractive risk-adjusted returns for our stockholders. These strengths include the following:

Experienced and Well-Known Investment Team.   On behalf of ARC and as of March 31, 2011, our Manager’s management team has been responsible for sourcing, structuring, and acquiring over 2,900 net leased properties, representing approximately 45 million leasable square feet at a purchase price of over $6 billion. As of March 31, 2011, ARC had approximately $1.7 billion of net leased properties under management. As former president, chief executive officer and vice-chairman of AFRT, a NYSE listed REIT that invested in properties and assets net leased to the financial services industry, Mr. Schorsch enjoys long-standing relationships with both public and private owners of net leased properties, brokers, and other key industry participants that provide a source of transaction flow not otherwise available to the general investment community. Additionally, his broad operating and investing experience for approximately a fifth of a century gives him an ideal vantage point for steering our investment strategy.

Exceptional Domain Expertise.   Our Manager’s management team has particular expertise structuring and investing in net leased properties throughout all stages of real estate investment cycles, which is well

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matched to the opportunities in the current volatile real estate market. As exemplified by Mr. Schorsch’s prominent role in forming and managing AFRT, and Mr. Kahane’s role as a trustee of AFRT, this team has considerable expertise in organizing and managing publicly-traded vehicles investing in net leased properties and executing effective value realization strategies.

Expertise in Real Estate Capital Markets, Corporate Acquisitions and Operations.   Our Manager’s management team’s real estate capital markets, corporate acquisition and operating experience sets it apart from most traditional real estate investors. Our Manager’s management team has executed large corporate and portfolio transactions, demonstrating a sophisticated structuring capability and an ability to execute complex capital markets transactions. On behalf of ARC, members of our Manager’s management team have sponsored eight other real estate companies in addition to AFRT, including American Realty Capital Trust, Inc., American Realty Capital New York Recovery REIT, Inc., Phillips Edison — ARC Shopping Center REIT, Inc., American Realty Capital Healthcare Trust, Inc., American Realty Capital — Retail Centers of America, Inc., American Realty Capital Trust II, Inc., ARC — Northcliffe Income Properties, Inc. and American Realty Capital Trust III, Inc., of which American Realty Capital Trust, Inc., American Realty Capital New York Recovery REIT, Inc., Phillips Edison — ARC Shopping Center REIT, Inc., American Realty Capital Healthcare Trust, Inc. and American Realty Capital — Retail Centers of America, Inc. are currently selling securities to the public. Additionally, members of our Manager’s management team have sponsored Business Development Corporation of America, Inc., a publicly offered specialty finance company which has elected to be treated as a business development company under the Investment Company Act of 1940, as amended.

Focus on Capital Preservation.   On behalf of ARC, our Manager’s management team has placed a premium on protecting and preserving capital by performing a comprehensive risk-reward analysis on each investment, with a rigorous focus on relative values among the target assets that are available in the market. ARC utilizes appropriate leverage to enhance equity returns while avoiding unwarranted levels of debt or excessive interest rate or re-financing exposure. Our Manager intends to employ a similar capital preservation strategy for us.

Disciplined Approach to Underwriting and Due Diligence.   Before acquiring a property, ARC’s team of investment professionals, led by Mr. Budko, implements a disciplined underwriting and due diligence process. The focus of the due diligence falls into the following four primary areas: (1) credit and financial reviews of the tenant as well as an assessment of the tenant’s business, the overall industry segment and the tenant’s market position within the industry; (2) lease quality, including an analysis of the term, tenant termination and abatement rights, landlord obligations and other lease provisions; (3) a real estate fundamentals review and analysis, including an evaluation of the replacement cost of the property and assessment of alternative uses; and (4) an analysis of the risk adjusted returns on the investment.

Dedicated Asset Management Team and In-House Operational and Professional Services.   Attaining attractive returns from investing in real estate requires both wise investment decision making and prudent asset management. ARC has an in-house real estate services team that employs over 50 professionals. This team is responsible for managing all of the investments made by ARC. Through an acquisition and capital services agreement between us and ARC, we will be able to utilize ARC’s in-house asset management team and legal, accounting and tax capabilities on our behalf.

Established Investment and Portfolio Management Capabilities.   ARC has an experienced in-house team of investment professionals that source, structure, underwrite and close our transactions. In addition, ARC has developed an extensive national network of property owners, investment sale brokers, tenants, borrowers, mortgage brokers, lenders, institutional investors and other market participants that helps us to identify and evaluate a variety of single tenant net leased investment opportunities. ARC’s management team is comprised of individuals with expertise in commercial real estate, credit capital markets, asset management and legal.

Financing Expertise.   ARC’s management team has substantial experience in financing single tenant net leased assets. ARC has developed and continues to enhance financing structures that have enabled us to efficiently finance a portion of the acquired properties through term loan and securitization transactions. These financing structures enable us to enhance portfolio returns without reducing tenant credit quality in search of yield.

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Reduced General and Administrative Expenses .  Under the administrative support agreement we expect to enter into with ARC concurrently with the closing of this offering, ARC will pay or reimburse us for our general administrative expenses, including, without limitation, legal fees, audit fees, board of director fees, insurance, marketing and investor relation fees, for a period of one year after the closing of the offering to the extent the amount of our FFO, adjusted to exclude acquisition-related fees and expenses, or AFFO, is less than the amount of the distributions declared by us in respect of our OP units during such one year period. To the extent these amounts are paid by ARC, they would not be subject to reimbursement by us.

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Strong Risk-Adjusted Cash Flows.

We intend to acquire net leased properties that have remaining lease terms of approximately three to eight years, on average. We believe that the competition to acquire net leased properties that have lease expirations in the medium-term is minimal and fragmented and, to our knowledge, we are one of the few public REITs that are traded on a national securities exchange, if not the only public REIT that is traded on a national securities exchange, focused exclusively on making investments of this type. We expect to acquire net leased properties that have medium-term remaining lease durations with less competition than when the real estate capital debt markets were more liquid and at prices where we believe the profile of the investment has the potential to provide not only recurring income but capital appreciation as well. We also expect to capitalize on value opportunities resulting from ARC’s reputation for historically closing substantially all transactions contemplated under definitive purchase and sale agreements.

We also believe smaller leased properties, that are approximately 3,000 to 10,000 square feet in size, represent an attractive investment opportunity in today’s real estate environment. Due to the complexities of acquiring and managing a large portfolio of relatively small assets, based on ARC’s experience, we believe these types of properties have not experienced significant institutional ownership interests or the corresponding yield reduction experienced by larger income producing properties. We believe the minimal property management required by net leases, coupled with the active management of a large portfolio of similar properties, is an effective investment strategy.

Diversification.

We will seek to assemble a high-quality well located portfolio of net leased properties diversified by tenant, industry, geography and lease duration. As of March 31, 2011, our 63 properties were located in 10 states and with leases with two different tenants in two different tenant industries.

Maximize Cash Flow Through Internal Growth.

We seek investments that provide for attractive returns initially and increasing returns over the remaining lease term with fixed rent escalations and/or percentage rent features that allow participation in the financial performance of the property. We have typically structured our property acquisitions to achieve a positive spread between our cost of capital and the rental amounts paid by our tenants. We have also embedded rental rate growth into our existing leases. During such lease term and any renewal periods, our leases typically provide for periodic increases in rent and/or percentage rent based upon a percentage of the tenant’s prior sales over a predetermined level. As of March 31, 2011, 100% of our leases relating to our continuing properties provided for fixed periodic increases in rent, which increases average 2.38% per annum on a weighted average basis. None of the leases include performance based rent escalations. We also have the opportunity to generate incremental revenue growth by rolling existing leases to market rents in many of our markets.

Aggressive Asset Management.

Unlike many owners of net leased properties who treat their assets more like corporate bonds, we and our Manager intend to implement an aggressive asset management approach for net leased properties in order to maximize our return on investment. Initially our Manager will create an asset specific management plan for each of our properties. Our Manager then intends to manage the properties aggressively against the plan with the goal of achieving a re-leasing of the property at an enhanced rent upon the expiration of the existing lease. As part of this plan, our team will be engaging in regular dialogues with our tenants to determine their ongoing property needs and how they can best position or reposition the property in order to meaningfully increase the likelihood that the existing tenant will renew its lease.

Value-Added Repositioning.

As part of our investment strategy, we will opportunistically make capital improvements to a property or offer rent abatements in order to induce an existing tenant to renew its lease or reposition the property to be leased to a new credit tenant. In the event we are successful in implementing this strategy, we may, on an opportunistic basis and subject to compliance with certain restrictions on selling properties applicable to

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REITs, resell such properties to buyers of long-term net leased properties. We are presently undertaking a strategic review of our two TRS properties to determine the optimal repositioning approach to maximize stockholder value for these assets.

Selectively Engaging in Gain-on-Sale Transactions.

On a limited and opportunistic basis, we intend to acquire and promptly resell medium-term net lease properties for immediate gain. To the extent we engage in these activities, to avoid adverse U.S. federal income tax consequences, we generally must do so through a taxable REIT subsidiary, or TRS. In general, a TRS is treated as a regular “C corporation” and therefore must pay corporate-level taxes on its taxable income. Thus, our yield on such activities will be reduced by such taxes borne by the TRS. Depending on the strategic alternative we ultimately decide to pursue, our two TRS properties may be an example of the execution of this strategy.

Scalable Operating Model.

We expect to leverage off of ARC’s experienced in-house team of investment professionals to source, structure, underwrite and close acquisitions of our target properties allowing for a rapid deployment of available funds earmarked for such purposes. In addition, ARC has developed an extensive national network of property owners, investment sale brokers, tenants, borrowers, mortgage brokers, lenders, institutional investors and other market participants that help it to identify and evaluate a variety of single tenant investment opportunities. ARC’s management team is comprised of individuals with expertise in commercial real estate, credit capital markets, asset management and legal. ARC also places significant focus on anticipating and meeting the needs of net leased tenants by focusing on their expansion, consolidation and relocation requirements. We believe that ARC’s presence, size and resources provide market intelligence that strengthens our growth and acquisition capabilities.

Our Portfolio

Our existing portfolio of properties consists of 63 freestanding net leased properties situated in 10 states. Our existing portfolio of properties is approximately 768,730 leasable square feet, of which approximately 465,600 leasable square feet comprises a distribution facility in the consumer retail industry, approximately 296,330 leasable square feet comprises properties in the retail banking industry and approximately 6,800 leasable square feet is vacant. As of March 31, 2011, our existing portfolio of properties was 99.1% occupied. Our real estate portfolio generated $9.0 million of rental revenue for the twelve month period ended March 31, 2011 on a historical combined basis.

The chart below presents a summary of our portfolio of properties as of March 31, 2011:

Tenant/Property		Number of Properties				Total Leasable Square Footage (%) (1)				Total Leasable Square Footage				Average Annual Rent (in thousands) (2)				Percentage (%) (3)
Citizens Bank (4)			60				38.6	%			296,330			$	6,814.5				75	%
Home Depot			1				60.5	%			465,600				2,287.7				25	%
Total Continuing Properties			61				99.1	%			761,930			$	9,102.2				100	%
TRS Properties (5)			2				0.9	%			6,800				0.0				0	%
Total Portfolio			63				100.0	%			768,730			$	9,102.2				100	%

Certain percentages and totals may not sum due to rounding.

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Financing Strategy

We intend to finance future acquisitions with the most advantageous source of capital available to us at the time of the transaction, which may include a combination of public and private offerings of our equity and debt securities, secured and unsecured corporate-level debt, property-level debt and mortgage financing and other public, private or bank debt. In addition, we may acquire properties in exchange for the issuance of our common stock or OP units.

We may also acquire a property subject to (and may assume) a fixed rate mortgage. We intend to enter into mortgage and financing arrangements that provide for amortization of part of the principal balance during the term, thereby reducing the refinancing risk at maturity, but also at the same time reducing our cash available for distribution. Some of our properties may be financed on a cross-defaulted or a cross-collateralized basis, and we may collateralize a single financing with more than one property.

We will refinance our existing $82.6 million (as of March 31, 2011) mortgage loan secured by our continuing properties leased to Citizens Bank and our two TRS properties with a $55 million draw against our anticipated $63 million senior secured revolving acquisition facility. Upon consummation of our acquisition of the continuing properties leased to Citizens Bank, such properties are expected to be included in the portfolio of properties available to secure our senior secured revolving acquisition facility. Our ability to enter into our senior secured revolving acquisition facility is subject to a number of conditions that are outside of our control, including, without limitation, the completion of lender due diligence and the delivery of customary loan documentation. For more information regarding our senior secured revolving acquisition facility, see “Structure and Formation of Our Company — The Financing Transactions — Senior Secured Revolving Acquisition Facility.” This refinancing will be contingent upon the closing of this offering since a significant portion of the net proceeds of this offering will be utilized to satisfy the difference between the draw from this revolving acquisition facility and the existing mortgage debt encumbering these properties. To the extent this facility cannot be obtained at the closing of this offering, we will continue to seek to refinance this $82.6 million of mortgage indebtedness prior to its maturity on August 31, 2011, including by raising both additional debt or equity, or negotiating for a loan extension with the lender. See “Risk Factors — Sixty-two of our 63 properties are encumbered by mortgage indebtedness that is maturing in the short-term, which indebtedness we may not be able to refinance upon maturity.”

Our strategy for additional acquisitions is to finance our properties with, or acquire our properties subject to, secured long-term fixed rate non-recourse debt at a positive spread to the yield on those properties. We seek to finance our properties with, or acquire our properties subject to, non-recourse long-term fixed rate debt through “match-funded” or substantially “match-funded” debt, meaning that we seek to obtain debt whose maturity matches as closely as possible the lease maturity of the property financed. By doing so, we seek to lock-in the positive spread on the properties (representing the difference between our yield and our cost of financing) for the lease term. Through non-recourse debt, we seek to limit our overall exposure in the event we default on the debt to the amount we have invested in the property or properties financed.

For properties that have not yet been financed with long-term fixed rate debt, we may employ a hedging strategy to manage our exposure to interest rate fluctuations prior to the time we obtain permanent fixed rate financing. We will do so by entering into hedging transactions that we expect to offset changes in interest rates. As interest rates increase, the hedge transactions are intended to offset the increased interest cost on the expected financing with gains on the hedge positions. Our hedging transactions will consist primarily of forward starting interest rate swaps. Interest rate swaps are agreements between two parties to exchange, at particular intervals, payment streams calculated on a specified notional amount. We will not hedge those

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properties that we have financed with long-term fixed rate debt, as our yields and spreads on those properties are fixed and, therefore, not impacted by fluctuations in interest rates.

Upon completion of this offering, we expect to have approximately $40.2 million in cash available to execute our growth strategy assuming we sell the maximum number of shares of common stock offered in this offering. Following completion of this offering, we also expect to incur indebtedness to supplement our equity capital. We expect that we will incur both corporate-level debt and property level debt. Although we are not required to maintain any particular leverage ratio, we expect to maintain an overall net debt to gross asset value of approximately 45% to 55%. However, our organizational documents do not limit the amount or percentage of debt that we may incur. The amount of leverage we will deploy for particular investments in our target assets will depend upon our or our Manager’s assessment of a variety of factors, which may include the anticipated liquidity and price volatility of the target assets in our investment portfolio, the potential for losses, the availability and cost of financing the assets, the creditworthiness of our tenants, the health of the U.S. economy and commercial mortgage markets, our outlook for the level, slope and volatility of interest rates, and the credit quality of the properties securing the applicable financing. Since this ratio is based, in part, upon market values of equity, it will fluctuate with changes in the market value of our common stock. However, we believe that this ratio provides an appropriate indication of leverage for a company whose assets are primarily net leased properties with medium-term lease durations.

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Formation Transactions

Our portfolio consists of 63 properties, owned by 29 property subsidiaries that are indirectly owned by the contributor, an affiliate of our sponsor. In addition, two investment funds sponsored by ARC hold, as of March 31, 2011; (i) an aggregate of approximately $19,400,000 of unsecured indebtedness payable by ARC Income Properties, LLC, the owner of 28 of these property subsidiaries, and (ii) an aggregate of approximately $11,200,000 of unsecured indebtedness payable by ARC Income Properties III, LLC, the owner of one of these property subsidiaries. Prior to, or concurrently with, the completion of this offering, we will engage in a series of transactions, which we refer to as the formation transactions, that will consolidate our portfolio within our company and our operating partnership and will repay this indebtedness (together with prepayment penalties related thereto in the aggregate amount of approximately $112,000) and certain other mortgage indebtedness assumed in connection with the formation transactions.

Part of the formation transactions includes a contribution transaction whereby the contributor, which is the indirect owner of the ownership interests in the property subsidiaries described above, will exchange certain indirect ownership interests in the property subsidiaries owning our real estate portfolio for OP units pursuant to a contribution agreement. The contribution agreement is subject to customary closing conditions, including the completion of this offering.

Pursuant to the formation transactions, the following have occurred or will occur substantially concurrent with the completion of this offering.

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Our Structure

The following diagram depicts our ownership structure upon completion of this offering and the formation transactions, assuming the minimum number of shares offered in this offering are sold. Our operating partnership will own 100% of the properties, directly or indirectly, and in some cases through special purpose entities that were created in connection with various financings.

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Our principals may be deemed to be our “promoters” based on their ownership and various relationships with us, the property subsidiaries and our Manager.

Material Benefits to Related Parties

Upon the completion of this offering and the formation transactions, our principals and certain of our directors and executive officers will receive material financial and other benefits, as described below. For a more detailed discussion of these benefits see “Management” and “Certain Relationships and Related Party Transactions.”

