VEREIT, Inc. (Form: 10-Q, Received: 11/05/2015 07:20:18)

Interest Rate Derivative

Number of

Instruments

Notional Amount

Interest rate swaps

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended September 30, 2015



	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _________ to __________

Commission file numbers: 001-35263 and 333-197780

VEREIT, Inc.

VEREIT Operating Partnership, L.P.

(Exact name of registrant as specified in its charter)



Maryland (VEREIT, Inc.)		45-2482685
Delaware (VEREIT Operating Partnership, L.P.)		45-1255683
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2325 E. Camelback Road, Suite 1100, Phoenix, AZ		85016
(Address of principal executive offices)		(Zip Code)

(800) 606-3610

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

VEREIT, Inc. Yes x No o VEREIT Operating Partnership, L.P. Yes x No o

Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

VEREIT, Inc. Yes x No o VEREIT Operating Partnership, L.P. Yes x No 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 definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



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



VEREIT Operating Partnership, L.P.	Large accelerated filer o		Accelerated filer o
	Non-accelerated filer x	(Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

VEREIT, Inc. Yes o No x VEREIT Operating Partnership, L.P. Yes o No x

As of November 3, 2015 , there were 904,960,924 shares of common stock outstanding.

VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

For the quarterly period ended September 30, 2015



	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements	-1
Consolidated Balance Sheets of VEREIT, Inc. as of September 30, 2015 and December 31, 2014 (Unaudited)	-1
Consolidated Statements of Operations of VEREIT, Inc. for the Three and Nine Months Ended September 30, 2015 and September 30, 2014 (Unaudited)	2
Consolidated Statements of Comprehensive Income (Loss) of VEREIT, Inc. for the Three and Nine Months Ended September 30, 2015 and September 30, 2014 (Unaudited)	3
Consolidated Statements of Changes in Equity of VEREIT, Inc. for the Nine Months Ended September 30, 2015 and September 30, 2014 (Unaudited)	4
Consolidated Statements of Cash Flows of VEREIT, Inc. for the Nine Months Ended September 30, 2015 and September 30, 2014 (Unaudited)	5
Consolidated Balance Sheets of VEREIT Operating Partnership, L.P. as of September 30, 2015 and December 31, 2014 (Unaudited)	6
Consolidated Statements of Operations of VEREIT Operating Partnership, L.P. for the Three and Nine Months Ended September 30, 2015 and September 30, 2014 (Unaudited)	7
Consolidated Statements of Comprehensive Income (Loss) of VEREIT Operating Partnership, L.P. for the Three and Nine Months Ended September 30, 2015 and September 30, 2014 (Unaudited)	8
Consolidated Statements of Changes in Equity of VEREIT Operating Partnership, L.P. for the Nine Months Ended September 30, 2015 and September 30, 2014 (Unaudited)	9
Consolidated Statements of Cash Flows of VEREIT Operating Partnership, L.P. for the Nine Months Ended September 30, 2015 and September 30, 2014 (Unaudited)	10
Notes to Consolidated Financial Statements as of September 30, 2015 (Unaudited)	11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	57
Item 3. Quantitative and Qualitative Disclosures About Market Risk	73
Item 4. Controls and Procedures	73
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	79
Item 1A. Risk Factors	79
Item 2. Unregistered Sales of Equity Securities	79
Item 3. Defaults Upon Securities	79
Item 4. Mine Safety Disclosures	79
Item 5. Other Information	79
Item 6. Exhibits	79
Signatures	80

Table of Contents

VEREIT, INC.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC.)

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share and per share data) (Unaudited)

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.



	September 30, 2015			December 31, 2014
ASSETS
Real estate investments, at cost:
Land	$	3,257,396		$	3,472,298
Buildings, fixtures and improvements	11,615,474			12,307,758
Land and construction in progress	37,356			77,450
Intangible lease assets	2,313,369			2,435,054
Total real estate investments, at cost	17,223,595			18,292,560
Less: accumulated depreciation and amortization	1,595,667			1,034,122
Total real estate investments, net	15,627,928			17,258,438
Investment in unconsolidated entities	57,247			98,053
Investment in direct financing leases, net	49,244			56,076
Investment securities, at fair value	54,455			58,646
Loans held for investment, net	40,002			42,106
Cash and cash equivalents	171,659			416,711
Restricted cash	47,775			62,651
Intangible assets, net	127,835			150,359
Deferred costs and other assets, net	385,806			389,922
Goodwill	1,828,005			1,894,794
Due from affiliates	66,981			86,122
Real estate assets held for sale, net	247,951			1,261
Total assets	$	18,704,888		$	20,515,139

LIABILITIES AND STOCKHOLDERS’ EQUITY
Mortgage notes payable and other debt, net	$	3,210,413		$	3,805,761
Corporate bonds, net	2,547,059			2,546,499
Convertible debt, net	981,031			977,521
Credit facility	2,110,000			3,184,000
Below-market lease liabilities, net	264,232			317,838
Accounts payable and accrued expenses	164,204			163,025
Deferred rent, derivative and other liabilities	114,343			127,611
Distributions payable	137,647			9,995
Due to affiliates	241			559
Mortgage notes payable associated with assets held for sale	118,493			—
Total liabilities	9,647,663			11,132,809
Commitments and contingencies (Note 14)	—			—
Preferred stock, $0.01 par value, 100,000,000 shares authorized and 42,834,138 issued and outstanding as of each of September 30, 2015 and December 31, 2014	428			428
Common stock, $0.01 par value, 1,500,000,000 shares authorized and 904,960,234 and 905,530,431 issued and outstanding as of September, 30, 2015 and December 31, 2014, respectively	9,050			9,055
Additional paid-in-capital	11,928,184			11,920,253
Accumulated other comprehensive (loss) income	(9,806		)	2,728
Accumulated deficit	(3,085,906		)	(2,778,576		)
Total stockholders’ equity	8,841,950			9,153,888
Non-controlling interests	215,275			228,442
Total equity	9,057,225			9,382,330
Total liabilities and equity	$	18,704,888		$	20,515,139

The accompanying notes are an integral part of these statements.

-1

Table of Contents

VEREIT, INC.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per share data) (Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Revenues:
Rental income	$	333,766		$	365,712		$	1,017,708		$	924,646
Direct financing lease income	659			625			2,097			2,812
Operating expense reimbursements	22,983			30,984			71,269			81,716
Cole Capital revenue	27,546			59,797			81,569			151,276
Total revenues	384,954			457,118			1,172,643			1,160,450
Operating expenses:
Cole Capital reallowed fees and commissions	3,896			15,398			9,637			56,902
Acquisition related ⁽¹⁾	1,764			13,998			5,509			34,616
Merger and other non-routine transactions ⁽²⁾	8,957			7,632			42,244			175,352
Property operating	31,950			40,977			95,547			110,018
Management fees to affiliates	—			—			—			13,888
General and administrative ⁽³⁾	32,842			30,213			99,906			122,806
Depreciation and amortization	208,542			265,150			645,196			689,731
Impairments	—			2,299			85,341			3,855
Total operating expenses	287,951			375,667			983,380			1,207,168
Operating income (loss)	97,003			81,451			189,263			(46,718		)
Other (expense) income:
Interest expense, net	(89,530		)	(101,643		)	(275,801		)	(326,491		)
Extinguishment and forgiveness of debt, net	—			(5,396		)	5,302			(21,264		)
Other income, net	3,401			8,687			12,791			17,104
Gain on disposition of interest in joint venture	6,729			—			6,729			—
Loss on derivative instruments, net	(1,420		)	(17,484		)	(2,137		)	(10,398		)
Gain on sale of investments	—			6,357			—			6,357
Total other expenses, net	(80,820		)	(109,479		)	(253,116		)	(334,692		)
Income (loss) before income and franchise taxes and loss on disposition of real estate and held for sale assets	16,183			(28,028		)	(63,853		)	(381,410		)
Loss on disposition of real estate and held for sale assets, net	(6,542		)	(256,894		)	(62,584		)	(275,768		)
Income (loss) before income and franchise taxes	9,641			(284,922		)	(126,437		)	(657,178		)
(Provision for) benefit from income and franchise taxes	(1,500		)	(3,125		)	(4,824		)	6,693
Net income (loss)	8,141			(288,047		)	(131,261		)	(650,485		)
Net (income) loss attributable to non-controlling interests	(612		)	7,649			2,298			23,923
Net income (loss) attributable to the Company	$	7,529		$	(280,398	)	$	(128,963	)	$	(626,562	)

Basic and diluted net loss per share attributable to common stockholders	$	(0.01	)	$	(0.35	)	$	(0.20	)	$	(0.94	)
Distributions declared per common share	$	0.14		$	0.25		$	0.14		$	0.79

_______________________________________________


(1)	Includes $1.7 million of expenses incurred during the nine months ended September 30, 2014 , paid to affiliates. No such expenses were incurred during the three months ended September 30, 2014 or the three and nine months ended September 30, 2015 .


(2)	Includes $137.8 million of expenses incurred during the nine months ended September 30, 2014 , paid to affiliates. No such expenses were incurred during the three months ended September 30, 2014 or the three and nine months ended September 30, 2015 .


(3)	Includes $60,000 and $16.1 million of expenses incurred during the three and nine months ended September 30, 2014 , respectively, paid to affiliates. No such expenses were incurred during the three and nine months ended September 30, 2015 .

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT, INC.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC.)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands) (Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net income (loss)	$	8,141		$	(288,047	)	$	(131,261	)	$	(650,485	)
Other comprehensive (loss) income:
Unrealized (loss) gain on interest rate derivatives	(10,076		)	5,800			(21,057		)	(7,896		)
Amount of loss reclassified from accumulated other comprehensive loss into income as interest expense	2,787			2,669			8,316			6,784
Unrealized (loss) gain on investment securities, net	(918		)	725			(232		)	9,698
Reclassification of previous unrealized (loss) gain on investment securities into net loss	—			(7,652		)	110			(7,652		)
Total other comprehensive (loss) income	(8,207		)	1,542			(12,863		)	934

Total comprehensive loss	(66		)	(286,505		)	(144,124		)	(649,551		)
Comprehensive (income) loss attributable to non-controlling interests	(283		)	7,649			2,627			23,923
Total comprehensive loss attributable to the Company	$	(349	)	$	(278,856	)	$	(141,497	)	$	(625,628	)

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT, INC.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC.)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except for share data) (Unaudited)



	Preferred Stock			Common Stock
	Number of Shares	Par Value		Number of Shares		Par Value			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stock-holders’ Equity			Non-Controlling Interests			Total Equity
Balance, January 1, 2015	42,834,138	$	428	905,530,431		$	9,055		$	11,920,253		$	2,728		$	(2,778,576	)	$	9,153,888		$	228,442		$	9,382,330
Repurchases of common stock to settle tax obligation	—	—		(183,492	)	(1		)	(1,633		)	—			—			(1,634		)	—			(1,634		)
Equity-based compensation, net of forfeitures	—	—		(386,705	)	(4		)	10,193			—			—			10,189			—			10,189
Tax shortfall from equity-based compensation	—	—		—		—			(629		)	—			—			(629		)	—			(629		)
Distributions declared on common stock	—	—		—		—			—			—			(124,225		)	(124,225		)				(124,225		)
Distributions to non-controlling interest holders	—	—		—		—			—			—			—			—			(16,879		)	(16,879		)
Distributions to participating securities	—	—		—		—			—			—			(222		)	(222		)	—			(222		)
Distributions to preferred shareholders	—	—		—		—			—			—			(53,920		)	(53,920		)	—			(53,920		)
Disposition of consolidated joint venture interest	—	—		—		—			—			—			—			—			6,339			6,339
Net loss	—	—		—		—			—			—			(128,963		)	(128,963		)	(2,298		)	(131,261		)
Other comprehensive loss	—	—		—		—			—			(12,534		)	—			(12,534		)	(329		)	(12,863		)
Balance, September 30, 2015	42,834,138	$	428	904,960,234		$	9,050		$	11,928,184		$	(9,806	)	$	(3,085,906	)	$	8,841,950		$	215,275		$	9,057,225



	Preferred Stock			Common Stock
	Number of Shares	Par Value		Number of Shares	Par Value		Additional Paid-In Capital			Accumulated Other Comprehensive Income		Accumulated Deficit			Total Stock-holders’ Equity			Non-Controlling Interests			Total Equity
Balance, January 1, 2014	42,199,547	$	422	239,234,725	$	2,392	$	2,940,907		$	7,666	$	(877,957	)	$	2,073,430		$	155,798		$	2,229,228
Issuance of common stock ⁽¹⁾	—	—		662,305,318	6,623		8,916,830			—		—			8,923,453			—			8,923,453
Conversion of Common OP Units to common stock	—	—		1,098,074	11		16,264			—		—			16,275			(16,275		)	—
Conversion of Preferred OP Units to Series F Preferred Stock	622,836	6		—	—		12,464			—		—			12,470			(12,470		)	—
Issuance of restricted share awards, net	—	—		5,326,404	54		(4,310		)	—		—			(4,256		)	—			(4,256		)
Equity-based compensation, net of forfeitures	—	—		—	—		23,183			—		—			23,183			9,622			32,805
Distributions declared on common stock	—	—		—	—		—			—		(593,846		)	(593,846		)	—			(593,846		)
Issuance of OP Units	—	—		—	—		—			—		—			—			152,484			152,484
Distributions to non-controlling interest holders	—	—		—	—		—			—		—			—			(28,809		)	(28,809		)
Distributions to participating securities	—	—		—	—		—			—		(3,617		)	(3,617		)	—			(3,617		)
Distributions to preferred shareholders	—	—		—	—		—			—		(80,749		)	(80,749		)	—			(80,749		)
Contributions from non-controlling interest holders	—	—		—	—		—			—		—			—			982			982
Non-controlling interests retained in Cole Merger	—	—		—	—		—			—		—			—			24,766			24,766
Net loss	—	—		—	—		—			—		(626,562		)	(626,562		)	(23,923		)	(650,485		)
Other comprehensive loss	—	—		—	—		—			934		—			934			—			934
Balance, September 30, 2014	42,822,383	$	428	907,964,521	$	9,080	$	11,905,338		$	8,600	$	(2,182,731	)	$	9,740,715		$	262,175		$	10,002,890

_______________________________________________

(1) Includes $2.2 million issued to affiliates of the Former Manager (as defined in Note 15 – Equity ) for the nine months ended September 30, 2014 .

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT, INC.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)



	Nine Months Ended September 30,
	2015			2014
Cash flows from operating activities:
Net loss	$	(131,261	)	$	(650,485	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Issuance of OP Units	—			92,884
Depreciation and amortization	660,715			744,545
Loss on real estate assets and interest in joint venture, net	55,855			275,768
Impairments	85,341			3,855
Equity-based compensation	10,189			32,805
Equity in income of unconsolidated entities	(1,611		)	(247		)
Distributions from unconsolidated entities	9,578			6,149
Loss on derivative instruments	2,137			10,398
Gain on sale and unrealized gains of investments securities	(65		)	(6,357		)
Gain on extinguishment and forgiveness of debt	(5,307		)	(14,637		)
Changes in assets and liabilities:
Investment in direct financing leases	1,503			1,147
Deferred costs and other assets	(59,509		)	(116,614		)
Due from affiliates	19,141			(2,365		)
Accounts payable and accrued expenses	6,679			(53,434		)
Deferred rent, derivative and other liabilities	(24,939		)	(20,748		)
Due to affiliates	(318		)	(37,520		)
Net cash provided by operating activities	628,128			265,144
Cash flows from investing activities:
Investments in real estate and other assets	(10,207		)	(3,517,290		)
Acquisition of real estate businesses, net of cash acquired	—			(756,232		)
Capital expenditures and leasing costs	(10,880		)	(33,378		)
Real estate developments	(51,863		)	(33,610		)
Principal repayments received from borrowers	6,043			5,091
Investments in unconsolidated entities	—			(2,699		)
Proceeds from disposition of interest in joint venture	43,041			—
Proceeds from disposition of real estate assets, net	370,229			129,212
Investment in leasehold improvements, property and equipment	—			(11,074		)
Proceeds from sale of investments	229			159,049
Deposits for real estate assets	(15,105		)	(205,896		)
Uses and refunds of deposits for real estate assets	42,619			278,362
Line of credit advances to affiliates	(10,000		)	(130,300		)
Line of credit repayments from affiliates	10,000			80,300
Change in restricted cash	10,488			(18,709		)
Net cash provided by (used in) investing activities	384,594			(4,057,174		)
Cash flows from financing activities:
Proceeds from mortgage notes payable	1,379			1,007,787
Payments on mortgage notes payable and other debt	(113,570		)	(1,137,329		)
Proceeds from credit facilities	—			5,689,000
Payments on credit facilities	(1,074,000		)	(4,708,800		)
Proceeds from corporate bonds	—			2,545,760
Payments of deferred financing costs	(2,412		)	(92,233		)
Repurchases of common stock for tax obligation	(1,634		)	—
Proceeds from issuances of common stock, net of offering costs	—			1,593,345
Redemption of Series D Preferred Stock	—			(316,126		)
Contributions from non-controlling interest holders	—			982
Distributions paid	(67,537		)	(697,771		)
Net cash (used in) provided by financing activities	(1,257,774		)	3,884,615
Net change in cash and cash equivalents	(245,052		)	92,585
Cash and cash equivalents, beginning of period	416,711			52,725
Cash and cash equivalents, end of period	$	171,659		$	145,310

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A ARC PROPERTIES OPERATING PARTNERSHIP, L.P.)

CONSOLIDATED BALANCE SHEETS

(In thousands, except for unit data) (Unaudited)



	September 30, 2015		December 31, 2014
ASSETS
Real estate investments, at cost:
Land	$	3,257,396	$	3,472,298
Buildings, fixtures and improvements	11,615,474		12,307,758
Land and construction in progress	37,356		77,450
Intangible lease assets	2,313,369		2,435,054
Total real estate investments, at cost	17,223,595		18,292,560
Less: accumulated depreciation and amortization	1,595,667		1,034,122
Total real estate investments, net	15,627,928		17,258,438
Investment in unconsolidated entities	57,247		98,053
Investment in direct financing leases, net	49,244		56,076
Investment securities, at fair value	54,455		58,646
Loans held for investment, net	40,002		42,106
Cash and cash equivalents	171,659		416,711
Restricted cash	47,775		62,651
Intangible assets, net	127,835		150,359
Deferred costs and other assets, net	385,806		389,922
Goodwill	1,828,005		1,894,794
Due from affiliates	66,981		86,122
Assets held for sale	247,951		1,261
Total assets	$	18,704,888	$	20,515,139

LIABILITIES AND EQUITY
Mortgage notes payable and other debt, net	$	3,210,413	$	3,805,761
Corporate bonds, net	2,547,059		2,546,499
Convertible debt, net	981,031		977,521
Credit facility	2,110,000		3,184,000
Below-market lease liabilities, net	264,232		317,838
Accounts payable and accrued expenses	164,204		163,025
Deferred rent, derivative and other liabilities	114,343		127,611
Distributions payable	137,647		9,995
Due to affiliates	241		559
Mortgage notes payable associated with assets held for sale	118,493		—
Total liabilities	9,647,663		11,132,809
Commitments and contingencies (Note 14)	—		—
General partner's preferred equity, 42,834,138 General Partner Preferred Units issued and outstanding as of each of September 30, 2015 and December 31, 2014	943,067		996,987
General partner's common equity, 904,960,234 and 905,530,431 General Partner OP Units issued and outstanding as of September 30, 2015 and December 31, 2014, respectively	7,899,149		8,157,167
Limited partner's preferred equity, 86,874 Limited Partner Preferred Units issued and outstanding as of each of September 30, 2015 and December 31, 2014	3,375		3,375
Limited partner's common equity, 23,763,797 Limited Partner OP Units issued and outstanding as of each of September 30, 2015 and December 31, 2014	194,009		201,102
Total partners’ equity	9,039,600		9,358,631
Non-controlling interests	17,625		23,699
Total equity	9,057,225		9,382,330
Total liabilities and equity	$	18,704,888	$	20,515,139

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A ARC PROPERTIES OPERATING PARTNERSHIP, L.P.)

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per unit data) (Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Revenues:
Rental income	$	333,766		$	365,712		$	1,017,708		$	924,646
Direct financing lease income	659			625			2,097			2,812
Operating expense reimbursements	22,983			30,984			71,269			81,716
Cole Capital revenue	27,546			59,797			81,569			151,276
Total revenues	384,954			457,118			1,172,643			1,160,450
Operating expenses:
Cole Capital reallowed fees and commissions	3,896			15,398			9,637			56,902
Acquisition related ⁽¹⁾	1,764			13,998			5,509			34,616
Merger and other non-routine transactions ⁽²⁾	8,957			7,632			42,244			175,352
Property operating	31,950			40,977			95,547			110,018
Management fees to affiliates	—			—			—			13,888
General and administrative ⁽³⁾	32,842			30,213			99,906			122,806
Depreciation and amortization	208,542			265,150			645,196			689,731
Impairments	—			2,299			85,341			3,855
Total operating expenses	287,951			375,667			983,380			1,207,168
Operating income (loss)	97,003			81,451			189,263			(46,718		)
Other (expense) income:
Interest expense, net	(89,530		)	(101,643		)	(275,801		)	(326,491		)
Extinguishment and forgiveness of debt, net	—			(5,396		)	5,302			(21,264		)
Other income, net	3,401			8,687			12,791			17,104
Gain on disposition of interest in joint venture	6,729			—			6,729			—
Gain (loss) on derivative instruments, net	(1,420		)	(17,484		)	(2,137		)	(10,398		)
Gain (loss) on sale of investments	—			6,357			—			6,357
Total other expenses, net	(80,820		)	(109,479		)	(253,116		)	(334,692		)
Income (loss) before income and franchise taxes and loss on disposition of real estate and held for sale assets	16,183			(28,028		)	(63,853		)	(381,410		)
Loss on disposition of real estate and held for sale assets, net	(6,542		)	(256,894		)	(62,584		)	(275,768		)
Income (loss) before income and franchise taxes	9,641			(284,922		)	(126,437		)	(657,178		)
(Provision for) benefit from income and franchise taxes	(1,500		)	(3,125		)	(4,824		)	6,693
Net income (loss)	8,141			(288,047		)	(131,261		)	(650,485		)
Net income attributable to non-controlling interests	(404		)	(155		)	(1,197		)	(235		)
Net income (loss) attributable to the OP	$	7,737		$	(288,202	)	$	(132,458	)	$	(650,720	)

Basic and diluted net loss from continuing operations per unit attributable to common unitholders	$	(0.01	)	$	(0.35	)	$	(0.20	)	$	(0.94	)
Distributions declared per common unit	$	0.14		$	0.25		$	0.14		$	0.79

_______________________________________________


(1)	Includes $1.7 million of expenses incurred during the nine months ended September 30, 2014 , paid to affiliates. No such expenses were incurred during the three months ended September 30, 2014 or the three and nine months ended September 30, 2015 .


(2)	Includes $137.8 million of expenses incurred during the nine months ended September 30, 2014 , paid to affiliates. No such expenses were incurred during the three months ended September 30, 2014 or the three and nine months ended September 30, 2015 .


(3)	Includes $60,000 and $16.1 million of expenses incurred during the three and nine months ended September 30, 2014 , respectively, paid to affiliates. No such expenses were incurred during the three and nine months ended September 30, 2015 .

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A ARC PROPERTIES OPERATING PARTNERSHIP, L.P.)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands) (Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net income (loss)	$	8,141		$	(288,047	)	$	(131,261	)	$	(650,485	)
Other comprehensive (loss) income:
Unrealized (loss) gain on interest rate derivatives	(10,076		)	5,800			(21,057		)	(7,896		)
Amount of loss reclassified from accumulated other comprehensive loss into income as interest expense	2,787			2,669			8,316			6,784
Unrealized (loss) gain on investment securities, net	(918		)	725			(232		)	9,698
Reclassification of previous unrealized (loss) gain on investment securities into net loss	—			(7,652		)	110			(7,652		)
Total other comprehensive (loss) income	(8,207		)	1,542			(12,863		)	934

Total comprehensive loss	(66		)	(286,505		)	(144,124		)	(649,551		)
Comprehensive (income) loss attributable to non-controlling interests	(404		)	(155		)	(1,197		)	(235		)
Total comprehensive loss attributable to the OP	$	(470	)	$	(286,660	)	$	(145,321	)	$	(649,786	)

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A ARC PROPERTIES OPERATING PARTNERSHIP, L.P.)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except for unit data) (Unaudited)



	Preferred Units							Common Units
	General Partner				Limited Partner			General Partner					Limited Partner
	Number of Units	Capital			Number of Units	Capital		Number of Units		Capital			Number of Units	Capital			Total Partners' Capital			Non-Controlling Interests			Total Capital
Balance, January 1, 2015	42,834,138	$	996,987		86,874	$	3,375	905,530,431		$	8,157,167		23,763,797	$	201,102		$	9,358,631		$	23,699		$	9,382,330
Repurchases of common OP Units to settle tax obligation	—	—			—	—		(183,492	)	(1,634		)	—	—			(1,634		)	—			(1,634		)
Equity-based compensation, net of forfeitures	—	—			—	—		(386,705	)	10,189			—	—			10,189			—			10,189
Tax shortfall from equity-based compensation	—	—			—	—		—		(629		)	—	—			(629		)	—			(629		)
Distributions to Common OP Units and non-controlling interests	—	—			—	—		—		(124,447		)	—	(3,269		)	(127,716		)	(13,610		)	(141,326		)
Distributions to Preferred OP Units	—	(53,920		)	—	—		—		—			—	—			(53,920		)	—			(53,920		)
Disposition of consolidated joint venture interest	—	—			—	—		—		—			—	—			—			6,339			6,339
Net (loss) income	—	—			—	—		—		(128,963		)	—	(3,495		)	(132,458		)	1,197			(131,261		)
Other comprehensive loss	—	—			—	—		—		(12,534		)	—	(329		)	(12,863		)	—			(12,863		)
Balance, September 30, 2015	42,834,138	$	943,067		86,874	$	3,375	904,960,234		$	7,899,149		23,763,797	$	194,009		$	9,039,600		$	17,625		$	9,057,225



	Preferred Units									Common Units
	General Partner				Limited Partner					General Partner				Limited Partner
	Number of Units	Capital			Number of Units		Capital			Number of Units	Capital			Number of Units		Capital			Total Partners' Capital			Non-Controlling Interests			Total Capital
Balance, January 1, 2014	42,199,547	$	1,054,989		721,465		$	16,466		239,234,725	$	1,018,123		17,832,274		$	139,083		$	2,228,661		$	567		$	2,229,228
Issuance of common OP units, net ⁽¹⁾	—	—			—		—			662,305,318	8,923,453			7,956,297		152,484			9,075,937			—			9,075,937
Conversion of Limited Partners' Common OP Units to General Partner's Common OP Units	—	—			—		—			1,098,074	16,275			(1,098,074	)	(16,275		)	—			—			—
Conversion of Limited Partners' Preferred OP Units to General Partner's Preferred OP Units	622,836	12,470			(622,836	)	(12,470		)	—	—			—		—			—			—			—
Issuance of restricted share awards, net	—	—			—		—			5,326,404	(4,256		)	—		—			(4,256		)	—			(4,256		)
Equity-based compensation, net of forfeitures	—	—			—		—			—	23,183			10,744,697		9,622			32,805			—			32,805
Distributions to Common OP Units, LTIPs and non-controlling interests	—	—			—		—			—	(597,463		)	—		(27,561		)	(625,024		)	(1,248		)	(626,272		)
Distributions to Preferred OP Units	—	(53,120		)	—		—			—	(27,629		)	—		—			(80,749		)	—			(80,749		)
Contributions from non-controlling interest holders	—	—			—		—			—	—			—		—			—			982			982
Non-controlling interests retained in Cole Merger	—	—			—		—			—	—			—		—			—			24,766			24,766
Net (loss) income	—	—			—		—			—	(626,562		)	—		(24,158		)	(650,720		)	235			(650,485		)
Other comprehensive loss	—	—			—		—			—	899			—		35			934			—			934
Balance, September 30, 2014	42,822,383	$	1,014,339		98,629		$	3,996		907,964,521	$	8,726,023		35,435,194		$	233,230		$	9,977,588		$	25,302		$	10,002,890

_______________________________________________

(1) Includes $2.2 million issued to affiliates of the Former Manager (as defined in Note 15 – Equity ) for the nine months ended September 30, 2014 .

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A ARC PROPERTIES OPERATING PARTNERSHIP, L.P.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)



	Nine Months Ended September 30,
	2015			2014
Cash flows from operating activities:
Net loss	$	(131,261	)	$	(650,485	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Issuance of OP Units	—			92,884
Depreciation and amortization	660,715			744,545
Loss on real estate assets and interest in joint venture, net	55,855			275,768
Impairments	85,341			3,855
Equity-based compensation	10,189			32,805
Equity in income of unconsolidated entities	(1,611		)	(247		)
Distributions from unconsolidated entities	9,578			6,149
Loss on derivative instruments	2,137			10,398
Gain on sale and unrealized gains of investments securities	(65		)	(6,357		)
Gain on extinguishment and forgiveness of debt	(5,307		)	(14,637		)
Changes in assets and liabilities:
Investment in direct financing leases	1,503			1,147
Deferred costs and other assets, net	(59,509		)	(116,614		)
Due from affiliates	19,141			(2,365		)
Accounts payable and accrued expenses	6,679			(53,434		)
Deferred rent, derivative and other liabilities	(24,939		)	(20,748		)
Due to affiliates	(318		)	(37,520		)
Net cash provided by operating activities	628,128			265,144
Cash flows from investing activities:
Investments in real estate and other assets	(10,207		)	(3,517,290		)
Acquisition of real estate businesses, net of cash acquired	—			(756,232		)
Capital expenditures and leasing costs	(10,880		)	(33,378		)
Real estate developments	(51,863		)	(33,610		)
Principal repayments received from borrowers	6,043			5,091
Investments in unconsolidated entities	—			(2,699		)
Proceeds from disposition of interest in joint venture	43,041			—
Proceeds from disposition of real estate, net	370,229			129,212
Investment in leasehold improvements, property and equipment	—			(11,074		)
Proceeds from sale of investments	229			159,049
Deposits for real estate assets	(15,105		)	(205,896		)
Uses and refunds of deposits for real estate assets	42,619			278,362
Line of credit advances to affiliates	(10,000		)	(130,300		)
Line of credit repayments from affiliates	10,000			80,300
Change in restricted cash	10,488			(18,709		)
Net cash provided by (used in) investing activities	384,594			(4,057,174		)
Cash flows from financing activities:
Proceeds from mortgage notes payable	1,379			1,007,787
Payments on mortgage notes payable and other debt	(113,570		)	(1,137,329		)
Proceeds from credit facilities	—			5,689,000
Payments on credit facilities	(1,074,000		)	(4,708,800		)
Proceeds from corporate bonds	—			2,545,760
Payments of deferred financing costs	(2,412		)	(92,233		)
Repurchases of common units to settle tax obligation	(1,634		)	—
Proceeds from issuances of OP units, net of offering costs	—			1,593,345
Redemption of Series D Preferred Units	—			(316,126		)
Contributions from non-controlling interest holders	—			982
Distributions paid	(67,537		)	(697,771		)
Net cash (used in) provided by financing activities	(1,257,774		)	3,884,615
Net change in cash and cash equivalents	(245,052		)	92,585
Cash and cash equivalents, beginning of period	416,711			52,725
Cash and cash equivalents, end of period	$	171,659		$	145,310

The accompanying notes are an integral part of these statements.

Table of Contents

VEREIT, INC. and VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited)

Note 1 – Organization

VEREIT, Inc., f/k/a American Realty Capital Properties, Inc. (the “General Partner” or “VEREIT”), is a Maryland corporation, incorporated on December 2, 2010, that qualified as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning in the taxable year ended December 31, 2011. VEREIT Operating Partnership, L.P., f/k/a ARC Properties Operating Partnership, L.P. (together with its subsidiaries, the “Operating Partnership” or the “OP”), is a Delaware limited partnership of which the General Partner is the sole general partner. The board of directors authorized amendments to the General Partner’s Articles of Amendment and Restatement and the Operating Partnership’s Certificate of Limited Partnership to effect name changes from American Realty Capital Properties, Inc. and ARC Properties Operating Partnership, L.P., to VEREIT, Inc. and VEREIT Operating Partnership, L.P., respectively, which became effective July 28, 2015. On July 20, 2015, VEREIT, under its former name, provided written notice to the NASDAQ Global Select Market (the “NASDAQ”) that it intended to voluntarily delist its common stock (“Common Stock”), par value $0.01 per share, and its 6.70% Series F Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”), par value $0.01 per share, from the NASDAQ promptly following the close of trading on July 30, 2015. VEREIT obtained authorization for listing on the New York Stock Exchange (the “NYSE”) and, effective July 31, 2015, transferred the listing of its Common Stock and Series F Preferred Stock to the NYSE. The Common Stock and Series F Preferred Stock now trade under the trading symbols, “VER” and “VER PRF,” respectively. As used herein, the terms the “Company,” “we,” “our” and “us” refer to VEREIT, together with our consolidated subsidiaries, including the OP.

The Company is a full-service real estate operating company with investment management capabilities that operates through two reportable segments, Real Estate Investment (“REI”) and its investment management business, Cole Capital (“Cole Capital”), as further discussed in Note 3 – Segment Reporting . Through the REI segment, the Company owns and actively manages a diversified portfolio of retail, restaurant, office and industrial real estate assets subject to long-term net leases with high credit quality tenants. The Company actively manages its portfolio considering a number of metrics including property type, concentration and key economic factors for appropriate balance and diversity. The Cole Capital segment is contractually responsible for raising capital for and managing the affairs of the Managed REITs (as defined in Note 3 – Segment Reporting ) on a day-to-day basis, identifying and making acquisitions and investments on the Managed REITs’ behalf and recommending to the respective board of directors of each of the Managed REITs an approach for providing investors with liquidity. Cole Capital receives compensation and reimbursement for performing these services. To support both reportable segments, the Company employs a shared services model pursuant to which its personnel are integral in providing, among other things, transactional and operational functions to the Company’s owned portfolio and the Managed REITs.

Substantially all of the Company’s REI segment is conducted through the OP. VEREIT is the sole general partner and holder of 97.4% of the common equity interests in the OP as of September 30, 2015 with the remaining 2.6% of the common equity interests owned by certain unaffiliated investors. Under the limited partnership agreement of the OP (the “LPA”), after holding units of limited partner interests in the OP (“OP Units”) for a period of one year , unless otherwise consented to by VEREIT, holders of OP Units have the right to redeem the OP Units for the cash value of a corresponding number of shares of VEREIT’s common stock or, at the option of VEREIT, a corresponding number of shares of VEREIT’s common stock. The remaining rights of the holders of OP Units are limited, however, and do not include the ability to replace the General Partner or to approve the sale, purchase or refinancing of the OP’s assets. Substantially all of the Cole Capital segment is conducted through Cole Capital Advisors, Inc. (“CCA”), an Arizona corporation and a wholly owned subsidiary of the OP. CCA is treated as a taxable REIT subsidiary (“TRS”) under Section 856 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

The actions of the Operating Partnership and its relationship with the General Partner are governed by the LPA. The General Partner does not have any significant assets other than its investment in the Operating Partnership. Therefore, the assets and liabilities of the General Partner and the Operating Partnership are substantially the same. Additionally, pursuant to the LPA, all administrative expenses and expenses associated with the formation, continuity, existence and operation of the General Partner incurred by the General Partner on the Operating Partnership’s behalf shall be treated as expenses of the Operating Partnership. Further, when the General Partner issues any equity instrument that has been approved by the General Partner’s board of directors, the LPA requires the Operating Partnership to issue to the General Partner equity instruments with substantially similar terms, to protect the integrity of the Company’s umbrella partnership REIT structure, pursuant to which each holder of interests in the Operating Partnership has a proportionate economic interest in the Operating Partnership reflecting its capital contributions thereto. OP Units issued to the General Partner are referred to as General Partner OP Units. OP Units issued to parties other than the General Partner are referred to as Limited Partner OP Units. The LPA also provides that the Operating Partnership issue debt with terms and provisions consistent with debt issued by the General Partner. The LPA will be amended to provide for the issuance of any additional class of equivalent equity instruments to the extent the General Partner’s board of directors authorizes the issuance of any new class of equity securities.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

On March 2, 2015, the General Partner filed restated consolidated financial statements and related financial information as of and for the fiscal years ended December 31, 2013 and 2012 and the fiscal periods ended March 31, 2014 and 2013, June 30, 2014 and 2013 and September 30, 2013, and the OP restated and amended its consolidated financial statements and related financial information as of and for the fiscal years ended December 31, 2013 and 2012 and the fiscal periods ended June 30, 2014 and 2013 (collectively, the “Restatement”) to correct errors that were identified as a result of a previously-announced investigation conducted by the audit committee (the “Audit Committee”) of the General Partner’s board of directors (the “Audit Committee Investigation”), as well as certain other errors that were identified by the Company. In addition, the Restatement reflected corrections of certain immaterial errors and certain previously identified errors that the Company became aware of during the normal course of business and were determined to be immaterial, both individually and in the aggregate, when the consolidated financial statements were originally issued.

Note 2 – Summary of Significant Accounting Policies

Basis of Accounting

The consolidated financial statements of the Company presented herein include the accounts of the General Partner and its consolidated subsidiaries, including the OP. All intercompany transactions have been eliminated upon consolidation. The financial statements are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. The results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the results for the entire year or any subsequent interim period.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2014 of the Company, which are included in the Company’s Annual Report on Form 10-K, as amended, filed March 30, 2015. There have been no significant changes to the Company’s significant accounting policies during the nine months ended September 30, 2015 , except as noted below regarding the early adoption of the U.S. Financial Accounting Standards Board (the “FASB”) Accounting Standards Update, (“ASU”) No. 2015-02, Consolidation. Information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries and consolidated joint venture arrangements. The portions of the consolidated joint venture arrangements not owned by the Company are presented as non-controlling interests in VEREIT's and the OP’s consolidated balance sheets and statements of operations, consolidated statements of comprehensive income (loss) and consolidated statements of changes in equity. In addition, as described in Note 1 – Organization , certain third parties have been issued OP Units. Holders of OP Units are considered to be non-controlling interest holders in the OP and their ownership interest is reflected as equity in the consolidated balance sheets. Further, a portion of the earnings and losses of the OP are allocated to non-controlling interest holders based on their respective ownership percentages. Upon conversion of OP Units to common stock, any difference between the fair value of common shares issued and the carrying value of the OP Units converted is recorded as a component of equity. As of both September 30, 2015 and December 31, 2014 , there were approximately 23.8 million Limited Partner OP Units outstanding.

During the three months ended September 30, 2015 , the Company early adopted the U.S. FASB ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”), as described in the Recent Accounting Pronouncements section below, which simplifies consolidation accounting by reducing the number of consolidation models and changing various aspects of current U.S. GAAP, including certain consolidation criteria for variable interest entities (“VIEs”). For legal entities being evaluated for consolidation, the Company must first determine whether the interests that it holds and fees it receives qualify as variable interests in the entity. A variable interest is an investment or other interest that will absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns. The Company’s evaluation includes consideration of fees paid to the Company where the Company acts as a decision maker or service provider to the entity being evaluated. If the Company determines that it holds a variable interest in an entity, it evaluates whether that entity is a variable interest entity (“VIE”). VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, and as a group, lack one of the following characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

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

The Company continually evaluates the need to consolidate legal entities based on standards set forth in GAAP as described above.

Reclassification

As described below, certain items previously reported have been reclassified to conform with the current period’s presentation.

The other debt balance from prior year has been combined in the consolidated balance sheets and consolidated statements of cash flows into the captions mortgage notes payable and other debt, net and payments on mortgage notes payable and other debt, respectively. State property income and franchise taxes previously included in general and administrative expenses and federal and state income taxes previously included in other income, net have been combined into the caption (provision for) benefit from income and franchise taxes in the consolidated statements of operations. Additionally, the gain on forgiveness of debt previously included in other income, net has been combined into the caption extinguishment and forgiveness of debt, net.

Further, the designated derivatives, fair value adjustments line item from prior year has been disaggregated within the consolidated statements of other comprehensive loss into the captions unrealized loss on interest rate derivatives and amount of loss reclassified from accumulated other comprehensive loss into income as interest expense. These captions were previously included within the notes to consolidated financial statements.

Assets Held for Sale

The Company classifies real estate investments as held for sale in accordance with U.S. GAAP. Upon classifying an asset as held for sale, the Company will no longer recognize depreciation expense related to the depreciable assets of the property. Assets held for sale are recorded at the lower of carrying value or estimated fair value, less the estimated cost to dispose of the assets. As of September 30, 2015 , five properties were classified as held for sale. As of December 31, 2014, two properties were classified as held for sale, which were sold during the first quarter of 2015.

If circumstances arise that the Company previously considered unlikely and, as a result, the Company decides not to sell a property previously classified as held for sale, the Company will reclassify the property as held and used. The Company measures and records a property that is reclassified as held and used at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation expense that would have been recognized had the property been continuously classified as held and used or (ii) the estimated fair value at the date of the subsequent decision not to sell.

Revenue Recognition

The Company’s revenues, which primarily consist of rental income, include rents that each tenant pays in accordance with the terms of each lease reported on a straight-line basis over the initial term of the lease. When the Company acquires a property, the term of each existing lease is considered to commence as of the acquisition date for the purposes of this calculation. Since many of the leases provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable, and include in revenues, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. Straight-line rent receivables are included in deferred costs and other assets, net, in the consolidated balance sheets. See Note 8 – Deferred Costs and Other Assets, Net . Cost recoveries from tenants are included within operating expense reimbursements in the consolidated statements of operations, in the period the related costs are incurred.The Company defers the revenue related to lease payments received from tenants in advance of their due dates. As of September 30, 2015 and December 31, 2014 , the Company had $49.4 million and $57.8 million , respectively, of deferred rental income, which is included in deferred rent, derivative, and other liabilities in the consolidated balance sheets.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The Company continually reviews receivables related to rent and unbilled rent receivables and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is uncertain, the Company will record an increase in the allowance for uncollectible accounts in the consolidated balance sheets or record a direct write-off of the receivable in the consolidated statements of operations. As of September 30, 2015 and December 31, 2014 , the Company maintained an allowance for uncollectible accounts of $3.1 million and $2.5 million , respectively.

Acquisition Related Expenses and Merger and Other Non-routine Transaction Related Expenses

All direct costs incurred as a result of a business combination are classified as acquisition related costs or merger and other non-routine transaction costs and expensed as incurred. Acquisition related expenses include legal and other transaction related costs incurred in connection with self-originated acquisitions including purchases of portfolios. In addition, indirect costs, such as internal salaries, that are tracked and documented in a manner that clearly indicates that the activities driving the cost directly relate to activities necessary to complete, or effect, self-originating purchases are classified as acquisition related expenses.

Similar costs incurred in relation to mergers, which are not considered self-originating purchases, and other non-routine transaction related expenses are included in merger and other non-routine transactions in the consolidated statements of operations. Merger and other non-routine transaction related expenses include the following costs (amounts in thousands):



	Three Months Ended September 30,							Nine Months Ended September 30,
	2015					2014		2015				2014
Merger related costs:
Strategic advisory services	$	—				$	3,150	$	—			$	35,765
Transfer taxes	—					—		—				5,109
Legal fees and expenses	—					579		—				5,126
Personnel costs and other reimbursements	—					—		—				751
Multi-tenant spin off	—					2,270		—				7,450
Other fees and expenses	—					—		—				1,676
Other non-routine transaction related costs:
Post-transaction support services	—					—		—				14,251
Subordinated distribution fee	—					—		—				78,244
Audit Committee Investigation and related matters ⁽¹⁾	9,251					—		38,953				—
Furniture, fixtures and equipment	—					—		—				14,085
Legal fees and expenses	(294		)	⁽²	⁾	743		2,659		⁽²	⁾	2,569
Personnel costs and other reimbursements	—					—		—				2,718
Other fees and expenses	—					890		632				7,608
Total	$	8,957				$	7,632	$	42,244			$	175,352

___________________________________


(1)	Includes all fees and costs associated with the Audit Committee Investigation and various litigations and investigations prompted by the results of the Audit Committee Investigation, including fees and costs incurred pursuant to the Company’s indemnification obligations.