ARC Real Estate Partners, LLC		310,000 OP units (with a combined aggregate value of approximately $3.9 million) in exchange for indirect interests in the property subsidiaries having an aggregate net book value (deficit) attributable to such interests as of March 31, 2011 of approximately $(14.1) million. All the equity interests in the contributor are owned by our executive officers as follows: 63.6% are held by Mr. Schorsch, our chairman and chief executive officer, 13.5% are held by Mr. Kahane, our president and chief operating officer, 16.4% are held by Mr. Budko, our executive vice president and chief investment officer, 3.0% are held by Mr. Block, our executive vice president and chief financial officer and 3.5% are held by Mr. Weil, our executive vice president and secretary.

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Management Agreement

We will enter into a management agreement with our Manager effective upon the closing of this offering. Pursuant to the management agreement, our Manager will implement our business strategy and perform certain services for us, subject to oversight by our board of directors. Our Manager will be responsible for, among other duties, (1) performing all of our day-to-day functions, (2) determining our investment strategy and guidelines in conjunction with our board of directors, (3) sourcing, analyzing and executing investments, asset sales and financings, and (4) performing asset management duties.

The initial term of the management agreement will end ten years after the closing of this offering, with automatic one-year renewal terms that end on the anniversary of the closing of this offering. During the initial term of the management agreement, it may be terminated by us only for cause. Cause is defined in the management agreement as:

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Following the initial term, the management agreement may be terminated annually upon the affirmative vote of at least two-thirds of our independent directors based upon: (1) our Manager’s unsatisfactory performance that is materially detrimental to us, or (2) our determination that the management fees payable to our Manager are not fair, subject to our Manager’s right to prevent termination based on unfair fees by accepting a reduction of management fees agreed to by at least two-thirds of our independent directors. We will provide our Manager with 180 days prior notice of such a termination. Our Manager may also decline to renew the management agreement by providing us with 180 days written notice.

The following table summarizes the fees we will pay to our Manager pursuant to the management agreement:

Type		Description
Management		We will pay our Manager a management fee equal to 0.50% per annum of our average unadjusted book value of our real estate assets, calculated and payable monthly in advance, provided that the full amount of the distributions declared by us in respect of our OP units for the six immediately preceding months is equal to or greater than the amount of our AFFO. Our Manager will waive such portion of its management fee that, when added to our AFFO, without regard to the waiver of the management fee, would increase our AFFO so that it equals the distributions declared by us in respect of our OP units for the prior six months. The management fee is payable in cash.
Incentive Fee		Our Manager will be entitled to an incentive fee with respect to each calendar quarter (or part thereof that the management agreement is in effect) in arrears. The incentive fee will be an amount, not less than zero, equal to the difference between (1) the product of (x) 20% and (y) the difference between (i) our Core Earnings (as defined below) for the previous 12-month period, and (ii) the product of (A) the weighted average of the issue price per share of our common stock of all of our public offerings multiplied by the weighted average number of all shares of common stock outstanding (including any restricted shares of common stock and other shares of common stock underlying awards granted under our equity incentive plans) in the previous 12-month period, and (B) 8.0%, and (2) the sum of any incentive fee paid to our Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive fee is payable with respect to any calendar quarter unless Core Earnings for the 12 most recently completed calendar quarters is greater than zero. Core Earnings is a non-GAAP measure and is defined as GAAP net income (loss) excluding non-cash equity compensation expense, incentive fees, acquisition fees, financing fees, depreciation and amortization, any unrealized gains, losses or other non-cash items recorded in net income for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income. The amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between our Manager and our independent directors and after approval by a majority of our independent directors.

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Type		Description
		The following example illustrates how we would calculate our quarterly incentive fee in accordance with the management agreement. Our actual results may differ materially from the following example.
		Assume the following:
		•   Core Earnings for the 12-month period equals $6,000,000;
		•   5,571,000 shares of common stock are outstanding and the weighted average number of shares of common stock outstanding during the 12-month period is 5,571,000;
		•   weighted average price per share of common stock is $12.50;
		•   incentive fees paid during the first three quarters of such 12-month period are $50,000; and
		•   Core Earnings for the 12 most recently completed calendar quarters is $10,000,000.

		Under these assumptions, the quarterly incentive fee payable to our Manager would be $35,800 as calculated below:
		1. Core Earnings		$6,000,000
		2. Weighted average price per share of common stock of $12.50 multiplied by the weighted average number of shares of common stock outstanding of 5,571,000 multiplied by 8%		$5,571,000
		3. Excess of Core Earnings over amount calculated in 2 above		$  429,000
		4. 20% of the amount calculated in 3 above		$    85,800

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		5. Incentive fee equals the amount calculated in 4 above less the incentive fees paid during the first three quarters of such 12-month period ($85,800 – $50,000); the quarterly incentive fee is payable to our Manager as Core Earnings for the 12 most recently completed quarters is greater than zero		$    35,800

		Pursuant to the calculation formula, if Core Earnings increases and the weighted average share price and weighted average number of shares of common stock outstanding remain constant, the incentive fee will increase.
		For purposes of calculating the incentive fee prior to the completion of a 12-month period following this offering, Core Earnings will be calculated on the basis of the number of days that the management agreement has been in effect on an annualized basis.
		One half of each quarterly installment of the incentive fee will be payable in shares of our common stock so long as the ownership of such additional number of shares by our Manager would not violate the 9.8% stock ownership limit set forth in our charter, after giving effect to any waiver from such limit that our board of directors may grant to our Manager in the future. The remainder of the incentive fee will be payable in cash.
		The number of shares to be issued to our Manager will be equal to the dollar amount of the portion of the quarterly installment of the incentive fee payable in shares divided by the average of the closing prices of our common stock on NASDAQ for the five trading days prior to the date on which such quarterly installment is paid.

Acquisition and Capital Services Agreement

We will enter into an acquisition and capital services agreement with ARC effective upon the closing of this offering. Pursuant to this agreement, we will be provided with access to ARC’s acquisition and debt capital markets team to acquire and finance our target properties. The services provided by ARC will include, among others, review and evaluation of all potential acquisitions, financial and market analysis, property underwriting, due diligence review, sourcing and negotiation of debt financing and preparation and distribution of materials relating to potential acquisitions and financings to our board of directors. See “Our Manager and ARC — Acquisition and Capital Services Agreement.”

The acquisition and capital services agreement will have an initial term of ten years commencing upon the closing of this offering, with automatic one-year renewal terms that end on the anniversary of the closing of this offering. Following the initial term, the acquisition and capital services agreement will be terminable by us or ARC upon 180 days prior written notice. We may also terminate the acquisition and capital services agreement at any time, including during the initial term, for cause. ARC may also decline to renew the acquisition and capital services agreement by providing us with 180 days written notice.

The following table summarizes the fees and expense reimbursements we will pay to ARC pursuant to the acquisition and capital services agreement:

Type		Description
Acquisition		We will pay ARC an acquisition fee equal to 1.0% of the contract purchase price (including assumed indebtedness) of each property that we acquire which is originated by ARC and evaluated following the commencement of this offering, but excluding the direct or indirect interests in any properties contributed to us in connection with the formation transactions. The acquisition fee is payable in cash at the closing of each acquisition.

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Type		Description
Financing		We will pay ARC a financing fee equal to 0.75% of the amount available under any secured mortgage financing or refinancing that we obtain and use for the acquisition of properties that is arranged by ARC, but excluding any financing on the direct or indirect interests in the properties which were contributed to us in connection with the formation transactions and the contemplated initial refinancing of the mortgage indebtedness encumbering our 60 continuing properties leased to Citizens Bank and our two TRS properties. The financing fee is payable in cash at the closing of each financing.
Expense reimbursement		We will be required to reimburse ARC for all out of pocket costs actually incurred by ARC related to us, including without limitation, legal fees and expenses, due diligence fees and expenses, other third party fees and expenses, costs of appraisals, travel expenses, nonrefundable option payments and deposits on properties not acquired, accounting fees and expenses, title insurance premiums and other closing costs, personnel costs and miscellaneous expenses relating to the selection, acquisition and due diligence of properties. Our reimbursement obligation is not subject to any dollar limitation. Expenses will be reimbursed in cash on a monthly basis following the end of each month. However, we will not reimburse ARC for the salaries and other compensation of its personnel.

Registration Rights Agreement

We will enter into a registration rights agreement with regard to (i) the common stock issuable in exchange for the OP units acquired by the contributor in the formation transactions, (ii) the shares of our common stock that are issuable upon the vesting and conversion of the restricted shares of Manager’s Stock to be granted to our Manager under our Equity Plan concurrently with the completion of this offering, (iii) any equity-based awards granted to our Manager under our Equity Plan in the future, and (iv) any shares of common stock that our Manager may receive pursuant to the incentive fee provisions of the management agreement in the future, which we refer to collectively as the registrable shares. Pursuant to the registration rights agreement, we will grant the contributor, our Manager and its direct and indirect transferees:

Notwithstanding the foregoing, any registration will be subject to cutback provisions, and we will be permitted to suspend the use, from time to time, of the prospectus that is part of the registration statement (and therefore suspend sales under the registration statement) for certain periods, referred to as “blackout periods.”

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respective officers and personnel to engage in other business activities may reduce the time that our Manager and ARC and their respective officers and personnel spend managing us.

Future Investment Opportunity Allocation Provisions .  Pursuant to our acquisition and capital services agreement with ARC, no entity controlled by ARC or its affiliates, including its principals, will sponsor or manage any public or private U.S. investment vehicle that has as its principal investment strategy to invest in net leased properties that are subject to leases that have remaining terms of less than 10 years but not less than three years other than us for so long as either Mr. Schorsch or Mr. Kahane are affiliated with our Manager and our management agreement is in effect. However, ARC and its affiliates may sponsor or manage another public or private U.S. investment vehicle that invests generally in real estate assets but not primarily in our target assets, including net leased properties.

Transactions with ARC .  In order to avoid any actual or perceived conflicts of interest between our Manager, ARC, any of their affiliates or any investment vehicle sponsored or managed by ARC or any of its affiliates, which we refer to as the ARC parties, and us, the approval of a majority of our independent directors will be required to approve (i) any purchase of our assets by ARC, our principals or any of their respective affiliates, and (ii) any purchase by us of any assets of ARC, our principals or any of their respective affiliates.

Excluded Properties .  ARC and its affiliates, including our principals, will continue to own direct and indirect interests in the excluded properties, which consist entirely of interests in 34 freestanding, single tenant net leased properties containing an aggregate of 1.2 million leasable square feet. Twenty-eight of the excluded properties will not be contributed to us in connection with the formation transactions because they are not practical to be owned by us due to the fact that a third party holds a majority interest in the properties and such third party was unwilling to contribute the interests in such properties to us on terms which were acceptable to us. The remaining six excluded properties, which are leased to Tractor Supply, are not being contributed to us because they are subject to secured leverage of approximately 73% (on a loan-to-value basis) and the prepayment of this debt would involve the incurrence of a prepayment penalty, as of March 31, 2011, of approximately $2.0 million. The existence of this prepayment penalty, when added to the overall leverage encumbering the Tractor Supply portfolio of over 96% (on a loan-to-value basis), would result in the cost of these properties to us exceeding their then market value. At no cost to us, ARC has granted us a 10-year right of first offer to acquire the Tractor Supply portfolio should ARC desire to sell the portfolio.

Limitations on Personal Investments .  Shortly after the consummation of this offering, we expect that our board of directors will adopt a policy with respect to any proposed investments by our directors or officers or the officers of our Manager, which we refer to as the covered persons, in our target properties. We expect this policy to provide that any proposed investment by a covered person for his or her own account in any of our target properties will be permitted if the capital required for the investment does not exceed the lesser of (i) $5 million, or (ii) 1% of our total stockholders’ equity as of the most recent month end, or the personal investment limit. To the extent that a proposed investment exceeds the personal investment limit, we expect that our board of directors will only permit the covered person to make the investment (i) upon the approval of the disinterested directors, or (ii) if the proposed investment otherwise complies with terms of any other related party transaction policy our board of directors may adopt in the future.

Formation Transactions.   We did not conduct arm’s-length negotiations with our sponsor with respect to all of the terms of the formation transactions. In the course of structuring the formation transactions, our sponsor had the ability to influence the type and level of benefits that it, its affiliates (including our principals and our Manager) and our other officers will receive from us. In addition, although the portfolio of our continuing properties was subject to a recent independent third-party investment valuation, the portfolio was not subject to a recent appraisal and the price to be paid by us to our sponsor for the acquisition of the interests in our properties in the formation transactions may exceed the fair market value of the portfolio.

Lease Transactions .  Upon the expiration of a lease at one of our properties, the tenant at such property could seek to vacate the space at our property and lease competing space at one of ARC’s competing properties that is located in the same market. Similarly, if one of our properties becomes vacant we could be competing with another ARC-controlled or ARC Fund-controlled property for a new tenant at such property. We refer to all present and future REITs and funds managed by ARC as the “ARC Funds”. In such event, we may be competing with another ARC-controlled or ARC Fund-controlled property for a lease from the same

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tenant. In such an instance, the management agreement will require our Manager to advise our independent directors of this potential conflict. After being advised of this potential conflict, our independent directors will determine if the potential lease is in our best interests and, if so, our independent directors (and not our Manager) will take responsibility for negotiating the lease with the potential tenant.

Operating Partnership .  We have adopted policies that are designed to eliminate or minimize certain potential conflicts of interest, and the limited partners of our operating partnership have agreed that in the event of a conflict between the duties owed by our directors to our company and our company’s duties, in its capacity as the general partner of our operating partnership, to such limited partners, we are under no obligation to give priority to the interests of such limited partners. See “Policies with Respect to Certain Activities” and “Description of the Partnership Agreement of ARC Properties Operating Partnership, L.P.”

Restrictions on Transfer

Under the agreement governing our operating partnership, holders of OP units do not have redemption or exchange rights and may not otherwise transfer their OP units, except under certain limited circumstances, for a period of 12 months after completion of this offering.

Restrictions on Ownership of Our Stock

In order to assist us in complying with the limitations on the concentration of ownership of REIT stock imposed by the Internal Revenue Code of 1986, as amended, or the Code, among other purposes, our charter generally prohibits any person from actually or constructively owning more than 9.8% in value of the aggregate of our outstanding shares of stock and not 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, subject to certain exceptions. Subject to certain limitations, our charter permits exceptions to be made with the approval of our board of directors.

Tax Status

We intend to elect and qualify to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ending December 31, 2011. Our qualification will depend upon our ability to meet, on a continuing basis, through actual investment and operating results, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our shares of stock. We believe that we will be organized in conformity with the requirements for qualification and taxation as a REIT under the Code and that our manner of operation will enable us to meet the requirements for qualification and taxation as a REIT. If we fail to qualify, or lose our qualification, as a REIT, we will be subject to U.S. federal income tax on our taxable income.

As a REIT, we generally will not be subject to U.S. federal income tax on our net taxable income that we distribute currently to our stockholders. To maintain our REIT qualification, we must meet a number of organizational and operational requirements, including a requirement that we 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. If we have previously qualified as a REIT and fail to qualify for taxation as a REIT in any subsequent taxable year and do not qualify for certain statutory relief provisions, our income for that year will be taxed at regular corporate rates, and we will be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT. Even if we qualify for taxation as a REIT, we may be subject to some federal, state and local taxes on our income or property. See “Material U.S. Federal Income Tax Considerations.”

Distribution Policy

We intend to pay regular monthly dividends to holders of our common stock and make regular monthly distributions to holders of OP units in our operating partnership. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its taxable income. We intend to pay a pro rata initial dividend in

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respect of the period from the closing of this offering through the end of the then-current fiscal month based on $0.0729 per share for a full month. On an annualized basis, this would be $0.875 per share, or an annual dividend rate of approximately 7.0%. We intend to maintain our initial dividend rate for the 12-month period following completion of this offering unless our actual results of operations, economic conditions or other factors differ materially from the assumptions used in our estimate. We have the ability to fund distributions from any source, including borrowing funds and using the proceeds of this offering. See “Risk Factors — Risks Related to this Offering — We may be unable to pay or maintain distributions, especially if we raise substantially more than the minimum offering, from cash available from operations or increase distributions over time.” Distributions made by us will be authorized by our board of directors in its sole discretion out of funds legally available therefor and will be dependent upon a number of factors, including restrictions under applicable law and the capital requirements of our company.

Distributions that you receive (not designated as capital gain dividends or, for taxable years beginning before January 1, 2013, qualified dividend income) will be taxed as ordinary income to the extent they are paid from our earnings and profits (as determined for U.S. federal income tax purposes). However, distributions that we designate as capital gain dividends generally will be taxable as long-term capital gain to our stockholders to the extent that they do not exceed our actual net capital gain for the taxable year. Some portion of your distributions may not be subject to tax in the year in which they are received because depreciation expense reduces our earnings and profits, but does not reduce cash available for distribution. The portion of your distribution which is not designated as a capital gain dividend and is in excess of our current and accumulated earnings and profits is considered a return of capital for U.S. federal income tax purposes and will reduce the adjusted tax basis of your investment, but not below zero, deferring such portion of your tax until your investment is sold or our company is liquidated, at which time you will be taxed at capital gains rates. If such portion of your distribution exceeds the adjusted tax basis of your investment, such excess will be treated as capital gain if you hold your shares of common stock as a capital asset for U.S. federal income tax purposes. Please note that each stockholder’s tax considerations are different, therefore, you should consult with your own tax advisor and financial planners prior to making an investment in our shares. You also should review the section entitled “Material U.S. Federal Income Tax Considerations.”

Corporate Information

We were incorporated as a Maryland corporation on December 2, 2010 and intend to elect and qualify to be taxed as a REIT commencing with our taxable year ending December 31, 2011. Our corporate offices are located at 405 Park Avenue, New York, New York 10022. Our telephone number is (212) 415-6500. Additional information about us and ARC and its affiliates may be obtained at www.americanrealtycap.com . The information contained on, or accessible through, our website, or any other website of ARC, is not incorporated by reference into this prospectus and should not be considered a part of this prospectus.

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The Offering

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		American Realty Capital Properties, Inc. Pro forma (1)																Historical American Realty Capital Properties, Inc. and ARC Predecessor Companies (2)
		Minimum Offering								Maximum Offering
		Three Months Ended March 31,				Year ended December 31,				Three Months Ended March 31,				Year ended December 31,				Three Months Ended March 31,				Year Ended December 31,				Period Ending December 31,
		2011				2010				2011				2010				2011				2010				2009				2008
Revenues:
Rental income		$	2,275,551			$	9,102,203			$	2,275,551			$	9,102,203			$	2,258,646			$	9,145,054			$	5,682,845			$	1,337,375
Operating expense reimbursement			—				—				—				—				—				—				5,130				—
Total revenues			2,275,551				9,102,203				2,275,551				9,102,203				2,258,646				9,145,054				5,687,975				1,337,375
Operating expenses:
Management fee			152,766				611,062				152,766				611,062				—				—				—				—
Acquisition and transaction related			—				—				—				—				—				10,000				3,705,364				—
Property, general and administrative			71,693				345,824				71,693				345,824				87,218				345,825				77,321				4,875
Depreciation and amortization			1,346,347				5,385,386				1,346,347				5,385,386				1,357,432				5,386,387				3,731,317				909,140
Total operating expenses			1,570,806				6,342,272				1,570,806				6,342,272				1,444,650				5,742,212				7,514,002				914,015
Operating income (loss) income			704,745				2,759,931				704,745				2,759,931				813,996				3,402,842				(1,826,027	)			423,360
Other income (expense):
Interest expense			(530,750	)			(2,552,709	)			(530,750	)			(2,552,709	)			(2,607,825	)			(10,804,845	)			(6,962,547	)			(1,608,503	)
Interest income			—				—				—				—				—				—				17,074				3,254
Other income			—				—				—				—				—				100,000				—				—
Total other income (expense)			(530,750	)			(2,552,709	)			(530,750	)			(2,552,709	)			(2,607,825	)			(10,704,845	)			(6,945,473	)			(1,605,249	)
Net income (loss) before noncontrolling interest adjustment			173,995				207,222				173,995				207,222				(1,793,829	)			(7,302,003	)			(8,771,500	)			(1,181,889	)
Net income attributable to noncontrolling interest holders			(9,989	)			(11,896	)			(6,288	)			(7,488	)			—				—				—				—
Net income (loss) attributable to American Realty Capital Properties, Inc.		$	164,006			$	195,326			$	167,707			$	199,734			$	(1,793,829	)		$	(7,302,003	)		$	(8,771,500	)		$	(1,181,889	)
Per Share Data:
Weighted average shares outstanding			5,400,000				5,400,000				8,800,000				8,800,000				—				—				—				—
Earnings per share basic and fully diluted		$	0.03			$	0.04			$	0.02			$	0.02				—				—				—				—
Reconciliation of net income to funds from operations (3) :
Net income attributable to American Realty Capital Properties, Inc.		$	164,006			$	195,326			$	167,707			$	199,734
Plus: Depreciation and amortization			1,346,347				5,385,386				1,346,347				5,385,386
Less: Depreciation and amortization attributable to noncontrolling interest holders			(77,290	)			(309,161	)			(48,652	)			(194,608	)
FFO attributable to common stockholders and OP units holders in operating partnership		$	1,433,063			$	5,271,551			$	1,465,402			$	5,390,512
Per Share Data:
Weighted average shares outstanding			5,400,000				5,400,000				8,800,000				8,800,000
FFO per share		$	0.27			$	0.98			$	0.17			$	0.61

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		American Realty Capital Properties, Inc. Pro forma (1)																Historical American Realty Capital Properties, Inc. and ARC Predecessor Companies
		Minimum Offering								Maximum Offering
		March 31,				December 31,				March 31,				December 31,				March 31,				December 31,
		2011				2010				2011				2010				2011				2010				2009				2008
Assets
Real estate investments, at cost:
Land		$	17,346,301			$	17,346,301			$	17,346,301			$	17,346,301			$	17,346,301			$	17,346,301			$	17,346,301			$	8,121,129
Buildings, fixtures and improvements			97,261,472				97,261,472				97,261,472				97,261,472				97,261,472				97,261,472				97,261,472				46,019,728
Acquired intangible lease assets			7,604,698				7,604,698				7,604,698				7,604,698				7,604,698				7,604,698				7,604,698				2,037,529
Total real estate investments, at cost			122,212,471				122,212,471				122,212,471				122,212,471				122,212,471				122,212,471				122,212,471				56,178,386
Less: accumulated depreciation and amortization			(11,354,714	)			(10,008,368	)			(11,354,714	)			(10,008,368	)			(11,354,714	)			(10,008,368	)			(4,640,457	)			(909,140	)
Total real estate investments, net			110,857,757				112,204,103				110,857,757				112,204,103				110,857,757				112,204,103				117,572,014				55,269,246
Cash and cash equivalents			1,995,323				1,991,237				40,770,323				40,766,237				618,529				614,442				922,746				315,018
Restricted cash			—				—				—				—				—				—				3,561,591				—
Prepaid expenses and other assets			910,892				687,789				910,892				687,789				910,892				687,789				245,712				84,801
Deferred offering costs			—				—				—				—				769,879				278,976				—				—
Deferred financing costs, net			1,210,441				1,627,907				1,210,441				1,627,907				1,848,594				2,266,060				3,421,831				1,537,194
Total assets		$	114,974,413			$	116,511,036			$	153,749,413			$	155,286,036			$	115,005,651			$	116,051,370			$	125,723,894			$	57,206,259
Liabilities and Equity/Deficiency
Mortgage notes payable		$	68,850,000			$	68,850,000			$	68,850,000			$	68,850,000			$	96,472,049			$	96,472,049			$	97,556,389			$	45,356,248
Long-term notes payable			—				—				—				—				30,626,146				30,626,146				30,780,311				10,680,494
Due to affiliates			—				—				—				—				—				—				845,362				321,628
Due to seller			—				—				—				—				—				—				2,068,888				—
Accounts payable and accrued expenses			585,095				746,724				585,095				746,724				1,370,501				1,025,700				1,007,952				643,037
Deferred rent and other liabilities			673,920				673,920				673,920				673,920				673,920				673,920				578,696				319,227
Total liabilities			70,109,015				70,270,644				70,109,015				70,270,644				129,142,616				128,797,815				132,837,598				57,320,634
Member’s deficiency			—				—				—				—				(14,136,965	)			(12,746,445	)			(7,113,704	)			(114,375	)
Preferred stock			—				—				—				—				—				—				—				—
Common stock			54,000				54,000				88,000				88,000				—				—				—				—
Additional paid in capital			40,936,398				42,311,392				79,677,398				81,052,392				—				—				—				—
Total American Realty Capital Properties, Inc. equity			40,990,398				42,365,392				79,765,398				81,140,392				(14,136,965	)			(12,746,445	)			(7,113,704	)			(114,375	)
Noncontrolling interests			3,875,000				3,875,000				3,875,000				3,875,000				—				—				—				—
Total liabilities and equity		$	114,974,413			$	116,511,036			$	153,749,413			$	155,286,036			$	115,005,651			$	116,051,370			$	125,723,894			$	57,206,259

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If any of the foregoing were to occur, it could result in the termination of the tenant’s leases and the loss of rental income attributable to the terminated leases. If a lease is terminated or defaulted on, we may be unable to find a new tenant to re-lease the vacated space at attractive rents or at all, which would have a material adverse effect on our results of operations and our financial condition. Furthermore, the consequences to us would be exacerbated if one of our major tenants were to experience an adverse development in their business that resulted in them being unable to make timely rental payments or to default under their lease. The occurrence of any of the situations described above would have a material adverse effect on our results of operations and our financial condition.

We rely significantly on two major tenants (including for this purpose, all affiliates of such tenants), and therefore, are subject to tenant credit concentrations that make us more susceptible to adverse events with respect to those tenants.

100% of our average annual rent is expected to be derived from two major tenants (including for this purpose, all affiliates of such tenants):

Therefore, the financial failure of a major tenant is likely to have a material adverse effect on our results of operations and our financial condition. In addition, the value of our investment is historically driven by the credit quality of the underlying tenant, and an adverse change in a major tenant’s financial condition or a decline in the credit rating of such tenant may result in a decline in the value of our investments and have a material adverse effect on our results from operations.

Sixty-two of our 63 properties are encumbered by mortgage indebtedness that is maturing in the short-term, which indebtedness we may not be able to refinance upon maturity.

As of March 31, 2011 we had approximately $82.6 million of mortgage indebtedness that will mature on August 31, 2011. This mortgage indebtedness is secured by our 60 continuing properties leased to Citizens Bank and our two TRS properties. Although we have reserved approximately $27.6 million of net proceeds from this offering to assist in repaying this mortgage indebtedness at maturity, given current economic conditions including, but not limited to, the current limitation on the availability of credit and related adverse conditions, in the global financial markets, we may not be able to refinance this obligation on favorable terms, or at all. If we are unable to refinance this obligation prior to the maturity date, then we may be forced to seek liquidity through a variety of options, including, but not limited to, the sale of these properties at below market prices. Furthermore, if we are unsuccessful in selling these properties we could lose our interest in these properties as a result of a foreclosure by the lender.

If we are forced to sell these properties or we lose our interest in them due to foreclosure, our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to make distributions to our stockholders will be materially and adversely affected. In addition, any foreclosure on our properties could create taxable income without accompanying cash proceeds, which could adversely affect our ability to meet the REIT distribution requirements imposed by the Code.

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

Under the terms of all of our net leases, in addition to satisfying their rent obligations, our tenants are responsible for the payment of real estate taxes, insurance and ordinary maintenance and repairs. However, under the provisions of future leases with our tenants, we may be required to pay some expenses, such as the costs of environmental liabilities, roof and structural repairs, 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 will be adversely affected and the amount of cash available to meet expenses and to make distributions to holders of our common stock may be reduced.

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Any of our properties that incurs a vacancy could be difficult to sell or re-lease.

One or more of our properties may incur a vacancy either by the continued default of a tenant under its lease or the expiration of one of our leases. Certain of our properties may be specifically suited to the particular needs of a tenant (e.g., a retail bank branch or distribution warehouse) and major renovations and expenditures may be required in order for us to re-lease vacant space for other uses. We may have difficulty obtaining a new tenant for any vacant space we have in our properties, including our two TRS properties, which are presently vacant. If the vacancy continues for a long period of time, we may suffer reduced revenues resulting in less cash available to be distributed to stockholders. In addition, the resale value of a property could be diminished because the market value of a particular property will depend principally upon the value of the leases of such property.

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

We are subject to industry concentrations, the most significant of which are the following as of March 31, 2011, on a pro forma basis:

Any downturn in one or more of these industries, or in any other industry in which we may have a significant credit concentration in the future, could result in a material reduction of our cash flows and/or material losses to our company.

Our properties may be subject to impairment charges.

We periodically evaluate our real estate investments for impairment indicators. The judgment regarding the existence of impairment indicators is based on factors such as market conditions, tenant performance and legal 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 in payment 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 an adjustment to the net carrying value of the property, which could have a material adverse effect on our results of operations and FFO in the period in which the impairment charge is recorded.

Our real estate investments are relatively illiquid, and therefore we may not be able to dispose of properties when appropriate or on favorable terms.

The real estate investments made, and to be made, by us are relatively difficult to sell quickly. Return of capital and realization of gains, if any, from an investment generally will occur upon disposition or refinancing of a property. In addition, the Code imposes restrictions on the ability of a REIT to dispose of properties that are not applicable to other types of real estate companies. We may be unable to realize our investment objectives by disposition or refinancing of a property at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy. In particular, these risks could arise from weakness in or even the lack of an established market for a property, changes in the financial condition or prospects of prospective purchasers, changes in national or international economic conditions, and changes in laws, regulations or fiscal policies of jurisdictions in which the property is located.

Our investments in properties backed by below investment grade credits will have a greater risk of default.

Our Home Depot tenant does not have an investment grade credit rating. We also may invest in other properties in the future where the underlying tenant’s credit rating is below investment grade. These investments will have a greater risk of default and bankruptcy than investments in properties leased exclusively to investment grade tenants.

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Our investments in properties where the underlying tenant does not have a publicly available credit rating will expose us to certain risks.

Our Home Depot tenant does not have a publicly available credit rating. Additionally, if in the future we invest in additional properties where the underlying tenant does not have a publicly available credit rating, we will rely on our own estimates of the tenant’s credit rating and usually subsequently obtain a private rating from a reputable credit rating agency to allow us to finance the property as we had planned. If our lender or a credit rating agency disagrees with our ratings estimates, or our ratings estimates are inaccurate, we may not be able to obtain our desired level of leverage and/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.

Operating expenses of our properties could reduce our cash flow and funds available for future distributions.

For certain of our properties, we may be responsible for operating costs of the property. In these instances, our leases may require the tenant to reimburse us for all or a portion of these costs, either in the form of an expense reimbursement or increased rent. Our reimbursement may be limited to a fixed amount or a specified percentage annually. To the extent operating costs exceed our reimbursement, our returns and net cash flows from the property and hence our overall operating results and cash flows could be materially adversely affected.

We have greater exposure to operating costs if we invest in properties leased to the United States Government.

We may invest in properties leased to the United States Government. Any leases with the United States Government generally will be typical Government Services Administration type leases. These leases do not provide that the United States Government is wholly responsible for operating costs of the property, but include an operating cost component within the rent we receive that increases annually by an agreed upon percentage based upon the Consumer Price Index, or CPI. Thus, we will have greater exposure to operating costs on our properties leased to the United States Government, if any, because if the operating costs of the property increase faster than the CPI, we will bear those excess costs.

We would face potential adverse effects from tenant defaults, bankruptcies or insolvencies.

The bankruptcy of our tenants may adversely affect the income generated by our properties. If our tenant files for bankruptcy, we generally cannot evict the tenant solely because of such bankruptcy. In addition, a bankruptcy court could authorize a bankrupt tenant to reject and terminate its lease with us. In such a case, our claim against the tenant for unpaid and future rent would 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 would pay in full amounts it owes us under the lease. Any shortfall resulting from the bankruptcy of one or more of our tenants could adversely affect our cash flow and results of operations.

The price we will pay for the assets we intend to acquire in the formation transactions, all of which we intend to purchase from the contributor, an affiliate of our sponsor, may exceed their aggregate fair market value.

The amount of consideration we will pay the contributor, an affiliate of our sponsor, for the contributed properties may be greater than the value of such properties, as determined by a recent independent third-party investment valuation, because the amount of consideration for such properties was not determined as a result of arm’s-length negotiations. Further, we have not obtained a recent appraisal of the fair market value of the properties nor solicited third-party bids for the properties for purposes of creating a market check on their value. Conflicts of interest exist in connection with the transaction in which interests in these properties are being contributed to our operating partnership. There can be no assurance that the values reflected in the independent third-party investment valuation that we obtained reflect the fair market value of the properties were they to be sold in an arm’s-length transaction. The initial public offering price of our common stock was determined in consultation with Realty Capital Securities, our affiliated co-dealer manager, based on the history and prospects for the industry in which we compete, our financial information, our management and

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our business potential and earning prospects, the prevailing securities markets at the time of this offering, and the recent market prices of, and the demand for, publicly-traded shares of generally comparable companies. The initial public offering price does not necessarily bear any relationship to the book value or the fair market value of the assets we intend to acquire in the formation transactions. As a result, the price to be paid by us for the acquisition of the assets in the formation transactions may exceed the fair market value of those assets. The aggregate historical combined net book value of the real estate assets to be acquired by us in the formation transactions was approximately $112.2 million as of March 31, 2011.

We are assuming liabilities in connection with the formation transactions, including unknown liabilities.

As part of the formation transactions, we will assume existing liabilities of our property subsidiaries, including, but not limited to, liabilities in connection with our properties, some of which may be unknown or unquantifiable at the time this offering is consummated. Unknown liabilities might include liabilities for cleanup or remediation of undisclosed environmental conditions, claims of tenants or other persons dealing with the entities prior to this offering, tax liabilities, employment-related issues, 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, they could adversely affect our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make distributions to our stockholders.

We face intense competition, which may decrease or prevent increases in the occupancy and rental rates of our properties.

We compete with numerous developers, owners and operators of retail, industrial and office real estate, many of which own properties similar to ours in the same markets in which our properties are located. If one of our properties becomes vacant and our competitors (which would include ARC or any ARC Fund) 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 abatements. As a result, our financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make distributions to our stockholders may be adversely affected.

Our operating performance and value are subject to risks associated with our real estate assets and with the real estate industry.

Our real estate investments are subject to various risks and fluctuations and cycles in value and demand, many of which are beyond our control. Certain events may decrease cash available for distributions, as well as the value of our properties. These events include, but are not limited to:

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In addition, periods of economic slowdown or recession, such as the recent global economic downturn, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or an increased incidence of defaults under existing leases. If we cannot operate our properties to meet our financial expectations, our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make distributions to our stockholders could be materially and adversely affected. We cannot assure you that we will achieve our return objectives.

A potential change 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.