(2)	For the three and nine months ended September 30, 2015 , legal fees and expenses primarily relate to fees incurred in connection with a legal matter resolved in early 2014, which the Company received invoices for in 2015. The negative balance for the three months ended September 30, 2015 is a result of estimated costs accrued in prior periods that exceeded actual expenses incurred.

Income Taxes

The General Partner currently qualifies and has elected to be taxed as a REIT for federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code. As a REIT, except as discussed below, the General Partner generally is not subject to federal income tax on taxable income that it distributes to its stockholders so long as it distributes at least 90% of its annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains). REITs are subject to a number of other organizational and operational requirements. Even if the General Partner maintains its qualification for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, federal income taxes on certain income and excise taxes on its undistributed income.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The OP is classified as a partnership for federal income tax purposes. As a partnership, the OP is not a taxable entity for federal income tax purposes. Instead, each partner in the OP is required to take into account its allocable share of the OP’s income, gains, losses, deductions and credits for each taxable year. However, the OP may be subject to certain state and local taxes on its income and property.

As of September 30, 2015 , the OP and the General Partner had no material uncertain income tax positions. The tax years subsequent to and including the fiscal year ended December 31, 2011 remain open to examination by the major taxing jurisdictions to which the OP, the General Partner, American Realty Capital Trust III, Inc. (“ARCT III”), CapLease, Inc. (“CapLease”), American Realty Capital Trust IV, Inc., (“ARCT IV”), Cole Real Estate Investments, Inc. (“Cole”) and Cole Credit Property Trust, Inc. are subject.

Under the LPA, the OP is to conduct business in such a manner as to permit the General Partner at all times to qualify as a REIT.

The Company conducts substantially all of its Cole Capital segment through a TRS structure. A TRS is a subsidiary of a REIT that is subject to corporate federal, state and local income taxes, as applicable. The Company’s use of a TRS enables it to engage in certain business activities while complying with the REIT qualification requirements and to retain any income generated by these businesses for reinvestment without the requirement to distribute those earnings. The Company conducts all of its business in the United States and Canada and, as a result, it files income tax returns in the U.S. federal jurisdiction, Canadian federal jurisdiction and various state and local jurisdictions. Certain of the Company’s inter-company transactions that have been eliminated in consolidation for financial accounting purposes are also subject to taxation.

The Company provides for income taxes in accordance with current authoritative accounting and tax guidance. The tax provision or benefit related to significant or unusual items is recognized in the quarter in which those items occur. In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the quarter in which the change occurs. The accounting estimates used to compute the provision for or benefit from income taxes may change as new events occur, additional information is obtained or the tax environment changes.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes the revenue recognition requirements in Revenue Recognition, Accounting Standards Codification (“ASC”) (Topic 605) and requires an entity to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, an amendment to ASU 2014-09 was issued to defer the effective date for all entities by one year. For public business entities, certain not-for-profit entities, and certain employee benefit plans, the guidance should be applied to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently evaluating the impact of the new standard on its financial statements.

In February 2015, the FASB issued ASU No. 2015-02, which eliminates the deferral of Financial Accounting Standard (“ FAS”) No. 167, Amendments to FASB Interpretation No. 46(R), modifies the evaluation of whether limited partnerships and similar legal entities are variable or voting interest entities, eliminates the presumption that the general partner should consolidate a limited partnership, modifies the consolidation analysis for reporting entities that are involved with variable interest entities, particularly those that have fee arrangements and related party relationships, and provides a scope exception for reporting entities with interests in legal entities that operate as registered money market funds . These changes require re-evaluation of the consolidation conclusion for certain entities and require the Company to revise its analysis regarding the consolidation or deconsolidation of such entities. ASU 2015-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, with early adoption permitted. As disclosed above, the Company has elected to early adopt ASU 2015-02 during the three months ended September 30, 2015 . The adoption had no material impact on the interests in joint venture arrangements, Managed REITs and other arrangements and therefore had no impact on the previous or current reporting periods’ statements of financial position, results of operations, or retained earnings.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The update requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability rather than presenting the costs as an asset, a deferred charge. The previous requirement to recognize debt issuance costs as deferred charges conflicts with the guidance in FASB Concepts Statement No. 6, “Elements of Financial Statements,” which states that debt issuance costs are similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. FASB Concepts Statement No. 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. After the update is adopted, debt disclosures will include the face amount of the debt liability and the effective interest rate. For public companies, ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and is to be applied retrospectively, with early adoption permitted. The Company has evaluated the impact of the adoption of this new standard, which is expected to result in reclassifications of certain deferred costs on the Company’s balance sheets but will not have an impact on its results of operations or cash flows.

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805). The update eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. The ASU is effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for any interim and annual financial statements that have not yet been issued. The ASU is applied prospectively to adjustments to provisional amounts that occur after the effective date. The Company is currently evaluating the impact of the new standard on its financial statements.

Note 3 – Segment Reporting

The Company operates in two segments, REI and Cole Capital, as further discussed below.

REI – Through its REI segment, the Company owns and actively manages a diversified portfolio of retail, restaurant, office and industrial real estate assets subject to long-term net leases with high credit quality tenants. As of September 30, 2015 , the Company owned 4,572 properties comprising 100.9 million square feet of retail and commercial space located in 49 states, the District of Columbia, Puerto Rico and Canada, which includes properties owned through consolidated joint ventures. The rentable space at these properties was 98.3% leased with a weighted-average remaining lease term of 11.1 years. In addition, as of September 30, 2015 , the Company owned 10 commercial mortgage-backed securities (“CMBS”) and 11 loans held for investment.

Cole Capital – Cole Capital is contractually responsible for managing the day-to-day affairs of Cole Credit Property Trust IV, Inc. (“CCPT IV”), Cole Real Estate Income Strategy (Daily NAV), Inc. (“INAV”), Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”) and Cole Credit Property Trust V, Inc. (“CCPT V,” and collectively with CCPT IV, INAV and CCIT II, the “Managed REITs”), raising capital for those Managed REITs still in offering, identifying and making acquisitions and investments on the Managed REITs’ behalf and recommending to the respective board of directors of each of the Managed REITs an approach for providing investors with liquidity. Prior to its merger with Select Income REIT on January 29, 2015, Cole Corporate Income Trust, Inc. (“CCIT”), was also managed by Cole Capital. Cole Capital serves as the dealer manager and distributes shares of common stock for certain Managed REITs and advises them regarding offerings, manages relationships with participating broker-dealers and financial advisors and provides assistance in connection with compliance matters relating to the offerings. Cole Capital receives compensation and reimbursement for services relating to the Managed REITs’ offerings and the investment, management, financing and disposition of their respective assets, as applicable. Cole Capital also develops new REIT offerings and assists in obtaining regulatory approvals from the SEC, the Financial Industry Regulatory Authority, Inc. and various blue sky jurisdictions for such offerings.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The Company allocates certain operating expenses, such as legal fees, employee related costs and benefits and general overhead expenses between its operating segments. The following tables present a summary of the comparative financial results and total assets for each business segment (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
REI segment:
Revenues:
Rental income	$	333,766		$	365,712		$	1,017,708		$	924,646
Direct financing lease income	659			625			2,097			2,812
Operating expense reimbursements	22,983			30,984			71,269			81,716
Total real estate investment revenues	357,408			397,321			1,091,074			1,009,174
Operating expenses:
Acquisition related	1,690			13,998			4,976			34,616
Merger and other non-routine transactions	8,957			7,613			42,244			173,406
Property operating	31,950			40,977			95,547			110,018
Management fees to affiliates	—			—			—			13,888
General and administrative	15,848			12,948			48,045			62,675
Depreciation and amortization	200,158			240,073			620,068			625,521
Impairment of real estate	—			2,299			85,341			3,855
Total operating expenses	258,603			317,908			896,221			1,023,979
Operating income (loss)	98,805			79,413			194,853			(14,805		)
Other (expense) income:
Interest expense, net	(89,530		)	(101,643		)	(275,801		)	(326,491		)
Extinguishment and forgiveness of debt, net	—			(5,396		)	5,302			(21,264		)
Other income, net	2,936			8,508			10,715			16,799
Gain on disposition of interest in joint venture	6,729			—			6,729			—
Loss on derivative instruments, net	(1,420		)	(17,484		)	(2,137		)	(10,398		)
Gain on sale of investments	—			6,357			—			6,357
Total other expenses, net	(81,285		)	(109,658		)	(255,192		)	(334,997		)
Income (loss) before income and franchise taxes and disposition of real estate and held for sale assets	17,520			(30,245		)	(60,339		)	(349,802		)
Loss on disposition of real estate and held for sale assets, net	(6,542		)	(256,894		)	(62,584		)	(275,768		)
Income (loss) before income and franchise taxes	10,978			(287,139		)	(122,923		)	(625,570		)
Provision for income and franchise taxes	(2,238		)	(1,994		)	(7,211		)	(5,905		)
Net income (loss)	$	8,740		$	(289,133	)	$	(130,134	)	$	(631,475	)

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Cole Capital segment:
Revenues:
Offering-related fees and reimbursements	$	5,850		$	21,535		$	14,483		$	73,957
Transaction service fees and reimbursements	7,400			24,423			24,696			44,406
Management fees and reimbursements	14,296			13,839			42,390			32,913
Total Cole Capital revenues	27,546			59,797			81,569			151,276
Operating expenses:
Cole Capital reallowed fees and commissions	3,896			15,398			9,637			56,902
Acquisition related	74			—			533			—
Merger and other non-routine transactions	—			19			—			1,946
General and administrative	16,994			17,265			51,861			60,131
Depreciation and amortization	8,384			25,077			25,128			64,210
Total operating expenses	29,348			57,759			87,159			183,189
Operating (loss) income	(1,802		)	2,038			(5,590		)	(31,913		)
Total other income, net	465			179			2,076			305
(Loss) income before income taxes	(1,337		)	2,217			(3,514		)	(31,608		)
Benefit from (provision for) income taxes	738			(1,131		)	2,387			12,598
Net (loss) income	$	(599	)	$	1,086		$	(1,127	)	$	(19,010	)

Total Company:
Total revenues	$	384,954		$	457,118		$	1,172,643		$	1,160,450
Total operating expenses	$	287,951		$	375,667		$	983,380		$	1,207,168
Total other expense, net	$	(80,820	)	$	(109,479	)	$	(253,116	)	$	(334,692	)
Net income (loss)	$	8,141		$	(288,047	)	$	(131,261	)	$	(650,485	)



	Total Assets
	September 30, 2015		December 31, 2014
REI segment	$	18,008,818	$	19,771,138
Cole Capital	696,070		744,001
Total Company	$	18,704,888	$	20,515,139

Note 4 – Goodwill and Other Intangibles

Goodwill

In connection with the Company’s acquisition of CapLease and the merger of Cole with and into our wholly owned subsidiary (the “Cole Merger”), the Company recorded goodwill as a result of the merger consideration exceeding the net assets acquired. The goodwill recorded as a result of the Cole Merger was allocated between the Company’s two segments, the REI segment and Cole Capital segment.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The following table summarizes the Company’s goodwill activity by segment from the date of the CapLease acquisition (in thousands):



	REI Segment			Cole Capital Segment			Consolidated
Balance as of January 1, 2013	$	—		$	—		$	—
Acquisition of Caplease	92,789			—			92,789
Balance as of December 31, 2013	92,789			—			92,789
Cole Merger	1,654,085			558,835			2,212,920
Measurement period adjustments	(27,339		)	49,627			22,288
Goodwill allocated to dispositions ⁽¹⁾	(210,139		)	—			(210,139		)
Impairment	—			(223,064		)	(223,064		)
Balance as of December 31, 2014	$	1,509,396		$	385,398		$	1,894,794
Goodwill allocated to dispositions and held for sale assets ⁽¹⁾	(66,789		)	—			(66,789		)
Balance as of September 30, 2015	$	1,442,607		$	385,398		$	1,828,005

_______________________________________________

(1) Included in loss on disposition of real estate and held for sale assets, net, in the consolidated statements of operations.

In the event the Company disposes of a property that constitutes a business under U.S. GAAP, the Company will allocate a portion of the REI segment’s goodwill to that property in determining the gain or loss on the disposal of the property. The amount of goodwill allocated to the property will be based on the relative fair value of the property to the fair value of the REI segment. The Company generally estimates the relative fair value by utilizing rental income on a straight line basis as an indication of the relative fair value. Future property acquisitions that constitute a business will be integrated into the REI segment and therefore will also be allocated goodwill upon disposition.

Intangible Assets

The intangible assets as of September 30, 2015 of $150.4 million , net of accumulated amortization of $22.5 million , primarily consist of management and advisory contracts that the Company has with certain Managed REITs, which are subject to an estimated useful life of approximately five years. The Company recorded $7.5 million and $22.5 million of amortization expense for the three and nine months ended September 30, 2015 , respectively, related to the management and advisory contracts. As of September 30, 2014 , the Company had intangible assets of $385.6 million , net of accumulated amortization of $62.3 million . The Company recorded $24.3 million and $62.3 million of amortization expense for the three and nine months ended September 30, 2014 , respectively, related to the management and advisory contracts. The estimated amortization expense for the remainder of the year ending December 31, 2015 is $7.6 million . The estimated amortization expense for each of the years ending December 31, 2016, 2017, 2018 and 2019 is $30.1 million .

Impairments

The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value, by reporting unit, may not be recoverable. The Company’s annual testing date is during the fourth quarter. The Company tests goodwill for impairment by first comparing the carrying value of net assets to the fair value of each reporting unit. If the fair value is determined to be less than the carrying value or if qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. The Company estimates the fair value of the reporting units, which the Company has determined is the same as its reportable segments, using discounted cash flows and relevant competitor multiples. During the nine months ended September 30, 2015 and 2014 , management monitored the actual performance of the business segments relative to the fair value assumptions used during our annual goodwill impairment test. During the nine months ended September 30, 2015 and 2014 , no triggering events were identified.

The Company evaluates intangible assets for impairment when an event occurs or circumstances change that indicate the carrying value may not be recoverable. The Company tests intangible assets for impairment by first comparing the carrying value of the asset group to the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the intangible assets to their respective fair values and recognize an impairment loss. The Company will estimate the fair value of the intangible assets using a discounted cash flow model specific to the applicable Managed REITs. There were no events or changes in circumstances that indicated that intangible assets were impaired during the nine months ended September 30, 2015 or 2014 .

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The fair values of the Cole Capital segment goodwill and intangible assets are dependent upon actual results, including, but not limited to, the timing of and aggregate capital raised and deployed on behalf of the Managed REITs, which is influenced by the Company’s ability to reinstate certain selling agreements that were suspended as a result of the Audit Committee Investigation and the resulting restatements. If the Company is unable to reinstate certain selling agreements with broker-dealers timely, the fair values of the Cole Capital segment goodwill and intangible assets may be less than the respective carrying value, resulting in an impairment that could have a material effect on a Company’s financial results. In addition, the actual timing of closing an offering or executing a liquidity event on behalf of a Managed REIT or the commencement of operations of newly formed REITs, which are not yet effective, may differ from the Company’s assumptions used at September 30, 2015 .

The evaluation of goodwill and intangible assets for potential impairment requires the Company’s management to exercise significant judgment and to make certain assumptions. While the Company believes its assumptions are reasonable, there are no guarantees as to actual results. Changes in assumptions based on actual results may have a material impact on the Company’s financial results.

Intangible Leases

Intangible lease assets and liabilities of the Company consist of the following as of September 30, 2015 and December 31, 2014 (amounts in thousands, except weighted-average useful life):



	Weighted-Average Useful Life	September 30, 2015		December 31, 2014
Intangible lease assets:
In-place leases, net of accumulated amortization of $361,315 and $236,096, respectively	14.1	$	1,575,024	$	1,816,508
Leasing commissions, net of accumulated amortization of $853 and $505, respectively	7.8	3,779		4,205
Above-market leases, net of accumulated amortization of $41,449 and $22,471, respectively	16.5	330,949		355,269
Total intangible lease assets, net		$	1,909,752	$	2,175,982

Intangible lease liabilities:
Below-market leases, net of accumulated amortization of $33,493 and $19,123, respectively	17.4	$	264,232	$	317,838

The following table provides the projected amortization expense and adjustments to rental income related to the intangible lease assets and liabilities for the remainder of 2015 and the next four calendar years as of September 30, 2015 (amounts in thousands) :



	October 1, 2015 - December 31, 2015		2016		2017		2018		2019
In-place leases:
Total to be included in amortization expense	$	46,008	$	179,088	$	163,617	$	149,574	$	137,702
Leasing Commissions
Total to be included in amortization expense	$	141	$	547	$	519	$	409	$	382
Above-market lease assets:
Total to be deducted from rental income	$	6,716	$	26,797	$	26,450	$	25,887	$	23,925
Below-market lease liabilities:
Total to be included in rental income	$	5,368	$	21,364	$	21,222	$	20,895	$	20,153

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Note 5 – Real Estate Investments

The Company acquired controlling financial interests in 14 commercial properties, including nine land parcels for build-to-suit development, for an aggregate purchase price of $10.2 million during the nine months ended September 30, 2015 (the “2015 Acquisitions”). During the nine months ended September 30, 2014 , the Company acquired controlling interests in 1,092 commercial properties, including 28 land parcels, but excluding the properties acquired in the Cole Merger and the ARCT IV Merger, for an aggregate purchase price of $3.8 billion . The following table presents the allocation of the fair values of the assets acquired and liabilities assumed during the periods presented (in thousands):



	Nine Months Ended September 30,
	2015			2014
Real estate investments, at cost:
Land	$	2,047		$	812,712
Buildings, fixtures and improvements	5,258			2,486,868
Land and construction in progress	2,140			11,083
Total tangible assets	9,445			3,310,663
Acquired intangible assets:
In-place leases	717			522,568
Above-market leases	153			110,230
Assumed intangible liabilities:
Below-market leases	(108		)	(101,108		)
Fair value adjustment of assumed notes payable	—			(23,531		)
Total purchase price of assets acquired, net	10,207			3,818,822
Mortgage notes payable assumed	—			(301,532		)
Cash paid for acquired real estate investments	$	10,207		$	3,517,290

Future Lease Payments

The following table presents future minimum base rent payments due to the Company from October 1, 2015 through December 31, 2019 and thereafter. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes among other items (in thousands):



	Future Minimum Operating Lease Base Rent Payments		Future Minimum Direct Financing Lease Payments ⁽¹⁾
October 1, 2015 - December 31, 2015	$	289,399	$	1,166
2016	1,225,267		4,674
2017	1,194,341		4,273
2018	1,158,149		3,183
2019	1,117,327		2,397
Thereafter	9,744,736		7,916
Total	$	14,729,219	$	23,609

____________________________________


(1)	37 properties are subject to direct financing leases and, therefore, revenue is recognized as direct financing lease income on the discounted cash flows of the lease payments. Amounts reflected are the minimum base rental cash payments due to the Company under the lease agreements on these respective properties.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Investment in Direct Financing Leases, Net

The components of the Company’s net investment in direct financing leases as of September 30, 2015 and December 31, 2014 are as follows (in thousands):



	September 30, 2015			December 31, 2014
Future minimum lease payments receivable	$	23,609		$	27,199
Unguaranteed residual value of property	33,598			39,852
Unearned income	(7,963		)	(10,975		)
Net investment in direct financing leases	$	49,244		$	56,076

Development Activities

The Company has contracted with a developer to complete a portfolio of build-to-suit development projects, of which 27 have been completed as of September 30, 2015 , for an aggregate cost of $47.6 million to date and the remaining 10 projects are expected to be completed within the next 12 months. Pursuant to the agreement between the Company and the developer, the Company will acquire the respective land parcel for each development and subsequently pay a fixed construction draw until the project is complete. During the nine months ended September 30, 2015 , two other build-to-suit and expansion projects were completed and placed into service for an aggregate cost of $55.8 million . The Company is also in the process of completing four other build-to-suit, redevelopment and expansion projects, which are expected to increase our revenue as a result of the additional square footage and improvement of the quality of the properties. Below is a summary of the construction commitments as of September 30, 2015 (dollar amounts in thousands):



Development projects in progress	14

Investment to date	17,666
Estimated cost to complete ⁽¹⁾	7,447
Total Investment ⁽²⁾	$	25,113

_______________________________________________

(1) The Company is contractually committed to fund a developer $4.1 million to complete the remaining 10 build-to-suit developments.

(2) Excludes tenant improvement costs incurred in accordance with existing leases. As of September 30, 2015 , $16.7 million of tenant improvement costs were included in land and construction in progress in the consolidated financial statements.

Property Dispositions and Held for Sale Assets

During the nine months ended September 30, 2015 , the Company disposed of 85 single-tenant properties, three anchored shopping centers and one property owned by a consolidated joint venture for an aggregate gross sales price of $675.9 million , resulting in net proceeds of $370.2 million after debt assumptions and closing costs. The Company recorded a loss of $39.3 million related to the sales, which is included in loss on disposition of real estate and held for sale assets, net in the accompanying consolidated statements of operations. During the nine months ended September 30, 2015 , the Company also had one property that had been foreclosed upon with a net book value of $38.2 million at the time of foreclosure. During the nine months ended September 30, 2014 , the Company disposed of 29 single-tenant properties and one anchored shopping center for an aggregate gross sales price of $158.6 million . The Company has no continuing involvement with these properties. The dispositions did not represent a change in strategic direction for the Company and will not have a significant effect on the operations or financial results of the Company. As such, the operating results of the dispositions are not classified as discontinued operations for any periods presented. See Note 20 – Subsequent Events for dispositions subsequent to September 30, 2015 .

In addition, the Company disposed of its interest in one consolidated joint venture, whose only assets were investments in three unconsolidated joint ventures, for an aggregate gross sales price of $77.5 million , resulting in proceeds of $43.0 million after debt repayment and closing costs. The debt obligation of the consolidated joint venture was held by an unconsolidated entity. The Company recorded a gain of $6.7 million related to the sale of the consolidated joint venture, which is included in gain on disposition of interest in joint venture in the accompanying consolidated statements of operations.

As of December 31, 2014 , there were two properties classified as held for sale (the “2014 Held for Sale Properties”), both of which were sold during the nine months ended September 30, 2015 . As of September 30, 2015 , there were five properties (the “2015 Held for Sale Properties”) classified as held for sale. The 2015 Held for Sale Properties are estimated to be sold in the next 12 months as part of the Company’s portfolio management strategy. To reflect the 2015 Held for Sale Properties’ fair values less cost to sell, the Company recorded a loss of $23.3 million , which includes $18.3 million of goodwill allocated in the cost basis of

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

such properties, for the nine months ended September 30, 2015 . The loss on properties held for sale is included in loss on disposition of real estate and held for sale assets, net in the accompanying consolidated statements of operations.

Unconsolidated Joint Ventures

As of September 30, 2015 , the Company had interests in three unconsolidated joint ventures with aggregate equity investments of $53.7 million , which had interests in three properties comprising 0.9 million of square feet of retail and office space (the “Unconsolidated Joint Ventures”).

The following is a summary of the Company’s percentage ownership and carrying amount related to each of the Unconsolidated Joint Ventures as of September 30, 2015 (dollar amounts in thousands):



Name of Joint Venture	Partner	Ownership % ⁽¹⁾	Carrying Amount of Investment ⁽²⁾
Cole/Mosaic JV South Elgin IL, LLC	Affiliate of Mosaic Properties and Development, LLC	50%	$	6,763
Cole/LBA JV OF Pleasanton CA, LLC	Affiliate of LBA Realty	90%	33,612
Cole/Faison JV Bethlehem GA, LLC	Faison-Winder Investors, LLC	90%	13,292
			$	53,667

_______________________________________________

(1) The Company’s ownership interest in this table reflects its legal ownership interest. Legal ownership may, at times, not equal the Company’s economic interest in the listed properties because of various provisions in certain joint venture agreements regarding distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns. As a result, the Company’s actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with its legal ownership interests.

(2) The total carrying amount of the investments is greater than the underlying equity in net assets by $10.2 million . This difference relates to a purchase price allocation of goodwill and a step up in fair value of the investment assets acquired in connection with the Cole Merger. The step up in fair value was allocated to the individual investment assets and is being amortized in accordance with the Company’s depreciation policy.

The Company accounts for the Unconsolidated Joint Ventures using the equity method of accounting as the Company has the ability to exercise significant influence, but not control, over operating and financial policies of these investments. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the joint ventures’ earnings and distributions. The Company records its proportionate share of net income from the Unconsolidated Joint Ventures in other income, net in the accompanying consolidated statements of operations. During the three and nine months ended September 30, 2015 , the Company recognized $0.1 million and $1.5 million , respectively, of equity in income from the Unconsolidated Joint Ventures, which is included in other income, net in the accompanying consolidated statements of operations. During the three and nine months ended September 30, 2014 , the Company recognized $0.2 million and $1.6 million of equity in income from the Unconsolidated Joint Ventures, respectively.

Tenant Concentration

As of September 30, 2015 , leases with Red Lobster® restaurants represented 12.0% of consolidated annualized rental income. Annualized rental income is rental revenue under our leases on operating properties reflecting straight-line rent adjustments associated with contractual rent increases in the leases as required by GAAP, which includes the effect of any tenant concessions, such as free rent, and excludes any contingent rent, such as percentage rent. There were no other tenants exceeding 10% of consolidated annualized rental income as of September 30, 2015 .

Geographic Concentration

As of September 30, 2015 , properties located in Texas represented 12.9% of consolidated annualized rental income. There were no other geographic concentrations exceeding 10% of consolidated annualized rental income as of September 30, 2015 .

Industry Concentration

As of September 30, 2015 , tenants in the casual dining restaurant industry accounted for 19.0% of consolidated annualized rental income. There were no other industry concentrations exceeding 10% of consolidated annualized rental income as of September 30, 2015 .

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Note 6 – Investment Securities, at Fair Value

Investment securities are considered available-for-sale and, therefore, increases or decreases in the fair value of these investments are recorded in accumulated other comprehensive income (loss) as a component of equity in the consolidated balance sheets unless the securities are considered to be other-than-temporarily impaired at which time the losses are reclassified to expense.

The following tables detail the unrealized gains and losses on investment securities as of September 30, 2015 and December 31, 2014 (in thousands):



	September 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
CMBS	$	52,502	$	2,598	$	(645	)	$	54,455



	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
CMBS	$	56,459	$	2,207	$	(20	)	$	58,646

As of September 30, 2015 and December 31, 2014 , the Company owned 10 CMBS with an estimated aggregate fair value of $54.5 million and $58.6 million , respectively. The Company generally receives monthly payments of principal and interest on the CMBS. As of September 30, 2015 , the Company earned interest on the CMBS at rates ranging between 5.88% and 8.95% . As of September 30, 2015 , the fair value of three CMBS were below their amortized cost. The Company believes that none of the unrealized losses on investment securities are other-than-temporary as management expects the Company will receive all contractual principal and interest related to these investments.

The scheduled maturity of the Company’s CMBS as of September 30, 2015 is as follows (in thousands):



	September 30, 2015
	Amortized Cost		Fair Value
Due within one year	$	—	$	—
Due after one year through five years	23,880		24,761
Due after five years through 10 years	11,738		12,287
Due after 10 years	16,884		17,407
Total	$	52,502	$	54,455

Note 7 – Loans Held for Investment

As of September 30, 2015 , the Company owned 11 loans held for investment with a weighted-average interest rate of 6.9% and weighted-average years to maturity of 9.3 years. The following table presents the composition of the loans held for investment as of September 30, 2015 (dollar amounts in thousands):



	Loans held for investment	Outstanding Balance		Carrying Value		Weighted-Average Interest Rate			Weighted-Average Years to Maturity
Mortgage notes receivable	10	$	26,544	$	24,702	6.3	%	⁽¹⁾	13.8	⁽²⁾
Unsecured note ⁽³⁾	1	15,300		15,300		8.0	%		1.5
Total	11	$	41,844	$	40,002	6.9	%		9.3

____________________________________


(1)	The interest rates on the mortgage notes receivable range from 5.57% to 7.24% , as of September 30, 2015 .


(2)	The mortgage notes receivable have maturity dates ranging from March 2016 to January 2033 .


(3)	The Company’s unsecured note is with an affiliate of the Former Manager, as defined within Note 15 – Equity . The unsecured note requires principal payments of $7.7 million on March 31, 2016 and $3.8 million on September 30, 2016 and the remaining balance is due at maturity, on March 31, 2017. The note may be pre-paid at par any time prior to maturity.

The Company’s mortgage notes receivable are comprised primarily of fully-amortizing or nearly fully-amortizing first mortgage loans. The Company has one mortgage note receivable where the Company does not receive monthly payments of principal and interest but rather the interest is capitalized into the outstanding balance that is due at maturity. The mortgage notes receivable are primarily on commercial real estate, each leased to a single tenant. Therefore, the Company’s monitoring of the

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

credit quality of its mortgage notes receivable is focused primarily on an analysis of the tenant, including review of tenant quality and ratings, trends in the tenant’s industry and general economic conditions and an analysis of measures of collateral coverage, such as an estimate of the loan-to-value ratio (principal amount outstanding divided by estimated value of the property) and its remaining term until maturity. As of September 30, 2015 and December 31, 2014 , the Company had no reserve for loan loss.

The following table summarizes the scheduled aggregate principal payments due to the Company on the loans held for investment subsequent to September 30, 2015 (in thousands):



	Outstanding Balance
Due within one year	$	9,298
Due after one year through five years	12,924
Due after five years through 10 years	6,516
Due after 10 years ⁽¹⁾	17,056
Total	$	45,794

____________________________________

(1) Includes additional $4.0 million of interest that will be capitalized into the outstanding balance of the note subsequent to September 30, 2015 .

Note 8 – Deferred Costs and Other Assets, Net

Deferred costs and other assets, net consisted of the following as of September 30, 2015 and December 31, 2014 (in thousands):



	September 30, 2015		December 31, 2014
Deferred costs, net	$	96,477	$	126,202
Accounts receivable, net ⁽¹⁾	54,598		66,021
Straight-line rent receivable	155,392		89,355
Prepaid expenses	15,484		15,171
Leasehold improvements, property and equipment, net ⁽²⁾	19,163		21,351
Restricted escrow deposits	5,835		34,339
Deferred tax asset and tax receivable	15,909		15,924
Program development costs, net ⁽³⁾	20,878		12,871
Derivative assets, at fair value	—		5,509
Other assets	2,070		3,179
Total	$	385,806	$	389,922

___________________________________


(1)	Allowance for doubtful accounts was $3.1 million and $2.5 million as of September 30, 2015 and December 31, 2014 , respectively.

(2)

Amortization expense for leasehold improvements totaled $0.4 million and $1.1 million for the three and nine months ended September 30, 2015 , respectively. Accumulated amortization was $2.3 million and $1.2 million as of September 30, 2015 and December 31, 2014 , respectively. Depreciation expense for property and equipment totaled $0.5 million and $1.5 million for the three and nine months ended September 30, 2015 , respectively. Accumulated depreciation was $3.1 million and $1.6 million as of September 30, 2015 and December 31, 2014 , respectively.


(3)	As of September 30, 2015 and December 31, 2014 , the Company had reserves of $20.2 million and $13.1 million , respectively, relating to the program development costs.

Note 9 – Fair Value Measures

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. U.S. GAAP guidance defines three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 – Unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. Changes in the type of inputs may result in a reclassification for certain assets. There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the nine months ended September 30, 2015 . The Company expects that changes in classifications between levels will be infrequent.

The Company performs quarterly impairment review procedures, primarily through continuous monitoring of events and changes in circumstances that could indicate the carrying amounts of its real estate assets may not be recoverable. Impairment indicators that the Company considers include, but are not limited to, bankruptcy or other credit concerns of a property’s major tenant or tenants, such as a history of late payments, rental concessions and other factors, as well as significant decreases in a property’s revenues due to lease terminations, vacancies, co-tenancy clauses, or reduced lease rates. When impairment indicators are identified, the Company assesses the recoverability of the assets by determining whether the carrying amount of the assets will be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying amount, the Company will adjust the real estate assets to their respective fair values and recognize an impairment loss. During the three months ended September 30, 2015 , no impairment indicators were identified through the procedures noted above.

During the second quarter of 2015 , the Company identified certain properties with a more likely than not probability of being disposed of within the next 12 to 24 months, in addition to the properties identified through the quarterly review procedures noted above. The Company considered the likely disposition to be an impairment indicator for these properties. As such, the Company reviewed estimated selling prices for these assets based on a number of factors including, but not limited to, existing leases in place, comparable lease rates and sales prices, third party opinions of value, comparable capitalization rates and estimated disposal costs. Of the properties reviewed, 161 properties were noted to have an estimated sales price, less disposal costs, that was less than the carrying amount of each respective property. As such, the Company reduced the carrying amounts of each asset to their respective fair values and recognized an impairment loss for such reductions. During the nine months ended September 30, 2015 and 2014 , real estate assets with carrying values totaling $319.3 million and $8.2 million , respectively, were deemed to be impaired and their carrying values were reduced to their estimated fair values of $234.0 million and $4.3 million , resulting in impairment charges of $85.3 million and $3.9 million , respectively.

The following table presents the impairment charges by asset class recorded during the nine months ended September 30, 2015 and 2014 (dollar amounts in thousands):



	Nine Months Ended September 30,
	2015			2014
Properties impaired	188			9

Asset classes impaired:
Investment in real estate assets, net	$	82,654		$	3,855
Investment in direct financing leases, net	3,417			—
Below-market lease liabilities, net	(730		)	—
Total impairment loss	$	85,341		$	3,855

The Company’s estimated fair values of its real estate assets were primarily based upon recent comparable sales transactions, which are considered to be Level 2 inputs, or based upon an income approach utilizing a present value technique to discount the expected cash flows using market participant assumptions for market rent and terminal values, which are considered to be Level 3 inputs.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014 , aggregated by the level in the fair value hierarchy within which those instruments fall (in thousands):



	Level 1		Level 2			Level 3		Balance as of September 30, 2015
Assets:
CMBS	$	—	$	—		$	54,455	$	54,455
Total assets	$	—	$	—		$	54,455	$	54,455
Liabilities:
Interest rate swap liabilities	$	—	$	(15,350	)	$	—	$	(15,350	)

	Level 1		Level 2			Level 3		Balance as of December 31, 2014
Assets:
CMBS	$	—	$	—		$	58,646	$	58,646
Interest rate swap assets	—		5,509			—		5,509
Total assets	$	—	$	5,509		$	58,646	$	64,155
Liabilities:
Interest rate swap liabilities	$	—	$	(7,384	)	$	—	$	(7,384	)

CMBS – The Company’s CMBS are carried at fair value and are valued using Level 3 inputs. The Company used estimated non-binding quoted market prices from the trading desks of financial institutions that are dealers in such securities for similar CMBS tranches that actively participate in the CMBS market. Broker quotes are only indicative of fair value and may not necessarily represent what the Company would receive in an actual trade for the applicable instrument. Management determines the prices are representative of fair value through their knowledge of and experience in the market. The significant unobservable input used in valuing the CMBS is the discount rate or market yield used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. Significant increases or decreases in the discount rate or market yield would result in a decrease or increase in the fair value measurement. The following risk factors are included in the consideration and selection of discount rates or market yields: risk of default, rating of the investment and comparable company investments.

Derivatives – The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of September 30, 2015 , the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, due to affiliates and accounts payable approximate their carrying value in the accompanying consolidated balance sheets due to their short-term nature and are classified as Level 1 under the fair value hierarchy.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The following are reconciliations of the changes in assets and (liabilities) with Level 3 inputs in the fair value hierarchy for the nine months ended September 30, 2015 and 2014 (in thousands):



	CMBS
Beginning balance, December 31, 2014	$	58,646
Total gains and losses:
Unrealized loss included in other comprehensive income, net	(232		)
Purchases, issuances, settlements and amortization:
Principal payments received	(4,055		)
Amortization included in net income	96
Ending balance, September 30, 2015	$	54,455



	CMBS			Series D Preferred Stock Embedded Derivative			Contingent Consideration Arrangements			Total
Beginning balance, December 31, 2013	$	60,583		$	(16,736	)	$	—		$	43,847
Total gains and losses:
Unrealized gain included in other comprehensive income, net	9,456			—			—			9,456
Changes in fair value included in net loss	—			(13,574		)	(990		)	(14,564		)
Purchases, issuances, settlements and amortization:
Fair value at purchase/issuance	151,197			—			(3,606		)	147,591
Sale of CMBS acquired in the Cole Merger	(151,248		)	—			—			(151,248		)
Reclassification of previous unrealized gains on investment securities into net loss-CMBS	(7,417		)	—			—			(7,417		)
Return of principal received	(3,678		)	—			—			(3,678		)
Amortization included in net loss	184			—			—			184
Reclassification of contingent consideration to held for sale	—			—			4,596			4,596
Redemption of Series D	—			30,310			—			30,310
Ending balance, September 30, 2014	$	59,077		$	—		$	—		$	59,077

The fair values of the Company’s financial instruments that are not reported at fair value in the consolidated balance sheets are reported below (dollar amounts in thousands):



	Level	Carrying Amount at September 30, 2015		Fair Value at September 30, 2015		Carrying Amount at December 31, 2014		Fair Value at December 31, 2014
Assets:
Loans held for investment	3	$	40,002	$	48,330	$	42,106	$	42,645

Liabilities:
Mortgage notes payable and other debt, net ⁽¹⁾	3	$	3,210,413	$	3,476,992	$	3,805,761	$	3,931,029
Corporate bonds, net	3	2,547,059		2,588,214		2,546,499		2,709,845
Convertible debt, net	3	981,031		1,020,495		977,521		1,088,069
Credit facilities	3	2,110,000		2,114,292		3,184,000		3,145,884
Total liabilities		$	8,848,503	$	9,199,993	$	10,513,781	$	10,874,827

_______________________________________________

(1) Includes mortgage notes secured by properties held for sale as of September 30, 2015 .

Loans held for investment – The fair value of the Company’s fixed-rate loan portfolio is estimated with a discounted cash flow analysis, utilizing scheduled cash flows and discount rates estimated by management to approximate market interest rates.

Mortgage notes payable and other debt and credit facilities – The fair value is estimated by an independent third party using a discounted cash flow analysis, based on management’s estimates of market interest rates.

Convertible debt and corporate bonds – The fair value is estimated based on current pricing marks received from an independent third party.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Note 10 – Debt

As of September 30, 2015 , the Company had $9.0 billion of debt outstanding, including net premiums, with a weighted-average years to maturity of 4.0 years and weighted-average interest rate of 3.65% . The following table summarizes the carrying value of debt as of September 30, 2015 and December 31, 2014 , and the debt activity for the nine months ended September 30, 2015 (in thousands):



					Nine Months Ended September 30, 2015
		Balance as of December 31, 2014			Debt Issuances		Repayments, Extinguishment and Assumptions			Accretion and (Amortization)			Balance as of September 30, 2015
Mortgage notes payable:
	Outstanding balance ⁽¹⁾	$	3,689,796		$	1,379	$	(457,900	)	$	—		$	3,233,275
	Net premiums ⁽²⁾⁽³⁾	70,139			—		8,020			(17,977		)	60,182
Other debt:
	Outstanding balance	45,325			—		(10,188		)	—			35,137
	Premium ⁽³⁾	501			—		—			(189		)	312
Mortgages and other debt, net		3,805,761			1,379		(460,068		)	(18,166		)	3,328,906

Corporate bonds:
	Outstanding balance	2,550,000			—		—			—			2,550,000
	Discount ⁽⁴⁾	(3,501		)	—		—			560			(2,941		)
Corporate bonds, net		2,546,499			—		—			560			2,547,059

Convertible debt:
	Outstanding balance	1,000,000			—		—			—			1,000,000
	Discount ⁽⁴⁾	(22,479		)	—		—			3,510			(18,969		)
Convertible debt, net		977,521			—		—			3,510			981,031

Credit facility:
	Outstanding balance	3,184,000			—		(1,074,000		)	—			2,110,000

Total debt		$	10,513,781		$	1,379	$	(1,534,068	)	$	(14,096	)	$	8,966,996

____________________________________


(1)	Includes $124.3 million of mortgage notes secured by properties held for sale as of September 30, 2015 .


(2)	Includes $5.8 million discount of mortgage notes associated with properties held for sale as of September 30, 2015 .


(3)	Net premiums on mortgages notes payable and other debt were recorded upon the assumption of the respective debt instruments in relation to the various mergers and acquisitions. Amortization of these net premiums is recorded as a reduction to interest expense over the remaining term of the respective debt instruments using the effective-interest method.


(4)	Discounts on the corporate bonds and convertible debt were recorded based upon the fair value of the respective debt instruments as of the respective issuance dates. Amortization of these discounts is recorded as an increase to interest expense over the remaining term of the respective debt instruments using the effective-interest method.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Mortgage Notes Payable

The Company’s mortgage notes payable consist of the following as of September 30, 2015 (dollar amounts in thousands):



	Encumbered Properties	Gross Carrying Value of Collateralized Properties ⁽¹⁾		Outstanding Balance ⁽²⁾		Weighted-Average Interest Rate ⁽³⁾		Weighted-Average Years to Maturity
Fixed-rate debt ⁽⁴⁾	677	$	6,250,140	$	3,225,103	5.03	%	5.4
Variable-rate debt	1	24,628		8,172		3.15	%	0.9
Total ⁽⁵⁾	678	$	6,274,768	$	3,233,275	5.02	%	5.3

____________________________________


(1)	Gross carrying value is gross real estate assets, including investment in direct financing leases, net of gross real estate liabilities.


(2)	Includes $124.3 million of mortgage notes secured by properties held for sale.


(3)	Weighted-average interest rate for variable-rate debt represents the interest rate in effect as of September 30, 2015 .


(4)	Includes $284.8 million of variable-rate debt fixed by way of interest rate swap arrangements.


(5)	The table above does not include loan amounts associated with the Unconsolidated Joint Ventures of $103.4 million , none of which is recourse to the Company. These loans mature on various dates ranging from October 2015 to July 2021 .

The Company’s mortgage loan agreements generally require restrictions on corporate guarantees and the maintenance of financial covenants including maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios). As of September 30, 2015 , the Company believes it was in compliance with the debt covenants under the mortgage loan agreements, except for a loan in default with a principal balance of $38.1 million that is described below.

During the three and nine months ended September 30, 2015 , an aggregate of $276.7 million and $388.7 million , respectively, of mortgage notes payable were repaid prior to maturity or assumed by the buyer in a property disposition. In connection with the extinguishments, the Company paid prepayment penalties and fees totaling $5,000 for the nine months ended September 30, 2015 , which are included in extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations. No such prepayment penalties were paid during the three months ended September 30, 2015 . During the three and nine months ended September 30, 2014 , an aggregate of $173.3 million and $1.0 billion , respectively, were repaid prior to maturity with prepayment fees totaling $3.0 million and $35.9 million , respectively, which are included in extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations. In addition, the Company paid $0.1 million and $10.2 million , respectively, during the three and nine months ended September 30, 2014 for the settlement of interest rate swaps that were associated with certain mortgage notes that were repaid prior to maturity, which approximated the fair value of the interest rate swaps.

The Company wrote off the deferred financing costs and net premiums associated with these mortgage notes payable, which resulted in a gain of $0.4 million during the nine months ended September 30, 2015 . No such gain was recorded during the three months ended September 30, 2015 . During the three and nine months ended September 30, 2014 , a gain of $1.9 million and $18.9 million , respectively, were recorded in relation to the write-off of deferred financing costs and net premiums. These costs are included in extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations. The mortgage notes payable repaid during the nine months ended September 30, 2015 had a weighted-average interest rate of 4.63% and a weighted-average remaining term of 16.2 years at the time of extinguishment.

On January 13, 2015, a substantially vacant office building in Bethesda, Maryland was foreclosed upon after the Company elected to stop making debt service payments on the related non-recourse loan with an outstanding balance of $53.8 million as of December 31, 2014. As a result of the foreclosure, the Company forfeited its right to the property and was relieved of all obligations on the non-recourse loan. During the nine months ended September 30, 2015 , the Company recorded a gain on the forgiveness of debt of $4.9 million , which is included in extinguishment and forgiveness of debt, net in the accompanying consolidated statements of operations.

On March 6, 2015, the Company received a notice of default from the lender of a non-recourse loan, with a principal balance of $38.1 million as of September 30, 2015 , due to the Company’s failure to pay a reserve payment required per the loan agreement. Due to the default, the Company is currently accruing interest at the default rate of interest of 10.68% per annum. The Company is actively negotiating with the servicer to either restructure the loan or complete foreclosure proceedings.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The following table summarizes the scheduled aggregate principal repayments due on mortgage notes subsequent to September 30, 2015 (in thousands):



	Total
October 1, 2015 - December 31, 2015	$	3,738
2016	243,978
2017	449,073
2018	210,948
2019	286,379
Thereafter	2,039,159
Total ⁽¹⁾	$	3,233,275

____________________________________


(1)	Includes $124.3 million of mortgage notes included in liabilities held for sale.

Other Debt

As of September 30, 2015 , the Company had a secured term loan from KBC Bank, N.V. with an outstanding principal balance of $35.1 million and remaining unamortized premium of $0.3 million (the “KBC Loan”). The interest coupon on the KBC Loan is fixed at 5.81% annually until its maturity in January 2018. The KBC Loan is non-recourse to the Company, subject to limited non-recourse exceptions. The KBC Loan provides for monthly payments of both principal and interest. The scheduled principal repayments subsequent to September 30, 2015 are $1.6 million , $12.5 million , $7.7 million and $13.3 million for the years ended December 31, 2015 , 2016 , 2017 and 2018 , respectively.

The KBC Loan is secured by various investment assets held by the Company. The following table is a summary of the amount outstanding and carrying value of the collateral by asset type as of September 30, 2015 (in thousands):



	Outstanding Balance		Collateral Carrying Value
Loans held for investment	$	9,708	$	20,428
Intercompany mortgage loans	2,715		8,013
CMBS	22,714		39,862
	$	35,137	$	68,303

Corporate Bonds

As of September 30, 2015 , the OP had aggregate senior unsecured notes of $2.55 billion outstanding (the “Senior Notes”). The following table presents the three senior notes with their respective terms (dollar amounts in thousands):



	Outstanding Balance		Interest Rate		Maturity Date
2017 Senior Notes	$	1,300,000	2.0	%	February 6, 2017
2019 Senior Notes	750,000		3.0	%	February 6, 2019
2024 Senior Notes	500,000		4.6	%	February 6, 2024
Total balance and weighted-average interest rate	$	2,550,000	2.8	%

The Senior Notes are guaranteed by the General Partner. The OP may redeem all or a part of any series of the Senior Notes at any time, at its option, for the redemption prices set forth in the indenture governing the Senior Notes. With respect to the 2019 Senior Notes and the 2024 Senior Notes, if such Senior Notes are redeemed on or after January 6, 2019 with respect to the 2019 Senior Notes, or November 6, 2023 with respect to the 2024 Senior Notes, the redemption price will equal 100% of the principal amount of the Senior Notes of the applicable series to be redeemed, plus accrued and unpaid interest on the amount being redeemed to, but excluding, the applicable redemption date. The Senior Notes are registered under the Securities Act of 1933, as amended, and are freely transferable. The Company believes it was in compliance with the covenants pursuant to the indenture governing the Senior Notes as of September 30, 2015 .

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Convertible Debt

As of September 30, 2015 , the OP had two tranches of convertible notes with an aggregate balance of $1.0 billion outstanding to the General Partner (the “Convertible Notes”) comprised of notes due in 2018 (“2018 Convertible Notes”) and notes due in 2020 (“2020 Convertible Notes”). The Convertible Notes are identical to the General Partner’s registered issuance of the same amount of notes to various purchasers in a public offering. The following table presents each of the 2018 Convertible Notes and the 2020 Convertible Notes listed below with their respective terms (dollar amounts in thousands):



	Outstanding Balance		Interest Rate		Conversion Rate ⁽¹⁾	Maturity Date
2018 Convertible Notes	$	597,500	3.00	%	60.5997	August 1, 2018
2020 Convertible Notes	402,500		3.75	%	66.7249	December 15, 2020
Total balance and weighted-average interest rate	$	1,000,000	3.30	%

____________________________________


(1)	Conversion rate represents the amount of the General Partner OP Units per $1,000 principal amount.

In connection with any permissible conversion election made by the holders of the identical convertible notes issued by the General Partner, the General Partner may elect to convert the 2018 Convertible Notes into cash, General Partner OP Units or a combination thereof, in limited circumstances prior to February 1, 2018 and may convert the 2018 Convertible Notes at any time into such consideration on or after February 1, 2018. Additionally, the General Partner may elect to convert the 2020 Convertible Notes into cash, General Partner OP Units or a combination thereof, in limited circumstances prior to June 15, 2020 and may convert the 2020 Convertible Notes at any time into such consideration on or after June 15, 2020. The Company believes it was in compliance with the covenants pursuant to the indenture governing the Convertible Notes as of September 30, 2015 .

Credit Facility

The General Partner, as guarantor, and the OP, as borrower, are parties to an unsecured credit facility (the “Credit Facility”) pursuant to a credit agreement, dated as of June 30, 2014, as amended, with Wells Fargo, National Association (“Wells Fargo”), as administrative agent and other lenders party thereto (the “Credit Agreement”).

On July 31, 2015, the General Partner and the OP entered into the Second Amendment to Credit Agreement (the “Second Amendment”) with Wells Fargo and other lenders party to the Credit Agreement. Pursuant to the Second Amendment, the maximum capacity under the Credit Facility was reduced from $3.6 billion to $3.3 billion , which included a reduction in the size of the $2.45 billion revolving credit facility to $2.3 billion and the elimination of the $150.0 million multicurrency revolving credit facility. The maximum aggregate dollar amount of letters of credit that may be outstanding at any one time under the Credit Facility was reduced from $50.0 million to $25.0 million .

In respect of financial covenants, the Second Amendment reduced the Company’s minimum Unencumbered Asset Value (as defined in the Credit Agreement) from $10.5 billion to $8.0 billion . For the purposes of determining Unencumbered Asset Value, the Company is permitted to include restaurant properties representing more than 30% of its Unencumbered Asset Value in such calculation such that: (i) from July 1, 2015 to June 29, 2016, up to 40% of the Unencumbered Asset Value may be comprised of restaurant properties; and (ii) from June 30, 2016 to December 30, 2016, up to 35% of the Unencumbered Asset Value may be comprised of restaurant properties. From December 31, 2016 on, the maximum percentage of Unencumbered Asset Value attributable to restaurant properties will be reduced back down to 30% . In connection with the Second Amendment, the Company agreed to pay certain customary fees to the consenting lenders and agreed to reimburse customary expenses of the arrangers, which are recorded as deferred financing costs and included in deferred costs and other assets, net on the accompanying consolidated unaudited balance sheets.

As of September 30, 2015 , the Credit Facility allowed for maximum borrowings of $3.3 billion , consisting of a $1.0 billion term loan and a $2.3 billion revolving credit facility. The outstanding balance on the Credit Facility was $2.1 billion , of which $1.1 billion bore a floating interest rate of 2.19% , at September 30, 2015 . The remaining outstanding balance on the Credit Facility of $1.0 billion is, in effect, fixed through the use of derivative instruments used to hedge interest rate volatility. Including the spread, which can vary based on the General Partner’s credit rating, the interest rate on this portion was 3.28% at September 30, 2015 . As of September 30, 2015 , a maximum of $1.2 billion was available to the OP for future borrowings, subject to borrowing availability.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The revolving credit facility generally bears interest at an annual rate of LIBOR plus from 1.00% to 1.80% or Base Rate plus 0.00% to 0.80% (based upon the General Partner’s then current credit rating). “Base Rate” is defined as the highest of the prime rate, the federal funds rate plus 0.50% or a floating rate based on one month LIBOR, determined on a daily basis. The term loan facility generally bears interest at an annual rate of LIBOR plus 1.15% to 2.05% , or Base Rate plus 0.15% to 1.05% (based upon the General Partner’s then current credit rating). In addition, the Credit Agreement provides the flexibility for interest rate auctions, pursuant to which, at the Company’s election, the Company may request that lenders make competitive bids to provide revolving loans, which competitive bids may be at pricing levels that differ from the foregoing interest rates.

The Credit Agreement provides for monthly interest payments under the Credit Facility. In the event of default, at the election of the majority of the lenders (or automatically upon a bankruptcy event of default with respect to the OP or the General Partner), the commitments of the lenders under the Credit Facility mature, and payment of any unpaid amounts in respect of the Credit Facility is accelerated. The revolving credit facility and the term loan facility both terminate on June 30, 2018 , in each case, unless extended in accordance with the terms of the Credit Agreement. The Credit Agreement provides for a one -year extension option with respect to each of the revolving credit facility and the term loan facility, exercisable at the Company’s election and subject to certain customary conditions, as well as certain customary “amend and extend” provisions. At any time, upon timely notice by the OP and subject to any breakage fees, the OP may prepay borrowings under the Credit Facility (subject to certain limitations applicable to the prepayment of any loans obtained through an interest rate auction, as described above). The OP incurs a fee equal to 0.15% to 0.25% per annum (based upon the General Partner’s then current credit rating) multiplied by the commitments (whether or not utilized) in respect of the dollar revolving credit facility. In addition, the OP incurs customary administrative agent, letter of credit issuance, letter of credit fronting, extension and other fees.

The Credit Facility requires restrictions on corporate guarantees, as well as the maintenance of financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) and the maintenance of a minimum net worth. The Company believes it was in compliance with the Credit Agreement and is not restricted from accessing the borrowing availability under the Credit Facility as of September 30, 2015 .

Note 11 – Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes in the fair value of derivatives designated that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three and nine months ended September 30, 2015 , such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, the Company estimates that an additional $8.6 million will be reclassified from other comprehensive income as an increase to interest expense.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

As of September 30, 2015 , the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (dollar amounts in thousands):

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the consolidated balance sheets as of September 30, 2015 and December 31, 2014 (in thousands):



Derivatives Designated as Hedging Instruments	Balance Sheet Location	September 30, 2015			December 31, 2014
Interest rate swaps	Deferred costs and other assets, net	$	—		$	4,941
Interest rate swaps	Deferred rent, derivative and other liabilities	$	(14,876	)	$	(7,384	)

In January 2014, the Company entered into an interest rate lock agreement with a notional amount of $250.0 million (the “Treasury Lock Agreement”). The Treasury Lock Agreement, which had an original maturity date of February 12, 2014, was entered into to hedge part of the Company’s interest rate exposure associated with the variability in future cash flows attributable to changes in the 10 -year U.S. treasury rates related to the planned issuance of debt securities in conjunction with the Cole Merger. In connection with the Company’s bond offering in February 2014, the Company settled the Treasury Lock Agreement for $3.9 million , which was accounted for as a cash flow hedge, recorded to other comprehensive loss and will be amortized into earnings over the 10 -year term of the Treasury Lock. The Company recognized $0.1 million and $0.4 million of interest expense for the three and nine months ended September 30, 2015 , respectively, related to the Treasury Lock Agreement.

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the requirements to be classified as hedging instruments. A loss of $1.4 million and loss of $2.1 million related to the change in the fair value of derivatives not designated as hedging instruments and other ineffectiveness was recorded directly in earnings for the three and nine months ended September 30, 2015 , respectively. The Company recorded a loss of $17.5 million and $10.4 million for the three and nine months ended September 30, 2014 , respectively.

As of September 30, 2015 , the Company had the following outstanding interest rate derivative that was not designated as a qualifying hedging relationship (dollar amounts in thousands):

The table below presents the fair value of the Company’s derivative financial instrument not designated as a hedge as well as its classification in the consolidated balance sheets as of September 30, 2015 and December 31, 2014 (in thousands):



Derivatives Not Designated as Hedging Instruments	Balance Sheet Location	September 30, 2015			December 31, 2014
Interest rate swaps	Deferred costs and other assets, net	$	—		$	568
Interest rate swaps	Deferred rent, derivative and other liabilities	$	(474	)	$	—

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Tabular Disclosure of Offsetting Derivatives

The table below details a gross presentation, the effects of offsetting and a net presentation of the Company’s derivatives as of September 30, 2015 and December 31, 2014 (in thousands). The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented in the accompanying consolidated balance sheets.



	Offsetting of Derivative Assets and Liabilities
	Gross Amounts of Recognized Assets		Gross Amounts of Recognized Liabilities			Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets Presented in the Consolidated Balance Sheets		Net Amounts of Liabilities Presented in the Consolidated Balance Sheets			Financial Instruments		Cash Collateral Received		Net Amount
September 30, 2015	$	—	$	(15,350	)	$	—	$	—	$	(15,350	)	$	—	$	—	$	(15,350	)
December 31, 2014	$	5,509	$	(7,384	)	$	—	$	5,509	$	(7,384	)	$	—	$	—	$	(1,875	)

Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision specifying that, if the Company either defaults or is capable of being declared in default on any of its indebtedness, the Company could also be declared in default on its derivative obligations.

As of September 30, 2015 , the fair value of the interest rate derivatives in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements, was $17.2 million . As of September 30, 2015 , the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of $17.2 million at September 30, 2015 .

Note 12 – Supplemental Cash Flow Disclosures

Supplemental cash flow information was as follows for the nine months ended September 30, 2015 and 2014 (in thousands):



	Nine Months Ended September 30,
	2015		2014
Supplemental Disclosures:
Cash paid for interest	$	280,659	$	248,698
Cash paid for income taxes	$	10,205	$	7,761
Non-cash investing and financing activities:
Common stock issued in merger with Cole	$	—	$	7,285,868
Accrued capital expenditures and real estate developments	$	4,363	$	12,634
Accrued deferred financing costs	$	164	$	—
Accrued distributions	$	130,648	$	9,927
Mortgage note payable relieved by foreclosure	$	53,798	$	—
Mortgage notes payable assumed in real estate disposition	$	300,720	$	22,701

Note 13 – Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following as of September 30, 2015 and December 31, 2014 (in thousands):



	September 30, 2015		December 31, 2014
Accrued interest	$	39,119	$	56,558
Accrued real estate taxes	60,133		37,633
Accounts payable	7,049		10,027
Accrued other	57,903		58,807
Total	$	164,204	$	163,025

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Note 14 – Commitments and Contingencies

Litigation

The Company is involved in various routine legal proceedings and claims incidental to the ordinary course of its business. There are no material legal proceedings pending against the Company, except as follows:

Regulatory Investigations and Litigation Relating to the Audit Committee Investigation

On October 29, 2014, the Company filed a Current Report on Form 8-K (the “October 29 8-K”) reporting the Audit Committee’s conclusion, based on the preliminary findings of its investigation, that certain previously issued consolidated financial statements of the Company, including those included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014, and related financial information should no longer be relied upon. Prior to that filing, the Audit Committee previewed for the SEC the information contained in the filing. Subsequent to that filing, the SEC provided notice that it had commenced a formal investigation and issued subpoenas calling for the production of various documents. In addition, the United States Attorney’s Office for the Southern District of New York contacted counsel for the Audit Committee and counsel for the Company with respect to this matter, and the Secretary of the Commonwealth of Massachusetts issued a subpoena calling for the production of various documents. The Audit Committee and the Company are cooperating with these regulators in their investigations.

As discussed below, the Company and certain of its former officers and current and former directors have been named as defendants in a number of lawsuits filed following the October 29 8-K, including class actions, derivative actions, and individual actions under the federal securities laws and state common and corporate laws in both federal and state courts in New York and Maryland.

Between October 30, 2014 and January 20, 2015, the Company and certain of its former officers and current and former directors (in addition to the Company’s underwriters for certain of the Company’s securities offerings, among other individuals and entities) were named as defendants in ten putative securities class action complaints filed in the United States District Court for the Southern District of New York (the “SDNY Actions”). The Court subsequently consolidated the SDNY Actions under the caption In re American Realty Capital Properties, Inc. Litigation , No. 15-MC-00040 (AKH) (the “SDNY Consolidated Securities Class Action”) and appointed a lead plaintiff. Following the Company’s issuance of its restated financials in March, 2015, on April 17, 2015 the lead plaintiff filed an amended class action complaint, which asserted claims for violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 promulgated thereunder, arising out of allegedly false and misleading statements in connection with the purchase or sale of the Company’s securities. On May 29, 2015, the defendants filed motions to dismiss certain claims in the SDNY Consolidated Securities Class Action. The court heard oral argument on the motions to dismiss on October 27, 2015. Although the court indicated that it would allow many of the claims asserted against the Company, the OP, and certain other defendants to proceed, in response to the motions made by the defendants, the court directed the plaintiffs to file a second amended class action complaint by December 11, 2015 to enable the plaintiffs to cure certain deficiencies that the court identified in the amended class action complaint.

In addition, on November 25, 2014, the Company and certain of its former officers and current and former directors were named as defendants in a putative securities class action complaint filed in the Circuit Court for Baltimore County, Maryland, captioned Wunsch v. American Realty Capital Properties, Inc., et al. , No. 03-C-14-012816 (the “Wunsch Action”). On December 23, 2014, the Company removed the action to the United States District Court for the District of Maryland (Northern Division), under the caption Wunsch v. American Realty Capital Properties, Inc., et al., No. 14-cv-4007 (ELH). On April 15, 2015, the Maryland court transferred the Wunsch Action to the United States District Court for the Southern District of New York, under the caption Wunsch v. American Realty Capital Properties, Inc., et al., No. 15-cv-2934. The Wunsch Action asserts claims for violations of Sections 11 and 15 of the Securities Act of 1933, arising out of allegedly false and misleading statements made in connection with the Company’s securities issued in connection with the Cole Merger. The Company is not yet required to respond to the complaint in the Wunsch Action.

Between November 2014 and February 2015, six shareholder derivative actions, purportedly in the name and for the benefit of the Company, were filed against certain of the Company’s former officers and current and former directors in the United States District Court for the Southern District of New York, which were later consolidated under the caption Serafin v. Schorsch, et al., No. 14-cv-9672 (AKH) (the “SDNY Consolidated Derivative Action”). In addition, between December 2014 and January 2015, the Company and certain of its former officers and current and former directors were named as defendants in two shareholder derivative actions filed in the Circuit Court for Baltimore City, Maryland: Meloche v. Schorsch, et al., No. 24-C-14-008210 (the “Meloche Action”) and Botifoll v. Schorsch, et al., No. 24-C-15-000245 (the “ Botifoll Action”). In addition, in January 2015, the

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Company and certain of its current directors, amongst others, were named as defendants in a shareholder derivative action filed in the Supreme Court of the State of New York, captioned Fran Kosky Roth IRA v. Rendell, et al. , No. 15-650269 (the “New York Derivative Action,” and together with the SDNY Consolidated Derivative Action, the Meloche Action, and the Botifoll Action, the “Derivative Actions”). The Derivative Actions sought money damages and other relief on behalf of the Company for, among other things, alleged breaches of fiduciary duty, abuse of control, gross mismanagement and unjust enrichment in connection with the alleged conduct underlying the claims asserted in the securities actions and negligence and breach of contract. On March 10, 2015, the plaintiffs in the SDNY Consolidated Derivative Action filed a consolidated amended complaint. On April 3, 2015, the Company and other defendants filed motions to dismiss the consolidated amended complaint in the SDNY Consolidated Derivative Action due to plaintiffs’ failure to make a pre-suit demand as required under Maryland law, which the Court granted on June 24, 2015. On July 8, 2015, the plaintiffs in the Botifoll Action voluntarily dismissed their complaint without prejudice. On July 15, 2015, the parties to the New York Derivative Action entered into a stipulation dismissing the action with prejudice as to plaintiffs’ failure to comply with the pre-suit demand requirement under Maryland law and without prejudice as to the underlying claims. On August 11, 2015, the plaintiff in the Meloche Action voluntarily dismissed the complaint without prejudice.

In January 2015, the Company and certain of its former directors and officers were named as defendants in an individual securities fraud action filed in the United States District Court for the Southern District of New York, captioned Jet Capital Master Fund, L.P. v. American Realty Capital Properties, Inc., et al., No. 15-cv-307 (AKH) (the “Jet Capital Action”). The Jet Capital Action seeks money damages and asserts claims for alleged violations of Sections 10(b), 18 and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, as well as common law fraud under New York law in connection with the purchase of the Company’s securities. On April 17, 2015, the plaintiff filed an amended complaint. On May 29, 2015, the Company and other defendants filed motions to dismiss certain claims in the Jet Capital Action. On October 27, 2015, the court heard oral argument on the motions to dismiss and denied the motions.

The Company, certain of its former officers and current and former directors, and ARC Properties Operating Partnership L.P. (in addition to several other individuals and entities) have also been named as defendants in two additional individual securities fraud actions filed in the United States District Court for the Southern District of New York, captioned Twin Securities, Inc. v. American Realty Capital Properties, Inc., et al. , No. 15-cv-1291 (the “Twin Securities Action”) and HG Vora Special Opportunities Master Fund, Ltd v. American Realty Capital Properties, Inc., et al., No. 15-cv-4107 (the “HG Vora Action”). The Twin Securities Action and the HG Vora Action seek money damages and assert claims for alleged violations of Sections 10(b), 14(a), 18, and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 promulgated thereunder, Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as well as common law fraud under New York law in connection with the purchase of the Company’s securities. The Company and defendants are not yet required to respond to the complaints in either of these actions.

On July 31, 2015, the Company and certain of its former officers and current and former directors were named as defendants in a shareholder derivative action filed in the United States District Court for the Southern District of New York, captioned Witchko v. Schorsch, et al ., No. 15-cv-06043 (AKH) (the “Witchko Action”). Witchko asserts claims under Section 14 of the Exchange Act arising out of allegedly false and misleading statements made in the Company’s proxy statements and the incorporation by reference of allegedly false and misleading financial statements. The action seeks money damages and other relief on behalf of the Company, for, among other things, alleged breach of fiduciary duty, abuse of control and unjust enrichment. On October 15, 2015, the Company and other defendants filed motions to dismiss the Witchko Action due to plaintiff’s failure to plead facts, as required under Maryland law, demonstrating that the Board’s decision to refuse plaintiff’s pre-suit demand was wrongful and not a protected business judgment.

On October 27, 2015, the Company and certain of its former officers, the OP, and other entities were named as defendants in an individual securities fraud action filed in the United States District Court for the District of Arizona, captioned Vanguard Specialized Funds, et al. v. VEREIT, Inc. et al. , No. 15-cv-02157 (ESW) (the “Vanguard Action”). The Vanguard Action seeks money damages and asserts claims for alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-9 promulgated thereunder, arising out of allegedly false and misleading statements in connection with the purchase or sale of the Company’s securities. The Vanguard Action also asserts claims under Arizona law pursuant to the Arizona Consumer Fraud Act and seeks punitive damages thereunder. The Company is not yet required to respond to the complaint in the Vanguard Action.

On October 27 and October 28, 2015, the Company and certain of its former officers, the OP, and other entities were named as defendants in four individual securities fraud actions filed in the United States District Court for the Southern District of New York: BlackRock ACS US Equity Tracker Fund, et al. v. American Realty Capital Properties, Inc. et al. , No. 15-cv-08464 (the “BlackRock Action”); PIMCO Funds: PIMCO Diversified Income Fund, et al. v. American Realty Capital Properties, Inc. et al. , No. 15-cv-08466 (the “PIMCO Action”); Clearline Capital Partners LP, et al. v. American Realty Capital Properties, Inc. et al. ,

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

No. 15-cv-08467 (the “Clearline Action”); and Pentwater Equity Opportunities Master Fund Ltd., et al. v. American Realty Capital Properties, Inc. et al. , No. 15-cv-08510 (the “Pentwater Action”). The BlackRock Action, the PIMCO Action, the Clearline Action and the Pentwater Action seek money damages arising out of allegedly false and misleading statements in connection with the purchase or sale of the Company’s securities. The BlackRock Action and the PIMCO Action assert claims for alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The BlackRock Action also asserts claims under Section 14(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. The Clearline Action and the Pentwater Action assert claims under Sections 10(b), 18(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Clearline Action and the Pentwater Action also assert a claim for common law fraud under New York law and seek punitive damages thereunder. The Company is not yet required to respond to the complaints in the BlackRock Action, the PIMCO Action, the Clearline Action or the Pentwater Action.

On October 28, 2015, the Company and certain of its former officers and directors (among other individuals and entities) were named as defendants in a putative securities class action complaint filed in the United States District Court for the Southern District of New York: IRA FBO John Esposito v. American Realty Capital Properties, Inc. et al. , No. 15-cv-08508 (the “Esposito Action”). The Esposito Action seeks money damages and asserts claims for alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 14(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder, arising out of allegedly false and misleading statements in connection with the purchase or sale of the Company’s securities. The Company is not yet required to respond to the complaint in the Esposito Action.

On October 30, 2015, the Company and certain of its former officers and directors were named as defendants in a shareholder derivative action filed in the United States District Court for the Southern District of New York, captioned Serafin, et al. v. Schorsch, et al. , No. 15-cv-08563 (the “Serafin Action”). The action seeks money damages and other relief on behalf of the Company for, among other things, alleged breach of fiduciary duty and contribution and indemnification. The Company and defendants are not yet required to respond to the complaint in this action.

The Company has not reserved amounts for any of the litigation or investigation matters referenced above either because we have not concluded that a loss is probable in the matter or because we believe that any probable loss or range of loss is not reasonably estimable at this time.

ARCT III Litigation Matters

After the announcement of the merger agreement with American Realty Capital Trust III, Inc. (“ARCT III”) in December 2012 (the “ARCT III Merger Agreement”), a putative class action lawsuit was filed in January 2013 against the Company, the OP, ARCT III, ARCT III’s operating partnership, members of the board of directors of ARCT III and certain subsidiaries of the Company in Supreme Court in the State of New York, captioned Quall v. American Realty Capital Properties, et al., No. 650329/2013. The plaintiff alleged, among other things, that the ARCT III board breached its fiduciary duties in connection with the transactions contemplated under the ARCT III Merger Agreement. In February 2013, the parties agreed to a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of ARCT III stockholders. The proposed settlement terms required certain additional disclosures related to the merger, which were included in a Current Report on Form 8-K filed by ARCT III with the SEC on February 21, 2013, but did not include any monetary payment to plaintiff. The memorandum of understanding also provided that the parties would enter into a stipulation of settlement, which would be subject to customary conditions, including confirmatory discovery and court approval following notice to ARCT III’s stockholders. If the parties enter into a stipulation of settlement, which has not yet occurred, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any settlement will be under the same terms as those contemplated by the memorandum of understanding.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

CapLease Litigation Matters

Following the announcement of the merger agreement with CapLease in May 2013, a number of lawsuits were filed by CapLease stockholders, the following of which remain pending:

On June 25, 2013, a putative class action and derivative lawsuit was filed in the Circuit Court for Baltimore City against the Company, the OP, CapLease, and members of the CapLease board of directors, among others, captioned Tarver v. CapLease, Inc., et al., No. 24-C-13-004176 (the “Tarver Action”). The complaint alleged, among other things, that the merger agreement was the product of breaches of fiduciary duty by the CapLease directors because the transaction purportedly did not provide for full and fair value for the CapLease shareholders and was not the result of a competitive bidding process, the merger agreement allegedly contained coercive deal protection measures and the merger was purportedly approved as a result of improper self-dealing by certain defendants who would receive certain alleged employment compensation benefits and continued employment pursuant to the merger agreement. The complaint also alleged that CapLease,the Company, the OP and others aided and abetted the CapLease directors’ alleged breaches of fiduciary duty.

In August 2013, counsel in the Tarver Action filed a motion for a stay in the Baltimore Court, informing the court that the plaintiff had agreed to join and participate in the prosecution of other actions concerning the CapLease transaction then pending in a New York court (which were subsequently dismissed). The stay was granted by the Baltimore Court and there has been no subsequent activity in the Tarver Action.

In October 2013, a putative class action lawsuit was filed in the Circuit Court for Baltimore City against the Company, the OP, CapLease, and members of the CapLease board of directors, among others, captioned Poling v. CapLease, Inc., et al., No. 24-C-13-006178 (the “Poling Action”). The complaint alleged that the merger agreement breached the terms of the CapLease 8.375% Series B Cumulative Redeemable Preferred Stock (“Series B”) and the terms of the 7.25% Series C Cumulative Redeemable Preferred Stock (“Series C”) and was in violation of the Series B Articles Supplementary and the Series C Articles Supplementary. The complaint alleged claims for breach of contract and breach of fiduciary duty against the CapLease entities and the CapLease board of directors, and that the Company, the OP and Safari Acquisition, LLC aided and abetted CapLease and the CapLease directors’ alleged breach of contract and breach of fiduciary duty.

In December 2013, all Defendants filed a motion to dismiss the Poling Action, which was granted by the court in May 2015. Plaintiff filed a notice of appeal on June 4, 2015.

Cole Litigation Matters

Two actions filed in March and April 2013 in the United States District Court for the District of Arizona, assert shareholder class action claims under the Securities Act of 1933, along with claims for breach of fiduciary duty, abuse of control, corporate waste, and unjust enrichment, among others, relating to the merger between a wholly owned subsidiary of Cole and Cole Holdings Corporation, pursuant to which Cole became a self-managed REIT; Schindler v. Cole Holdings Corp., et al., 13-cv-00712; and Carter v. Cole Holdings Corp., et al., 13-cv-00629. Defendants filed a motion to dismiss both complaints in January 2014. Both of those lawsuits have been stayed by the Court pursuant to a joint request made by all parties pending final approval of the Consolidated Maryland Cole Merger Action described below.

To date, a number of lawsuits have been filed in connection with the Cole Merger, the following of which remain pending. Between October and November 2013, eight putative stockholder class action or derivative lawsuits were filed in the Circuit Court for Baltimore City, Maryland, which were consolidated in December 2013, under the caption Polage v. Cole Real Estate Investments, Inc., et al. , 24-c-13-006665 (the “Consolidated Maryland Cole Merger Action”).

These lawsuits named the Company, Cole and Cole’s board of directors as defendants, and certain of the actions also named CREInvestments, LLC, a Maryland limited liability company and a wholly-owned subsidiary of Cole, as a defendant. Each complaint generally alleged that the individual defendants breached fiduciary duties owed to stockholders of Cole in connection with the Cole Merger, and that certain entity defendants aided and abetted those breaches. The breach of fiduciary duty claims asserted included claims that the Cole Merger did not provide for full and fair value for the Cole shareholders and was the product of an “inadequate sale process,” that the Cole Merger Agreement contained coercive deal protection measures and that the Cole Merger Agreement and the Cole Merger were approved as a result of, or in a manner which facilitated, improper self-dealing by certain defendants. In addition, certain of the lawsuits claimed that the individual defendants breached their duty of candor to shareholders and/or asserted claims derivatively against the individual defendants for their alleged breach of fiduciary duties owed to Cole, waste of corporate assets and unjust enrichment. Among other remedies, the complaints sought unspecified money damages, costs and attorneys’ fees.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

In January 2014, the parties to the Consolidated Maryland Cole Merger Action entered into a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of Cole stockholders. The proposed settlement terms required Cole to make certain additional disclosures related to the Cole Merger, which were included in a Current Report on Form 8-K filed by Cole with the SEC on January 14, 2014. The memorandum of understanding also contemplated that the parties would enter into a stipulation of settlement, subject to customary conditions, including confirmatory discovery and court approval following notice to Cole’s stockholders. In August 2014, the parties in the Consolidated Maryland Cole Merger Action executed a Stipulation and Release and Agreement of Compromise and Settlement (the “Stipulation”) and the Baltimore Circuit Court entered an Order on Preliminary Approval of Derivative and Class Action Settlement and Class Action Certification and scheduled a final settlement hearing.

In December 2014, the parties in the Consolidated Maryland Cole Merger Action executed an Amended Stipulation and Release and Agreement of Compromise and Settlement (the “Amended Stipulation”) modifying the Stipulation. In January 2015, the Baltimore Circuit Court issued an order approving the settlement pursuant to the terms of the Amended Stipulation. Under the terms of the approved settlement, defendants paid a settlement amount of $14.0 million , half of which was to be used for attorney’s fees. One objector is pursuing an appeal of the settlement order. That appeal is pending.

In December 2013, Realistic Partners filed a putative class action lawsuit against the Company and the then-members of its board of directors in the Supreme Court for the State of New York, captioned Realistic Partners v. American Realty Capital Partners, et al., No. 654468/2013. Cole was later added as a defendant. The plaintiff alleged, among other things, that the board of the Company breached its fiduciary duties in connection with the transactions contemplated under the Cole Merger Agreement and that Cole aided and abetted those breaches. In January 2014, the parties entered into a memorandum of understanding regarding settlement of all claims asserted on behalf of the alleged class of the Company’s stockholders. The proposed settlement terms required the Company to make certain additional disclosures related to the Cole Merger, which were included in a Current Report on Form 8-K filed by the Company with the SEC on January 17, 2014. The memorandum of understanding also contemplated that the parties would enter into a stipulation of settlement, which would be subject to customary conditions, including confirmatory discovery and court approval following notice to the Company’s stockholders, and provided that the defendants would not object to a payment of up to $625,000 for attorneys’ fees. If the parties enter into a stipulation of settlement, which has not occurred, a hearing will be scheduled at which the court will consider the fairness, reasonableness and adequacy of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement, that the court will approve any proposed settlement, or that any eventual settlement will be under the same terms as those contemplated by the memorandum of understanding.

Contractual Lease Obligations

The following table reflects the minimum base rent payments due from the Company over the next five years and thereafter for certain ground lease obligations, which are substantially reimbursable by our tenants, and office lease obligations (in thousands):



	Future Minimum Base Rent Payments
	Ground Leases		Offices Leases
October 1, 2015 - December 31, 2015	$	4,845	$	1,292
2016	18,518		5,010
2017	17,947		4,585
2018	15,785		4,703
2019	15,383		4,769
Thereafter	251,217		18,558
Total	$	323,695	$	38,917

Purchase Commitments

Cole Capital enters into purchase and sale agreements and deposits funds into escrow towards the purchase of real estate assets, most of which are expected to be assigned to one of the Managed REITs at or prior to the closing of the respective acquisition. As of September 30, 2015 , Cole Capital was a party to 26 purchase and sale agreements with unaffiliated third-party sellers to purchase a 100% interest in 33 properties, subject to meeting certain criteria, for an aggregate purchase price of $417.0 million , exclusive of closing costs. As of September 30, 2015 , Cole Capital had $5.9 million of property escrow deposits held by escrow agents in connection with these future property acquisitions, which may be forfeited if the transactions are not completed under certain circumstances. Cole Capital will be reimbursed by the assigned Managed REIT for amounts escrowed when the property is assigned to the respective Managed REIT.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Environmental Matters

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

Note 15 – Equity

Common Stock and General Partner OP Units

The General Partner is authorized to issue up to 1.5 billion shares of Common Stock. As of September 30, 2015 , the General Partner had approximately 905.0 million common shares issued and outstanding.

Additionally, the Operating Partnership had approximately 905.0 million General Partner OP Units issued and outstanding as of September 30, 2015 , corresponding to the General Partner’s outstanding shares of Common Stock.

Preferred Stock and Preferred OP Units

On January 3, 2014, in connection with the ARCT IV Merger, 42.2 million shares of Series F Preferred Stock were issued, resulting in the Operating Partnership concurrently issuing 42.2 million General Partner Series F preferred units (“General Partner Series F Preferred Units”) to the General Partner, and 700,000 Series F Preferred Units (“Limited Partner Series F Preferred Units”) to holders of each outstanding unit of American Realty Capital Operating Partnership IV, L.P. (the “ARCT IV Operating Partnership”) (each, an “ARCT IV OP Unit”). As of September 30, 2015 , there were approximately 42.8 million shares of Series F Preferred Stock (and approximately 42.8 million corresponding General Partner Series F Preferred Units) and 86,874 Limited Partner Series F Preferred Units issued and outstanding.

The Series F Preferred Units contain the same terms as the Series F Preferred Stock. Therefore, the Series F Preferred Stock/Units will pay cumulative cash dividends at the rate of 6.70% per annum on their liquidation preference of $25.00 per share/unit (equivalent to $1.675 per share/unit on an annual basis). The Series F Preferred Stock is not redeemable by the Company before the fifth anniversary of the date on which such Series F Preferred Stock was issued (the “Initial Redemption Date”), except under circumstances intended to preserve the General Partner’s status as a REIT for federal and/or state income tax purposes and except upon the occurrence of a change of control. On and after the Initial Redemption Date, the Company may, at its option, redeem shares of the Series F Preferred Stock, in whole or from time to time in part, at a redemption price of $25.00 per share plus, subject to exceptions, any accrued and unpaid dividends thereon to the date fixed for redemption. The shares of Series F Preferred Stock have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless the General Partner redeems or otherwise repurchases them or they become convertible and are converted into Common Stock (or, if applicable, alternative consideration). The Series F Preferred Stock traded on the NASDAQ under the symbol “ARCPP” through July 30, 2015. The Series F Preferred Stock began trading on the NYSE under the symbol “VER PRF” on July 31, 2015.

Limited Partner OP Units

As of September 30, 2015 and December 31, 2014 , the Operating Partnership had approximately 23.8 million of Limited Partner OP Units outstanding.

On March 11, 2015, the Company received redemption requests totaling approximately 13.1 million OP Units ( $126.7 million based on a redemption price of $9.65 ) from certain affiliates of ARC Properties Advisors, LLC (the “Former Manager”). The Company believes it has potential claims against recipients of those OP Units and is engaged in discussions with affiliates of the Former Manager regarding the redemption requests. Pending any resolution, the Company does not currently intend to satisfy any of the redemption requests. In light of the potential claims, the OP did not pay distributions in respect of a substantial portion of the outstanding Limited Partner OP Units on October 15, 2015, when the Common Stock dividend was otherwise paid.

Public Offerings

On May 28, 2014, the General Partner closed on a public offering of 138.0 million shares of Common Stock at a price of $12.00 per share. The net proceeds to the General Partner were $1.6 billion after deducting underwriting discounts, commissions and offering-related expenses. Concurrently, the Operating Partnership issued the General Partner 138.0 million General Partner OP Units.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Common Stock Dividends

On December 23, 2014, in connection with the amendments to the Credit Facility, the Company agreed to suspend payment of dividends on its common stock until it complied with certain financial statement delivery and other information requirements. On March 30, 2015, the Company satisfied these financial statement and other information requirements. On August 5, 2015, the Company declared a dividend of $0.1375 per share of Common Stock (equaling an annualized dividend rate of $0.55 per share) to stockholders of record as of September 30, 2015 , which was paid on October 15, 2015, and December 31, 2015, which will be paid on January 15, 2016.

Common Stock Repurchases

Under the General Partner’s Equity Plan (defined below), individuals have the option to have the General Partner repurchase shares vesting from awards made under the Equity Plan in order to satisfy the minimum federal and state tax withholding obligations. During the nine months ended September 30, 2015 , the General Partner repurchased 183,492 shares to satisfy the federal and state tax withholding on behalf of employees.

Note 16 – Equity-based Compensation

Equity Plan

The General Partner has adopted an equity plan (the “Equity Plan”), which provides for the grant of stock options, stock appreciation rights, restricted shares of Common Stock (“Restricted Shares”), restricted stock units (“Restricted Stock Units”), dividend equivalent rights and other stock-based awards to the General Partner’s and its affiliates’ non-executive directors, officers and other employees and advisors or consultants who are providing services to the General Partner or its affiliates. To date, the General Partner has granted fully vested shares of Common Stock, Restricted Shares, Restricted Stock Units and Deferred Stock Units, as defined below, under the Equity Plan. Restricted Shares provide for rights identical to those of Common Stock. Restricted Stock Units do not provide for any rights of a common stockholder prior to the vesting of such Restricted Stock Units. In accordance with U.S. GAAP, Restricted Shares are considered issued and outstanding. As is the case when fully vested shares of Common Stock are issued from the Equity Plan, for each Restricted Share awarded under the Equity Plan, the Operating Partnership issues a General Partner OP Unit to the General Partner with identical terms. Upon vesting of Restricted Stock Units, the Operating Partnership issues a General Partner OP Unit to the General Partner for each share of Common Stock issued as a result of such vesting.

The General Partner authorized and reserved a total number of shares equal to 10.0% of the total number of issued and outstanding shares of Common Stock (on a fully diluted basis assuming the redemption of all OP Units for shares of Common Stock) to be issued at any time under the Equity Plan for equity incentive awards. As of September 30, 2015 , the General Partner had cumulatively awarded under its Equity Plan approximately 4.2 million Restricted Shares, net of the forfeiture of 3.5 million Restricted Shares through that date, 2.1 million Restricted Stock Units, net of the forfeiture of 0.2 million Restricted Stock Units through that date, and 0.1 million Deferred Stock Units, as defined below, collectively representing approximately 6.4 million shares of Common Stock. Accordingly, as of such date, approximately 86.4 million additional shares were available for future issuance.

During the nine months ended September 30, 2015 , the General Partner awarded 5,634 common shares. The fair value of the awards was determined using the closing stock price on the grant date and expensed in full on the grant date. The Company recorded $0.1 million of compensation expense related to the awards for the nine months ended September 30, 2015 , which is recorded in general and administrative expense in the accompanying consolidated statements of operations.

Restricted Shares

The Company has issued Restricted Shares to certain employees and non-executive directors beginning in 2011 through September 30, 2015 . In addition, the Company issued Restricted Shares to employees of affiliates of the Former Manager prior to 2015. The fair value of the Restricted Shares granted to employees under the Equity Plan is generally determined using the closing stock price on the grant date and is expensed over the requisite service period on a straight-line basis. The fair value of Restricted Shares granted to non-executive directors and employees of affiliates of the Former Manager under the Equity Plan is measured based upon the fair value of goods or services received or the equity instruments granted, whichever is more reliably determinable and is expensed in full at the date of grant. During the three and nine months ended September 30, 2015 , the Company recorded $0.6 million and $2.7 million , respectively, of compensation expense related to the Restricted Shares, which is recorded in general and administrative expense in the accompanying consolidated statements of operations.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The following table details the activity of the Restricted Shares during the nine months ended September 30, 2015 .



	Restricted Shares		Weighted-Average Grant Date Fair Value
Unvested shares, December 31, 2014	2,684,062		$	13.84
Granted	4,010		9.76
Vested	(749,184	)	13.95
Forfeited	(424,654	)	13.64
Unvested shares, September 30, 2015	1,514,234		$	13.84

Time-Based Restricted Stock Units

During the nine months ended September 30, 2015 , the General Partner awarded Restricted Stock Units to certain employees that will vest if the recipient maintains his/her employment over the requisite service period (the “Time-Based Restricted Stock Units”). The fair value of the Time-Based Restricted Stock Units granted to employees under the Equity Plan is generally determined using the closing stock price on the grant date and is expensed over the requisite service period on a straight-line basis, which is generally three years. During the three and nine months ended September 30, 2015 , the Company recorded $0.5 million and $1.1 million , respectively, of compensation expense related to the Time-Based Restricted Stock Units, which is recorded in general and administrative expense in the accompanying consolidated statements of operations.

Deferred Stock Units

During the nine months ended September 30, 2015 , the General Partner awarded Deferred Stock Units to non-executive directors under the Equity Plan (the “Deferred Stock Units”). Each Deferred Stock Unit represents the right to receive one share of Common Stock. The Deferred Stock Units provide for immediate vesting and will be settled with Common Stock on the earlier of the date on which the respective director separates from the Company or the third anniversary of the grant date. The fair value of the Deferred Stock Units is determined using the closing stock price on the grant date and is expensed in full on the grant date. During the three and nine months ended September 30, 2015 , the Company recorded $0.1 million and $0.8 million , respectively, of expense related to the Deferred Stock Units, which is recorded in general and administrative expense in the accompanying consolidated statements of operations.

The following table details the activity of the Time-Based Restricted Stock Units and Deferred Stock Units during the nine months ended September 30, 2015 .