Under current authoritative accounting guidance for leases, a lease is classified by a tenant as a capital lease if the significant risks and rewards of ownership are considered to reside with the tenant. Under capital lease accounting for a tenant, both the leased asset and liability are reflected on their balance sheet. If the lease does not meet any of the criteria for a capital lease, the lease is considered an operating lease by the tenant, and the obligation does not appear on the tenant’s balance sheet; rather, the contractual future minimum payment obligations are only disclosed in the footnotes thereto. Thus, entering into an operating lease can appear to enhance a tenant’s balance sheet in comparison to direct ownership. The Financial Accounting Standards Board, or the FASB, and the International Accounting Standards Board, or the IASB, conducted a joint project to re-evaluate lease accounting. In August 2010, the FASB and the IASB jointly released exposure drafts of a proposed accounting model that would significantly change lease accounting. The final standards are expected to be issued in 2011. 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, if the accounting standards regarding the financial statement classification of operating leases are revised, then companies may be less willing to enter into leases with us in general or desire to enter into leases with us with shorter terms because the apparent benefits to their balance sheets could be reduced or eliminated. This in turn could cause a delay in investing our offering proceeds and make it more difficult for us to enter into leases on terms we find favorable.

We will 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 make future acquisitions necessary to grow our business or meet maturing obligations.

In order to qualify as a REIT under the Code, we will be 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 distribution requirement, we may not be able to fund, from cash retained from operations, all of our future capital needs, including capital needed to make investments and to satisfy or refinance maturing obligations.

We expect to rely on external sources of capital, including debt and equity financing to fund future capital needs. However, the recent U.S. and global economic slowdown has resulted in a capital environment characterized by limited availability, increasing costs and significant volatility. If we are unable to obtain needed capital on satisfactory terms or at all, we may not be able to make the investments needed to expand our business, or to meet our obligations and commitments as they mature.

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Any additional debt we incur will increase our leverage. Our access to capital will depend upon a number of factors over which we have little or no control, including:

We may not be in a position to take advantage of attractive investment opportunities for growth if we are unable to access the capital markets on a timely basis on favorable terms.

Our ability to sell equity to expand our business will depend, in part, on the market price of our common stock, and our failure to meet market expectations with respect to our business could negatively affect the market price of our common stock and limit our ability to sell equity.

The availability of equity capital to us will depend, in part, on the market price of our common stock which, in turn, will depend upon various market conditions and other factors that may change from time to time, including:

Our failure to meet market expectations with regard to future earnings and cash distributions would likely adversely affect the market price of our common stock and, as a result, the availability of equity capital to us.

We will have substantial amounts of indebtedness outstanding following this offering, which may affect our ability to make distributions, may expose us to interest rate fluctuation risk and may expose us to the risk of default under our debt obligations.

As of March 31, 2011, on a pro forma basis, our aggregate indebtedness would have been approximately $68.9 million. Additionally, concurrently with the completion of this offering, we expect to enter into a senior secured revolving acquisition facility, which, on a pro forma basis, would provide an additional $8 million of borrowing availability. We may incur significant additional debt for various purposes including, without limitation, the funding of future acquisitions, capital improvements and leasing commissions in connection with the repositioning of a property.

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Payments of principal and interest on borrowings may leave us with insufficient cash resources to make the distributions currently contemplated or necessary to maintain our REIT qualification. Our substantial outstanding indebtedness, and the limitations imposed on us by our debt agreements, could have other significant adverse consequences, including the following:

If any one of these events were to occur, our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make distributions to our stockholders could be materially and adversely affected. In addition, any foreclosure on our properties could create taxable income without accompanying cash proceeds, which could adversely affect our ability to meet the REIT distribution requirements imposed by the Code.

Our existing loan agreements contain, and future financing arrangements, including our senior secured revolving acquisition facility, will likely contain, restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.

We are subject to certain restrictions pursuant to the restrictive covenants of our outstanding indebtedness, which may affect our distribution and operating policies and our ability to incur additional debt. Loan documents evidencing our existing indebtedness contain, and loan documents entered into in the future will likely contain, certain operating covenants that limit our ability to further mortgage the property or discontinue insurance coverage. In addition, future agreements may contain, and any future company credit facilities, including our senior secured revolving acquisition facility, likely will contain, financial covenants, including certain coverage ratios and limitations on our ability to incur secured and unsecured debt, make distributions, sell all or substantially all of our assets, and engage in mergers and consolidations and certain acquisitions. Specifically, our ability to make distributions may be limited by our senior secured revolving acquisition facility, pursuant to which our distributions may not exceed the greater of (i) 95.0% of our AFFO or (ii) the amount required for us to qualify and maintain our status as a REIT. Covenants under any future indebtedness may restrict our ability to pursue certain business initiatives or certain acquisition transactions. In addition, failure to meet any of these covenants, including the financial coverage ratios, could cause an event of default under or accelerate some or all of our indebtedness, which would have a material adverse effect on us.

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Increases in interest rates would increase the amount of our variable-rate debt payments and could limit our ability to pay dividends to our stockholders.

Indebtedness under our senior secured revolving acquisition facility is subject to, and we may incur additional indebtedness in the future subject to, floating interest rates, and as a result, increases in interest rates on such indebtedness would reduce our cash flows and our ability to pay dividends to our stockholders. In addition, if we are required to repay existing debt during periods of higher interest rates, we may need to sell one or more of our investments in order to repay the debt, which might reduce the realization of the return on such investments.

Our organizational documents have no limitation on the amount of indebtedness that we may incur. As a result, we may become highly leveraged in the future, which could adversely affect our financial condition.

Our business strategy contemplates the use of both secured and unsecured debt to finance long-term growth. While we intend to limit our indebtedness to maintain an overall net debt to gross asset value of approximately 45% to 55%, provided that we may exceed this amount for individual properties in select cases where attractive financing is available, our governing documents contain no limitations on the amount of debt that we may incur, and our board of directors may change our financing policy at any time without stockholder approval. As a result, we may be able to incur substantial additional debt, including secured debt, in the future, which could result in an increase in our debt service and harm our financial condition.

Adverse global market and economic conditions may continue to adversely affect us and could cause us to recognize impairment charges or otherwise harm our performance.

Recent market and economic conditions have been challenging, with tighter credit conditions in 2008 through 2010. Continued concerns about the availability and cost of credit, the U.S. mortgage market, inflation, unemployment levels, geopolitical issues and declining equity and real estate markets have contributed to increased market volatility and diminished expectations for the U.S. economy. The commercial real estate sector in particular has been adversely affected by these market and economic conditions. These conditions may result in our tenants requesting rent reductions, declining to extend or renew leases upon expiration or renewing at lower rates. These conditions also have forced tenants, in some cases, to declare bankruptcy or vacate leased premises. We may be unable to re-lease vacated space at attractive rents or at all. We are unable to predict whether, or to what extent or for how long, these adverse market and economic conditions will persist. The continuation or intensification of these conditions may impede our ability to generate sufficient operating cash flow to pay expenses, maintain properties, make distributions and repay debt.

Uninsured losses or losses in excess of our insurance coverage could 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.

Upon completion of this offering we plan to carry comprehensive liability, fire, extended coverage, business interruption and rental loss insurance covering all of the properties in our portfolio under a blanket insurance policy with policy specifications, limits and deductibles customarily carried for similar properties. In addition, we plan to carry professional liability and directors’ and officers’ insurance. We will select policy specifications and insured limits that we believe to be appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice. We will not carry insurance for certain losses, including, but not limited to, losses caused by riots or war. Certain types of losses may be either uninsurable or not economically insurable, such as losses due to earthquakes, riots or acts of war. Should an uninsured loss occur, we could lose both our investment in and anticipated profits and cash flow from a property. If any such loss is insured, we may be required to pay a significant deductible on any claim for recovery of such a loss prior to our insurer being obligated to reimburse us for the loss, or the amount of the loss may exceed our coverage for the loss. In addition, future lenders may require such insurance, and our failure to obtain such insurance could constitute a default under our loan agreements. 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

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we do not intend to increase our title insurance coverage as the market value of our portfolio increases. As a result, our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make distributions to our stockholders may be materially and adversely affected.

If we or one or more of our tenants experiences 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.

If any of our insurance carriers become insolvent, we could be adversely affected.

We expect to 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. Replacing insurance coverage at unfavorable rates and the potential of uncollectible claims due to carrier insolvency could adversely affect our results of operations and cash flows.

Terrorism and other factors affecting demand for our properties 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 Washington, D.C. on September 11, 2001, and other acts of terrorism or war could have a negative impact on our operations. 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. The lack of sufficient insurance for these types of acts could expose us to significant losses and could have a negative impact on our operations.

We may be required to make significant capital expenditures to improve our properties in order to retain and attract tenants, causing a decline in operating revenue and reducing cash available for debt service and distributions to stockholders.

If adverse economic conditions continue in the real estate market and demand for freestanding single tenant properties remains low, we expect that, upon expiration of leases at our properties, we will be required to make rent or other concessions to tenants, and/or accommodate requests for renovations, build-to-suit remodeling and other improvements. As a result, we may have to make significant capital or other expenditures in order to retain tenants whose leases expire and to attract new tenants. Additionally, we may need to raise capital to make such expenditures. If we are unable to do so or capital is otherwise unavailable, we may be unable to make the required expenditures. This could result in non-renewals by tenants upon expiration of their leases, which would result in declines in revenue from operations and reduce cash available for debt service and distributions to stockholders.

Difficult conditions in the commercial real estate markets may cause us to experience market losses related to our holdings, and these conditions may not improve in the near future.

Our results of operations are materially affected by conditions in the real estate markets, the financial markets and the economy generally and may cause commercial real estate values, including the values of our properties, and market rental rates, including rental rates that we are able to charge, to decline significantly. Current economic and credit market conditions have contributed to increased volatility and diminished expectations for real estate markets, as well as adversely impacted inflation, energy costs, geopolitical issues and the availability and cost of credit, and will continue to do so going forward. The further deterioration of the real estate market may cause us to record losses on our assets, reduce the proceeds we receive upon sale or refinance of our assets or adversely impact our ability to lease our properties. Declines in the market values of our properties may adversely affect our results of operations and credit availability, which may reduce earnings and, in turn, cash available for distributions to our stockholders. Current economic and credit market conditions may also cause one or more of the tenants to whom we have exposure to fail or default in their payment obligations, which could cause us to record material losses or a material reduction in our cash flows.

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Because we own real property, we are subject to extensive environmental regulation, which creates uncertainty regarding future environmental expenditures and liabilities.

Environmental laws regulate, and impose liability for, releases of hazardous or toxic substances into the environment. Under various provisions of these laws, an owner or operator of real estate, such as us, is or may be liable for costs related to soil or groundwater contamination on, in, or migrating to or from its property. In addition, persons who arrange for the disposal or treatment of hazardous or toxic substances may be liable for the costs of cleaning up contamination at the disposal site. Such laws often impose liability regardless of whether the person knew of, or was responsible for, the presence of the hazardous or toxic substances that caused the contamination. The presence of, or contamination resulting from, any of these substances, or the failure to properly remediate them, may adversely affect our ability to sell or lease our property or to borrow using such property as collateral. In addition, persons exposed to hazardous or toxic substances may sue us for personal injury damages. For example, certain laws impose liability for release of or exposure to asbestos-containing materials and contamination from past operations or from off-site sources. As a result, in connection with our current or former ownership, operation, management and development of real properties, we may be potentially liable for investigation and cleanup costs, penalties, and damages under environmental laws.

Although all of our properties were, at the time they were acquired by our predecessor, subjected to preliminary environmental assessments, known as Phase I assessments, by independent environmental consultants that identify certain liabilities, Phase I assessments are limited in scope, and may not include or identify all potential environmental liabilities or risks associated with the property. Further, any environmental liabilities that arose since the date the studies were done would not be identified in the assessments. Unless required by applicable laws or regulations, we may not further investigate, remedy or ameliorate the liabilities disclosed in the Phase I assessments.

We cannot assure you that these or other environmental studies identified all potential environmental liabilities, or that we will not incur material environmental liabilities in the future. If we do incur material environmental liabilities in the future, we may face significant remediation costs, and we may find it difficult to sell any affected properties.

As a result of becoming a public company, we must implement additional financial and accounting systems, procedures and controls which are applicable to such companies, which will increase our costs and require substantial management time and attention.

As a public company, we will incur significant legal, accounting and other expenses that our predecessor did not incur as a private company, including costs associated with public company reporting requirements and corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. As an example, in order to comply with such reporting requirements, we are evaluating our internal control systems in order to allow management to report on, and our independent registered public accounting firm to attest to, our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. If we fail to implement proper overall business controls, including as required to integrate the property subsidiaries and support our growth, our results of operations could be harmed or we could fail to meet our reporting obligations. In addition, if we identify significant deficiencies or material weaknesses in our internal control over financial reporting that we cannot remediate in a timely manner, or if we are unable to receive an unqualified report from our independent registered public accounting firm with respect to our internal control over financial reporting, investors and others may lose confidence in the reliability of our financial statements and the trading price of our common stock and our ability to obtain any necessary equity or debt financing could suffer.

Furthermore, the design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements, or misrepresentations. Although management will continue to review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, including any material weaknesses, in our internal control over financial reporting which may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in the trading

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price of our common stock, or otherwise materially adversely affect our business, reputation, results of operations, financial condition, or liquidity.

We may be unable to complete acquisitions that would grow our business, and even if consummated, we may fail to successfully integrate and operate acquired properties.

Our growth strategy includes the disciplined acquisition of properties as opportunities arise. Our ability to acquire properties on satisfactory terms and successfully integrate and operate them is subject to the following significant risks:

If we cannot complete property acquisitions on favorable terms, or operate acquired properties to meet our goals or expectations, our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make distributions to our stockholders could be materially and adversely affected.

Payment of fees to our Manager and ARC reduces cash available for investment and distribution.

Our Manager and ARC will perform services for us in connection with the selection, acquisition, financing, leasing and management of us and our properties. Our Manager and ARC will be paid substantial fees for these services, which reduce the amount of cash available for investment in properties or distribution to stockholders. Such fees and reimbursements include: (i) a management fee payable to our Manager equal to 0.50% per annum of our average unadjusted book value of our real estate assets, calculated and payable monthly in advance, provided that the full amount of the distributions declared by us in respect of our OP units for the six immediately preceding months is equal to or greater than the amount of our AFFO; (ii) incentive fees equal to the difference between (1) the product of (x) 20% and (y) the difference between (I) our Core Earnings (as defined below) for the previous 12-month period, and (II) the product of (A) the weighted average of the issue price per share of our common stock of all of our public offerings multiplied by the weighted average number of all shares of common stock outstanding (including any restricted shares of

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common stock and other shares of common stock underlying awards granted under our equity incentive plans) in the previous 12-month period, and (B) 8.00%, and (2) the sum of any incentive fee paid to our Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive fee is payable with respect to any calendar quarter unless Core Earnings for the 12 most recently completed calendar quarters is greater than zero; (iii) an acquisition fee payable to ARC equal to 1.0% of the contract purchase price (including assumed indebtedness) of each property that we acquire which is originated by ARC and evaluated following the commencement of this offering, but excluding the direct or indirect interests in any properties contributed to us in connection with the formation transactions; (iv) a financing fee payable to ARC equal to 0.75% of the amount available under any secured mortgage financing or refinancing that we obtain and use for the acquisition of properties that is arranged by ARC, but excluding any financing on the direct or indirect interests in the properties which were contributed to us in connection with the formation transactions and the contemplated initial refinancing of the mortgage indebtedness encumbering our 60 continuing properties leased to Citizens Bank and of our two TRS properties; and (v) reimbursement for all out of pocket costs actually incurred by ARC in connection with the performance of services under the acquisition and capital services agreement, including without limitation, legal fees and expenses, due diligence fees and expenses, other third party fees and expenses, costs of appraisals, travel expenses, nonrefundable option payments and deposits on properties not acquired, accounting fees and expenses, title insurance premiums and other closing costs, personnel costs and miscellaneous expenses relating to the selection, acquisition and due diligence of properties. See “Our Manager and ARC — Management Agreement” and “— Acquisition and Capital Services Agreement.” Also, in the future we may contract with ARC to perform property management and leasing services with respect to our properties in respect of which we will pay fees equal to 1.5% of gross revenues from such properties plus certain expense reimbursements.

Risks Related to Our Relationship with Our Manager and ARC

We will be dependent on ARC and its key personnel, especially Messrs. Schorsch, Kahane, Budko, Block and Weil, who provide services to us through the management agreement and the acquisition and capital services agreement, and we may not find a suitable replacement for our Manager and ARC if the management agreement and the acquisition and capital services agreement is terminated, or for these key personnel if they leave ARC or otherwise become unavailable to us.

We will have no separate facilities and will be completely reliant on our Manager and ARC. Our chief executive officer, our president, our executive vice president and chief investment officer and our two other executive officers are executives of ARC. We do not expect to have any employees. Our Manager and ARC have significant discretion as to the implementation of our investment and operating policies and strategies. Accordingly, we believe that our success will depend to a significant extent upon the efforts, experience, diligence, skill and network of business contacts of the officers and key personnel of our Manager and ARC. The officers and key personnel of our Manager and ARC will evaluate, negotiate, close and monitor our investments; therefore, our success will depend on their continued service. The departure of any of the officers or key personnel of our Manager could have a material adverse effect on our performance and slow our future growth. We have not obtained and do not expect to obtain “key person” life insurance on any of our key personnel.

Neither our Manager nor ARC is obligated to dedicate any specific personnel exclusively to us. In addition, none of our officers or the officers of our Manager or ARC are obligated to dedicate any specific portion of their time to our business. Each of them has significant responsibilities for other investment vehicles currently managed by affiliates of ARC, including as a result of being part of the senior management or key personnel of the other eight ARC-sponsored REITs and their advisors. Three of the ARC-sponsored REITs have registration statements that are not yet effective and are in the development phase, and four of the ARC-sponsored REITs have registration statements that became effective recently. As a result, such REITs will have concurrent and/or overlapping fundraising, acquisition and operational phases as us, which may cause conflicts of interest to arise throughout the life of our company. Additionally, based on our sponsor’s experience, a significantly greater time commitment is required of senior management during the development stage when the REIT is being organized, funds are initially being raised and funds are initially being invested, and less time is required as additional funds are raised and the offering matures. As a result, these individuals may not always be able to devote sufficient time to the management of our business. Further, when there are

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turbulent conditions in the real estate markets or distress in the credit markets, the attention of our Manager’s and ARC’s personnel and our executive officers and the resources of ARC will also be required by the other investment vehicles managed by affiliates of ARC. In such situations, we may not receive the level of support and assistance that we may receive if we were internally managed.

In addition, we offer no assurance that our Manager will remain our investment manager or that we will continue to have access to ARC to provide us with acquisition and capital services following the initial term of the acquisition and capital services agreement. The initial term of our management agreement with our Manager and the acquisition and capital services agreement between us and ARC extends until the tenth anniversary of the closing of this offering, with automatic one-year renewals of our management agreement and our acquisition and capital services agreement, subject to a 180-day prior written notice of termination period. If the management agreement is terminated or the acquisition and capital services agreement is terminated and no suitable replacement is found to provide the services needed by us under those agreements, we may not be able to execute our business plan.

There are various conflicts of interest in our relationship with ARC and our Manager, which could result in decisions that are not in the best interests of our stockholders.

We are subject to conflicts of interest arising out of our relationship with ARC and our Manager. Specifically, Mr. Schorsch, our chief executive officer and the chairman of our board of directors, Mr. Kahane, our president and one of our directors, Mr. Budko, our executive vice president and chief investment officer, Mr. Block, our executive vice president and chief financial officer, and Mr. Weil, our executive vice president and secretary, are executives of ARC. Our Manager and executive officers may have conflicts between their duties to us and their duties to, and interests in, ARC and other ARC Funds. Our ability to make investments in our target assets is governed by an acquisition and capital services agreement with ARC. Our acquisition and capital services agreement with ARC provides that no entity controlled by ARC or its affiliates, including its principals, will sponsor or manage any public or private U.S. investment vehicle that has as its principal investment strategy to invest in net leased properties that are subject to leases that have remaining terms of less than 10 years but not less than three years other than us for so long as either Mr. Schorsch or Mr. Kahane are affiliated with our Manager and our management agreement is in effect. However, ARC and its affiliates may sponsor or manage another public or private U.S. investment vehicle that invests generally in real estate assets but not primarily in our target assets, including net leased properties.

Shortly after the consummation of this offering, we expect that our board of directors will adopt a policy with respect to any proposed investments by our directors or officers or the officers of our Manager, which we refer to as the covered persons, in our target properties. We expect this policy to provide that any proposed investment by a covered person for his or her own account in any of our target properties will be permitted if the capital required for the investment does not exceed the lesser of (i) $5 million, or (ii) 1% of our total stockholders’ equity as of the most recent month end, or the personal investment limit. To the extent that a proposed investment exceeds the personal investment limit, we expect that our board of directors will only permit the covered person to make the investment (i) upon the approval of the disinterested directors, or (ii) if the proposed investment otherwise complies with terms of any other related party transaction policy our board of directors may adopt in the future. Subject to compliance with all applicable laws, these individuals may make investments for their own account in our target properties which may present certain conflicts of interest not addressed by our current policies.

We may acquire properties in geographic areas where ARC or other ARC Funds own competing properties. Also, we may acquire properties from, or sell properties to, ARC or other ARC-sponsored programs. If ARC or any one of the other ARC-sponsored programs attracts a tenant that we are competing for, we could suffer a loss of revenue due to delays in locating another suitable tenant.

We will pay our Manager and ARC substantial management fees, incentive fees, acquisition fees and financing fees and may, in the future, pay them property management fees, most of which are payable regardless of the performance of our portfolio. Our Manager’s and ARC’s entitlement to such fees, which are not based upon performance metrics or goals, might reduce their incentive to devote their time and effort to seeking investments that provide attractive risk-adjusted returns for our portfolio. Additionally, the payment of acquisition fees and financing fees to ARC with respect to properties acquired and financings obtained after

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the date of this offering (excluding the initial refinancing of the mortgage indebtedness encumbering our continuing properties leased to Citizens Bank and our two TRS properties) and, therefore, ARC may attempt to cause us to acquire properties and incur financings in order to earn these fees. This in turn could hurt both our ability to make distributions to our stockholders and the market price of our common stock.

ARC and its affiliates, including our principals, will continue to own direct and indirect interests in 34 net leased properties containing an aggregate of 1.2 million leasable square feet. See “Business and Properties  — Excluded Properties.” The ownership of these properties may create conflicts of interest relating to the amount of attention our principals devote to our business since they may be more focused on the financial success of these excluded properties.

Concurrently with the completion of this offering, we will grant to our Manager an aggregate number of restricted shares of Manager’s Stock equal to 3.0% of the number of shares sold in this offering, or 162,000 restricted shares assuming the sale of 5.4 million shares, the minimum number of shares offered in this offering, or 264,000 restricted shares assuming the sale of 8.8 million shares, the maximum number of shares offered in this offering. This award will vest ratably in quarterly installments over a three-year period beginning on the first day of the calendar quarter after we complete this offering. Once vested, to the extent our Manager sells some of the shares, its interests may be less aligned with our interests.

Each of the management agreement with our Manager and the acquisition and capital services agreement with ARC was not negotiated on an arm’s-length basis and may not be as favorable to us as if each agreement had been negotiated with an unaffiliated third party and each agreement may be costly and difficult to terminate.

Our executive officers and two of our five directors are executives of ARC. Each of our management agreement with our Manager and the acquisition and capital services agreement with ARC was negotiated between related parties and their terms, including amounts payable under each agreement and the term of each agreement, which exceeds the term of most other externally advised REITs, may not be as favorable to us as if it had been negotiated with an unaffiliated third party.

Termination of the management agreement with our Manager and the acquisition and capital services agreement with ARC without cause is difficult. During the initial term of the management agreement, the management agreement may be terminated by us only for cause. Following the initial ten-year term, the management agreement may be terminated annually upon the affirmative vote of at least two-thirds of our independent directors based upon: (1) our Manager’s unsatisfactory performance that is materially detrimental to us, or (2) a determination that the management fees payable to our Manager are not fair, subject to our Manager’s right to prevent termination based on unfair fees by accepting a reduction of management fees agreed to by at least two-thirds of our independent directors. Our Manager will be provided 180 days prior written notice of any such termination. Additionally, the acquisition and capital services agreement with ARC has a ten year term and then continues on a yearly basis thereafter subject to 180 days prior written notice of any termination. These provisions may adversely affect our ability to terminate our Manager and ARC without cause.

Both our Manager and ARC are only contractually committed to serve us until the tenth anniversary of the closing of this offering. Thereafter, the management agreement and the acquisition and capital services agreement are each renewable for one-year terms; provided, however, that (1) our Manager may terminate the management agreement annually upon 180 days prior written notice and (2) ARC may terminate the acquisition and capital services agreement monthly upon 180 days prior written notice. If the management agreement is terminated or the acquisition and capital services agreement is terminated and, in each case, no suitable replacement is found to manage us or provide acquisition and capital services to us, we may not be able to execute our business plan.

Pursuant to each of the management agreement and the acquisition and capital services agreement, neither our Manager nor ARC will assume any responsibility other than to render the services called for thereunder and neither will be responsible for any action of our board of directors in following or declining to follow its advice or recommendations. Each of our Manager and ARC maintains a contractual as opposed to a fiduciary relationship with us. Under the terms of the management agreement and the acquisition and capital services agreement, none of our Manager, ARC, or any of their respective officers, members or personnel, any

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person controlling or controlled by our Manager or ARC or any person providing sub-advisory services to our Manager or ARC will be liable to us, any subsidiary of ours, our directors, our stockholders or any subsidiary’s stockholders or partners for acts or omissions performed in accordance with and pursuant to the management agreement or the acquisition and capital services agreement, except because of acts constituting bad faith, willful misconduct, gross negligence, or reckless disregard of their duties under the management agreement or the acquisition and capital services agreement. In addition, we have agreed to indemnify our Manager, ARC and each of their respective officers, stockholders, members, managers, directors and personnel, any person controlling or controlled by our Manager or ARC and any person providing sub-advisory services to our Manager or ARC with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts or omissions of our Manager or ARC not constituting bad faith, willful misconduct, gross negligence, or reckless disregard of duties, performed in good faith in accordance with and pursuant to the management agreement or the acquisition and capital services agreement.

The incentive fee payable to our Manager under the management agreement is payable quarterly and is based on our Core Earnings and therefore, may cause our Manager to select investments in more risky assets to increase its incentive compensation.

Our Manager is entitled to receive incentive compensation based upon our achievement of targeted levels of Core Earnings. In evaluating investments and other management strategies, the opportunity to earn incentive compensation based on Core Earnings may lead our Manager to place undue emphasis on the maximization of Core Earnings at the expense of other criteria, such as preservation of capital, in order to achieve higher incentive compensation. Investments with higher yield potential are generally riskier or more speculative. This could result in increased risk to the value of our investment portfolio.

The conflicts of interest policy we will adopt may not adequately address all of the conflicts of interest that may arise with respect to our investment activities and also may limit the allocation of investments to us.

In order to avoid any actual or perceived conflicts of interest with our Manager, ARC or any of the ARC parties, we will adopt a conflicts of interest policy prior to the closing of this offering to specifically address some of the conflicts relating to our investment opportunities. Although under this policy the approval of a majority of our independent directors will be required to approve (i) any purchase of our assets by any of the ARC parties and (ii) any purchase by us of any assets of any of the ARC parties, there is no assurance that this policy will be adequate to address all of the conflicts that may arise or will address such conflicts in a manner that is favorable to us. In addition, as a result of the investment opportunity allocation provisions applicable to us, other ARC Funds may in the future, participate in some of our investments. Participating investments will not be the result of arm’s length negotiations and will involve potential conflicts between our interests and those of the other participating ARC Funds in obtaining favorable terms. Since our executives are also executives of ARC, the same personnel may determine the price and terms for the investments for both us and these ARC Funds and there can be no assurance that any procedural protections, such as obtaining market prices or other reliable indicators of fair market value, will prevent the consideration we pay for these investments from exceeding their fair market value or ensure that we receive terms for a particular investment opportunity that are as favorable as those available from an independent third party.

We will compete for investors with other programs of our sponsor, which could adversely affect the amount of capital we have to invest.

In addition to sponsoring this offering, ARC is currently the sponsor of eight public offerings of non-traded REIT shares, which offerings will be ongoing during our offering period. These programs all have filed registration statements for the offering of common stock and intend to elect to be taxed as REITs. The offerings will occur concurrently with our offering, and our sponsor may sponsor other offerings during our offering period. Realty Capital Securities, our affiliated co-dealer manager, is the dealer manager for these other offerings. We will compete for investors with these other programs, and the overlap of these offerings with our offering could adversely affect our ability to raise all the capital we seek in this offering, the timing of sales of our shares and, accordingly, the amount of proceeds that we might have available to invest in our target properties.

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Risks Related to this Offering

The historical performance of the ARC Predecessor Companies may not be indicative of our future results or an investment in our common stock.

We have presented in this prospectus under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” certain information relating to the combined historical performance of the ARC Predecessor Companies. When considering this information you should bear in mind that the combined historical results of the ARC Predecessor Companies may not be indicative of the future results that you should expect from us or any investment in our common stock. In particular, our results could vary significantly from these combined historical results due to the fact that:

We may be unable to pay or maintain distributions, especially if we raise substantially more than the minimum offering, from cash available from operations or increase distributions over time.

There are many factors that can affect the availability and timing of cash distributions to stockholders. Distributions will be based principally on cash available from our operations, but we may be required to borrow funds, utilize proceeds from this offering or sell assets to fund these distributions. The amount of cash available for distributions is affected by many factors, such as our ability to buy properties, rental income from these properties and our operating expense levels, as well as many other variables. Actual cash available for distributions may vary substantially from estimates. Additionally, our ability to make distributions may be limited by our senior secured revolving acquisition facility, pursuant to which our distributions may not exceed the greater of (i) 95.0% of our AFFO or (ii) the amount required for us to qualify and maintain our status as a REIT. We cannot assure you that we will be able to pay or maintain our anticipated level of distributions or that distributions will increase over time. We cannot give any assurance that rents from the properties we acquire will increase or that future acquisitions of real properties or other investments will increase our cash available for distributions to stockholders. Our actual results may differ significantly from the assumptions used by our board of directors in establishing the distribution rate to stockholders. We may

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not have sufficient cash from operations to make a distribution required to qualify for or maintain our REIT status. We may pay distributions from unlimited amounts of any source. We have not established any limit on the amount of proceeds from this offering that may be used to fund distributions, except in accordance with our organizational documents and Maryland law. Distributions from the proceeds of this offering or from borrowings also could reduce the amount of capital we ultimately invest in properties and other permitted investments. This, in turn, would reduce the value of your investment.

We may be required to reduce our distributions to stockholders following the expiration of the administrative support agreement.

Our administrative support agreement with ARC, pursuant to which ARC will pay or reimburse us for our general administrative expenses, including, without limitation, legal fees, audit fees, board of director fees, insurance, marketing and investor relation fees, for a period of one year after the closing of the offering to the extent the amount of our AFFO is less than the amount of distributions declared by us in respect of our OP units during such one year period, has a one year term. Upon expiration of this agreement, we may not have sufficient funds available to pay distributions at the rate we had paid distributions during prior periods and may be required to reduced the rate of distributions.

If we raise more than the minimum offering, our estimated cash available for distribution may not be sufficient to cover our proposed dividend and accordingly we may be unable to pay or maintain such proposed dividend without utilizing cash raised from the offering in order to cover such dividend.

Our proposed dividend rate is 7% per annum. In order to cover this proposed dividend rate in the event we raise more than the minimum offering, we will rely on a waiver of asset management fees payable to our Manager (which management fees are estimated to be approximately $611,000 per annum on a pro forma basis as of March 31, 2011) and the payment and/or reimbursement of certain of our general and administrative expenses by our sponsor for a period of one year after the closing of this offering (which general and administrative expenses are estimated to be $345,000 on a pro forma basis during the first year of our operations). As a result, if we sell approximately 1,300,000 more shares than the minimum number of shares, our cash available for distribution may not be sufficient to cover our proposed dividend during our first year of operations and we may be unable to pay or maintain such proposed dividend without utilizing offering proceeds for this purpose. Further, if we sell approximately 909,000 more shares than the minimum number of shares, our cash available for distribution may not be sufficient to cover our proposed dividend after our first year of operations and we may be unable to pay or maintain such proposed dividend at such time. This, in turn, would reduce the cash available to make acquisitions in our target assets which, in turn, could negatively impact our FFO per share and accordingly the price of our common stock.

Certain dividends payable on shares of the Manager’s Stock may limit our ability to pay dividends on shares of our common stock.

No dividends may be authorized, set aside or paid to the record holders of the outstanding shares of the Manager's Stock until such time that we cover the payment of cash dividends declared on shares of our common stock with AFFO for the six immediately preceding months. Following this event, to the extent any shares of Manager's Stock remain outstanding, no dividends will be paid on our common stock until the holders of Manager's Stock then outstanding have received dividends per share of Manager’s Stock equal to the cash dividends that were paid on each share of our common stock, that were not so paid on the Manager's Stock during the period in which such shares of our common stock and Manager’s Stock were outstanding. As a result, our ability to pay dividends on shares of our common stock may be limited by this restriction and holders of our common stock may not receive dividends when and in the amounts expected. This, in turn, could reduce the value of your investment.

Differences between the book value of the assets to be acquired in the formation transactions and the price paid for our common stock will result in an immediate and material dilution of the book value of our common stock.

As of March 31, 2011, the aggregate historical net book value of the real estate assets to be acquired by us in the formation transactions was approximately $110.9 million, the outstanding property related debt totaled $127.1 million, and net member deficit totaled ($14.1) million, or a loss of $2.47 per share of our

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common stock, assuming the exchange of OP units for shares of our common stock on a one-for-one basis. As a result, the pro forma net book value per share of our common stock after the completion of this offering and the formation transactions will be less than the initial public offering price. The purchasers of common stock offered hereby will experience immediate and substantial dilution of $5.60 per share in the pro forma net book value per share of our common stock assuming we sell the minimum number of shares of common stock in this offering and $3.92 per share in the pro forma net book value per share of our common stock assuming we sell the maximum number of shares of common stock in this offering.

The number of shares of our common stock available for future sale, including by ARC and other of our affiliates, could adversely affect the market price of our common stock, and future sales by us of shares of our common stock or issuances by our operating partnership of OP units may be dilutive to existing stockholders.

Sales of substantial amounts of shares of our common stock in the public market, or upon exchange of OP units or exercise of any equity awards, or the perception that such sales might occur could adversely affect the market price of the shares of our common stock. The exchange of OP units for common stock, the vesting of any equity-based awards granted to certain directors, executive officers and other employees or us, our Manager and ARC under our Equity Plan, the issuance of our common stock or OP units in connection with property, portfolio or business acquisitions and other issuances of our common stock or OP units could have an adverse effect on the market price of the shares of our common stock. Also, the contributor will hold 310,000 OP units on a pro forma basis and our Manager will hold a minimum of 162,000 and a maximum of 264,000 restricted shares, and the contributor and our Manager are party to a registration rights agreement that provides for registration rights. The exercise of these registration rights, which would require us to prepare, file and have declared effective a resale registration statement permitting the public resale of any shares issued upon redemption of such OP units, and shares of our common stock issued upon the vesting and conversion of the restricted Manager’s Stock granted to our Manager could depress the price of our common stock. The existence of these OP units and restricted shares, as well as additional OP units that may be issued in the future, equity awards, and shares of our common stock reserved for issuance as restricted shares or upon exchange of any such OP units and any related resales may adversely affect the market price of our common stock and the terms upon which we may be able to obtain additional capital through the sale of equity securities. In addition, future sales by us of shares of our common stock may be dilutive to existing stockholders.