	Time-Based Restricted Stock Units		Weighted-Average Grant Date Fair Value		Deferred Stock Units		Weighted-Average Grant Date Fair Value
Unvested units, December 31, 2014	—		$	—	—		$	—
Granted	642,808		9.68		90,076		8.75
Vested	(379	)	9.76		(90,076	)	8.75
Forfeited	(30,344	)	9.76		—		—
Unvested units, September 30, 2015	612,085		$	9.68	—		$	—

Market-Based Restricted Stock Units

During the nine months ended September 30, 2015 , the General Partner awarded Restricted Stock Units to certain employees under the Equity Plan that are contingent upon the Common Stock reaching a certain market price (the “Market-Based Restricted Stock Units”). The Market-Based Restricted Stock Units will vest on December 31, 2015 if the employee is still employed as of such date and if the closing price of the Common Stock exceeds $10 per share for 20 consecutive trading days (the “Market Condition”) prior to December 31, 2015. If the Market Condition is achieved subsequent to December 31, 2015 but prior to December 31, 2017, the Market-Based Restricted Stock Units will vest on the date the Market Condition is satisfied, provided the recipient has maintained his/her continuous employment for the required period. If the Market Condition is not satisfied by December 31, 2017, the Market-Based Restricted Stock Units will become null and void. The fair value and derived service period of the Market-Based Restricted Stock Units as of their grant date is determined using a Monte Carlo simulation, which takes into account multiple input variables that determine the probability of satisfying the Market Condition. The method requires the input of assumptions, including the future dividend yield and expected volatility of the Common Stock. Compensation expense relating to the awards that are expected to vest upon achieving the Market Condition is recognized on a straight-line basis over the derived service period regardless of whether the Market Condition is satisfied, provided that the requisite service condition has been

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

achieved. The amount of periodic expense recognized is based upon the estimated forfeiture rate, which is updated according to actual forfeiture activity. During the three and nine months ended September 30, 2015 , the Company recorded $2.2 million and $4.3 million , respectively, of expense related to the Market-Based Restricted Stock Units which is recorded in general and administrative expense in the accompanying consolidated statements of operations.

Long-Term Incentive Awards

During the nine months ended September 30, 2015 , the General Partner awarded long-term incentive-based Restricted Stock Units (the “LTI Target Awards”) to certain employees under the Equity Plan. Vesting of the LTI Target Awards is based upon the General Partner’s level of achievement of total stockholder return (“TSR”), including both share price appreciation and common stock dividends, as measured equally against a market index and against a peer group for the period from April 1, 2015 through December 31, 2017 (“LTI Performance Period”).

The fair value and derived service period of the LTI Target Awards as of their grant date is determined using a Monte Carlo simulation which takes into account multiple input variables that determine the probability of satisfying the required TSR, as outlined in the award agreements. This method requires the input of assumptions, including the future dividend yield, the expected volatility of the Common Stock and the expected volatility of the market index constituents and the peer group. Compensation expense relating to awards that are expected to vest based upon the General Partner’s expected TSR is recognized on a straight-line basis over the derived service period regardless of whether the necessary TSR is attained, provided that the requisite service condition has been achieved. The amount of periodic expense recognized is based upon the estimated forfeiture rate, which is updated according to actual forfeiture activity. During the three and nine months ended September 30, 2015 , the Company recorded $0.6 million and $1.3 million , respectively, of expense related to the LTI Target Awards, which is recorded in general and administrative expense in the accompanying consolidated statements of operations.

The following table details the activity of the unvested Market-Based Restricted Stock Units and the LTI Target Awards during the nine months ended September 30, 2015 .



	Market-Based Restricted Stock Units		Weighted-Average Grant Date Fair Value		LTI Target Awards		Weighted-Average Grant Date Fair Value
Unvested units, December 31, 2014	—		$	—	—		$	—
Granted	922,686		8.57		759,241		11.65
Vested	—		—		(828	)	11.77
Forfeited	(95,592	)	8.58		(60,614	)	11.77
Unvested units, September 30, 2015	827,094		$	8.57	697,799		$	11.64

Director Stock Plan

The General Partner adopted the Non-Executive Director Stock Plan (the “Director Stock Plan”), which provides for the grant of Restricted Shares of common stock to each of the General Partner’s non-executive directors. As of September 30, 2015 , all shares awarded by the General Partner have vested and there was no activity within the Director Stock Plan during the nine months ended September 30, 2015 .

The fair value of these Restricted Shares, as well as the corresponding General Partner OP Units issued by the Operating Partnership, under the Director Stock Plan is determined based upon the closing stock price on the grant date.

Multi-Year Outperformance Plans

Upon consummation of the merger with ARCT III, the Company entered into the 2013 Advisor Multi-Year Outperformance Agreement (the “OPP”) with the Former Manager, whereby the Former Manager was able to earn compensation upon the attainment of stockholder value creation targets.

Under the OPP, the Former Manager was granted long-term incentive plan units of the OP (“LTIP Units”), which could be earned or forfeited based on the General Partner’s total return to stockholders, as defined by the OPP, for the three -year period that commenced on December 11, 2012.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Pursuant to previous authorization from the General Partner’s board of directors, as a result of the termination of the Management Agreement, all of the approximately 8.2 million LTIP Units were deemed vested and convertible into OP Units upon the consummation of the Company’s transition to self-management on January 8, 2014 and were converted into OP Units on such date.

On October 3, 2013, the General Partner’s board of directors approved a multi-year outperformance plan (the “2014 OPP”), which became effective upon the General Partner’s transition to self-management on January 8, 2014. Under the 2014 OPP, individual agreements were entered into between the General Partner and the participants selected by the General Partner’s board of directors (the “Participants”) that set forth the Participant’s participation percentage in the 2014 OPP and the number of LTIP Units of the OP subject to the award (“OPP Agreements”). Under the 2014 OPP and the OPP Agreements, the Participants were eligible to earn performance-based bonus awards equal to the Participant’s participation percentage of a pool that is funded up to a maximum award opportunity of approximately 5% of the General Partner’s equity market capitalization at the time of the approval of the 2014 OPP which, following the Audit Committee’s and Company’s review, was determined to be $120.0 million , not the $218.1 million pool which had been used originally to calculate and report the awards issued to the Participants.

During the three months ended December 31, 2014 , all of the Participants in the 2014 OPP departed from the Company and forfeited all of their interests in the 2014 OPP. As such, all equity-based compensation expense related to the 2014 OPP was reversed in the three months ended December 31, 2014 and no expense was recorded during the three and nine months ended September 30, 2015 . During the three and nine months ended September 30, 2014 , the Company recorded $2.7 million and $8.0 million of equity-based compensation expense relating to the 2014 OPP, which is included in general and administrative expense in the accompanying statements of operations.

The Compensation Committee of the General Partner’s board of directors (the “Compensation Committee”) elected to terminate the 2014 OPP on April 23, 2015, which had zero LTIP Units outstanding following the fourth quarter 2014 departures of the Participants. During the first quarter of 2015, the Compensation Committee, with input from its independent compensation consultant, elected to adopt the LTI Target Award structure described above.

Note 17 – Related Party Transactions and Arrangements

Prior to January 8, 2014, the Former Manager managed the Company’s affairs on a day-to-day basis, with the exception of certain acquisition, accounting and portfolio management services performed by employees of the Company. In August 2013, the Company’s board of directors determined that it was in the best interest of the Company and its stockholders to become self-managed, and the Company transitioned to self-management on January 8, 2014. In connection with becoming self-managed, the General Partner terminated the management agreement with the Former Manager and the General Partner and the OP entered into employment and incentive compensation arrangements with certain former executives.

In 2014, the Company, ARCT III and ARCT IV incurred commissions, fees and expenses payable to the Former Manager and its affiliates including Realty Capital Securities, LLC (“RCS”), RCS Advisory Services, LLC (“RCS Advisory”), AR Capital, LLC (“ARC”), ARC Advisory Services, LLC (“ARC Advisory”), American Realty Capital Advisors III, LLC (the “ARCT III Advisor”), American Realty Capital Advisors IV, LLC (the “ARCT IV Advisor”), American National Stock Transfer, LLC (“ANST”) and ARC Real Estate Partners, LLC (“ARC Real Estate”). As a result of the resignations of certain officers and directors in December 2014, the Former Manager and its affiliates are no longer affiliated with the Company.

During the three and nine months ended September 30, 2015 , there were no material transactions with the Former Manager or any of the Former Manager’s affiliates.

The Audit Committee Investigation identified certain payments made by the Company to the Former Manager and its affiliates that were not sufficiently documented or that otherwise warrant scrutiny. As of December 31, 2014 , the Company had recovered consideration valued at $8.5 million in respect of such payments. The Company is considering whether it has a right to seek recovery for any other such payments and, if so, its alternatives for seeking recovery. The Company believes it has potential claims against recipients of certain OP Units and is engaged in discussions with affiliates of the Former Manager regarding pending redemption requests. Prior to any resolution, the Company does not currently intend to satisfy any of the redemption requests. See Note 15 – Equity for further discussion. As of September 30, 2015 , no asset has been recognized in the accompanying consolidated financial statements related to any potential recovery .

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The following table summarizes the related party fees and expenses incurred by the Company and ARCT IV by category and the aggregate amounts contained in such categories for the periods presented (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Expenses and capitalized costs:
Offering related costs	$	—	$	—	$	—	$	2,150
Acquisition related expenses	—		—		—		1,652
Merger and other non-routine transaction related costs	—		—		—		137,778
Management fees to affiliates	—		—		—		13,888
General and administrative expenses	—		60		—		16,089
Indirect affiliate expenses	—		5,595		—		10,090
Total expenses and capitalized costs	$	—	$	5,655	$	—	$	181,647

The following sections below further expand on the summarized related party transactions listed above. Unless otherwise indicated, all of the related party fees and expenses discussed below were incurred and recognized during the three and nine months ended September 30, 2014 . No such expenses were incurred during the three and nine months ended September 30, 2015 .

Offering Related Costs

The Company and ARCT IV recorded commissions, fees and offering cost reimbursements for services provided to the Company and ARCT IV, as applicable, by affiliates of the Former Manager.

During the nine months ended September 30, 2014 , the Company incurred $2.2 million i n commissions and fees paid to RCS in connection with the ARCT IV IPO, for which RCS served as the dealer manager. In addition, the Company reimbursed RCS for services relating to the Company’s ATM equity program during 2014. Offering related costs are included in offering costs in the accompanying consolidated statements of changes in equity. No fees were incurred during the three months ended September 30, 2014 in connection with these transactions.

Acquisition Related Expenses

During the nine months ended September 30, 2014 , the Company paid a fee of $1.0 million (equal to 0.25% of the contract purchase price) to RCS for strategic advisory services related to its acquisition of certain properties from Fortress Investment Group LLC and $0.6 million (equal to 0.25% of the contract purchase price) to RCS related to its acquisition of certain properties from Inland American Real Estate Trust, Inc. (“Inland”). No fees were incurred during the three months ended September 30, 2014 in connection with these transactions.

Merger and Other Non-routine Transactions

The Company and ARCT IV incurred fees and expenses payable to the Former Manager and its affiliates for services related to mergers and other non-routine transactions, as discussed below.

The tables below shows fees and expenses attributable to each merger and other non-routine transaction during the nine months ended September 30, 2014 (in thousands). No related party transactions classified as merger and other non-routine transactions in the accompanying consolidated statements of operations were incurred during the three months ended September 30, 2014 .

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)



	Nine Months Ended September 30, 2014
	ARCT IV Merger		Internalization and Other		Cole Merger		Multi-tenant Spin Off		Total
Merger related costs:
Strategic advisory services	$	8,400	$	—	$	17,115	$	1,750	$	27,265
Personnel costs and other reimbursements	—		—		72		—		72
Other non-routine transaction related costs:
Subordinated distribution fees	78,244		—		—		—		78,244
Furniture, fixtures and equipment	5,800		10,000		—		—		15,800
Other fees and expenses	—		—		2,900		—		2,900
Personnel costs and other reimbursements	417		—		1,728		—		2,145
Post-transaction support services	1,352		10,000		—		—		11,352
Total merger and other non-routine transaction related costs	$	94,213	$	20,000	$	21,815	$	1,750	$	137,778

Merger Related Costs

ARCT IV Merger

Pursuant to ARCT IV’s advisory agreement with the ARCT IV Advisor, ARCT IV agreed to pay the ARCT IV Advisor a brokerage commission on the sale of property in connection with the ARCT IV Merger. At the time of the ARCT IV merger, ARCT IV paid $8.4 million to the ARCT IV Advisor in connection with this agreement. These commissions were included in merger and other non-routine transactions in the accompanying consolidated statements of operations for the nine months ended September 30, 2014 .

Cole Merger

The Company entered into an agreement with RCS under which RCS agreed to provide strategic and financial advisory services to the Company in connection with the Cole Merger. The Company agreed to pay a fee equal to 0.25% of the transaction value upon the consummation of the transaction and reimburse out of pocket expenses. The Company incurred and recognized $14.2 million in expense from this agreement during the nine months ended September 30, 2014 .

Pursuant to the Transaction Management Services Agreement, dated December 9, 2013, the Company and the OP agreed to pay RCS Advisory an aggregate fee of $2.9 million in connection with providing the following services: transaction management support related to the Cole Merger up to the date of the Transaction Management Services Agreement and ongoing transaction management support, marketing support, due diligence coordination and event coordination up to the date of the termination of the Transaction Management Services Agreement. The Transaction Management Services Agreement expired on the consummation of the Company’s transition to self-management on January 8, 2014. The Company paid RCS Advisory $2.9 million thereunder on January 8, 2014.

Multi-tenant Spin-off

The Company entered into an agreement with RCS, under which RCS agreed to provide strategic and financial advisory services to the Company in connection with a spin-off of the Company’s multi-tenant shopping center business. During the nine months ended September 30, 2014 , the Company incurred $1.8 million of such fees, which are included in merger and other non-routine transactions in the accompanying consolidated statement of operations.

Other Non-routine Transactions

ARCT IV Merger Subordinated Distribution Fee

On January 3, 2014, the OP entered into a Contribution and Exchange Agreement (the “ARCT IV Contribution and Exchange Agreement”) with the ARCT IV OP, American Realty Capital Trust IV Special Limited Partner, LLC (the “ARCT IV Special Limited Partner”) and ARC Real Estate. The ARCT IV Special Limited Partner was entitled to receive certain distributions from the ARCT IV OP, including the subordinated distribution of net sales proceeds resulting from an “investment liquidity event” (as defined in the agreement of limited partnership of the ARCT IV OP). The ARCT IV Merger constituted an “investment liquidity event,” due to the attainment of the 6.0% performance hurdle and the return to ARCT IV’s stockholders of $358.3 million in

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

addition to their initial investment. Pursuant to the ARCT IV Contribution and Exchange Agreement, the ARCT IV Special Limited Partner contributed its interest in the ARCT IV OP, inclusive of the $78.2 million of subordinated distribution proceeds received, to the ARCT IV OP in exchange for 2.8 million ARCT IV OP Units. Upon consummation of the ARCT IV Merger, these ARCT IV OP Units were immediately converted into 6.7 million OP Units after application of the applicable ARCT IV exchange ratio. In conjunction with the merger agreement with ARCT IV, the ARCT IV Special Limited Partner agreed to hold its OP Units for a minimum of two years before converting them into shares of the Company’s common stock.

Furniture, Fixtures and Equipment and Other Assets

The Company entered into three agreements with affiliates of the Former Manager and the Former Manager (the “Sellers”), as applicable, pursuant to which, the Sellers sold the OP certain furniture, fixtures and equipment and other assets (“FF&E”) used by the Sellers in connection with managing the property-level business and operations and accounting functions of the Company and the OP. The Company incurred and recorded $15.8 million to purchase the FF&E and other assets during the nine months ended September 30, 2014 . The Company has concluded that there was no evidence of the receipt and it could not support the value of the FF&E and other assets. As such, the Company expensed the amount originally capitalized and recognized the expense in merger and other non-routine transactions during the fourth quarter of 2014.

Other Fees and Expenses

In connection with the closing of the Cole Merger, the Company paid $2.9 million to RCS Advisory during the nine months ended September 30, 2014 .

Personnel Costs and Other Reimbursements

The Company and ARCT IV incurred expenses of and paid $2.1 million to RCS Advisory and ANST for personnel costs and reimbursements in connection with non-recurring transactions during the nine months ended September 30, 2014 .

Post-Transaction Support Services

In connection with its entry into the merger agreement with ARCT IV, ARCT IV agreed to pay additional asset management fees, which totaled $1.4 million , net of credits received during the nine months ended September 30, 2014 .

Pursuant to the Amendment and Acknowledgment of Termination of Amended and Restated Management Agreement entered into as of January 8, 2014, the Former Manager agreed to provide certain transition services including accounting support, acquisition support, investor relations support, public relations support, human resources and administration, general human resources duties, payroll services, benefits services, insurance and risk management, information technology, telecommunications and Internet and services relating to office supplies. Pursuant to this agreement, the Company paid $10.0 million to the Former Manager on January 8, 2014. This arrangement was in effect for a 60 -day term beginning on January 8, 2014.

Management Fees to Affiliates

The Company and ARCT IV recorded fees and reimbursements for services provided by the Former Manager and its affiliates related to the operations of the Company and ARCT IV.

Asset Management Fees

ARCT IV

In connection with the asset management services provided by the ARCT IV Advisor, ARCT IV issued (subject to periodic approval by ARCT IV’s board of directors) to the ARCT IV Advisor performance-based restricted partnership units of the ARCT IV OP designated as “ARCT IV Class B Units,” which were intended to be profit interests and to vest, and no longer be subject to forfeiture, at such time as: (x) the value of the ARCT IV OP’s assets plus all distributions equaled or exceeded the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the “economic hurdle”); (y) any one of the following occurs: (1) the termination of the advisory agreement by an affirmative vote of a majority of the Company’s independent directors without cause; (2) a listing; or (3) another liquidity event; and (z) the ARCT IV Advisor was still providing advisory services to ARCT IV.

The calculation of the ARCT IV asset management fees was equal to: (i) 0.1875% of the cost of ARCT IV’s assets; divided by (ii) the value of one share of ARCT IV common stock as of the last day of such calendar quarter. When approved by the board of directors, the ARCT IV Class B Units were issued to the ARCT IV Advisor quarterly in arrears pursuant to the terms of the ARCT IV OP agreement. During the year ended December 31, 2013, ARCT IV’s board of directors approved the issuance of

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

492,483 ARCT IV Class B Units to the ARCT IV Advisor in connection with this arrangement. As of December 31, 2013, ARCT IV did not consider achievement of the performance condition to be probable and no expense was recorded at that time. The ARCT IV Advisor received distributions on unvested ARCT IV Class B Units equal to the distribution rate received on the ARCT IV common stock. The performance condition related to the 498,857 ARCT IV Class B Units, which includes units issued for the period of January 1, 2014 through the ARCT IV Merger Date, was satisfied upon the completion of the ARCT IV Merger. These ARCT IV Class B Units immediately converted into OP Units at the 2.3961 exchange ratio and the Company recorded an expense of $13.9 million based on the fair value of the ARCT IV Class B Units during the nine months ended September 30, 2014 . No expense was recognized during the three months ended September 30, 2014 .

General and Administrative Expenses

The Company and ARCT IV recorded general and administrative expenses as shown in the table below for services provided by the Former Manager and its affiliates related to the operations of the Company and ARCT IV during the periods indicated (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
General and administrative expenses:
Advisory fees and reimbursements	$	—	$	60	$	—	$	2,015
Equity awards	—		—		—		14,074
Total general and administrative expenses	$	—	$	60	$	—	$	16,089

Advisory Fees and Reimbursements

The Company and ARCT IV agreed to pay certain fees and reimbursements during the three and nine months ended September 30, 2014 , to the Former Manager and its affiliates, as applicable, for their out-of-pocket costs, 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 or general operation of the Company. During the three and nine months ended September 30, 2014 , these expenses totaled $0.1 million and $2.0 million , respectively.

Equity Awards

Upon consummation of the merger with ARCT III, the Company entered into the OPP with the Former Manager. The OPP gave the Former Manager the opportunity to earn compensation upon the attainment of certain stockholder value creation targets. During the nine months ended September 30, 2014 , $1.6 million was recorded in general and administrative expenses as equity-based compensation relating to the change in total return to stockholders used in computing the number of LTIP units earned between December 31, 2013 and January 8, 2014. No expenses were incurred during the three months ended September 30, 2014 .

During the nine months ended September 30, 2014 , the Company granted 796,075 restricted share awards to employees of affiliates of the Former Manager as compensation for certain services and 87,702 restricted stock awards to two directors who were affiliates of the Former Manager. The grant date fair value of the awards of $12.5 million for the nine months ended September 30, 2014 was recorded in general and administrative expenses in the accompanying consolidated statements of operations. No grants were made to employees of affiliates of the Former Manager during the three months ended September 30, 2014 .

Indirect Affiliate Expenses

The Company incurred fees and expenses payable to affiliates of the Former Manager or payable to a third party on behalf of affiliates of the Former Manager for amenities related to certain buildings, as explained below. These expenses are depicted in the table below for the periods indicated (in thousands):

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Indirect affiliate expenses:
Audrain building	$	—	$	4,769	$	—	$	8,691
ANST office build-out	—		114		—		449
New York (405 Park Ave.) office	—		677		—		864
Dresher, PA office	—		24		—		60
North Carolina office	—		11		—		26
Total indirect affiliate expenses	$	—	$	5,595	$	—	$	10,090

Audrain Building

During the year ended December 31, 2013, a wholly owned subsidiary of ARC Real Estate purchased a historic building in Newport, Rhode Island (“Audrain”) with plans to renovate the second floor to serve as offices for certain executives of the Company, the Former Manager and affiliates of the Former Manager. An affiliate of the Former Manager requested that invoices relating to the second floor renovation and tenant improvements and all building operating expenses either be reimbursed by the Company to ARC Advisory or be paid directly to the contractors and vendors. During the three and nine months ended September 30, 2014 , the Company incurred $4.7 million and $8.5 million respectively, for tenant improvements and furniture and fixtures relating to the renovation directly to the third parties.

In addition, on October 4, 2013, the Company entered into a lease agreement with the subsidiary of ARC Real Estate for a term of 15 years with annual base rent of $0.4 million requiring monthly payments beginning on that date. As there were tenants occupying the building when it was purchased, these tenants subleased their premises from the Company until their leases terminated. During the three and nine months ended September 30, 2014 , the Company incurred and paid $0.1 million and $0.2 million , respectively, for base rent, which was partially offset by $17,000 of rental revenue received from the subtenants during the nine months ended September 30, 2014 . No rental revenue was received during the three months ended September 30, 2014 .

As a result of findings of the investigation conducted by the Audit Committee, the Company terminated this lease agreement and was reimbursed for the tenant improvements and furniture costs incurred by the Company, totaling $8.5 million , during the year ended December 31, 2014. Reimbursement was made by delivery and retirement of 916,423 OP Units held by an affiliate of the Former Manager. The Company never moved into or occupied the building.

ANST Office Build-out

During the three and nine months ended September 30, 2014 , as a result of the Cole Merger, the Company worked to develop a partnership with ANST. Plans were made to move ANST to part of the Cole Capital office building in 2014. In order to accommodate the ANST employees, the Cole Capital office building was remodeled. During the three and nine months ended September 30, 2014 , the Company paid $0.1 million and $0.4 million , respectively, directly to third parties for leasehold improvements and furniture and fixtures relating to the renovation.

ANST never moved into the building. The Company is considering its options with regard to recovery of such payments, although no decisions have been made at this time. No asset has been recognized in the financial statements related to any potential recovery.

Shared Office Space

During the three and nine months ended September 30, 2014 , the Company paid $0.7 million and $1.0 million , respectively, to an affiliate of the Former Manager for rent related to offices in New York, Pennsylvania, and North Carolina where certain of the Company’s employees shared office space with an affiliate of the Former Manager. The Company no longer occupies the office space.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Additional Related Party Transactions

The following related party transactions were not included in the tables above.

Tax Protection Agreement

The Company is party to a tax protection agreement with ARC Real Estate, which contributed its 100% indirect ownership interests in 63 of the Company’s properties to the Operating Partnership in the formation transactions related to the Company’s IPO. Pursuant to the tax protection agreement, the Company has agreed to indemnify ARC Real Estate for its tax liabilities (plus an additional amount equal to the taxes incurred as a result of such indemnity payment) attributable to its built-in gain, as of the closing of the formation transactions, with respect to its interests in the contributed properties (other than two vacant properties contributed), if the Company sells, conveys, transfers or otherwise disposes of all or any portion of these interests in a taxable transaction on or prior to September 6, 2021. The sole and exclusive rights and remedies of ARC Real Estate under the tax protection agreement will be a claim against the Operating Partnership for ARC Real Estate’s tax liabilities as calculated in the tax protection agreement, and ARC Real Estate shall not be entitled to pursue a claim for specific performance or bring a claim against any person that acquires a protected property from the Operating Partnership in violation of the tax protection agreement.

Investment from the ARCT IV Special Limited Partner

In connection with the ARCT IV Merger, the ARCT IV Special Limited Partner invested $0.8 million in the ARCT IV OP and was subsequently issued 79,870 OP Units in respect thereof upon the closing of the ARCT IV Merger after giving effect to the ARCT IV’s exchange ratio of 2.3961 of ARCT IV OP Units. This investment is included in non-controlling interests in the accompanying consolidated balance sheets.

Investment in an Affiliate of the Former Manager

During the nine months ended September 30, 2014 , the Company held an investment in a real estate fund advised by an affiliate of the Former Manager, which invested primarily in equity securities of other publicly traded REITs. As of September 30, 2015 , the Company sold all of its investments in the fund.

Cole Capital

Cole Capital is contractually responsible for managing the Managed REITs’ affairs on a day-to-day basis, identifying and making acquisitions and investments on the Managed REITs’ behalf, and recommending to the respective board of directors of each of the Managed REITs an approach for providing investors with liquidity. In addition, the Company distributes the shares of common stock for certain Managed REITs and advises them regarding offerings, manages relationships with participating broker-dealers and financial advisors and provides assistance in connection with compliance matters relating to the offerings. The Company receives compensation and reimbursement for services relating to the Managed REITs’ offerings and the investment, management and disposition of their respective assets, as applicable.

Offering-Related Revenue

The Company generally receives a selling commission and dealer manager or distribution fee based on the gross offering proceeds related to the sale of shares of the Managed REITs’ common stock in their primary offerings, before reallowance of commissions earned by participating broker-dealers. The Company has and intends to continue to reallow 100% of selling commissions earned to participating broker-dealers. The Company, in its sole discretion, may reallow all or a portion of its dealer manager fee to such participating broker-dealers as a marketing and due diligence expense reimbursement, based on factors such as the volume of shares issued by such participating broker-dealers and the amount of marketing support provided by such participating broker-dealers. No selling commissions or dealer manager fees are paid to the Company or other broker-dealers with respect to shares issued under the respective Managed REIT’s distribution reinvestment plan, under which the stockholders may elect to have distributions reinvested in additional shares.

All other organization and offering expenses associated with the sale of the Managed REITs’ common stock (excluding selling commissions, if applicable, and the dealer manager fee) are paid for in advance by the Company and subject to reimbursement by the Managed REITs, up to certain limits in accordance with their respective advisory agreements and charters. As these costs are incurred, they are recorded as reimbursement revenue, up to the respective limit, and are included in offering-related revenues in the financial results for Cole Capital in Note 3 – Segment Reporting . Expenses paid on behalf of the Managed REITs in excess of these limits that are expected to be collected based on future estimated offering proceeds are recorded as program development costs, which are included in deferred costs and other assets, net in the accompanying consolidated unaudited balance sheets. The

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Company assesses the collectability of the program development costs, considering the offering period and historical and forecasted sales of shares under the Managed REITs’ respective offerings and reserves for any balances considered not collectible. As of September 30, 2015 and December 31, 2014 , the Company had organization and offering costs of $20.9 million and $12.9 million , respectively, which were net of reserves of $20.2 million and $13.1 million , respectively. Additional reserves may be recorded in subsequent periods if actual proceeds raised from the offerings and corresponding program development costs incurred differ from management’s assumptions used at September 30, 2015 .

The following table shows the offering fee summary information for the Managed REITs as of September 30, 2015 :



Program	Selling Commissions ⁽¹⁾	Dealer Manager and Distribution Fees ⁽²⁾
Open Programs
CCPT V	7%	2%
INAV	₍₃₎	₍₃₎
CCIT II	7%	2%

Closed Programs
CCPT IV ⁽⁴⁾	7%	2%

_______________________________________________


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


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


(3)	In connection with the INAV offering, the Company receives selling commissions, an asset-based dealer manager fee and/or an asset-based distribution fee, all based on the net asset value, as summarized in the table below for each class of common stock:



Share Class	Selling Commission ⁽¹⁾	Dealer Manager Fee ⁽²⁾	Distribution Fee ⁽²⁾
Wrap Class Shares	—	0.55%	—
Advisor Class Shares	up to 3.75%	0.55%	0.50%
Institutional Class Shares	—	0.25%	—

(4) CCPT IV’s offering closed April 4, 2014.

Transaction Service Revenue

The Company earns acquisition fees related to the acquisition, development or construction of properties on behalf of certain of the Managed REITs. In addition, the Company is reimbursed for acquisition expenses incurred in the process of acquiring properties up to certain limits per the respective advisory agreement. The Company is not reimbursed for personnel costs in connection with services for which it receives acquisition fees or real estate commissions. In addition, the Company may earn disposition fees related to the sale of one or more properties, including those held indirectly through joint ventures, on behalf of a Managed REIT and other affiliates.

The following table shows the transaction-related fees for the Managed REITs and other real estate programs as of September 30, 2015 :



Program	Acquisition Transactional Fees ⁽¹⁾	Disposition Fees	Liquidation Performance Fees ⁽²⁾
Open Programs
CCPT V	2%	1%	15%
INAV	—	—	—
CCIT II	2%	1%	15%

Closed Programs
CCPT IV	2%	1%	15%
Other Programs	Various	Various	Various

_______________________________________________


(1)	Percent taken on gross purchase price.

(2)

Performance fee paid only under the following circumstances: (i) if shares are listed on a national securities exchange; (ii) if the respective Managed Program is sold or the assets are liquidated; or (iii) upon termination of the advisory agreement. In connection with such events, the performance fee will only be earned upon the return to investors of their net capital invested and an 8% annual cumulative, non-compounded return ( 6% in the case of CCPT V).

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Management Service Revenue

The Company earns advisory and asset and property management fees from certain Managed REITs and other real estate programs. The Company may also be reimbursed for expenses incurred in providing advisory and asset and property management services, subject to certain limitations. In addition, the Company earns a performance fee relating to INAV for any year in which the total return on stockholders’ capital exceeds 6% per annum on a calendar year basis.

The following table shows the management fees for the Managed REITs as of September 30, 2015 :



Program	Asset Management / Advisory Fees ⁽¹⁾	Performance Fees ⁽²⁾
Open Programs
CCPT V	0.65% - 0.75%	—
INAV	0.90%	25%
CCIT II	0.65% - 0.75%	—

Closed Programs
CCPT IV	0.65% - 0.75%	—
Other Programs	Various	—

_______________________________________________

(1) Annualized fee based on the average monthly invested assets or net asset value, if available.

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

The table below reflects the revenue earned from the Managed REITs and other affiliates for the three and nine months ended September 30, 2015 and 2014 (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Offering-related fees and reimbursements
Securities commissions ⁽¹⁾	$	3,328	$	13,369	$	8,345	$	48,993
Dealer manager and distribution fees ⁽²⁾	1,258		4,099		3,143		14,964
Reimbursement revenue	1,264		4,067		2,995		10,000
Offering-related fees and reimbursements	5,850		21,535		14,483		73,957

Transaction service fees and reimbursements
Acquisition fees	6,233		22,897		14,913		41,868
Disposition fees ⁽³⁾	764		74		8,189		74
Reimbursement revenues	403		1,452		1,594		2,464
Transaction service fees and reimbursements	7,400		24,423		24,696		44,406

Management fees and reimbursements
Asset and property management fees and leasing fees	416		428		1,213		1,407
Advisory and performance fee revenue	10,998		11,212		32,674		26,134
Reimbursement revenues	2,882		2,199		8,503		5,372
Management fees and reimbursements	14,296		13,839		42,390		32,913

Interest income on Affiliate Lines of Credit	306		76		967		101

Total related-party revenues	$	27,852	$	59,873	$	82,536	$	151,377

___________________________________


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


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


(3)	The Company earned a disposition fee of $4.4 million on behalf of CCIT when it merged with Select Income REIT on January 29, 2015.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Investment in the Managed REITs

As of September 30, 2015 , the Company owned aggregate equity investments of $3.6 million in the Managed REITs. The Company accounts for these investments using the equity method of accounting which requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the respective Managed REIT’s earnings and distributions. The Company records its proportionate share of net income from the Managed REITs within other income, net in the consolidated statements of operations. During the three and nine months ended September 30, 2015 , the Company recognized $27,000 of net loss and $63,000 of net income, respectively, from the Managed REITs. During the three and nine months ended September 30, 2014 , the Company recognized $0.4 million of net income and $1.4 million of net loss, respectively, from the Managed REITs.

The table below presents certain information related to the Company’s investments in the Managed REITs as of September 30, 2015 (carrying amount in thousands):



	September 30, 2015
Managed REIT	% of Outstanding Shares Owned	Carrying Amount of Investment
CCPT IV	0.01%	$	124
CCPT V	1.39%	1,692
CCIT II	0.85%	1,608
INAV	0.16%	155
		$	3,579

Due to Affiliates

Due to affiliates, as reported in the accompanying consolidated balance sheets, of $0.2 million and $0.6 million as of September 30, 2015 and December 31, 2014 , respectively, relates to amounts due to the Managed REITs for expense reimbursements.

Due from Affiliates

As of September 30, 2015 and December 31, 2014 , $67.0 million and $86.1 million , respectively, was expected to be collected from affiliates, including balances from the Managed REITs’ lines of credit, as well as balances for services provided by the Company and expenses subject to reimbursement by the Managed REITs in accordance with their respective advisory and property management agreements. The Company had a balance of $17.0 million due from the Managed REITs as of September 30, 2015 for services provided by the Company which we expect to be reimbursed in accordance with the Managed REITs’ respective advisory and property management agreements. The balance is included in due from affiliates in the accompanying consolidated balance sheets.

As of September 30, 2015 , the Company had revolving line of credit agreements in place with each of CCIT II, CCPT V and INAV (the “Affiliate Lines of Credit”) that provide for maximum borrowings of $60.0 million to each of CCIT II and CCPT V and $20.0 million to INAV. The Affiliate Lines of Credit bear interest at variable rates ranging from one-month LIBOR plus 2.20% to one-month LIBOR plus 2.45% and mature on dates ranging from December 2015 to March 2016. As of each of September 30, 2015 and December 31, 2014 , there was $50.0 million outstanding on the Affiliate Lines of Credit.

Note 18 – Net Loss Per Share/Unit

The General Partner’s unvested Restricted Shares contain non-forfeitable rights to dividends and are considered to be participating securities in accordance with GAAP and, therefore, are included in the computation of earnings per share under the two-class method. Under the two-class computation method, net losses are not allocated to participating securities unless the holder of the security has a contractual obligation to share in the losses. The unvested Restricted Shares are not allocated losses as the awards do not have a contractual obligation to share in losses of the General Partner. The two-class method is an earnings allocation formula that determines earnings per share for each class of common shares and participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

Net Loss Per Share

The following is a summary of the basic and diluted net loss per share computation for the General Partner for the three and nine months ended September 30, 2015 and 2014 (dollar amounts in thousands, except for share and per share data):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net income (loss) attributable to the Company	$	7,529		$	(280,398	)	$	(128,963	)	$	(626,562	)
Less: dividends to preferred shares and participating securities	18,191			37,643			54,142			84,366
Net loss attributable to common stockholders	$	(10,662	)	$	(318,041	)	$	(183,105	)	$	(710,928	)

Weighted average number of common shares outstanding - basic and diluted	903,461,323			902,096,102			903,267,282			756,289,984

Basic and diluted net loss per share from continuing operations attributable to common stockholders	$	(0.01	)	$	(0.35	)	$	(0.20	)	$	(0.94	)

As of September 30, 2015 , approximately 23.8 million OP Units outstanding, which are convertible into an equal number of shares of Common Stock, and approximately 3.7 million of unvested Restricted Shares and unvested Restricted Stock Units were excluded from the calculation of diluted net loss per share as the effect would have been antidilutive.

Net Loss Per Unit

The following is a summary of the basic and diluted net loss per unit computation for the OP for the three and nine months ended September 30, 2015 and 2014 (dollar amounts in thousands, except for unit and per unit data):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net income (loss) attributable to the Operating Partnership	$	7,737		$	(288,202	)	$	(132,458	)	$	(650,720	)
Less: dividends to preferred units and participating securities	18,191			37,643			54,142			84,366
Net loss attributable to common unitholders	$	(10,454	)	$	(325,845	)	$	(186,600	)	$	(735,086	)

Weighted average number of common units outstanding - basic and diluted	927,225,120			926,801,361			927,031,079			781,112,325

Basic and diluted net loss from continuing operations per unit attributable to common unitholders	$	(0.01	)	$	(0.35	)	$	(0.20	)	$	(0.94	)

As of September 30, 2015 , approximately 3.7 million shares of unvested restricted units were excluded from the calculation of diluted net loss per unit as the effect would have been antidilutive.

Note 19 – Income Taxes

As a REIT, the General Partner generally is not subject to federal income tax, with the exception of its TRS entities. However, the General Partner, including its TRS entities, and the Operating Partnership are still subject to certain state and local income and franchise taxes in the various jurisdictions in which they operate.

Based on the above, Cole Capital’s business, substantially all of which is conducted through a TRS structure, recognized a benefit of $0.7 million and $2.4 million for the three and nine months ended September 30, 2015 , respectively, which is included in (provision for) benefit from income and franchise taxes in the accompanying consolidated statements of operations. A provision of $1.1 million and a benefit of $12.6 million were recognized for the three and nine months ended September 30, 2014 . The difference in the provision or benefit reflected in the accompanying consolidated statements of operations as compared to the provision or benefit calculated at the statutory federal income tax rate is primarily attributable to various permanent differences and state and local income taxes.

Table of Contents

VEREIT, INC. AND VEREIT OPERATING PARTNERSHIP, L.P.

(F/K/A AMERICAN REALTY CAPITAL PROPERTIES, INC. AND ARC PROPERTIES OPERATING PARTNERSHIP, L.P. )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015 (Unaudited) – (Continued)

The REI segment recognized a provision for the three and nine months ended September 30, 2015 of $2.2 million and $7.2 million , respectively, and a provision for the three and nine months ended September 30, 2014 of $2.0 million and $5.9 million , respectively, which are included in (provision for) benefit from income and franchise taxes in the accompanying consolidated statements of operations.

The Company had no unrecognized tax benefits as of or during the nine months ended September 30, 2015 and 2014 . Any interest and penalties related to unrecognized tax benefits would be recognized within (provision for) benefit from income and franchise taxes in the accompanying consolidated statements of operations. The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various Canadian jurisdictions, and is subject to routine examinations by the respective tax authorities. With few exceptions, the Company is no longer subject to federal or state examinations by tax authorities for years before 2011.

Note 20 – Subsequent Events

The following events occurred subsequent to September 30, 2015 :

Notable Real Estate Investment Activity

From October 1, 2015 through November 3, 2015, the Company disposed of 56 properties for an aggregate gross sales price of $436.4 million . The notable dispositions include 51 Red Lobster ^® restaurants for an aggregate gross sales price of $204.4 million and an AT&T office property held in one of the consolidated joint venture arrangements for $226.2 million , which represents the Company’s share of the sales price based on its legal ownership interest. The legal ownership interest may not equal the Company’s economic interest at the disposition date.

Departure and Appointment of Certain Officers

Effective October 5, 2015, the board of directors appointed Michael J. Bartolotta as Executive Vice President, Chief Financial Officer and Treasurer, succeeding Michael J. Sodo in those positions. Mr. Sodo entered into a separation agreement with the Company with respect to his departure, pursuant to which, effective October 5, 2015, Mr. Sodo was no longer the Company’s Executive Vice President, Chief Financial Officer and Treasurer and no longer occupied any other positions with the Company’s subsidiaries. Pursuant to Mr. Sodo’s employment agreement with the Company, dated January 9, 2015, he will receive cash severance of $1.4 million and his outstanding unvested time-based restricted shares and restricted stock units will vest in full. The outstanding performance criteria underlying Mr. Sodo’s performance-based restricted stock units have not been satisfied and, accordingly, such performance-based restricted stock units have been forfeited in full. Mr. Sodo remained with the Company to assist in the transition of responsibilities to Mr. Bartolotta through November 4, 2015.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements of VEREIT, Inc., f/k/a American Realty Capital Properties, Inc. and VEREIT Operating Partnership, L.P., f/k/a ARC Properties Operating Partnership, L.P. (together with its subsidiaries, the “Operating Partnership” or the “OP”) and the notes thereto. As used herein, the terms the “Company,” “we,” “our” and “us” refer to VEREIT, together with our consolidated subsidiaries, including the OP, which were affiliates of the Former Manager prior to December 12, 2014, and are no longer affiliated with the Former Manager since then. Capitalized terms used herein, but not otherwise defined, shall have the meaning ascribed to those terms in “Part I – Financial Information,” including the Notes to the Consolidated Financial Statements contained therein.

Restatement

We previously restated our consolidated financial statements and related financial information as of and for the fiscal years ended December 31, 2013 and 2012 and the fiscal periods ended March 31, 2014 and 2013, June 30, 2014 and 2013 and September 30, 2013, and the OP restated and amended its consolidated financial statements and related financial information as of and for the fiscal years ended December 31, 2013 and 2012 and the fiscal periods ended June 30, 2014 and 2013 to correct errors that were identified as a result of a previously-announced investigation conducted by the Audit Committee of the Company’s board of directors, as well as certain other errors that were identified in connection with the investigation. For a discussion of reconciliations of originally reported amounts to the corresponding prior fiscal period restated amounts, see our Quarterly Report on Form 10-Q for the fiscal period ended September 30, 2014 filed with the SEC on March 2, 2015. The following discussion and analysis of our financial condition and results of operations is based on the restated amounts.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” (within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) that reflect our expectations and projections about our future results, performance, prospects and opportunities. We have attempted to identify these forward-looking statements by using words such as “may,” “will,” “expects,” “anticipates,” “believes,” “intends,” “should,” “estimates,” “could” or similar expressions. These forward-looking statements are based on information currently available to us and are subject to a number of known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among other things, those discussed below. We do not undertake publicly to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required to satisfy our obligations under federal securities law.

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


•	We could be subject to unexpected costs or unexpected liabilities that may arise from potential dispositions, and may be unable to dispose of properties on advantageous terms.


•	We are subject to risks associated with lease terminations, tenant defaults, bankruptcies and insolvencies and credit, geographic and industry concentrations with respect to tenants.


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


•	We may not be able to effectively manage or dispose of assets acquired in connection with certain mergers and portfolio acquisitions that do not fit within our target assets.


•	We encounter significant competition in the acquisition of properties and we may be unable to acquire properties on advantageous terms.


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


•	Our goodwill and intangible assets may be subject to impairment charges.


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


•	Our overall borrowing and operating flexibility may be adversely affected by the terms and restrictions within the loan documents governing our existing indebtedness.


•	Our access to capital and terms of future financings may be adversely affected by our credit rating downgrade and current loss of eligibility to register the offer and sale of our securities on Form S-3.


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


•	We may not be able to achieve and maintain profitability.

Table of Contents


•	We may be affected by risks associated with pending governmental investigations relating to the findings of the Audit Committee Investigation and related litigation.


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


•	We may fail to remain qualified as a REIT for U.S. federal income tax purposes.


•	We may be deemed to be an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”) and thus subject to regulation under the Investment Company Act.


•	We may not generate cash flows sufficient to pay our dividends to stockholders, and therefore may be forced to borrow at higher rates to fund our dividends.


•	As disclosed in our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2014 filed with the SEC on March 30, 2015, we reported material weaknesses in our disclosure controls and procedures and our internal control over financial reporting and we may not be able to remediate such material weaknesses in a timely manner.


•	We may be unable to fully reestablish the financial network which previously supported Cole Capital and its Managed REITs and/or regain the prior level of transaction and capital raising volume of Cole Capital.