Increases in market interest rates may result in a decrease in the value of our common stock.

One of the factors that will influence the price of our common stock will be the dividend yield on our common stock (as a percentage of the price of our common stock) relative to market interest rates. An increase in market interest rates may lead prospective purchasers of our common stock to expect a higher dividend yield and, if we are unable to pay such yield, the market price of our common stock could decrease.

The market price of our common stock could be adversely affected by our level of cash distributions.

The market’s perception of our growth potential and our current and potential future cash distributions, whether from operations, sales or refinancings, as well as the real estate market value of the underlying assets, may cause our common stock to trade at prices that differ from our net asset value per share. If we retain operating cash flow for investment purposes, working capital reserves or other purposes, these retained funds, while increasing the value of our underlying assets, may not correspondingly increase the market price of our common stock. Our failure to meet the market’s expectations with regard to future earnings and distributions likely would adversely affect the market price of our common stock.

There has been no public market for our common stock prior to this offering.

Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on NASDAQ but we cannot assure you that an active trading market will develop or be sustained or that shares of our common stock will be resold at or above the initial public offering price. The initial public offering price of our common stock was determined by agreement among us and Realty Capital Securities, our affiliated co-dealer manager, but we cannot assure you that our common stock will not trade

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below the initial public offering price following the completion of this offering and the formation transactions. See “Plan of Distribution.” The market value of our common stock could be materially and adversely affected by general market conditions, including the extent to which a secondary market develops for our common stock following the completion of this offering and the formation transactions, the extent of institutional investor interest in us, 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 general stock and bond market conditions. Some other factors that could negatively affect our share price or result in fluctuations in the price of our common stock include:

If securities analysts do not publish research or reports about our business or if they downgrade our common stock or our sector, the price of our common stock could decline.

The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts. Furthermore, if one or more of the analysts who do cover us downgrades our stock or our industry, or the stock of any of our competitors, the price of our common stock could decline. If one or more of these analysts ceases coverage of our company, we could lose attention in the market, which in turn could cause the price of our common stock to decline.

Risks Related to Our Organization and Structure

The supermajority voting requirements applicable to our board of directors in connection with our consolidation, merger, sale of all or substantially all of our assets or our engaging in a share exchange will limit our independent directors’ ability to influence such corporate matters.

Our charter provides that we may not consolidate, merge, sell all or substantially all of our assets or engage in a share exchange, unless such actions are approved by the affirmative vote of at least two-thirds of our board of directors. As a result, at least one of our directors who is also a principal of ARC will have to approve such significant corporate transactions. This concentrated control limits the ability of our independent directors to influence such corporate matters and could delay, deter or prevent a change of control transaction that might otherwise involve a premium for our shares of common stock or otherwise be in the best interests of our stockholders. As a result, our directors who are also principals of ARC may block certain transactions that our independent directors otherwise view as being in the best interests of our stockholders. Additionally, the market price of our common stock could be adversely affected because of the such imbalance of control.

Our sponsor exercised significant influence with respect to the terms of the formation transactions, including transactions in which it determined the compensation our principals would receive.

We did not conduct arm’s-length negotiations with our sponsor with respect to the formation transactions. In the course of structuring the formation transactions, our sponsor had the ability to influence the type and level of benefits that it, its affiliates (including our principals and our Manager) and our other officers will receive from us. In addition, our principals had substantial pre-existing indirect ownership interests in the

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property subsidiaries and will receive substantial economic benefits as a result of the formation transactions. In addition, our principals have certain executive management and director positions with us, our Manager and ARC, for which they will receive certain other benefits such as any profits associated with the fees earned by our Manager and ARC and equity-based awards. See “Certain Relationships and Related Party Transactions — Formation Transactions.”

Our charter, the partnership agreement of our operating partnership and Maryland law contain provisions that may delay or prevent a change of control transaction.

Our charter contains a 9.8% ownership limit. Our charter, subject to certain exceptions, and commencing upon the completion of this offering, limits any person to actual or constructive ownership of no more than 9.8% in value of the aggregate of our outstanding shares of stock and not 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. Our board of directors, in its sole discretion and upon receipt of certain representations and undertakings, may exempt a person (prospectively or retroactively) from the ownership limits. However, our board of directors may not, among other limitations, grant an exemption from the ownership limits to any person whose ownership, direct or indirect, in excess of the 9.8% ownership limit would cause us to fail to qualify as a REIT. The ownership limits and the other restrictions on ownership and transfer of our stock contained in our charter may delay or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders. See “Description of Stock — Restrictions on Ownership and Transfer.”

Tax protection provisions on certain properties could limit our operating flexibility.

We have agreed with the contributor, an affiliate of our sponsor, to indemnify it against adverse tax consequences if we were to sell, convey, transfer or otherwise dispose of all or any portion of the interests in the continuing properties being acquired by us in the formation transactions, in a taxable transaction. However, we can sell these properties in a taxable transaction if we pay the contributor cash in the amount of its tax liabilities arising from the transaction and tax payments. These tax protection provisions apply for a period expiring on the tenth anniversary of the closing of the formation transactions. Although it may be in our stockholders’ best interest that we sell a property, it may be economically disadvantageous for us to do so because of these obligations. We have also agreed to make debt available for the contributor to guarantee. We agreed to these provisions in order to assist the contributor in preserving its tax position after its contribution of its interests in the continuing properties. As a result, we may be required to incur and maintain more debt than we would otherwise.

We may pursue less vigorous enforcement of the terms of the formation transactions and other agreements because of conflicts of interest with certain of our directors and officers.

Our principals and certain of our other executive officers and employees have indirect interests in all of the property subsidiaries that we will acquire in the formation transactions, which property subsidiaries will enter into the contribution agreement and other agreements with us in connection with such acquisitions. We may choose not to enforce, or to enforce less vigorously, our rights under these agreements due to our ongoing relationship with our principals and our other executive officers.

Tax consequences to holders of OP units upon a sale or refinancing of our properties may cause the interests of our principals to differ from the interests of our other stockholders.

As a result of the unrealized built-in gain that may be attributable to one or more of the contributed properties at the time of contribution, some holders of OP units, including our principals, may experience different tax consequences than holders of our common stock upon the sale or refinancing of the properties owned by our operating partnership, including disproportionately greater allocations of items of taxable income and gain upon a realization event. As those holders will not receive a correspondingly greater distribution of cash proceeds, they may have different objectives regarding the appropriate pricing, timing and other material terms of any sale or refinancing of certain properties, or whether to sell or refinance such properties at all, than those that would be in the best interests of our stockholders taken as a whole.

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Our sponsor, the contributor and our principals will have significant influence over our affairs.

Upon completion of this offering and the formation transactions, (i) the contributor, an affiliate of our sponsor, will own approximately 5.3% of our operating partnership’s outstanding OP units assuming we sell the minimum number of shares offered, or 5.3% of our outstanding common stock on a fully diluted basis, or approximately 3.3% of our operating partnership’s outstanding OP units assuming we sell the maximum number of shares offered, or 3.3% of our outstanding common stock on a fully diluted basis and (ii) our Manager, which is wholly owned by our sponsor, will be granted (a) 162,000 shares of Manager’s Stock assuming we sell the minimum number of shares offered, or (b) 264,000 shares of Manager’s Stock assuming we sell the maximum number of shares offered, or, in each case, approximately 2.8% of our outstanding common stock on a fully diluted basis, which will vest ratably in quarterly installments over a three-year period beginning on the first day of the calendar quarter after we complete this offering. If the contributor exercises its redemption rights with respect to its OP units and we issue common stock in exchange therefor, and all of the restricted shares granted to our Manager vest, our sponsor, through its affiliation with the contributor and ownership and control of our Manager, will own collectively approximately 8.0% of our common stock on a fully diluted basis assuming we sell the minimum number of shares offered, or approximately 6.1% of our common stock on a fully diluted basis assuming we sell the maximum number of shares offered. In such an instance, our sponsor and/our the contributor will have influence over our affairs and could exercise such influence in a manner that is not in the best interests of our other stockholders, including by attempting to delay, defer or prevent a change of control transaction that might otherwise be in the best interests of our stockholders. In addition, under our directed share program, at our request, our dealer managers have reserved up to 25% of the common stock being offered in this offering for sale to our directors, officers, employees and other individuals associated with us and members of their families, at a purchase price of $11.50 per share, reflecting the fact that selling commissions and dealer manager fees will not be payable in connection with such sales. Additionally, under our discounted share program, at our request, our dealer managers have reserved up to 2.45 million shares of the common stock being offered in this offering for sale to holders of interests in ARC Income Properties, LLC and ARC Income Properties III, LLC, affiliates of ARC which hold certain unsecured indebtedness that will be repaid in the formation transactions, at a price of $12.04 per share, reflecting the fact that selling commissions will be 3.5%, and dealer manager fees will be 0.985%, of the gross proceeds from such sales. Accordingly, it is possible that ARC and its affiliates may also hold a substantial percentage of the shares of our common stock. If all of the shares offered pursuant to our directed share program and our discounted share program are purchased by our affiliates, our affiliates will have the ability to elect all of our directors. In addition, we expect our two principals to serve on our board of directors, and we expect our board of directors to consist of five persons upon the completion of this offering and the formation transactions. These indicia of control are in addition to the control our sponsor, our executive officers, who also are members of our sponsor, and our principals will have over our affairs attributable to their direct and indirect ownership interests in our Manager.

We are a holding company with no direct operations. As a result, we will rely on funds received from our operating partnership to pay liabilities and dividends, our stockholders’ claims will be structurally subordinated to all liabilities of our operating partnership and our stockholders will not have any voting rights with respect to our operating partnership’s activities, including the issuance of additional OP units.

We are a holding company and will conduct all of our operations through our operating partnership. We do not have, apart from our ownership of our operating partnership, any independent operations. As a result, we will rely on distributions from our operating partnership to pay any dividends we might declare on shares of our common stock. We will also rely on distributions from our operating partnership to meet any of our obligations, including tax liability on taxable income allocated to us from our operating partnership (which might make distributions to the company not equal to the tax on such allocated taxable income).

In addition, because we are a holding company, stockholders’ claims will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of our operating partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, claims of our stockholders will be satisfied only after all of our and our operating partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.

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After giving effect to this offering, we will own approximately 94.7% of the OP units in our operating partnership assuming the sale of the minimum number of shares offered or approximately 96.7% of the OP units in our operating partnership assuming the sale of the maximum number of shares offered. However, our operating partnership may issue additional OP units in the future. Such issuances could reduce our ownership percentage in our operating partnership. Because our common stockholders will not directly own any OP units, they will not have any voting rights with respect to any such issuances or other partnership level activities of our operating partnership.

Our board of directors may create and issue a class or series of common or preferred stock without stockholder approval.

Our board of directors is empowered under our charter to amend our charter from time to time to increase or decrease the aggregate number of shares of our stock or the number of shares of stock of any class or series that we have authority to issue, to designate and issue from time to time one or more classes or series of stock and to classify or reclassify any unissued shares of our common stock or preferred stock without stockholder approval. Our board of directors may determine the relative preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of any class or series of stock issued. As a result, we may issue series or classes of stock with voting rights, rights to distributions or other rights, senior to the rights of holders of our common stock. The issuance of any such stock could also have the effect of delaying or preventing a change of control transaction that might otherwise be in the best interests of our stockholders.

Certain provisions in the partnership agreement of our operating partnership may delay or prevent unsolicited acquisitions of us.

Provisions in the partnership agreement of our operating partnership may delay or make more difficult unsolicited acquisitions of us or changes in our control. These provisions could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although some stockholders might consider such proposals, if made, desirable. These provisions include, among others:

Our charter and bylaws and the partnership agreement of our operating partnership also contain other provisions that may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders. See “Material Provisions of Maryland Law and of Our Charter and Bylaws — Removal of Directors,” “— Advance Notice of Director Nominations and New Business” and “Description of the Partnership Agreement of ARC Properties Operating Partnership, L.P.”

Certain rights which are reserved to our stockholders may allow third parties to enter into business combinations with us that are not in the best interest of the stockholders, without negotiating with our board of directors.

Certain provisions of the Maryland General Corporation Law, or the MGCL, may have the effect of requiring a third party seeking to acquire us to negotiate with our board of directors, including:

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As permitted by the MGCL, our board of directors has by resolution exempted business combinations (1) between us and any person, provided that such business combination is first approved by our board of directors (including a majority of directors who are not affiliates or associates of such person) and (2) between us and our sponsor, our Manager, our operating partnership or any of their respective affiliates. Consequently, the five-year prohibition and the supermajority vote requirements will not apply to such business combinations. As a result, any person described above may be able to enter into business combinations with us that may not be in the best interest of our stockholders without compliance by us with the supermajority vote requirements and other provisions of the statute. This resolution, however, may be altered or repealed in whole or in part at any time by our board of directors. If this resolution is repealed, or our board of directors does not otherwise approve a business combination with a person other than our sponsor, our Manager, our operating partnership or any of their respective affiliates, the statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.

Pursuant to a provision in our bylaws, we have opted out of the control share provisions of the MGCL. However, we may, by amendment to our bylaws, opt in to the control shares provisions of the MGCL in the future.

Additionally, Title 3, Subtitle 8 of the MGCL permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain takeover defenses, such as a classified board, some of which we do not yet have. These provisions may have the effect of inhibiting a third-party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium over the then current market price. See “Material Provisions of Maryland Law and of Our Charter and Bylaws — Business Combinations, “— Control Share Acquisitions,” and “Policies with Respect to Certain Activities — Other Policies.”

Our fiduciary duties as sole general partner of our operating partnership could create conflicts of interest.

Upon the completion of this offering and the formation transactions, we, as the sole general partner of our operating partnership, will have fiduciary duties to our operating partnership and the limited partners in the operating partnership, the discharge of which may conflict with the interests of our stockholders. The limited partnership agreement of our operating partnership provides that, in the event of a conflict between the duties owed by our directors to our company and the duties that we owe, in our capacity as the sole general partner of our operating partnership, to such limited partners, our directors are under no obligation to give priority to the interests of such limited partners. In addition, those persons holding OP units will have the right to vote on certain amendments to the limited partnership agreement (which require approval by a majority in interest of the limited partners, including us) and individually to approve certain amendments that would adversely affect their rights, as well as the right to vote on mergers and consolidations of us in our capacity as sole general partner of the operating partnership in certain limited circumstances. These voting rights may be exercised in a manner that conflicts with the interests of our stockholders. For example, we cannot adversely affect the limited partners’ rights to receive distributions, as set forth in the limited partnership agreement, without their consent, even though modifying such rights might be in the best interest of our stockholders generally.

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We have never operated as a REIT or as a public company and we cannot assure you that we will successfully and profitably operate our business in compliance with the regulatory requirements applicable to REITs and to public companies.

We have not previously operated as a publicly-traded REIT. In addition, certain members of our board of directors and certain of our executive officers have no experience in operating a publicly-traded REIT that is traded on a securities exchange. We cannot assure you that we will be able to successfully operate our company as a REIT or a publicly-traded company, including satisfying the requirements to timely meet disclosure requirements and complying with the Sarbanes-Oxley Act, including implementing effective internal controls. Failure to maintain our qualification as a REIT or comply with other regulatory requirements would have an adverse effect on our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make distributions to our stockholders.

Our board of directors may change significant corporate policies without stockholder approval.

Our investment, financing, borrowing and dividend policies and our policies with respect to other activities, including growth, debt, capitalization and operations, will be determined by our board of directors. These policies may be amended or revised at any time and from time to time at the discretion of the board of directors without a vote of our stockholders. See “Policies with Respect to Certain Activities.” In addition, the board of directors may change our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal requirements. A change in these policies could have an adverse effect on our business, financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to make distributions to our stockholders.

We are highly dependent on information systems of ARC and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay dividends.

Our business is highly dependent on communications and information systems of ARC. Any failure or interruption of ARC’s systems could cause delays or other problems in our securities trading activities, which could have a material adverse effect on our operating results and negatively affect the market price of our common stock and our ability to pay dividends to our stockholders.

U.S. Federal Income Tax Risks

Our failure to qualify or remain qualified as a REIT would subject us to U.S. federal income tax and potentially state and local tax, and would adversely affect our operations and the market price of our common stock.

We intend to elect and qualify to be taxed as a REIT commencing with our taxable year ending December 31, 2011. However, we may terminate our REIT qualification, if our board of directors determines that not qualifying as a REIT is in the best interests of our stockholders, or inadvertently. Our qualification as a REIT depends upon our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. We currently intend to structure our activities in a manner designed to satisfy all of the requirements for qualification as a REIT. However, the REIT qualification requirements are extremely complex and interpretation of the U.S. federal income tax laws governing qualification as a REIT is limited. Accordingly, we cannot be certain that we will be successful in operating so we can qualify or remain qualified as a REIT. Our ability to satisfy the asset tests depends on our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the REIT income or quarterly asset requirements also depends on our ability to successfully manage the composition of our income and assets on an ongoing basis. Accordingly, if certain of our operations were to be recharacterized by the Internal Revenue Service, or IRS, such recharacterization could jeopardize our ability to satisfy all of the requirements for qualification as a REIT. Furthermore, future legislative, judicial or administrative change to the U.S. federal income tax laws could be applied retroactively, which could result in our disqualification as a REIT.