•	Our Cole Capital operations are subject to extensive governmental regulation.


•	We may be unable to retain or hire key personnel.

All forward-looking statements should be read in light of the risks identified in Part II, Item 1A. Risk Factors within our Quarterly Report on Form 10-Q for the period ended June 30, 2015.

Overview

We are a Maryland corporation incorporated on December 2, 2010 that qualified as a REIT for U.S. federal income tax purposes beginning in the taxable year ended December 31, 2011. Effective July 31, 2015, we transferred the listing of our Common Stock and Series F Preferred Stock to the NYSE from the NASDAQ. The Common Stock and Series F Preferred Stock now trade under the trading symbols, “VER” and “VER PRF,” respectively.

We are a full-service real estate operating company with investment management capabilities that operates through two business segments, REI and our investment management business, Cole Capital, as further discussed in Note 3 – Segment Reporting , to our unaudited consolidated financial statements in this Quarterly Report on Form 10-Q. Through the REI segment, the Company owns and actively manages a diversified portfolio of 4,572 retail, restaurant, office and industrial real estate properties with 100.9 million square feet, of which 98.3% was leased as of September 30, 2015 , with a weighted-average remaining lease term of 11.1 years. Cole Capital is contractually responsible for raising capital for and managing the affairs of the Managed REITs on a day-to-day basis, identifying and making acquisitions and investments on the Managed REITs’ behalf, and recommending to the respective board of directors of each of the Managed REITs an approach for providing investors with liquidity. Cole Capital receives compensation and reimbursement for performing these services.

We seek to lease space and/or acquire properties leased to creditworthy tenants that meet our underwriting and operating guidelines. Prior to entering into any transaction, our corporate credit analysis and underwriting professionals conduct a review of a tenant’s credit quality. In addition, we consistently monitor the credit quality of our portfolio by actively reviewing the creditworthiness of certain tenants, focusing primarily on those tenants representing the greatest concentration of our portfolio. This review primarily includes an analysis of the tenant’s financial statements either quarterly, or as frequently as the lease permits. We also consider tenant credit quality when assessing our portfolio for strategic dispositions. When we assess tenant credit quality, we: (i) review relevant financial information, including financial ratios, net worth, revenue, cash flows, leverage and liquidity; (ii) evaluate the depth and experience of the tenant’s management team; and (iii) assess the strength/growth of the tenant’s industry. On an on-going basis, we evaluate the need for an allowance for doubtful accounts arising from estimated losses that could result from the tenant’s inability to make required current rent payments and an allowance against accrued rental income for future potential losses that we deem to be unrecoverable over the term of the lease. The factors considered in determining the credit risk of our tenants include, but are not limited to: payment history; credit status and change in status (credit ratings for public companies are used as a primary metric); change in tenant space needs (i.e., expansion/downsize); tenant financial performance; economic conditions in a specific geographic region; and industry specific credit considerations. We are of the opinion that the credit risk of our portfolio is largely mitigated by the high quality of our existing tenant base, reviews of prospective tenants’ risk profiles prior to lease execution and consistent monitoring of our portfolio to identify potential problem tenants.

Table of Contents

Operating Highlights and Key Performance Indicators

2015 Activity


•	Disposed of 74 and 89 properties, as well as classified three and five properties as held for sale, recording losses of $6.5 million and $62.6 million during the three and nine months ended September 30, 2015 , respectively. We also disposed of our interest in one consolidated joint venture during the three months ended September 30, 2015 , recording a gain of $6.7 million .


•	Decreased outstanding mortgage loans through property dispositions and monthly principal payments by $281.3 million and $457.9 million during the three and nine months ended September 30, 2015 , respectively, bringing the outstanding principal to $3.2 billion at September 30, 2015 .


•	Reduced the maximum capacity under the Credit Facility from $3.6 billion to $3.3 billion and reduced our minimum Unencumbered Asset Value from $10.5 billion to $8.0 billion .


•	Paid down $190.0 million and $1.1 billion on the revolving credit facility during the three and nine months ended September 30, 2015 , respectively, bringing the outstanding balance to $1.1 billion at September 30, 2015 .


•	Established a quarterly dividend of $0.1375 per share beginning in the third quarter of 2015, at an annualized rate of $0.55 per share.

Real Estate Portfolio Metrics

In managing our portfolio, we are committed to diversification by property type, industry, tenant and geography. Below is a summary of our property type diversification and our top ten concentrations, based on annualized rental income, as of September 30, 2015.

Table of Contents

Our financial performance is influenced by the timing of acquisitions and dispositions and the operating performance of our real estate investments. The following table shows the property statistics of our real estate assets, excluding properties owned through unconsolidated joint ventures as of September 30, 2015 and 2014 :



	September 30, 2015	September 30, 2014
Portfolio Metrics
Properties owned	4,572	4,714
Rentable square feet (in millions)	100.9	113.8
Economic occupancy rate	98.3%	99.2%
Investment-grade tenants ⁽¹⁾	43.5%	44.8%

____________________________________


(1)	Investment-grade tenants are those with a Standard & Poor’s credit rating of BBB- or higher or a Moody’s credit rating of Baa3 or higher. The ratings may reflect those assigned by Standard & Poor’s or Moody’s to the lease guarantor or the parent company, as applicable.

The following table shows the economic metrics of our real estate assets, excluding properties owned through unconsolidated joint ventures, as of and for the three months ended September 30, 2015 :



		September 30, 2015
Economic Metrics
Weighted-average lease term ⁽¹⁾		11.1
Lease rollover ⁽¹⁾⁽²⁾ :
Annual average		3.4%
Maximum for a single year		4.3%
Same store growth ⁽³⁾ :
Three months ended		0.9%
Flat leases ⁽¹⁾⁽⁴⁾		21.5%

____________________________________

(1)

Based on annualized rental revenue of our real estate portfolio as of September 30, 2015. Annualized rental revenue represents rental revenue under our leases on operating properties reflecting straight-line rent adjustments associated with contractual rent increases in the leases as required by GAAP, including the effect of any tenant concessions, such as free rent, and excluding any contingent rent, such as percentage rent.


(2)	For the period beginning October 1, 2015 through December 31, 2019.


(3)	Represents contract rental revenue increase for properties that were owned for the entirety of the respective period in 2015 and 2014, except for properties during the current or prior year that were under development or redevelopment. See the Non-GAAP Measures section below for descriptions of our non-GAAP measures and reconciliations to the most comparable GAAP measure.


(4)	A flat lease is a lease that requires equal rent payments, with no increases, throughout the initial term of the lease agreement. A flat lease may include a period of free rent at the beginning or end of the lease.

Table of Contents

Operating Performance

In addition, management uses the following financial metrics of our business segments to assess our operating performance (dollars in thousands, except per share amounts).



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Financial Metrics
Real Estate Investment Segment
Revenues	$	357,408		$	397,321		$	1,091,074		$	1,009,174
Operating income (loss)	$	98,805		$	79,413		$	194,853		$	(14,805	)
Net income (loss)	$	8,740		$	(289,133	)	$	(130,134	)	$	(631,475	)
Funds from operations (“FFO”) ⁽¹⁾	$	192,161		$	194,712		$	581,670		$	226,971
Adjusted funds from operations (“AFFO”) ⁽¹⁾	$	191,419		$	214,991		$	581,862		$	491,843
AFFO per diluted share ⁽¹⁾	$	0.21		$	0.23		$	0.63		$	0.61

Cole Capital Segment
Revenues	$	27,546		$	59,797		$	81,569		$	151,276
Operating income (loss)	$	(1,802	)	$	2,038		$	(5,590	)	$	(31,913	)
Net income (loss)	$	(599	)	$	1,086		$	(1,127	)	$	(19,010	)
Funds from operations (“FFO”) ⁽¹⁾	$	(599	)	$	1,086		$	(1,127	)	$	(19,010	)
Adjusted funds from operations (“AFFO”) ⁽¹⁾	$	5,009		$	29,558		$	17,039		$	53,412
AFFO per diluted share ⁽¹⁾	$	0.01		$	0.03		$	0.02		$	0.07

Consolidated
Revenues	$	384,954		$	457,118		$	1,172,643		$	1,160,450
Operating income (loss)	$	97,003		$	81,451		$	189,263		$	(46,718	)
Net income (loss)	$	8,141		$	(288,047	)	$	(131,261	)	$	(650,485	)
Funds from operations (“FFO”) ⁽¹⁾	$	191,562		$	195,798		$	580,543		$	207,961
Adjusted funds from operations (“AFFO”) ⁽¹⁾	$	196,428		$	244,549		$	598,901		$	545,255
AFFO per diluted share ⁽¹⁾	$	0.21		$	0.26		$	0.64		$	0.68

____________________________________


(1)	See the Non-GAAP Disclosure section below for descriptions of our non-GAAP measures and reconciliations to the most comparable GAAP measure.

Results of Operations

Our results of operations are primarily influenced by the timing of acquisitions and dispositions and the operating performance of our real estate investments.

The following is a comparison of the three and nine months ended September 30, 2015 to the three and nine months ended September 30, 2014

Rental Income

During the three months ended September 30, 2015 , rental income decreased $31.9 million to $333.8 million as compared to $365.7 million during the same period in 2014 . The decrease was primarily due to the disposition of an anchored shopping center portfolio in the fourth quarter of 2014, as well as the various dispositions in 2015, partially offset by earning a full quarter of revenue for the Red Lobster portfolio for the three months ended September 30, 2015 , compared to a partial quarter for the same period in 2014.

Table of Contents

The following chart shows the components of the change in our rental income from the three months ended September 30, 2014 to the three months ended September 30, 2015 (in millions):

Rental income increased $93.1 million to $1.0 billion for the nine months ended September 30, 2015 as compared to $924.6 million during the same period in 2014 . The increase was primarily due to the full impact of Cole for the nine months ended September 30, 2015 compared to the 2014 impact of Cole from the closing of the Cole Merger on February 7, 2014 through September 30, 2014.

Cole Capital Revenue

We consummated the Cole Merger and acquired Cole Capital on February 7, 2014. Cole Capital’s results of operations are influenced by capital raised on behalf of the Managed REITs in offering as well as the timing and extent of real estate asset acquisitions and assets under management, which are driven by the Managed REITs’ capital raised, cash flows provided by operations and available proceeds from debt financing.

As a result of the Audit Committee Investigation and the resulting Restatement, certain selling agreements with broker-dealers for the Managed REITs were suspended. Accordingly, our Cole Capital results of operations for the three and nine months ended September 30, 2015 , as compared to the three and nine months ended September 30, 2014 , reflect decreases in most revenue categories, as further discussed below. Certain selling agreements have been re-instated to date and we are in on-going discussions with other broker-dealers that suspended their respective selling agreements. We expect to continue to secure the reinstatement of suspended selling agreements; however, there are no guarantees as to when these agreements will be reinstated, if at all.

Offering-related fees and reimbursements include selling commissions, dealer manager fees and distribution fees earned from selling securities in the Managed REITs. The Company reallows 100% of selling commissions and may reallow all or a portion of our dealer manager fees to participating broker-dealers as a marketing and due diligence expense reimbursement, based on factors such as the volume of shares sold by such participating broker-dealers and the amount of marketing support provided by such participating broker-dealers. The following table represents offering-related fees and reimbursements as well as amounts reallowed for the three and nine months ended September 30, 2015 and 2014 (in thousands). The net decreases of $4.2 million and $12.2 million for the three and nine months ended September 30, 2015 , respectively, are a direct result of the decrease in capital raise related to the the suspension of certain selling agreements, as discussed above, and partly due to the closing of the offering of Cole Credit Property Trust IV, Inc. in the first quarter of 2014.



	Three Months Ended September 30,							Nine Months Ended September 30,
	2015		2014		Change			2015		2014		Change
Offering-related fees	$	4,586	$	17,468	$	(12,882	)	$	11,488	$	63,957	$	(52,469	)
Offering-related reimbursements	1,264		4,067		(2,803		)	2,995		10,000		(7,005		)
Less: reallowed fees and commissions	3,896		15,398		(11,502		)	9,637		56,902		(47,265		)
Offering-related fees and reimbursements, net of reallowed	$	1,954	$	6,137	$	(4,183	)	$	4,846	$	17,055	$	(12,209	)

Transaction service fees and reimbursement revenue consists primarily of acquisition and disposition fees earned from acquiring and selling properties on behalf of the Managed REITs and other affiliates. Transaction service fees were $7.0 million and $23.1 million for the three and nine months ended September 30, 2015 , respectively, as compared to $23.0 million and $41.9 million during the same periods in 2014 . Transaction-related reimbursement revenues were $0.4 million and $1.6 million for the

Table of Contents

three and nine months ended September 30, 2015 , as compared to $1.5 million and $2.5 million during the same periods in 2014 . The net decrease s of $17.1 million and $19.7 million for the three and nine months ended September 30, 2015 , respectively, are primarily due to decreases in acquisition fee revenue as there were less funds raised by the Managed REITs’ offering that could be deployed into real estate acquisitions on their behalf.

Management fees and reimbursement revenue represents advisory, asset and property management fees for operating, leasing and managing the portfolios of the Managed REITs and other affiliates. Management fees were $11.4 million and $33.9 million for the three and nine months ended September 30, 2015 , respectively, as compared to $11.6 million and $27.5 million during the same periods in 2014 . Management reimbursement revenues were $2.9 million and $8.5 million for the three and nine months ended September 30, 2015 , as compared to $2.2 million and $5.4 million during the same periods in 2014 . The overall net increase s in fees and reimbursements of $0.5 million and $9.5 million for the three and nine months ended September 30, 2015 , respectively, primarily relate to an increase in performance fees the Company received from INAV (of which a portion was waived in prior periods in relation to exceeding certain thresholds) as well as an increase in advisory and asset and property management fees from certain Managed REITs.

Acquisition Related Expenses

Acquisition related expenses decreased $12.2 million and $29.1 million for the three and nine months ended September 30, 2015 , respectively, to $1.8 million and $5.5 million as compared to $14.0 million and $34.6 million , respectively, during the same periods in 2014 . Acquisition costs primarily consist of legal, deed transfer and other costs related to real estate purchase transactions, including costs incurred for deals that are not consummated. The decrease in acquisition costs was primarily due to a significant decrease in acquisition activity during the three and nine months ended September 30, 2015 , as compared to the same periods in 2014 primarily due to acquiring the Red Lobster portfolio in the third quarter of 2014.

Merger and Other Non-routine Transaction Related Expenses

Merger and other non-routine transaction costs increased $1.4 million to $9.0 million for the three months ended September 30, 2015 , as compared to $7.6 million for the three months ended September 30, 2014 . The increase for the quarter primarily relates to costs incurred as a result of the Audit Committee Investigation that we began incurring in the fourth quarter of 2014 and related litigation and investigation matters. The costs associated with the Audit Committee Investigation and related matters primarily consist of legal and other professional fees and costs, including fees and costs incurred as a result of the Company’s indemnification obligations.

Merger and other non-routine transaction costs decreased $133.1 million to $42.2 million for the nine months ended September 30, 2015 , as compared to $175.3 million for the same period in 2014 . For the nine months ended September 30, 2014 , $78.2 million was recorded as an incentive distribution fee to an affiliate of the Former Manager upon the consummation of the ARCT IV Merger. We issued 6.7 million Limited Partner OP Units to the affiliate of the Former Manager as compensation for this fee. The remaining expenses incurred during the nine months ended September 30, 2014 were incurred in connection with the completion of the Cole Merger and the Company’s transition to self-management.

Property Operating Expenses and Operating Expense Reimbursement

Property operating expenses include both reimbursable and non-reimbursable property expenses. Operating expense reimbursement revenue represents reimbursements for taxes, property maintenance and other charges contractually due from the tenant per their respective leases. Property operating expenses were $32.0 million and $95.5 million for the three and nine months ended September 30, 2015 , respectively, as compared to $41.0 million and $110.0 million , respectively, during the same periods in 2014 . Operating expense reimbursements were $23.0 million and $71.2 million for the three and nine months ended September 30, 2015 , respectively, as compared to $31.0 million and $81.7 million , respectively, during the same periods in 2014 . The net decrease s of $1.0 million and $4.0 million for the three and nine months ended September 30, 2015 , respectively, were driven primarily by the disposal of our portfolio of anchored shopping centers, which generally have higher operating expenses, during the fourth quarter of 2014, as well as the disposal of a portfolio of 68 CVS properties and various other dispositions since the prior period.

Management Fees to Affiliates

There were no management fees to affiliates incurred during the three and nine months ended September 30, 2015 as we completed our transition to self-management on January 8, 2014. During the nine months ended September 30, 2014 , we incurred management fees of $13.9 million related to asset management fees in connection with the asset management services provided by the ARCT IV Advisor. We recorded an expense of $13.9 million based on the fair value of converted ARCT IV Class B Units, as discussed within Note 17 – Related Party Transactions and Arrangements .

Table of Contents

General and Administrative Expenses

General and administrative expenses increased $2.6 million to $32.8 million for the three months ended September 30, 2015 , as compared to $30.2 million during the same period in 2014 . The increase is primarily related to a decrease in expected reimbursements for organization, registration and offering expenses associated with the sale of common stock from the Managed REITs and was partially offset by a decrease in employee compensation, a portion of which is variable and based on activities such as acquiring real estate and raising capital, as well as a decrease in sponsorship fees, both of which are a result of the suspended selling agreements.

General and administrative expenses decreased $22.9 million to $99.9 million for the nine months ended September 30, 2015 , as compared to $122.8 million during the same period in 2014 . The decrease in general and administrative expense is primarily related to a decrease in equity-based compensation of $22.6 million in comparison to the prior period, related to an issuance of shares granted to employees of affiliates of the Former Manager during the nine months ended September 30, 2014 , which were fully expensed upon grant.

Depreciation and Amortization Expenses

Depreciation and amortization expenses decreased $56.7 million and $44.5 million for the three and nine months ended September 30, 2015 , respectively, to $208.5 million and $645.2 million as compared to $265.2 million and $689.7 million , respectively, during the same periods in 2014 .

As noted within Note 3 – Segment Reporting , depreciation and amortization expense recorded within the REI segment decreased $39.9 million and $5.4 million for the three and nine months ended September 30, 2015 , respectively, to $200.2 million and $620.1 million as compared to $240.1 million and $625.5 million , respectively, during the same periods in 2014 . The depreciation and amortization expense recorded during the three and nine months ended September 30, 2015 decreased from the respective 2014 periods due to the disposal of our portfolio of anchored shopping centers during the fourth quarter of 2014 and dispositions of real estate properties in 2015. In addition, we recorded $185.8 million of impairments on real estate subsequent to September 30, 2014. The decrease in depreciation and amortization for the nine months ended September 30, 2015 , was offset by the full impact of the properties acquired in the Cole Merger on February 7, 2014.

As noted within Note 3 – Segment Reporting , depreciation and amortization expense recorded within the Cole Capital segment decreased $16.7 million and $39.1 million for the three and nine months ended September 30, 2015 , respectively, to $8.4 million and $25.1 million as compared to $25.1 million and $64.2 million , respectively, during the same periods in 2014 . The depreciation and amortization expense recorded during the three and nine months ended September 30, 2015 is less than the respective 2014 periods primarily due to $86.4 million of impairment charges on intangible assets within the Cole Capital segment recorded during the fourth quarter of 2014.

Impairment of Real Estate

There were no impairments of real estate properties during the three months ended September 30, 2015 . During the same period in 2014 , there were $2.3 million of impairments related to five properties. Impairments of real estate increased $81.4 million to $85.3 million for the nine months ended September 30, 2015 as compared to $3.9 million during the same period in 2014 . The increase is a result of the impairment of 188 properties during the nine months ended September 30, 2015 , as compared to nine properties during the nine months ended September 30, 2014 . The Company identified these properties for potential sale during the second quarter of 2015 as part of its portfolio management strategy. See Note 9 – Fair Value Measures to our consolidated unaudited financial statements in this Quarterly Report on Form 10-Q for further discussion regarding the impairments.

Interest Expense, Net

Interest expense decreased $12.1 million and $50.7 million for the three and nine months ended September 30, 2015 , respectively, to $89.5 million and $275.8 million as compared to $101.6 million and $326.5 million , respectively, during the same periods in 2014 . The decrease is primarily a result of our decreased debt balance, largely due to prepaying mortgage notes payable, assumption of debt by the buyer in a property disposition, and using cash from operations and dispositions to pay down the revolving credit facility. The Company has removed more than $1.0 billion of mortgage debt from its balance sheet since the Cole Merger to decrease its secured debt profile.

Extinguishment and Forgiveness of Debt, Net

There was no loss on extinguishment and forgiveness of debt recorded for the three months ended September 30, 2015 . A loss on extinguishment and forgiveness of debt of $5.4 million was recorded for the three months ended September 30, 2014 . During the three months ended September 30, 2015 and 2014 , an aggregate of $276.7 million and $173.3 million , respectively, of mortgage notes payable were repaid prior to maturity or assumed by the buyer in a property disposition.

Table of Contents

A loss on extinguishment and forgiveness of debt of $5.3 million and a gain on extinguishment and forgiveness of debt of $21.3 million were recorded for the nine months ended September 30, 2015 and 2014 , respectively. During the nine months ended September 30, 2015 and 2014 , an aggregate of $388.7 million and $1.0 billion , respectively, of mortgage notes payable were repaid prior to maturity or assumed by the buyer in a property disposition. In connection with the extinguishments, we paid prepayment fees totaling $3.0 million and $35.9 million for the three and nine months ended September 30, 2014 . No such fees were paid during the the same periods in 2015 .

Other Income, Net

Other income, net decreased $5.3 million and $4.3 million for the three and nine months ended September 30, 2015 , respectively, to $3.4 million and $12.8 million as compared to $8.7 million and $17.1 million , respectively, during the same periods in 2014 . The decrease is primarily a result of a decrease in interest income from investment securities, largely resulting from the sale of 15 CMBS for $158.0 million during the third quarter of 2014, as well as a decrease in interest income from mortgage notes receivable, primarily due to two mortgage notes receivable with an aggregate principal balance of $71.0 million being repaid in the fourth quarter of 2014. Additionally, during the three months ended September 30, 2015 , the Company received $0.9 million of insurance proceeds, compared to $3.3 million during the same period in 2014, each related to merger litigation.

Gain on Sale of Interest in Joint Venture

Gain on sale of interest in joint venture was $6.7 million for each of the three and nine months ended September 30, 2015 due to the disposition of the Company’s interest in one consolidated joint venture, as discussed within Note 5 – Real Estate Investments . There was no gain on sale of joint venture recorded during the same period in 2014 .

Loss on Derivative Instruments, Net

Loss on derivative instruments, net for the three and nine months ended September 30, 2015 were $1.4 million and $2.1 million , respectively, as compared to $17.5 million and $10.4 million during the same periods in 2014 . Losses on derivative instruments, net for the current periods relate to the ineffective portion of changes in fair value of cash flow hedges. The decreases primarily relate to that fact that we recorded losses of $18.8 million and $13.6 million for the three and nine months ended September 30, 2014 , respectively, relating to the Series D embedded derivative, which was settled in conjunction with the redemption of the Series D Preferred Stock in the third quarter of 2014.

Gain on Sale of Investments

There was no gain on sale of investments for the three and nine months ended September 30, 2015 . Gain on sale of investments for the three and nine months ended September 30, 2014 were each $6.4 million , which relate to a gain recorded in connection with the sale of the 15 CMBS we had acquired in the Cole merger.

Loss on Disposition of Real Estate and Held For Sale Assets, Net

Loss on disposition of real estate and held for sale assets, net decreased $250.4 million from a loss of $256.9 million to a loss of $6.5 million for the three months ended September 30, 2015 and decreased $213.2 million from a loss of $275.8 million to a loss of $62.6 million for the nine months ended September 30, 2015 . The decrease is primarily a result of classifying five properties as held for sale as of September 30, 2015 , resulting in a loss of $23.3 million being recorded to reduce the properties down to their fair value less cost to sell. During the three months ended September 30, 2015 , the Company also disposed of a portfolio of 68 CVS properties, which resulted in a loss of $8.5 million, which includes $18.5 million of goodwill allocated to the cost basis of such properties.

Provision for/Benefit from Income and Franchise Taxes

Cole Capital is primarily operated through a TRS, where the profits or loss of Cole Capital are subject to income taxes. For the three and nine months ended September 30, 2015 , Cole Capital recorded a benefit of $0.7 million and $2.4 million , respectively, as compared to a provision of $1.1 million and a benefit of $12.6 million for the same periods in 2014 . The benefit or provision for tax is primarily dependent on the operations of the TRS.

The consolidated provision for income taxes of $1.5 million and $4.8 million for the three and nine months ended September 30, 2015 , respectively, reflect a decrease of $1.6 million and a decrease of $11.5 million , respectively, from a provision for income taxes of $3.1 million and benefit from income taxes of $6.7 million , respectively, during the same periods in 2014 . As discussed within Note 2 – Summary of Significant Accounting Policies , the Company uses accounting estimates to compute the provision for or benefit from income taxes which may change as new events occur. The change in the components of the provision for or benefit from income taxes relating to state and federal income and franchise taxes are discussed within Note 19 – Income Taxes .

Table of Contents

Non-GAAP Measures

Our results are presented in accordance with U.S. GAAP. We also disclose certain non-GAAP measures, as discussed further below, as we believe they are useful to investors.

Contract Rental Revenue

Contract Rental Revenue includes minimum rent, percentage rent and other contingent consideration, and rental revenue from parking and storage space and excludes GAAP adjustments, such as straight-line rent and amortization of above-market lease assets and below-market lease liabilities. Contract Rental Revenue includes such revenues from properties subject to a direct financing lease. The Company believes that Contract Rental Revenue is a useful supplemental measure to investors and analysts for assessing the performance of the Company’s REI segment, although it does not represent revenue that is computed in accordance with GAAP. Therefore, Contract Rental Revenue should not be considered as an alternative to revenue, as computed in accordance with GAAP, or as an indicator of the Company’s financial performance. Contract Rental Revenue may not be comparable to similarly titled measures of other companies.

The following table shows the calculation of Contract Rental Revenue for the three and nine months ended September 30, 2015 and 2014 (dollar amounts in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Rental income – as reported	$	333,766		$	365,712		$	1,017,708		$	924,646
Direct financing lease income – as reported	659			625			2,097			2,812
Adjustments:
Straight line rent	(21,705		)	(24,871		)	(64,809		)	(49,804		)
Amortization of below-market lease liabilities, net of amortization of above-market lease assets	1,152			1,934			3,223			4,425
Net direct financing lease adjustments	507			620			1,493			1,147
Other non-contract rental revenue	—			—			—			—
Contract Rental Revenue	$	314,379		$	344,020		$	959,712		$	883,226

Funds from Operations and Adjusted Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”), an industry trade group, has promulgated a measure known as funds from operations (“FFO”), which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO, a non-GAAP supplemental financial performance measure, is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income or loss as determined under U.S. GAAP.

NAREIT defines FFO as net income or loss computed in accordance with U.S. GAAP, excluding gains or losses from disposition of property, depreciation and amortization of real estate assets and impairment write-downs on real estate including pro rata share of adjustments for unconsolidated partnerships and joint ventures. Our FFO calculation complies with NAREIT’s policy described above.

In addition to FFO, we use Adjusted Funds From Operations (“AFFO”) as a non-GAAP supplemental financial performance measure to evaluate the operating performance of our company. AFFO, as defined by our Company, excludes from FFO non-routine items such as acquisition related costs, merger and other non-routine transactions costs, gains or losses on sale of investments, insurance and litigation settlements and extinguishment of debt cost. We also exclude certain non-cash items such as impairments of intangibles, straight-line rental revenue, unrealized gains or losses on derivatives, equity-based compensation and amortization of intangibles, deferred financing costs, above-market lease assets and below-market lease liabilities. Management believes that excluding these costs from FFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time. AFFO also allows for a comparison of the performance of our operations with other traded REITs that are not currently engaging in acquisitions and mergers, as well as a comparison of our performance with that of other traded REITs, as AFFO, or an equivalent measure, is routinely reported by traded REITs, and we believe often used by analysts and investors for comparison purposes.

For all of these reasons, we believe FFO and AFFO, in addition to net income (loss) and cash flows from operating activities, as defined by GAAP, are helpful supplemental performance measures and useful in understanding the various ways in which our management evaluates the performance of our company over time. However, not all REITs calculate FFO and AFFO the same

Table of Contents

way, so comparisons with other REITs may not be meaningful. FFO and AFFO should not be considered as alternatives to net loss or to cash flows from operating activities, and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs.

AFFO may provide investors with a view of our future performance and future dividend policy. However, because AFFO excludes items that are an important component in an analysis of the historical performance of a property, AFFO should not be construed as a historic performance measure. Neither the SEC, NAREIT, nor any other regulatory body has evaluated the acceptability of the exclusions contemplated to adjust FFO in order to calculate AFFO and its use as a non-GAAP financial performance measure.

The table below presents FFO and AFFO for the three and nine months ended September 30, 2015 and 2014 (in thousands, except share and per share data).



	Three Months Ended September 30,						Nine Months Ended September 30,
Total Company:	2015			2014			2015			2014
Net income (loss)	$	8,141		$	(288,047	)	$	(131,261	)	$	(650,485	)
Dividends on non-convertible preferred stock	(17,974		)	(17,974		)	(53,920		)	(53,121		)
(Gain) loss on real estate assets and interest in joint venture, net	(187		)	256,894			55,855			275,768
Depreciation and amortization of real estate assets	200,159			240,046			620,061			625,447
Impairment of real estate	—			2,299			85,341			3,855
Proportionate share of adjustments for unconsolidated entities	1,423			2,580			4,467			6,497
FFO	191,562			195,798			580,543			207,961

Acquisition related	1,764			13,998			5,509			34,616
Merger and other non-routine transactions	8,957			7,632			42,244			175,352
Legal settlements and insurance proceeds	(925		)	(3,275		)	(2,175		)	(3,275		)
Unrealized gain on investment securities	(4		)	(6,357		)	(65		)	(6,357		)
Loss on derivative instruments, net	1,420			17,484			2,137			10,398
Amortization of premiums and discounts on debt and investments, net	(4,920		)	(8,106		)	(14,076		)	(17,910		)
Amortization of below-market lease liabilities, net of above-market lease assets	1,152			1,934			3,223			4,425
Net direct financing lease adjustments	507			620			1,493			1,147
Amortization and write-off of deferred financing costs	11,320			12,486			26,677			68,447
Amortization of management contracts	7,510			24,288			22,530			62,304
Deferred tax benefit ⁽¹⁾	(5,701		)	—			(13,547		)	—
Extinguishment of debt and forgiveness of debt, net	—			5,396			(5,302		)	21,264
Straight-line rent	(21,705		)	(24,871		)	(64,809		)	(49,804		)
Equity-based compensation	4,016			5,541			10,189			32,805
Other amortization and non-cash charges	781			713			2,300			1,832
Proportionate share of adjustments for unconsolidated entities	694			1,268			2,030			2,050
AFFO	$	196,428		$	244,549		$	598,901		$	545,255

Weighted-average shares outstanding - basic	903,461,323			902,096,102			903,267,282			756,289,984
Effect of dilutive securities ⁽²⁾	25,995,886			44,970,255			26,109,180			49,555,790
Weighted-average shares outstanding - diluted ⁽³⁾	929,457,209			947,066,357			929,376,462			805,845,774

AFFO per diluted share	$	0.21		$	0.26		$	0.64		$	0.68

____________________________________


(1)	This adjustment represents the non-current portion of the tax benefit recognized in net loss in order to show only the current portion of the benefit as an impact to AFFO.


(2)	Dilutive securities include OP Units, unvested restricted shares, certain unvested restricted stock units and convertible preferred stock, as applicable.

Table of Contents

(3)

Weighted-average shares for all periods presented exclude the effect of the convertible debt as the strike price of each convertible debt instrument is greater than the price of the General Partner’s common stock as of the end of each reporting period presented. In addition, for the three and nine months ended September 30, 2015 , 1.5 million shares underlying Restricted Stock Units that are contingently issuable have been excluded based on the Company’s level of achievement of certain performance targets through September 30, 2015 .

The table below presents FFO and AFFO for the REI Segment for the three and nine months ended September 30, 2015 and 2014 (in thousands, except share and per share data).



	Three Months Ended September 30,						Nine Months Ended September 30,
REI segment:	2015			2014			2015			2014
Net income (loss)	$	8,740		$	(289,133	)	$	(130,134	)	$	(631,475	)
Dividends on non-convertible preferred stock	(17,974		)	(17,974		)	(53,920		)	(53,121		)
(Gain) loss on real estate assets and interest in joint venture, net	(187		)	256,894			55,855			275,768
Depreciation and amortization of real estate assets	200,159			240,046			620,061			625,447
Impairment of real estate	—			2,299			85,341			3,855
Proportionate share of adjustments for unconsolidated entities	1,423			2,580			4,467			6,497
FFO	192,161			194,712			581,670			226,971

Acquisition related	1,690			13,998			4,976			34,616
Merger and other non-routine transactions	8,957			7,613			42,244			173,406
Legal settlement and insurance proceeds	(925		)	(3,275		)	(2,175		)	(3,275		)
Unrealized gain on investment securities	(4		)	(6,357		)	(65		)	(6,357		)
Loss on derivative instruments, net	1,420			17,484			2,137			10,398
Amortization of premiums and discounts on debt and investments, net	(4,920		)	(8,106		)	(14,076		)	(17,910		)
Amortization of below-market lease liabilities, net of amortization of above-market lease assets	1,152			1,934			3,223			4,425
Net direct financing lease adjustments	507			620			1,493			1,147
Amortization and write-off of deferred financing costs	11,320			12,486			26,677			68,447
Extinguishment of debt and forgiveness of debt, net	—			5,396			(5,302		)	21,264
Straight-line rent	(21,705		)	(24,871		)	(64,809		)	(49,804		)
Equity-based compensation expense, net of forfeitures ⁽¹⁾	1,073			2,086			3,832			26,301
Other amortization and non-cash charges	(1		)	3			7			164
Proportionate share of adjustments for unconsolidated entities	694			1,268			2,030			2,050
AFFO	$	191,419		$	214,991		$	581,862		$	491,843

Weighted-average shares outstanding - basic	903,461,323			902,096,102			903,267,282			756,289,984
Effect of dilutive securities ⁽²⁾	25,995,886			44,970,255			26,109,180			49,555,790
Weighted-average shares outstanding - diluted ⁽³⁾	929,457,209			947,066,357			929,376,462			805,845,774

AFFO per diluted share	$	0.21		$	0.23		$	0.63		$	0.61

____________________________________


(1)	This adjustment represents the non-current portion of the tax benefit recognized in net loss in order to show only the current portion of the benefit as an impact to AFFO.


(2)	Dilutive securities include OP Units, unvested restricted shares, certain unvested restricted stock units and convertible preferred stock, as applicable.

(3)

Weighted-average shares for periods presented exclude the effect of the convertible debt as the strike price of each convertible debt instrument is greater than the price of the General Partner’s common stock as of the end of each reporting period presented. In addition, for the three and nine months ended September 30, 2015 , 1.5 million shares underlying Restricted Stock Units that are contingently issuable have been excluded based on the Company’s level of achievement of certain performance targets through September 30, 2015 .

Table of Contents

The table below presents FFO and AFFO for the Cole Capital Segment for the three and nine months ended September 30, 2015 and 2014 (in thousands, except share and per share data).



	Three Months Ended September 30,					Nine Months Ended September 30,
Cole Capital segment:	2015			2014		2015			2014
Net (loss) income	(599		)	1,086		(1,127		)	(19,010		)
FFO	(599		)	1,086		(1,127		)	(19,010		)

Acquisition related	74			—		533			—
Merger and other non-routine transactions	—			19		—			1,946
Amortization of management contracts	7,510			24,288		22,530			62,304
Deferred tax benefit ⁽¹⁾	(5,701		)	—		(13,547		)	—
Equity-based compensation expense, net of forfeitures ⁽²⁾	2,943			3,455		6,357			6,504
Other amortization and non-cash charges	782			710		2,293			1,668
AFFO	$	5,009		$	29,558	$	17,039		$	53,412

Weighted-average shares outstanding - basic	903,461,323			902,096,102		903,267,282			756,289,984
Effect of dilutive securities ⁽³⁾	25,995,886			44,970,255		26,109,180			49,555,790
Weighted-average shares outstanding - diluted ⁽⁴⁾	929,457,209			947,066,357		929,376,462			805,845,774

AFFO per diluted share	$	0.01		$	0.03	$	0.02		$	0.07

_________________________________


(1)	This adjustment represents the non-current portion of the tax benefit recognized in net loss in order to show only the current portion of the benefit or provision as an impact to AFFO.


(2)	During the three months ended December 31, 2014, the Company reversed certain equity-based compensation amounts previously recorded due to the resignation of certain executives.


(3)	Dilutive securities include limited partnership interests in our operating partnership, unvested restricted shares, certain unvested restricted stock units and convertible preferred stock, as applicable.

(4)

Weighted-average shares for all periods presented exclude the effect of the convertible debt as the strike price of each convertible debt instrument is greater than the price of the Company’s common stock as of the end of each reporting period presented. In addition, for the three months ended September 30, 2015 , 1.5 million of shares underlying restricted stock units that are contingently issuable have been excluded based on the Company’s level of achievement of certain performance targets through September 30, 2015 .

Liquidity and Capital Resources

In the normal course of business, our principal demands for funds will be for reducing the outstanding balance of our credit facility and the payment of operating expenses, including legal expenses, distributions to our investors, and principal and interest on our other outstanding indebtedness. Our cash needs are intended to be provided by proceeds from dispositions and cash flow from operations. If we are unable to satisfy our operating costs with our cash flow from operations, we may use borrowings on our line of credit to cover such obligations, as necessary.

As of September 30, 2015 , we had $171.7 million of cash and cash equivalents.

Debt Summary

As of September 30, 2015 , we had $9.0 billion of debt outstanding, including net premiums, with a weighted-average years to maturity of 4.0 years and weighted-average interest rate of 3.65% . Since December 31, 2014, we reduced our outstanding borrowings under the Credit Facility by $1.1 billion . During the nine months ended September 30, 2015 , there were no changes to the covenants, interest rate and amounts outstanding of our Senior Notes or Convertible Notes. We reduced our secured debt during the nine months ended September 30, 2015 by $466.7 million pursuant to our disposition activity during that period, reducing our interest expense by $36.6 million . As of September 30, 2015 , the Company had a net debt leverage ratio of 50.3% , calculated as net debt (or the Company's outstanding principal debt balance, excluding certain GAAP adjustments, such as premiums and discounts, less all cash and cash equivalents), divided by gross real estate investments (or total gross real estate and related assets, including net investments in unconsolidated entities, investment in direct financing leases, investment securities backed by real estate and loans held for investment, net of gross intangible lease liabilities).

Table of Contents

Developments in Debt Financing

Credit Facility

In respect of the Credit Facility, our outstanding balance as of September 30, 2015 was $2.1 billion , following our repayment of amounts under the revolving portion of the Credit Facility during the nine months ended September 30, 2015 of $300.0 million . During the nine months ended September 30, 2015 , we entered into the Second Amendment. Pursuant to the Second Amendment, the maximum capacity under the Credit Facility was reduced from $3.6 billion to $3.3 billion , which included a reduction in the size of the $2.45 billion revolving credit facility to $2.3 billion and the elimination of the $150.0 million multicurrency revolving credit facility. The maximum aggregate dollar amount of letters of credit that may be outstanding at any one time under the Credit Facility was reduced from $50.0 million to $25.0 million . In respect of financial covenants, the Second Amendment reduced the Company’s minimum Unencumbered Asset Value (as defined in the Credit Agreement) from $10.5 billion to $8.0 billion . For the purposes of determining Unencumbered Asset Value, the Company is permitted to include restaurant properties representing more than 30% of its Unencumbered Asset Value in such calculation such that: (i) from July 1, 2015 to June 29, 2016, up to 40% of the Unencumbered Asset Value may be comprised of restaurant properties; and (ii) from June 30, 2016 to December 30, 2016, up to 35% of the Unencumbered Asset Value may be comprised of restaurant properties. From December 31, 2016 on, the maximum percentage of Unencumbered Asset Value attributable to restaurant properties will be reduced back down to 30%. In connection with the Second Amendment, the Company agreed to pay certain customary fees to the consenting lenders and agreed to reimburse customary expenses of the arrangers. Aside from the Second Amendment, as well as satisfying all Consent and Waiver Agreement limitations upon filing all necessary deliverables, there were no material changes to the covenants and terms of the Credit Facility during the nine months ended September 30, 2015 .

Other Debt Financing Sources

As noted above, there were no changes to the covenants, interest rate or amount outstanding of our Senior Notes and Convertible Notes during the nine months ended September 30, 2015 . We reduced our overall secured debt balance by $466.7 million during the nine months ended September 30, 2015 by disposing of encumbered real estate as part of our disposition activity.

Disposition Activity

As part of our effort to fine-tune our real estate portfolio by focusing on holding core assets, we have disposed of 89 properties during the nine months ended September 30, 2015 for an aggregate gross sales price of $675.9 million . We also have placed $23.3 million of properties under contract for disposition. We expect to continue to explore opportunities to sell additional properties as we pay off outstanding debt and reduce our borrowings under the Credit Facility in order to reduce our overall leverage, while providing us further financial flexibility.

Principal Use of Funds

Loan Obligations

The payment terms of our loan obligations vary. In general, only interest amounts are payable monthly with all unpaid principal and interest due at maturity. Some of our loan agreements require that we comply with specific reporting and financial covenants mainly related to debt coverage ratios and loan-to-value ratios. Each loan that has these requirements has specific ratio thresholds that must be met. As of September 30, 2015 , the Company believes it was in compliance with the debt covenants under its respective loan agreements, except for a loan in default with a principal balance of $38.1 million that is described further below.

As of September 30, 2015 , we had non-recourse mortgage indebtedness of $3.2 billion , which was collateralized by 678 properties, reflecting a decrease from December 31, 2014 of $456.5 million derived from our disposition activity during from January 1, 2015 to September 30, 2015. Our mortgage indebtedness bore interest at the weighted-average rate of 5.02% per annum and had a weighted-average maturity of 5.3 years. We may in the future incur additional mortgage debt on the properties we currently own or use long-term non-recourse financing to acquire additional properties.

Our loan obligations in respect of the Senior Notes and Convertible Notes are consistent with those as of December 31, 2014 and the terms of the Credit Facility have been modified as described above under “Developments in Debt Financing – Credit Facility.”

Table of Contents

Dividends

The amount of dividends payable to our stockholders is determined by our board of directors and is dependent on a number of factors, including funds available for dividends, financial condition, capital expenditure requirements, as applicable, and annual dividend requirements needed to qualify and maintain our status as a REIT under the Internal Revenue Code.

Until the completion of the Restatement and the filing of Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and in connection with the amendments to the Credit Agreement, we agreed to suspend payment of dividends on our common stock until the Company complied with certain periodic financial reporting and related requirements set forth in such amendments. On March 30, 2015, the Company satisfied these periodic financial reporting and related requirements. Accordingly, on August 5, 2015, the General Partner’s board of directors authorized, and the General Partner declared, a dividend in respect of its Common Stock whereby $0.1375 per share (equaling an annualized dividend rate of $0.55 per share) was paid on October 15, 2015 and will be paid on January 15, 2016 to holders of record on each of September 30, 2015 and December 31, 2015, respectively. As our real estate portfolio matures, we expect cash flows from operations to continue to cover our dividends.

Contractual Obligations

The following is a summary of our contractual obligations as of September 30, 2015 (in thousands):



	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Principal payments - mortgage notes and other debt	$	3,268,411	$	194,415	$	708,682	$	534,045	$	1,831,269
Interest payments - mortgage notes and other debt ^{(1) (2)}	624,155		158,898		255,872		209,385		—
Principal payments - credit facility	2,110,000		—		2,110,000		—		—
Interest payments - credit facility ^{(1) (2)}	178,578		60,039		118,539		—		—
Principal payments - corporate bonds	2,550,000		—		1,300,000		750,000		500,000
Interest payments - corporate bonds	225,341		71,500		100,028		53,813		—
Principal payments - convertible debt	1,000,000		—		597,500		—		402,500
Interest payments - convertible debt	126,257		33,019		63,050		30,188		—
Operating and ground lease commitments	362,612		6,137		46,060		40,640		269,775
Build-to-suit commitments	10,019		10,019		—		—		—
Total	$	10,455,373	$	534,027	$	5,299,731	$	1,618,071	$	3,003,544

____________________________________


(1)	As of September 30, 2015 , we had $284.8 million of variable rate mortgage notes and $1.0 billion of variable rate debt on the credit facility effectively fixed through the use of interest rate swap agreements. We used the effective interest rates fixed under our swap agreements to calculate the debt payment obligations in future periods.


(2)	Interest payments due in future periods on the $1.1 million of variable rate debt payment obligations were calculated using a forward LIBOR curve.

Cash Flow Analysis

Operating Activities – The level of cash flows provided by operating activities is affected by acquisition and transaction costs, the timing of interest payments, as well as the receipt of scheduled rent payments. During the nine months ended September 30, 2015 , net cash provided by operating activities increased $363.0 million to $628.1 million from $265.1 million . The increase is primarily due to an increase in revenue, excluding non-cash adjustments, of $54.0 million , a decrease in merger and other transaction expenses of $54.9 million , a decrease in prepayment fees and penalties relating to debt repayment of $35.9 million and a decrease in the net change in assets and liabilities of $172.1 million .

Investing Activities – Net cash provided by investing activities for the nine months ended September 30, 2015 increased $4.4 billion to $384.6 million from net cash used in investing activities of $4.1 billion . The increase in cash flow primarily relates to a decrease in cash paid for real estate assets of $3.5 billion and a decrease in cash paid for real estate businesses of $756.2 million , both as a result of a decrease in acquisition activity as compared to the same period in prior year. The increase is also related to an increase in cash proceeds from the disposition of real estate assets of $241.0 million , driven primarily by the disposal of a portfolio of 68 CVS properties and various other dispositions since the prior period as well as assumption of mortgage notes payable by the buyer in such property dispositions.

Financing Activities – Net cash used in financing activities increased $5.2 billion to $1.3 billion during the nine months ended September 30, 2015 from net cash provided by financing activities of $3.9 billion . The increase is primarily related to a decrease in proceeds from the issuance of corporate bonds of $2.5 billion and an increase in net payments on the credit facility of $2.1 billion , combined with a decrease in the proceeds from the issuance of Common Stock, net of offering costs, of $1.6 billion , all of which relate to the fact that the Company raised more capital to fund large acquisitions in the prior period. The increase was slightly offset by a decrease in distributions paid of $630.2 million .

Table of Contents

Election as a REIT

We elected to be taxed as a REIT under Sections 856 through 860 of the Code commencing with the taxable year ended December 31, 2011. If we continue to qualify for taxation as a REIT, we generally will not be subject to federal corporate income tax to the extent we distribute our REIT taxable income to our stockholders, and so long as we distribute at least 90% of our REIT taxable income, computed without regard to the dividends paid deduction and excluding net capital gain. REITs are subject to a number of other organizational and operational requirements. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, federal income taxes on certain income and excise taxes on our undistributed income. On August 5, 2015, the General Partner’s board of directors authorized, and the General Partner declared the reinstatement of a dividend on its Common Stock, and we believe that such dividend will be sufficient to meet the 90% distribution requirement discussed above for the taxable year ended December 31, 2015. As such, we believe we are organized and operating in such a manner as to qualify to be taxed as a REIT for the taxable year ended December 31, 2015 .

Related Party Transactions and Agreements

In the past, we entered into certain agreements and paid certain fees or reimbursements to ARC, the Former Manager and its affiliates. As of December 31, 2014, as a result of the resignations of certain executive officers (one of whom was a director) in the fourth quarter of 2014, the Former Manager and its affiliates were no longer affiliated with us. Accordingly, there have been no related party transactions to report during the nine months ended September 30, 2015 aside from those with the Managed REITs, as further described below.

We are contractually responsible for managing the Managed REITs’ affairs on a day-to-day basis, identifying and making acquisitions and investments on the Managed REITs’ behalf, and recommending to each of the Managed REIT’s respective board of directors an approach for providing investors with liquidity. In addition, we distribute the shares of common stock for certain of the Managed REITs and advise them regarding offerings, manage relationships with participating broker-dealers and financial advisors, and provide assistance in connection with compliance matters relating to the offerings. We receive compensation and reimbursement for services relating to the Managed REITs’ offerings and the investment, management and disposition of their respective assets, as applicable. See Note 17 – Related Party Transactions and Arrangements to our consolidated financial statements in this report for a further explanation of the various related party transactions, agreements and fees.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Significant Accounting Estimates

Our accounting policies have been established to conform to GAAP. The preparation of financial statements in conformity with GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to the various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses. We consider our critical accounting policies to be the following:

• Revenue Recognition;

• Real Estate Investments;

• Allocation of Purchase Price of Business Combinations including Acquired Properties;

• Goodwill;

• Impairments;

• Income Taxes; and

• Recently Issued Accounting Pronouncements.

A complete description of such policies and our considerations is contained in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2014. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2014, and related notes thereto.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

As of September 30, 2015 , our debt included fixed-rate debt, including debt that has interest rates that are fixed with the use of derivative instruments, with a fair value and carrying value of $8.1 billion and $7.8 billion , respectively. Changes in market interest rates on our fixed rate debt impact fair value of the debt, but they have no impact on interest incurred or cash flow. For instance, if interest rates rise 100 basis points and our fixed rate debt balance remains constant, we expect the fair value of our debt to decrease, the same way the price of a bond declines as interest rates rise. The sensitivity analysis related to our fixed-rate debt assumes an immediate 100 basis point move in interest rates from their September 30, 2015 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our fixed rate debt by $220.9 million . A 100 basis point decrease in market interest rates would result in an increase in the fair value of our fixed-rate debt by $222.3 million .

As of September 30, 2015 , our debt included variable-rate debt with an aggregate fair value and carrying value of $1.1 billion . The sensitivity analysis related to our variable-rate debt assumes an immediate 100 basis point move in interest rates from their September 30, 2015 levels, with all other variables held constant. A 100 basis point increase or decrease in variable interest rates on our variable-rate notes payable would increase or decrease our interest expense by $11.0 million annually.

As the information presented above includes only those exposures that existed as of September 30, 2015 , it does not consider exposures or positions arising after that date. The information represented herein has limited predictive value. Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.

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

Item 4. Controls and Procedures.

I. Discussion of Controls and Procedures of the General Partner

For purposes of the discussion in this Part I of Item 4, the “Company” refers to the General Partner.

Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2015 and determined that the disclosure controls and procedures were not effective. Management believes that two of the nine material weaknesses disclosed in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2014 filed with the SEC on March 30, 2015, have been fully remediated as of September 30, 2015, as described in “Changes in Internal Control Over Financial Reporting” below. Further, management believes the control design changes and remediation measures described in the “Remediation” section below adequately address the remaining seven material weaknesses disclosed as of December 31, 2014. However, those seven remaining material weaknesses could not be considered remediated at September 30, 2015 because a sufficient period of time has not passed since the implementation to allow for adequate demonstration and testing of the operational effectiveness of the applicable control design changes and remediation measures.

Material Weaknesses

Material Weaknesses in Disclosure Controls and Procedures . The Company’s disclosure controls and procedures were not properly designed or implemented to ensure that the information contained in the Company’s periodic reports and other SEC filings correctly reflected the information contained in the Company’s accounting records and other supporting information and, in the case of AFFO per share (a non-GAAP measure that is an important industry metric), was correctly calculated. In addition, the

Table of Contents

Company did not have appropriate controls to ensure that its SEC filings were reviewed on a timely basis by senior management or that significant changes to amounts or other disclosures contained in a document that had previously been reviewed and approved by the Audit Committee were brought to the attention of the Audit Committee or its Chair for review and approval before the document was filed with the SEC. Finally, the Company did not have appropriate controls over the formulation of AFFO per share guidance or the periodic re-assessment of the Company’s ability to meet its guidance.

Material Weaknesses in Internal Control over Financial Reporting. Under standards established by the Public Company Accounting Oversight Board, a material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

During 2013, due in part to a number of large portfolio acquisitions, the Company experienced significant growth and increases in the complexity of its financial reporting and number of non-routine transactions. In late 2013 and early in the first quarter of 2014, as a result of the anticipation and then completion of the Company’s transition from management by the Former Manager to self-management and the Company’s acquisitions of ARCT IV and Cole, the complexity of the Company’s transactions and the need for accounting judgments and estimates became more prevalent and had a severe impact on the Company’s control environment. Consequently, the following material weaknesses in the Company’s internal control over financial reporting were reported as of December 31, 2014:

Control Environment – The Company failed to implement and maintain an effective internal control environment that had appropriate processes to manage the changes in business conditions resulting from the volume and complexity of its 2013 and first quarter 2014 transactions, combined with the pressure of market expectations inherent in announcing AFFO per share guidance for 2014.

The control environment, as part of the internal control framework, sets the tone of an organization, influencing the control consciousness of its people and providing discipline and structure. Among the deficiencies in the control environment were failures to:


•	Emphasize the importance of adherence to the Company’s Code of Business Conduct and Ethics;


•	Establish appropriate policies and procedures surrounding the accounting treatment and classification of merger-related expenses, goodwill, impairments and purchase accounting;


•	Establish controls designed to prevent changes to the financial statements and supporting financial information by senior management without the proper levels of review, support and approval; and


•	Establish controls designed to ensure that accounting employees would not be subject to pressure to make inappropriate decisions affecting the financial statements and/or the financial statement components of the calculation of AFFO, and that accounting concerns raised by employees would be timely and appropriately addressed by senior management.

Related Party Transactions and Conflicts of Interest – The Company did not maintain the appropriate controls to assess, authorize and monitor related party transactions, validate the appropriateness of such transactions or manage the risks arising from contractual relationships with affiliates. Without the appropriate controls, the Company made certain payments to the Former Manager and its affiliates that were not sufficiently documented or that otherwise warrant scrutiny.

Equity-based Compensation – The Company did not maintain appropriate controls over various grants of equity-based compensation. In the fourth quarter of 2013, in anticipation of the Company’s transition to self-management, the Company entered into employment agreements with the Company’s former Executive Chairman and Chief Executive Officer and its former Chief Financial Officer (which took effect on January 8, 2014), and also approved the 2014 OPP pursuant to which awards were made to them on January 8, 2014. Without the appropriate controls, these documents contained terms that were inconsistent with the terms authorized by the Compensation Committee. Additionally, the Company did not obtain copies of or administer the equity awards made by means of block grants allocated by the Former Manager and its affiliates, nor did it review the awards for consistency with the Compensation Committee’s authorization.

Accounting Close Process – The Company did not have consistent policies and procedures throughout its offices relating to purchase accounting, accounting for gain or loss on disposition and testing for impairment. In addition, senior management did not establish clear reporting lines and job responsibilities, or promote accountability over business process control activities.

Critical Accounting Estimates and Non-Routine Transactions – The Company did not maintain effective controls or develop standardized policies and procedures for critical accounting estimates and non-routine transactions, including management review and approval of the accounting treatment of all critical and significant estimates on a periodic basis.

Table of Contents

Information Technology General Controls – Access, Authentication and Information Technology Environment – The Company did not maintain effective information technology environmental and governance controls, including controls over information systems security administration and management functions in the following areas: (a) granting and revoking user access rights; (b) timely notification of user departures; (c) periodic review of appropriateness of access rights; (d) physical access restrictions; and (e) segregation of duties.

Remediation

As discussed below, the Company has been actively engaged in improving its disclosure controls and procedures and internal control over financial reporting. The Company’s new senior management reports on a quarterly basis to the Audit Committee and, where applicable, to the other committees of the board of directors as to the progress made in remediating the material weaknesses identified above.

Financial Reporting and Disclosure Controls and Procedures – Under the oversight of the Audit Committee, the Company has adopted a chartered disclosure committee comprised of senior attorneys, accounting personnel and executives and heads of other pertinent firm-wide disciplines. The chair of the disclosure committee has ongoing dialogue with the Audit Committee on how the disclosure committee is fulfilling its mandate to ensure the timeliness, accuracy, completeness and quality of the Company’s SEC filings and other public disclosures. The disclosure committee is responsible for establishing and administering a process by which certain personnel in relevant functions and areas are required to provide sub-certifications in support of the certifications that the Company’s principal executive and principal financial officers are required to provide in connection with each periodic SEC report. Processes including formalized calendars and timelines have been implemented to help plan appropriately for quarterly financial reporting as well as securities offerings and other events that require public disclosure.

Additionally, at the direction of the Audit Committee, the Company has enhanced and formalized the procedures for the review and approval of annual and quarterly SEC reports as follows:


•	Drafts of reports are circulated sufficiently in advance of Audit Committee meetings to permit adequate review;


•	Audit Committee meetings are attended in person to the extent practicable and, in addition to Audit Committee members, required attendees include the Chief Financial Officer, Chief Accounting Officer, General Counsel, head of Internal Audit, independent auditors and outside legal counsel as necessary;


•	At Audit Committee meetings, in addition to required communications from the independent auditors, reports are made by the Chief Accounting Officer on significant changes from prior filings, significant judgments reflected in the report and the receipt of sub-certifications;


•	At Audit Committee meetings, separate executive sessions are held with the independent auditor, head of Internal Audit, General Counsel and others as necessary; and


•	Any material changes to a draft of a periodic report that is approved by the Audit Committee are submitted to and reviewed and approved by the chair of the Audit Committee prior to filing.

Control Environment – The Company has established a new executive management team and has reconstituted the board of directors with shareholders electing six independent directors, five of whom are new to the board in 2015, including a non-executive chairman. The Audit Committee, the board of directors and new executive management team are committed to establishing a culture of compliance, integrity and transparency and this commitment and expectation has been communicated to all employees of the Company.

The board of directors, with the assistance of outside counsel, has conducted a comprehensive review of its key practices and procedures. This review has included, among other things, the nature, transparency and timeliness of information provided to the board of directors by management, the agenda-setting process, the process by which the board of directors oversees the Company’s risk management functions and the roles and responsibilities, charters, key practices and procedures of the committees of the board of directors. As a result of this review, in late December 2014, the board of directors adopted a new related person transactions policy and assigned the administration of this policy to the Nominating and Corporate Governance Committee.

Under the Audit Committee’s oversight, management conducted a comprehensive review of the Company’s corporate compliance policies, entity level controls, and programs and has also provided training to senior management and accounting personnel on ethics, reporting procedures and other key topics as well as a review of the Company’s whistleblower hotline policies and procedures. With the assistance of an outside consultant, the Company has completed documenting key policies and procedures for the additional remediation items outlined below.

Table of Contents

The Company has designed and implemented controls in a number of areas highlighted by the Audit Committee investigation, as follows:


•	Added additional layers of review of the Company’s significant accounting policies and estimates, including the bonus accrual process;


•	Improved the controls around decisions on whether or not to reflect certain accounting adjustments in the Company’s books and records and/or to report such adjustments within financial statements, by revising its policies, implementing additional review and training all accounting personnel on the revised policies;


•	Adopted new accounting policies that incorporate technical accounting guidance as to when expenses may be appropriately classified as merger-related expenses, as well as policies for the accounting for goodwill, impairments and purchase accounting, and conducted training on the implementation of these policies with relevant members of its accounting staff; and


•	Adopted new practices surrounding the calculation and presentation of AFFO and the formulation and review of AFFO guidance.

Related Party Transactions and Conflicts of Interest – The resignation of the members of senior management affiliated with the Former Manager has eliminated certain conflicts of interest that existed prior to such resignations.

The Company has worked closely with outside counsel and has taken significant steps in an effort to terminate its remaining historical relationships with affiliates of its Former Manager, including ARC and RCS Capital Corporation. There are no ongoing business activities between the Company and the Former Manager or any of its affiliates. The Company has also disentangled its internal control framework from ARC’s affiliated entities. The Company has obtained copies of the relevant financial books and records held by ARC pertinent to the ongoing effective execution of internal controls over financial reporting and has eliminated all human resource, information technology and other overlapping departmental services that impact internal control over financial reporting.

The Company has also enhanced the procedures for review and approval of potential related party transactions with directors, director nominees, executive officers, 5% shareholders and their immediate family members through the adoption of a related person transactions policy administered by the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will annually assess the use and effectiveness of the policy. The Company has designed policies and procedures for our accounting function on the approval, monitoring and disclosure of related party transactions.

Equity-Based Compensation – The Company has obtained copies from ARC of all equity awards made by means of block grants allocated by the Former Manager or its affiliates and has fully expensed any outstanding awards to employees of the Former Manager or its affiliates. In addition, the Company has reviewed these equity awards for consistency with Compensation Committee authorization and obtained any necessary authorizations and booked all required accounting adjustments.

Under the Compensation Committee’s oversight, the Company has implemented new governance processes for the authorization, documentation, issuance, administration and accounting for equity-based compensation. The Compensation Committee now approves each award, rather than delegating authority to management to allocate large tranches of awards. In-house counsel, accounting, tax, and human resources personnel have worked together to oversee the issuance of equity-based compensation to directors, officers and employees. Equity-based compensation tracking and recordkeeping has been further improved through the use of equity tracking software. All compensation matters within the Compensation Committee’s purview are now reviewed by the Compensation Committee chair and in-house counsel against the Compensation Committee’s authorization to ensure consistency and appropriate documentation. In respect of all other employment matters, the human resources department now consults with in-house counsel before making any offer of employment or any compensation adjustment that includes any equity-based award or otherwise raises equity compensation issues.

Accounting Close Process – The Company has standardized its internal accounting close process and has completed the integration of its accounting and financial reporting processes including its procedures for purchase accounting, accounting for gain or loss on disposition and the testing for impairment. Toward this end, the Company has documented its key accounting policies and procedures. In addition, the Company has designed and implemented internal controls within its accounting close process to ensure that closing activities, such as reconciliations, journal entry reviews and comprehensive financial analysis, are performed and reviewed timely. The Company has created a financial reporting sub-certification process and has defined key roles and responsibilities within the organizational structure. Lastly, the Company has conducted trainings for its accounting and other professionals to ensure the accounting close processes and entity level and company level controls and procedures are well defined, documented and implemented to support operational effectiveness.

Table of Contents

Critical Accounting Estimates and Non-Routine Transactions – The Company has documented various critical accounting policies, and intends to continue to document new accounting policies and to update its existing documentation for any noted changes on a timely basis. New policies have been communicated to the relevant Company employees. The Company has also established a process under which senior management approves all critical accounting estimates and non-routine transactions on a periodic basis as part of the financial close and reporting processes.

Information Technology General Controls – Access, Authentication and IT Environment – The Company has removed all dependencies on the formerly affiliated third party service provider and secured the Company’s physical access. The Company has also implemented an access management system to govern the granting and revocation of user access rights and standardized the administration of access to financially significant systems within the information technology organization. The system maintains a database of access grants and a record of business approvals. The controls governing access to programs and data have been updated to reflect the use of the access management system. The Company has trained business approvers, managers, information technology staff and human resources staff on the revised controls and their respective roles and responsibilities within each control. The process for managing and conducting the periodic system access reviews has been standardized across all systems. Periodic access reviews are managed by the Information Technology department to ensure adherence to the control standard.

Changes in Internal Control over Financial Reporting

During the nine months ended September 30, 2015, management of the Company remediated two previously disclosed material weaknesses described below.

Information Technology General Controls Over Management of Third Party Service Providers – When the transition services agreement between the Company and the Former Manager was terminated on January 8, 2014, the Company did not enter into a follow-on formal agreement with the affiliate of the Former Manager that managed technology infrastructure and systems significant to the Company’s financial reporting process. Without a formal agreement governing the delivery of services, the Company’s management could not make any assertions about the operating effectiveness of the third party service provider’s controls over information systems, programs, data and processes financially significant to the Company or the security of the Company’s data under the control of the related third party service provider.

Remediation – The Company has completed the integration of systems, offices and business processes, removing the dependencies on the formerly affiliated third party service provider. The Information Technology department now requires all service providers to have the appropriate contracts and service level agreements in place prior to the initiation of any services.

Cash Reconciliations and Monitoring – The Company did not implement appropriate controls to record payments received and to reconcile its cash receipts and bank accounts on a timely basis.

Remediation – The Company has documented treasury and accounting policies and procedures, implemented controls over identified individuals responsible for the monitoring and timely reconciliation of cash accounts and has reviewed all bank accounts associated with the Company.

There were no additional changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act), that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than ongoing integration activities relating to the Company’s acquisitions of large portfolios in 2013, and of ARCT IV and Cole in the first quarter of 2014 and the remediation efforts described above.

II. Discussion of Controls and Procedures of the Operating Partnership

In the information incorporated by reference into this Part II of Item 4, the term “Company” refers to the Operating Partnership, except as the context otherwise requires.

Evaluation of Disclosure Controls and Procedures

Management of the General Partner, under the supervision of its Chief Executive Officer and its Chief Financial Officer, evaluated the effectiveness of the OP’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) and, based on that evaluation, the General Partner’s Chief Executive Officer and the General Partner’s Chief Financial Officer concluded that the OP’s disclosure controls and procedures were not effective at September 30, 2015 as a result of the matters discussed under “Material Weaknesses in Disclosure Controls and Procedures” in Part I of this Item 4 above. Management believes that two of the nine material weaknesses disclosed in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2014 filed with the SEC on March 30, 2015, have been fully remediated as of September 30, 2015, as discussed in “Changes in Internal Control Over Financial Reporting” above. Further, management believes the control design changes and remediation measures discussed in the “Remediation” section above adequately address the

Table of Contents

remaining seven material weaknesses disclosed as of December 31, 2014. However, those seven remaining material weaknesses could not be considered remediated at September 30, 2015 because a sufficient period of time has not passed since the implementation to allow for adequate demonstration and testing of the operational effectiveness of the applicable control design changes and remediation measures.

Material Weaknesses

The information under the heading “Material Weaknesses” in Part I of this Item 4 is incorporated herein by reference.

Remediation

The information under the heading “Remediation” in Part I of this Item 4 is incorporated herein by reference.

Changes in Internal Control over Financial Reporting

The information under the heading “Changes in Internal Control over Financial Reporting” in Part I of this Item 4 is incorporated herein by reference.

Table of Contents

PART II — Other Information

Item 1. Legal Proceedings.

The information contained under the heading “Litigation” in Note 14 – Commitments and Contingencies to our consolidated financial statements in this report is incorporated by reference into this Part II of Item 1. Except as set forth therein, as of the end of the period covered by this Quarterly Report on Form 10-Q, we are not a party to, and none of our properties are subject to, any material pending legal proceedings.

Item 1A. Risk Factors.

There have been no material changes from the risk factors set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

The following disclosure would have otherwise been filed in a Current Report on Form 8-K under the heading “Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year:”

On November 4, 2015, the General Partner’s board of directors adopted Amended and Restated Bylaws (the “Bylaws”) in order to consolidate previous amendments to the General Partner’s original bylaws into one document and make other minor changes. The Bylaws will become effective January 1, 2016.

The foregoing description of the Bylaws is qualified in its entirety by reference to the full text of the Bylaws, a copy of which is attached to this Quarterly Report on Form 10-Q as Exhibit 3.18.

Item 6. Exhibits.

The exhibits listed in the Exhibit Index (following the signatures section of this report) are included in, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, each registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.



	VEREIT, INC.
	By:	/s/ Michael J. Bartolotta
	Michael J. Bartolotta
	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)



	VEREIT OPERATING PARTNERSHIP, L.P.
	By: VEREIT, Inc., its sole general partner
	By:	/s/ Michael J. Bartolotta
	Michael J. Bartolotta
	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

Dated: November 4, 2015

Table of Contents

EXHIBITS

The following exhibits are included in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 (and are numbered in accordance with Item 601 of Regulation S-K):



Exhibit No.		Description
3.1 ⁽¹⁾		Articles of Amendment and Restatement of VEREIT, Inc.
3.2 ⁽²⁾		Articles Supplementary Relating to the Series A Convertible Preferred Stock of VEREIT, Inc., dated May 10, 2012.
3.3 ⁽³⁾		Articles Supplementary Relating to the Series B Convertible Preferred Stock of VEREIT, Inc., dated July 24, 2012.
3.4 ⁽⁴⁾		Articles Supplementary Relating to the Series C Convertible Preferred Stock of VEREIT, Inc., dated June 6, 2013.
3.5 ⁽⁵⁾		Articles of Amendment to Articles of Amendment and Restatement of VEREIT, Inc., effective July 2, 2013.
3.6 ⁽⁶⁾		Articles Supplementary Relating to the Series D Cumulative Convertible Preferred Stock of VEREIT, Inc., filed November 8, 2013.
3.7 ⁽⁷⁾		Articles of Amendment to Articles of Amendment and Restatement of VEREIT, Inc., effective December 9, 2013.
3.8 ⁽⁸⁾		Articles Supplementary Relating to the 6.70% Series F Cumulative Redeemable Preferred Stock of VEREIT, Inc., dated January 2, 2014.
3.9 ⁽⁹⁾		Articles of Amendment to Articles of Amendment and Restatement of VEREIT, Inc., dated July 28, 2015.
3.10 ⁽¹⁰⁾		Articles Supplementary to Articles of Amendment and Restatement of VEREIT, Inc., dated August 5, 2015.
3.11 ⁽¹¹⁾		Bylaws of VEREIT, Inc.
3.12 ⁽¹²⁾		Amendment No. 1 to VEREIT, Inc.’s bylaws, effective as of February 7, 2014.
3.13 ⁽¹³⁾		Amendment No. 2 to VEREIT, Inc.’s bylaws, effective December 31, 2014.
3.14 ⁽⁹⁾		Amendment No. 3 to VEREIT, Inc.’s bylaws, effective July 28, 2015.
3.15 ⁽¹⁰⁾		Amendment No. 4 to VEREIT, Inc.’s bylaws, effective August 5, 2015.
3.16 ⁽¹⁴⁾		Certificate of Limited Partnership of VEREIT Operating Partnership, L.P.
3.17 ⁽¹⁰⁾		Amendment to Certificate of Limited Partnership of VEREIT Operating Partnership, L.P., effective July 28, 2015.
3.18 *		Amended and Restated Bylaws of VEREIT, Inc., effective as of January 1, 2016.
4.1 ⁽¹⁵⁾		Third Amended and Restated Agreement of Limited Partnership of VEREIT Operating Partnership, L.P., effective January 3, 2014.
4.2 ⁽¹⁰⁾		First Amendment to Third Amended and Restated Agreement of Limited Partnership of VEREIT Operating Partnership, L.P., dated January 26, 2015.
4.3 ⁽¹⁰⁾		Second Amendment to Third Amended and Restated Agreement of Limited Partnership of VEREIT Operating Partnership, L.P., dated July 28, 2015.
10.1*		Separation Agreement, dated as of October 1, 2015, by and between VEREIT, Inc. and Michael J. Sodo.
10.2*		Employment Letter and Confidentiality and Non-Competition Agreement, effective as of October 5, 2015, by and between VEREIT, Inc. and Michael J. Bartolotta.
31.1*		Certification of the Chief Executive Officer of VEREIT, Inc. pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of the Chief Financial Officer of VEREIT, Inc. pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3*		Certification of the Chief Executive Officer of VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P., pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.4*		Certification of the Chief Financial Officer of VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P., pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Written statements of the Chief Executive Officer of VEREIT, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Written statements of the Chief Financial Officer of VEREIT, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.3*		Written statements of the Chief Executive Officer of VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.4*		Written statements of the Chief Financial Officer of VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**		XBRL Instance Document.
101.SCH**		XBRL Taxonomy Extension Schema Document.
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document.

Table of Contents

_____________________________


(1)	Previously filed with the Pre-Effective Amendment No. 5 to Form S-11 Registration Statement (Registration No. 333-172205) filed with the SEC on July 5, 2011.


(2)	P reviously filed with the Current Report on Form 8-K filed with the SEC on May 15, 2012.


(3)	Previously filed with the Current Report on Form 8-K filed with the SEC on July 30, 2012.


(4)	Previously filed with the Current Report on Form 8-K filed with the SEC on June 12, 2013.


(5)	Previously filed with the Current Report on Form 8-K filed with the SEC on July 9, 2013.


(6)	Previously filed with the Current Report on Form 8-K filed with the SEC on November 15, 2013.


(7)	Previously filed with the Amended Current Report on Form 8-K/A filed with the SEC on December 19, 2013.


(8)	Previously filed with the Registration Statement on Form 8-A filed with the SEC on January 3, 2014.


(9)	Previously filed with the Current Report on Form 8-K filed with the SEC on July 28, 2015.


(10)	Previously filed with the Quarterly Report on Form 10-Q filed with the SEC on August 6, 2015.


(11)	Previously filed with the Pre-Effective Amendment No. 4 to Form S-11 Registration Statement (Registration No. 333-172205) filed with the SEC on June 13, 2011.


(12)	Previously filed with the Current Report on Form 8-K filed with the SEC on February 7, 2014.


(13)	Previously filed with the Current Report on Form 8-K filed with the SEC on January 5, 2015.


(14)	Previously filed with the Registration Statement on Form S-4 (Registration No. 333-197780-01) filed with the SEC on August 1, 2014.


(15)	Previously filed with Amendment No. 2 to the Annual Report on Form 10-K/A for the year ended December 31, 2013 filed with the SEC on March 2, 2015.

* Filed herewith

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act and is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.

Exhibit 3.18

AMENDED AND RESTATED BYLAWS

VEREIT, INC.

ARTICLE 1

OFFICES

Section 1.01. Principal Office. The principal office of the Corporation in the State of Maryland shall be located at such place as the Board of Directors may designate.

Section 1.02. Other Offices. The Corporation also may have offices, including a principal executive office, at such other places both within and outside the State of Maryland as the Board of Directors may from time to time determine or the business of the Corporation may require.

Section 1.03. Books. The books of the Corporation may be kept within or outside the State of Maryland as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE 2

MEETINGS OF STOCKHOLDERS

Section 2.01. Place of Meetings. All meetings of stockholders shall be held at the principal executive office of the Corporation or at such other place as shall be set in accordance with these bylaws and stated in the notice of the meeting.

Section 2.02. Annual Meetings. An annual meeting of the stockholders for the election of directors and the transaction of any business within the powers of the Corporation shall be held on the date and at the time and place set by the Board of Directors.

Section 2.03. Special Meetings.

(a) General. Each of the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer and the President of the Corporation may call a special meeting of stockholders. Except as provided in Section 2.03(b)(iv) , a special meeting of stockholders shall be held on the date and at the time and place set by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer or the President, whoever has called the meeting. Subject to Section 2.03(b) , a special meeting of stockholders also shall be called by the Secretary of the Corporation to act on any matter that may properly be considered at a meeting of stockholders upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast on such matter at such meeting.

(b) Stockholder-Requested Special Meetings.

(i) Any stockholder of record seeking to have stockholders request a special meeting shall, by sending written notice to the Secretary (the “ Record Date Request Notice ”) by registered mail, return receipt requested, request the Board of Directors to fix a record date to determine the stockholders entitled to request a special meeting (the “ Request Record Date ”). The Record Date Request Notice shall set forth the purpose of the meeting and the matters proposed to be acted on at it, shall be signed by one or more stockholders of record as of the date of signature (or their agents duly authorized in a writing accompanying the Record Date Request Notice), shall bear the date of signature of each such stockholder (or such agent) and shall set forth all information relating to each such stockholder, each individual whom the stockholder proposes to nominate for election or re-election as a director and each matter proposed to be acted on at the meeting that would be required to be disclosed in connection with the solicitation of proxies for the election of directors or the election of each such individual, as applicable, in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such a solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “ Exchange Act ”). Upon receiving the Record Date Request Notice, the Board of Directors may fix a Request Record Date. The Request Record Date shall not precede and shall not be more than ten days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Directors. If the Board of Directors, within ten days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the tenth day after the first date on which a Record Date Request Notice is received by the Secretary.

(ii) In order for any stockholder to request a special meeting to act on any matter that properly may be considered at a meeting of stockholders, one or more written requests for a special meeting (collectively, the “ Special Meeting Request ”) signed by stockholders of record (or their agents duly authorized in a writing accompanying the request) as of the Request Record Date entitled to cast not less than a majority of all the votes entitled to be cast on such matter at such meeting (the “ Special Meeting Percentage ”) shall be delivered to the Secretary. In addition, the Special Meeting Request shall (A) set forth the purpose of the meeting and the matters proposed to be acted on at it (which shall be limited to those lawful matters set forth in the Record Date Request Notice received by the Secretary), (B) bear the date of signature of each such stockholder (or such agent) signing the Special Meeting Request, (C) set forth (1) the name and address, as they appear in the Corporation’s books, of each stockholder signing such request (or on whose behalf the Special Meeting Request is signed), (2) the class, series and number of all shares of stock of the Corporation which are owned (beneficially or of record) by each such stockholder, and (3) the nominee holder for, and number of, shares of stock of the Corporation owned beneficially but not of record by such stockholder, (D) be sent to the Secretary by registered mail, return receipt requested, and (E) be received by the Secretary within 60 days after the Request Record Date. Any requesting stockholder (or agent duly authorized in a writing accompanying the revocation of the Special Meeting Request) may revoke his, her or its request for a special meeting at any time by written revocation delivered to the Secretary.

(iii) The Secretary shall inform the requesting stockholders of the reasonably estimated cost of preparing and mailing or delivering the notice of the meeting (including the Corporation’s proxy materials). The Secretary shall not be required to call a special meeting upon stockholder request and such meeting shall not be held unless, in addition to the documents required by Section 2.03(b)(ii) , the Secretary receives payment of such reasonably estimated cost prior to the preparation and mailing or delivery of such notice of the meeting.

(iv) In the case of any special meeting called by the Secretary upon the request of stockholders (a “ Stockholder-Requested Meeting ”), such meeting shall be held at such place, date and time as may be designated by the Board of Directors; provided, however, that the date of any Stockholder-Requested Meeting shall be not more than 90 days after the record date for such meeting (the “ Meeting Record Date ”); provided further, however, that if the Board of Directors fails to designate, within ten days after the date that a valid Special Meeting Request is actually received by the Secretary (the “ Delivery Date ”), a date and time for a Stockholder-Requested Meeting, then such meeting shall be held at 2:00 p.m., local time, on the 90th day after the Meeting Record Date or, if such 90th day is not a Business Day (as defined below), on the first preceding Business Day; provided further, however, that if the Board of Directors fails to designate a place for a Stockholder-Requested Meeting within ten days after the Delivery Date, then such meeting shall be held at the principal executive office of the Corporation. In fixing a date for a Stockholder-Requested Meeting, the Board of Directors may consider such factors as it deems relevant, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for the meeting and any plan of the Board of Directors to call an annual meeting or a special meeting. In the case of any Stockholder-Requested Meeting, if the Board of Directors fails to fix a Meeting Record Date that is a date within 30 days after the Delivery Date, then the close of business on the 30th day after the Delivery Date shall be the Meeting Record Date. The Board of Directors may revoke the notice for any Stockholder-Requested Meeting if the requesting stockholders fail to comply with the provisions of Section 2.03(b)(iii) .

(v) If written revocations of the Special Meeting Request have been delivered to the Secretary and the result is that stockholders of record (or their agents duly authorized in writing), as of the Request Record Date, entitled to cast less than the Special Meeting Percentage have delivered, and not revoked, requests for a special meeting on the matter to the Secretary: (A) if the notice of meeting has not already been delivered, the Secretary shall refrain from delivering the notice of the meeting and send to all requesting stockholders who have not revoked such requests written notice of any revocation of a request for a special meeting on the matter, or (B) if the notice of meeting has been delivered and if the Secretary first sends to all requesting stockholders who have not revoked requests for a special meeting on the matter written notice of any revocation of a request for the special meeting and written notice of the Corporation’s intention to revoke the notice of the meeting or for the chairman of the meeting to adjourn the meeting without action on the matter, (1) the Secretary may revoke the notice of the meeting at any time before ten days before the commencement of the meeting, or (2) the chairman of the meeting may call the meeting to order and adjourn the meeting without acting on the matter. Any request for a special meeting received after a revocation by the Secretary of a notice of a meeting shall be considered a request for a new special meeting.

(vi) The Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer or the President may appoint regionally or nationally recognized independent inspectors of elections to act as the agent of the Corporation for the purpose of promptly performing a ministerial review of the validity of any

purported Special Meeting Request received by the Secretary. For the purpose of permitting the inspectors to perform such review, no such purported Special Meeting Request shall be deemed to have been delivered to the Secretary until the earlier of (A) five Business Days after receipt by the Secretary of such purported request and (B) such date as the independent inspectors certify to the Corporation that the valid requests received by the Secretary represent, as of the Request Record Date, stockholders of record entitled to cast not less than the Special Meeting Percentage. Nothing contained in this Section 2.03(b)(vi) shall in any way be construed to suggest or imply that the Corporation or any stockholder shall not be entitled to contest the validity of any request, whether during or after such five Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

(vii) For purposes of these bylaws, “ Business Day ” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

Section 2.04. Notice of Meetings and Adjourned Meetings; Scope of Notice; Waivers of Notice .

(a) Not less than ten nor more than 90 days before each meeting of stockholders, the Secretary shall give to each stockholder entitled to vote at such meeting and to each stockholder not entitled to vote who is entitled to notice of the meeting notice in writing or by electronic transmission stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, by mail, by presenting it to such stockholder personally, by leaving it at the stockholder’s residence or usual place of business or by any other means permitted by the Maryland General Corporation Law (the “ MGCL ”). If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at the stockholder’s address as it appears on the records of the Corporation, with postage thereon prepaid. If transmitted electronically, such notice shall be deemed to be given when transmitted to the stockholder by an electronic transmission to any address or number of the stockholder at which the stockholder receives electronic transmissions. The Corporation may give a single notice to all stockholders who share an address, which single notice shall be effective as to any stockholder at such address, unless a stockholder objects to receiving such single notice or revokes a prior consent to receiving such single notice. Failure to give notice of any meeting to one or more stockholders, or any irregularity in such notice, shall not affect the validity of any meeting fixed in accordance with this Article 2 or the validity of any proceedings at any such meeting. The Corporation may postpone or cancel a meeting of stockholders by making a public announcement (as defined in Section 2.11(c)(iii) ) of such postponement or cancellation prior to the meeting. Notice of the date, time and place to which the meeting is postponed shall be given not less than ten days prior to such date and otherwise in the manner set forth in this Section 2.04 . Unless these bylaws otherwise require, at any meeting of stockholders (whether or not a quorum is present), the chairman of the meeting may adjourn the meeting sine die or from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

(b) Subject to Section 2.11(a) , any business of the Corporation may be transacted at an annual meeting of stockholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice. No business shall be transacted at a special meeting of stockholders except as specifically designated in the notice.

(c) Whenever any notice of a meeting is required to be given pursuant to the charter of the Corporation (as amended, supplemented or restated from time to time, the “ Charter ”) or these bylaws or pursuant to applicable law, a waiver thereof in writing or by electronic transmission, given by the person or persons entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

(d) For purposes of these bylaws, “ Person ” or “ person ” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture or other enterprise or entity.

Section 2.05. Quorum. At any meeting of stockholders, the presence, in person or by proxy, of the stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum, but this Section 2.05 shall not affect any requirement under any statute or the Charter for the vote necessary for the approval of any matter. If, however, such quorum is not established at any meeting of the stockholders, the chairman of the meeting may adjourn the meeting sine die or from time to time to a date not more than 120 days after the original record date without notice other than

announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

The stockholders present either in person or by proxy, at a meeting which has been duly called and at which a quorum has been established, may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough stockholders to leave fewer than would be required to establish a quorum.

Section 2.06. Voting; Proxies.

(a) Unless otherwise provided in the Charter, each outstanding share of stock of the Corporation, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders. A nominee for director shall be elected to the Board of Directors if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election; provided, however, that directors shall be elected by a plurality of the votes cast at any meeting of stockholders for which (i) the secretary of the Corporation receives a notice that a stockholder has nominated a person for election to the Board of Directors in compliance with the Charter and these bylaws, to the extent applicable, and applicable law and (ii) such nomination has not been withdrawn by such stockholder on or before the tenth day before the Corporation first mails its notice of meeting for such meeting to the stockholders. If directors are to be elected by a plurality of the votes cast, stockholders shall not be permitted to vote against a nominee. Each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of stockholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the Charter. Voting on any question or in any election may be viva voce unless the chairman of the meeting shall order that voting be by ballot or otherwise.

(b) A holder of record of shares of stock of the Corporation may cast votes in person or by proxy executed by the stockholder or by the stockholder’s duly authorized agent in any manner permitted by law. Such proxy or evidence of authorization of such proxy shall be filed with the Secretary of the Corporation before or at the meeting. No proxy shall be valid more than eleven months after its date unless otherwise provided in the proxy.

(c) In determining the number of votes cast for or against a proposal or nominee, shares abstaining from voting on a matter (including elections) and non-votes by brokers will be counted for purposes of determining a quorum but will not be treated as votes cast.

Section 2.07. Action by Consent. Unless otherwise provided under the Charter or these bylaws and subject to the MGCL, any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting if a unanimous consent setting forth the action is given in writing or by electronic transmission by each stockholder entitled to vote on the matter and filed with the minutes of proceedings of the stockholders; provided, however, that, to the extent expressly permitted by the articles supplementary relating to one or more classes or series of the Corporation’s preferred stock, any action required or permitted to be taken by the holders of such class or series of preferred stock, voting separately as a class or series or separately as a class with one or more other such classes or series, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing or by electronic transmission, setting forth the action so taken, shall be given by the holders of outstanding shares of the relevant class or series having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted by delivery to the Corporation’s principal place of business, or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. The Corporation shall give notice of any action taken by less than unanimous consent to each stockholder not later than ten days after the effective time of such action.

Section 2.08. Organization. Every meeting of stockholders shall be conducted by an individual appointed by the Board of Directors to be chairman of the meeting or, in the absence of such appointment or appointed individual, by the Chairman of the Board of Directors or, in the case of a vacancy in the office or absence of the Chairman of the Board of Directors, by one of the following officers present at the meeting in the following order: the Vice Chairman of the Board of Directors, if there is one, the Chief Executive Officer, the President, the Vice Presidents in their order of rank and seniority, the Secretary or, in the absence of such officers, a chairman chosen by the stockholders by the vote of a majority of the votes cast by stockholders present in person or by proxy. The Secretary or, in the Secretary’s absence, an Assistant Secretary or, in the absence of both the Secretary and all Assistant Secretaries, an individual appointed by the Board of Directors or, in the absence of such appointment, an individual appointed by the chairman of the meeting shall act as secretary. If the Secretary presides at a meeting of stockholders, an Assistant Secretary or, in the absence of all Assistant Secretaries, an individual appointed by the Board of Directors or the chairman of the meeting, shall record the minutes of the meeting.

Section 2.09. Conduct. The order of business and all other matters of procedure at any meeting of stockholders shall be determined by the chairman of the meeting. The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of the chairman and without any action by the stockholders, are appropriate for the proper conduct of the meeting, including, without limitation: (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to stockholders of record of the Corporation, their duly authorized proxies and such other individuals as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to stockholders of record of the Corporation entitled to vote on such matter, their duly authorized proxies and other such individuals as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments; (e) determining when and for how long the polls should be opened and when the polls should be closed; (f) maintaining order and security at the meeting; (g) removing any stockholder or any other individual who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; (h) concluding a meeting or recessing or adjourning the meeting to a later date and time and at a place announced at the meeting; and (i) complying with any state and local laws and regulations concerning safety and security. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 2.10. Inspectors. The Board of Directors or the chairman of the meeting may appoint, before or at the meeting, one or more inspectors for the meeting and any successor to the inspector. Except as otherwise provided by the chairman of the meeting, the inspectors, if any, shall (a) determine the number of shares of stock represented at the meeting, in person or by proxy, and the validity and effect of proxies, (b) receive and tabulate all votes, ballots or consents, (c) report such tabulation to the chairman of the meeting, (d) hear and determine all challenges and questions arising in connection with the right to vote, and (e) do such acts as are proper to fairly conduct the election or vote. Each such report shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

Section 2.11. Advance Notice of Stockholder Nominees for Director and Other Business Proposals.