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If we fail to qualify as a REIT for any taxable year, and we do not qualify for certain statutory relief provisions, 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 qualification. Losing our REIT qualification would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends paid deduction, and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.

Even if we qualify as a REIT, in certain circumstances, we may incur tax liabilities that would reduce our cash available for distribution to you.

Even if we qualify as a REIT, we may be subject to U.S. federal, state and local income taxes. For example, net income from the sale of properties that are “dealer” properties sold by a REIT (a “prohibited transaction” under the Code) will be subject to a 100% tax. We may not make sufficient distributions to avoid excise taxes applicable to REITs. We also may decide to retain net capital gain we earn from the sale or other disposition of our property and pay U.S. federal 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 unless they file U.S. federal income tax returns and thereon seek a refund of such tax. We also may be subject to state and local taxes on our income or property, including franchise, payroll and transfer taxes, either directly or at the level of our operating partnership or at the level of the other companies through which we indirectly own our assets, such as TRSs, which are subject to full U.S. federal, state, local and foreign corporate-level income taxes. Any taxes we pay directly or indirectly will reduce our cash available for distribution to you.

To qualify 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 your overall return.

In order to qualify 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 distributions 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. These requirements could cause us to distribute amounts that otherwise would be spent on investments in 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 distributions. 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 while we qualify as a REIT, it is possible that we might not always be able to do so.

Certain of our business activities are potentially subject to the prohibited transaction tax, which could reduce the return on your investment.

For so long as we qualify as a REIT, our ability to dispose of property during the first few years following acquisition may be restricted to a substantial extent as a result of our REIT qualification. Under applicable provisions of the Code regarding prohibited transactions by REITs, while we qualify as a REIT, we will be subject to a 100% penalty tax on any gain recognized on the sale or other disposition of any property (other than foreclosure property) that we own, directly or through any subsidiary entity, including our operating partnership, but generally excluding our TRSs, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of trade or business. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. While we qualify as a REIT, we intend to avoid the 100% prohibited transaction tax by (a) conducting activities that may otherwise be considered prohibited

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transactions through a TRS (but such TRS will incur income taxes), (b) conducting our operations in such a manner so that no sale or other disposition of an asset we own, directly or through any subsidiary, will be treated as a prohibited transaction or (c) structuring certain dispositions of our properties to comply with a prohibited transaction safe harbor available under the Code for properties held for at least two years. However, despite our present intention, no assurance can be given that any particular property we own, directly or through any subsidiary entity, including our operating partnership, but generally excluding our TRSs, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business. Our two TRS Properties will be held in a TRS because we are contemplating various strategies including selling them as a means of maximizing our value from those properties.

Our TRSs are subject to corporate-level taxes and our dealings with our TRSs may be subject to 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 corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs.

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. We may use TRSs generally to hold properties for sale in the ordinary course of business or to hold assets or conduct activities that we cannot conduct directly as a REIT. Our TRSs will be subject to applicable U.S. federal, state, local and foreign income tax on its taxable income. In addition, the rules, which are applicable to us, 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.

If our operating partnership failed to qualify as a partnership or is not otherwise disregarded for U.S. federal income tax purposes, we would cease to qualify as a REIT.

We intend to maintain the status of our operating partnership as a partnership or a disregarded entity for U.S. federal income tax purposes. However, if the IRS were to successfully challenge the status of our operating partnership as a partnership or disregarded entity for such purposes, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that our operating partnership could make to us. This also would also result in our failing to qualify as a REIT, and becoming subject to a corporate level tax on our income. This substantially would reduce our cash available to pay distributions and the yield on your investment. In addition, if any of the partnerships or limited liability companies through which our operating partnership owns its properties, in whole or in part, loses its characterization as a partnership and is otherwise not disregarded for U.S. federal income tax purposes, it would be subject to taxation as a corporation, thereby reducing distributions to the operating partnership. Such a recharacterization of an underlying property owner could also threaten our ability to maintain our REIT qualification.

We may choose to make distributions in our own stock, in which case you may be required to pay U.S. federal income taxes in excess of the cash dividends you receive.

In connection with our qualification as a REIT, we are required 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. In order to satisfy this requirement, we may distribute taxable dividends that are payable in cash and shares of our common stock at the election of each stockholder. Under IRS Revenue Procedure 2010-12, up to 90% of any such taxable dividend with respect to the taxable years 2010 and 2011 could be payable in our common stock. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current or accumulated earnings and profits for U.S. federal income tax purposes. As a result, U.S. stockholders may be required to pay U.S. federal income taxes with respect to such dividends in excess of the cash dividends received. Accordingly, U.S. stockholders receiving a distribution of our shares may be required to sell shares received in such distribution or may be required to sell other stock or assets owned by them, at a time that may be disadvantageous, in order to satisfy any tax imposed on such distribution. If a U.S. stockholder sells the stock that it receives as a dividend in order to

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pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock, by withholding or disposing of part of the shares in such distribution and using the proceeds of such disposition to satisfy the withholding tax imposed. In addition, if a significant number of our stockholders determine to sell shares of our common stock in order to pay taxes owed on dividends, such sale may put downward pressure on the trading price of our common stock.

Further, while Revenue Procedure 2010-12 applies only to taxable dividends payable by us in a combination of cash and stock with respect to the taxable years 2010 and 2011, and it is unclear whether and to what extent we will be able to pay taxable dividends in cash and stock in later years. Moreover, various tax aspects of such a taxable cash/stock dividend are uncertain and have not yet been addressed by the IRS. No assurance can be given that the IRS will not impose additional requirements in the future with respect to taxable cash/stock dividends, including on a retroactive basis, or assert that the requirements for such taxable cash/stock dividends have not been met.

The taxation of distributions to our stockholders can be complex; however, distributions that we make to our stockholders generally will be taxable as ordinary income.

Distributions that we make to our taxable stockholders out of current and accumulated earnings and profits (and not designated as capital gain dividends, or, for tax years beginning before January 1, 2013, qualified dividend income) generally will be taxable as ordinary income. However, a portion of our distributions may (1) be designated by us as capital gain dividends generally taxable as long-term capital gain to the extent that they are attributable to net capital gain recognized by us, (2) be designated by us, for taxable years beginning before January 1, 2013, as qualified dividend income generally to the extent they are attributable to dividends we receive from our TRSs, or (3) constitute a return of capital generally to the extent that they exceed our accumulated earnings and profits as determined for U.S. federal income tax purposes. A return of capital is not taxable, but has the effect of reducing the basis of a stockholder’s investment in our common stock.

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

The maximum tax rate applicable to qualified dividend income payable to U.S. stockholders that are individuals, trusts and estates has been reduced to 15% for tax years beginning before January 1, 2013. Dividends payable by REITs, however, generally are not eligible for the reduced rates. Although this legislation does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock.

If we were considered to actually or constructively pay a “preferential dividend” to certain of our stockholders, our status as a REIT could be adversely affected.

In order to qualify 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 net capital gain. In order for distributions to be counted as satisfying the annual distribution requirements for REITs, and to provide us with a REIT-level tax deduction, the distributions must not be “preferential dividends.” A dividend is not a preferential dividend if the distribution is pro rata among all outstanding shares of stock within a particular class, and in accordance with the preferences among different classes of stock as set forth in our organizational documents. Currently, there is uncertainty as to the IRS’s position regarding whether certain arrangements that REITs have with their stockholders could give rise to the inadvertent payment of a preferential dividend (e.g., the pricing methodology for stock purchased under a distribution reinvestment plan inadvertently causing a greater than 5% discount on the price of such stock purchased). There is no de minimis exception with respect to preferential dividends; therefore, if the IRS were to take the position that we inadvertently paid a preferential

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dividend, we may be deemed to have failed the 90% distribution test, and our status as a REIT could be terminated for the year in which such determination is made if we were unable to cure such failure. While we believe that our operations have been structured in such a manner that we will not be treated as inadvertently paying preferential dividends, we can provide no assurance to this effect.

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 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, 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 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.

Complying with REIT requirements may force us to forgo and/or liquidate otherwise attractive investment opportunities.

To qualify 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 and qualified real estate assets) 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 and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total securities can be represented by securities of one or more TRSs. 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 ability of our board of directors to revoke our REIT qualification without stockholder approval may subject us to U.S. federal income tax and reduce distributions to our stockholders.

Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. While we intend to elect and qualify to be taxed as a REIT, we may not elect to be treated as a REIT or may terminate our REIT election if we determine that qualifying as a REIT is no longer in the best interests of our stockholders. If we cease to be a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders and on the market price of our common stock.

We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility and reduce the market price of our common stock.

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 you that any such changes will not adversely affect the taxation of a stockholder. Any such changes could have an

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adverse effect on an investment in our shares or on the market value or the resale potential of our assets. You are urged to consult with your tax advisor with respect to the impact of recent legislation on your investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares. You also should note that our counsel’s tax opinion is based upon existing law, applicable as of the date of its opinion, all of which will be subject to change, either prospectively or retroactively.

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 invests in real estate to elect to be treated for U.S. federal income tax purposes as a corporation. As a result, our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders. Our board of directors 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.

The share ownership restrictions of the Code for REITs and the 9.8% share ownership limit in our charter may inhibit market activity in our shares of stock and restrict our business combination opportunities.

In order to qualify as a REIT for each taxable year ending on or after December 31, 2011, five or fewer individuals, as defined in the 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 a taxable year. Attribution rules in the 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 after December 31, 2011. To help insure 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 while we so qualify. Unless exempted by our board of directors, for so long as we 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 Code) more than 9.8% in value of the aggregate of our outstanding shares of stock and not 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. Our board of directors may not grant an exemption from these restrictions to any proposed transferee whose ownership 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 of directors determines that it is no longer in our best interest to continue to 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 the stockholders.

Non-U.S. stockholders will be subject to U.S. federal withholding tax and may be subject to U.S. federal income tax on distributions received from us and upon the disposition of our shares.

Subject to certain exceptions, distributions received from us will be treated as dividends of ordinary income to the extent of our current or accumulated earnings and profits. Such dividends ordinarily will be subject to U.S. withholding tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty, unless the distributions are treated as “effectively connected” with the conduct by the non-U.S. stockholder of a U.S. trade or business. Capital gain distributions attributable to sales or exchanges of U.S. real property generally will be taxed to a non-U.S. stockholder as if such gain were effectively connected with a U.S. trade or business. However, a capital gain dividend will not be treated as effectively connected income if (a) the distribution is received with respect to a class of stock that is regularly traded on an established securities market located in the United States; and (b) the non-U.S. stockholder does not own more than 5% of the class of our stock at any time during the one year period ending on the date the distribution is received. We anticipate that our shares will be “regularly traded” on an established securities market for the foreseeable future, although, no assurance can be given that this will be the case. See “Material U.S. Federal Income Tax Considerations — Taxation of Non-U.S. Stockholders.”

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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” within the meaning of the Foreign Investment in Real Property Tax Act of 1980, or FIRPTA. Our common stock will not constitute a “U.S. real property interest” 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, but cannot assure you, that we will be a domestically-controlled qualified investment entity, and because our common stock will be publicly traded, no assurance can be given that we 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 U.S. real property interest 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 and constructively, 5% or less of our common stock at any time during the five-year period ending on the date of the sale. See “Material U.S. Federal Income Tax Considerations — Taxation of Non-U.S. Stockholders — Sale of Shares.” We encourage you to consult your tax advisor to determine the tax consequences applicable to you if you are a non-U.S. stockholder. See “Material U.S. Federal Income Tax Considerations — Taxation of Non-U.S. Stockholders.”

Potential characterization of distributions or gain on sale may be treated as unrelated business taxable income to tax-exempt investors.

If (a) we are a “pension-held REIT,” (b) a tax-exempt stockholder has incurred debt to purchase or hold our common stock, or (c) a holder of common stock is a certain type of tax-exempt stockholder, dividends on, and gains recognized on the sale of, common stock by such tax-exempt stockholder may be subject to U.S. federal income tax as unrelated business taxable income under the Code.

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USE OF PROCEEDS

We are offering shares of our common stock at the initial public offering price of $12.50 per share. We estimate that we will receive net proceeds from this offering of approximately $60.9 million assuming the sale of the minimum number of shares of common stock offered in this offering or approximately $99.7 million assuming the sale of the maximum number of shares of common stock offered in this offering, after deducting selling commissions and dealer manager fees, and estimated expenses of the offering. We will contribute the net proceeds of this offering to our operating partnership in exchange for OP units.

The following table sets forth the estimated sources and the estimated uses of funds that we expect in connection with this offering. Some of the uses indicated in the following table could be funded from other sources, such as additional cash on hand.

		Minimum Offering Amount				Maximum Offering Amount
Gross offering proceeds		$	67,500,000			$	110,000,000
Uses:
Fees and expenses (1)			1,225,000				1,550,000
Selling commissions and dealer manager fees			5,400,000				8,800,000
Repay existing indebtedness (2) (3)			58,248,195				58,248,195
Property transfer, debt origination and transfer expenses (4)			1,250,000				1,250,000
Distribution reserve (5)			—				1,833,360
General working capital purposes			1,376,805				38,318,445	(6)
Total Uses		$	67,500,000			$	110,000,000

(1)

Includes repayment of start-up costs of $74,271 (as of March 31, 2011), consisting of $12,771 for SEC registration fees, $11,500 for FINRA registration fees and $50,000 for NASDAQ registration fees, previously paid by our sponsor.

(2)

As part of our formation transactions, we anticipate refinancing the mortgage indebtedness encumbering our 60 continuing properties leased to Citizen’s Bank and our two TRS properties in the principal amount, as of March 31, 2011, of approximately $82.6 million, with an interest rate of 6.3% per annum, and which matures in August 2011. In connection with this refinancing, we anticipate utilizing approximately $27.6 million of net proceeds from this offering to repay this mortgage indebtedness with the balance coming from a $55.0 million draw against our anticipated $63.0 million senior secured revolving acquisition facility.

(3)

In connection with our formation transactions, we will repay the outstanding indebtedness on (i) unsecured debt owed by 28 of our property subsidiaries in the principal amount of approximately $19.4 million that has a weighted average interest rate of 9.94% and matures on July 11, 2011 (subject to two one-year extension options) and (ii) unsecured debt owed by one of our property subsidiaries in the principal amount of approximately $11.2 million (together with prepayment penalties related thereto in the amount of approximately $112,000) that has an interest rate of 8.50% and matures on September 8, 2013.

(4)

Includes approximately $630,000 debt origination costs and related fees associated with the anticipated senior secured revolving acquisition facility, $112,000 of prepayment costs related to outstanding unsecured debt, $295,000 in property transfer taxes relating to the transfer of interests in our portfolio of properties to us and $150,000 debt transfer fees associated with the transfer of our Home Depot property to us subject to its existing mortgage financing of approximately $13.85 million.

(5)

Represents a reserve for the payment of distributions in respect of OP units during the one year period following the closing of this offering at an annual rate of 7% to the extent our cash flows provided by our operations are insufficient to fund these distributions. As described in the section of this prospectus entitled “Distribution Policy”, we estimate, on a pro forma basis, that our estimated cash available for the 12 months ended March 31, 2011 would be $6,137,890 and the aggregate distributions for that same period would equal $7,971,250, leaving a shortfall of $1,833,360.

(6)

We expect a significant portion of this amount to be available to fund the acquisition of new properties.

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Pending the use of the net proceeds, we intend to invest the net proceeds in interest-bearing, short-term investment-grade securities, money-market accounts or other investments which are consistent with our intention to elect and qualify to be taxed as a REIT.

We do not intend to use any of the net proceeds from the offering to fund distributions to our stockholders, but to the extent we use the net proceeds to fund distributions, these payments will be treated as a return of capital to our stockholders for U.S. federal income tax purposes.

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CAPITALIZATION

The following table presents capitalization information as of March 31, 2011 on (1) a historical basis for the ARC Predecessor Companies, (2) a pro forma as adjusted basis for our company taking into account the formation transactions, and (3) a pro forma as adjusted basis for our company taking into account both the formation transactions and the offering. The pro forma adjustments give effect to the formation transactions and the offering as if they had occurred on March 31, 2011 and the application of the net proceeds as described in “Use of Proceeds.”

You should read this table in conjunction with “Use of Proceeds,” “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the more detailed information contained in the ARC Predecessor Companies’ combined financial statements and notes thereto included elsewhere in this prospectus.

		Historical ARC Predecessor Companies				Pro Forma American Realty Capital Properties, Inc. (Formation Transactions)				Pro Forma American Realty Capital Properties, Inc. (Minimum Offering)				Pro Forma American Realty Capital Properties, Inc. (Maximum Offering)
		As of March 31, 2011
		(unaudited) (dollars in thousands)
Mortgages and notes payable		$	127,098			$	127,098			$	68,850			$	68,850
Stockholders’/members’ (deficit) equity:
Members’ (deficit)			(14,121	)			—				—				—
Common stock, $0.01 par value per share, 249,990,000 shares authorized, 1,000 shares issued and outstanding, actual, 5,400,000 shares issued and outstanding on a pro forma basis assuming the minimum offering is completed and 8,800,000 shares issued and outstanding on a pro forma basis assuming the maximum offering is completed (1)			—				—				54				88
Additional paid-in capital			—				(17,996	)			40,936				79,677
Total American Realty Capital Properties, Inc. equity							(17,996	)			40,990				79,765
Noncontrolling interests			—				3,875				3,875				3,875
Total equity			(14,121	)			(14,121	)			44,865				83,640
Total capitalization		$	112,977			$	112,977			$	113,715			$	152,490

(1)

Does not include (i) a number of shares of Manager’s Stock equal to 3.0% of the number of shares of common stock sold in this offering, or 162,000 shares of Manager’s Stock if the minimum offering is completed, or 264,000 shares of Manager’s Stock if the maximum offering is completed, that will be granted to our Manager concurrently with the completion of this offering, (ii) 310,000 shares of common stock that may be issued, at our option, upon the redemption of OP units to be issued in the formation transactions and (iii) 9,000 unvested shares of common stock to be issued to our independent directors concurrently with the completion of this offering. Also excludes 1,000 shares of common stock that we sold to our sponsor at $0.01 per share in connection with the formation transactions because we will repurchase those shares at their issue price shortly before the completion of this offering.