(a)	Annual Meetings of Stockholders.

(i) Nominations of individuals for election to the Board of Directors may be made at an annual meeting of stockholders (A) pursuant to the Corporation’s notice of meeting, (B) by or at the direction of the Board of Directors, or (C) by any stockholder of the Corporation who is a stockholder of record both at the time of giving of notice provided for in this Section 2.11(a) and at the time of the annual meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who complies with this Section 2.11(a) . The proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders (x) pursuant to the Corporation’s notice of meeting, (y) by or at the direction of the Board of Directors, or (z) by any stockholder of the Corporation who is a stockholder of record both at the time of giving of notice provided for in this Section 2.11(a) and at the time of the annual meeting, who is entitled to vote at the meeting on any such other business and who complies with this Section 2.11(a) .

(ii) For any nomination, other than a nomination made pursuant to the Corporation’s notice of meeting or by or at the direction of the Board of Directors, or other business, other than business proposed pursuant to the Corporation’s notice of meeting or by or at the direction of the Board of Directors, to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such other business must otherwise be a proper matter for action by the stockholders. To be timely, a stockholder’s notice shall set forth all information required under this Section 2.11 and shall be delivered to the Secretary at the principal executive office of the Corporation not earlier than 5:00 p.m., Eastern Time, on the 150th day nor later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of the proxy statement (as defined in Section 2.11(c)(iii) ) for the preceding year’s annual meeting; provided, however, that if the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than 5:00 p.m., Eastern Time, on the 150th day prior to the date of such annual meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to the date of such annual meeting, as originally convened, or the tenth day following the day on which public announcement of the date of such meeting is first made. The public announcement of a postponement or adjournment of an annual meeting shall not commence a new time period for the giving of a stockholder’s notice as described above.

(iii) Such stockholder’s notice shall set forth:

(A) as to each individual whom the stockholder proposes to nominate for election or reelection as a director (each, a “ Proposed Nominee ”), all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a director in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act;

(B) as to any other business that the stockholder proposes to bring before the meeting, a description of such business, the stockholder’s reasons for proposing such business at the meeting and any material interest in such business of such stockholder or any Stockholder Associated Person (as defined below), individually or in the aggregate, including any anticipated benefit to the stockholder or the Stockholder Associated Person therefrom;

(1) the class, series and number of all shares of stock or other securities of the Corporation or any affiliate thereof (collectively, the “ Company Securities ”), if any, which are owned (beneficially or of record) by such stockholder, Proposed Nominee or Stockholder Associated Person, the date on which each such Company Security was acquired and the investment intent of such acquisition, and any short interest (including any opportunity to profit or share in any benefit from any decrease in the price of such stock or other security) in any Company Securities of any such person;

(2) the nominee holder for, and number of, any Company Securities owned beneficially but not of record by such stockholder, Proposed Nominee or Stockholder Associated Person;

(3) whether and the extent to which such stockholder, Proposed Nominee or Stockholder Associated Person, directly or indirectly (through brokers, nominees or otherwise), is subject to or during the last six months has engaged in any hedging, derivative or other transaction or series of transactions or entered into any other agreement, arrangement or understanding (including any short interest, any borrowing or lending of securities or any proxy or voting agreement), the effect or intent of which is to (x) manage risk or benefit of changes in the price of (I) Company Securities, or (II) any security of any entity that was listed in the peer group in the stock performance graph in the most recent annual report to security holders of the Corporation (a “ Peer Group Company ”) for such stockholder, Proposed Nominee or Stockholder Associated Person, or (y) increase or decrease the voting power of such stockholder, Proposed Nominee or Stockholder Associated Person in the Corporation or any affiliate thereof (or, as applicable, in any Peer Group Company) disproportionately to such person’s economic interest in the Company Securities (or, as applicable, in any Peer Group Company); and

(4) any substantial interest, direct or indirect (including, without limitation, any existing or prospective commercial, business or contractual relationship with the Corporation), by security holdings or otherwise, of such stockholder, Proposed Nominee or Stockholder Associated Person, in the Corporation or any affiliate thereof, other than an interest arising from the ownership of Company Securities where such stockholder, Proposed Nominee or Stockholder Associated Person receives no extra or special benefit not shared on a pro rata basis by all other holders of the same class or series.

(D) as to the stockholder giving the notice, any Stockholder Associated Person with an interest or ownership referred to in clauses (B) or (C) of Section 2.11(a)(iii) and any Proposed Nominee:

(1) the name and address of such stockholder, as they appear on the Corporation’s stock ledger, and the current name and business address, if different, of each such Stockholder Associated Person and any Proposed Nominee; and

(2) the investment strategy or objective, if any, of such stockholder and each such Stockholder Associated Person who is not an individual and a copy of the prospectus, offering memorandum or similar document, if any, provided to investors or potential investors in such stockholder and each such Stockholder Associated Person;

(E) the name and address of any person who contacted or was contacted by the stockholder giving the notice or any Stockholder Associated Person about the Proposed Nominee or other business proposal prior to the date of such stockholder’s notice; and

(F) to the extent known by the stockholder giving the notice, the name and address of any other stockholder supporting the Proposed Nominee for election or reelection as a director or the proposal of other business on the date of such stockholder’s notice.

(iv) Such stockholder’s notice shall, with respect to any Proposed Nominee, be accompanied by a certificate executed by the Proposed Nominee (A) certifying that such Proposed Nominee (1) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation in connection with service or action as a director that has not been disclosed to the Corporation, and (2) will serve as a director of the Corporation if elected; and (B) attaching a completed Proposed Nominee questionnaire (which questionnaire shall be provided by the Corporation, upon request, to the stockholder providing the notice and shall include all information relating to the Proposed Nominee that would be required to be disclosed in connection with the solicitation of proxies for the election of the Proposed Nominee as a director in an election contest (even if an election contest is not involved), or would otherwise be required in connection with such solicitation, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act and the rules thereunder, or would be required pursuant to the rules of any national securities exchange on which any securities of the Corporation are listed or over-the-counter market on which any securities of the Corporation are traded).

(v) Notwithstanding anything in Section 2.11(a) to the contrary, if the number of directors to be elected to the Board of Directors is increased, and there is no public announcement of such action at least 130 days prior to the first anniversary of the date of the proxy statement (as defined in Section 2.11(c)(iii) ) for the preceding year’s annual meeting, a stockholder’s notice required by this Section 2.11(a) also shall be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive office of the Corporation not later than 5:00 p.m., Eastern Time, on the tenth day following the day on which such public announcement is first made by the Corporation.

(vi) For purposes of this Section 2.11 , “ Stockholder Associated Person ” of any stockholder means (A) any person acting in concert with such stockholder, (B) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder (other than a stockholder that is a depositary), and/or (C) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such stockholder or such Stockholder Associated Person.

(b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of individuals for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected only: (i) by or at the direction of the Board of Directors, (ii) by a stockholder that has requested that a special meeting be called for the purpose of electing directors in compliance with Section 2.03(b) and that has supplied the information required by Section 2.03(b) about each individual whom such stockholder proposes to nominate for election as a director, or (iii) provided that the special meeting has been called in accordance with Section 2.03(a) for the purpose of electing directors, by any stockholder of the Corporation who is a stockholder of record both at the time of giving of notice provided for in this Section 2.11 and at the time of the special meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who complies with the notice procedures set forth in this Section 2.11 .

If the Corporation calls a special meeting of stockholders for the purpose of electing one or more individuals as directors, any stockholder may nominate an individual or individuals (as the case may be) for election as a director as specified in the Corporation’s notice of meeting, if such stockholder’s notice, containing the information required by Section 2.11(a)(iii) , is delivered to the Secretary at the principal executive office of the Corporation not earlier than the 120th day prior to such special meeting and not later than 5:00 p.m., Eastern Time, on the later of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees

proposed by the Board of Directors to be elected at such meeting. The public announcement of a postponement or adjournment of a special meeting shall not commence a new time period for the giving of a stockholder’s notice as described above.


(c)	General.

(i) If information submitted pursuant to this Section 2.11 by any stockholder proposing a nominee for election as a director or any proposal for other business at a meeting of stockholders shall be inaccurate in any material respect, such information may be deemed not to have been provided in accordance with this Section 2.11 . Any such stockholder shall notify the Corporation of any inaccuracy or change (within two Business Days of becoming aware of such inaccuracy or change) in any such information. Upon written request by the Secretary or the Board of Directors, any such stockholder shall provide, within five Business Days of delivery of such request (or such other period as may be specified in such request), (A) written verification, satisfactory, in the discretion of the Board of Directors or any authorized officer of the Corporation, to demonstrate the accuracy of any information submitted by the stockholder pursuant to this Section 2.11 , and (B) a written update of any information (including, if requested by the Corporation, written confirmation by such stockholder that it continues to intend to bring such nomination or other business proposal before the meeting) submitted by the stockholder pursuant to this Section 2.11 as of an earlier date. If a stockholder fails to provide such written verification or written update within such period, the information as to which written verification or a written update was requested may be deemed not to have been provided in accordance with this Section 2.11 .

(ii) Only such individuals who are nominated in accordance with this Section 2.11 shall be eligible for election by stockholders as directors, and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with this Section 2.11 . The chairman of the meeting shall have the power to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with this Section 2.11 .

(iii) For purposes of this Section 2.11 , “ the date of the proxy statement ” shall have the same meaning as “the date of the company’s proxy statement released to shareholders” as used in Rule 14a-8(e) promulgated under the Exchange Act, as interpreted by the Securities and Exchange Commission from time to time. “ Public announcement ” shall mean disclosure (A) in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or other widely circulated news or wire service, or (B) in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to the Exchange Act.

(iv) Notwithstanding the foregoing provisions of this Section 2.11 , a stockholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.11 . Nothing in this Section 2.11 shall be deemed to affect any right of a stockholder to request inclusion of a proposal in, or the right of the Corporation to omit a proposal from, the Corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act. Nothing in this Section 2.11 shall require disclosure of revocable proxies received by the stockholder or Stockholder Associated Person pursuant to a solicitation of proxies after the filing of an effective Schedule 14A by such stockholder or Stockholder Associated Person under Section 14(a) of the Exchange Act.

Section 2.12. Control Share Acquisition Act. Notwithstanding any other provision of the Charter or these bylaws, Title 3, Subtitle 7 of the MGCL shall not apply to any and all acquisitions by any person of shares of stock of the Corporation.

Section 2.13. Business Combinations. By virtue of resolutions adopted by the Board of Directors prior to or at the time of adoption of these bylaws, as amended, any business combination (as defined in Section 3-601(e) of the MGCL) between the Corporation and any of its present or future stockholders, or any affiliates or associates of the Corporation or any present or future stockholder of the Corporation, or any other person or entity or group of persons or entities, is exempt from the provisions of Title 3, Subtitle 6 of the MGCL entitled “Special Voting Requirements,” including, but not limited to, the provisions of Section 3-602 of such Subtitle. The Board of Directors may not revoke, alter or amend such resolution or otherwise adopt any resolution that is inconsistent with a prior resolution of the Board of Directors that exempts any business combination (as defined in Section 3-601(e) of the MGCL) between the Corporation and any other person, whether identified specifically, generally or by type from the provisions of Title 3, Subtitle 6 of the MGCL without the affirmative vote of a majority of the votes cast on the matter by the holders of the issued and outstanding shares of common stock of the Corporation.

Section 2.14. Proxy Access Rights.

(a) Proxy Access .

(i) Whenever the Board of Directors solicits proxies with respect to the election of directors at an annual meeting of stockholders, subject to the provisions of this Section 2.14 and to the extent permitted by applicable law, the Corporation shall include in its proxy materials for such annual meeting, in addition to any persons nominated for election by, or at the direction of, a majority of the Board of Directors, the name, together with the Required Information (defined below), of any person nominated for election (each such person being hereinafter referred to as a “ Stockholder Nominee ”) to the Board of Directors by a stockholder or group of no more than twenty (20) such stockholders that satisfies the requirements of this Section 2.14 (such individual or group, including as the context requires each member thereof, being hereinafter referred to as the “ Eligible Stockholder ”). For the purpose of determining the aggregate number of stockholders in this Section 2.14 , any two or more funds that are (A) under common management and funded primarily by a single employer or (B) a “group of investment companies,” as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended, shall be treated as one stockholder.

(ii) For purposes of this Section 2.14 , the “ Required Information ” that the Corporation will include in its proxy materials is (A) the information concerning the Stockholder Nominee and the Eligible Stockholder that is required to be disclosed in the Corporation’s proxy statement by the rules and regulations promulgated under the Exchange Act, by these bylaws, by the Charter and/or by the listing standards of each principal U.S. exchange upon which the common stock of the Corporation is listed; and (B) if the Eligible Stockholder so elects, a written statement, not to exceed 500 words, in support of the Stockholder Nominee’s candidacy (the “ Statement ”). Notwithstanding anything to the contrary contained in this Section 2.14 , the Corporation may omit from its proxy materials any information or Statement (or portion thereof) that it actually believes is materially false or misleading, omits to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, or would violate any applicable law or regulation.


(b)	Notice Requirements .

(i) Notwithstanding the procedures set forth in Section 2.11 of these bylaws, in order to nominate a Stockholder Nominee pursuant to this Section 2.14 , an Eligible Stockholder must, in addition to satisfying the other requirements of this Section 2.14 , provide a notice expressly electing to have its Stockholder Nominee(s) included in the Corporation’s proxy materials pursuant to this Section 2.14 , that complies with the requirements set forth in this Section 2.14 (a “ Notice of Proxy Access Nomination ”) within the time period set forth below. In order for an Eligible Stockholder to nominate a Stockholder Nominee pursuant to this Section 2.14 , the Eligible Stockholder’s Notice of Proxy Access Nomination must be received by the Secretary of the Corporation at its principal executive office not less than 120 days prior to the anniversary of the date of the proxy statement for the prior year’s annual meeting of stockholders (the “ Deadline ”); provided, however, that in the event the annual meeting is scheduled to be held on a date more than 30 days before the anniversary date of the immediately preceding annual meeting (the “ Anniversary Date ”) or more than 60 days after the Anniversary Date, or if no annual meeting was held in the preceding year, the Deadline shall be the close of business on the later of (x) the 150th day prior to the scheduled date of such annual meeting or (y) the tenth day following the day on which public announcement of the date of such annual meeting is first made by the Corporation. In no event shall an adjournment, postponement or rescheduling of any previously scheduled meeting of stockholders, or the public announcement thereof, commence a new time period for the giving of a Notice of Proxy Access Nomination under this Section 2.14 .

(ii) In order to nominate a Stockholder Nominee pursuant to this Section 2.14 , an Eligible Stockholder providing the information required to be provided pursuant to Section 2.14(a)(ii) within the time period specified in Section 2.14(b)(i) for delivering the Notice of Proxy Access Nomination must further update and supplement such information, if necessary, so that all such information provided or required to be provided shall be true and correct as of the record date for purposes of determining the stockholders entitled to vote at such annual meeting and as of the date that is ten (10) business days prior to such annual meeting, and such update and supplement (or a written notice stating that there are no such updates or supplements) must be delivered in writing to the Secretary of the Corporation at its principal executive office not later than the close of business on the fifth (5th) business day after the record date for purposes of determining the stockholders entitled to vote at the meeting (in the case of the update and supplement required to be made as of the record date), and not later than the close of business on the eighth (8th) business day prior to the date for the meeting (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting).

(iii) In the event that any of the information or communications provided by the Eligible Stockholder or the Stockholder Nominee to the Corporation or its stockholders ceases to be true and correct in all material respects or omits a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, each Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the Secretary of the Corporation of any defect in such previously provided information or communications and of the information that is required to correct any such defect.

(i) The maximum number of Stockholder Nominees (including Stockholder Nominees that were submitted by an Eligible Stockholder for inclusion in the Corporation’s proxy materials pursuant to this Section 2.14 but that were either subsequently withdrawn or that the Board of Directors decides to nominate as Board of Director nominees) nominated by all Eligible Stockholders that will be included in the Corporation’s proxy materials with respect to an annual meeting shall not exceed twenty-five percent (25%) of the number of directors in office as of the last day on which a Notice of Proxy Access Nomination may be timely delivered pursuant to and in accordance with this Section 2.14 (the “ Final Proxy Access Nomination Date ”), or if such amount is not a whole number, the closest whole number below twenty-five percent (25%); provided that the maximum number of Stockholder Nominees that will be included in the Corporation’s proxy materials with respect to an annual meeting will be reduced by the number of individuals that the Board of Directors decides to nominate for re-election who were previously elected to the Board of Directors based on a nomination pursuant to Section 2.11 or this Section 2.14 .

(ii) Any Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the Corporation’s proxy materials pursuant to this Section 2.14 shall rank such Stockholder Nominees based on the order that the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the Corporation’s proxy statement in the event that the total number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 2.14 exceeds the maximum number of Stockholder Nominees provided for in Section 2.14(c)(i) (including by operation of Section 2.14(c)(iii) ). In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 2.14 exceeds the maximum number of Stockholder Nominees provided for in Section 2.14(c)(i) (including by operation of Section 2.14(c)(iii) ), the highest ranking Stockholder Nominee who meets the requirements of this Section 2.14 from each Eligible Stockholder will be selected for inclusion in the Corporation’s proxy materials until the maximum number is reached, going in order from the largest to the smallest of such Eligible Stockholders based on the number of shares of common stock of the Corporation each Eligible Stockholder disclosed as owned in the Notice of Proxy Access Nomination submitted to the Corporation hereunder. If the maximum number of Stockholder Nominees provided for in this Section 2.14 is not reached after the highest ranking Stockholder Nominee who meets the requirements of this Section 2.14 from each Eligible Stockholder has been selected, this selection process will continue as many times as necessary, following the same order each time, until the maximum number of Stockholder Nominees provided for in this Section 2.14 is reached. The Stockholder Nominees so selected by each Eligible Stockholder in accordance with this Section 2.14(ii) will be the only Stockholder Nominees entitled to be included in the Corporation’s proxy materials, and, following such selection, if the Stockholder Nominees so selected are not included in the Corporation’s proxy materials or are not submitted for election (for any reason, including the failure to comply with this Section 2.14 ), no other Stockholder Nominees will be included in the Corporation’s proxy materials or otherwise submitted for stockholder election pursuant to this Section 2.14 .

(iii) If for any reason one or more vacancies occur on the Board of Directors after the Final Proxy Access Nomination Date but before the date of the applicable annual meeting and the Board of Directors resolves to reduce the size of the Board of Directors in connection therewith, the maximum number of Stockholder Nominees included in the Corporation’s proxy materials pursuant to this Section 2.14 shall be calculated based on the number of directors in office as so reduced.

(d) Stockholder Eligibility .

(i) For purposes of this Section 2.14 , an Eligible Stockholder shall be deemed to “own” only those outstanding shares of common stock of the Corporation as to which the Eligible Stockholder possesses both (A) the full voting and investment rights pertaining to the shares and (B) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (A) and (B) (x) shall not include any shares (I) borrowed for any purposes or purchased pursuant to an agreement to resell, (II) sold in any transaction that has not been settled or closed, and (y) shall be

reduced by the notional amount of shares of common stock of the Corporation subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder, whether or not any such instrument is to be settled with shares or with cash, to the extent not already taken into account in clause (x)(II) above and a number of shares of common stock of the Corporation equal to the net “short” position in the common stock of the Corporation held by such stockholder’s affiliates, whether through short sales, options, warrants, forward contracts, swaps, contracts of sale, other derivatives or similar agreements or any other agreement or arrangement, or (III) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of outstanding common stock of the Corporation, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of (1) reducing in any manner, to any extent or at any time in the future, such stockholder’s or its affiliates’ full right to vote or direct the voting of any such shares and/or (2) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or affiliate. A stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder’s ownership of shares shall be deemed to continue during any period in which the stockholder (a) has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder and (b) has loaned the shares if the stockholder may terminate the share lending within five (5) days. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of the common stock of the Corporation are “owned” for these purposes shall be determined by the Board of Directors or any committee thereof. For purposes of this Section 2.14 , the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the General Rules and Regulations of the Exchange Act.

(ii) In order to make a nomination pursuant to this Section 2.14 , an Eligible Stockholder must have owned (as defined below) the Required Ownership Percentage (as defined below) of the Corporation’s outstanding common stock (the “ Required Shares ”) continuously for the Minimum Holding Period (as defined below) or longer as of both the date the Notice of Proxy Access Nomination is required to be received by the Corporation in accordance with this Section 2.14 and the record date for determining stockholders entitled to vote at the applicable annual meeting, and must continue to own the Required Shares through the applicable meeting date; provided, that, up to, but not more than, twenty (20) stockholders who otherwise meet all of the requirements to be an Eligible Stockholder may aggregate their stockholdings in order to meet the Required Ownership Percentage, but not the Minimum Holding Period, of the Required Shares. For purposes of this Section 2.14 , the “ Required Ownership Percentage ” is 3% or more of the Corporation’s issued and outstanding common stock, and the “ Minimum Holding Period ” is three (3) years.

(iii) In order to nominate a Stockholder Nominee pursuant to this Section 2.14 , an Eligible Stockholder, or with respect to clauses (E), (F) and (G) below, the Stockholder Nominee, must provide the following information in writing to the Secretary of the Corporation within the time period specified in this Section 2.14 for delivering the Notice of Proxy Access Nomination:

(A) one or more written statements from the record holders of the shares or from the intermediaries through which the shares are or have been held during the Minimum Holding Period (as defined below) verifying that, as of a date within seven (7) calendar days prior to the date the Notice of Proxy Access Nomination is received by the Secretary of the Corporation, the Eligible Stockholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Stockholder’s agreement to provide (I) within five (5) business days after the record date for the annual meeting, written statements from such persons verifying the Eligible Stockholder’s continuous ownership of the Required Shares through the record date, along with a written statement that the Eligible Stockholder will continue to hold the Required Shares through the applicable meeting date or (II) the updates and supplements described in Section 2.14(b)(ii) within the time periods set forth therein;

(B) a copy of the Schedule 14N filed or to be filed with the Securities and Exchange Commission in accordance with Rule 14a-18 of the Exchange Act;

(C) the information, representations and agreements that are required to be set forth in a stockholder’s notice of nomination pursuant to Section 2.11 and this Section 2.14 ;

(D) the written consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected;

(E) the information, representations and agreements that are required by Section 2.11 and this Section 2.14 ;

(F) an agreement by each Stockholder Nominee, upon such Stockholder Nominee’s election, to make such acknowledgements, enter into such agreements and provide such information as the Board of Directors requires of all directors at such time, including without limitation, agreeing to be bound by the Corporation’s code of ethics, insider trading policies and procedures and other similar policies and procedures;

(G) an irrevocable resignation of the Stockholder Nominee, which shall become effective upon a determination in good faith by the Board of Directors or any committee thereof that the information provided to the Corporation by such individual pursuant to Sections 2.11 and 2.14 of these bylaws was untrue in any material respect or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;

(H) a representation (in the form provided by the Secretary of the Corporation upon written request) that the Eligible Stockholder (I) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control at the Corporation, and that the Eligible Stockholder does not presently have such intent, (II) has not nominated and will not nominate for election to the Board of Directors at the annual meeting any person other than the Stockholder Nominee(s) being nominated pursuant to this Section 2.14 , (III) has not engaged and will not engage in, and has not and will not be a “participant” in, another person’s “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors, (IV) will not distribute to any stockholder any form of proxy for the annual meeting other than the form of proxy distributed by the Corporation, (V) agrees to comply with all other laws and regulations applicable to any solicitation in connection with the annual meeting, including, without limitation, Rule 14a-9 promulgated under the Exchange Act, (VI) meets the requirements set forth in this Section 2.14 and (VII) has provided and will continue to provide facts, statements and other information in all communications with the Corporation and its stockholders in connection with the nomination hereunder that is or will be true and correct in all material respects and does not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and

(I) a written undertaking (in the form provided by the Secretary of the Corporation upon written request) that the Eligible Stockholder agrees to (I) assume all liability stemming from any legal or regulatory violation arising out of the communications with stockholders of the Corporation by the Eligible Stockholder, its affiliates and associates, or their respective agents or representatives, either before or after the furnishing of the Notice of Proxy Access Nomination or out of information that the Eligible Stockholder has provided or will provide to the Corporation or filed with the Securities and Exchange Commission, (II) indemnify and hold harmless the Corporation and each of its directors, officers, agents, employees, affiliates, control persons or other persons acting on behalf of the Corporation individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Corporation or any of its directors, officers, agents, employees, affiliates, control persons or other persons acting on behalf of the Corporation arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 2.14 , and (III) promptly provide to the Corporation such additional information as requested pursuant to this Section 2.14 .

In connection with clause (A) of the preceding sentence, if any intermediary which verifies the Eligible Stockholder’s ownership of the Required Shares for the Minimum Holding Period is not the record holder of such shares, a Depository Trust Company (“ DTC ”) participant or an affiliate of a DTC participant, then the Eligible Stockholder will also need to provide a written statement as required by clause (A) of the preceding sentence from the record holder of such shares, a DTC participant or an affiliate of a DTC participant that can verify the holdings of such intermediary.

(iv) Whenever the Eligible Stockholder consists of a group of more than one stockholder, each provision in this Section 2.14 that requires the Eligible Stockholder to provide any written statements, representations, undertakings, agreements or other instruments or to meet any other conditions shall be deemed to require each stockholder that is a member of such group to provide such statements, representations, undertakings, agreements or other instruments and to meet such other conditions. When an Eligible Stockholder is comprised of a group, a violation of any provision of these bylaws by any member of the group shall be deemed a violation by the Eligible Stockholder group. No person may be a member of more than one group of persons constituting an Eligible Stockholder with respect to any annual meeting.

(e) Stockholder Nominee Requirements .

(i) Notwithstanding anything in these bylaws to the contrary, the Corporation shall not be required to include, pursuant to this Section 2.14 , any Stockholder Nominee in its proxy materials for any meeting of stockholders (A) for which the Secretary of the Corporation receives a notice that the Eligible Stockholder or any other stockholder of the Corporation has nominated one or more persons for election to the Board of Directors pursuant to the advance notice requirements for stockholder nominees for director set forth in Section 2.11 of these bylaws, (B) if the Eligible Stockholder who has nominated such Stockholder Nominee has engaged in or is currently engaged in, or has been or is a “participant” in another person’s “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors, (C) if the Stockholder Nominee is or becomes a party to any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation, or is receiving or will receive any such compensation or other payment from any person or entity other than the Corporation, in each case, in connection with service as a director of the Corporation, (D) who is not independent under the listing standards of each principal U.S. exchange upon which the common stock of the Corporation is listed, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board of Directors in determining and disclosing independence of the Corporation’s directors, in each case, as determined by the Board of Directors or any committee thereof, (E) whose election as a member of the Board of Directors would cause the Corporation to be in violation of these bylaws, the Charter, the rules and listing standards of the principal U.S. exchanges upon which the common stock of the Corporation is traded, or any applicable state or federal law, rule or regulation, (F) who provides any information to the Corporation or its stockholders required or requested pursuant to any subsection of Section 2 of these bylaws that is not accurate, truthful and complete in all material respects, or that otherwise contravenes any of the agreements, representations or undertakings made by the Stockholder Nominee in connection with the nomination, (G) who is or has been, within the past three years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, (H) who is a named subject of a pending criminal proceeding (excluding traffic violations) or has been convicted in such a criminal proceeding within the past ten (10) years, (I) is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended, (J) if such Stockholder Nominee or the applicable Eligible Stockholder shall have provided information to the Corporation in respect of such nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make the statement made, in light of the circumstances under which they were made, not misleading, as determined by the Board of Directors or any committee thereof or (K) the Eligible Stockholder or applicable Stockholder Nominee fails to comply with its obligations pursuant to this Section 2.14 .

(ii) Any Stockholder Nominee who is included in the Corporation’s proxy materials for a particular annual meeting of stockholders but either (a) withdraws from or becomes ineligible or unavailable for election at such annual meeting, or (b) does not receive a number of “for” votes equal to at least twenty-five percent (25%) of the number of shares present and entitled to vote for the election of directors, will be ineligible to be a Stockholder Nominee pursuant to this Section 2.14 for the next two annual meetings of stockholders.

(iii) Notwithstanding anything to the contrary set forth herein, if the Board of Directors or a designated committee thereof determines that any stockholder nomination was not made in accordance with the terms of this Section 2.14 or that the information provided in a Notice of Proxy Access Nomination does not satisfy the informational requirements of this Section 2.14 in any material respect, then such nomination shall not be considered at the applicable annual meeting. If neither the Board of Directors nor such committee makes a determination as to whether a nomination was made in accordance with the provisions of this Section 2.14 , the presiding officer of the annual meeting shall determine whether a nomination was made in accordance with such provisions. If the presiding officer determines that any stockholder nomination was not made in accordance with the terms of this Section 2.14 or that the information provided in a stockholder’s notice does not satisfy the informational requirements of this Section 2.14 in any material respect, then such nomination shall not be considered at the annual meeting in question.

Additionally, such nomination will not be considered at the annual meeting in question if the Eligible Stockholder (or a qualified representative thereof) does not appear at the meeting of stockholders to present any nomination pursuant to this Section 2.14 . If the Board of Directors, a designated committee thereof or the presiding officer determines that a nomination was made in accordance with the terms of this Section 2.14 , the presiding officer shall so declare at the annual meeting and ballots shall be provided for use at the meeting with respect to such Stockholder Nominee.

(f) This Section 2.14 provides the exclusive method for stockholders to include nominees for director in the Corporation’s proxy materials. If a stockholder has complied with the procedures set forth in this Section 2.14 then such stockholder will also be deemed to have complied with the procedures set forth in Section 2.11 for all purposes under these bylaws.

ARTICLE 3

DIRECTORS

Section 3.01. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

Section 3.02. Number, Election, Classes, Term of Office and Qualifications.

(a) The number of directors shall be governed by the Charter. The election, classes and terms of office of directors shall be governed by the Charter. Directors need not be stockholders.

(b) Each director shall be an individual at least 21 years of age who is not under legal disability.

(c) At least a majority of the directors will be individuals whom the Board of Directors has determined are “independent” under the standards established by the Board of Directors and in accordance with the then applicable listing standards of the principal U.S. exchange upon which the common stock of the Corporation is listed.

Section 3.03. Quorum and Manner of Acting. A majority of the total number of directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors; provided, however, that, if less than a majority of such directors is present at such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice ; provided further, however, that if, pursuant to applicable law, the Charter or these bylaws, the vote of a majority or other percentage of a particular group of directors is required for action, a quorum also must include a majority or such other percentage of such group. The directors present at a meeting which has been duly called and at which a quorum has been established may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough directors to leave fewer than required to establish a quorum. The action of a majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Charter or these bylaws. If enough directors have withdrawn from a meeting to leave fewer than required to establish a quorum, but the meeting is not adjourned, the action of the majority of that number of directors necessary to constitute a quorum at such meeting shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Charter or these bylaws.

Section 3.04. Time and Place of Meetings. The Board of Directors shall hold its meetings at such place, either within or outside the State of Maryland, and at such time as may be determined from time to time by the Board of Directors (or the Chairman of the Board of Directors in the absence of a determination by the Board of Directors).

Section 3.05. Annual Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. If such annual meeting is not so held, the annual meeting of the Board of Directors may be held at such place either within or outside the State of Maryland, on such date and at such time as shall be specified in a notice thereof given as hereinafter provided in Section 3.08 or in a waiver of notice thereof given by any director who chooses to waive the requirement of notice.

Section 3.06. Regular Meetings. The Board of Directors may provide, by resolution, the time and place for the holding of regular meetings of the Board of Directors without other notice than such resolution.

Section 3.07. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors or the President and shall be called by the Chairman of the Board of Directors, President or Secretary on the

written request of two directors. Notice of special meetings of the Board of Directors shall be given to each director at least three days before the date of the meeting in such manner as is determined by the Board of Directors.

Section 3.08. Notice. Notice of any special meeting of the Board of Directors shall be delivered personally or by telephone, electronic mail, facsimile transmission, courier or United States mail to each director at his or her business or residence address. Notice by personal delivery, telephone, electronic mail or facsimile transmission shall be given at least three days prior to the meeting. Notice by United States mail shall be given at least three days prior to the meeting. Notice by courier shall be given at least three days prior to the meeting. Telephone notice shall be deemed to be given when the director or his or her agent is personally given such notice in a telephone call to which the director or his or her agent is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Corporation by the director. Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Corporation by the director and receipt of a completed answer-back indicating receipt. Notice by United States mail shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. Notice by courier shall be deemed to be given when received by such member of the Board of Directors. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these bylaws.

Section 3.09. Organization. At each meeting of the Board of Directors, the Chairman of the Board of Directors or, in the absence of the Chairman of the Board, the Vice Chairman of the Board of Directors, if any, shall act as chairman of the meeting. In the absence of both the Chairman and Vice Chairman of the Board, the Chief Executive Officer or, in the absence of the Chief Executive Officer, the President or, in the absence of the President, a director chosen by a majority of the directors present, shall act as chairman of the meeting. The Secretary or, in his or her absence, an Assistant Secretary of the Corporation, or, in the absence of the Secretary and all Assistant Secretaries, an individual appointed by the chairman of the meeting, shall act as Secretary of the meeting.

Section 3.10. Committees. The Board of Directors may appoint from among its members one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may delegate to committees appointed under this Section 3.10 any of the powers of the Board of Directors, except as prohibited by law. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee. The act of a majority of the committee members present at a meeting shall be the act of such committee. The Board of Directors may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two members of any committee (if there are at least two members of the committee) may fix the time and place of its meeting unless the Board of Directors shall otherwise provide. The Board of Directors shall have the power at any time to change the membership of any committee, to fill any vacancy, to designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, or to dissolve any committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

Section 3.11. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee thereof.

Section 3.12. Telephonic Meetings. Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors, or such committee, as the case may be, by means of conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time, and such participation in a meeting shall constitute presence in person at the meeting.

Section 3.13. Resignation. Any director may resign at any time by delivering his or her resignation to the Board of Directors or to the Chairman of the Board of Directors or the Secretary of the Corporation. The resignation of any director shall take effect immediately upon receipt thereof or at such later time as shall be specified in such resignation; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 3.14. Vacancies. Vacancies on the Board of Directors resulting from death, resignation, removal or otherwise and newly created directorships resulting from any increase in the number of directors may be filled by a majority of the directors then in office (although less than a quorum) or by the sole remaining director, and each director so elected shall

hold office until the next annual meeting of stockholders and until his or her successor is elected and qualifies or until his or her earlier death, resignation or removal. If there are no directors in office, then an election of directors may be held in accordance with the MGCL. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office until the next annual meeting of stockholders and until his or her successor is elected and qualifies or until his or her earlier death, resignation or removal.

Section 3.15. Compensation. Directors shall not receive any stated salary for their services as directors but, by resolution of the Board of Directors, may receive compensation per year and/or per meeting and/or per visit to real property or other facilities owned or leased by the Corporation and for any service or activity they performed or engaged in as directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they perform or engage in as directors; but nothing herein contained shall be construed to preclude any directors from serving the Corporation in any other capacity and receiving compensation therefor.

Section 3.16. Reliance. Each director and officer of the Corporation shall, in the performance of his or her duties with respect to the Corporation, be entitled to rely on any information, opinion, report or statement, including any financial statement or other financial data, prepared or presented by an officer or employee of the Corporation whom the director or officer reasonably believes to be reliable and competent in the matters presented, by a lawyer, certified public accountant or other person, as to a matter which the director or officer reasonably believes to be within the person’s professional or expert competence, or, with respect to a director, by a committee of the Board of Directors on which the director does not serve, as to a matter within its designated authority, if the director reasonably believes the committee to merit confidence.

Section 3.17. Ratification. The Board of Directors or the stockholders may ratify and make binding on the Corporation any action or inaction by the Corporation or its officers to the extent that the Board of Directors or the stockholders could have originally authorized the matter. Moreover, any action or inaction questioned in any stockholders’ derivative proceeding or any other proceeding on the ground of lack of authority, defective or irregular execution, adverse interest of a director, officer or stockholder, non-disclosure, miscomputation, the application of improper principles or practices of accounting or otherwise, may be ratified, before or after judgment, by the Board of Directors or by the stockholders, and if so ratified, shall have the same force and effect as if the questioned action or inaction had been originally duly authorized, and such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned action or inaction.

Section 3.18. Emergency Provisions. Notwithstanding any other provision in the Charter or these bylaws, this Section 3.18 shall apply during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors under Article III of these bylaws cannot readily be obtained (an “ Emergency ”). During any Emergency, unless otherwise provided by the Board of Directors, (a) a meeting of the Board of Directors or a committee thereof may be called by any director or officer by any means feasible under the circumstances; (b) notice of any meeting of the Board of Directors during such an Emergency may be given less than 72 hours prior to the meeting to as many directors and by such means as may be feasible at the time, including publication, television or radio; and (c) the number of directors necessary to constitute a quorum shall be one-third of the entire Board of Directors.

Section 3.19. Preferred Stock Directors. Notwithstanding anything else contained herein, whenever the holders of one or more classes or series of preferred stock shall have the right, voting separately as a class or series, to elect directors, the election, term of office, filling of vacancies, removal and other features of such directorships shall be governed by the terms of such preferred stock set by the Board of Directors pursuant to the Charter, and such directors so elected shall not be subject to the provisions of Sections 3.02 and 3.14 unless otherwise provided in the terms of such preferred stock.

ARTICLE 4

OFFICERS

Section 4.01. General Provisions. The officers of the Corporation shall include a President, a Secretary and a Treasurer and may include a Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, a Chief Executive Officer, one or more Vice Presidents, a Chief Operating Officer, a Chief Financial Officer, one or more Assistant Secretaries and one or more Assistant Treasurers. In addition, the Board of Directors may from time to time elect such other officers with such powers and duties as it shall deem necessary or desirable. One person may hold the offices and perform the duties of any two or more of said offices, except that no one person shall hold the offices and perform the duties of President and Vice

President. Election of an officer or agent shall not of itself create contract rights between the Corporation and such officer or agent.

Section 4.02. Election, Term of Office and Compensation; Vacancies. The officers of the Corporation shall be elected annually by the Board of Directors, except that the Chief Executive Officer or President may from time to time appoint one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers or other officers. Each such officer shall hold office until his or her successor is elected and qualifies, or until his or her death, or his or her resignation or removal in the manner hereinafter provided. The compensation of the officers shall be fixed from time to time by or under the authority of the Board of Directors and no officer shall be prevented from receiving such compensation by reason of the fact that he or she is also a director. Any vacancy in any office may be filled by the Board of Directors for the balance of the term.

Section 4.03. Removal. Any officer or agent of the Corporation may be removed, with or without cause, by the Board of Directors if in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

Section 4.04. Resignations. Any officer may resign at any time by delivering his or her resignation to the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the President or the Secretary. The resignation of any officer shall take effect immediately upon receipt thereof or at such later time as shall be specified in such resignation; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.

Section 4.05. Powers and Duties. The officers of the Corporation shall have such powers and perform such duties incident to each of their respective offices and such other duties as may from time to time be conferred upon or assigned to them by the Board of Directors.

ARTICLE 5

CONTRACTS, CHECKS AND DEPOSITS

Section 5.01. Contracts. The Board of Directors may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document shall be valid and binding upon the Corporation when duly authorized or ratified by action of the Board of Directors and executed by an authorized person.

Section 5.02 C hecks and Drafts. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or agent of the Corporation in such manner as shall from time to time be determined by the Board of Directors.

Section 5.03. Deposits. All funds of the Corporation not otherwise employed shall be deposited or invested from time to time to the credit of the Corporation as the Board of Directors, the Chief Executive Officer, the President, the Chief Financial Officer or any other officer designated by the Board of Directors may determine.

ARTICLE 6

STOCK

Section 6.01. Certificates. Except as may be otherwise provided by the Board of Directors, stockholders of the Corporation are not entitled to certificates representing the shares of stock held by them. If the Corporation issues shares of stock represented by certificates, such certificates shall be in such form as prescribed by the Board of Directors or a duly authorized officer, shall contain the statements and information required by the MGCL and shall be signed by the officers of the Corporation in the manner permitted by the MGCL. If the Corporation issues shares of stock without certificates, to the extent then required by the MGCL, the Corporation shall provide to the record holders of such shares a written statement of the information required by the MGCL to be included on stock certificates. There shall be no differences in the rights and obligations of stockholders based on whether or not their shares are represented by certificates.

Section 6.02. Transfers. All transfers of shares of stock shall be made on the books of the Corporation, by the holder of the shares, in person or by his or her attorney, in such manner as the Board of Directors or any officer of the Corporation may prescribe and, if such shares are certificated, upon surrender of certificates duly endorsed. The issuance of a new certificate upon the transfer of certificated shares is subject to the determination of the Board of Directors that such shares shall no longer be represented by certificates. Upon the transfer of any uncertificated shares, to the extent then required by the

MGCL, the Corporation shall provide to the record holders of such shares a written statement of the information required by the MGCL to be included on stock certificates.

The Corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by the laws of the State of Maryland.

Notwithstanding the foregoing, transfers of shares of any class or series of stock will be subject in all respects to the Charter of the Corporation and all of the terms and conditions contained therein.

Section 6.03. Replacement Certificate. Any officer of the Corporation may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, destroyed, stolen or mutilated, upon the making of an affidavit of that fact by the person claiming the certificate to be lost, destroyed, stolen or mutilated; provided, however, if such shares have ceased to be certificated, no new certificate shall be issued unless requested in writing by such stockholder and the Board of Directors has determined that such certificates may be issued. Unless otherwise determined by an officer of the Corporation, the owner of such lost, destroyed, stolen or mutilated certificate or certificates, or his or her legal representative, shall be required, as a condition precedent to the issuance of a new certificate or certificates, to give the Corporation a bond in such sums as it may direct as indemnity against any claim that may be made against the Corporation.

Section 6.04. Stock Ledger. The Corporation shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate stock ledger containing the name and address of each stockholder and the number of shares of each class held by such stockholder.

Section 6.05. Fractional Stock; Issuance of Units. The Board of Directors may authorize the Corporation to issue fractional stock or authorize the issuance of scrip, all on such terms and under such conditions as it may determine. Notwithstanding any other provision of the Charter or these bylaws, the Board of Directors may issue units consisting of different securities of the Corporation. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Corporation, except that the Board of Directors may provide that for a specified period securities of the Corporation issued in such unit may be transferred on the books of the Corporation only in such unit.

ARTICLE 7

GENERAL PROVISIONS

Section 7.01. Fixing the Record Date.

(a) The Board of Directors may set, in advance, a record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or determining stockholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of stockholders, not less than ten days, before the date on which the meeting or particular action requiring such determination of stockholders of record is to be held or taken.

(b) When a record date for the determination of stockholders entitled to notice of and to vote at any meeting of stockholders has been set as provided in this section, such record date shall continue to apply to the meeting if adjourned or postponed, except if the meeting is adjourned or postponed to a date more than 120 days after the record date originally fixed for the meeting, in which case a new record date for such meeting may be determined as set forth herein.

Section 7.02. Dividends. Dividends and other distributions upon the stock of the Corporation may be authorized by the Board of Directors, subject to the provisions of applicable law and the Charter. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of applicable law and the Charter. Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine, and the Board of Directors may modify or abolish any such reserve.

Section 7.03. Accounting Year. The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.

Section 7.04. Investment Policy. Subject to the provisions of the Charter, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion.

Section 7.05. Corporate Seal. The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall have inscribed thereon the name of the Corporation, the year of its incorporation and the words “Incorporated Maryland”. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof. Whenever the Corporation is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word “(SEAL)” adjacent to the signature of the person authorized to execute the document on behalf of the Corporation.

Section 7.06. Voting of Stock by Certain Holders. Stock of the Corporation registered in the name of a corporation, partnership, limited liability company, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, general partner, trustee or managing member thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such stock pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such stock. Any director or fiduciary may vote stock registered in the name of such person in the capacity of such director or fiduciary, either in person or by proxy.

Shares of stock of the Corporation directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time.