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DILUTION

Purchasers of our common stock offered by this prospectus will experience dilution to the extent of the difference between the initial public offering price per share and the tangible net book value per share. On a pro forma basis at March 31, 2011, after giving effect to the formation transactions (including the grant of common stock to our Manager and our three independent directors and the issuance of OP units to the contributor in exchange for interests in our properties), the receipt by us of the net proceeds from the offering, the deduction of the selling commissions and dealer manager fees, and estimated offering expenses payable by us, our pro forma tangible net book value at March 31, 2011 would have been $39.3 million or $6.90 per share of common stock assuming the sale of the minimum number of shares of common stock being offered or $78.1 million or $8.58 per share of common stock assuming the sale of the maximum number of shares of common stock being offered. This would represent an increase in pro forma tangible net book value attributable to the sale of shares of common stock to new investors of (i) $59.6 million or $10.44 per share and an immediate dilution in pro forma tangible net book value of $5.60 per share from the initial public offering price of $12.50 per share assuming the sale of the minimum number of shares of common stock or $98.4 million or (ii) $10.80 per share and an immediate dilution in pro forma tangible net book value of $3.92 per share from the initial public offering price of $12.50 per share assuming the sale of the maximum number of shares of common stock. The following table ⁽¹⁾ illustrates this per share dilution:

		Minimum Offering				Maximum Offering
Initial public offering price per share		$	12.50			$	12.50
Tangible net book value per share as of March 31, 2011, before the formation transactions and the offering (2)			(3.54	)			(2.22	)
Increase in pro forma tangible net book value per share attributable to the formation transactions but before the offering (3)			—				—
Increase in pro forma tangible net book value per share attributable to the offering (4)			10.44				10.80
Net increase in pro forma net book value per share attributable to the formation transactions and the offering			10.44				10.80
Pro forma tangible net book value per share after the offering and the formation transactions			6.90	(5)			8.58	(6)
Dilution in pro forma tangible net book value per share to new investors (7)		$	5.60			$	3.92

(1)

Excludes (a) an aggregate of 9,000 shares of our common stock to be granted to our three independent directors concurrently with the completion of this offering, which will vest ratably in annual installments over a five-year period beginning on the first anniversary of the date we complete this offering, subject to the director’s continued service on our board of directors, and (b) 162,000 shares of Manager’s Stock (based on the sale of a minimum of 5,400,000 shares of common stock), or 264,000 shares of Manager’s Stock (based on the sale of a maximum of 8,800,000 shares of common stock), as applicable, to be granted to our Manager concurrently with the completion of this offering, which will vest ratably in quarterly installments over a three-year period beginning on the first day of the calendar quarter after we complete this offering. Assuming all the restricted shares granted to our three independent directors had vested on March 31, 2011, new investors would have experienced additional dilution of $0.01 per share attributable to such restricted shares. Assuming all the restricted shares granted to our Manager had vested on March 31, 2011, new investors would have experienced additional dilution of (i) $0.19 per share attributable to such restricted shares assuming 162,000 shares are issued to our Manager and (ii) $0.24 per share attributable to such restricted shares assuming 264,000 shares are issued to our Manager. Assuming all the restricted shares granted to our three independent directors and our Manager vested on March 31, 2011, new investors would have experienced additional dilution of (i) $0.20 per share attributable to such restricted shares assuming 162,000 shares are issued to our Manager and (ii) $0.25 per share attributable to such restricted shares assuming 264,000 shares are issued to our Manager.

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($ in millions)
Land			$17.3
Buildings, fixtures and improvements			97.3
Less: accumulated depreciation and amortization			(8.7)
Cash and cash equivalents			0.6
Prepaid expenses and other assets			0.9
Mortgage notes payable			(96.5)
Long-term notes payable			(30.6)
Accounts payable and accrued expenses			(0.6)
Net book value of tangible assets			$(20.3)

($ in millions)
Land			$17.3
Buildings, fixtures and improvements			97.3
Less: accumulated depreciation and amortization			(8.7)
Cash and cash equivalents			2.0
Prepaid expenses and other assets			0.9
Mortgage notes payable			(68.9)
Accounts payable and accrued expenses			(0.6)
Net book value of tangible assets			$39.3

($ in millions)
Land			$17.3
Buildings, fixtures and improvements			97.3
Less: accumulated depreciation and amortization			(8.7)
Cash and cash equivalents			40.8
Prepaid expenses and other assets			0.9
Mortgage notes payable			(68.9)
Accounts payable and accrued expenses			(0.6)
Net book value of tangible assets			$78.1

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DISTRIBUTION POLICY

We intend to pay regular monthly dividends to holders of our common stock and make regular monthly distributions to holders of OP units in our operating partnership. We intend to pay a pro rata initial dividend in respect of the period from the closing of this offering through the end of the then-current fiscal month based on $0.0729 per share for a full month. On an annualized basis, this would be $0.875 per share, or an annual dividend rate of approximately 7.0%. We intend to maintain our initial dividend rate for the 12-month period following completion of this offering unless our actual results of operations, economic conditions or other factors differ materially from the assumptions used in our estimate. Distributions made by us will be authorized by our board of directors in its sole discretion out of funds legally available therefor and will be dependent upon a number of factors, including restrictions under applicable law, the capital requirements of our company and meeting the distribution requirements necessary to maintain our qualification as a REIT. Actual distributions may be significantly different from the expected distributions.

The following table describes our pro forma net loss before noncontrolling interests for the 12-month period ended March 31, 2011, and the adjustments we have made thereto in order to estimate our initial cash available for distribution to the holders of our common stock and OP units for the 12-month period ended March 31, 2011. The table reflects our consolidated information, including the OP units. Each OP unit may be exchanged for cash or, at our option, one share of our common stock, beginning 12 months after the completion of this offering.

		Minimum Offering				Maximum Offering
Pro forma net loss before noncontrolling interests for the 12 months ended December 31, 2010		$	207,222			$	207,222
Add Income before noncontrolling interests for the three months ended March 31, 2011			173,995				173,995
Less Income before noncontrolling interests for the three months ended March 31, 2010			(163,425	)			(163,425	)
Pro forma net loss before noncontrolling interests for the 12 months ended March 31, 2011			217,792				217,792
Add Pro forma real estate depreciation and amortization			4,178,895				4,178,895
Add Amortization of in place leases			1,206,491				1,206,491
Add Amortization of deferred financing costs			274,176				274,176
Less Net effect of straight-line rents			(696,350	)			(696,350	)
Add Asset management fees subordinated to distributions (1)			—				611,062
Add General and administrative expenses reimbursed by our sponsor (2)			—				345,824
Pro forma cash flows provided by operations for the 12 months ended March 31, 2011			5,181,004				6,137,890
Estimated cash flows used in investing activities for the 12 months ended March 31, 2011			—				—
Estimated cash flows used in financing activities for the 12 months ended March 31, 2011			—				—
Estimated cash available for distribution for the 12 months ended March 31, 2011			5,181,004				6,137,890
Estimated annual distribution to unvested restricted stockholders for the 12 months ended March 31, 2011			—				—
Estimated annual distribution to noncontrolling interests for the 12 months ended March 31, 2011			271,250				271,250
Estimated annual distribution to common stockholders for the 12 months ended March 31, 2011			4,725,000				7,700,000
Estimated annual distribution for the 12 months ended March 31, 2011			4,996,250				7,971,250	(3)
Estimated distribution per unvested restricted share for the 12 months ended March 31, 2011		$	—			$	—
Estimated distribution per OP unit for the 12 months ended March 31, 2011		$	0.875			$	0.875
Estimated distribution per common share for the 12 months ended March 31, 2011		$	0.875			$	0.875
Payout ratio based on estimated cash available for distribution to our holders of common stock / OP units			96.4	%			129.9	%

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It is possible that our distributions may exceed our current and accumulated earnings and profits as determined for U.S. federal income tax purposes. Therefore, a portion of our distributions may represent a return of capital for U.S. federal income tax purposes. See “Material U.S. Federal Income Tax Considerations — Taxation of Stockholders” for more information.

United States federal income tax law generally requires that a REIT distribute annually to its 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, and that it in general pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income, including net capital gain. For more information, see “Material U.S. Federal Income Tax Considerations-Annual Distribution Requirements.” Although we anticipate that our estimated cash available for distribution will exceed the annual distribution requirements applicable to REITs, under some circumstances we may be required to borrow funds, utilize net proceeds of this offering, liquidate otherwise attractive investments or make taxable distributions of our stock or other property in order to meet these distribution requirements.

Distributions that you receive (not designated as capital gain dividends, or, for the taxable year beginning before January 1, 2013, qualified dividend income) will be taxed as ordinary income to the extent they are paid from our earnings and profits (as determined for U.S. federal income tax purposes). However, distributions that we designate as capital gain dividends generally will be taxable as long-term capital gain to our stockholders to the extent that they do not exceed our actual net capital gain for the taxable year. Some portion of your distributions may not be subject to tax in the year in which they are received because depreciation expense reduces the amount of taxable income, but does not reduce cash available for distribution. The portion of your distribution which is not designated as a capital gain dividend and is in excess of our current and accumulated earnings and profits is considered a return of capital for U.S. federal income tax purposes and will reduce the adjusted tax basis of your investment, but not below zero, deferring such portion of your tax until your investment is sold or our company is liquidated, at which time you will be taxed at capital gains rates. To the extent such portion of your distribution exceeds the adjusted tax basis of your investment, such excess will be treated as capital gain if you hold your shares of common stock as a

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capital asset for U.S. federal income tax purposes. Please note that each stockholder’s tax considerations are different, therefore, you should consult with your own tax advisor and financial planners prior to making an investment in our shares. You also should review the section entitled “Material U.S. Federal Income Tax Considerations.”

We cannot assure you that our estimated distributions will be made or sustained. See “Special Note Regarding Forward-Looking Statements.” Any distributions we pay in the future will depend upon our actual results of operations, economic conditions and other factors that could differ materially from our current expectations. Our actual results of operations will be affected by a number of factors, including the revenue we receive from our properties, our operating expenses, interest expense, our occupancy levels, the ability of our tenants to meet their obligations and unanticipated expenditures. For more information regarding risk factors that could materially adversely affect our actual results of operations, see “Risk Factors.” If our properties do not generate sufficient cash flow to allow cash to be distributed by us, we may be required to fund distributions from working capital, borrowings, the net proceeds of this offering or reduce such distributions. See “Risk Factors — Risks Related to this Offering — We may be unable to pay or maintain distributions, especially if we raise substantially more than the minimum offering, from cash available from operations or increase distributions over time.”

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		American Realty Capital Properties, Inc. Pro forma (1)																Historical American Realty Capital Properties, Inc. and ARC Predecessor Companies (2)
		Minimum Offering								Maximum Offering
		Three Months Ended March 31,				Year Ended December 31,				Three Months Ended March 31,				Year Ended December 31,				Three Months Ended March 31,				Year Ended December 31,				Period Ending December 31,
		2011				2010				2011				2010				2011				2010				2009				2008
Revenues:
Rental income		$	2,275,551			$	9,102,203			$	2,275,551			$	9,102,203			$	2,258,646			$	9,145,054			$	5,682,845			$	1,337,375
Operating expense reimbursement			—				—				—				—				—				—				5,130				—
Total revenues			2,275,551				9,102,203				2,275,551				9,102,203				2,258,646				9,145,054				5,687,975				1,337,375
Operating expenses:
Management fee			152,766				611,062				152,766				611,062				—				—				—				—
Acquisition and transaction related			—				—				—				—				—				10,000				3,705,364				—
Property, general and administrative			71,693				345,824				71,693				345,824				87,218				345,825				77,321				4,875
Depreciation and amortization			1,346,347				5,385,386				1,346,347				5,385,386				1,357,432				5,386,387				3,731,317				909,140
Total operating expenses			1,570,806				6,342,272				1,570,806				6,342,272				1,444,650				5,742,212				7,514,002				914,015
Operating income (loss) income			704,745				2,759,931				704,745				2,759,931				813,996				3,402,842				(1,826,027	)			423,360
Other income (expense):
Interest expense			(530,750	)			(2,552,709	)			(530,750	)			(2,552,709	)			(2,607,825	)			(10,804,845	)			(6,962,547	)			(1,608,503	)
Interest income			—				—				—				—				—				—				17,074				3,254
Other Income			—				—				—				—				—				100,000				—				—
Total other income (expense)			(530,750	)			(2,552,709	)			(530,750	)			(2,552,709	)			(2,607,825	)			(10,704,845	)			(6,945,473	)			(1,605,249	)
Net income/(loss) before noncontrolling interest adjustment			173,995				207,222				173,995				207,222				(1,793,829	)			(7,302,003	)			(8,771,500	)			(1,181,889	)
Net income attributable to noncontrolling interest holders			(9,989	)			(11,896	)			(6,288	)			(7,488	)			—				—				—				—
Net income/(loss) attributable to American Realty Capital Properties, Inc.		$	164,006			$	195,326			$	167,707			$	199,734			$	(1,793,829	)		$	(7,302,003	)		$	(8,771,500	)		$	(1,181,889	)
Per Share Data:
Weighted average shares outstanding			5,400,000				5,400,000				8,800,000				8,800,000				—				—				—				—
Earnings per share basic and fully diluted		$	0.03			$	0.04			$	0.02			$	0.02				—				—				—				—

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		American Realty Capital Properties, Inc. Pro forma (1)																Historical American Realty Capital Properties, Inc. and ARC Predecessor Companies
		Minimum Offering								Maximum Offering
		March 31,				December 31,				March 31,				December 31,				March 31,				December 31,
		2011				2010				2011				2010				2011				2010				2009				2008
Assets
Real estate investments, at cost:
Land		$	17,346,301			$	17,346,301			$	17,346,301			$	17,346,301			$	17,346,301			$	17,346,301			$	17,346,301			$	8,121,129
Buildings, fixtures and improvements			97,261,472				97,261,472				97,261,472				97,261,472				97,261,472				97,261,472				97,261,472				46,019,728
Acquired intangible lease assets			7,604,698				7,604,698				7,604,698				7,604,698				7,604,698				7,604,698				7,604,698				2,037,529
Total real estate investments, at cost			122,212,471				122,212,471				122,212,471				122,212,471				122,212,471				122,212,471				122,212,471				56,178,386
Less: accumulated depreciation and amortization			(11,354,714	)			(10,008,368	)			(11,354,714	)			(10,008,368	)			(11,354,714	)			(10,008,368	)			(4,640,457	)			(909,140	)
Total real estate investments, net			110,857,757				112,204,103				110,857,757				112,204,103				110,857,757				112,204,103				117,572,014				55,269,246
Cash and cash equivalents			1,995,323				1,991,237				40,770,323				40,766,237				618,529				614,442				922,746				315,018
Restricted cash			—				—				—				—				—				—				3,561,591				—
Prepaid expenses and other assets			910,892				687,789				910,892				687,789				910,892				687,789				245,712				84,801
Deferred offering costs			—				—				—				—				769,879				278,976				—				—
Deferred financing costs, net			1,210,441				1,627,907				1,210,441				1,627,907				1,848,594				2,266,060				3,421,831				1,537,194
Total assets		$	114,974,413			$	116,511,036			$	153,749,413			$	155,286,036			$	115,005,651			$	116,051,370			$	125,723,894			$	57,206,259
Liabilities and Equity/Deficiency
Mortgage notes payable			68,850,000			$	68,850,000				68,850,000			$	68,850,000			$	96,472,049			$	96,472,049			$	97,556,389			$	45,356,248
Long-term notes payable			—				—				—				—				30,626,146				30,626,146				30,780,311				10,680,494
Due to affiliates			—				—				—				—				—				—				845,362				321,628
Due to seller			—				—				—				—				—				—				2,068,888				—
Accounts payable and accrued expenses			585,095				746,724				585,095				746,724				1,370,501				1,025,700				1,007,952				643,037
Deferred rent and other liabilities			673,920				673,920				673,920				673,920				673,920				673,920				578,696				319,227
Total liabilities			70,109,015				70,270,644				70,109,015				70,270,644				129,142,616				128,797,815				132,837,598				57,320,634
Member’s deficiency			—				—				—				—				(14,136,965	)			(12,746,455	)			(7,113,704	)			(114,375	)
Preferred stock			—				—				—				—				—				—				—				—
Common stock			54,000				54,000				88,000				88,000				—				—				—				—
Additional paid in capital			40,936,398				42,311,392				79,677,398				81,052,392				—				—				—				—
Total American Realty Capital Properties, Inc. equity			40,990,398				42,365,392				79,765,398				81,140,392				(14,136,965	)			(12,746,455	)			(7,113,704	)			(114,375	)
Noncontrolling interests			3,875,000				3,875,000				3,875,000				3,875,000				—				—				—				—
Total liabilities and equity		$	114,974,413			$	116,511,036			$	153,749,413			$	155,286,036			$	115,005,651			$	116,051,370			$	125,723,894			$	57,206,259