The Board of Directors may adopt by resolution a procedure by which a stockholder may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date, the time after the record date within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable. On receipt by the Corporation of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the holder of record of the specified stock in place of the stockholder who makes the certification.

Section 7.07. Amendments. The Board of Directors shall have the exclusive power to alter, amend or repeal these bylaws, provided that Sections 2.12 and 2.13 of Article 2 of these bylaws and this sentence may not be altered, amended or repealed by the Board of Directors unless it shall also obtain the affirmative vote of a majority of the votes cast on the matter by the holders of the issued and outstanding shares of common stock of the Corporation at a meeting of stockholders duly called and of which a quorum is present.

Effective as of January 1, 2016.

Exhibit 10.1

VEREIT, Inc.

2325 E. Camelback Road, Suite 1100

Phoenix, AZ 85016

October 1, 2015

Michael Sodo

c/o 5 Bryant Park, 23rd Floor

New York, New York 10018

Dear Mike,

This letter confirms our mutual understanding relating to your termination of employment with VEREIT, Inc., formerly known as American Reality Capital Properties, Inc. (“VEREIT”) and certain rights and obligations under your Employment Agreement with VEREIT dated as of January 9, 2015 (the “Employment Agreement”), under your Restricted Share Award Agreement with VEREIT dated August 26, 2014 (the “2014 Award Agreement”), and under your Restricted Stock Unit Award Agreement with VEREIT dated as of April1, 2015 (the “2015 Award Agreement”). Capitalized terms in this letter have the meanings set forth in the Employment Agreement.

1. Termination of Employment . Your position with VEREIT as its Executive Vice President, Chief Financial Officer and Treasurer (and any positions held at VEREIT’s subsidiaries) will terminate effective as of October 5, 2015, although it is agreed that you will remain with VEREIT until November 4, 2015 (the “Termination Date”), in order to assist with successor transition.

2. Cash Payments . In accordance with and subject to the terms and conditions of the Employment Agreement, you will receive the Severance Payments and the unpaid portion of the Promotion Cash Grant (in addition to the Accrued Benefits), as described in Section 6(b) of the Employment Agreement.

3. Equity Incentive Award . In accordance with and subject to the terms and conditions of the 2014 Award Agreement, the unvested portion of your award will become fully vested as of the Termination Date, as described in Section 2(b) of the 2014 Award Agreement, and in accordance with and subject to the terms and conditions of the 2015 Award Agreement, the unvested portion of your Time-Based Award (as defined in the 2015 Award Agreement) will become fully vested as of the Termination Date, as described in Section 2(c) of the 2015 Award Agreement, and settled in accordance with Section 5 of the 2015 Award Agreement. Pursuant to Section 3 of the 2015 Award Agreement, because the Performance Condition relating to your Performance-Based Award (as such terms are defined in the 2015 Award Agreement) will not be satisfied as of the Termination Date, your Performance-Based Award will be forfeited for no consideration.

4. Release of Claims . In accordance with the terms of Section 6( c) of the Employment Agreement, receipt of the payments and benefits set forth in paragraphs 2 and 3 of this letter (other than the Accrued Benefits) are subject to your execution and nonrevocation of a general release of claims within 60 days from the Termination Date.

5. Restrictive Covenants . In accordance with the terms of the Employment Agreement, you will be bound by and subject to certain post-employment obligations, including without limitation, those set forth in Section 8 (Covenants) . Notwithstanding the terms of Section 8(a) therein, the parties agree that a competitor thereunder for purposes of Restriction on Competition will be limited to any publicly-held triple net lease companies. The other terms of Section 8(a) will remain unchanged.

6. Certain Taxes . In the event that travel or other expenses are determined to be taxable fringe benefits and included as income, thereby resulting in Federal, state or local taxable income to you for 2015, VEREIT will make a payment to you in such amount, up to $50,000, such that, after taking into account the Federal, state and local taxes you owe on such payment, you will have a remaining amount equal to the Federal, state and local taxes you owe on the related taxable income (the “Gross-Up Payment”). VEREIT will pay you the Gross-Up Payment as soon as administratively feasible after you have provided VEREIT with information from your tax advisor that you will be liable for such taxes for 2015, but in no event shall the GrossUp Payment be made later than the end of the calendar year next following the calendar year in which such taxes are required to be remitted to the applicable taxing authority.

In acknowledgement and agreement of the terms set forth in this letter, please sign below .

Sincerely,

/s/ Glenn Rufrano

Glenn Rufrano

Chief Executive Officer

ACKNOWLEDGED AND AGREED TO:

/s/ Michael Sodo

Michael Sodo

Exhibit 10.2

VEREIT, Inc.

2325 E. Camelback Road, Suite 1100

Phoenix, AZ 85016

September 30, 2015

Michael J. Bartolotta

7 Vik Drive

Warwick, New York 10990

RE: Terms of Employment

Dear Mr. Bartolotta:

The following sets forth the terms and conditions of your employment (this “Agreement”) with VEREIT, Inc. (the “Company”). Your employment will commence effective as of October 5, 2015 (the “Effective Date”).

Position & Title

Your title will be Executive Vice President, Chief Financial Officer and Treasurer of the Company, reporting to the Chief Executive Officer of the Company or such other senior executive officer of the Company as the Chief Executive Officer may designate. In this capacity, you will have the duties, authorities and responsibilities as designated from time to time by the Chief Executive Officer or his designee, commensurate with your position. You shall devote substantially all of your business time and attention and your best efforts to the performance of your duties and responsibilities hereunder. Notwithstanding the foregoing, you may participate in charitable, academic or community activities (including service on charitable boards), and in trade or professional organizations; provided that all of your activities do not otherwise interfere with your duties and responsibilities to the Company. At all times during your employment with the Company, you agree to adhere to all of the Company’s written policies, rules and regulations governing the conduct of its employees that are provided to you, including without limitation, any compliance manual, code of ethics and employee handbook and other policies adopted by the Company from time to time.

Location

You will work primarily out the Company’s offices in New York, New York, provided that you understand and agree that you may be required to spend significant time at the Company’s offices in Phoenix, Arizona. You may also be required to travel on Company business from time to time.

Base Salary

You will be paid a base salary at the rate of $500,000 per annum, payable in periodic installments according to the Company’s normal payroll practices (as adjusted from time to time in accordance herewith, the “Base Salary”). The Base Salary is subject to periodic review by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”), but shall not be decreased below this level.

Annual Bonus

You will be eligible to receive an annual bonus (“Annual Bonus”) for each completed calendar year that you are employed by the Company, with a target annual bonus opportunity equal to 125% of your Base Salary (“Target Bonus”), based upon the achievement of performance goals established by the Compensation Committee in consultation with the Chief Executive Officer. Any Annual Bonus for a completed calendar year will be paid by the Company at the same time that bonuses are generally paid to other senior executives of the Company, provided, however, that you must be employed by the Company on the date of payment to be eligible to receive such Annual Bonus (except as otherwise provided herein). Notwithstanding the foregoing, for the 2015 calendar year, your Target Bonus will be $468,750 and your Annual Bonus for such year will be calculated based on the performance goals with respect to you established by the Compensation Committee pursuant to recommendations made by the Chief Executive Officer of the Company.

Employee Benefits

You will be entitled to the standard employee benefits provided by the Company to its employees generally (currently including participation in the 401(k) plan, health care coverage, group life insurance and group disability coverage), which benefits are subject to change from time to time at the Company’s sole discretion. You will be entitled to four (4) weeks of paid vacation for each full calendar year of service, to be taken and accrued under the Company’s vacation policy.

Equity Awards

You will be eligible to receive an annual long term incentive equity award with respect to shares of the Company’s common stock for each calendar year of your employment, subject to such terms and conditions, including types of award and vesting, as may be determined by the Compensation Committee in consultation with the Chief Executive Officer. Such terms and conditions shall be determined on the same basis as equity awards made generally to other senior executives of the Company.

Effective as of the Effective Date, you will be granted a number of restricted stock units (“RSUs”) with respect to the common stock of the Company under the VEREIT, Inc. Equity Plan, as amended (the “Equity Plan”), with a target Fair Market Value (as defined in the Equity Plan) equal to $700,000 determined based upon the closing price of the Company’s common stock on the Effective Date (the “Equity Award”). One-third (1/3) of the Equity Award will vest based on your continued employment in equal installments on each of the first three anniversaries of the Effective Date and will otherwise be subject to the terms set forth in an award agreement (the “Award Agreement”). Two-thirds (2/3) of the Equity Award will vest based on your continued employment and the achievement of the same performance conditions that measure the Company’s total shareholder return against a specified peer group of companies and a specified market index, over a performance period from April 1, 2015 through December 31, 2017 as applicable to other senior executives of the Company. Except as otherwise provided herein, the Equity Award will be subject to, and controlled by, the terms and conditions of the Equity Plan and the applicable Award Agreements.

Indemnification

The Company will provide you with indemnification rights and directors and officers insurance coverage pursuant to the Company’s standard form of Indemnification Agreement, a copy of which has been provided to you.

Expenses

You shall be entitled to reimbursement of reasonable business expenses, in accordance with the Company’s policy, as in effect from time to time, including, without limitation, reasonable travel and entertainment expenses incurred by you in connection with the business of the Company, after the presentation by you of appropriate documentation.

Termination of Employment

You will be an “at-will” employee, and the Company may terminate your employment with or without Cause (as defined below) at any time upon written notice to you, and you may terminate your employment for any reason upon not less than thirty (30) days written notice to the Company (which the Company may, in its sole discretion, make effective earlier than any notice date).

Upon your termination of employment, the Company will pay or provide you with (i) any unpaid Base Salary through the date of termination in accordance with the Company’s normal payroll practices, (ii) reimbursement for any unreimbursed business expenses incurred through the date of termination in accordance with the Company’s expense reimbursement policy and (iii) all other payments or benefits to which you are entitled under the terms of any applicable compensation arrangement or benefit plan or program which will be paid or provided in accordance with the terms of such arrangement, plan or program (collectively, the “Accrued Benefits”).

In the event of a termination of your employment due to your death or Disability (as defined below), in addition to the Accrued Benefits, you or your designated beneficiary (as discussed in more detail below under “General”), as applicable, will be entitled to any earned and accrued but unpaid Annual Bonus for the year prior to the year of termination, payable when the applicable Annual Bonus for such year would have otherwise been paid (had you remained employed by the Company through the payment date thereof). In addition, upon any such termination due to your death or Disability, a prorated number of shares underlying all of the then-outstanding and unvested portion of any equity award granted to you by the Company prior to the third (3rd) anniversary of the Effective Date shall become vested, determined by multiplying the number of shares subject to such equity awards by a fraction, the numerator of which is the number of whole months elapsed from the date of grant of the equity award until the date of your termination of employment and the denominator of which is the total number of whole months in the applicable vesting period for such equity award; and if an outstanding equity award is to vest and/or the amount of the award to vest is to be determined based on the achievement of performance criteria, then such equity award shall be

subject to such pro rata vesting for the applicable performance period, assuming the performance criteria had been achieved at target levels for such period.

In the event of a termination of your employment (i) by the Company without Cause or (ii) by you for Good Reason (a “Qualifying Termination”), in addition to the Accrued Benefits, you will be entitled to (A) any earned and accrued but unpaid Annual Bonus for the year prior to the year of termination, payable when the applicable Annual Bonus for such year would have otherwise been paid (had you remained employed by the Company through the payment date thereof) but in no event later than the last day of the year in which such termination occurs (the “Prior Year Bonus”), and (B) severance payments equal to the sum of your annual Base Salary and Target Bonus for the year of termination, payable in substantially equal installments based on the Company’s payroll periods over the twelve (12) month period following the date of your Qualifying Termination (the “Severance Period”).

In the event of a Qualifying Termination, provided that you timely elect continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company will pay or provide you with continued participation, at the same cost to you as if you were an active employee, for you and your then covered dependents in the applicable group medical plan of the Company, if any, in which you and your eligible dependents participated as of the date of the Qualifying Termination in accordance with the terms of such plan in effect from time to time, for a period equal to the earliest of (i) the completion of the Severance Period, (ii) the date that you obtain new employment that offers group medical coverage or (iii) the COBRA continuation period (the “Continued Medical Coverage”). However, if the Company reasonably determines that it is necessary or advisable to avoid any penalties or additional taxes associated with such coverage, in lieu of such Continued Medical Coverage, you may receive monthly payments equal to the monthly COBRA rate (or equivalent rate) under such group medical plan less the active employee rate for such medical coverage.

In addition, in the event of a Qualifying Termination, (i) all of the then-outstanding and unvested portion of any equity award granted to you by the Company prior to the third anniversary of the Effective Date shall become vested in full, and (ii) if such an outstanding equity award is to vest and/or the amount of the award to vest is to be determined based on the achievement of performance criteria, then such equity award shall vest as to the number of shares equal to 100% of the number of shares that would have been earned pursuant to the terms thereof assuming the performance criteria had been achieved at target levels for the relevant performance period (the “Accelerated Vesting”).

In order to receive the Severance Payments, the Prior Year Bonus, and the Continued Medical Coverage and the Accelerated Vesting, you must execute, and not revoke, a fully effective release of claims, substantially in the form attached hereto as Exhibit A, within forty-five (45) days following the date of your termination of employment. The first Severance Payment will be made on the sixtieth (60th) day following the date of your termination of employment, and will include payment of any amounts that were otherwise due prior thereto.

Definitions

For purposes of this Agreement, the following terms have the meanings set forth below:

“ Cause ” means that you have: (i) committed, with respect to the Company, an act of fraud, embezzlement, misappropriation, intentional misrepresentation or conversion of assets, (ii) been convicted of, or entered a plea of guilty or “ nolo contendere ” to, a felony (excluding any felony relating to the negligent operation of an automobile), (iii) willfully failed to substantially perform (other than by reason of illness or temporary disability) your reasonably assigned material duties, (iv) engaged in willful misconduct in the performance of your duties, (v) engaged in conduct that violated the Company’s then existing written internal policies or procedures that have been provided to you in writing prior to such conduct and which is materially detrimental to the business and reputation of the Company, or (vi) materially breached any non-competition, non-disclosure or other agreement in effect between you and the Company; provided, however, that with respect to clauses (iii) and (iv), no event shall constitute Cause unless (A) the Company has given you written notice of termination setting forth the conduct that is alleged to constitute Cause within thirty (30) days of the first date on which the Company has knowledge of such conduct, and (B) you fail to cure such conduct within thirty (30) days following the date on which such notice is provided.

“ Disability ” means that you are unable to perform your duties hereunder due to any sickness, injury or disability for a consecutive period of one hundred eighty (180) days or an aggregate of six (6) months in any twelve (12)-consecutive month period. A determination of “Disability” shall be made by a physician satisfactory to both you and the Company, provided that if you and the Company do not agree on a physician, you and the Company shall each select a physician and these two together shall select a third physician, whose determination as to Disability shall be binding on all parties. The appointment of one or more individuals to carry out your offices or duties during a period of your inability to perform such duties and pending a determination of Disability shall not be considered a breach of this Agreement by the Company.

“ Good Reason ” means (i) a reduction in your Base Salary or Target Bonus percentage, (ii) a reduction in your title or a material diminution in your duties, responsibilities or authorities, or (iii) the relocation of your primary place of employment to a location that is more than 50 miles from the location of the Company’s offices in New York, New York, as of the date hereof; provided that no event will constitute Good Reason unless (A) you have given the Company written notice setting forth the conduct of the Company that is alleged to constitute Good Reason, within thirty (30) days of the first date on which you have knowledge of such conduct, and (B) the Company fails to cure such conduct within thirty (30) days following the date on which such written notice is provided.

Code Section 280G

Notwithstanding the other provisions of this Agreement, in the event that the amount of payments payable to you under this Agreement or otherwise would constitute an “excess parachute payment” (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended), then such payments will be reduced by the minimum possible amounts until no amount payable to you constitutes an “excess parachute payment;” provided, however, that no such reduction will be made if the net after-tax payment (after taking into account Federal, state, local, and other income and excise taxes) to which you would otherwise be entitled without such reduction would be greater than the net after-tax payment (after taking into account Federal, state, local and other income and excise taxes) to you resulting from the receipt of such payments with such reduction. The payment reduction (if any) contemplated herein will be implemented by (a) first reducing any cash severance payments, (b) then reducing other cash payments, and (c) then reducing all other benefits, in each case, with amounts having later payment dates being reduced first. A determination as to whether any payment reduction is required, and if so, as to which payments are to be reduced and the amount of the reduction, will be made by a nationally recognized public accounting firm selected by the Company. The fees and expenses of the accounting firm will be paid entirely by the Company and the determinations made by accounting firm will be binding upon you and the Company.

Code Section 409A

The intent of the parties is that payments and benefits under this Agreement comply with, or be exempt from, Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (“Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement will be interpreted to be in compliance therewith. A termination of employment will not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment that are considered “non-qualified deferred compensation” under Code Section 409A unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms will mean “separation from service.” If you are deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment that is considered non-qualified deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit will be made or provided at the date which is the earlier of (A) the day after the expiration of the six-month period measured from the date of your “separation from service,” and (B) the date of your death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) will be paid or reimbursed to you in a lump sum and any remaining payments and benefits due under this Agreement will be paid or provided in accordance with the normal payment dates specified for them herein. For purposes of Code Section 409A, your right to receive any installment payments pursuant to this Agreement will be treated as a right to receive a series of separate and distinct payments.

General

The Company may withhold from any and all amounts payable to you such federal, state and local taxes as may be required to be withheld pursuant to applicable laws or regulations.

You shall be entitled to reimbursement of reasonable attorneys’ fees and disbursements incurred by you in connection with the negotiation and documentation of this Agreement, up to a maximum of $10,000.

Any amounts payable hereunder after your death shall be paid to your designated beneficiary or beneficiaries, whether received as a designated beneficiary or by will or the laws of descent and distribution. You may designate a beneficiary or beneficiaries for all purposes of this Agreement, and may change at any time such designation, by notice to the Company making specific reference to this Agreement.

In no event shall you be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to you under any of the provisions of this Agreement and except as set forth herein with respect to Continued Medical Coverage, such amounts shall not be reduced or otherwise subject to offset in any manner, regardless of whether you obtain other employment.

You hereby certify that you are not a party to any agreement or understanding, written or oral, and you are not subject to any restriction, which could prevent you from performing all of your duties and obligations hereunder. If you possess any proprietary or confidential information regarding your previous employer, you hereby agree that you will neither disclose nor use such information in a manner which would cause you to violate any preexisting agreements with that employer. Section 8 (“Representations”) of the Employee Confidentiality and Non-Competition Agreement, attached hereto as Exhibit B , is hereby incorporated by reference.

This Agreement shall be governed under the laws of the State of New York, without regard to the principles of conflicts of laws.

These are the terms of your employment with the Company subject to our receipt of (i) your signed acceptance of this Agreement and (ii) your signed acceptance of the Employee Confidentiality and Non-Competition Agreement attached hereto as Exhibit B .

This Agreement may be executed in any number of counterparts each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

Sincerely,

/s/ Glenn Rufrano

Glenn Rufrano

Chief Executive Officer

VEREIT, Inc.

Accepted By:

/s/ Michael J. Bartolotta

Michael J. Bartolotta

EXHIBIT A

GENERAL RELEASE AND WAIVER AGREEMENT

This General Release and Waiver Agreement (the “General Release”) is made as of the ___ day of ______________, 20_ by Michael J. Bartolotta (the “Executive”),

WHEREAS, the Executive and VEREIT, Inc. (the “Company”) have entered into an Employment Agreement (the “Agreement”) effective as of October 5, 2015 that provides for certain compensation and severance amounts upon his termination of employment; and

WHEREAS, the Executive has agreed, pursuant to the terms of the Agreement, to execute a release and waiver in the form set forth in this General Release in consideration of the Company’s agreement to provide the compensation and severance amounts upon his termination of employment set out in the Agreement; and

WHEREAS, the Executive has incurred a termination of employment effective as of _______________, 20_; and

WHEREAS, the Company and the Executive desire to settle all rights, duties and obligations between them, including without limitation all such rights, duties, and obligations arising under the Agreement or otherwise out of the Executive’s employment by the Company.

NOW THEREFORE, intending to be legally bound and for good and valid consideration the sufficiency of which is hereby acknowledged, the Executive agrees as follows:

1. RELEASE. In consideration of the Agreement and for the payments to be made pursuant to the Agreement:

(a) Except as set forth in Section 1(b) herein, the Executive knowingly and voluntarily releases, acquits and forever discharges the Company, and any and all of its past and present owners, parents, affiliated entities, divisions, subsidiaries and each of their respective stockholders, members, predecessors, successors, assigns, managers, agents, directors, officers, employees, representatives, attorneys, employee benefit plans and plan fiduciaries, and each of them (collectively, the “Releasees”) from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, damages, causes of action, suits, rights, costs, losses, debts and expenses of any nature whatsoever, known or unknown, suspected or unsuspected, foreseen or unforeseen, matured or unmatured, against them which the Executive or any of his heirs, executors, administrators, successors and assigns (“Executive Persons”) ever had, now has or at any time hereafter may have, own or hold by reason of any matter, fact, or cause whatsoever from the beginning of time up to and including the effective date of this General Release (hereinafter referred to as the “Executive’s Claims”), including without limitation: (i) any claims arising out of or related to any federal, state and/or local labor or civil rights laws including, without limitation, the federal Civil Rights Acts of 1866, 1871, 1964 and 1991, the Rehabilitation Act, the Pregnancy Discrimination Act of 1978, the Age Discrimination in Employment Act of 1967, as amended by, inter alia , the Older Workers Benefit Protection Act of 1990, the National Labor Relations Act, the Worker Adjustment and Retraining Notification Act, the Family and Medical Leave Act of 1993, the Employee Retirement Income Security Act of 1974, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act of 1938, as they may be or have been amended from time to time, and any and all other federal, state or local laws, regulations or constitutions covering the same or similar subject matters; and (ii) any and all other of the Executive’s Claims arising out of or related to any contract, any and all other federal, state or local constitutions, statutes, rules or regulations, or under any common law right of any kind whatsoever, or under the laws of any country or political subdivision, including, without limitation, any of the Executive’s Claims for any kind of tortious conduct (including but not limited to any claim of defamation or distress), breach of the Agreement, violation of public policy, promissory or equitable estoppel, breach of the Company’s policies, rules, regulations, handbooks or manuals, breach of express or implied contract or covenants of good faith, wrongful discharge or dismissal, and/or failure to pay in whole or part any compensation, bonus, incentive compensation, overtime compensation, benefits of any kind whatsoever, including disability and medical benefits, back pay, front pay or any compensatory, special or consequential damages, punitive or liquidated damages, attorneys’ fees, costs, disbursements or expenses, or any other claims of any nature; and all claims under any other federal, state or local laws relating to employment, except in any case to the extent such release is prohibited by applicable federal, state and/or local law.

A - 1

(b) Notwithstanding anything herein to the contrary, the release set forth herein, dose not release, limit, waive or modify and shall not extend to: (i) those rights which as a matter of law cannot be waived; (ii) claims, causes of action or demands of any kind that may arise after the date hereof and that are based on acts or omissions occurring after such date; (iii) claims for indemnification, advancement and reimbursement of legal fees and expenses or contribution under the Agreement or under any other agreement with, or the organizational documents of, the Company or its affiliates, (iv) claims for coverage under any directors and officers insurance policy; (v) claims under COBRA; (vi) claims with respect to accrued, vested benefits or payments under any employee benefit or equity plan of the Company; (vii) claims relating to Executive’s right to any Severance Payments, the Prior Year Bonus, the Continued Medical Coverage and the Accelerated Vesting, each as defined in the Agreement; (viii) claims to enforce the terms of this release and (ix) Executive’s rights as a stockholder of the Company.

(c) The Executive acknowledges that he is aware that he may later discover facts in addition to or different from those which he now knows or believes to be true with respect to the subject matter of this Release, but it is his intention to fully and finally forever settle and release any and all matters, disputes, and differences, known or unknown, suspected and unsuspected, which now exist, may later exist or may previously have existed between himself and the Releasees or any of them, and that in furtherance of this intention, the Executive’s general release given herein shall be and remain in effect as a full and complete general release notwithstanding discovery or existence of any such additional or different facts.

(d) Executive represents that he has not filed or permitted to be filed and will not file against the Releasees, any claim, complaints, charges, arbitration or lawsuits and covenants and agrees that he will not seek or be entitled to any personal recovery in any court or before any governmental agency, arbitrator or self-regulatory body against any of the Releasees arising out of any matters set forth in Section 1(a) hereof. If Executive has or should file a claim, complaint, charge, grievance, arbitration, lawsuit or similar action, he agrees to remove, dismiss or take similar action to eliminate such claim, complaint, charge, grievance, arbitration, lawsuit or similar action within five (5) days of signing this Termination Release.

(e) Notwithstanding the foregoing, this Termination Release is not intended to interfere with Executive’s right to file a charge with the Equal Employment Opportunity Commission (hereinafter referred to as the “EEOC”) in connection with any claim he believes he may have against the Company. However, Executive hereby agrees to waive the right to recover money damages in any proceeding he may bring before the EEOC or any other similar body or in any proceeding brought by the EEOC or any other similar body on his behalf. This General Release does not release, waive or give up any claim for workers’ compensation benefits, indemnification rights, vested retirement or welfare benefits he is entitled to under the terms of the Company’s retirement and welfare benefit plans, any other vested shares, equity or benefits or indemnification arrangements, as in effect from time to time, any right to unemployment compensation that Executive may have, or his right to enforce his rights under the Agreement.

2. CONFIRMATION OF OBLIGATIONS. Executive hereby confirms and agrees to his continuing obligation under the Agreement after termination of employment not to directly or indirectly disclose to third parties or use any Confidential Information (as defined in the Agreement) that he may have acquired, learned, developed, or created by reason of his employment with the Company.

3. CONFIDENTIALITY; NO COMPETITION; NONSOLICITATION.

(a) Executive hereby confirms and agrees to his confidentiality, nonsolicitation and non-competition obligations pursuant to the Agreement and his duty of loyalty and fiduciary duty to the Company under applicable statutory or common law.

(b) The Executive and the Company each agree to keep the terms of this General Release confidential and shall not disclose the fact or terms to third parties, except as required by applicable law or regulation or by court order or, as to the Company, in the normal course of its business; provided, however, that Executive may disclose the terms of this General Release to members of his immediate family, his attorney or counselor, and persons assisting his in financial planning or tax preparation, provided these people agree to keep such information confidential. Notwithstanding the foregoing, the Executive may in all events disclose the terms of this General Release to his attorney or counselor in connection with anything coming within the scope of subparagraph (b) of the foregoing Paragraph 1.

4. NO DISPARAGEMENT. Each of the Executive and the Company agree not to disparage the other, including making any statement or comments or engaging in any conduct that is disparaging toward the Company (including the Releasees and each of them) or the Executive, as the case may be, whether directly or indirectly, by name or innuendo; provided , however , that nothing in this General Release shall restrict communications protected as privileged under federal or state law to testimony or communications ordered and required by a court, in arbitration or by an administrative agency of competent jurisdiction.

A - 2

5. REMEDIES FOR BREACH. In the event that either Party breaches, violates, fails or refuses to comply with any of the provisions, terms or conditions or any of the warranties or representations of this General Release (the “Breach”), in its sole discretion the non-breaching Party shall recover against the breaching Party damages, including reasonable attorneys’ fees, accruing to the non-breaching Party as a consequence of the Breach. Regardless of and in addition to any right to damages the non-breaching Party may have, the non-breaching Party shall be entitled to injunctive relief. The provisions of Paragraphs 1, 2, 3 and 4 hereof are material and critical terms of this General Release, and the Executive agrees that, if he breaches any of the provisions of these paragraphs, the Company shall be entitled to injunctive relief against the Executive regardless of and in addition to any other remedies which are available.

6. NO RELIANCE. Neither the Executive nor the Company is relying on any representations made by the other (including any of the Releasees) regarding this General Release or the implications thereof.

7. MISCELLANEOUS PROVISIONS.

(a) This General Release contains the entire agreement between the Company and the Executive concerning the matters set forth herein. No oral understanding, statements, promises or inducements contrary to the terms of this General Release exist. This General Release cannot be changed or terminated orally. Should any provision of this General Release be held invalid, illegal or unenforceable, it shall be deemed to be modified so that its purpose can lawfully be effectuated and the balance of this General Release shall be enforceable and remain in full force and effect.

(b) This General Release shall extend to, be binding upon, and inure to the benefit of the Parties and their respective successors, heirs and assigns.

(c) This General Release shall be governed by and construed in accordance with the laws of the State of New York, without regard to any choice of law or conflict of law, principles, rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

(d) This General Release may be executed in any number of counterparts each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

8. EFFECTIVE DATE/REVOCATION. The Executive may revoke this General Release in writing at any time during a period of seven (7) calendar days after his execution of this General Release (the “Revocation Period”). This General Release shall be effective and enforceable automatically on the day after the expiration of the Revocation Period (the “Effective Date”). If the Executive revokes this General Release, no severance or any other payment pursuant to the Agreement or otherwise shall be due or payable by the Company to the Executive.

9. ACKNOWLEDGEMENT. In signing this General Release, the Executive acknowledges that:

(a) The Executive has read and understands the Agreement and the General Release and the Executive is hereby advised in writing to consult with an attorney prior to signing this General Release;

(b) The Executive has consulted with his attorney, and he has signed the General Release knowingly and voluntarily and understands that the General Release contains a full and final release of all of the Executive’s claims;

(c) The Executive is aware and is hereby advised that the Executive has the right to consider this General Release for twenty-one (21) calendar days before signing it (or in the event of a group termination program forty-five (45) days), and that if the Executive signs this Agreement prior to the expiration of the twenty-one (21) calendar days (or 45 days, if applicable), the Executive is waiving the right freely, knowingly and voluntarily; and

(d) The General Release is not made in connection with an exit incentive or other employee separation program offered to a group or class of employees.

IN WITNESS WHEREOF, the Executive has executed this General Release as of the day and year first above written.

_________________________________

A - 3

EXHIBIT B

EMPLOYEE CONFIDENTIALITY AND NON-COMPETITION AGREEMENT

THIS AGREEMENT is made as of October 5, 2015, by the undersigned employee (hereinafter called “Employee”) of VEREIT, Inc. (together with all other affiliated and/or related entities of the foregoing, the “Employer’’ or the “Company”) a Maryland corporation.

WHEREAS, prior to employment by Employer, Employee understood and agreed that an agreement containing restrictive and other provisions of the type hereinafter set forth would be entered into by Employee as an ancillary part of the taking of such employment and Employee is in fact herein entering into such an agreement;

WHEREAS, Employee understands that at various times Employee may be performing services for the benefit of any one or more of the entities comprising the Employer even though Employee may actually be an employee of only one or less than all of such entities or individuals;

WHEREAS, Employee understands and agrees that Employee will be an employee at will without employment or any right of employment for any fixed or particular time period or term notwithstanding that Employee’s compensation arrangements now or in the future may be based upon a stated time period or time basis which will not in any way constitute any agreement or understanding that Employee is or will be employed for that or any other particular time period or for any fixed term, and at all times Employee will remain and be, in fact, an employee at will.

NOW, THEREFORE, with intent to be legally bound, as an ancillary part of the taking of said employment and in consideration thereof, Employee agrees as follows:

1. CONFIDENTIAL AND PROPRIETARY INFORMATION OF EMPLOYER

The Employee recognizes and acknowledges that certain assets of the Employer constitute Confidential Information. The term “Confidential Information” as used in this Agreement shall mean all information which is known only to the Employee or the Employer, other employees of the Employer, or others in a confidential relationship with the Employer, and relating to the Employer’s business including, without limitation, information regarding clients, customers, pricing policies, methods of operation, proprietary Employer programs, sales products, profits, costs, markets, key personnel, formulae, product applications, technical processes, and trade secrets, as such information may exist from time to time, which the Employee acquired or obtained by virtue of work performed for the Employer, or which the Employee may acquire or may have acquired knowledge of during the performance of said work. The Employee shall not, during the term of Employee’s employment with the Company (the “Term”) or at any time thereafter, disclose all or any part of the Confidential Information to any person, firm, corporation, association, or any other entity for any reason or purpose whatsoever, directly or indirectly, except as may be required pursuant to his employment hereunder, unless and until such Confidential Information becomes publicly available other than as a consequence of the breach by the Employee of his confidentiality obligations hereunder. In the event of the termination of his employment, whether voluntary or involuntary and whether by the Employer or the Employee, the Employee shall deliver to the Employer all documents and data pertaining to the Confidential Information and shall not take with his any documents or data of any kind or any reproductions (in whole or in part) or extracts of any items relating to the Confidential Information.

In the event that the Employee receives a request or is required (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose all or any part of the Confidential Information, the Employee agrees to (a) promptly notify the Employer in writing of the existence, terms and circumstances surrounding such request or requirement, (b) consult with the Employer on the advisability of taking legally available steps to resist or narrow such request or requirement, and (c) assist the Employer in seeking a protective order or other appropriate remedy (in which case the Employer shall pay or reimburse the Employee for all reasonable out-of-pocket expenses incurred in connection with such consultation or assistance). In the event that such protective order or other remedy is not obtained or that the Employer waives compliance with the provisions hereof, the Employee shall not be liable for such disclosure unless disclosure to any such tribunal was caused by or resulted from a previous disclosure by the Employee not permitted by this Agreement.

Notwithstanding anything herein to the contrary, nothing in this agreement shall (i) prohibit the Employee from making reports of possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of state or federal law or regulation, or (ii) require notification or prior approval by the employer of any reporting described in clause (i).

B - 1

2. INTELLECTUAL PROPERTY OF EMPLOYER

During the Term, the Employee shall promptly disclose to the Employer or any successor or assign, and grant to the Employer and its successors and assigns without any separate remuneration or compensation other than that received by his in the course of his employment, his entire right, title and interest in and to any and all inventions, developments, discoveries, models, or any other intellectual property of any type or nature whatsoever (“Intellectual Property”), whether developed by his during or after business hours, or alone or in connection with others, that is in any way related to the business of the Employer, its successors or assigns. This provision shall not apply to books or articles authored by the Employee during non-work hours, consistent with his obligations under this Agreement, so long all such books or articles (a) are not funded in whole or in party by the Employer, and (b) do not contain any Confidential Information or Intellectual Property of the Employer. The Employee agrees, at the Employer’s expense, to take all steps necessary or proper to vest title to all such Intellectual Property in the Employer, and cooperate fully and assist the Employer in any litigation or other proceedings involving any such Intellectual Property.

3. NON-COMPETITION BY EMPLOYEE AND RESTRICTIVE COVENANT

During the Term and for a period of twelve (12) calendar months after the termination of the Employee’s employment for any reason (the “Restricted Period”), the Employee shall not, directly or indirectly, either as a principal, agent, employee, employer, stockholder, partner or in any other capacity whatsoever: engage or assist others who engage, in whole or in part, in any business or enterprise that is directly competitive with (x) the business that the Company engaged in during the period of the Employee’s employment with the Company, currently net leased real estate investments, or (y) any product, service or business as to which the Company has actively begun preparing to develop at the time of Employee’s separation from the Company.

During the Term and the Restricted Period, the Employee shall not, directly or indirectly, either as a principal, agent, employee, employer, stockholder, partner or in any other capacity whatsoever: (a) have any contact with any investor, advisor or registered financial representative which was an investor, or advisor or registered financial representative of an investor, of the Company during the Term or which the Company was actively pursuing as a potential investor, advisor or registered financial representative of a potential investor at the end of the Term, for the purpose of pursuing activities with that investor, advisor or registered financial representative which are competitive with or similar to the relationship between the Company and that investor, or (b) without the prior consent of the Board of Directors of the Company, employ or solicit the employment of, or assist others in employing or soliciting the employment of, any individual employed by the Company at any time during the Term.

Nothing in this Section 3 shall prohibit Employee from making any passive investment in a public company, or where he is the owner of five percent (5%) or less of the issued and outstanding voting securities of any entity, provided such ownership does not result in his being obligated or required to devote any managerial efforts. The Employee agrees to secure prior written consent from the Chief Compliance Officer of the Company for any outside business activity described in the Written Supervisory Procedures.

The Employee agrees that the restraints imposed upon his pursuant to this Section 3 are necessary for the reasonable and proper protection of the Company and its subsidiaries and affiliates, and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area. The parties further agree that in the event that any provision of this Section 3 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too greatly a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law.

4. EMPLOYER PROPERTY

Employee shall be responsible for the safekeeping of any equipment or property provided by Employer, including but not limited to furniture, supplies, records, documents, cellular phones, laptop computers, desktop computers, printers, fax machines, answering machines, computer software, manuals, etc.

Upon termination of Employee’s employment with Employer, Employee shall turn over to Employer upon demand all such equipment and property provided by Employer. Employee must also return to Employer all Employer files, records and keys issued.

5. INJUNCTIVE RELIEF

Employee and Employer agree that any breach by Employee of the covenants and agreements contained in any Section of this Agreement will result in irreparable injury to Employer for which money damages could not adequately compensate Employer

B - 2

and therefore, in the event of any such breach, Employer shall be entitled (in addition to any other rights or remedies which Employer may have at law or in equity, including money damages) to have an injunction issued by any competent court of equity enjoining and restraining Employee and/or any other person involved therein from continuing such breach. If Employer resorts to the courts of competent jurisdiction for the enforcement of any of the covenants or agreements contained herein, or if such covenants or agreements are otherwise the subject of litigation between the parties, if the Employer prevails in such action on all material issues, then any limiting term of such covenants and agreements shall be extended for a period of time equal to the period of such breach, which extension shall commence on the later of (a) the date of which the original (unextended) term of such covenants and agreements is scheduled to terminate or (b) the date that the final court (without further right of appeal) enforces such covenant or agreement.

6. CONTINUING EFFECT OF OTHER PROVISIONS IN EVENT OF PARTIAL INVALIDITY

Employee further agrees that a breach of any agreement, whether written or oral, between Employer and Employee or any other actionable conduct by Employee, or any defense, set-off or counterclaim by Employee against Employer, or any other related rights Employee has against Employer will have no effect on any or all of the terms and provisions of the restrictive covenants and other agreements contained herein or on their enforceability and validity. If any portion of the covenants or agreements contained in this Agreement, or the application thereof, is construed to be invalid or unenforceable then the other portions of such covenants or agreements or the application thereof shall not be affected and shall be given full force and effect without regard to the invalid or unenforceable portions. If any covenant or agreement therein is held to be unenforceable because of the area covered or the duration thereof, such covenant or agreement shall then be enforceable in its reduced form. If any of the provisions hereof violate or contravene the applicable laws of any jurisdiction, such provisions shall be deemed not to be a part of this Agreement with respect to such jurisdiction only, and the remainder of this Agreement shall remain in full force and effect in such jurisdiction and this entire Agreement shall remain in full force and effect in all other jurisdictions.

7. BENEFIT TO SUCCESSORS OF EMPLOYER AND APPLICABLE LAW

This Agreement shall inure to the benefit of Employer and its successors and assigns.

This Agreement shall be construed and enforced in accordance with the laws of the New York State. If required by the context of this Agreement, singular language shall be construed as plural, plural language shall be construed as singular, and the gender of personal pronouns shall be construed as masculine, feminine or neuter. This Agreement supplements and does not supersede and is in no way in diminution of any other agreements(s), entered into by Employee regarding the subject matter hereof or containing provisions the same as or similar in nature hereto, and this Agreement and all such agreements shall remain in full force and effect, independent of one another, and the provisions most restrictive to Employee of this Agreement and all such agreements shall be the controlling provisions that are applicable to Employee.

8. REPRESENTATIONS

Employee represents, warrants and covenants that employee is not a party to or bound by any agreement with any third person or entity and/or is not otherwise bound by law which would in any way restrict, inhibit or limit Employee’s ability to fully render and perform all services requested by Employer, including but not limited to, fully contacting and dealing with all customers and suppliers in all marketplaces, fully advising Employer about processes and methods, fully using and disclosing all information about suppliers, customers, processes and methods of which Employee may have knowledge, and keeping Employer fully informed of such, and/or which would in any way restrict, inhibit or limit Employee’s ability to fully compete with any third person or entity seeking in any way to restrict, inhibit or limit Employee from fully rendering and performing all services requested by Employer, including but not limited to, those set forth above, and/or seeking damages as a result thereof. Employee hereby agrees to indemnify and hold harmless Employer from any and all claims, liabilities, losses, damages and/or expenses with respect thereto including but not limited to reasonable attorneys’ fees. Employee hereby acknowledges that he fully understands that Employer’s employment of Employee is conditioned upon Employee’s ability to fully render and perform all services requested of his without any restriction, hindrance or limit by any third person or entity.

B - 3

IN WITNESS WHEREOF, Employee has executed this Agreement with intent to be legally bound as of the day and year first above written.

EMPLOYEE:

/s/ Michael J. Bartolotta

By: Michael J. Bartolotta

B - 4

Exhibit 31.1

VEREIT, INC.

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULES 13a-14(a) AND 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Glenn J. Rufrano, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of VEREIT, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	November 4, 2015	/s/ Glenn J. Rufrano
		Glenn J. Rufrano
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 31.2

VEREIT, INC.

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULES 13a-14(a) AND 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Bartolotta, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of VEREIT, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	November 4, 2015	/s/ Michael J. Bartolotta
		Michael J. Bartolotta Executive Vice President, Chief Financial Officer and Treasurer
		(Principal Financial Officer)

Exhibit 31.3

VEREIT OPERATING PARTNERSHIP, L.P.

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULES 13a-14(a) AND 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Glenn J. Rufrano, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of VEREIT Operating Partnership, L.P.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	November 4, 2015	/s/ Glenn J. Rufrano
		Glenn J. Rufrano
		Chief Executive Officer of VEREIT, Inc., the sole general partner
		of VEREIT Operating Partnership, L.P.
		(Principal Executive Officer)

Exhibit 31.4

VEREIT OPERATING PARTNERSHIP, L.P.

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULES 13a-14(a) AND 15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael J. Bartolotta, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of VEREIT Operating Partnership, L.P.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	November 4, 2015	/s/ Michael J. Bartolotta
		Michael J. Bartolotta Executive Vice President, Chief Financial Officer and Treasurer of
		VEREIT, Inc., the sole general partner of VEREIT Operating Partnership, L.P.
		(Principal Financial Officer)

Exhibit 32.1

VEREIT, INC.

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of VEREIT, Inc. (the “Company”) for the period ended September 30, 2015 (the “Report”), I, Glenn J. Rufrano, Chief Executive Officer of the Company, certify to my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date:	November 4, 2015	/s/ Glenn J. Rufrano
		Glenn J. Rufrano
		Chief Executive Officer
		(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

VEREIT, INC.

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of VEREIT, Inc. (the “Company”) for the period ended September 30, 2015 (the “Report”), I, Michael J. Bartolotta, Executive Vice President, Chief Financial Officer and Treasurer of the Company, certify to my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date:	November 4, 2015	/s/ Michael J. Bartolotta
		Michael J. Bartolotta Executive Vice President, Chief Financial Officer and Treasurer
		(Principal Financial Officer)

Exhibit 32.3

VEREIT OPERATING PARTNERSHIP, L.P.

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of VEREIT Operating Partnership, L.P. (the “Company”) for the period ended September 30, 2015 (the “Report”), I, Glenn J. Rufrano, Chief Executive Officer of VEREIT, Inc., the sole general partner of the Company, certify to my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date:	November 4, 2015	/s/ Glenn J. Rufrano
		Glenn J. Rufrano
		Chief Executive Officer of VEREIT, Inc., the sole general partner
		of VEREIT Operating Partnership, L.P.
		(Principal Executive Officer)

Exhibit 32.4

VEREIT OPERATING PARTNERSHIP, L.P.

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of VEREIT Operating Partnership, L.P. (the “Company”) for the period ended September 30, 2015 (the “Report”), I, Michael J. Bartolotta, Executive Vice President, Chief Financial Officer and Treasurer of VEREIT, Inc., the sole general partner of the Company, certify to my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date:	November 4, 2015	/s/ Michael J. Bartolotta
		Michael J. Bartolotta Executive Vice President, Chief Financial Officer and Treasurer of
		VEREIT Inc., the sole general partner of VEREIT Operating Partnership, L.P.
		(Principal Financial Officer)